Nanjing Panda Electronics Company Limited

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in Nanjing Panda Electronics Company Limited , you should at once hand this circular and the accompanying form of proxy to the purchaser or other transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.

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

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MAJOR AND CONNECTED TRANSACTION IN RELATION TO EQUITY TRANSFER OF 5.07% OF EQUITY INTEREST IN SHENZHEN JINGWAH

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

of Nanjing Panda Electronics Company Limited

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

A letter from the Board is set out on pages 1 to 17 of this circular. A letter from the Independent Board Committee is set out on page 18 of this circular. A letter from Gram Capital containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 19 to 29 of this circular. Please refer to the announcements of the Company dated 15 July 2014 and 9 October 2014 for details of the EGM which was postponed to be held at the Company’s Conference Room, 301 Zhongshan Road East, Nanjing, the People’s Republic of China on Friday, 21st November 2014 at 2:30 p.m..

A revised notice convening the EGM and the Supplemental Proxy Form for use at the EGM are also enclosed with this circular. Whether or not you are able to attend and vote at the EGM, please complete and return the Supplemental Proxy Form in accordance with the instructions printed thereon to the office of the Company as soon as possible and in any event not less than 24 hours before the time of the EGM or any adjournment thereof. Completion and return of the Supplemental Proxy Form will not preclude you from attending and voting in person at the EGM or any adjournment thereof should you so wish.

5 November 2014

CONTENTS

		Page
DEFINITIONS. . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	ii
LETTER FROM THE BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		1
LETTER FROM THE INDEPENDENT BOARD COMMITTEE. . . . . . . . . . . . . . . . . . . . .		18
LETTER FROM GRAM CAPITAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		19
APPENDIX I —	GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	30
APPENDIX IIA —	SUMMARY OF VALUATION REPORT. . . . . . . . . . . . . . . . . . . . .	39
APPENDIX IIB —	LETTERS IN RELATION TO THE VALUATION REPORT. . . .	66
APPENDIX IIC —	VALUATION REPORT ON PROPERTY INTEREST. . . . . . . . . .	69
APPENDIX III —	FINANCIAL INFORMATION OF THE GROUP. . . . . . . . . . . . . .	87
APPENDIX IV —	FINANCIAL INFORMATION OF THE TARGET GROUP. . . . .	93
APPENDIX V —	UNAUDITED PRO FORMA FINANCIAL
	INFORMATION OF THE ENLARGED GROUP. . . . . . . . . . . .	190
APPENDIX VI —	MANAGEMENT DISCUSSION AND
	ANALYSIS ON SHENZHEN JINGWAH. . . . . . . . . . . . . . . . . . .	197
APPENDIX VII —	LETTER FROM THE BOARD IN RELATION TO THE
	PROFIT FORECAST OF SHENZHEN JINGWAH. . . . . . . . . .	204
APPENDIX VIII —	LETTER FROM BAKER TILLY HONG KONG LIMITED
	IN RELATION TO THE PROFIT FORECAST
	OF SHENZHEN JINGWAH. . . . . . . . . . . . . . . . . . . . . . . . . . . . .	205

— i —

DEFINITIONS

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

“Board” the board of Directors; “Business Day” any day on which the Stock Exchange is open for the business of dealing in securities; “CEC” China Electronics Corporation ( 中國電子信息產業集團有限公司 ), the ultimate controller of the Company; “Company” Nanjing Panda Electronics Company Limited ( 南京熊猫電子股份有限公司 ), a joint stock company incorporated in the PRC with limited liability; “Completion Date” a date within 90 Business Days after the Equity Transfer Agreement beomes effective and when the Sale Interest are to be transferred to the Company; “connected person(s)” has the meaning ascribed to it under the Listing Rules; “CSRC” China Securities Regulatory Commission; “Director(s)” the directors of the Company; “EGM” the extraordinary general meeting of the Company to be convened and held on Friday, 21 November 2014 for the purposes of considering and, if thought fit, approving, inter alia, the Equity Transfer, the execution of the Equity Transfer Agreement and the transaction contemplated thereunder;

“Enlarged Group” the Group as enlarged by the Target Group upon completion of the Equity Transfer;

— ii —

DEFINITIONS

“Equity Transfer”

the transfer of 5.07% equity interests in Shenzhen Jingwah by PEGL (as the transferor) to the Company (as the transferee) at the cash consideration of RMB 50,365,830;

“Equity Transfer Agreement” an equity transfer agreement dated 14 July 2014 in respect of the Equity Transfer entered into by the Company and PEGL, major terms of which are set out in this circular;
“Gram Capital” or Gram Capital Limited, a licensed corporation to carry out Type “Independent Financial 6 (advising on corporate finance) regulated activity under SFO Adviser” and the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in respect of the Equity Transfer Agreement and the Equity Transfer;

“Group” the Company and its subsidiaries;

“HK$” Hong Kong dollars, the lawful currency of Hong Kong;
“Hong Kong” Hong Kong Special Administration Region of the PRC;
“Independent Board an independent committee of the Board comprising all independent Committee” non-executive Directors, namely Ms. Zhang Xiuhua, Ms. Liu Danping and Mr. Chu Wai Tsun, Vincent;
“Independent Shareholders” Shareholders other than PEGL and its associates;
“Independent Third Part(ies)” third part(ies) independent of the Company and its connected persons as defined under the Listing Rules;
“Latest Practicable Date” 31 October 2014, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained herein;
“Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange (as amended from time to time);
“Mr. Deng” Mr. Deng Weiming, a non-executive Director;
“Mr. Hsuan” Mr. Jason Hsuan, a non-executive Director;

— iii —

DEFINITIONS

“Mr. Lai”	Mr. Lai Weide, an executive Director;
“Mr. Lu”	Mr. Lu Qing, a non-executive Director;
“Mr. Xu”	Mr. Xu Guofei, an executive Director;
“NEIIC”	Nanjing Electronics Information Industrial Corporation (南京中電
	熊猫信息產業集團有限公司), the controlling shareholder of PEGL
	and directly holding 4.29% equity interest in the Company;
“PEGL”	Panda Electronics Group Limited (熊猫電子集團有限公司), the
	controlling Shareholder of the Company holding approximately
	36.63% of the total issued share capital of the Company as at the
	Latest Practicable Date;
“PRC”	the People’s Republic of China (for the purpose of this circular,
	excluding Hong Kong, Macau and Taiwan);
“PRC Lawyer”	Yongheng Partners (江蘇永衡昭輝律師事務所);
“PRC Valuer”	Vocation (Beijing) International Assets Valuation Company
	Limited (沃克森(北京)國際資產評估說明有限公司);
“Supplemental Proxy Form”	the supplemental form of proxy for use at the EGM;
“RMB”	Renminbi, the lawful currency of the PRC;
“Sale Interest” or	5,834,430 shares (representing 5.07% of the total share capital) of
“transaction subject”	Shenzhen Jingwah held by PEGL;
“SFO”	The Securities and Futures Ordinance (Chapter 571 of Laws of
	Hong Kong);
“Shareholder(s)”	holder(s) of the share(s) of the Company;
“Shenzhen Jingwah” or	Shenzhen Jingwah Electronics Co., Ltd. (深圳市京華電子股份有
“Target Company”	限公司), a company incorporated in the PRC with limited liability,
	the Company holding its 38.03% equity interests as at the Latest
	Practicable Date;

— iv —

DEFINITIONS

“Significant Asset Purchase” the purchase of the Sale Interest, acquisition of the control of Shenzhen Jingwah and the consolidation of its financial statements into the accounts of the Group; “Stock Exchange” The Stock Exchange of Hong Kong Limited; “SUAEE” Shanghai United Assets and Equity Exchange; “Target Group” The Target Company and its subsidiaries; “Valuation Report” an asset evaluation statement dated 27 May 2014 in respect of all equity interests of Shenzhen Jingwah prepared by the PRC Valuer; “Valuation Report valuation report issued by Vigers in respect of the valuation of the on Property Interests” property interests of the Target Group as at 31 August 2014 “Vigers” Vigers Appraisal & Consulting Limited “%” per cent; “‰” per mille; and “2014 Interim Report” the interim report of the Company for the six months ended 30 June 2014.

The English names of the PRC established companies/entities in this circular are only translations of their official Chinese names. In case of inconsistency, the Chinese names prevail.

In this circular, for the purposes of illustration only, amounts quoted in RMB have been converted into HK$ at the rate of RMB1.00 to HK$1.26. Such exchange rate has been used, where applicable, for the purpose of illustration only and does not constitute a representation that any amount were or may have been exchanged at this or an other rates or at all.

— v —

LETTER FROM THE BOARD

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Executive Directors

Mr. Lai Weide (Chairman) Mr. Xu Guofei

Non-executive Directors

Mr. Deng Weiming Mr. Lu Qing Mr. Xia Dechuan Mr. Jason Hsuan

Independent non-executive Directors Ms. Zhang Xiuhua Ms. Liu Danping Mr. Chu Wai Tsun, Vincent

Registered Address: Level 1-2, Block 5, North Wing, Nanjing High and New Technology Development Zone, Nanjing, the PRC

Office Address: 301 Zhongshan Road East, Nanjing, the PRC Postal Code: 210002

5 November 2014

To the Shareholders

Dear Sir or Madam,

MAJOR AND CONNECTED TRANSACTION IN RELATION TO

EQUITY TRANSFER OF 5.07% OF EQUITY INTEREST IN SHENZHEN JINGWAH

1. INTRODUCTION

Reference is made to the announcement issued by the Company dated 15 July 2014 in relation to the Major and Connected Transaction in relation to the acquisition of 5.07% equity interests in Shenzhen Jingwah, which is subject to the approval of Shareholders at the EGM.

The purpose of this circular is to provide you with details of (i) the Equity Transfer; (ii) a letter from Gram Capital to the Independent Board Committee and the Independent Shareholders containing its advice on the Equity Transfer; (iii) a letter from the Independent Board Committee with its recommendations on the Equity Transfer to the Independent Shareholders and (iv) other information prescribed by the Listing Rules.

— 1 —

LETTER FROM THE BOARD

2. THE EQUITY TRANSFER/SIGNIFICANT ASSET PURCHASE

BACKGROUND INFORMATION

Reference is made to the announcement dated 15 July 2014 in relation to the Major and Connected Transaction in relation to the acquisition of 5.07% equity interests in Shenzhen Jingwah, which is subject to the approval of Shareholders at the EGM.

In accordance with the relevant laws and regulations on transfer of state-owned property right in the PRC, PEGL listed its 5.07% equity interests in Shenzhen Jingwah on SUAEE for open bidding by public bidders from 13 June 2014 to 11 July 2014. On 10 July 2014, the Company convened an extraordinary meeting of the seventh session of the Board for approving the Company to participate in the bidding for 5,834,430 shares of Shenzhen Jingwah which were listed on SUAEE for transfer (the issue is subject to the approval at a general meeting of the Company). On 11 July 2014, the Company bid for the equity interests at the bidding price of RMB50,365,830 (approximately HK$63,460,946). The bidding price is equivalent to the listing price of the equity interests at SUAEE, and the Company has successfully bid the equity interests.

Therefore, on 14 July 2014, the Company entered into the Equity Transfer Agreement with PEGL, pursuant to which, PEGL (as the transferor) agreed to transfer 5.07% equity interests in Shenzhen Jingwah to the Company (as the transferee) at the cash consideration of RMB50,365,830 (approximately HK$63,460,946).

On 15 July 2014, the Board resolved to approve, among others, (a) the significant asset restructuring; (b) the Equity Transfer Agreement; and (c) Draft Report on Significant Asset Purchase and Connected Transaction of the Company and its Abstract.

The Draft Report on Significant Asset Purchase and Connected Transaction of the Company (“Draft Report”) is prepared in accordance with the requirements of CSRC. The scope of the Draft Report is mainly on:

(a) Background information of the Equity Transfer;
(b) Basic information of the Company and PEGL;
(c) Basic information on Shenzhen Jingwah; and
(d) Valuation, financial information and profit forecast of Shenzhen Jingwah.

— 2 —

LETTER FROM THE BOARD

Material information of the Significant Asset Purchase has been disclosed in this circular and investors can also refer to the Draft Report (in Chinese only), on the website of the Stock Exchange (www.hkexnews.hk) published by the Company on 15 July 2014.

As advised by the PRC Lawyer, the Board is of the view that the Significant Asset Purchase is in compliance with the relevant laws and regulations, departmental rules and regulating documents such as the Company Law of the PRC, the Securities Law of the PRC, the Administrative Measures on Significant Assets Restructuring of Listed Companies (上市公司重大資產重組管理辦法), Regulations in Relation to Regulating Issues Arising from Significant Assets Restructuring of Listed Companies (關於規範上市公司重大資產重組若干問題的規定) and satisfies the requirements for the significant asset restructuring.

PARTICULARS OF THE EQUITY TRANSFER AGREEMENT

The Equity Transfer Agreement is conditional upon Independent Shareholders’ approval at the EGM to be convened, details of which are set out below:

1. Date of agreement: 14 July 2014

2. Parties:

(i) PEGL (as the transferor)
(ii) the Company (as the transferee)

3. Assets transferred

As at the date of the Equity Transfer Agreement, the Company and PEGL held 38.03% and 5.07% equity interests in Shenzhen Jingwah respectively. According to the Equity Transfer Agreement, PEGL (as the transferor) agreed to transfer its 5.07% equity interests in Shenzhen Jingwah to the Company (as the transferee).

4. Consideration and payment terms

According to the Equity Transfer Agreement, the total consideration of the Equity Transfer was RMB50,365,830 (approximately HK$63,460,946). The Company is to settle the same by way of cash.

In particular, the Company has paid to SUAEE a deposit of RMB15,100,000 (approximately HK$19,026,000), which will be used as part of the consideration of the Equity Transfer after the Equity Transfer Agreement comes into force.

— 3 —

LETTER FROM THE BOARD

The Company will pay the remaining consideration of the Equity Transfer of RMB35,265,830 (approximately HK$44,434,946) in cash to PEGL within three Business Days from the effective date of the Equity Transfer Agreement.

If the Company fails to pay the consideration in accordance with the terms of the Equity Transfer Agreement, an overdue daily interest at the rate of 0.5‰ of the unpaid consideration will be imposed. If the Company fails to pay the consideration for more than 30 days, PEGL has the right to terminate the Equity Transfer Agreement and claim damages against the Company.

The consideration is equivalent to the asking price of the bidding set at SUAEE, which is determined by PEGL according to the valuation of its valuer with reference to, among other things, the Valuation Report prepared by the PRC Valuer. The Directors consider that the independence of the PRC Valuer was not impaired. The PRC Valuer, is a renowned valuation institution in the PRC which is quaified to carry out securities and futures related valuation business with the qualification for property and land valuation. When preparing the Valuation Report, the PRC Valuer have observed relevant laws and regulations and asset valuation standards, and adhered to the principles of independence, objectiveness and fairness in the execution of the asset valuation practice. Based on the findings the PRC Valuer gathered during the execution process, all the statements made in the Valuation Report are objective and authentic.

On the other hand, the Valuation Report on Property Interests of Target Group was issued by Vigers appointed by the Company. Details of the Valuation Report on Property Interests is set out in Appendix IIC of this circular.

Given above, the Directors (including the independent non-executive Directors) consider that the consideration, based on the Valuation Report is fair and reasonable and in the interests of the Company and the Shareholders as a whole.

5. Profit or loss attributable to the Sale Interest during the transitional period

The Company shall take the profit or loss attributable to the Sale Interest during the period from the valuation date (i.e. 31 December 2013) to the Completion Date.

6. Transfer of ownership

Transfer of ownership shall take place within 60 Business Days from the effective date of the Equity Transfer Agreement. Completion shall take place within 90 Business Days after fulfillment of the conditions precedent and SUAEE approves or records the Equity Transfer.

— 4 —

LETTER FROM THE BOARD

If PEGL fails to transfer the ownership of the Sale Interest to the Company in accordance with the terms of the Equity Transfer Agreement, a daily interest at the rate of 0.5‰ on the total consideration will be imposed. If PEGL fails to transfer the Sale Interest for more than 30 days, the Company has the right to terminate the Equity Transfer Agreement and claim damages against PEGL.

7. Conditions precedent

The Equity Transfer Agreement shall take effect upon the satisfaction of the following conditions precedent:

(i) approval of the Equity Transfer at the EGM; and
(ii) submission of the Equity Transfer Agreement to CSRC for its approval or filing as required by the laws and administrative regulations of the PRC.

AUTHORIZATION TO THE BOARD

The Board also proposes that the Shareholders authorize the Board to deal with all matters relating to the Significant Asset Purchase, including but not limited to the following:

to implement and make corresponding adjustments to the specific plan of the Significant Asset Purchase if appropriate and in accordance with policy requirements and the actual situation of the securities market on the condition that the transaction is not changed. The Company would re-comply with all applicable Listing Rules requirements, which may include obtaining Shareholders’ approval, in cases when material changes to the transaction are proposed;
in accordance with the laws, regulations, normative documents and the Articles of Association of the Company, to prepare, amend, supplement and execute relevant transaction documents, agreements and supplementary documents in relation to the Significant Asset Purchase and reporting documents and announce the same according to the requirements of approval authorities and regulatory authorities;
to proceed with the approval and filing procedure in relation to the Significant Asset Purchase, prepare, execute and submit relevant reporting documents;
to engage intermediaries such as financial adviser(s), audit firm(s), assets valuers and law firm(s) to provide services in respect of the Significant Asset Purchase;
to deal with other matters relating to the Significant Asset Purchase; and

— 5 —

LETTER FROM THE BOARD

these authorizations shall be valid for a period of 12 months from the date of passing of this resolution.

INFORMATION ON THE GROUP AND PEGL

The Group is principally engaged in the research and development, manufacture and sale of electronic equipment and consumer electronics as well as electronics manufacturing services.

PEGL is principally engaged in development, manufacture, sales and maintenance of various kinds of communication equipment, home appliance products, electronic equipment, electronic intelligent equipment, computer and other electronic equipment, radio and television equipment, video and audio equipment, electronic devices and components, environment protection equipment, social public service and other special equipment, electronics and electrical machinery equipment, instruments and meters, office machinery, general finance/tax control equipment; development of computers and IT software, system integration equipment and services; property management.

As at the Latest Practicable Date, PEGL is a shareholder of the Company, holding approximately 36.63% of the total issued share capital of the Company.

INFORMATION ON SHENZHEN JINGWAH

Shenzhen Jingwah was previously known as Shenzhen Jingwah Electronics Co., Ltd. (深圳京華電子有限公司). It was jointly established by Nanjing Panda Electronics Group Company Limited (南京熊猫電子集團公司), China Electronics Shenzhen Company, Nanjing Panda Newindustry Trading Company Limited（南京熊猫新產業工貿公司）, Dongguan Tangxia Kaili Industry Development Company (東莞市塘廈凱利實業開發公司) and internal employees on 8 May 1984 with the Administration for Industry and Commerce of Shenzhen. On 9 July 1993, it was reorganized as Shenzhen Jingwah Electronics Corporation Ltd. with the approval from Shenzhen Municipal People’s Government (Shen Fu Ban Fu [1993] No.748) and its registered capital amounted to RMB115,070,000.

Shenzhen Jingwah is principally engaged in the production of broadcast and TV equipment, communications equipment, home appliances, electronic and mechanical parts and components, electrical instrumentation as well as plastic injection products and moulds (another production license); domestic commerce, material supply and sales (excluding franchised, controlled or exclusive goods); import and export of goods and technology, etc.

Before the Equity Transfer, the Company, PEGL and other shareholders held 38.03%, 5.07% and 56.9% interests in Shenzhen Jingwah, respectively.

— 6 —

LETTER FROM THE BOARD

Upon the completion of the Equity Transfer, the Company will hold 43.10% equity interests in Shenzhen Jingwah. On 29 May 2014, Shenzhen Jingwah convened a general meeting for considering and approving the resolution in relation to the composition of the members of the board of Shenzhen Jingwah, at which the board of Shenzhen Jingwah was approved to be comprised of nine directors and five of which are to be appointed by the Company. The resolution will be effective upon the completion of the Equity Transfer Agreement.

Pursuant to the above, Shenzhen Jingwah will be controlled by the Company upon the completion of the Equity Transfer Agreement, thus the accounts of Shenzhen Jingwah will be consolidated in the accounts of the Group.

The completion of the Equity Transfer shall be subject to the fulfillment of the following conditions: (i) consideration and approval of the Equity Transfer at the general meeting of the Company; and (ii) approval or filing of the Equity Transfer by CSRC.

FINANCIAL INFORMATION OF SHENZHEN JINGWAH

The consolidated financial information of Shenzhen Jingwah for the three financial years ended 31 December 2011, 2012 and 2013 and six months ended 30 June 2014 is set out below.

	Six months ended
	30 June	Year ended 31	Year ended 31	Year ended 31
	2014	December 2013	December 2012	December 2011
	(Audited)	(Audited)	(Audited)	(Audited)
	RMB’000	RMB’000	RMB’000	RMB’000
Profit before tax	42,828	65,589	63,425	47,253
Profit after deduction of
tax and extraordinary items	35,546	49,228	48,456	35,582
	At 30 June	At 31 December	At 31 December	At 31 December
	2014	2013	2012	2011
	(Audited)	(Audited)	(Audited)	(Audited)
	RMB’000	RMB’000	RMB’000	RMB’000
Total assets	431,594	440,238	449,654	387,095
Total liabilities	132,030	141,700	150,424	98,001
Net assets	299,564	298,538	299,230	289,094

— 7 —

LETTER FROM THE BOARD

In accordance with the Valuation Report as at 31 December 2013 prepared by the PRC Valuer, the appraised value of total assets and net assets of Shenzhen Jingwah amounted to RMB1,034,826,000 (approximately HK$1,303,880,000) and RMB993,409,000 (approximately HK$ 1,251,695,000) respectively. The PRC Valuer is of the opinion that the Valuation Report is effective within one year from 31 December 2013. In the valuation of Shenzhen Jingwah, with 31 December 2013 as the reference date, the PRC Valuer adopted both asset-based method and income method to appraise the value. The Summary of the Valuation Report is set out in Appendix IIA of this circular.

The income approach referred in the Valuation Report constitutes profit forecast under the Rule 14.61 of the Listing Rules and the Board is satisfied that the calculations under the income approach has been made after due and careful enquiry and a letter from the Board and the full text of the letter from Baker Tilly Hong Kong Limited are set out in Appendix IIB(1) and IIB(2) to this circular.

According to the asset valuation results, the appraised value of the investment property of Shenzhen Jingwah is RMB588,854,900, representing nearly 60% of the valuation conclusion of RMB993,409,000. It means that property accounts for a large proportion in the valuation conclusion and the proportion of consumer electronics is relatively small.

According to the information published by Wind Information (www.wind.com.cn), the change in the average price of commodity property in Shenzhen Futian District, where Shenzhen Jingwah is located, for the period from 31 December 2013 to 30 September 2014 is 0.10%.

According to the website of Shenzhen Huaqiang North Index (www.hcsindex.org), the comprehensive index of electronic products is 97.31 for September 2014 and 92.87 for December 2013, representing a change of 4.78%.

The rapid development of consumer electronics industry as stated in the valuation report is relative to the long term development trend of the entire industry. Overall, the changes in the property and consumer electronics industries for the period from December 2013 to September 2014 are not big.

Given the above, the value of Shenzhen Jingwah under the Valuation Report is still valid and fairly reflected the latest fair value of Shenzhen Jingwah and is sufficient for shareholders for making informed decision.

Further, according to the Valuation Report on Property Interests of Target Group issued by Vigers appointed by the Company, the valuation of the property interests of Target Group is approximately RMB 603,700,000.00 as at 31 August 2014. The Board confirmed that the properties assets are classified as investment properties, which are stated at cost less accumulated depreciation and impairment losses. Depreciation is calculated using straight-line method to allocate their costs to their residual values over their lease terms of 10 to 30 years.

— 8 —

LETTER FROM THE BOARD

Moreover, according to the Valuation Report on Property Interests of Target Group issued by Vigers, as there is no State-owned Land Use Rights Certificate and the Building Ownership Certificate for the property leased by Longgang Jingwah, Vigers has ascribed no commercial value to such property as opposed to the appraised value of Longgang Jingwah of RMB56,944,000 as at 31 December 2013 by the PRC Valuer. Despite the discrepancies between the two valuation results, the Board considers the appraised value of RMB56,944,000 in the Valuation Report is fair and reasonable because pursuant to a Co-operation of Developing Land Agreement (合作開發土地協議書) (“Co-operation Agreement”) between Shenzhen Longgang District Pinghu Town Liang An Tian Economic Development Company (深圳市龍崗區平湖鎮良安田經濟發展公司) (“Liang An Tian”) and Shenzhen Jingwah, Shenzhen Jingwah has been allowed to erect buildings on the land of the property for owner-occupation and leasing for a term of 40 years commencing from 15 February 1993 to 14 February 2033. In view of the property can be leased to receive rent for the remaining term of the above Co-operation of Developing Land Agreement, Vigers opined that the investment value of this property to Shenzhen Jingwah as at 31 August 2014 was RMB80,000,000 (equivalent to approximately HK$100,800,000). Investment value is recognised as a non-market value and only reflects the benefits that an owner of an asset enjoys from the ownership of the asset.

Liang An Tian is invested and established by the Pinghu Town Government, Longgang District, Shenzhen. Shenzhen Jingwah and Liang An Tian entered into a Co-operation Agreement on 15 February 1993. The validity and execution of the agreement was secured with the signature and seal of the Government of Pinghu Town, Longgang District, Shenzhen. Pursuant to the Co-operation Agreement, Liang An Tian and Shenzhen Jingwah would jointly developed the land and build plants by way of land investment and capital investment respectively, with a co-operation term of 40 years commencing from 15 February 1993 to 14 February 2033 (the “Co-operation Period”). The property is leased by Longgang Jingwah to various tenants under different tenancies. Pursuant to the opinions of the lawyers in PRC, if Liang An Tian recovered the land before the expiration of the Co-operation Period, even though the property has not yet obtained the State-owned Land Use Rights Certificate and the Building Ownership Certificate, Shenzhen Jingwah is still entitled to claim its loss from Liang An Tian arising from the violation of the agreement by Liang An Tian in accordance with the “Contract Law of the PRC” 《中華人民共和國合同法》( ) and other relevant rules and regulations. Therefore, the interest of the Company could be secured.

Taking into account of the opinions of the lawyers in the PRC and the Co-operation Agreement, the Board is of the view that the interest of the Company regarding the Co-operation Agreement could be secured and that the valuation as stated in the Valuation Report is fair and reasonable.

— 9 —

LETTER FROM THE BOARD

The Valuation Report on Property Interests of Target Group prepared by an independent property valuer, Vigers in accordance with Chapter 5 and Practice Note 12 of the Listing Rules is set out in Appendix IIC to this circular.

PROFIT FORECAST OF SHENZHEN JINGWAH

In accordance with the PRC laws and regulations, the Board has considered and approved the publication of the profit forecast of Shenzhen Jingwah as at 31 December 2014 at the meeting of the Board convened on 15 July 2014, which has been disclosed by the Company on the Shanghai Stock Exchange on 15 July 2014. In accordance with the PRC laws and regulations, the Board has prepared the updated profit forecast of Shenzhen Jingwah for the year ending 31 December 2014 and the year ending 31 December 2015 (“Profit Forecast of Shenzhen Jingwah”), the summary of which are set out as below.

The Profit Forecast of Shenzhen Jingwah is based on various estimation assumptions. Although the principle of prudence has been followed, there are still uncertainties with the estimation assumptions. Therefore, there may be discrepancies between the actual operating results and profit forecast results. Thus, investors are advised to exercise caution.

(RMB’000)

							2014
						Actual	Forecast
			Actual	Actual	Actual	amount for	amount for		Forecast
			amount for	amount for	amount for	Jan – Jun	Jul – Dec		amount for
Items			2011	2012	2013	2014	2014	Total	2015
I.	Operating	income	840,173.8	1,301,062.8	1,656,729.7	409,933.4	620,012.1	1,024,945.5	1,082,078.3
	Less:	Operating cost	724,627.2	1,148,088.3	1,490,523.4	334,569.4	561,890.1	896,459.5	945,211.5
		Business taxes and
		surcharges	6,977.6	6,937.2	8,448.4	3,595.6	2,797.2	6,392.8	6,677.4
		Selling expenses	7,279.1	9,321.9	9,985.4	5,487.3	5,439	10,926.3	10,917.1
		Administrative expenses	51,954.4	74,006.4	85,341.1	23,093.2	30,839.6	53,932.8	52,347.4
		Financial expenses	-2,958.4	-1,443.3	-1,241.7	-1,665.4	21.9	-1,643.5	207.4
		Loss in assets impairment	3,308.9	182.1	444.5	36.6	—	36.6	—
	Add:	Income from change in
		fair value (losses are
		represented by “–”)	—	—	—	—	—	—	—
		Investment income
		(losses are represented
		by “–”)	192.7	-136	904.9	2,631.1	—	2,631.1	—
	Include:	Investment
		income of associates
		and joint ventures	192.7	-136	-357.7	103.3	—	103.3	—
II.	Operating	profit (losses are
	represented by “–”)		49,157.7	63,834.2	64,133.5	42,447.8	19,024.3	61,472.1	66,717.5
	Add:	Non—operating income	2,230.1	474.9	2,461.6	634.7	—	634.7	—
	Less:	Non—operating expenses	4,135.5	883.6	1,005.9	254	—	254	—

— 10 —

LETTER FROM THE BOARD

Items III. Total profit (losses are represented by “–”) Less: Income tax IV. Net Profit (net losses are represented by “–”) Net profit attributable to the equity shareholders of the Parent company Non—controlling interests V. Earnings per share VI. Other comprehensive income VII. Total comprehensive income Total comprehensive income attributable to the equity shareholders of the Parent company Total comprehensive income attributable to minority shareholders	Actual amount for 2011 47,252.3 11,670.7 35,581.6 29,558.6 6,023 35,581.6 29,558.6 6,023	Actual amount for 2012 63,425.5 14,969.4 48,456.1 39,169.1 9,287 48,456.1 39,169.1 9,287	Actual amount for 2013 65,589.2 16,361 49,228.2 39,252.2 9,976 49,228.2 39,252.2 9,976	Actual amount for Jan – Jun 2014 42,828.5 7,282.2 35,546.3 29,944.2 5,602.1 35,546.3 29,944.2 5,602.1	2014 Forecast amount for Jul – Dec 2014 19,024.3 6,018.7 13,005.6 10,492.2 2,513.4 13,005.6 10,492.2 2,513.4	Total 61,852.8 13,300.9 48,551.9 40,436.4 8,115.5 48,551.9 40,436.4 8,115.5	Forecast amount for 2015 66,717.5 13,971.7 52,745.8 43,765.5 8,980.3 52,745.8
							43,765.5
							8,980.3

Taking into account of the change tendency of the domestic market and adhering to the principle of being practical, realistic and prudent, the Profit Forecast of Shenzhen Jingwah is prepared based on the actual operating performance of Shenzhen Jingwah in the preceding three years ending 31 December 2011, 31 December 2012 and 31 December 2013 and the six months ending 30 June 2014 audited by certified public accountants with licenses of securitiesrelated business, and its production and operation capability, investment plans as well as its production and operation plans in 2014. The applicable accounting policies and the applied calculation method are in compliance with the existing laws, regulations, accounting standards and generally applied accounting policies of the PRC.

The Profit Forecast of Shenzhen Jingwah is based on the following assumptions:

(1) The revenue forecast of consumer electronic products for the second half of 2014 is based on the actual sales for the second half of 2013, and adjusted according to the decrease in sales in the first half of 2014. The management expects that the sales for the year of 2014 to decrease by approximately 41% as compared with that of 2013. Moreover, the revenue forecast of 2015 is based on the sales in the year of 2014, and adjusted by the growth rate of approximately 6%. According to Wind Information, the sales growth rate of the electronics components and parts manufacturing industry in mainland China increased by approximately 6% annually in the past five years. Wind Information is the leading enterprise in mainland China which provides financial information and software services.

— 11 —

LETTER FROM THE BOARD

(2) The revenue forecast of property leasing is based on the actual revenue of 2013 and the average annual growth rate of the property leasing price index in Shenzhen in the past five years, which is approximately 5%.
(3) Cost of sales and gross profit are forecasted based on Shenzhen Jingwah’s 2013 gross profit margins of consumer electronic products and property leasing, respectively.
(4) There are no material changes on the state and the relevant local laws, regulations and economic policies currently applicable to Shenzhen Jingwah.
(5) There are no material changes on the industry and the market of the products of Shenzhen Jingwah engaged in.
(6) The production and operation of Shenzhen Jingwah are free from the adverse effects of the critical shortage of raw materials and the material changes in costs and other expenses.
(7) There will be no material changes in the current interest rates and exchange rates in the PRC.
(8) There will be no changes in the current tax debt and tax rate policy of Shenzhen Jingwah.
(9) There will be no material changes in politics, economy, finance, law and supervision and other external macro-environmental factors in the countries or regions where overseas operations are located.
(10) There will be no other force majeure or unforeseeable factors which will have a material adverse effect.
(11) There will not be material changes in specification of all electronic products and product mix to be sold by Shenzhen Jingwah.
(12) There will not be material changes in demand for electronic products in the PRC and the pricing policies as set by major suppliers and subcontractors will not be changed significantly.

The Board is satisfied that the Profit Forecast of Shenzhen Jingwah, for which the Directors are solely responsible, have been made after due and careful enquiry. In the event that certain events occur during the profit forecast period which causes significant changes in the assumptions above, the Company will make further announcement to announce its view of the relevant events and their likely impact on the Profit Forecast of Shenzhen Jingwah.

— 12 —

LETTER FROM THE BOARD

REASONS FOR AND BENEFITS OF THE EQUITY TRANSFER

1. Enhancing the Company’s scale of income and overall competitiveness

Through the subject transaction, the Company’s scale of income will be substantially enhanced, the business operation area will expand from the Yangtze River Delta to the Pearl River Delta and foreign customers of consumer electronics will increase. The transaction is conducive to the further enhancement of the Company’s overall competitiveness, market development capacity, resource control capacity and followup development capacity in the domestic and foreign markets, improvement of the Company’s profit composition, promotion of the Company’s earnings level and strengthening of the Company’s anti-risk capability and sustainable development capacity.

2. Improving the standard management of investee companies

Before the transaction, Shenzhen Jingwah is held as to 38.03% by the Company and 4 of its 9 directors were recommended by the Company. Shenzhen Jingwah is an important investee company of the Company. The investment received by the Company from Shenzhen Jingwah amounted to RMB14.90 million and RMB14.94 million for 2012 and 2013, respectively. After the transaction, the Company will have the right to appoint 5 directors who will account for the majority in the board of directors of Shenzhen Jingwah; the Company will establish and improve the corporate governance structure of Shenzhen Jingwah and promote its standard operation capacity, profitability and earnings level in accordance with the standard governance requirements of the Company, thus promoting the earning performance of the Company.

3. Expanding the Company’s consumer electronic products field

The Company is principally engaged in research, development and sales of electronic equipment and consumer electronics as well as electronics manufacturing services, of which, consumer electronics are mainly digital home related products. After the transaction, the consumer electronics products of the Company will be increased by the tablet personal computer, car navigator and other digital products engaged in by Shenzhen Jingwah, expanding the Company’s consumer electronic products field.

Taking into account the above reasons, the Directors (of which the opinions of independent non-executive Directors are set in “Letter From The Independent Board Committee” on page 18 of this circular) are of the view that the terms of the Equity Transfer Agreement are fair and reasonable, the Equity Transfer is on normal commercial terms and in the ordinary and usual course of business of the Group and is in the interest of the Company and the Shareholders as a whole.

— 13 —

LETTER FROM THE BOARD

FINANCIAL EFFECT OF THE EQUITY TRANSFER

The transaction will achieve the expansion of the Company’s categories of consumer electronic products, enlarge the assets scale, coordinate integrated operation, further exploit potentialities and increase benefits, effectively promote industrial synergistic effects and accelerate the effective integration of the Company’s business segment of consumer electronics, which will be favorable for continuously enhancing the Company’s profitability. The total assets and operating income of the Company will be increased.

Shenzhen Jingwah, headquartered in the prosperous Huaqiang North, Futian District, Shenzhen City, covers an area of 30,000 square meters and possesses owned properties with a floor area of over 50,000 square meters. In 1999, Jingwah Properties Company (京華物業公司) was incorporated to implement market-oriented development management for the headquarter. At present, it has become a prosperous business area integrating shopping plaza, hotel and communication support market. With the continuous expansion of production and operation, Shenzhen Jingwah has also constructed a Jingwah industrial line in Pinghu, Longgang. These owned properties will provide a sustained and stable income stream to the Company. Shenzhen Jingwah has 19 investment properties with gross floor area of 50,420.11 square meters for leasing purpose, among which 17 properties are located at North Huafa Road in Futian district of Shenzhen where forms part of the Huaqiangbei commercial zone, one of the largest electronic markets with prosperous business in China. For the year of 2012 and 2013 and from January to June 2014, the revenues from property leasing were RMB62.08 million, RMB66.35 million and RMB37.157 million respectively, representing 4.76%, 4.01% and 9.18% of the revenue of Shenzhen Jingwah for respective period.

Shenzhen Jingwah will be controlled by the Company upon the completion of the Equity Transfer Agreement, thus the consolidated profit or loss and assets and liabilities of Shenzhen Jingwah will be accounted for in the consolidated financial statements of the Group. The Unaudited Pro Forma Financial Information of the Enlarged Group is set out in Appendix V to this circular.

The Board has considered the “Unaudited Pro Forma Financial Information of the Enlarged Group” set out in Appendix V to this circular and noted the following financial effects of the Equity Transfer (assuming the completion of the Equity Transfer had occurred on 30 June 2014) on the Enlarged Group as compared to the financial position of the Group as at 30 June 2014:

Total assets Total liabilities Net assets	The Group RMB’000 4,226,777 (1,073,763) 3,153,014	The Enlarged Group RMB’000 4,509,860 (1,205,769) 3,304,091

— 14 —

LETTER FROM THE BOARD

The Group and the Enlarged Group made certain improvements in terms of total assets, total liabilities and the net assets.

Upon completion of the Equity Transfer, the financial statements of Shenzhen Jingwah will be consolidated into the consolidated financial statements of the Company, indicators of scale of business and profitability of the Company would record a growth. With the additional 5.07% shareholdings in Shenzhen Jingwah, the Company’s net profit attributable to the parent company would also increase upon the consolidation. In light of this the Directors are of the view that the Equity Transfer would likely to have a positive impact on the future earnings of the Company.

REQUIREMENTS UNDER THE LISTING RULES

As the accounts of Shenzhen Jingwah will be consolidated in accounts of the Group, in accordance with Rule 14.28 of the Listing Rules, one or more of relevant applicable percentage ratios of the Equity Transfer exceed 25% but are lower than 100%, the Equity Transfer constitutes a major transaction of the Company under Chapter 14 of the Listing Rules. Therefore, the Equity Transfer is subject to the reporting, announcement and the Independent Shareholders’ approval requirements under Chapter 14 of the Listing Rules.

As PEGL is the controlling Shareholder, it is a connected person of the Company as defined by Rule 14A.07 of the Listing Rules. Therefore, the Equity Transfer also constitutes a non-exempt connected transaction of the Company and is subject to the reporting, announcement and the Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

3. THE EGM

A revised notice convening the EGM and the Supplemental Proxy Form for the EGM are also enclosed herewith. Please refer to the announcements of the Company dated 15 July 2014 and 9 October 2014 for details of the EGM which is to be held at the Company’s Conference Room, 301 Zhongshan Road East, Nanjing, the People’s Republic of China on Friday, 21 November 2014 at 2:30 p.m. The register of members relating to H-shares of the Company will be closed from 16 August 2014 to 21 November 2014, both days inclusive, during which period no transfer of H-shares of the Company will be registered. In order to attend the EGM, all transfers accompanied by the relevant share certificates must be lodged with the share registrar of the Company in Hong Kong, Hong Kong Registrars Limited, at 46th Floor, Hopewell Center, 183 Queen’s Road East, Hong Kong, no later than 4:00 p.m. on Friday, 15 August 2014.

Pursuant to Chapter 14A of the Listing Rules, any Shareholder with a material interest in the Equity Transfer will not vote on such transaction.

— 15 —

LETTER FROM THE BOARD

As at the Latest Practicable Date, PEGL is a shareholder of the Company, holding approximately 36.63% of the total issued share capital of the Company, while NEIIC holds 56.85% equity interest in PEGL, the controlling shareholder of the Company, and is therefore the controlling shareholder of PEGL. In addition, NEIIC holds approximately 4.29% of the total issued share capital of the Company. CEC is the ultimate controlling shareholder of the Company and holds 70% of the issued share capital of NEIIC.

As disclosed in Appendix I to this circular, Mr. Lai holds offices in CEC, NEIIC and PEGL, Mr. Xu holds offices in CEC, NEIIC and PEGL, Mr. Deng and Mr. Lu hold offices in PEGL, and Mr. Hsuan holds an office in TPV Technology, and are all therefore connected persons of the Company and had abstained from voting on the relevant resolutions of the Board approving the Equity Transfer, the execution of the Equity Transfer Agreement and the transaction contemplated thereunder.

Mr. Xu, who holds approximately 0.00028% of the total issued share capital of the Company, is a connected person of the Company. Mr. Xu holds offices in CEC, NEIIC and PEGL as disclosed in Appendix I to this circular. Therefore, CEC, NEIIC, PEGL and its associates and Mr. Xu will be required to abstain from voting in respect of the resolutions approving the Equity Transfer, the execution of the Equity Transfer Agreement and the transaction contemplated thereunder.

Save as disclosed above, no other associates of CEC, NEIIC or PEGL holds any shares in the Company and will be required to abstain from voting in respect of the resolutions approving the Equity Transfer, the execution of the Equity Transfer Agreement and the transaction contemplated thereunder.

4. PROXY ARRANGEMENT

The Supplemental Proxy Forms are enclosed herewith. Whether or not you intend to attend the EGM, you are requested to complete the Proxy Form in accordance with the instructions printed thereon and return the same to the office of the Company as soon as possible but in any event not less than 24 hours before the time appointed for holding the EGM or any adjournment thereof. Completion and return of the Proxy Form will not preclude you from attending and voting at the EGM or any adjourned meeting should you so wish.

5. VOTING BY POLL

Pursuant to Rule 13.39(4) of the Listing Rules, any vote of shareholders at a general meeting must be taken by way of poll. The results of the poll will be published on the HKExnews website at www.hkexnews.hk and the Company’s website at www.panda.cn after the EGM as soon as possible.

— 16 —

LETTER FROM THE BOARD

6. RECOMMENDATION

The Directors (including the independent non-executive Directors) are of the opinion that the Equity Transfer is fair and reasonable and is in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors (including the independent non-executive Directors) recommend the Independent Shareholders to vote in favour of the relevant resolutions to be proposed at the EGM.

The text of the letter from the Independent Board Committee is set out on page 18 of this circular. The text of the letter from Gram Capital containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 19 to 29 of this circular. Independent Shareholders are strongly recommended to read carefully these two letters for details of the advice.

7. ADDITIONAL INFORMATION

Your attention is drawn to the additional information set out in the appendices to this circular as required under the Listing Rules

By order of the Board

Nanjing Panda Electronics Company Limited Lai Weide Chairman

— 17 —

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

The following is the text of a letter of recommendation from the Independent Board Committee to the Independent Shareholders which has been prepared for the purpose of inclusion in this circular.

==> picture [433 x 55] intentionally omitted <==

5 November 2014

To the Independent Shareholders

Dear Sir or Madam,

EQUITY TRANSFER, EQUITY TRANSFER AGREEMENT AND TRANSACTION CONTEMPLATED THEREUNDER

We have been appointed as members of the Independent Board Committee to advise you in connection with the Equity Transfer, Equity Transfer Agreement and the transaction contemplated thereunder, details of which are set out in the Letter from the Board contained in the circular dated 5 November 2014 issued by the Company to the Shareholders (the “Circular”), of which this letter forms part. Unless specified otherwise, capitalized terms used herein shall have the same meanings as those defined in the Circular.

Having considered the terms of the Equity Transfer Agreement and the interests of the Company and the Shareholders as a whole so far as the Independent Shareholders are concerned and having considered the advice of Gram Capital and the principal factors and reasons taken into consideration by it in arriving at its advice as set out on pages 19 to 29 of the Circular, we are of the opinion that the terms of the Equity Transfer Agreement are fair and reasonable and the Equity Transfer is on normal commercial terms and in the ordinary and usual course of business of the Group and is in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the relevant ordinary resolutions to be proposed at the EGM.

Yours faithfully,

For and on behalf of the

Independent Board Committee

Ms. Zhang Xiuhua Ms. Liu Danping Mr. Chu Wai Tsun, Vincent

Independent Non-executive Directors

— 18 —

LETTER FROM GRAM CAPITAL

Set out below is the text of a letter received from Gram Capital, the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in respect of the Equity Transfer for the purpose of inclusion in this circular.

Room 1209, 12/F. Nan Fung Tower 173 Des Voeux Road Central Hong Kong

5 November 2014

To: The independent board committee and the independent shareholders

of Nanjing Panda Electronics Company Limited

Dear Sirs,

MAJOR AND CONNECTED TRANSACTION IN RELATION TO THE EQUITY TRANSFER OF 5.07% EQUITY INTERESTS IN SHENZHEN JINGWAH

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 Equity Transfer, details of which are set out in the letter from the Board (the “ Board Letter ”) contained in the circular dated 5 November 2014 issued by the Company to the Shareholders (the “ Circular ”), of which this letter forms part. Terms used in this letter shall have the same meanings as defined in the Circular unless the context requires otherwise.

On 14 July 2014, the Company entered into the Equity Transfer Agreement with PEGL, pursuant to which, PEGL (as the transferor) agreed to transfer 5.07% equity interests in Shenzhen Jingwah to the Company (as the transferee) at the cash consideration of RMB50,365,830 (equivalent to HK$63,460,946) (the “ Consideration ”).

With reference to the Board Letter, the Equity Transfer constitutes a major and connected transaction for the Company under Chapters 14 and 14A of the Listing Rules respectively. As such, the Equity Transfer is subject to the reporting, announcement and independent shareholders’ approval requirements under the Listing Rules.

— 19 —

LETTER FROM GRAM CAPITAL

The Independent Board Committee comprising Ms. Zhang Xiuhua, Ms. Liu Danping and Mr. Chu Wai Tsun, Vincent (all being independent non-executive Directors) has been established to advise the Independent Shareholders on (i) whether the terms of the Equity Transfer Agreement are on normal commercial terms and are fair and reasonable so far as the Shareholders are concerned; (ii) whether the Equity Transfer is in the interests of the Company and the Shareholders as a whole and is conducted in the ordinary and usual course of business of the Group; and (iii) how the Independent Shareholders should vote in respect of the resolution(s) to approve the Equity Transfer Agreement and the transactions contemplated thereunder at the EGM. We, Gram Capital Limited, have been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this respect.

BASIS OF OUR OPINION

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 Circular and the information and representations as provided to us by the Directors. We have assumed that all information and representations that have been 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 Latest Practicable Date. We have also assumed that all statements of belief, opinion, expectation and intention made by the Directors in the Circular 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 Circular, or the reasonableness of the opinions expressed by the Company, its advisers and/or the Directors, which have been provided to us. Our opinion is based on the Directors’ representation and confirmation that there are no undisclosed private agreements/arrangements or implied understanding with anyone concerning the Equity Transfer. We consider that we have taken sufficient and necessary steps on which to form a reasonable basis and an informed view for our opinion in compliance with Rule 13.80 of the Listing Rules.

We have not made any independent evaluation or appraisal of the assets and liabilities of the Group, Shenzhen Jingwah or its subsidiaries, and we have not been furnished with any such evaluation or appraisal, save as and except for (i) the valuation report of Shenzhen Jingwah (the “ Valuation Report ”) prepared by the PRC Valuer, the summary of which is set out in Appendix IIA to the Circular; and (ii) the Valuation Report on Property Interests prepared by Vigers as set out in Appendix IIC to the Circular. Since we are not experts in the valuation of land, properties and/or business, we have relied solely upon the Valuation Report for the fair value of the equity interests of Shenzhen Jingwah as at 31 December 2013 (the “ Valuation ”).

— 20 —

LETTER FROM GRAM CAPITAL

The Directors have collectively and individually accepted full responsibility for the accuracy of the information contained in the Circular and have confirmed, having made all reasonable enquiries, which to the best of their knowledge and belief, that the information contained in the Circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement in the Circular or the Circular misleading. We, as the Independent Financial Adviser, take no responsibility for the contents of any part of the Circular, save and except for this letter of advice.

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 in-depth investigation into the business and affairs of the Company, Shenzhen Jingwah, PEGL or their respective subsidiaries or associates, nor have we considered the taxation implication on the Group or the Shareholders as a result of the Equity Transfer. Our opinion is necessarily based on the financial, economic, market and other conditions in effect and the information made available to us as at the Latest Practicable Date. Shareholders should note that subsequent developments (including any material change in market and economic conditions) may affect and/or change our opinion and we have no obligation to update this opinion to take into account events occurring after the Latest Practicable Date or to update, revise or reaffirm our opinion. In addition, nothing contained in this letter should be construed as a recommendation to hold, sell or buy any Shares or any other securities of the Company.

Lastly, where information in this letter has been extracted from published or otherwise publicly available sources, it is the responsibility of Gram Capital to ensure that such information has been correctly extracted from the relevant sources while we are not obligated to conduct any independent in-depth investigation into the accuracy and completeness of those information.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion in respect of the Equity Transfer, we have taken into consideration the following principal factors and reasons:

1. Background of and reasons for the Equity Transfer

Business overview of the Group

As referred to in the Board Letter, the Group is principally engaged in the research and development, manufacture and sale of electronic equipment and consumer electronics as well as electronics manufacturing services.

— 21 —

LETTER FROM GRAM CAPITAL

Set out below are the audited consolidated financial results of the Group for the two financial years ended 31 December 2013, as extracted from the Company’s annual report for the year ended 31 December 2013 (the “ 2013 Annual Report ”):

	For the year	For the year	Change
	ended 31	ended 31	from 2012
	December 2013	December 2012	to 2013
	RMB’000	RMB’000	%
Turnover	2,447,754	2,396,126	2.15
— Electronic equipment products	1,433,402	1,206,185	18.84
— Consumer electronic products	238,340	478,541	(50.19)
— Electronic manufacturing products	717,295	665,489	7.78
— Other operations	58,717	45,911	27.89
Profit and total comprehensive
income for the year	188,375	136,023	38.49

As depicted by the above table, the Group recorded a slight increase in turnover of approximately 2.15% from approximately RMB2,396.13 million for the year ended 31 December 2012 to approximately RMB2,447.75 million for the year ended 31 December 2013, of which turnover from electronic equipment products recorded significant increase in 2013. Profit and total comprehensive income for the year substantially increased by approximately 38.49% from 2012 to 2013.

With reference to the 2013 Annual Report and as advised by the Directors, in 2014, the Company will continue to push forward the electronic equipment industrialization project. At the same time, the Company will further enhance its capability in electronic manufacturing services and actively expand the line of consumer electronics and digital home products.

Information on PEGL

— 22 —

LETTER FROM GRAM CAPITAL

Information on Shenzhen Jingwah

Before the Equity Transfer, the Company, PEGL and other shareholders held 38.03%, 5.07% and 56.9% interests in Shenzhen Jingwah, respectively. Upon the completion of the Equity Transfer, the Company will hold 43.10 % equity interests in Shenzhen Jingwah. On 29 May 2014, Shenzhen Jianghua convened a general meeting for considering and approving the resolution in relation to the composition of the members of the Board of Shenzhen Jingwah (the “ Resolution ”), at which the Board was approved to be comprised of nine directors and five of which are to be appointed by the Company. The Resolution will be effective upon the completion of the Equity Transfer Agreement.

Set out below is the audited financial information of the Target Group for the six months ended 30 June 2014 and the two financial years ended 31 December 2013 as extracted from Appendix IV to the Circular:

	For the
	six months	For the year	For the year
	ended 30	ended 31	ended 31
	June 2014	December 2013	December 2012
	RMB’000	RMB’000	RMB’000
Profit before tax	42,828	65,589	63,425
Profit and total comprehensive income	35,546	49,228	48,456
	As at	As at	As at
	30 June	31 December	31 December
	2014	2013	2012
	RMB’000	RMB’000	RMB’000
Total assets	431,594	440,238	449,654
Total liabilities	132,030	141,700	150,424
Net assets	299,564	298,538	299,230

— 23 —

LETTER FROM GRAM CAPITAL

2. Reasons for the Equity Transfer

As confirmed by the Directors, Shenzhen Jingwah will be controlled by the Company upon the completion of the Equity Transfer Agreement, thus Shenzhen Jingwah will become a subsidiary of the Company and the accounts of Shenzhen Jingwah will be consolidated in the accounts of the Group. With reference to the Board Letter and as advised by the Directors, the Equity Transfer will (i) enhance the Company’s scale of income and overall competitiveness; (ii) improve the standard of management of investee companies; and (iii) expand the Company’s consumer electronic products field. Details of the aforementioned benefits/reasons for the Equity Transfer are set out in the section headed “Reasons for and benefit of the Equity Transfer” in the Board Letter.

With reference to the statistics of National Bureau of Statistics of China, from 2009 to 2013, the PRC’s gross domestic product (“ GDP ”) increased at a compound annual growth rate (“ CAGR ”) of approximately 13.66% and reached approximately RMB56,884.5 billion in 2013. During the period from 2009 to 2013, annual disposable income of urban households per capita increased from approximately RMB17,175 to approximately RMB26,955, representing a CAGR of approximately 11.93%. We noted from a press release dated 26 August 2014 from the website of the Ministry of Industry and Information Technology of the PRC that the household audio and visual industry and the communication equipment industry recorded increase of approximately 4.7% and 15.7% respectively in their sales value for the seven months ended 31 July 2014 as compared to the corresponding period in 2013. The aforementioned statistic would be favourable to the development of field of the consumer electronic products which Shenzhen Jingwah is engaged in.

In light of the foregoing reasons for the Equity Transfer and the improving financial performance of Shenzhen Jingwah, we concur with the Directors that the Equity Transfer is in the interests of the Company and the Shareholders as a whole.

— 24 —

LETTER FROM GRAM CAPITAL

3. Terms of the Equity Transfer Agreement

Date

14 July 2014

Parties

PEGL (as the transferor); and the Company (as the transferee)

Consideration and payment terms

According to the Equity Transfer Agreement, the Consideration was RMB50,365,830 (equivalent to approximately HK$63,460,946).

The Company has paid to SUAEE a deposit of RMB15,100,000 (equivalent to approximately HK$19,026,000), which will be used as part of the Consideration after the Equity Transfer Agreement comes into force.

The Company will pay the remaining Consideration of RMB35,265,830 (equivalent to approximately HK$44,434,946) in cash to PEGL within three business days from the effective date of the Equity Transfer Agreement.

The Consideration is equivalent to the listing price of the Sale Interest at SUAEE, which is determined by PEGL according to the valuation of its valuer with reference to, among other things, the Valuation Report. The aforesaid listing price was applicable to all potential bidder(s).

According to the Valuation Report, the Valuation amounted to RMB993,408,800 (equivalent to approximately HK$1,251,695,088) as at 31 December 2013. The Consideration is about the same to “5.07% of the Valuation”. In preparing the Valuation Report, with 31 December 2013 as the base date, the PRC Valuer mainly adopted asset-based approach, except for the valuation of the long-term equity investment of Shenzhen Jingwah Information Technology Co., Ltd. (“ JW Information ”) (深圳市京華信息技術有限公司) and Shenzhen Longgang Jingwah Electronics Co., Ltd. (“ Longgang Jingwah ”) (深圳市龍崗京華電子有限公司), whereas JW Information and Longgang Jingwah can provide future profit forecasts, income approach was adopted. For other assets, assets-based approach was adopted.

— 25 —

LETTER FROM GRAM CAPITAL

We have reviewed the Valuation Report and enquired into the PRC Valuer on the methodology adopted and the basis and assumptions adopted in arriving at the Valuation in order for us to understand the Valuation Report. As confirmed by the PRC Valuer, the asset-based approach and income approach are commonly adopted approaches for valuation of companies and is also consistent with normal market practice. Based on our observation on valuation performed for acquisition/disposal of business entities, we noted that there is adoption of asset-based or income approach and the professional valuers usually consider that the asset-based approach and income approach are generally accepted approach. Having also considered the nature of the items under the Valuation (including but not limited to current assets and other assets which include cash and bank balances, receivable, wealth management products, etc.; and non-current assets which include long-term equity investment, real estate investment, machines and equipment, etc.), we do not doubt the valuation approaches adopted by the PRC Valuer. In addition, due to lack of comparable companies (in respect of Shenzhen Jingwah) in a developed and active market, market approach was considered not appropriate to conclude the final Valuation. Accordingly, we have not considered other analysis to assess the fairness and reasonableness of the Consideration.

For our due diligence purpose, we have also discussed and interviewed with the PRC Valuer to understand the major evaluation parameters (including but not limited to operating revenue, operating costs, discount rate, cost of equity capital, cost of interest-bearing debts, debtequity ratio, etc.) and evaluation procedures adopted for the valuation of the long-term equity investment of JW Information and Longgang Jingwah.

Moreover, we have interviewed the PRC Valuer as to its qualifications, expertise and independence to PEGL, Shenzhen Jingwah and their respective connected persons and reviewed their terms of engagement. With reference to the Board Letter, the independence of the PRC Valuer was not impaired due to its engagement by PEGL. When preparing the Valuation Report, the PRC Valuer have observed relevant laws and regulations and asset valuation standards, and adhered to the principles of independence, objectiveness and fairness in the execution of the asset valuation practice. Accordingly, we do not doubt the independence of the PRC Valuer in respect of the preparation of the Valuation Report and it is not considered inappropriate to determine the Consideration with reference to the Valuation Report.

With reference to the summary of Valuation Report as contained in Appendix IIA to the Circular (the “ Valuation Summary ”), the results of the Valuation Report are valid for one year from the valuation base date (i.e. 31 December 2013). According to Article 11 of the Principles for Asset Valuation — Valuation Report issued by the China Appraisal Society, “Valuation report shall clearly specify the valid period for using the report. Generally, the valuation report shall only be used where the period between the valuation date and the date on which the economic act executed is not more than one year”.

— 26 —

LETTER FROM GRAM CAPITAL

With reference to the Board Letter, the appraised value of the investment property of Shenzhen Jingwah is RMB588,854,900 according to the Valuation Report, representing nearly 60% of the Valuation of RMB993,409,000. According to the information published by Wind Information (www.wind.com.cn), the change in the average price of commodity property in Shenzhen Futian District, where Shenzhen Jingwah is located, for the period from 31 December 2013 to 30 September 2014 is 0.10%. According to the website of Shenzhen Huaqiang North Index (www. hcsindex.org), the comprehensive index of electronic products was 97.31 for September 2014 as compared to 92.87 for December 2013, representing a change of 4.78%. Accordingly, the Directors considered that there is no significant change in the market conditions.

Given the above, the Valuation of Shenzhen Jingwah under the Valuation Report is still valid and fairly reflects the latest fair value of Shenzhen Jingwah and is sufficient for the Shareholders for making informed decision.

Detailed basis and assumptions of and the major evaluation parameters and evaluation procedures adopted for the Valuation Report are set out in the Valuation Summary. During our discussion with the PRC Valuer, we have not identified any major factors which caused us to doubt the fairness and reasonableness of the principal bases and assumptions and the major evaluation parameters and evaluation procedures adopted for the Valuation. However, Shareholders should note that valuation of assets or companies usually involves assumptions and therefore the Valuation may or may not reflect the fair value of the equity interests of Shenzhen Jingwah as at 31 December 2013 accurately.

In addition, the Valuation Report on Property Interests was prepared by Vigers in respect of the valuation of the property interests of the Target Group (the “ Property Valuation ”). We noted that the market value of the properties of Shenzhen Jingwah as at 31 August 2014 according to the Valuation Report on Property Interests does not deviate much from the appraised value of the same as at 31 December 2013 according to the Valuation Report.

We also noted that Vigers has ascribed no commercial value as at 31 August 2014 to the property leased out by Longgang Jingwah as opposed to the appraised value of Longgang Jingwah of RMB56,944,000 as at 31 December 2013 according to the Valuation Report. Nevertheless, with reference to the Valuation Report on Property Interests, in view of that the property can be leased out by Longgang Jingwah to receive rent for the remaining term of the Co-operation Agreement (details of which are set out in the Board Letter and the Valuation Report on Property Interests), Vigers have opined that the investment value of the said property as at 31 August 2014 was RMB80,000,000. Investment value is recognised as a non-market value and only reflects the benefits that an owner of an asset enjoys from the ownership of the asset.

— 27 —

LETTER FROM GRAM CAPITAL

For our due diligence purpose regarding the Valuation Report on Property Interests, we have reviewed the Valuation Report on Property Interests and discussed with Vigers regarding the methodology adopted and the basis and assumptions used in arriving at the Property Valuation as at 31 August 2014. In the course of our discussion, we noted that Vigers carried out site visits to the Jingwah Property in September 2014 to research for the necessary information for determining the Property Valuation. According to the Valuation Report on Property Interests, Vigers has adopted the direct comparison approach and the term and reversion approach. As further confirmed by Vigers, direct comparison approach and term and reversion approach are commonly adopted for valuation of properties and are also consistent with normal market practice.

Detailed basis and assumptions of the Valuation Report on Property Interests are set out in Appendix IIC to the Circular. During our discussion with Vigers, we have not identified any major factors which caused us to doubt the fairness and reasonableness of the principal basis and assumptions adopted for the Property Valuation. Nevertheless, Shareholders should note that valuation of assets or properties usually involves assumptions and therefore the Property Valuation may or may not reflect the true market value of the Jingwah Property as at 31 August 2014 accurately.

Having considered that (i) the Consideration is equivalent to the listing price of the Sale Interest at SUAEE, which was applicable to all potential bidder(s); and (ii) the Consideration is about the same to “5.07% of the Valuation”, we are of the opinion that the Consideration is fair and reasonable so far as the Shareholders are concerned.

Having considered the foregoing terms of the Equity Transfer Agreement and that the Resolution will be effective upon the completion of the Equity Transfer Agreement, we are of the view that the terms of the Equity Transfer Agreement are on normal commercial terms and are fair and reasonable so far as the Shareholders are concerned.

4. Possible financial effects of the Equity Transfer

As confirmed by the Directors, upon completion of the Equity Transfer, Shenzhen Jingwah will become a non-wholly owned subsidiary of the Company and its financial statements will be consolidated into those of the Group.

Effect on net asset value and gearing

With reference to the unaudited pro forma financial information of the Enlarged Group as contained in Appendix V to the Circular, the Equity Transfer would lead to an increase in the net assets of the Enlarged Group. Moreover, the Enlarged Group’s gearing level (the ratio between total liabilities and total assets) would increase due to the Equity Transfer.

— 28 —

LETTER FROM GRAM CAPITAL

Effect on working capital and earnings

With reference to the unaudited pro forma financial information of the Enlarged Group as contained in Appendix V to the Circular, the Equity Transfer would lead to an increase in the working capital (as derived by current assets minus current liabilities) of the Enlarged Group.

Furthermore, in view of the improving financial performance of Shenzhen Jingwah, the Directors expect that the Enlarged Group would enjoy higher future earnings after the Equity Transfer.

It should be noted that the aforementioned analyses are for illustrative purpose only and do not purport to represent how the financial position of the Enlarged Group will be upon completion of the Equity Transfer.

RECOMMENDATION

Having taken into consideration the factors and reasons as stated above, we are of the opinion that (i) the terms of the Equity Transfer Agreement are on normal commercial terms and are fair and reasonable so far as the Shareholders are concerned; and (ii) the Equity Transfer is in the interests of the Company and the Shareholders as a whole and is conducted in the ordinary and usual course of business of the Group. Accordingly, we recommend the Independent Board Committee to advise the Independent Shareholders to vote in favour of the resolution(s) to be proposed at the EGM to approve the Equity Transfer Agreement and the transactions contemplated thereunder and we recommend the Independent Shareholders to vote in favour of the resolution(s) in this regard.

Yours faithfully,

For and on behalf of

Gram Capital Limited Graham Lam

Managing Director

— 29 —

GENERAL INFORMATION

APPENDIX I

1. RESPONSIBILITY STATEMENT

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

2. DISCLOSURE OF INTERESTS

(A) Interests of Directors

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

Interests in domestic shares of the Company:

				No. of shares	Percentage of
			Nature of	held (Long	share capital
Name of Director	Position	Capacity	interests	position)	in issue
					(%)
Xu Guofei	Executive Director	Beneficial owner	Personal	2,546	0.00028

(B) Interests of Substantial Shareholders

As at the Latest Practicable Date, so far as is known to the Directors, Supervisors and chief executive of the Company, the interests or short positions of the persons (not being a Director or Supervisor or chief executive of the Company) in the shares and underlying shares of the Company which would fall to be disclosed under the provisions of Divisions 2 and 3 of Part XV of the SFO, or which were recorded in the register required to be kept by the Company under Section 336 of the SFO, or as otherwise notified to the Company and the Stock Exchange:

— 30 —

GENERAL INFORMATION

APPENDIX I

(i) Interests in the shares of the Company

			Approximate	Approximate
		Class/no. of shares	percentage in the	percentage
		interested	relevant class of	in the total
Name of Shareholder	Capacity/nature of interests	(long position)	shares in issue	shares in issue
PEGL	Corporate interests held in the	334,715,000	49.82%	36.63%
	capacity of beneficial owner	domestic shares
Lewis Joseph	Personal interests held in the	20,260,000	8.37%	2.22%
	capacity of beneficial owner	H shares
Tuesday Thirteen Inc.	Corporate interests held in the	16,920,000	7.00%	1.85%
	capacity of controlled corporation	H shares
Tang Hanbo	Personal interests held in the	22,586,000	9.33%	2. 47%
	capacity of beneficial owner	H shares

As at the Latest Practicable Date, so far as is known to the Directors, the following Directors and supervisors hold offices as Directors or employees in CEC, the ultimate controller of the Company as shown above:

Name of Director/Supervisor	Position held in CEC
Lai Weide	Deputy General Manager
Xu Guofei	Assistant to General Manager

As at the Latest Practicable Date, so far as is known to the Directors, the following Directors and supervisors hold offices as Directors or employees in NEIIC, the controlling shareholder of PEGL as shown above:

Name of Director/Supervisor

Position held in NEIIC

Lai Weide Chairman Xu Guofei General Manager Zhang Yinqian Secretary of the Party Committe

— 31 —

GENERAL INFORMATION

APPENDIX I

As at the Latest Practicable Date, so far as is known to the Directors, the following Directors and supervisors hold offices as Directors or employees in PEGL, the controlling Shareholder of the Company as shown above:

Name of Director/Supervisor

Position held in PEGL

Lai Weide Chairman Xu Guofei General Manager Zhang Yinqian Secretary of the Party Committee Deng Weiming Deputy General Manager Lu Qing Deputy General Manager

As at the Latest Practicable Date, so far as is known to the Directors, the following Directors and supervisors hold offices as Directors or employees in TPV Technology, whose ultimate controlling shareholder is CEC, the ultimate controller of the Company as shown above and therefore an associate of the Company:

Name of Director/Supervisor Position held in TPV Technology Jason Hsuan Chairman

(ii) Interests in non-wholly owned subsidiaries of the Company

		Approximate
		percentage
	Name of shareholders interested	of interest held by
Name of non-wholly owned	in 10% or more of the	that shareholder
subsidiaries of the Company	subsidiaries of the Company	(long position)
Nanjing Panda Information	GALANT (HK) LIMITED	25%
Industry Co., Ltd
Nanjing Panda International	Hong Kong Shun Sing	28%
Telecommunication	Development Co., Ltd
System Co., Ltd
Nanjing Panda Electronics	GALANT (HK) LIMITED	25%
Manufacturing Co., Ltd
Nanjing Panda System	Liu Changhua	10.90%
Integration Co., Ltd
Nanjing Panda Power Supply	Shi Qingrong	11.46%
Technology Manufacture
Co., Ltd

— 32 —

GENERAL INFORMATION

APPENDIX I

Save as disclosed above, the Directors, supervisors and chief executive of the Company are not aware that there is any person (other than a Director, supervisor or chief executive of the Company) who, as at the Latest Practicable Date, had an interest or short position in the shares and underlying shares of the Company which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who is, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of members of the Group or any options in respect of such capital.

3. LITIGATION

As at the Latest Practicable Date, there was no litigation or claim of material importance known to the Directors to be pending or threatened against any member of the Enlarged Group.

4. SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors or supervisors of the Company had entered, or proposed to enter, into a service contract with any member of the Enlarged Group which is not determinable by the Group within one year without payment of compensation, other than statutory compensation.

5. COMPETING INTERESTS

As at the Latest Practicable Date, so far was known to the Directors, none of the Directors or their respective associates was considered to have an interest in a business which competes or is likely to compete, either directly or indirectly, with the business of the Group (other than those businesses to which the Directors and his/her associates were appointed to represent the interests of the Company and/or the Group) or have any other conflicts of interest with the Group pursuant to the Listing Rules.

6. DIRECTORS’ INTERESTS IN CONTRACTS AND ASSETS

As disclosed above, Mr. Lai holds offices in CEC, NEIIC and PEGL, Mr. Xu holds offices in CEC, NEIIC and PEGL and holds approximately 0.00028% of the total issued share capital of the Company and Mr. Deng and Mr. Lu hold offices in PEGL, and are all therefore considered to be interested in the transactions contemplated under the Major and Connected Transaction in relation to the Equity Transfer and had abstained from voting on the relevant resolutions of the Board approving the Major and Connected Transaction in relation to the Equity Transfer.

— 33 —

GENERAL INFORMATION

APPENDIX I

Save as aforesaid, the Board confirms that as at the Latest Practicable Date, none of the other Directors had any direct or indirect interests in any assets which had been acquired or disposed of by, or leased to, any member of the Enlarged Group or were proposed to be acquired or disposed of by, or leased to, any member of the Enlarged Group since 31 December 2013 (being the date to which the latest published audited accounts of the Group were made up), none of the other Directors was materially interested in any contract or arrangement entered into by any members of the Enlarged Group subsisting as at the Latest Practicable Date which was significant in relation to the business of the Group.

Mr. Hsuan, by virtue of his office held TPV Technology as disclosed above, is also a connected person of the Company and had abstained from voting on the relevant resolutions of the Board approving the Equity Transfer, the Equity Transfer Agreement and the transaction thereunder.

Save as aforesaid, the Board confirms that none of the other Directors abstained from voting on the relevant resolutions of the Board approving the Major and Connected Transaction in relation to the Equity Transfer.

7. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Group since 31 December 2013 (being the date to which the latest published audited accounts of the Group were made up).

8. MATERIAL CONTRACTS

Within the two years immediately preceding the date of announcement of the Company dated 15 July 2014 and up to the Latest Practicable Date, the following contracts (not being contracts entered into in the ordinary course of business) have been entered into by members of the Enlarged Group and are or may be material:

(A) The subscription agreements entered into by the Company in respect to the non-public issuance of A shares were as follows:
(i) On 7 November 2012, the Company entered into the non-public share issue and subscription agreement with Nanjing Electronics Information Industrial Corporation, pursuant to which, the agreement was effective upon obtaining approval of the CSRC for the non-public share issue on 12 April 2013.
(ii) In June 2013, the Company entered into the non-public share issue and subscription agreements with eight investors (including Jiangsu GTIG Huading Investment Co., Ltd .（江蘇國泰華鼎投資有限公司）).

— 34 —

GENERAL INFORMATION

APPENDIX I

The names of subscribers, number of shares subscribed for and subscription amount are set out in the following table:

No. Name of Subscriber 1 Jiangsu GTIG Huading Investment Co., Ltd. 2 South Industry Assets Management Co., Ltd. 3 Tibet Autonomous Region Investment Co., Ltd. 4 Beijing Infrastructure Investment Co., Ltd. 5 Caitong Fund Management Co., Ltd. 6 Nanjing Ruisen Investment Management Partnership Enterprise (Limited Partnership) 7 Aegon-Industrial Fund Management Co., Ltd. 8 Tibet Shan Nan Zhong He Investment Management Centre (Limited Partnership) 9 Nanjing Electronics Information Industrial Corporation Total	Number of Shares subscribed for (share) 35,000,000 25,200,000 25,000,000 26,000,000 30,000,000 51,000,000 17,603,922 9,803,921 39,215,686 258,823,529	Subscription Amount (RMB) 178,500,000.00 128,520,000.00 127,500,000.00 132,600,000.00 153,000,000.00 260,100,000.00 89,780,002.20 49,999,997.10 199,999,998.60 1,319,999,997.90

(B) On 21 January 2014, the Company entered into the supplemental agreement to the Financial Services Agreement with China Electronics Financial Co., Ltd., (“ CEC Finance ”) which was considered and approved at the 2014 First Extraordinary General Meeting of the Company held on 12 March 2014. Pursuant to the Financial Services Agreement, CEC Finance has agreed to provide deposit and loan interest rate concessions and preferential charge of various financial services to its maximum capacity subject to relevant policies, laws and regulations. For main contents please refer to the relevant announcements published on China Securities Journal, Shanghai Securities News and the website of the Shanghai Stock Exchange on 22 January 2014 and the circular despatched on 25 February 2014.

— 35 —

GENERAL INFORMATION

APPENDIX I

9. EXPERTS AND CONSENTS

The followings are the qualification of the experts (“the Experts”) who have been named in this circular or have given opinions or advice in this circular:

Name

Qualifications

Gram Capital Limited

A licensed corporation to carry out Type 6 (advising on corporate finance) regulated activity as defined under the SFO

Baker Tilly Hong Kong Limited

Certified Public Accountants

Baker Tilly China (Special General Partnership)

Certified Public Accountants

Vigers Appraisal & Consulting Limited

Professional surveyors and valuers

Vocational (Beijing) International Assets Valuation Company Limited

Professional Valuer

Yongheng Partners

Legal adviser on PRC law

As at the Latest Practicable Date, the Experts did not have any shareholding in any member of the Enlarged Group or any right (whether legally enforceable or not) to subscribe for securities in any member of the Group nor did it have any direct or indirect interests in any assets which had been, since 31 December 2013 (being the date to which the latest published audited consolidated financial statements of the Group were made up), acquired or disposed of by or leased to any member of the Enlarged Group, or which were proposed to be acquired or disposed of by or leased to any member of the Enlarged Group.

As at the Latest Practicable Date, the Experts have given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter and references to its name in the form and context in which they respectively appear herein.

— 36 —

GENERAL INFORMATION

APPENDIX I

10. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the offices of the Company at 301 Zhongshan Road East, Nanjing, Jiangsu Province, the PRC and the Company’s solicitors at 23rd Floor, Admiralty Centre, Tower II, 18 Harcourt Road, Hong Kong, during normal business hours on any weekday (except public holidays) from the date of this circular up to and including the date of the EGM:

(a) the Equity Transfer Agreement;
(b) the letter from the Independent Board Committee, the text of which is set out in this circular;
(c) the letter from Gram Capital, the text of which is set out in this circular;
(d) the written consents referred to in the section headed “Experts and Consents” in this Appendix;
(e) the material contracts referred to in the section headed “Material Contracts” in this Appendix;
(f) the Valuation Report, a summary of which is set out in Appendix IIA to this circular;
(g) the respective letters from the Board and Baker Tilly Hong Kong Limited in relation to the Valuation Report, the text of which is set out in Appendix IIB of this circular;
(h) the Valuation Report on the Property Interests, the text of which is set out in Appendix IIC to this circular;
(i) accountants’ report of Shenzhen Jingwah prepared by Baker Tilly Hong Kong Limited as set out in Appendix IV of this circular;
(j) report on unaudited pro forma statement of assets and liabilities of the enlarged group prepared by Baker Tilly Hong Kong Limited as set out in Appendix V of this circular;
(k) the PRC legal opinion on the Significant Asset Purchase issued by the PRC Lawyer;

— 37 —

GENERAL INFORMATION

APPENDIX I

(l) the letter from the Board in relation to the Profit Forecast of Shenzhen Jingwah, the text of which is set out in Appendix VII to this circular;
(m) the letter from Baker Tilly Hong Kong Limited in relation to the Profit Forecast of Shenzhen Jingwah, the text of which is set out in Appendix VIII to this circular;
(n) the Annual Reports of the Company of 2012 and 2013;
(o) the circular of the Company of 24 February 2014; and
(p) the Memorandum and Articles of Association of the Company.

11. GENERAL

(a) The registered office of the Company is situated at Level 1-2, Block 5, North Wing, Nanjing High and New Technology Development Zone, Nanjing, Jiangsu Province, the PRC.
(b) The principal place of business of the Company is at 301 Zhongshan Road East, Nanjing, Jiangsu Province, the PRC.
(c) The company secretary of the Company is Mr. Shen Jianlong, who is the Chief Accountant and Secretary to the Board.

— 38 —

SUMMARY OF VALUATION REPORT

APPENDIX IIA

The following contains a summary of and extract from a valuation report of Shenzhen Jingwah as at 31 December 2013 prepared by PRC Valuer which was engaged by PEGL according to the relevant PRC laws and regulations. It is solely for the Shareholders’ information.

The report was originally prepared in Chinese. In case of any discrepancy between the Chinese version and the English version, the Chinese version shall prevail.

Vocational (Beijing) International Assets Valuation Company Limited（沃克森（北京）國際資產評估有限公司） was appointed by PEGL in accordance with relevant laws, regulations, standards and principles of asset valuations adopting both asset-based approach and income approach and following the necessary valuation procedures to perform valuation of the market value of the entire equity interests of Shenzhen Jingwah Electronics Co., Ltd. as at 31 December 2013.

THE PURPOSE OF VALUATION

PEGL proposes to transfer the equity interests of Shenzhen Jingwah Electronics Co., Ltd. The purpose of the valuation was to provide reference for the value of the economic behaviour of the proposed equity transfer of PEGL. The economic behaviour was approved by the Board of PEGL.

THE TARGET AND SCOPE OF VALUATION

The target of valuation was the market value of all equity interests of Shenzhen Jingwah Electronics Co., Ltd. on the valuation base date.

The book value of all shareholders’ equity interests was RMB220.337 million.

The specific scope of the valuation was all assets and liabilities of Shenzhen Jingwah Electronics Co., Ltd. on the valuation base date on 31 December 2013. Among which, the book value of total assets was RMB261.7538 million, while the book value of liabilities was RMB41.4168 million. The book value of shareholders’ equities was RMB220.337 million. The book value before valuation was audited by Baker Tilly China (Special General Partnership) and the report of unqualified audit opinion Tian Zhi Ye Zhi [2014] No. 502 was issued.

VALUATION BASE DATE

The valuation base date of the matter was 31 December 2013.

— 39 —

SUMMARY OF VALUATION REPORT

APPENDIX IIA

VALUE TYPE

The value type of the valuation was market value.

CONCLUSION OF VALUATION

The valuation mainly adopted asset-based approach, except for the valuation of the long-term equity investment of Shenzhen Jingwah Information Technology Co., Ltd. (“ JW Information ”) (深圳市京華信息技術有限公司) and Shenzhen Longgang Jingwah Electronics Co., Ltd. (“ Longgang Jingwah ”) (深圳市龍崗京華電子有限公司) which can provide future profit forecasts, income approach was adopted. For other assets, asset-based approach was adopted. Certified public valuer performed reasonable analysis and the conclusion of the valuation is as follows:

The appraised value of all equity interests of Shenzhen Jingwah Electronics Co., Ltd. amounted to RMB993.4088 million, representing an increase of RMB773.0718 million as compared with the book value of net assets, with an appreciation rate of 350.86%.

1. Analysis of application of asset-based approach

Asset-based approach is a method to determine the value of the valuation target by reasonably valuing the various assets’ value and liabilities of the enterprise. Further, as the entity being appraised can supply and the valuer can collect from independent external resources, information as required for the application of the asset-based approach, the valuer is of the opinion that the asset-based approach can be adopted for the valuation.

The valuation of asset-based approach is based on the balance sheet of Shenzhen Jingwah and the audited report prepared by Baker Tilly China (Special General Partnerhip).

2. Analysis of application of income approach

The adoption of income approach for valuation requires fulfillment of the following three conditions:

(1) The investment amount paid by the investor in a particular company shall not exceed the discounted value of the company’s future expected income;
(2) The future income of such company can be reasonably estimated; and
(3) The income rate which corresponds to the risk level of the future income of such company can be reasonably estimated.

Since the management of the entity being appraised is able to provide profit forecasts of JW Information and Longgang Jingwah for the next year, the valuer is of the opinion that the income approach can be adopted for the valuation of these two subsidiaries.

— 40 —

SUMMARY OF VALUATION REPORT

APPENDIX IIA

ASSET VALUATION RESULTS

The Valuation Base Date:31 December 2013

Subject entity: Shenzhen Jingwah

Items		Changes on valuation
		(RMB’000)
Equity interest attributable to parent company		262,566.6
Add:	Current asset	–6,238.2
	Investment property	588,854.9
	Fixed assets	38,851.7
	Intangible assets	–5,782.9
	Long-term unamortized expenses	–2,153.3
	Future business development prospect of subsidiaries	117,310.0
Outcome		993,408.8

The main reasons for the appreciation of 4,441.09% in the valuation of investment real estates of RMB588,854,900 are:

(1) The real estate assets were recorded quite a long time ago and there is a great appreciation in the market prices for Shenzhen real estate since then.
(2) Usage of most real estate assets have been changed from industrial or residential to commercial, which led to evaluation increment.

Fixed assets and investment properties of Shenzhen Jingwah were recorded at their respective original costs in around 1985 to 1990, and there was no change thereafter. The appraised value was arrived at based on the comparison between the market price on the valuation basis date (i.e. 31 December 2013) upon adjustment. According to the fixed assets investment price index (固定資產投資價格指數) by Wind Information (www.wind.com.cn), solely based on investment price index and not taking into account of the market supply and demand, original book value should have grown by at least 275%. In addition, the book depreciation period of fixed assets and investment properties is shorter than their economic life, thus resulting in basically residual value recorded as net book balance with actual long economic life, which is also a reason for the substantial increase in the appraised value.

— 41 —

SUMMARY OF VALUATION REPORT

APPENDIX IIA

The accounting depreciation period for investment properties is 20-30 years. The net book value is the balance after provision for depreciation. The investment properties were generally accounted for in the period from 1985 to around 1990, and provision for depreciation has been made for approximately 20 years up to the valuation base date. The balance has already been very small, which is one of the major reasons for appreciation of appraised value.

The economic life of building in the valuation is about 50 years, greatly longer than the accounting depreciation period. On the valuation base date, the minimum economic life for valuation was nearly 30 years. The value obtained through modifying the transaction cases obtained by the valuer from the public market is the market transaction value of the building on the valuation base date. Since the cost of construction and installation and unit price of property transaction in Shenzhen rapidly grew in nearly 20 years, the appraised value is relatively high; the basis for comparison is the book balance accounted for 20 years ago. All these are the information basis for the substantial increase in the appraised value.

The future business development prospect of subsidiaries of approximately RMB 117,310,000 represented the appreciation value, which is calculated as follows:

Currency Unit: RMB’000

Names of investees Date of investment Shareholding ratio Methods to determine the valuation results Carrying value Appraisal value (%) JW Information 10 December 2003 62 Income approach 47,260 113,928 Longgang Jingwah 7 February 1990 100 Income approach 6,302 56,944 Total	Appreciated value 66,668 50,642
	117,310

As stated in the Valuation Report, the results of the Valuation Report are valid for one year from the valuation base date (i.e. 31 December 2013).

According to Article 11 of the Principles for Asset Valuation - Valuation Report, “Valuation report shall clearly specify the valid period for using the report. Generally, the valuation report shall only be used where the period between the valuation date and the date on which the economic act executed is not more than one year.”

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SUMMARY OF VALUATION REPORT

APPENDIX IIA

The valuation report is only intended to provide a value reference basis for the proposed equity transfer by PEGL (being the entrusted party), and shall not be regarded as the guarantee for the realizable price of appraised assets and the subject of the valuation. It is advised that the entrusted party and relevant parties shall take into account the conditions of the assets during the equity transfer, market conditions and other factors when referring and analyzing the conclusion of the valuation, in order to make reasonable decisions.

When applying the valuation conclusion of the report, the users of the report shall take note of Item XII “Special Notes” set out in the report on the valuation conclusion, including but not limited to the following:

Business activity documents, business licences, property title documents, financial statements, accounting documents, assets breakdown and other related information relating to the valuation provided by the entrusted party and the appraised entity form the basis for preparing the report. The entrusted party, the appraised unit and related parties shall be liable for the truthfulness, validity, accuracy and completeness of the original materials for the valuation provided by them. All materials provided by the entrusted party and the appraised unit including business activity documents, business licences, property title documents and accounting documents were independently reviewed by the valuers provided that no responsibility in respect of the truthfulness of above information shall be laid on the valuers.
Pursuant to the Guiding Opinions for Certified Public Valuers on Legal Ownership of Subject under Appraisal (《註冊資產評估師關注評估對象法律權屬指導意見》) issued by the Chinese Institute of Certified Public Accountants, the entrusted party and relevant parties should provide all legal ownership materials of the target of valuation and shall be responsible for the truthfulness, legality and completeness of these materials. The purpose of the certified public valuers implementing assets valuation is to estimate the values of the target of valuation and provide professional opinions. Confirmation of legal ownership of the target of valuation or expressing opinions on such matter do not fall within the practice scope of the certified public valuers.
This valuation conclusion has reflected the prevailing price of the target of valuation based on the open market principle for this valuation purpose, without considering the impact on the appraised value due to higher bidding prices by other parties with special interests nor taking into account the impact on asset price due to changes in the state’s macroeconomic policies, or when encountering natural disasters and other force majeure. In case of any changes in the foregoing conditions and the principle of going concern adopted for the valuation, the valuation conclusion shall become invalid.

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SUMMARY OF VALUATION REPORT

APPENDIX IIA

VALUATION BASIS

The basis of the valuation included the laws and regulations, valuation standards, ownership of enterprises, pricing and economic behavior. The basis of laws and regulations mainly includes the laws and regulations related to the valuation promulgated by the National People’s Congress, the State Council, State-owned Assets Supervision and Administration Commission of the State Council and Shenzhen Municipal Government. The basis of valuation standards was mainly the standards related to the valuation issued by the Chinese Institute of Certified Public Valuers. The basis of ownership of enterprises was the various certificates and licenses obtained by the enterprises and the ownership certificates of assets. The basis of pricing included the evidences related to the valuation provided by the enterprises, issued by relevant departments of the nation and collected by the valuation firm. The basis of behavior included the Board Resolution of PEGL and the assets valuation engagement letter entered into by this valuation firm and the entrusted party.

INTRODUCTION TO THE VALUATION METHODS

Asset-based approach

1. Valuation method in respect of current assets and other assets

① Cash and bank balances included cash, bank deposits and other cash and bank balances. The valuers supervised the stocktaking of cash, the result of which was cross-checked the cash amount as at the valuation base date. The valuers issued confirmation letter in respect of the bank deposits, and examined the bank account statements and bank balance reconciliation statements. Upon verification, the appraised value of cash and bank deposits was determined based on the verified book value.
② Upon verification, for each item of receivable, if there was concrete evidence showing a loss, the bad debt loss was recognized according to the actual loss. If there was no such evidence, the estimated loss was recognized referring to the accounting policy of bad debt provision. Upon verification, the appraised value of prepayments was determined based on the value of assets or entitlements arising from the recoverable goods.
③ For other current assets which mainly include wealth management products and so on, the valuers mainly reviewed the contents of table of other current assets, occurrence date, amount and business, verified against the reconciliation evidence, relevant documents and original evidence, so as to confirm the truthfulness and reliability. The valuers checked each item with large amount and conducted random check and review of items with small amount. The appraised value of securities which were traded publicly were calculated based on the closing price as at the valuation base date excluding the taxes payable during the transaction procedures. The appraised value of securities which cannot be traded publicly were calculated based on the principal plus the interests accumulated during the holding period.

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SUMMARY OF VALUATION REPORT

APPENDIX IIA

The long term deferred expenses and deferred income tax assets were appraised based on the inspection of account and original evidence, and the appraised value thereof was determined based on the value of assets and entitlements of Shenzhen Jingwah Electronics Co., Ltd. after completion of the Equity Transfer.

2. Valuation method of non-current assets

(1) Valuation method of long-term equity investment

For long-term equity investment, except for the two subsidiaries, namely JW Information and Longgang Jingwah, which adopted the income approach, other long-term equity investment adopted the asset-based approach for valuation. Upon determining the valuation results of long-term investees, the appraised value of long-term investment was calculated based on the proportion of interest held in the entity.

For other long-term equity investment held by its non-controlled subsidiary, different valuation methods were adopted for specific situations:

① For those without dividends as investment income in the history, but could be incorporated in the overall valuation of the enterprise, the asset-based approach was usually used to conduct the overall valuation on the investees. Upon determination of the valuation results of the long-term investees, the appraised value of long-term investment was calculated based on the proportion of interest held by the appraised unit.
② For those without dividends as investment income in the history, and holding relatively low equity interest and cannot be incorporated in the overall valuation of the enterprise, the following approaches are adopted respectively:
a. For those investees, the investments of which have been settled and retrieved as at the valuation base date, the appraised value shall be determined based on the investment amount in the settlement and retrieval; For those long-term equity investments which have been transferred after the valuation base date, the appraised value shall be determined based on the realized transferred value.
b. For those long-term equity investment projects, the necessary information of which needed in the valuation cannot be provided by the entrustor nor be obtained by the valuers through open sources, they should be set out in accordance with the audited book value.

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SUMMARY OF VALUATION REPORT

APPENDIX IIA

(2) Real estate investment and buildings

Market comparison approach is adopted pursuant to the collection of the equity positions and relevant information of the real estate.

The market comparison approach is a valuation method by analyzing the actual transactions of properties in the same region and similar to the subject property that have taken place recently based on the principle of substitution in arriving at the valuation of the properties to be appraised. Based on such known prices, the appraisers arrived at the price of the property to be appraised as at the valuation reference date with reference to factors such as the transaction particulars, date, region and other individual factor relating to the property. The basic formula is as follows:

Price of the property to be appraised =

Correction coefficient of transaction particulars × Correction coefficient of transaction date × Correction coefficient of region factors × Correction coefficient of particular factors× Property price of transaction cases

(3) Valuation of machines and equipment

For the purpose of this valuation and taking into account of the information collected on site by the valuers and the preliminary conditions of the going concern of the appraised unit upon the realization of the purpose of the valuation, this valuation adopted the cost approach to appraise the machines and equipment as well as transportation equipment. Appraised value = Full replacement cost × integrated newness rate

① Determination of replacement value

Full replacement cost = equipment purchasing price + transportation and miscellaneous charges + installation and testing charges + other charges + cost of capital

Note: Full replacement cost is the recovery replacement cost; For those fixed asset equipment in compliance with the requirements of the Provisional Regulation of the PRC on Valueadded Tax and its supplemental documents, their appraised full replacement costs do not include the value-added input.

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SUMMARY OF VALUATION REPORT

APPENDIX IIA

Pursuant to the categories of the equipment included in the scope of this valuation scope, the full replacement costs shall be determined based on the different positions of the equipment when conducting the valuation. For instance, miscellaneous charges will not be considered for calculated in the electronic equipment, and its full replacement cost shall be its market price. The full replacement costs for vehicles shall be the purchasing price for the vehicle plus vehicle purchasing charges, license fee etc.

② Determination of newness rate

a. In terms of newness rate of equipment with high value, the method of weighted average of service life newness rate and on site inspection newness rate was adopted to determine the integrated newness rate, the calculation formula is as follows:

Integrated newness rate = service life/theoretical newness rate × 40% + onsite inspection newness rate × 60%

In which: Service life newness rate = (economic service life – used life)/ economic service life × 100%

Onsite inspection newness rate: during the period of onsite work, evaluators conducted onsite observation and getting information on technological performance situation of equipment from operators. According to onsite inspection on equipment, taking into consideration the relevant situations such as used life, actual technical condition, load and original manufacturing quality of equipment, they comprehensively analyzed and estimated newness rate of equipment. The onsite inspection newness rate is determined by the valuer after field survey and verification on structures for specific assets, usage status of various assets, making reference to the usage and maintenance records of the assets and interviewing with relevant asset managers and according to the evaluation standards under Manual for General Asset Valuation Data and Parameters (《資產評估常用資料與參數手冊》). The onsite inspection newness rate obtained through the above assessment process is fair and reasonable.

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SUMMARY OF VALUATION REPORT

APPENDIX IIA

Newness rate of vehicles: In accordance with the Provisions on the Standards for Compulsory Retirement of Motor Vehicles, Order [2012] No. 12 jointly issued by the Ministry of Commerce, the National Development and Reform Commission, the Ministry of Public Security and the Ministry of Environmental Protection, used life and used mileage were adopted to calculate theoretical newness rate, respectively, lower of which was determined as theoretical newness rate. Taking into account several indicators such as onsite inspection of vehicles’ outlook, structural damaged or not, main engine normal or not, circuit connected or not, braking reliable or not, exhaust condition up to standards or not, etc., they adjusted theoretical newness rate with consideration of onsite inspection situations to determine the integrated newness rate of vehicles.

In which: Service life newness rate = residual life/(used life + residual life) × 100%

Mileage newness rate = residual mileage/(travelled mileage + residual mileage) × 100%

b. In terms of equipment with less value, service life newness rate was directly adopted to determine the newness rate.
c. In terms of equipment exceeding economic service life, onsite inspection newness rate was adopted to determine the integrated newness rate. In case of using such method, the newness rate is generally not lower than 15%.

③ Calculation of appraisal value

Appraisal value = replacement cost × integrated newness rate

3. Appraisal method of liabilities

Upon verification, on various liabilities, the liabilities and amounts confirmed were the appraisal value. The liability items without confirmation/verification will be valued as nil.

For this valuation, the valuer did not find any existing liabilities of this kind that has to be valued as nil, so the liabilities as assessed are not undervalued.

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SUMMARY OF VALUATION REPORT

APPENDIX IIA

Income approach

Valuation method of JW Information and Longgang Jingwah

The valuation for these two subsidiaries adopted the discounted cash flow approach. The selected cash flow basis was the free cash flow of the enterprise, and the valuation of the entire shareholder equity was determined based on the appraised overall value of the enterprise.

This valuation was conducted on the basis of the free cash flow of the enterprise in the incoming years. The entire shareholder equity was calculated by applying the appropriate discount rate to the value of the overall operating assets of the enterprise, adding the values of the overage assets and the non-operating assets, then deducting interest-bearing liability.

① Calculation formula

Value of entire shareholder equity = overall value of the enterprise – interest-bearing liability

Overall value of the enterprise = Operating assets value + Overage assets value (including longterm investment value) – Overage liability value + Non-operating assets value

Operating assets value = Present value of cash flow during the specific estimate period + Present (final) value of cash flow after the specific estimate period

② Determination of return period

Continuous period is adopted to estimate the cash flow of the electronic product business of the Company in this valuation, the specific period is ended at 31 December 2018, and the continuous period is to commence from 1 January 2019.

③ Determination of expected income

The enterprise’s free cash flow is the quantitative indicator for the enterprise’s expected income.

The enterprise’s free cash flow is the cash flow of all investors including the shareholders and the creditors of the interest-bearing liability. The calculation formula is as follows:

Enterprise’s free cash flow = net profit after tax + depreciation and amortization + interest expenses (1-Income tax rate) – capital expenditure – additional working capital

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SUMMARY OF VALUATION REPORT

APPENDIX IIA

④ Overage assets and non-operating assets

Overage assets are the assets without direct relationship with the enterprise’s income and unnecessary in the going concern of the enterprise, which mainly include overage cash, negotiable securities, and other assets without direct relationship with the expected income cash flow. Nonoperating assets are the assets not involved in production and operation, but are necessary to support the operating assets. In general, non-operating assets are overage assets, but not all of the overage assets belong to non-operating assets. Such assets shall be appraised separately.

⑤ Overage liabilities

Overage liabilities are the liabilities without direct relationship with operating activities, such as dividend payable, interest payable, non-operating liabilities payable to shareholders and related parties, etc.

⑥ Interest-bearing debts

Interest-bearing debts are debts stated in the book on the base date, interests of which need to be paid, including shot-term loans, interest-bearing notes payable, long-term loans due within one year, long-term loans and so forth.

Major evaluation parameters and evaluation procedures

(1) JW Information

This evaluation prediction basis is prepared with reference to the financial statements of JW Information from 2009 to 2013 audited by the certified public accountants of the PRC, based on the operating performance in the last five years and in compliance with the requirements prescribed in the relevant laws and regulations in force of the PRC as well as the national macro policies. This valuation studied the current situation and the prospects of the electronic sales product industry, analyzed the advantages and disadvantages of JW Information, especially the market circumstances JW Information confronts with and the future development prospects and potentials thereof, and also made references to the development schemes of JW Information and through comprehensive analysis and research. This valuation made analysis and prediction on the basis of adequate consideration of the current situation and development potentials of JW Information and with the premise of the basic assumptions and restricted conditions of this report.

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SUMMARY OF VALUATION REPORT

APPENDIX IIA

a) Forecast of operating revenue

The main revenue sources of JW Information are MID computers, GPS automobile navigators and recording pens. The increase in sales of 2013 was mainly contributed to that the current electronic market is in the stage to the mature period, with the sustainable relatively high market increase rate, however, the increase is gradually slowing down. As demonstrated in the financial statements provided by JW Information, the revenue of JW Information from January to March 2014 was RMB169,753,000, representing a decrease of approximately 49% from RMB335,610,000 in the corresponding period of 2013. In the end of the first quarter of 2014, JW Information has around 27 customers as compared to 35 customers during the whole last year. JW Information reduced the sales channels of those insignificant customers, and reinforced the attentions to several material customers. The sales of tablet products maintained at a stable high level with only one slack season from January to March 2014, the sales during which declined as compared to the previous months. With reference to the effects of the sales decrease in the first quarter, the sales revenue of 2014 would decrease as compared to that of 2013. The decrease in the operating revenue from January to March 2014 was mainly due to rapid upgrade of consumer electronics, which required the adjustment of product portfolio for adaptation to market variations. It was an accidental event in the long run. JW brand has certain good reputations, and the brand “JW” was awarded as “Top 10 Famous Trademarks in Shenzhen” and “Guangdong Famous Trademark”. The products of JW were sold to the Europe and America as well as the East Asia countries. JW Information is a high and new tech enterprise at national grade, possessing certain R&D capabilities and technology advantages. It can deeply customize intelligent terminal products according to clients’ requirements. With abundant funds, completed supply chain and industry chain, JW Information is ceaselessly expanding its R&D capabilities and industry scale of intelligent terminal, resulting in a further improvement room for sales volume of tablet PC. Provided that it does well in capitalizing favorable circumstances and capturing business opportunities, continuously improves technological content, quality and technique of complete units, and expedites the process of upgrading and updating of products, a larger market share can be gained. According to Wind Information, the whole industry of manufacturing electronic parts and components had an annual average sales growth of 5.92% from 2000 to 2012. In accordance with accounting statements audited by Chinese CPA, JW Information recorded a compound growth rate of 52.52% in operating revenue from 2008 to 2013. Pursuant to historical data of changes in operating revenue of JW Information, with reference to development level of electronics industry, taking development strategy and operating strategy of JW Information into consideration, it is cautiously estimated that a sales growth of around 6% will be achieved from 2015.

According to the published “Huaqiangbei Comprehensive Index from 2007 to 2014”, the geometric rate of increase of the unit price from 2007 to 2014 was -0.9%. This sales unit price is determined with reference to the increase tendency of this index.

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SUMMARY OF VALUATION REPORT

APPENDIX IIA

b) Determination of operating costs

Operating costs are the cost carried over from the production of products of JW Information, mainly including the expenses of raw materials, wages and manufactures.

As analyzed, the operating costs of JW Information in the last three years accounted for 93% to 94% of the revenue of the enterprise. And the prediction of the future operating costs has made reference to this ratio.

c) Determination of the discount rate

In order to determine the appropriate discount rate, references are usually made to the return rate of the same industry existing in the market, then comparison will be made between the risks and operation situation of the relevant JW Information and products to the market and this industry to calculate the weighted average cost of capital of the target JW Information. This valuation adopted the mode of WACC widely used in the world to evaluate the discount rate.

K E D e WACC = x + Kd x (1 + T) V V

Where: Ke is the cost of equity capital;

Kd is the cost of debt capital; E is the market value of the equity; D is the market value of interest-bearing debt; T is the income tax rate of enterprise; V is the total market value of enterprise (i.e. E=D).

As analyzed, WACC is calculated as follows:

If (T) is 25%, i.e. the statutory rate of the enterprise income tax in the PRC

WACC = Ke ×E/V+ Kd×(1-T)×D/V

=11.10% ×0.9219+6%×(1-25%)×0.0781 =10.58%

As JW Information is subject to a preferential tax rate in 2014, the tax rate (T) is 15%. Therefore, WACC=10.63%.

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SUMMARY OF VALUATION REPORT

APPENDIX IIA

(1) Determination of cost of equity capital Ke

The Capital Asset Pricing Model (CAPM) was adopted in determining the rate of return of equity capital of comparable enterprises. The rate of return in the CAPM is equivalent to the enterprise system risk coefficient (β) multiplied by the rate of return free from risks plus the market-risk rate of return. The calculation formula is shown below:

Ke = Rf+β×RPm+Rc

Where: Rf= rate of return free from risks;

β= enterprise risk coefficient; RPm= market risk premium; Rc = enterprise specific risk adjustment coefficient.

The adoption of the CAPM is mainly for determining the rate of return free from risks, the system risk coefficient and the market risk premium.

① Determination of rate of return free from risks Rf

In the valuation, the treasury bonds with the remaining period from the valuation reference date to the date of maturity exceeding 10 years were selected from Shanghai stock market and Shenzhen stock market, and their yields to maturity were calculated. The average yield to maturity of the selected treasury bonds was used as the rate of return free from risks in this valuation. Therefore, the rate of return free from risks Rf was 4.2641%. (Data source: Wind Information)

② Enterprise system risk coefficient β

It is determined in accordance with the estimates of Beta of A share companies listed in Shanghai and Shenzhen stock markets which are similar to the enterprise as obtained from Wind Information. The specific process of determination is as follows:

Firstly, the Beta without financial leverage of the enterprises was calculated based on the published Beta of similar listed companies, and then the average Beta without financial leverage and the target capital structure D/ E of the enterprise concerned with the above calculation were obtained to calculate the Beta of target enterprise.

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SUMMARY OF VALUATION REPORT

APPENDIX IIA

The calculation formula is shown below:

βL=(1+(1-T)×D/E)×βU

Where:

βL: Beta with financial leverage;

D/E: Debt to equity ratio of the similar listed companies published;

βU: Beta without financial leverage;

T: Income tax rate

In sum, the βL is 0.9895.

③ Determination of market risk premium Rpm

For market risk premium, the ratio published by Aswath Damadoran, an economist of New York University, was adopted with reference to the industry practice. The ratio was recently updated in January 2014. He determined the market risk premium of the PRC to be 5.90%.

④ Determination of enterprise specific risk adjustment coefficient Rc

Enterprise specific risks are mainly related to enterprise scale, operational phase of enterprise, historical operation situation, financial risk of enterprise, development stage of major products, business of enterprises and distribution of products and regions, corporate internal management and control mechanism, experience and qualifications of the management, reliance on major customers and suppliers, etc. As the scale of the enterprises evaluated is not large, the business, products and regional distribution are limited, and the internal management and control mechanism is yet to be strengthened. Thus, the enterprise specific risk adjustment coefficient Rc is 1%.

⑤ Determination of cost of equity capital Ke

Ke =Rf+βL*Rmp+ Rc

=4.2641%+ 0.9895×5.90%+1% =11.10%

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SUMMARY OF VALUATION REPORT

APPENDIX IIA

(2) Determination of cost of interest-bearing debts Kd

According to the liability constitution of previous years and as at the reference date reviewed by the valuer and based on the statistics of the national interest rates of previous years, the six-month to one-year lending rate released by the PBOC was adopted for the cost of interest-bearing debts. Kd=6%

(3) Determination of debt-equity ratio (D/V) and equity-value ratio (E/D) of JW Information

The debt-equity ratio (D/V) and equity-value ratio (E/D) of JW Information are determined with reference to interest-bearing-debt (D), fair market value of owner’s equity (E) and total market value (V=D+E) of comparable companies in the industry. For further information, please refer to the table below.

The selection was in the principle of listed companies with similar or close business structure, operation model, enterprise scale, assets allocation and usage, operational phase of enterprise, growth, operational risk, financial risk and other factors as those of all the equity interests held by the shareholders of the enterprise evaluated.

Upon analysis, the calculation of average capital structure of comparable companies as at 31 December 2013 is as follows:

Unit: RMB’000

No. Name of comparable company Stock code Interest- bearing debt Fair market value of owner’s equity Total market value (D) (E) (V=D+E) 1 Shenzhen Zhongheng Huafa A (深華發A) 000020.SZ 301,765 1,472,919 1,774,684 2 Sea Star (實益達) 002137.SZ 163,030 1,815,306 1,978,336 3 ZoweeTechnology (卓翼科技) 002369.SZ 261,349 4,272,000 4,533,349 4 Universal Scientific Industrial (環旭電子) 601231 1,175,255 21,296,786 22,472,041 5 FenghuoElectronics (烽火電子) 000561.SZ 100,000 3,485,692 3,585,692 Average	Debt-equity ratio Equity-value ratio (D/V) (E/V) 0.1700 0.8300 0.0824 0.9176 0.0577 0.9423 0.0523 0.9477 0.0279 0.9721 0.0781 0.9219	Debt-equity ratio Equity-value ratio (D/V) (E/V) 0.1700 0.8300 0.0824 0.9176 0.0577 0.9423 0.0523 0.9477 0.0279 0.9721 0.0781 0.9219
		0.9219

Source: WIND Information

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SUMMARY OF VALUATION REPORT

APPENDIX IIA

d) Valuation conclusion by the income approach

Free cash flows for each year during the forecast period were considered based on the interim cash inflows, and the free cash flows for each year during the profitable period were converted into the current value as at 31 December 2013 based on the weighted capital cost. The calculation formula is shown below:

t=n

P=∑Rt /( 1+i)t+ Pn /( 1+i)n

As calculated by the above estimations, the valuation conclusion of JW Information by the income approach is set out in the below table:

Currency Unit: RMB’000

Forecast years

						Years
						with stable
Items	2014	2015	2016	2017	2018	increase
Operating income	830,804	918,719	945,730	973,087	998,422	998,422
Operating cost and expenses	819,520	904,077	931,591	960,078	986,259	986,708
Total profit	11,284	14,642	14,139	13,009	12,163	11,714
Income tax	1,698	3,670	3,544	3,262	3,051	2,939
Net Profit	9,586	10,972	10,595	9,747	9,112	8,775
Add: Depreciation	4,670	4,749	4,625	4,451	4,460	4,909
Interest expenses (after tax effects)	794	700	700	700	700	700
Less: Capital expenses	2,153	558	5,523	2,978	588	4,543
Increased working capital	-28,653	3,566	1,180	1,238	1,098	—
Free cash flow	41,550	12,297	9,217	10,682	12,586	9,841
Discount rate (WACC)	10.63%	10.58%	10.58%	10.58%	10.58%	10.58%
Discount years	0.50	1.50	2.50	3.50	4.50
Discount coefficient	0.95	0.86	0.78	0.70	0.64	6.01
Present value of the free cash flow	39,503	10,569	7,165	7,508	8,000	59,149
Total present value of the free cash flow						131,894
Add: overage assets						71,861
Less: overage liabilities						20,000
Value of the total equity						183,755
Shareholding ratio						62%
Attributed equity value						113,928

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SUMMARY OF VALUATION REPORT

APPENDIX IIA

(2) Longgang Jingwah

a. Forecast of operating revenue

Shenzhen Longgang Jingwah Electronics Co., Ltd. is currently engaged in leasing of selfowned property and property management. The source of all revenues is the revenue from property leasing.

As at the valuation base date, all properties of the valuation target were used for leasing and the occupancy rate was above 95%.

In accordance with the “Code for Real Estate Appraisal”, in case there is a lease, the income from the valuation target within the lease term shall be calculated according to the contractual rental. Beyond the lease term, the annual income from the valuation target shall be determined based on the objective rental in the market. Market comparison approach was adopted for calculation in the estimation of market rental. In the estimation, 3 comparable examples of the same functions and in the same region were selected for determining the objective rental. According to the lease and vacancy conditions of the valuation target in previous years, and the lease and vacancy conditions of similar properties in the region where the valuation target is located, the vacancy rate is determined to be 4% as properties of the valuation target are in vacancy in an average of a half month in a year. The annual growth rate of income is calculated in accordance with the property leasing price index in Shenzhen from the period from 2007 to 2012.

No.	Time		Leasing price index
1	December	2007	1595
2	December	2008	1490
3	December	2009	1597
4	December	2010	1514
5	December	2011	1807
6	December	2012	2027
	Geometric	average annual growth rate	4.90%

The above information is from CREIS index and fdc.soufun.com.

Pursuant to the Agreement on Cooperative Development of Land as provided by the appraised unit, the term of cooperation is 40 years. As at the valuation base date, there were still 20 years left, thus the term of income in the valuation was calculated at 20 years.

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SUMMARY OF VALUATION REPORT

APPENDIX IIA

b. Determination of operating costs

Operating costs are the cost carried over from the leasing activities of Longgang Jingwah, mainly including the administrative fee, property tax, land use tax, maintenance cost and depreciation.

Administrative fee refers to the properties administrative fee calculated at 2% of rental income paid to Shenzhen Jingwah Property Management Co., Ltd. as appointed by Longgang Jingwah; property tax and land use tax refer to the taxes due under the tax law; depreciation refers to the depreciation provided for the leased properties; and maintenance cost refers to the daily maintenance cost of the leased properties as incurred by Longgang Jingwah.

c. Determination of the discount rate

In order to determine the appropriate discount rate, references are usually made to the return rate of the same industry existing in the market, then comparison will be made with the market and relevant comparable companies in the industry to calculate the weighted average cost of capital of the target Longgang Jingwah. This valuation adopted the mode of WACC widely used in the world to evaluate the discount rate.

K E D e WACC = x + Kd x (1 + T) V V

Where: Ke is the cost of equity capital; Kd is the cost of debt capital; E is the market value of the equity; D is the market value of interest-bearing debt; T is the income tax rate of enterprise; V is the total market value of enterprise (i.e. E+D).

As analyzed, WACC is calculated as follows:

If (T) is 25%, i.e. the statutory rate of the enterprise income tax in the PRC WACC = Ke ×E/V+ Kd×(1-T)×D/V = 9.5% ×0.7+6.0%×(1-25%)×0.3 = 8.00%

— 58 —

SUMMARY OF VALUATION REPORT

APPENDIX IIA

(1) Determination of cost of equity capital Ke

Ke = Rf+β×RPm+Rc

Where: Rf= rate of return free from risks;

β= enterprise risk coefficient; RPm= market risk premium; Rc = enterprise specific risk adjustment coefficient.

The adoption of the CAPM is mainly for determining the rate of return free from risks, the system risk coefficient and the market risk premium.

① Determination of rate of return free from risks Rf

② Enterprise system risk coefficient β

— 59 —

SUMMARY OF VALUATION REPORT

APPENDIX IIA

The calculation formula is shown below:

βL=(1+(1-T)×D/E)×βU

Where:

βL: Beta with financial leverage;

D/E: Debt to equity ratio of the similar listed companies published;

βU: Beta without financial leverage;

T: Income tax rate

In sum, the βL of the property lease industry is 0.6079.

③ Determination of market risk premium Rpm

④ Determination of enterprise specific risk adjustment coefficient Rc

Enterprise specific risks are mainly related to enterprise scale, operational phase of enterprise, historical operation situation, financial risk of enterprise, development stage of major products, business of enterprises and distribution of products and regions, corporate internal management and control mechanism, experience and qualifications of the management, reliance on major customers and suppliers, etc. As the scale of the enterprises evaluated is not large, the internal management and control mechanism is yet to be strengthened. Thus, the enterprise specific risk adjustment coefficient Rc is 0.5%.

⑤ Determination of cost of equity capital Ke

Property lease Ke =Rf+βL*Rmp+ Rc =4.2641%+ 0.6079×5.90%+0.5% =9.5%

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SUMMARY OF VALUATION REPORT

APPENDIX IIA

(2) Determination of cost of interest-bearing debts Kd

According to the liability constitution of previous years and as at the reference date reviewed by the valuer and based on the statistics of the national interest rates of previous years, the one-year lending rate released by the PBOC was adopted for the cost of interest-bearing debts. Kd=6.0%

(3) Determination of debt-equity ratio (D/V) equity-value ratio (E/V)

The debt-equity ratio (D/V) and equity-value (E/V) of Longgang Jingwah are determind with reference to interest-bearing debt (D), fair market value of owner’s equity (E) and total market value (V=D+E) of comparable companies in the industry. For further information, please refer to the table below.

Upon analysis, the calculation of average capital structure of comparable companies as at 31 December 2013 is as follows:

Unit: RMB’000

No. Name of comparable company Stock code Interest- bearing debt Fair market value of owner’s equity Total market value (D) (E) (V=D+E) 1 Yangguang (陽光股份) 000608.SZ 2,010,354 3,854,554 5,864,908 2 China International Trade (中國國貿) 600007.SH 3,700,000 10,687,268 14,387,268 Average	Debt-equity ratio Equity-value ratio (D/V) (E/V) 0.3428 0.6572 0.2572 0.7428 0.3000 0.7000	Debt-equity ratio Equity-value ratio (D/V) (E/V) 0.3428 0.6572 0.2572 0.7428 0.3000 0.7000
		0.7000

Source: WIND Information

— 61 —

SUMMARY OF VALUATION REPORT

APPENDIX IIA

d. Valuation conclusion by the income approach

t=n

P=∑Rt /( 1+i)t+ Pn /( 1+i)n t=1

As calculated by the above estimations, the valuation conclusion of Longgang Jingwah by the income approach is set out in the below table:

Currency Unit: RMB’000

		Forecast years
Items	2014	2015	2016	2017 to 2033
Operating income	19,860	20,962	21,755	537,520
Operating cost and expenses	16,565	17,353	17,563	352,298
Total profit	3,295	3,609	4,192	185,222
Income tax	829	908	1,054	46,466
Net Profit	2,466	2,701	3,138	138,756
Add: Depreciation	2,317	2,317	2,317	24,899
Interest expenses (after tax effects)	1,068	1,068	1,068	18,158
Less: Capital expenses	309	496	15	6,026
Increased working capital	1,647	193	77	2,377
Free cash flow	3,895	5,397	6,431	173,410
Discount rate (WACC)	8.00%	8.00%	8.00%	8.00%
Discount years	0.50	1.50	2.50	3.50 - 19.50
Discount coefficient	0.96	0.89	0.83	0.76 - 0.22
Present value of the free cash flow	3,748	4,808	5,306	70,953
Total present value of the free cash flow				84,815
Add: overage assets				1,494
Less: overage liabilites				4,365
Less: interest bearing debts				25,000
Value of the total equity				56,944

— 62 —

SUMMARY OF VALUATION REPORT

APPENDIX IIA

Valuation assumptions

This valuation was based on the following assumptions:

(I) Basic assumptions

Open market assumption: this is an assumption and limitation about conditions of the market where assets to be traded and effects of such market conditions on assets. An open market means a well-developed competitive market with willing buyers and willing sellers acting reasonably at arms’ length, having sufficient opportunities and time to obtain market information and under no compulsion or restrictions to buy or sell;
Going concern assumption: there has no material change in operation mode and profit mode of the appraised unit. It is assumed that the operator of the enterprise is responsible, and the management is capable of undertaking theirs’ duties, the enterprise may be in normal operation. It is assumed that the operator of the enterprise is capable of operating continually in pursuit of its development objective and policy, which could not result in a diversion in the development of the enterprise due to personal reason.

(II) General assumptions

There will be no material change in the laws, regulations and policies of the industry regarding the appraised unit.
There will be no other material changes in social and economic environment and economic development except the changes already known to the public.
Fluctuations of existing bank credit rate and foreign exchange rate in the country will maintain at a reasonable level.
There are no other material changes in the tax system of the country except the changes already known to the public.
There are no other factors of force majeure or unforeseeable factors that may give rise to material adverse impact.
There will be free cash flow of the enterprise in the middle of each forecast period.
Inflation factor is not taken into account in estimating various parameter values.

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SUMMARY OF VALUATION REPORT

APPENDIX IIA

There has no material change in operation mode and profit mode of the appraised unit. It is assumed that the operator of the enterprise is responsible, and the management is capable of undertaking theirs’ duties, the enterprise may be in normal operation. It is assumed that the operator of the enterprise is capable of operating continually in pursuit of its development objective and policy, which could not result in a diversion in the development of the enterprise due to personal reason.

(III) Specific assumptions

Regarding the legal description or legal issues (whether their limitation of rights or liabilities) of the valued asset in this valuation report, we conduct general inspection on the valued asset. Apart from those disclosed in the report, the ownership of the valued asset is assumed to be in good condition, can be traded on the market, not subject to lien and easements, unviolated and has no other encumbrances.
Regarding the information provided by the entruster and other parties which the whole or any part of the valuation conclusion in this valuation report relies upon, the Company has only conducted independent auditing pursuant to the valuation procedures. We make no representation as to the authenticity and accuracy of such information.
Assumption of indefective items, contingent items or other items: The evaluation agent and its appraisers take no responsible for indefective items, contingent items or other items which may exist with the enterprise and have impact on the enterprise, such as those deemed not exist by the appraisers under the conditions that they are required by appraisers to deliver by the appraised unit, and failed to be delivered by the latter, and they are unknown even when the appraisers have fulfilled evaluation procedures.
Assumption of authenticity and completeness of information: Refers to authenticity and completeness of financial statements, accounting vouchers, list of assets and other documents related to the evaluation provided by the appraised unit.
It is assumed that all certificates, licenses, consents or other legal or administrative authorization documents issued by regions, government institutions and private organizations required for the appraised assets to be used in a specific manner (which forms the basis of value estimation in this valuation report) have been or could be at any time obtained or updated.

— 64 —

SUMMARY OF VALUATION REPORT

APPENDIX IIA

It is assumed that all improvements on the relevant assets performed by Shenzhen Jingwah Electronics Co., Ltd. are in line with relevant laws and regulations related to other laws, plans, or engineering codes set by relevant competent departments at higher levels.
Estimations in this valuation report are made based on the assumption that all significant or potential factors which may affect the value analysis have been disclosed to us by the appraised unit.
There will not be significant changes in the accounting policies and auditing methods of the appraised unit after the valuation base date.
The estimated consideration set out in this valuation report is calculated based on the financial position of the appraised unit on the valuation base date.
The appraised unit will continue to operate legally, and will be consistent with the current practice in terms of the scope, means and decisive procedures of operation.
Some properties under appraisal are located in Huaqiangbei, the municipal business zone of Shenzhen. The properties under appraisal are industrial buildings, and are leased for commercial purpose now. This valuation assumes that such properties will stay in the current usage condition until the expiration of the land.
The appraised unit operates independently, independently distributes earnings, takes responsibility for financial and operating risk as an independently economic entity.

Should there be occurrences of events not in line with the aforesaid assumptions, the results in this valuation would lapse.

For full details, Shareholders may refer to the Valuation Report.

— 65 —

LETTERS IN RELATION TO THE VALUATION REPORT

APPENDIX IIB

1. LETTER FROM THE BOARD IN RELATION TO THE VALUATION REPORT

5 November 2014

The Listing Division of The Stock Exchange of Hong Kong Limited

11/F., One International Finance Centre,

1 Harbour View Street, Central, Hong Kong

Dear Sirs,

Re: Nanjing Panda Electronics Company Limited (the “Company”) Shenzhen Jingwah Electronics Co., Ltd. (the “Target Company”)

We, hereby confirm that, in compliance with the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, have reviewed the calculations for discounted future estimated cash flows underlying the valuation of the Target Company’s 62% equity interest in Shenzhen Jingwah Information Technology Co., Ltd. and 100% equity interest in Shenzhen Longgang Jingwah Electronics Co., Ltd. as at 31 December 2013 (the “ Valuation ”) in connection with a valuation of the Target Company as at 31 December 2013 prepared by 沃克森 (北京) 國際資產評估說明有限公司 (Vocation (Beijing) International Assets Valuation Company Limited) dated 27 May 2014.

Baker Tilly Hong Kong Limited has also reviewed the arithmetical accuracy of the calculations of the discounted future estimated cash flows underlying the Valuation in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 500 “Reporting on Profit Forecasts, Statements of Sufficiency of Working Capital and Statements of Indebtedness” and with reference to Hong Kong Standard on Assurance Engagements 3000 “Assurance Engagements Other Than Audits or Reviews of Historical Financial Information” issued by the Hong Kong Institute of Certified Public Accountants.

We hereby confirm that the discounted future estimated cash flows made pursuant to the Valuation is made after due and careful enquiry.

For and on behalf of

The Board of Directors

Xia Dechuan

Non-executive Director

— 66 —

LETTERS IN RELATION TO THE VALUATION REPORT

APPENDIX IIB

2. LETTER FROM BAKER TILLY HONG KONG LIMITED IN RELATION TO THE VALUATION REPORT

The following is the text of a letter received from Baker Tilly Hong Kong Limited, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this circular.

BAKER TILLY HONG KONG| 天職香港

5 November 2014

The Board of Directors

Nanjing Panda Electronics Company Limited

Dear Sirs,

Nanjing Panda Electronics Company Limited (the “Company”) Shenzhen Jingwah Electronics Co., Ltd. (the “Target Company”)

We refer to the discounted future estimated cash flows underlying the valuation of the Target Company’s 62% equity interest in Shenzhen Jingwah Information Technology Co., Ltd. and 100% equity interest in Shenzhen Longgang Jingwah Electronics Co., Ltd. as at 31 December 2013 (the “ Valuation ”) in connection with a valuation of the Target Company as at 31 December 2013 prepared by 沃克森（北京）國際資產評估說明有限公司 dated 27 May 2014. The Valuation based on the discounted future estimated cash flows is regarded as a profit forecast under Rule 14.61 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and is set out in the section headed “Valuation method of JW Information and Longgang Jingwah” in Appendix IIA of the circular dated 5 November 2014 (the “ Circular ”) of the Company.

Responsibilities

The directors of the Target Company are solely responsible for the preparation of the discounted future estimated cash flows in accordance with the bases and assumptions (the “ Assumptions ”) determined by the directors and set out on pages 49 to 65 in Appendix IIA of the Circular.

It is our responsibility to form an opinion, based on our procedures, on the arithmetical accuracy of the calculations of the discounted future estimated cash flows underlying the Valuation.

— 67 —

LETTERS IN RELATION TO THE VALUATION REPORT

APPENDIX IIB

Basis of opinion

We carried out our work in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 500 “Reporting on Profit Forecasts, Statements of Sufficiency of Working Capital and Statements of Indebtedness” and with reference to Hong Kong Standard on Assurance Engagements 3000 “Assurance Engagements Other Than Audits or Reviews of Historical Financial Information” issued by the Hong Kong Institute of Certified Public Accountants (“ HKICPA ”). Those standards require that we plan and perform our work to obtain reasonable assurance as to whether the discounted future estimated cash flows, so far as the calculations are concerned, have been properly compiled, in all material respects, in accordance with the Assumptions. Our work is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing issued by the HKICPA. Accordingly, we do not express an audit opinion.

The discounted future estimated cash flows do not involve the adoption of accounting policies. The Assumptions include hypothetical assumptions about future events and management actions which cannot be confirmed and verified in the same way as past results and these may or may not occur. Even if the events and actions anticipated do occur, actual results are still likely to be different from the Valuation and the variation may be material. Accordingly, we have not reviewed, considered or conducted any work on the reasonableness and the validity of the Assumptions and do not express any opinion whatsoever thereon.

Opinion

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

Yours faithfully,

Baker Tilly Hong Kong Limited

Certified Public Accountants

Hong Kong Chan Kwan Ho, Edmond Practising certificate number P02092

— 68 —

VALUATION REPORT ON PROPERTY INTEREST

APPENDIX IIC

The following is the text of a letter, a summary of valuation and valuation certificates prepared for the purpose of incorporation in this circular received from Vigers Appraisal & Consulting Limited, an independent valuer, in connection with their valuation of the property interests held by the Target Group as at 31 August 2014.

Vigers Appraisal & Consulting Limited International Asset Appraisal Consultants

10th Floor, The Grande Building 398 Kwun Tong Road Kowloon Hong Kong

==> picture [102 x 102] intentionally omitted <==

5 November 2014

The Directors Nanjing Panda Electronics Company Limited 301 Zhongshan Road East Nanjing, the PRC

Dear Sirs,

Re: Valuation of various properties located in the People’s Republic of China (the “PRC) (the “Properties”)

In accordance with your instructions for us to value the Properties held by Nanjing Panda Electronics Company Limited (the “Company”) and its subsidiaries (together referred hereinafter as the “Group”) in the People’s Republic of China (the “PRC”), we confirm that we have carried out inspections, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the market values of such Properties as at 31 August 2014 (“date of valuation”) for the purpose of incorporation in the circular.

Our valuation is our opinion of the market value which we would define as intended to mean “the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion”.

— 69 —

VALUATION REPORT ON PROPERTY INTEREST

APPENDIX IIC

In valuing Properties Nos. 1-8, we have assessed the value of the Properties by adopting the direct comparison approach and made reference to the recent transactions for similar premises in the proximity. Adjustments have been made for the differences in transaction dates, building age, floor area etc. between the comparable properties and the subject properties. In valuing Properties Nos. 1-6 and 8, we have also adopted the term and reversion approach by taking into account the current rent passing of the property interests and the reversionary potential of the tenancies.

Our valuation has been made on the assumption that the owners sell the Properties in the market without the benefit of a deferred terms contract, leaseback, joint venture, management agreement or any other similar arrangement which could serve to increase the values of the Properties. Furthermore, no account has been taken of any option or right of pre-emption concerning or affecting the sale of the Properties and no forced sale situation in any manner is assumed in our valuation.

In the course of our valuation, we have assumed that all consents, approvals and licences from relevant PRC government authorities for development of the Properties in the PRC will be granted without any onerous conditions or undue delay. Moreover, we have also assumed free and uninterrupted rights to use, occupy or assign the Properties for the whole of the unexpired term as granted.

We have not caused title searches to be made for the Propeties at the relevant government bureau in the PRC. We have been provided with certain extracts of title documents relating to the property interest. However, we have not inspected the original documents to verify the ownership, encumbrances or the existence of any subsequent amendments which may not appear on the copies handed to us. In undertaking our valuation for the Properties in the PRC, we have relied on the legal opinion (“the PRC legal opinion”) provided by the Group’s PRC legal adviser, Yongheng Partners.

We have relied to a considerable extent on information provided by the Group and have accepted advice given to us on such matters as planning approvals or statutory notices, easements, tenure, occupation, lettings, site and floor areas and in the identification of the Properties in which the Group have valid interests. Dimensions, measurements and areas included in the attached valuation certificates are based on information contained in the documents provided to us and are therefore only approximations.

We have inspected the exteriors of the Properties, where possible, the interiors of the premises. However, no structural survey has been made, but in the course of our inspection, we did not note any serious defects. We are not, therefore, able to report that the Properties are free from rot, infestation or any other structural defects. No tests were carried out on any of the services. The inspections are carried out in September and October 2014 by Mr. Jin Guang Wei, a China Real Estate Appraiser and Mr. Lai Kar Yin, a valuer.

— 70 —

VALUATION REPORT ON PROPERTY INTEREST

APPENDIX IIC

In valuing the property interests, we have complied with the requirements set out in Chapter 5 and Practice Note 12 to the Rules Governing the Listing of Securities issued by The Stock Exchange of Hong Kong Limited and the HKIS Valuation Standards (2012 Edition) published by the Hong Kong Institute of Surveyors (“HKIS”).

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

Unless otherwise stated, all monetary amounts stated are in Hong Kong Dollars. The exchange rate used in valuing the Properties in the PRC as at 31 August 2014 was HK$1.00 = RMB0.79. There has been no significant fluctuation in the exchange rates for RMB against Hong Kong Dollars between that date and the date of this letter.

We enclosed herewith our summary of valuation and valuation certificates.

Yours faithfully, For and on behalf of Vigers Appraisal & Consulting Limited Raymond Ho Kai Kwong Registered Professional Surveyor (GP) MRICS MHKIS MSc (e-com) China Real Estate Appraiser Managing Director

Note : Mr. Raymond Ho Kai Kwong, Chartered Surveyor, MRICS MHKIS MSc(e-com), has over twenty seven years’ experiences in undertaking valuations of properties in Hong Kong and has over twenty years’ experiences in valuations of properties in the PRC.

— 71 —

VALUATION REPORT ON PROPERTY INTEREST

APPENDIX IIC

SUMMARY OF VALUATION

Property interests owned by the Group in the PRC for investment purpose

1.
5 buildings located at zone of Jingwah Electronics Co., Ltd.
(Land Plot No.B213-0046), Huafa Road North, Futian District,
Shenzhen, Guangdong Province, the PRC
2.
6 buildings located at zone of Jingwah Electronics Co., Ltd.
(Land Plot No.B213-0048), Huafa Road North, Futian District,
Shenzhen, Guangdong Province, the PRC
3.
3 units on 8th Floor, Block 103, Sai Ge High Technology
Industrial Zone, located at Zhenxing Road, Futian District,
Shenzhen, Guangdong Province, the PRC
4.
Retail unit nos.1135 and 1137 on Ground Floor, Central Power
Information Plaza, Block B, located at Shennan Road and Huafa
Road North, Futian District, Shenzhen, Guangdong Province,
the PRC
5.
15th Floor on Block 2 of Tong Jian Building located at
Shennan Road, Shangbu District, Shenzhen,
Guangdong Province, the PRC
6.
A retail unit on Ground Floor located at No.1 Da Ying Bi East,
Xuanwu District, Nanjing, Jiangsu Province, the PRC
7.
Unit 501 on 5th Floor of Block 6, Jia Yu Building, located at
Nancheng Road, Dongguan, Guangdong Province, the PRC
8.
19 buildings located at zone of Jingwah Industrial Park, Pinghu
Town Liang An Tian, Longgang District, Shenzhen, Guangdong
Province, the PRC
TOTAL:

Market Value in its
existing state as at
31 August 2014
RMB389,000,000
(equivalent to approximately
HK$492,000,000)
RMB194,000,000
(equivalent to approximately
HK$246,000,000)
RMB3,400,000
(equivalent to approximately
HK$4,300,000)
RMB800,000
(equivalent to approximately
HK$1,000,000)
RMB12,600,000
(equivalent to approximately
HK$15,900,000)
RMB3,900,000
(equivalent to approximately
HK$4,900,000)
No commercial value
No commercial value
(See Note 5 in
PropertyNo. 8)
RMB603,700,000
(equivalent to approximately
HK$764,100,000)

— 72 —

VALUATION REPORT ON PROPERTY INTEREST

APPENDIX IIC

VALUATION CERTIFICATES

Property Description and Tenure

5 buildings The property comprises a located at zone parcel of land with site area of Jingwah of approximately 8,626.9 Electronics sq.m. and 5 buildings Co., Ltd.(Land erected thereon. The Plot No.B213buildings were completed 0046), Huafa in the period between 1982 Road North, and 1989. Futian District, Shenzhen, The buildings have a Guangdong total gross floor area of Province, the approximately 33,128.05 PRC sq.m.

The property is held under a land use rights for a term of 50 years commencing from 25 October 1980 to 24 October 2030 for industrial and warehouse uses.

Market value in Particulars of existing state as at Occupancy 31 August 2014 Portion of the RMB389,000,000 property having a total gross floor area (equivalent to of 32,068.05 sq.m. approximately is subject to various HK$492,000,000) tenancies for terms from 1 to 5 years with the latest term being expired on 31 July 2016 at a total annual rent of RMB30,096,247 for retail, restaurant and office uses.

Particulars of Occupancy

Portion of the property having a total gross floor area of 1,060 sq.m. is occupied by the Group for office use as at the date of valuation.

Notes:

Pursuant to 5 State-owned Real Estate Ownership Certificates (Document Nos.: Shen Fang Di Zi No. 3000743904, 3000743901, 3000743903, 3000743899 and 3000743905), the land use rights of the property (Site No: B213-0046) having a total site area of approximately 8,626.9 sq.m. were granted to Shenzhen Jingwah Electronics Co., Ltd. (“Shenzhen Jingwah”) for a term of 50 years commencing from 25 October 1980 to 24 October 2030 for industrial and warehouse use.

— 73 —

VALUATION REPORT ON PROPERTY INTEREST

APPENDIX IIC

The buildings of the property have a total gross floor area of approximately 33,128.05 sq.m. The particulars of the buildings have been summarized as follows:

Real Estate
Certificate No.
Building
Usage
Year of
Completion
Shen Fang Di Zi
No. 3000743904
No. 5 Five-storey Plant of
Jingwah Electronics Co., Ltd.
(京華電子公司五層廠房5棟)
Industrial
1988
Shen Fang Di Zi
No. 3000743901
No. 3 Five-storey Plant of
Jingwah Electronics Co., Ltd.
(京華電子公司五層廠房3棟)
Industrial
1984
Shen Fang Di Zi
No. 3000743903
No. 4 Six-storey Plant of
Jingwah Electronics Co., Ltd.
(京華電子公司六層廠房4棟)
Industrial
1989
Shen Fang Di Zi
No. 3000743899
No. 2 Five-storey Plant of
Jingwah Electronics Co., Ltd.
(京華電子公司五層廠房2棟)
Industrial
1982
Shen Fang Di Zi
No. 3000743905
No. 1 Five-storey Plant of
Jingwah Electronics Co., Ltd.
(京華電子公司五層廠房1棟)
Industrial
1982
Total

Gross Floor
Area
(sq.m.)
6,831.58
8,373.42
6,390.06
6,767.27
4,765.72
33,128.05

In the course of our valuation, we have disregarded the illegal structures. In undertaking our valuation, we have based on the area of the Real Estate Ownership Certificates provided by the Company.
In the course of our valuation, we have made the following assumptions:
(a) The registered owner of the property has obtained the relevant title certificate and is entitled to sell, transfer, mortgage, charge, lease, sub-lease or otherwise dispose of the property to any third party (either local or overseas) at a consideration without payment of any additional premium or other onerous payment to the government during the whole of the unexpired term of their land use rights periods;
(b) The property is free from any mortgages, orders and other legal encumbrances which may cause adverse effects to the title of the property;
(c) All legal documents and the relevant planning permits were obtained; and
(d) In undertaking our valuation of a land parcel for industrial and warehouse, the market value of the property in existing state as at the date of valuation is RMB389,000,000. Land premium would require to be paid in respect of the property is RMB208,000,000 and the market value of the property before deducting the land premium is RMB597,000,000. In calculating the land premium, we have made reference to the latest government regulations. But the actual amount to be paid will be based on an agreement between relevant government authorities and the property owner. The land premium is for reference only.

— 74 —

VALUATION REPORT ON PROPERTY INTEREST

APPENDIX IIC

The PRC legal opinion provided by the Group’s PRC legal adviser, Yongheng Partners, states, inter alia, the followings:
(a) Shenzhen Jingwah has the sole legitimate rights related to land use rights and building ownership and Shenzhen Jingwah is entitled to occupy, use, get income, transfer, mortgage or otherwise dispose of such property within the valid period in accordance with the law.
(b) After completing with the relevant registration for changing use, Shenzhen Jingwah can change the land use of the property.
Shenzhen Jingwah is an indirect 38.03%-owned subsidiary of the Company.
The property contributes a significant portion of revenue to the Group. We are of the view that the property is the material property held by the Group.

Details of the material property :

(a) General description of : The property is located at the west of Huafa Road North in location of the property the Huaqiang North commercial area of Futian District in Shenzhen. Huaqiag North commercial area is a traditional commercial area where many shopping arcades and shops are located. The general price level of commercial units in the region was about RMB40,000 – RMB180,000/sq.m.
(b) Details of encumbrances, : The property is not subject to any encumbrances, pledges or liens, pledges, mortgages mortgages. against the property
(c) Environmental Issue : No environmental impact assessment has been carried out. (d) Details of investigations, : See note 5 notices, pending litigation, breaches of law or title defects
(e) Future plans for construction, : As advised by the Company, there is no plan for new major renovation, improvement or construction, renovation, improvement or development in the development of the property near future.

— 75 —

VALUATION REPORT ON PROPERTY INTEREST

APPENDIX IIC

Property

Description and Tenure

Particulars of Occupancy

Market value in existing state as at 31 August 2014

6 buildings The property comprises a located at zone parcel of land with total of Jingwah site area of approximately Electronics 8,044.5 sq.m. and 6 Co., Ltd.(Land buildings erected thereon. Plot No.B213The buildings were 0048), Huafa completed in the period Road North, between 1983 and 1992. Futian District, Shenzhen, The buildings have a Guangdong total gross floor area of Province, the approximately 17,764.55 PRC sq.m.
The property is held under a land use rights for a term of 50 years commencing from 21 August 1981 to 21 August 2031 for residential uses.

Portion of the RMB194,000,000 property having a total gross floor area (equivalent to of 17,119.68 sq.m. approximately is subject to various HK$246,000,000) tenancies for terms from 1 to 12 years with the latest term being expired on 31 October 2015 at a total annual rent of RMB18,554,097 for retail, restaurant, office and hotel uses.

Portion of the property having a total gross floor area of 644.87 sq.m. is occupied by the Group for quarter use as at the date of valuation.

Notes:

Pursuant to 6 State-owned Real Estate Ownership Certificates (Document Nos.: Shen Fang Di Zi No. 3000203086, 3000203082, 3000203087, 3000203084, 3000203081 and 3000203085), the land use rights of the property (Site No: B213-0048) having a total site area of approximately 8,044.7 sq.m. were granted to Shenzhen Jingwah for a term of 50 years commencing from 21 August 1981 to 21 August 2031 for residential uses.

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VALUATION REPORT ON PROPERTY INTEREST

APPENDIX IIC

The buildings of the property have a total gross floor area of approximately 17,764.55 sq.m. The particulars of the buildings have been summarized as follows:

Real Estate
Certificate No.
Building
Usage
Year of
Completion
Shen Fang Di Zi
No. 3000203086
No. 12 Eight-storey Dormitory of
Jingwah Electronics Co., Ltd.
(京華電子公司八層宿舍12棟)
Residential
1989
Shen Fang Di Zi
No. 3000203082
No. 16 Eight-storey Dormitory of
Jingwah Electronics Co., Ltd.
(京華電子公司八層宿舍16棟)
Residential
1991
Shen Fang Di Zi
No. 3000203087
No. 9 Six-storey Dormitory of
Jingwah Electronics Co., Ltd.
(京華電子公司六層宿舍9棟)
Residential
1987
Shen Fang Di Zi
No. 3000203084
No. 11 Three-storey Canteen of
Jingwah Electronics Co., Ltd.
(京華電子公司三層食堂11棟)
Composite
Building
1983
Shen Fang Di Zi
No. 3000203081
No. 10 Six-storey Dormitory of
Jingwah Electronics Co., Ltd.
(京華電子公司六層宿舍10棟)
Residential
1983
Shen Fang Di Zi
No. 3000203085
No. 14 Two-storey Exhibition Hall of
Jingwah Electronics Co., Ltd.
(京華電子公司二層展廳14棟)
Exhibition
1992
Total

Gross Floor
Area
(sq.m.)
6,232.85
4,289.29
2,212.34
2,336.07
1,934.61
759.39
17,764.55

In the course of our valuation, we have made the following assumptions:
(a) The registered owner of the property has obtained the relevant title certificate and is entitled to sell, transfer, mortgage, charge, lease, sub-lease or otherwise dispose of the property to any third party (either local or overseas) at a consideration without payment of any additional premium or other onerous payment to the government during the whole of the unexpired term of their land use rights periods;
(b) The property is free from any mortgages, orders and other legal encumbrances which may cause adverse effects to the title of the property;
(c) All legal documents and the relevant planning permits were obtained;
(d) In undertaking our valuation of a land parcel for residential uses, the market value of the property in existing state as at the date of valuation is RMB194,000,000. Land premium would require to be paid in respect of the property is RMB48,000,000 and the market value of the property before deducting the land premium is RMB242,000,000. In calculating the land premium, we have made reference to the latest government regulations. But the actual amount to be paid will be based on an agreement between relevant government authorities and the property owner. The land premium is for reference only; and
(e) For your reference, assuming the site No. B213-0048 of the property had been approved by the Stateowned Land Bureau to be transferable in the open market, we estimate that the additional premium for such modification is about RMB72,000,000.

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VALUATION REPORT ON PROPERTY INTEREST

APPENDIX IIC

The PRC legal opinion provided by the Group’s PRC legal adviser, Yongheng Partners, states, inter alia, the followings:
(a) Shenzhen Jingwah has the sole legitimate rights related to land use rights and building ownership and Shenzhen Jingwah is entitled to occupy, use and get income of such property within the valid period in accordance with the law.
(b) According to Urban Renewal Method of Shenzhen City ( 深圳市城市更新辦法 ) and other provisions, Shenzhen Jingwah is entitled to, transfer, mortgage or otherwise dispose of such property after paying a premium for changing the non-commodity nature of the property into the commodity nature.
(c) After completing with the relevant registration for changing use, Shenzhen Jingwah can change the land use of the property.
Shenzhen Jingwah is an indirect 38.03%-owned subsidiary of the Company.
The property contributes a significant portion of revenue to the Group. We are of the view that the property is the material property held by the Group.

Details of the material property:

(a) General description of : The property is located at the west of Huafa Road North in location of the property the Huaqiang North commercial area of Futian District in Shenzhen. Huaqiag North commercial area is a traditional commercial area where many shopping arcades and shops are located. The general price level of commercial units in the region was about RMB40,000 – RMB180,000/sq.m.
(b) Details of encumbrances, : The property is not subject to any encumbrances, pledges or liens, pledges, mortgages mortgages. against the property
(c) Environmental Issue : No environmental impact assessment has been carried out. (d) Details of investigations, : See note 4 notices, pending litigation, breaches of law or title defects
(e) Future plans for construction, : As advised by the Company, there is no plan for new major renovation, improvement or construction, renovation, improvement or development in the development of the property near future.

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VALUATION REPORT ON PROPERTY INTEREST

APPENDIX IIC

Property

Description and Tenure

Market value in Particulars of existing state as at Occupancy 31 August 2014

3 units on 8th The property comprises a Floor, Block parcel of land with site area 103, Sai Ge of approximately 14,339.35 High Technology sq.m. and a building erected Industrial Zone, thereon. The building was located at completed in 1990. Zhenxing Road, Futian District, T h e p r o p e r t y h a s a Shenzhen, total gross floor area of Guangdong approximately 144.84 sq.m. Province, the PRC The property is held under a land use rights for a term of 50 years commencing from 21 March 1988 to 20 March 2038.
The property is RMB3,400,000 occupied by the Group for quarter (equivalent to use as at the date of approximately valuation. HK$4,300,000)

Notes:

Pursuant to 3 State-owned Real Estate Ownership Certificates (Document Nos.: Shen Fang Di Zi No. 3000431181, 3000431179 and 3000431178), the land use rights of the property (Site No: B214-0008) having a total site area of approximately 14,339.35 sq.m. were granted to Shenzhen Jingwah for a term of 50 years commencing from 21 March 1988 to 20 March 2038.
The land portion of the property comprises a parcel of land having site area of approximately 14,339.35 sq.m. The particulars of the parcel of land are summarized as follows:

Site No. Site Area Usage Real Estate Ownership Certificate No. (sq.m.) B214-0008 14,339.35 Industrial Shen Fang Di Zi No. 3000431181 Shen Fang Di Zi No. 3000431179 Shen Fang Di Zi No. 3000431178

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VALUATION REPORT ON PROPERTY INTEREST

APPENDIX IIC

The building portion of the property has a total gross floor area of approximately 144.84 sq.m. The particulars of the building portion have been summarized as follows:

Real Estate
Certificate No.
Building
Usage
Year of
Completion
Shen Fang Di Zi
No. 3000431181
Room 3-810, Building 103
in SEG Industrial Zone
(賽格工業區103棟3-810)
Quarter
1990
Shen Fang Di Zi
No. 3000431179
Room 3-811, Building 103
in SEG Industrial Zone
(賽格工業區103棟3-811)
Quarter
1990
Shen Fang Di Zi
No. 3000431178
Room 3-812, Building 103
in SEG Industrial Zone
(賽格工業區103棟3-812)
Quarter
1990
Total

Gross Floor
Area
(sq.m.)
48.28
48.28
48.28
144.84

In the course of our valuation, we have made the following assumptions:
(a) The registered owner of the property has obtained the relevant title certificate and is entitled to sell, transfer, mortgage, charge, lease, sub-lease or otherwise dispose of the property to any third party (either local or overseas) at a consideration without payment of any additional premium or other onerous payment to the government during the whole of the unexpired term of their land use rights periods;
(b) The property is free from any mortgages, orders and other legal encumbrances which may cause adverse effects to the title of the property; and
(c) All legal documents and the relevant planning permits were obtained.
The PRC legal opinion provided by the Group’s PRC legal adviser, Yongheng Partners, states, inter alia, the followings:
(a) Shenzhen Jingwah has the sole legitimate rights related to land use rights and building ownership and Shenzhen Jingwah is entitled to occupy, use, get income, transfer, mortgage or otherwise dispose of such property within the valid period in accordance with the law.
(b) After completing with the relevant registration for changing use, Shenzhen Jingwah can change the land use of the property.
Shenzhen Jingwah is an indirect 38.03%-owned subsidiary of the Company.

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VALUATION REPORT ON PROPERTY INTEREST

APPENDIX IIC

Property

Description and Tenure

Market value in Particulars of existing state as at Occupancy 31 August 2014

Retail unit nos. The property comprises a 1135 and 1137 parcel of land with site area on Ground of approximately 6,471.1 Floor, Block B, sq.m. and a building erected Central Power thereon. The building was Information completed in 1999. Plaza, located at Shennan The property has a Road and Huafa total gross floor area of Road North, approximately 6.17 sq.m. Futian District, Shenzhen, The property is held under Guangdong a land use rights for a term Province, the of 50 years commencing PRC from 17 May 1994 to 16 May 2044 for commercial and office uses.

The property is RMB800,000 subject to a tenancy for a term being (equivalent to expired on 31 approximately December 2015 at HK$1,000,000) a total annual rent of RMB45,600 for retail use.

Notes:

Pursuant to 2 State-owned Real Estate Ownership Certificates (Document Nos.: Shen Fang Di Zi No. 3000063428 and 3000063429), the land use rights of the property (Site No: B213-0051) having a total site area of approximately 6,471.1 sq.m. were granted to Shenzhen Jingwah for a term of 50 years commencing from 17 May 1994 to 16 May 2044 for commercial and office uses.
The building portion of the property has a total gross floor area of approximately 6.17 sq.m. The particulars of the building portion have been summarized as follows:

Real Estate Certificate No. Building Usage Year of Completion Shen Fang Di Zi No. 3000063428 Shop 1135, Tower B of CEICE Electronic Technology Building (中電電子科技大廈B座1135商鋪) N/A 1999 Shen Fang Di Zi No. 3000063429 Shop 1137, Tower B of CEICE Electronic Technology Building (中電電子科技大廈B座1137商鋪) N/A 1999 Total	Gross Floor Area (sq.m.) 3.14 3.03 6.17

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VALUATION REPORT ON PROPERTY INTEREST

APPENDIX IIC

In the course of our valuation, we have made the following assumptions:
(a) The registered owner of the property has obtained the relevant title certificate and is entitled to sell, transfer, mortgage, charge, lease, sub-lease or otherwise dispose of the property to any third party (either local or overseas) at a consideration without payment of any additional premium or other onerous payment to the government during the whole of the unexpired term of their land use rights periods;
(b) The property is free from any mortgages, orders and other legal encumbrances which may cause adverse effects to the title of the property; and
(c) All legal documents and the relevant planning permits were obtained.
The PRC legal opinion provided by the Group’s PRC legal adviser, Yongheng Partners, states that Shenzhen Jingwah has the sole legitimate rights related to land use rights and building ownership and Shenzhen Jingwah is entitled to occupy, use, get income, transfer, mortgage or otherwise dispose of such property within the valid period in accordance with the law.
Shenzhen Jingwah is an indirect 38.03%-owned subsidiary of the Company.

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VALUATION REPORT ON PROPERTY INTEREST

APPENDIX IIC

Property

Description and Tenure

Market value in Particulars of existing state as at Occupancy 31 August 2014

15th Floor on The property comprises Block 2 of Tong an office floor on the Jian Building 15th Floor of a 20-storey located at building completed in or Shennan Road, about 1983. Shangbu District, Shenzhen, The property has a gross Guangdong floor area of approximately Province, the 743.8 sq.m. PRC
The property is RMB12,600,000 subject to a tenancy for a term being (equivalent to expired on 31 approximately December 2014 at HK$15,900,000) a total annual rent of RMB439,200 for office use.

Notes:

Pursuant to a Building Purchasing Agreement ( 房屋買賣協議書 ) entered into between Panda Electronics Group Co., Ltd. and Shenzhen Jingwah dated 6 December 2006, the property with a gross floor area of approximately 743.8 sq.m. was purchased at a consideration of RMB 830,000.
In the course of our valuation, we have made the following assumptions:
(a) The registered owner of the property has obtained the relevant title certificate and is entitled to sell, transfer, mortgage, charge, lease, sub-lease or otherwise dispose of the property to any third party (either local or overseas) at a consideration without payment of any additional premium or other onerous payment to the government during the whole of the unexpired term of their land use rights periods;
(b) The property is free from any mortgages, orders and other legal encumbrances which may cause adverse effects to the title of the property; and
(c) All legal documents and the relevant planning permits were obtained.
The PRC legal opinion provided by the Group’s PRC legal adviser, Yongheng Partners, states that Shenzhen Jingwah has the sole legitimate rights related to land use rights and building ownership and Shenzhen Jingwah is entitled to occupy, use, get income, transfer, mortgage or otherwise dispose of such property within the valid period in accordance with the law.
Shenzhen Jingwah is an indirect 38.03%-owned subsidiary of the Company.

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VALUATION REPORT ON PROPERTY INTEREST

APPENDIX IIC

Property

Description and Tenure

Market value in Particulars of existing state as Occupancy at 31 August 2014

A retail unit on The property comprises a Ground Floor retail unit on the Ground located at No. 1 Floor of a building Da Ying Bi East, completed in 1994. Xuanwu District, Nanjing, Jiangsu The property has a gross Province, the floor area of approximately PRC 224.57 sq.m.

The property is RMB3,900,000 subject to a tenancy for a term being (equivalent to expired on 30 June approximately 2017 at a total annual HK$4,900,000) rent of RMB105,600 for commercial use.

The property is held under a land use rights for a term expiring on 3 February 2044.

Notes:

Pursuant to a State-owned Land Use Rights Certificate (Document No.: Ning Xuan Guo Yong (2003) Zi No. 01219), the land use rights of the property (Site No: 02-001-007-015-2) were granted to Shenzhen Jingwah for a term expiring on 3 February 2044 for composite uses.
Pursuant to a Building Ownership Certificate (Document No.: Ning Fang Quan Zheng Xuan Zhuan Zi No. 202933), the property has a gross floor area of approximately 224.57 sq.m.
In the course of our valuation, we have made the following assumptions:
(a) The registered owner of the property has obtained the relevant title certificate and is entitled to sell, transfer, mortgage, charge, lease, sub-lease or otherwise dispose of the property to any third party (either local or overseas) at a consideration without payment of any additional premium or other onerous payment to the government during the whole of the unexpired term of their land use rights periods;
(b) The property is free from any mortgages, orders and other legal encumbrances which may cause adverse effects to the title of the property; and
(c) All legal documents and the relevant planning permits were obtained.
The PRC legal opinion provided by the Group’s PRC legal adviser, Yongheng Partners, states that Shenzhen Jingwah has the sole legitimate rights related to land use rights and building ownership and Shenzhen Jingwah is entitled to occupy, use, get income, transfer, mortgage or otherwise dispose of such property within the valid period in accordance with the law.
Shenzhen Jingwah is an indirect 38.03%-owned subsidiary of the Company.

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VALUATION REPORT ON PROPERTY INTEREST

APPENDIX IIC

Property

Description and Tenure

Market value in Particulars of existing state as Occupancy at 31 August 2014

Unit 501 on The property comprises a 5th Floor of residential unit on the 5th Block 6, Jai Yu Floor of a 7-storey building Building, located completed in or about at Nancheng 1998. Road, Dongguan, Guangdong The property has a gross Province, the floor area of approximately PRC 113 sq.m.

The property is No commercial value occupied by the Group for residential use as at the date of valuation.

As advised by the Company, the property has not yet been obtained the State-owned Land Use Rights Certificate and the Building Ownership Certificate.

Notes:

The property has not yet obtained the State-owned Land Use Rights Certificate and the Building Ownership Certificate.
As advised by the Company, the property has not obtained the State-owned Land Use Rights Certificate and the Building Ownership Certificate. The property cannot be freely transferrable in the market. We have ascribed no commercial value to the property. For reference purpose, assuming the property has obtained the State-owned Land Use Rights Certificate and the Building Ownership Certificate and can be freely transferrable in the market as at the date of valuation, the market value of the property as at the date of valuation was RMB320,000.
The PRC legal opinion provided by the Group’s PRC legal adviser, Yongheng Partners, states that the property has not yet obtained the relevant title document and Shenzhen Jingwah is not entitled to possess, use, get income, transfer, mortgage or otherwise dispose of such property.

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VALUATION REPORT ON PROPERTY INTEREST

APPENDIX IIC

Property

Description and Tenure

Market value in Particulars of existing state as at Occupancy 31 August 2014

19 buildings The property comprises located at zone a parcel of land and 19 of Jingwah buildings erected thereon. Industrial Park, The buildings were Pinghu Town completed in the period Liang An Tian, between 1993 and 2005. Longgang District, The buildings have a Shenzhen, total gross floor area of Guangdong approximately 77,398 sq.m. Province, the PRC

The property is No commercial value leased by Shenzhen (See Note 5 below) Longgang Jingwah Electronics Co., Ltd. to various tenants under various tenancies with the latest term being expired on 31 August 2017 at a total annual rent of RMB8,940,398 for industrial uses.

Notes:

Pursuant to a Co-operation of Developing Land Agreement ( 合作開發土地協議書 ) between Shenzhen Longgang District Pinghu Town Liang An Tian Economic Development Company ( 深圳市龍崗區平湖鎮良安田經濟發展公司 ) (“Liang An Tian”) and Shenzhen Jingwah, Shenzhen Jingwah has been allowed to develop the property for a term of 40 years commencing from 15 February 1993 to 14 February 2033 for industrial and quarter uses.
The property has not yet obtained the State-owned Land Use Rights Certificate and the Building Ownership Certificate. The property cannot be freely transferrable in the market.
The PRC legal opinion provided by the Group’s PRC legal adviser, Yongheng Partners, states, inter alia, the followings:
(a) Pursuant to a Co-operation of Developing Land Agreement and a supplemental agreement between Liang An Tian and Shenzhen Jingwah, Liang An Tian has agreed to provide the land of the property for Shenzhen Jingwah to develop the property for a term of 40 years., Shenzhen Jingwah has to pay an annual fee of RMB1,200,000 to Liang An Tian between 2010 and 2013; and
(b) The above agreements bewteen Liang An Tian and Shenzhen Jingwah were legal and valid. Shenzhen Jingwah has the right to use the land of the property according to the law.
According to Construction Completion Certificates and a Construction Contract provided by the Company, the buildings of the property have a total gross floor area of approximately 77,398 sq.m.
As property cannot be freely transferrable in the market, we have ascribed no commercial value to the property. However, pursuant to the above Co-operation of Developing Land Agreement, Shenzhen Jingwah can erect buildings on the land of the property for owner-occupation and leasing. In view of the property can be leased to receive rent for the remaining term of the above Co-operation of Developing Land Agreement, we have opined that the investment value of the property to Shenzhen Jingwah as at the date of valuation was RMB80,000,000 (equivalent to approximately HK$101,300,000) for reference purpose. Investment value is recognised as a nonmarket value and only reflects the benefits that an owner of an asset enjoys from the ownership of the asset.
Shenzhen Jingwah is an indirect 38.03%-owned subsidiary of the Company.
Shenzhen Longgang Jingwah Electronics Co., Ltd. is a direct wholly-owned subsidiary of Shenzhen Jingwah.

— 86 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX III

1. FINANCIAL INFORMATION OF THE GROUP

The audited consolidated financial statements of the Group for each of the three years ended 31 December 2011, 2012 and 2013 are disclosed in the Company’s 2011 annual reports dated 29 March 2012 (pages 70 to 138), 2012 annual report dated 27 March 2013 (pages 113 to 176) and 2013 annual report dated 28 March 2014 (pages 103 to 165), respectively. The unaudited condensed consolidated financial statements of the Group for the six months ended 30 June 2014 are disclosed in the Company’s 2014 interim report dated 15 August 2014 (pages 31 to 45). The said annual reports and interim report have been published and are available on the website of the Stock Exchange (www.hkex.com.hk) and the website of the Company (www. panda.cn).

The Company’s 2011 annual report is available on http://www.hkexnews.hk/listedco/listconews/ SEHK/2012/0424/LTN20120424256.pdf.

The Company’s 2012 annual report is available on http://www.hkexnews.hk/listedco/listconews/ SEHK/2013/0424/LTN20130424747.pdf.

The Company’s 2013 annual report is available on http://www.hkexnews.hk/listedco/listconews/ SEHK/2014/0429/LTN20140429453.pdf.

The Company’s 2014 Interim Report is available on http://www.hkexnews.hk/listedco/listconews/ SEHK/2014/0905/LTN20140905351.pdf.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX III

2. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

The Company is principally engaged in research, development and sales of electronic equipment and consumer electronics as well as electronics manufacturing services. Electronic equipment include industrial automation equipment, electronic transport equipment and communications equipment; consumer electronics include digital home electronics and related products; electronics manufacturing include EMS and other services . The income from the major business for the years of 2011, 2012 and 2013 as well as for the six months ended 30 June 2014 is set out as follows:

	Six months	Year ended	Year ended	Year ended
	ended	31 December	31 December	31 December
Name of products or services	30 June 2014	2013	2012	2011
	(Unaudited)	(Audited)	(Audited)	(Audited)
	RMB’000	RMB’000	RMB’000	RMB’000
Income from electronic
equipment products	657,183	1,427,714	1,198,417	1,006,334
Income from consumer
electronics products	26,421	238,368	469,266	629,508
Income from electronic
manufacturing service	440,435	702,713	649,509	384,836
Other Income	28,260	60,468	56,423	60,258

The electronic information manufacturing industry in which the Company is in is a strategic, basic and leading industry of national economy, the technical support and material basis for accelerating industrial transformation and upgrading and the construction of national economy and society informatization, and an important cornerstone for guaranteeing national defense construction and national information security. The electronic information manufacturing industry in China seized the great opportunity of national economic and social development and international industrial transfer, proactively promoted structure adjustment, vigorously strengthened independent innovation and achieved the stable growth of industries, and its role of support and leading for economic and social development is increasingly prominent. In the future China will continue to strongly support the development of electronic information industry which is in face of a good market prospect.

The income from electronic equipment products of the Company exceeds 50% of the revenue from major business, and is part of the important development direction of the Company in the future.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX III

At the current stage, the factory automation and control technologies, industries and applications in China have experienced rapid development. The factory automation industry involves a number of fields, e.g. power, electronics, computer, artificial intelligence, communication, electromechanical, etc. It can be seen from the development of factory automation market in China at the current stage that China has a huge market, while the automation development in China is relatively lagging behind. The technical transformation of traditional industries, factory automation and enterprise informatization require abundant industrial automation systems, resulting in a huge potential market. The huge market potentials and relatively weak industrial competition will provide a good development platform for enterprises with certain advantages in terms of technology and scale.

The communication industry is a strategic, basic and leading industry for constructing national information infrastructures, providing network and information services and comprehensively supporting economic and social development. It is characterised by high technology starting point, long industrial chain, strong permeability, obvious guiding effects, etc. and is an important force to boost the transformation and upgrading of traditional industries, promote the strategic adjustment of economic structure and enhance national level of informatization, and for building a well-off society in an all-around way. With the progress of smart city pilots, emergency communication and other professional communication fields will have a broad market.

Along with the gradual acceleration of urbanisation, the mass transit of our country has already got into an unprecedented and flourishing development period. China has become the global greatest market of urban mass transit construction. Up to 2015, the total length of the mass transit in China will be 2,400 km, while the total investment will reach RMB800 billion. As the market has enormous capacity, there should be promising prospect. The Company continuously achieves outstanding accomplishment in AFC/ACC market, and meanwhile, actively expands communication systems of transportation, and progressively becomes a supplier with capability to totally undertake the mass transit.

• Financial and operational prospects of the Enlarged Group

1. Diversifying the types of consumer electronics products

The major products and services of the Company are electronic devices, the research and development, production and sale of consumer electronics as well as electronic manufacturing services. Such electronic devices principally include products such as industrial automation devices, transportation electronic devices and communication devices, such consumer electronics principally include digital family-related products, and such electronic manufacturing services include EMS services.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX III

Shenzhen Jingwah is principally engaged in the production and sale of consumer electronics products with tablet computers and automotive navigation devices as its major products, and is also engaged in property leasing (management) business.

Through this transaction, a diversification of the types of consumer electronics products offered by the Company will be achieved and the Company’s scale of assets will be enhanced for better coordination of its integrated operations. Through further tapping its potentials and advancing its efficiencies, this will effectively boost business synergy and facilitate the efficient integration of the Company’s consumer electronics business segment, promoting a continuous improvement of the listed company’s profitability.

2. Enhancing the Company’s scale of assets, scale of business and profitability

(1) Enhancing the scale of assets

Assuming that this transaction had been completed on 1 January 2013, the asset structures of the Company, Shenzhen Jingwah and the entity subsequent to the transaction as at 30 June 2014 would be as follows:

Item Total current assets Total non-current assets Total assets	Nanjing Panda RMB’000 2,774,348 1,452,429 4,226,777	Shenzhen Jingwah RMB’000 349,165 82,429 431,594	30 June 2014 Pro Forma Adjustments RMB’000 RMB’000 Note Note1 Note2 –50,366 –24 3 50,366 –148,487 4 –148,511	Total RMB’000 3,073,123 1,436,737
				4,509,860

Upon completion of this transaction, the total assets of the Company as at 30 June 2014 would increase to RMB4,509,860 with a 6.70% increase in its scale of assets.

Notes:

(1) Pursuant to the Equity Transfer Agreement, the total consideration for the Equity Transfer is RMB50,365,830, which will be satisfied by internal resources of the Group by way of cash.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX III

(2) Upon completion of the Equity Transfer, the Company’s equity interest in the Target Company will be increased from 38.03% to 43.10% and the Company will be able to control a majority of the board of the directors of the Target Company. Accordingly, the Target Company, currently an associate of the Company, will be regarded as a subsidiary.

The Equity Transfer is considered as a combination of businesses under common control as the Group and the Target Group are controlled by CEC both before and after the Equity Transfer and is accounted for under merger basis in accordance with the Accounting Guideline 5 “Merger Accounting for Common Control Combinations” issued by the Hong Kong Institute of Certified Public Accountants. Accordingly, the assets and liabilities of the Target Group will be stated at the predecessor’s values, and will be included in the consolidated financial statements of the Group from the beginning of the earliest period presented as if the Target Group had always been part of the Group.

Pro forma adjustments made represent:

(i) the deemed disposal of the existing 38.03% of equity interests held in the Target Company as recorded as an interest in associates.
(ii) the adjustments to eliminate the Company’s net investment in the Target Company and the current accounts between the Group and the Target Group.
(3) Adjustments were made to the amount of balance of transactions between Nanjing Panda and Shenzhen Jingwah.
(4) Adjustments were made to the long-term equity investment of Nanjing Panda in Shenzhen Jingwah.

(2) Enhancing the scale of business and profitability

Located in the bustling Huaqiang North area of Futian District in Shenzhen, the headquarters of Shenzhen Jingwah occupy a land area of 30,000 m[2] and consist of property with a building area of over 50,000 m[2] . Shenzhen Jingwah Property Management Co., Ltd. was established in 1999 for the market-oriented development and management of the headquarters complex, which has become an integrated commercial area with shopping malls, inns and hotels, as well as communication amenities. As its production operations continuously grew, Shenzhen Jingwah further established Jingwah Industrial Zone in Pinghu, Longgang. These pieces of self-owned property will strongly secure the continuous profitability of the Company.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX III

3. Enhancing the listed company’s overall competitiveness

Through this transaction, the Company’s scale of revenue would witness a considerable growth, with the extension of its area of business operations from the Yangtze River Delta to the Pearl River Delta and an expansion of its overseas customer base for its consumer electronics. This transaction is conducive to the further enhancement of its overall competitiveness and its capabilities of market expansion, resources control and subsequent development across its domestic and overseas markets, such that both its profit composition and profitability can be enhanced and the risk tolerance and sustainable development abilities of the listed company can be sharpened.

3. INDEBTEDNESS

At the close of business on 30 September 2014, being the latest practicable date for the purpose of indebtedness statement prior to printing of this circular, the Group had total borrowings of approximately RMB293,000,000, comprising unsecured bank loans of approximately RMB200,000,000 and bills payable of approximately RMB93,000,000 that were secured by the Group’s restricted bank deposits of approximately RMB70,000,000.

At the close of business on 30 September 2014, the Group had contingent liabilities in respect of performance bonds of approximately RMB41,000,000 given by banks to customers in respect of projects undertaken by the Group. These performance bonds were secured by the Group’s restricted deposits of approximately RMB41,000,000.

At the close of business on 30 September 2014, the Target Group did not have any outstanding indebtedness or significant contingent liabilities.

Save as aforesaid, and apart from intra-group liabilities and normal trade payables in the ordinary course of business, as at the close of business on 30 September 2014, the Enlarged Group did not have any debt securities issued and outstanding or agreed to be issued, bank overdrafts, loans or other similar indebtedness, liabilities under acceptances (other than normal trade bills) or acceptance credits, mortgages, charges, finance lease or hire purchase commitments, guarantees or other material contingent liabilities.

The Directors confirmed that no material changes in the indebtedness and contingent liabilities of the Enlarged Group since 30 September 2014 up to and including the Latest Practicable Date.

4. WORKING CAPITAL

The Directors are of the opinion that, after taking into account the expected completion of the Equity Transfer and the financial resources available to the Enlarged Group (including the internally generated revenue and funds) and in the absence of unforeseen circumstances, the Enlarged Group has sufficient working capital for its present requirements, that is for at least the next twelve months from the date of this circular.

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

The following is the text of a report received from Baker Tilly Hong Kong Limited, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this circular.

BAKER TILLY

HONG KONG| 天職香港

The Board of Directors

Nanjing Panda Electronics Company Limited

Dear Sirs,

We report on the financial information of Shenzhen Jingwah Electronics Co., Ltd. (the “Target Company”) and its subsidiaries (together the “Target Group”) comprising the consolidated balance sheets of the Target Group and the balance sheets of the Target Company as at 31 December 2011, 2012 and 2013 and 30 June 2014, and the consolidated statements of comprehensive income, the consolidated statements of changes in equity and the consolidated cash flow statements of the Group for each of the years ended 31 December 2011, 2012 and 2013 and the six months ended 30 June 2014 (the “Relevant Periods”) together with exploratory notes thereto (the “Financial Information”), for inclusion in the circular of the Company dated 5 November 2014 (the “Circular”) in connection with the proposed transfer of 5.07% equity interest in the Target Company to the Company.

The Target Company was established in the People’s Republic of China (the “PRC”) as a company with limited liability on 8 May 1984. As at the end of the Relevant Periods, the Target Company has direct or indirect interests in the subsidiaries as set out in note 15 of section II below.

All the companies in the Target Group have adopted 31 December as their financial year end date. The statutory consolidated financial statements of the Target Group for each of the years ended 31 December 2011, 2012 and 2013 were prepared in accordance with the relevant accounting rules and regulations applicable to enterprises in the PRC. The statutory consolidated financial statements of the Target Group for the year ended 31 December 2011 were audited by 天職國際會計師事務所有限公司, a certified public accounting firm registered in the PRC. The statutory consolidated financial statements of the Target Group for the years ended 31 December 2012 and 2013 were audited by 天職國際會計師事務所（特殊普通合夥）, a certified public accounting firm registered in the PRC.

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APPENDIX IV

The directors of the Target Company are responsible for the preparation of consolidated financial statements of the Target Group for the Relevant Periods (the “Underlying Financial Statements”) in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”), and for such internal control as the directors of the Target Company determine is necessary to enable the preparation of the Underlying Financial Statements that are free from material misstatement, whether due to fraud or error. The Underlying Financial Statements were audited by us in accordance with Hong Kong Standards on Auditing issued by the HKICPA.

The Financial Information has been prepared by the directors of the Company for inclusion in the Circular based on the Underlying Financial Statements, with no adjustment made thereon, and in accordance with the applicable disclosure provisions of the Hong Kong Companies Ordinance and the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”).

Directors’ responsibility for the Financial Information

The directors of the Company are responsible for the preparation of the Financial Information that gives a true and fair view in accordance with HKFRSs, the disclosure requirements of the Hong Kong Companies Ordinance and the applicable disclosure provisions of the Listing Rules, and for such control as the directors of the Company determine is necessary to enable the preparation of the Financial Information that is free from material misstatement, whether due to fraud or error.

Reporting accountant’s responsibility

Our responsibility is to form an opinion on the Financial Information based on our procedures performed in accordance with the Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant” issued by the HKICPA.

Opinion

In our opinion, the Financial Information gives, for the purpose of this report, a true and fair view of the state of affairs of the Target Group and of the Target Company as at 31 December 2011, 2012 and 2013 and 30 June 2014 and of the Target Group’s results and cash flows for the Relevant Periods then ended.

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APPENDIX IV

Corresponding Financial Information

For the purposes of this report, we have reviewed the unaudited corresponding interim financial information of the Target Group comprising the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated cash flow statement of the Target Group for the six months ended 30 June 2013 together with explanatory notes thereto (the “Corresponding Financial Information”), for which the directors of the Target Company are responsible.

The directors of the Company are responsible for the preparation and presentation of Corresponding Financial Information in accordance with the same basis adopted in respect of the Financial Information.

Our responsibility is to express a conclusion on the Corresponding Financial Information based on our review. We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the HKICPA. A review of Corresponding Financial Information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Based on our review, nothing has come to our attention that causes us to believe that the Corresponding Financial Information, for the purpose of this report, is not prepared, in all material respects, in accordance with the accounting policies set out in note 2 of section II below.

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

I. FINANCIAL INFORMATION OF THE TARGET GROUP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Note Turnover 7 Cost of sales Gross profit Other income and net gains 8 Distribution costs Administrative expenses Operating profit Share of results of associates Profit before taxation 9 Income tax expense 11 Profit and total comprehensive income for the year/period Attributable to: Equity shareholders of the Target Company Non-controlling interests	Year ended 31 December 2011 2012 2013 RMB’000 RMB’000 RMB’000 833,176 1,294,126 1,648,281 (727,467) (1,147,951) (1,490,787) 105,709 146,175 157,494 1,157 1,137 4,302 (7,279) (9,322) (9,985) (52,527) (74,429) (85,864) 47,060 63,561 65,947 193 (136) (358) 47,253 63,425 65,589 (11,671) (14,969) (16,361) 35,582 48,456 49,228 29,559 39,169 39,252 6,023 9,287 9,976 35,582 48,456 49,228	Six months ended 30 June 2013 2014 RMB’000 RMB’000 (unaudited) 852,855 401,338 (777,908) (334,569) 74,947 66,769 1,940 4,793 (4,112) (5,488) (38,814) (23,349) 33,961 42,725 (324) 103 33,637 42,828 (8,115) (7,282) 25,522 35,546 22,140 29,944 3,382 5,602 25,522 35,546

Details of dividends payable to equity shareholders of the Target Company are set out in note 12.

The accompanying notes form part of the Financial Information.

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APPENDIX IV

I. FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

CONSOLIDATED BALANCE SHEETS

Note ASSETS Non-current assets Investment properties 13 Property, plant and equipment 14 Associates 16 Deferred tax assets 17 Current assets Inventories 18 Trade and bills receivables 19 Deposits, prepayments and other receivables 20 Other financial assets 21 Cash and cash equivalents 22 Total assets EQUITY Capital and reserves attributable to equity shareholders of the Target Company Share capital 23 Reserves Non-controlling interests Total equity	At 31 December 2011 2012 2013 RMB’000 RMB’000 RMB’000 17,006 15,045 19,042 75,455 58,529 64,918 1,895 1,579 919 357 224 1,210 94,713 75,377 86,089 50,626 97,053 54,556 30,666 32,346 33,570 6,686 9,194 3,844 — — 76,000 204,404 235,684 186,179 292,382 374,277 354,149 387,095 449,654 440,238 115,068 115,068 115,068 140,398 142,767 147,499 255,466 257,835 262,567 33,628 41,395 35,971 289,094 299,230 298,538	At 30 June 2014 RMB’000 18,406 60,254 1,022 2,747
		82,429
		61,675 47,659 3,997 41,000 194,834
		349,165
		431,594

		115,068 142,923
		257,991 41,573
		299,564

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

I. FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

CONSOLIDATED BALANCE SHEETS (Continued)

Note LIABILITIES Current liabilities Trade payables 25 Accruals and other payables 26 Tax payable Total liabilities Total equity and liabilities Net current assets Total assets less current liabilities	At 31 December 2011 2012 2013 RMB’000 RMB’000 RMB’000 41,364 116,585 73,154 51,678 28,847 58,884 4,959 4,992 9,662 98,001 150,424 141,700 387,095 449,654 440,238 194,381 223,853 212,449 289,094 299,230 298,538	At 30 June 2014 RMB’000 70,646 54,108 7,276
		132,030

		431,594

		217,135

		299,564

The accompanying notes form part of the Financial Information.

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APPENDIX IV

I. FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

BALANCE SHEETS

Note ASSETS Non-current assets Investment properties 13 Property, plant and equipment 14 Subsidiaries 15 Associates 16 Deferred tax assets 17 Current assets Deposits, prepayments and other receivables 20 Other financial assets 21 Cash and cash equivalents 22 Total assets EQUITY Share capital 23 Reserves 24 Total equity	At 31 December 2011 2012 2013 RMB’000 RMB’000 RMB’000 17,006 15,045 19,042 11,254 7,068 3,616 40,450 33,607 30,550 892 892 892 52 60 758 69,654 56,672 54,858 62,735 60,850 61,983 — — 20,000 107,238 122,414 125,072 169,973 183,264 207,055 239,627 239,936 261,913 115,068 115,068 115,068 89,787 90,090 105,429 204,855 205,158 220,497	At 30 June 2014 RMB’000 18,406 3,604 30,550 892 2,336
		55,788
		60,339 — 146,161
		206,500
		262,288

		115,068 84,493
		199,561

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

I. FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

BALANCE SHEETS (Continued)

Note LIABILITIES Current liabilities Accruals and other payables 26 Tax payable Total liabilities Total equity and liabilities Net current assets Total assets less current liabilities	At 31 December 2011 2012 2013 RMB’000 RMB’000 RMB’000 31,341 31,947 35,104 3,431 2,831 6,312 34,772 34,778 41,416 239,627 239,936 261,913 135,201 148,486 165,639 204,855 205,158 220,497	At 30 June 2014 RMB’000 57,728 4,999
		62,727

		262,288

		143,773

		199,561

The accompanying notes form part of the Financial Information.

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

I. FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

As at 1 January 2011 Profit and total comprehensive income for the year Dividends approved in respect of the previous year Acquisition of additional interests in a subsidiary Establishment of a new non-wholly owned subsidiary Dividends paid to non-controlling shareholders of subsidiaries As at 31 December 2011 and 1 January 2012 Profit and total comprehensive income for the year Dividends approved in respect of the previous year Disposals of partial interests in subsidiaries Dividends paid to non-controlling shareholders of subsidiaries As at 31 December 2012 and 1 January 2013 Profit and total comprehensive income for the year Dividends approved in respect of the previous year Dividends paid to non-controlling shareholders of subsidiaries As at 31 December 2013	Share capital RMB’000 115,068 — — — — — 115,068 — — — — 115,068 — — — 115,068	Capital reserve RMB’000 19,601 — — (841) — — 18,760 — — (2,280) — 16,480 — — — 16,480	Statutory common funds Accumulated profits Attributable to equity shareholders of the Target Company Non- controlling interests RMB’000 RMB’000 RMB’000 RMB’000 60,188 54,905 249,762 29,489 — 29,559 29,559 6,023 — (23,014) (23,014) — — — (841) (209) — — — 450 — — — (2,125) 60,188 61,450 255,466 33,628 — 39,169 39,169 9,287 — (34,520) (34,520) — — — (2,280) 2,280 — — — (3,800) 60,188 66,099 257,835 41,395 — 39,252 39,252 9,976 — (34,520) (34,520) — — — — (15,400) 60,188 70,831 262,567 35,971	Total equity RMB’000 279,251 35,582 (23,014) (1,050) 450 (2,125) 289,094 48,456 (34,520) — (3,800) 299,230 49,228 (34,520) (15,400) 298,538

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APPENDIX IV

I. FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Continued)

As at 1 January 2014 Profit and total comprehensive income for the period Dividends approved in respect of the previous year As at 30 June 2014 As at 1 January 2013 Profit and total comprehensive income for the period Dividends approved in respect of the previous year Dividends paid to non-controlling shareholders of subsidiaries As at 30 June 2013 (unaudited)	Share capital RMB’000 115,068 — — 115,068 115,068 — — — 115,068	Capital reserve RMB’000 16,480 — — 16,480 16,480 — — — 16,480	Statutory common funds Accumulated profits Attributable to equity shareholders of the Target Company Non- controlling interests RMB’000 RMB’000 RMB’000 RMB’000 60,188 70,831 262,567 35,971 — 29,944 29,944 5,602 — (34,520) (34,520) — 60,188 66,255 257,991 41,573 60,188 66,099 257,835 41,395 — 22,140 22,140 3,382 — (34,520) (34,520) — — — — (7,800) 60,188 53,719 245,455 36,977	Total equity RMB’000 298,538 35,546 (34,520) 299,564 299,230 25,522 (34,520) (7,800) 282,432

The accompanying notes form part of the Financial Information.

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

I. FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

CONOSLIDATED CASH FLOW STATEMENTS

Note Operating activities Cash generated from operations 27 Income tax paid Net cash generated from/(used in) operating activities Investing activities Acquisition of additional interests in a subsidiary Decrease/(increase) in net amounts due with related parties Dividends received from associates Interest received (Decrease)/increase in other financial assets Proceeds from disposals of investment properties Proceeds from disposals of property, plant and equipment Purchase of investment properties Purchase of property, plant and equipment Net cash (used in)/generated from investing activities	Year ended 31 December 2011 2012 2013 RMB’000 RMB’000 RMB’000 108,716 76,567 118,809 (11,296) (14,803) (12,677) 97,420 61,764 106,132 (1,050) — — 842 7,609 (5,372) 180 180 302 2,909 3,788 3,764 — — (76,000) — — 48 2,739 1,051 481 (3,748) — (5,783) (9,566) (4,654) (23,124) (7,694) 7,974 (105,684)	Six months ended 30 June 2013 2014 RMB’000 RMB’000 (unaudited) 24,625 2,717 (7,629) (11,205) 16,996 (8,488) — — 1,015 14,846 — — 2,072 3,572 (50,000) 35,000 — — 499 95 — (176) (20,795) (1,880) (67,209) 51,457

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

I. FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

CONOSLIDATED CASH FLOW STATEMENTS (Continued)

Note Financing activities Capital contribution from non- controlling shareholders of a new non-wholly owned subsidiary Dividends paid to equity shareholders of the Target Company Dividends paid to non-controlling shareholders of subsidiaries Net cash used in financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of the year/period Effect of foreign exchange rate changes Cash and cash equivalents at end of the year/period 22	Year ended 31 December 2011 2012 2013 RMB’000 RMB’000 RMB’000 450 — — (23,014) (34,520) (34,520) (2,125) (3,800) (15,400) (24,689) (38,320) (49,920) 65,037 31,418 (49,472) 139,374 204,404 235,684 (7) (138) (33) 204,404 235,684 186,179	Six months ended 30 June 2013 2014 RMB’000 RMB’000 (unaudited) — — (34,520) (34,520) (7,800) — (42,320) (34,520) (92,533) 8,449 235,684 186,179 (33) 206 143,118 194,834

The accompanying notes form part of the Financial Information.

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP

1 General information

The principal activities of the Target Group are the development, manufacture and sale of consumer electronic products, and property leasing and management.

The directors of the Target Company consider the ultimate holding company to be China Electronic Corporation, a PRC state-owned enterprise.

2 Summary of significant accounting policies

The principal accounting policies applied in the preparation of the Financial Information are set out below. These policies have been consistently applied to the Relevant Periods, unless otherwise stated.

2.1 Basis of preparation

The Financial Information 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”), Interpretations and Accounting Guidelines issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”), and the disclosure requirements of the Hong Kong Companies Ordinance. The Financial Information has been prepared under the historical cost convention, except that other financial assets are carried at their fair values as explained in the accounting policies set out in note 2.4.

The preparation of the Financial Information in conformity with HKFRSs requires the use of certain critical accounting estimates. It also requires management to exercise their judgement in the process of applying the Target Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the Financial Information are disclosed in note 6.

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

2 Summary of significant accounting policies (Continued)

2.2 Subsidiaries and non-controlling interests

Subsidiaries are entities controlled by the Target Group. The Target Group controls an entity when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. When assessing whether the Target Group has power, only substantive rights (held by the Target Group and other parties) are considered.

An investment in a subsidiary is consolidated into the Financial Information from the date that control commences until the date that control ceases. Intra-group balances, transactions and cash flows and any unrealised profits arising from intragroup transactions are eliminated in full in preparing the Financial Information. 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.

Non-controlling interests represent the equity in a subsidiary not attributable directly or indirectly to the Target Company, and in respect of which the Target Group has not agreed any additional terms with the holders of those interests which would result in the Target Group as a whole having a contractual obligation in respect of those interests that meets the definition of a financial liability. For each business combination, the Target Group can elect to measure any non-controlling interests either at fair value or at their proportionate share of the subsidiary’s net identifiable assets.

Non-controlling interests are presented in the consolidated balance sheets within equity, separately from equity attributable to the equity shareholders of the Target Company. Non-controlling interests in the results of the Target Group are presented on the face of the consolidated statements of comprehensive income as an allocation of the total profit or loss and comprehensive income for the year between non-controlling interests and the equity shareholders of the Target Company. Loans from holders of non-controlling interests and other contractual obligations towards these holders are presented as financial liabilities in the consolidated balance sheets.

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

2 Summary of significant accounting policies (Continued)

2.2 Subsidiaries and non-controlling interests (Continued)

Changes in the Target Group’s interests in a subsidiary that do not result in a loss of control are accounted for as equity transactions, whereby adjustments are made to the amounts of controlling and non-controlling interests within consolidated equity to reflect the change in relative interests, but no adjustments are made to goodwill and no gain or loss is recognised.

When the Target Group loses control of a subsidiary, it is accounted for as a disposal of the entire interest in that subsidiary, with a resulting gain or loss being recognised in profit or loss. Any interest retained in that former subsidiary at the date when control is lost is recognised at fair value and this amount is regarded as the fair value on initial recognition of a financial asset or, when appropriate, the cost on initial recognition of an investment in an associate or joint venture.

In the Target Company’s balance sheets, an investment in a subsidiary is stated at cost less any impairment losses (see note 2.8), unless the investment is classified as held for sale.

2.3 Associates

An associate is an entity in which the Target Group or Target Company has significant influence, but not control or joint control, over its management, including participation in the financial and operating policy decisions.

An investment in an associate is accounted for in the Financial Information under the equity method, unless it is classified as held for sale. Under the equity method, the investment is initially recorded at cost, adjusted for any excess of the Target Group’s share of the acquisition-date fair values of the associate’s identifiable net assets over the cost of the investment (if any). Thereafter, the investment is adjusted for the post acquisition change in the Target Group’s share of the associate’s net assets and any impairment loss relating to the investment (see note 2.8). Any acquisition-date excess over cost, the Target Group’s share of the postacquisition, post-tax results of the associates and any impairment losses for the year are recognised in profit or loss, whereas the Target Group’s share of the post-acquisition post-tax items of the associates’ other comprehensive income is recognised in the Target Group’s other comprehensive income.

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

2 Summary of significant accounting policies (Continued)

2.3 Associates (Continued)

When the Target Group’s share of losses exceeds its interest in the associate, the Target Group’s interest is reduced to nil and recognition of further losses is discontinued except to the extent that the Target Group has incurred legal or constructive obligations or made payments on behalf of the associate. For this purpose, the Target Group’s interest is the carrying amount of the investment under the equity method together with the Target Group’s long-term interests that in substance form part of the Target Group’s net investment in the associate.

Unrealised profits and losses resulting from transactions between the Target Group and its associates are eliminated to the extent of the Target Group’s interest in the associate, except where unrealised losses provide evidence of an impairment of the asset transferred, in which case they are recognised immediately in profit or loss.

When the Target Group ceases to have significant influence over an associate, it is accounted for as a disposal of the entire interest in that associate, with a resulting gain or loss being recognised in profit or loss. Any interest retained in that former associate at the date when significant influence is lost is recognised at fair value and this amount is regarded as the fair value on initial recognition of a financial asset.

In the Target Company’s balance sheets, investments in associates are stated at cost less impairment losses (see note 2.8), unless the investments are classified as held for sale.

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

2 Summary of significant accounting policies (Continued)

2.4 Other financial assets

Other financial assets, which are not held for trading, are classified as availablefor-sale financial assets. They 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 form observable markets. Cost includes attributable transaction costs. At each balance sheet date the fair value is remeasured, with any resultant gain or loss being recognised in other comprehensive income and accumulated separately in equity in the fair value reserve. Interest income from these financial assets is recognised in profit or loss in accordance with the policy set out in note 2.15(v). When these financial assets are derecognised or impaired (see note 2.8), the cumulative gain or loss is reclassified from equity to profit or loss.

Other financial assets are recognised/derecognised on the date the Target Group commits to purchase/sell the financial assets.

2.5 Investment properties

Investment properties are land and/or buildings which are owned or held under a leasehold interest (see note 2.7) to earn rental income and/or for capital appreciation.

Investment properties are stated at cost less accumulated depreciation and impairment losses (see note 2.8(ii)). Depreciation is calculated using straight-line method to allocate their costs to their residual values over their lease terms of 10 to 30 years. Any gain or loss arising from the retirement or disposal of an investment property is recognised in profit or loss. Rental income from investment properties is accounted for as described in note 2.15(ii).

When the Target Group holds a property interest under an operating lease to earn rental income and/or for capital appreciation, the interest is classified and accounted for as an investment property on a property-by-property basis. Any such property interest which has been classified as an investment property is accounted for as if it were held under a finance lease (see note 2.7), and the same accounting policies are applied to that interest as are applied to other investment properties leased under finance leases. Lease payments are accounted for as described in note 2.7.

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

2 Summary of significant accounting policies (Continued)

2.6 Property, plant and equipment

Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses (see note 2.8(ii)).

Construction in progress represents leasehold improvements under construction and is stated at cost. Cost includes costs of construction and other direct costs. No provision for depreciation is made on construction in progress until such time as the relevant assets are completed and ready for intended use. When the assets concerned are brought into use, the costs are transferred to property, plant and equipment and depreciated in accordance with the policy as stated below.

Depreciation on property, plant and equipment is calculated using the straight-line method to allocate their costs to their residual values over their estimated useful lives, as follows:

— Buildings	20 to 30 years
— Leasehold improvements	3 to 10 years
— Plant, machinery and equipment	2 to 10 years
— Transportation equipment and motor vehicles	5 to 10 years

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

Gains or losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in profit or loss.

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

2 Summary of significant accounting policies (Continued)

2.7 Leases

Leases where substantially all the risks and rewards of ownership of assets remain with the lessors are accounted for as operating leases. Leases that substantially transfer to the lessees all the risks and rewards of ownership of assets are accounted for as finance leases.

(a) Where the Target Group is the lessee

(i) Operating leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to profit or loss on a straight-line basis over the period of the lease.

(ii) Finance leases

Leases of assets where the Group has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease’s commencement at the lower of the fair value of the leased property and the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in obligations under finance leases. The interest element of the finance cost is recognised in profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

(b) Where the Target Group is the lessor

(i) Operating leases

When assets are leased out under operating leases, the assets are included in the balance sheets according to their nature and where applicable, are depreciated in accordance with the Target Group’s depreciation policies, as set out in note 2.6 above. Revenue arising from assets leased out under operating leases is recognised in accordance with the Target Group’s revenue recognition policies, as set out in note 2.15(ii) below.

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

2 Summary of significant accounting policies (Continued)

2.8 Impairment of assets

(i) Impairment of investments in equity securities and other receivables

Investment in equity securities and other 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 Target Group about one or more of the following loss events:

significant financial difficulty of the debtor;
a breach of contract, such as a default or delinquency in interest or principal payments;
it becoming probable that the debtor will enter bankruptcy or other financial reorganisation;
significant changes in the technological, market, economic or legal environment that have an adverse effect on the debtor; and
a significant or prolonged decline in the fair value of an investment in an equity instrument below its cost.

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

For investments in subsidiaries and associates, the impairment loss is measured by comparing the recoverable amount of the investment with its carrying amount in accordance with note 2.8(ii). The impairment loss is reversed if there has been a favourable change in the estimates used to determine the recoverable amount in accordance with note 2.8(ii).

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

2 Summary of significant accounting policies (Continued)

2.8 Impairment of assets (Continued)

(i) Impairment of investments in equity securities and other receivables (Continued)
For trade and other receivables, 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 available-for-sale financial assets, the cumulative loss that has been recognised in the fair value reserve is reclassified to profit or loss. The amount of the cumulative loss that is recognised in profit or loss is the difference between the acquisition cost (net of any principal repayment and amortisation) and current fair value, less any impairment loss on that asset previously recognised in profit or loss.

Impairment losses recognised in profit or loss in respect of availablefor-sale financial assets are not reversed through profit or loss. Any subsequent increase in the fair value of such assets is recognised in other comprehensive income.

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

2 Summary of significant accounting policies (Continued)

2.8 Impairment of assets (Continued)

(i) Impairment of investments in equity securities and other receivables (Continued)

Impairment losses are written off against the corresponding assets directly, except for impairment losses recognised in respect of debtors included within trade and bills receivables 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 Target Group is satisfied that recovery is remote, the amount considered irrecoverable is written off against debtors 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.

(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:

investment properties; and
property, plant and equipment.

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

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

2 Summary of significant accounting policies (Continued)

2.8 Impairment of assets (Continued)

(ii) Impairment of other assets (Continued)
Calculation of recoverable amount

The recoverable amount of an asset is the greater of its fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the 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 if 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 to reduce the carrying amount of the assets in the unit (or group of units) on a pro rata basis, except that the carrying value of an asset will not be reduced below its individual fair value less costs to sell (if measurable) or value in use (if determinable).

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.

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

2 Summary of significant accounting policies (Continued)

2.9 Inventories

Inventories are carried at the lower of cost and net realisable value. Cost is determined using the weighted average method. The cost of finished goods and work in progress comprises design costs, raw materials, direct labour, other direct costs and related production overheads (based on normal operating capacity). It excluded borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.

2.10 Trade and other receivables

Trade and other receivables are initially recognised at fair value and thereafter stated at amortised cost using the effective interest method, less allowance for impairment of doubtful debts (see note 2.8(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.

2.11 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.

2.12 Trade and other payables

Trade and other payables are initially recognised at fair value and are subsequently stated at amortised cost unless the effect of discounting would be immaterial, in which case they are stated at cost.

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

2 Summary of significant accounting policies (Continued)

2.13 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 in other comprehensive income or directly in equity, in which case the relevant amounts of tax are recognised in other comprehensive income or directly in equity, respectively.

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.

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

2 Summary of significant accounting policies (Continued)

2.13 Income tax (Continued)

The limited exceptions to recognition of deferred tax assets and liabilities are those temporary differences arising from goodwill not deductible for tax purposes, 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 Target 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 profit will be available.

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 Target Company or the Target 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 Target Company or the Target Group intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously; or

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

2 Summary of significant accounting policies (Continued)

2.13 Income tax (Continued)

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
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.

2.14 Provisions

Provisions are recognised when the Target Group or the Target Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not recognised for future operating losses.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of the time is recognised as interest expense.

— 119 —

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

2 Summary of significant accounting policies (Continued)

2.15 Recognition of revenue

Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances and excludes value added tax or other sales related taxes.

(i) Revenue from the sale of products is recognised when the Target Group has delivered the products to the customer, the customer has accepted the products and collectability of the related receivable is reasonably assured.
(ii) Rental income from operating leases is recognised on a straight-line basis over the lease term.
(iii) Property management fee income is recognised when the related services are provided.
(iv) Dividend income from investments is recognised when the shareholders’ rights to receive payment have been established.
(v) Interest income is recognised using the effective interest method.

2.16 Foreign currency translation

(a) Functional and presentation currency

Items included in the financial statements of each of the Target Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The Financial Information is presented in Renminbi (“RMB”), which is also the functional currency of the Target Company and all its subsidiaries.

— 120 —

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

2 Summary of significant accounting policies (Continued)

2.16 Foreign currency translation (Continued)

(b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss, except when deferred in equity as qualifying cash flow hedges or qualifying net investment hedges.

2.17 Borrowing costs

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

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

2.18 Retirement benefit scheme

According to the relevant regulations in the PRC, the Target Group contributes to pension funds based on the standard rates fixed by the PRC Government. The Target Group remits all pension fund contributions to respective social security offices, which are responsible for the payment and liabilities relating to the pension funds. Payments to retirement benefits scheme are charged to profit or loss.

— 121 —

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

2 Summary of significant accounting policies (Continued)

2.18 Retirement benefit scheme (Continued)

Termination benefits are payable when employment is terminated by the Target Group before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Target Group recognises termination benefits when it is demonstrably committed to either: terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal; or providing termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after the balance sheet date are discounted to their present value.

2.19 Research and development costs

Research costs are expensed when incurred.

Development costs relating to the design and testing of new or improved products and reassessment of production procedures for cost efficiency purposes are expensed as incurred as the directors consider that the related economic benefits generated from these developments have very limited useful life.

2.20 Government grants

Government grants are not recognised until there is reasonable assurance that the Target Group will comply with the conditions attaching with them and that the grants will be received.

Government grants whose primary condition is that the Target Group should purchase, construct or otherwise acquire non-current assets are recognised as deferred income in the balance sheet and transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets.

Other government grants are recognised as income over the periods necessary to match them with the costs for which they are intended to compensate, on a systematic basis. Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Target Group with no future related costs are recognised in profit or loss in the period in which they become receivable.

— 122 —

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

2 Summary of significant accounting policies (Continued)

2.21 Related parties

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

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

— 123 —

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

3 Application of HKFRSs

For the purpose of preparing and presenting the Financial Information of the Revelant Periods, the Target Group has adopted all HKFRSs which are effective to the accounting period beginning on 1 January 2014 throughout the Relevant Periods.

At the date of this report, the Target Group has not early adopted the new and revised HKFRSs that have been issued but are not yet effective. These include the following which may be relevant to the Target Group:

	Effective for
	accounting periods
	beginning on or after
Annual improvements to HKFRSs 2010 – 2012 cycle	1 July 2014
Annual improvements to HKFRSs 2011 – 2013 cycle	1 July 2014
Amendments to HKAS 16 and HKAS 38, Classification	1 January 2016
of acceptable methods of depreciation and amortisation
HKFRS 15, Revenue from contracts with customers	1 January 2017
HKFRS 9, Financial instruments	1 January 2018

The Target Group is in the process of making an assessment of what the impact of these amendments and new standards is expected to be in the period of initial application, but is not yet in a position to state whether these amendments and new standards would have a significant impact on the Target Group’s financial statements.

4 Financial Risk Management

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

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

4 Financial Risk Management (Continued)

(a) Market risk

(i) Foreign currency risk

The Target Group is exposed to foreign currency risk arising from various currency exposures, primarily with respect to the United States Dollars (“USD”). Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities. In addition, the conversion of RMB into foreign currencies is subject to the rules and regulations of foreign exchange control promulgated by the PRC government.

The Target Group mainly operates in the PRC with most of the transactions denominated and settled in RMB. The Target Group currently does not hedge its foreign exchange exposure.

At 31 December 2011 and 31 December 2013, if RMB had strengthened/ weakened by 5% against USD with all the variables held constant, posttax profit for the year would have been RMB116,000 and RMB68,000, respectively, lower/higher mainly as a result of foreign exchange losses/gains on translation of USD-denominated monetary assets and liabilities.

At 31 December 2012 and 30 June 2014, if RMB had strengthened/ weakened by 5% against USD with all the variables held constant, post-tax profit for the year/period would have been RMB186,000 and RMB105,000, respectively, higher/lower mainly as a result of foreign exchange gains/losses on translation of USD-denominated monetary assets and liabilities.

5% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange risks. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts translation at the year end for a 5% change in foreign exchange rates.

(ii) Interest rate risk

The interest rate risk arises primarily from bank deposits and other financial assets. The Target Group does not use financial derivatives to hedge against interest rate risk.

— 125 —

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

4 Financial Risk Management (Continued)

(a) Market risk (Continued)

(ii) Interest rate risk (Continued)
(i) Interest rate profile

The Target Group’s interest rate profile as monitored by management is set out below:

			At	31 December	31 December		At 30	June
	2011		2012		2013		2014
	Effective		Effective		Effective		Effective
	interest		interest		interest		interest
	rate	Amount	rate	Amount	rate	Amount	rate	Amount
	_% _	RMB’000	_% _	RMB’000	_% _	RMB’000	_% _	RMB’000
Variable rate
instruments:
Other financial assets	—	—	—	—	3.60% -	76,000	5.10%	41,000
					6.30%
Bank deposits	0.36% -	203,857	0.35% -	235,238	0.35% -	185,865	0.35% -	194,551
	3.10%		3.10%		2.85%		2.85%
		203,857		235,238		261,865		235,551

(ii) Sensitivity analysis

At 31 December 2011, 2012 and 2013 and 30 June 2014, it is estimated that a general increase/decrease of 100 basis points in interests rates, with all other variables held constant, would have increase/decrease the Target Group’s profit after tax for the year/ period and accumulated profits by approximately RMB1,529,000, RMB1,764,000, RMB1,964,000 and RMB1,767,000 respectively. Other components of equity would not be affected by the changes in interest rates.

The sensitivity analysis above indicates the impact on the Target Group’s profit for the period and retained profits that would arise assuming that there is an annualised impact on interest income and expense by a change in interest rates. The 100 basis point increase or decrease represents management’s assessment of a reasonably possible change in interest rates over the period until the end of the next annual reporting period. The analysis has been performed on the same basis throughout the Relevant Periods.

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

4 Financial Risk Management (Continued)

(b) Credit risk

The Target Group’s credit risk is primarily attributable to its trade and other receivables, other financial assets and cash and cash equivalents. Management has a credit policy in place and the exposures to these credit risks are monitored on an ongoing basis.

In respect of trade and other receivables, the Target Group has put in place policies to ensure that sales of products and services are made to customers with an appropriate credit history and the Target Group performs individual credit evaluations on all customers requiring credit over a certain amount. Given the Target Group’s historical experience in collection of trade and other receivables, the directors are of opinion that adequate provision for uncollectible trade and other receivables has been made in the Financial Information. In this regard, the directors consider that the Target Group’s credit risk is significantly reduced.

The Target Group has concentration of credit risk as 56%, 42%, 30% and 59% of the total trade and bills receivables as at 31 December 2011, 2012 and 2013 and 30 June 2014, respectively, was due from the Target Group’s five largest customers.

The credit risk for other financial assets and cash and cash equivalents are considered by the Target Group to be minimal as the counterparties are generally banks and financial institutions with good ratings.

The maximum exposure to credit risk without taking into account of any collateral held is represented by the carrying amount of each financial asset in the balance sheet after deducting any impairment allowance. Further quantitative disclosures on exposure to credit risk arising from trade and bills receivables are set out in note 19.

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

4 Financial Risk Management (Continued)

(c) Liquidity risk

The Target Group monitors and maintains a level of cash and cash equivalents deemed adequate by management to finance the Target Group’s operations and development and to mitigate the effect of fluctuations in cash flows.

The table below analyses the Target Group’s financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

The Target Group

At 31 December 2011 Trade payables Accruals and other payables At 31 December 2012 Trade payables Accruals and other payables	Carrying amount RMB’000 41,364 51,678 93,042 116,585 28,847 145,432	Total contractual undiscounted cash flow Within 1 year or on demand RMB’000 RMB’000 41,364 41,364 51,678 51,678 93,042 93,042 116,585 116,585 28,847 28,847 145,432 145,432

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

4 Financial Risk Management (Continued)
(c) Liquidity risk (Continued)

The Target Group (Continued)

At 31 December 2013 Trade payables Accruals and other payables At 30 June 2014 Trade payables Accruals and other payables	Carrying amount RMB’000 73,154 58,884 132,038 70,646 54,108 124,754	Total contractual undiscounted cash flow Within 1 year or on demand RMB’000 RMB’000 73,154 73,154 58,884 58,884 132,038 132,038 70,646 70,646 54,108 54,108 124,754 124,754

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

4 Financial Risk Management (Continued)
(c) Liquidity risk (Continued)

The Target Company

At 31 December 2011 Accruals and other payables At 31 December 2012 Accruals and other payables At 31 December 2013 Accruals and other payables At 30 June 2014 Accruals and other payables	Carrying amount RMB’000 31,341 31,947 35,104 57,728	Total contractual undiscounted cash flow Within 1 year or on demand RMB’000 RMB’000 31,341 31,341 31,947 31,947 35,104 35,104 57,728 57,728

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

4 Financial Risk Management (Continued)
(d) Categories of financial instruments

The Target Group

Financial assets Loan and receivables (including cash and cash equivalents) Other financial assets Financial liabilities Financial liabilities at amortised cost The Target Company Financial assets Loan and receivables (including cash and cash equivalents) Other financial assets Financial liabilities Financial liabilities at amortised cost	At 31 December 2011 2012 2013 RMB’000 RMB’000 RMB’000 239,083 271,167 222,318 — — 76,000 239,083 271,167 298,318 93,042 145,432 132,038 169,973 183,264 187,055 — — 20,000 169,973 183,264 207,055 31,341 31,947 35,104	At 30 June 2014 RMB’000 245,256 41,000
		286,256

		124,754

		206,500 —
		206,500

		57,728

— 131 —

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

4 Financial Risk Management (Continued)

(e) Fair values

The fair values of other financial assets are categorised as level 3 fair value hierarchy as defined in HKFRS 13 “Fair Value Measurement”. The fair values have been determined by discounted cash flow with future cash flows that are estimated based on expected recoverable amounts, discounted at a rate that reflect management’s best estimation of the expected risk level. Significant unobservable inputs are mainly the expected future cash flow and the discount rate. The higher the future cash flows or the lower the discount rate, the higher the fair value determined.

The following tables present reconciliations of level 3 fair value measurements of other financial assets.

The Target Group

At 1 January Payments for purchases Proceeds from settlements	At 31 December 2011 2012 2013 RMB’000 RMB’000 RMB’000 — — — — — 296,000 — — (220,000) — — 76,000	At 30 June 2014 RMB’000 76,000 565,000 (600,000) 41,000

The Target Company

At 1 January Payments for purchases Proceeds from settlements	At 31 December 2011 2012 2013 RMB’000 RMB’000 RMB’000 — — — — — 240,000 — — (220,000) — — 20,000	At 30 June 2014 RMB’000 20,000 115,000 (135,000) —

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

4 Financial Risk Management (Continued)

(e) Fair values (Continued)

During the Relevant Periods, there was no transfer occurred between levels in the hierarchy.

All other financial instruments are carried at amounts not materially different from their fair values as at 31 December 2011, 2012 and 2013 and 30 June 2014.

5 Capital risk management

The Target Group’s objectives when managing capital are to safeguard the Target Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Target Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

The Target Group regards total equity presented on the face of the consolidated balance sheets as capital for capital management purposes.

Management of the Target Group reviews its capital structure periodically by assessing budgets of major projects taking into account the position of funding. The Target Group is not subject to externally imposed capital requirements.

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APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

6 Critical accounting estimates and judgements

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

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

(a) Useful lives of investment properties and property, plant and equipment

The Target Group’s management determines the estimated useful lives and related depreciation charges for its investment properties and property, plant and equipment. This estimate is based on the historical experience of the actual useful lives of investment properties and property, plant and equipment of similar nature and functions. It could change significantly as a result of technical innovations and competitor actions in response to severe industry cycles. Management will increase the depreciation charge where useful lives are less than previously estimated lives, or it will write-off or write-down technically obsolete or non-strategic assets that have been abandoned or sold.

(b) Impairment of trade and other receivables

The Target Group makes provision for impairment of trade and other receivables based on an estimate of the recoverability of these receivables. Provisions are applied to trade and other receivables where events or changes in circumstances indicate that the balances may not be collectible. The identification of impairment of trade and other receivables requires the use of estimates. Where the expectation is different from the original estimates, such difference will impact carrying value of receivables and provision for impairment losses in the period in which such estimate has been changed.

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APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

6 Critical accounting estimates and judgements (Continued)

(c) Provision for obsolete inventories

Management reviews the condition of the inventories of the Target Group and makes provision for obsolete and slow-moving inventory items identified that are no longer suitable for sale. Management estimates the net realisable value for such inventories based primarily on the latest invoice prices and current market conditions. The Target Group carries out an inventory review at each balance sheet date and makes provision for obsolete items. Management reassesses the estimation on each balance sheet date.

(d) Fair values of other financial assets

The other financials assets have been valued based on the expected future cash flows discounted at a rate that reflect management’s best estimation of the expected risk level. These valuations require the Target Group to make estimates about expected future cash flows, credit risk and discount rate, and hence they are subject to uncertainty.

7 Revenue and segmental information

The Target Group determines its operating segments based on the internal financial information reviewed by the board of directors of the Target Company that are used to make strategic decisions. The Target Group has the following reportable segments during the Relevant Periods:

(i) Consumer electronic products: Development, production and sale of consumer electronic products (ii) Property leasing Leasing of investment properties and provision and management: of property management services

The segmental information was prepared in accordance with the method adopted by the senior executive management of the Target Group in evaluating segment performance and allocation of resources between segments. The Target Group’s senior executive management monitors the results, assets and liabilities attributable to each reportable segment on the following basis:

Segment assets include all non-current and current assets with the exception of interests in associates, other financial assets and other corporate assets. Segment liabilities include all liabilities.

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APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

7 Revenue and segmental information (Continued)

Revenue and expenses are allocated to the reportable segments with reference to sales generated by those segments and the expenses incurred by those segments.

The following tables provide an analysis of the Target Group’s revenue, results and certain assets, liabilities and expenditure information by reportable segments:

Year ended 31 December 2011

Revenue External sales Internal sales Total Results Segment results Unallocated corporate expenses Interest income Share of results of associates Income tax expense Profit for the year Assets Segment assets Associates Unallocated corporate assets Consolidated total assets Liabilities Segment liabilities	Consumer electronic products RMB’000 750,701 11,280 761,981 16,777 180,927 74,502	Property leasing and management RMB’000 63,714 9,599 73,313 30,931 302,054 46,660	Other operations RMB’000 18,761 76 18,837 (115) 13,317 8,475	Elimination Consolidated RMB’000 RMB’000 — 833,176 (20,955) — (20,955) 833,176 (3,125) 44,468 (317) 2,909 193 (11,671) 35,582 (114,805) 381,493 1,895 3,707 387,095 (31,636) 98,001

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APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

7 Revenue and segmental information (Continued)

Year ended 31 December 2011 (Continued)

	Consumer	Property
	electronic	leasing and	Other
	products	management	operations	Elimination	Consolidated
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Other information
Capital expenditure	8,153	5,056	1,155	—	14,364
Depreciation	7,843	10,907	69	242	19,061
Write-down of inventories	2,152	—	688	—	2,840
Loss on disposals of property,
plant and equipment	4	4,083	—	—	4,087
Impairment loss recognised/
(reversed) on trade and
other receivables	429	94	(54)	—	469

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APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

7 Revenue and segmental information (Continued)

Year ended 31 December 2012

Revenue External sales Internal sales Total Results Segment results Unallocated corporate expenses Interest income Share of results of associates Income tax expense Profit for the year Assets Segment assets Associates Unallocated corporate assets Consolidated total assets Liabilities Segment liabilities	Consumer electronic products RMB’000 1,209,858 14,949 1,224,807 28,496 255,369 136,839	Property leasing and management RMB’000 68,344 11,597 79,941 41,532 292,054 46,818	Other operations RMB’000 15,924 862 16,786 166 17,901 12,866	Elimination Consolidated RMB’000 RMB’000 — 1,294,126 (27,408) — (27,408) 1,294,126 (6,787) 63,407 (3,634) 3,788 (136) (14,969) 48,456 (117,438) 447,886 1,579 189 449,654 (46,099) 150,424

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APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

7 Revenue and segmental information (Continued)

Year ended 31 December 2012 (Continued)

	Consumer	Property
	electronic	leasing and	Other
	products	management	operations	Elimination	Consolidated
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Other information
Capital expenditure	3,918	736	—	—	4,654
Depreciation	8,087	10,013	145	151	18,396
Write-down/(reversal of write
down) of inventories	100	—	(238)	—	(138)
Loss on disposals of property,
plant and equipment	591	22	3	23	639
Impairment loss recognised on
— trade and other receivables	199	47	74	—	320
— property, plant
and equipment	—	—	—	3,455	3,455

— 139 —

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APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

7 Revenue and segmental information (Continued)

Year ended 31 December 2013

Revenue External sales Internal sales Total Results Segment results Unallocated corporate expenses Interest income Share of results of associates Income tax expense Profit for the year Assets Segment assets Associates Other financial assets Unallocated corporate assets Consolidated total assets Liabilities Segment liabilities	Consumer electronic products RMB’000 1,560,363 49,367 1,609,730 29,097 165,480 120,625	Property leasing and management RMB’000 72,482 11,939 84,421 55,656 291,588 57,749	Other operations RMB’000 15,436 — 15,436 323 9,608 8,588	Elimination Consolidated RMB’000 RMB’000 — 1,648,281 (61,306) — (61,306) 1,648,281 (22,401) 62,675 (492) 3,764 (358) (16,361) 49,228 (108,616) 358,060 919 76,000 5,259 440,238 (45,262) 141,700

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APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

7 Revenue and segmental information (Continued)

Year ended 31 December 2013 (Continued)

	Consumer	Property
	electronic	leasing and	Other
	products	management	operations	Elimination	Consolidated
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Other information
Capital expenditure	20,765	8,142	—	—	28,907
Depreciation	8,316	8,836	135	21	17,308
Write-down of inventories	263	—	—	—	263
Gain on disposals
of investment properties	—	(41)	—	—	(41)
Loss on disposals of property,
plant and equipment	543	20	—	162	725
Impairment loss recognised/
(reversed) on trade and
other receivables	9	(18)	—	190	181

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APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

7 Revenue and segmental information (Continued)

Six months ended 30 June 2014

Revenue External sales Internal sales Total Results Segment results Unallocated corporate expenses Interest income Share of results of associates Income tax expense Profit for the period Assets Segment assets Associates Other financial assets Unallocated corporate assets Consolidated total assets Liabilities Segment liabilities	Consumer electronic products RMB’000 356,266 27,552 383,818 14,746 168,229 93,783	Property leasing and management RMB’000 37,055 6,143 43,198 17,453 318,392 84,971	Other operations RMB’000 8,017 63 8,080 748 10,376 8,814	Elimination Consolidated RMB’000 RMB’000 — 401,338 (33,758) — (33,758) 401,338 6,267 39,214 (61) 3,572 103 (7,282) 35,546 (107,637) 389,360 1,022 41,000 212 431,594 (55,538) 132,030

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APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

7 Revenue and segmental information (Continued)

Six months ended 30 June 2014 (Continued)

	Consumer	Property
	electronic	leasing and	Other
	products	management	operations	Elimination	Consolidated
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Other information
Capital expenditure	961	1,095	—	—	2,056
Depreciation	3,769	3,268	65	—	7,102
Loss on disposals of property,
plant and equipment	40	43	76	—	159
Impairment loss recognised/
(reversed) on trade and
other receivables	39	(1)	—	(2)	36

— 143 —

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APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

7 Revenue and segmental information (Continued)

Six months ended 30 June 2013 (unaudited)

Revenue External sales Internal sales Total Results Segment results Unallocated corporate expenses Interest income Share of results of associates Income tax expense Profit for the period	Consumer electronic products RMB’000 808,295 23,166 831,461 9,773	Property leasing and management RMB’000 37,421 5,802 43,223 29,924	Other operations RMB’000 7,139 82 7,221 (542)	Elimination Consolidated RMB’000 RMB’000 — 852,855 (29,050) — (29,050) 852,855 (6,884) 32,271 (382) 2,072 (324) (8,115) 25,522	Elimination Consolidated RMB’000 RMB’000 — 852,855 (29,050) — (29,050) 852,855 (6,884) 32,271 (382) 2,072 (324) (8,115) 25,522
					852,855

					32,271 (382) 2,072 (324) (8,115)
					25,522

	Consumer	Property
	electronic	leasing and	Other
	products	management	operations	Elimination	Consolidated
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Other information
Capital expenditure	19,544	1,251	—	—	20,795
Depreciation	4,147	5,593	67	12	9,819
Loss on disposals of property,
plant and equipment	393	17	—	12	422
Impairment loss recognised/
(reversed) on trade and
other receivables	41	(2)	—	191	230

— 144 —

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

7 Revenue and segmental information (Continued)

(a) Geographical information

The following summary provides an analysis of the Target Group’s revenue by geographical markets. The revenue by geographical market is based on the location of customers regardless of where the goods are produced.

Revenue from external customers

PRC (excluding Hong Kong) Hong Kong	Year ended 31 December 2011 2012 2013 RMB’000 RMB’000 RMB’000 780,225 1,006,771 1,418,664 52,951 287,355 229,617 833,176 1,294,126 1,648,281	Six months ended 30 June 2013 2014 RMB’000 RMB’000 (unaudited) 744,716 191,158 108,139 210,180 852,855 401,338	Six months ended 30 June 2013 2014 RMB’000 RMB’000 (unaudited) 744,716 191,158 108,139 210,180 852,855 401,338
			401,338

Non-current assets

Non-current assets for this purpose consist of investment properties and property, plant and equipment which are all located in the PRC as at 31 December 2011, 2012 and 2013 and 30 June 2014.

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

7 Revenue and segmental information (Continued)

(b) Major customers

Revenue from major customers, each of whom amounted to 10% or more of the Target Group’s total revenue, is set out as below:

				Six months ended	Six months ended
	Year	ended 31 December		30 June
	2011	2012	2013	2013	2014
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
				(unaudited)
Customer A1	579,667	631,083	1,160,430	604,251	64,247
Customer B1	N/A2	287,355	N/A2	108,139	N/A2
Customer C1	N/A2	144,522	N/A2	N/A2	N/A2
Customer D1	N/A2	N/A2	N/A2	N/A2	210,180

1 Revenue was generated from the customer electronic products segment.

2 The corresponding revenue did not contribute 10% or more of the Target Group’s total revenue.

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APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

8 Other income and net gains

Other income Government grants# Interest income on short- term deposits Interest income on other financial assets Write-off of accruals and other payables Sundry income Other net (losses)/gains Gain on disposals of investment properties Loss on disposals of property, plant and equipment Exchange gains/(losses)	Year ended 31 December 2011 2012 2013 RMB’000 RMB’000 RMB’000 1,300 142 671 2,909 3,788 2,424 — — 1,340 895 128 1,625 20 2 22 5,124 4,060 6,082 — — 41 (4,087) (639) (725) 120 (2,284) (1,096) (3,967) (2,923) (1,780) 1,157 1,137 4,302	Six months ended 30 June 2013 2014 RMB’000 RMB’000 (unaudited) — 600 1,457 1,044 615 2,528 1,260 — 25 35 3,357 4,207 — — (422) (159) (995) 745 (1,417) 586 1,940 4,793

Government grants include mainly funds and subsidies from local government authorities for the development of the Target Group.

— 147 —

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

9 Profit before taxation

				Six months	Six months
	Year	ended 31 December		ended 30 June
	2011	2012	2013	2013	2014
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
				(unaudited)
Auditors’ remuneration	202	235	235	235	235
Cost of inventories
recognised as
an expense	617,542	1,095,760	1,334,959	720,655	291,840
Depreciation of
— Investment properties	2,132	1,961	1,779	1,144	812
— Property, plant
and equipment	16,929	16,435	15,529	8,675	6,290
Impairment loss recognised/
(reversed) on
— Trade and bills
receivables	454	164	177	267	43
— Deposits, prepayments
and other receivables	15	156	4	(37)	(7)
— Property, plant and
equipment	—	3,455	—	—	—
Operating lease rentals in
respect of land and building	2,354	2,860	2,745	1,755	1,557
Research and development
expenses#	20,406	34,400	44,768	23,617	10,654
Staff costs (including
directors’ and supervisors’
emoluments)
— Salaries and other
allowances	72,309	82,070	97,819	38,863	28,784
— Retirement benefit
scheme contributions	5,436	5,441	6,372	3,102	2,583
Write-down/(reversal of write-
down) of inventories	2,840	(138)	263	—	—

Research and development expenses include RMB3,825,000, RMB6,024,000, RMB7,258,000, RMB3,598,000 and RMB2,816,000 for the years ended 31 December 2011, 2012 and 2013 and six months ended 30 June 2013 and 2014, respectively, relating to staff costs which are also included in the respective amount disclosed separately above.

— 148 —

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

10 Directors’, Supervisors’ and five highest paid individuals’ emoluments

(a) Directors’ and Supervisors’ emoluments

Details of the emoluments paid or payable to each of the Directors and Supervisors were as follows:

Year ended 31 December 2011

Name Executive Directors: Luo Yunshui Non-executive Directors: Li Jinghe Liu Sizhang_(Note ii) Shen Jianlong Xu Guofei Xiang Qunxiong Zhang Zhengping (Note iv)_ Supervisors: Shen Yonglin Independent Supervisors: Wang Jiming Wei Junchang Total	Fees RMB’000 — — — — — — — — — — — — —	Salaries and other allowances RMB’000 522 — — — — — — — 107 — — — 629	Retirement benefit scheme contributions RMB’000 26 — — — — — — — 12 — — — 38	Total RMB’000 548
				— — — — — —
				—
				119
				— —
				—
				667

— 149 —

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

10 Directors’, Supervisors’ and five highest paid individuals’ emoluments (Continued)

(a) Directors’ and Supervisors’ emoluments (Continued)

Details of the emoluments paid or payable to each of the Directors and Supervisors were as follows: (Continued)

Year ended 31 December 2012

Name Executive Directors: Luo Yunshui Non-executive Directors: Guo Jian_(Note i) Li Jinghe Liu Sizhang(Note ii) Shen Jianlong Wen Hui(Note i) Xu Guofei Xiang Qunxiong Xia Dechuan(Note i) Zhang Zhengping (Note iv)_ Supervisors: Shen Yonglin Independent Supervisors: Wang Jiming Wei Junchang Total	Fees RMB’000 — — — — — — — — — — — — — — — —	Salaries and other allowances RMB’000 686 — — — — — — — — — — 85 — — — 771	Retirement benefit scheme contributions RMB’000 29 — — — — — — — — — — 14 — — — 43	Total RMB’000 715
				— — — — — — — — —
				—
				99
				— —
				—
				814

— 150 —

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APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

10 Directors’, Supervisors’ and five highest paid individuals’ emoluments (Continued)

(a) Directors’ and Supervisors’ emoluments (Continued)

Details of the emoluments paid or payable to each of the Directors and Supervisors were as follows: (Continued)

Year ended 31 December 2013

Name Executive Directors: Luo Yunshui Non-executive Directors: Guo Jian_(Note i) Li Jinghe Shen Jianlong Song Yunfeng(Note iii) Wen Hui(Note i) Xu Guofei Xiang Qunxiong Xia Dechuan(Note i) Zhang Zhengping (Note iv)_ Supervisors: Shen Yonglin Independent Supervisors: Wang Jiming Wei Junchang Total	Fees RMB’000 — — — — — — — — — — — — — — — —	Salaries and other allowances RMB’000 694 — — — — — — — — — — 133 — — — 827	Retirement benefit scheme contributions RMB’000 34 — — — — — — — — — — 17 — — — 51	Total RMB’000 728
				— — — — — — — — —
				—
				150
				— —
				—
				878

— 151 —

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

10 Directors’, Supervisors’ and five highest paid individuals’ emoluments (Continued)

(a) Directors’ and Supervisors’ emoluments (Continued)

Details of the emoluments paid or payable to each of the Directors and Supervisors were as follows: (Continued)

Six months ended 30 June 2014

Name Executive Directors: Luo Yunshui Non-executive Directors: Guo Jian_(Note i) Li Jinghe Shen Jianlong Song Yunfeng(Note iii) Wen Hui(Note i) Xu Guofei Xiang Qunxiong Xia Dechuan(Note i)_ Supervisors: Shen Yonglin Independent Supervisors: Wang Jiming Wei Junchang Total	Fees RMB’000 — — — — — — — — — — — — — — —	Salaries and other allowances RMB’000 93 — — — — — — — — — 45 — — — 138	Retirement benefit scheme contributions RMB’000 20 — — — — — — — — — 10 — — — 30	Total RMB’000 113
				— — — — — — — —
				—
				55
				— —
				—
				168

— 152 —

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

10 Directors’, Supervisors’ and five highest paid individuals’ emoluments (Continued)

(a) Directors’ and Supervisors’ emoluments (Continued)

Details of the emoluments paid or payable to each of the Directors and Supervisors were as follows: (Continued)

Six months ended 30 June 2013 (unaudited)

Name Executive Directors: Luo Yunshui Non-executive Directors: Guo Jian_(Note i) Li Jinghe Shen Jianlong Wen Hui(Note i) Xu Guofei Xiang Qunxiong Xia Dechuan(Note i) Zhang Zhengping (Note iv)_ Supervisors: Shen Yonglin Independent Supervisors: Wang Jiming Wei Junchang Total	Fees RMB’000 — — — — — — — — — — — — — — —	Salaries and other allowances RMB’000 91 — — — — — — — — — 44 — — — 135	Retirement benefit scheme contributions RMB’000 18 — — — — — — — — — 9 — — — 27	Total RMB’000 109
				— — — — — — — —
				—
				53
				— —
				—
				162

Notes:

(i) Appointed on 28 November 2012.
(ii) Resigned on 28 November 2012.
(iii) Appointed on 14 October 2013.
(iv) Resigned on 14 October 2013.

— 153 —

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APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

10 Directors’, Supervisors’ and five highest paid individuals’ emoluments (Continued)

(b) The five highest paid individuals

Of the five individuals with highest emoluments, one of them is a director whose emolument is disclosed in note 10(a) above. The aggregate of the emoluments in respect of the remaining individuals are as follows:

Salaries and other allowances Retirement benefits scheme contributions	Year ended 31 December 2011 2012 2013 RMB’000 RMB’000 RMB’000 2,189 2,750 2,987 94 113 133 2,283 2,863 3,120	Six months ended 30 June 2013 2014 RMB’000 RMB’000 (unaudited) 421 430 67 55 488 485	Six months ended 30 June 2013 2014 RMB’000 RMB’000 (unaudited) 421 430 67 55 488 485
			485

The number of highest paid employees whose aggregate emoluments fell within the following bands is as follows:

Number of employees

Nil to HKD1,000,000 HKD1,000,001 to HKD2,000,000	Year ended 31 December 2011 2012 2013 RMB’000 RMB’000 RMB’000 4 3 3 — 1 1 4 4 4	Six months ended 30 June 2013 2014 RMB’000 RMB’000 (unaudited) 4 4 — — 4 4	Six months ended 30 June 2013 2014 RMB’000 RMB’000 (unaudited) 4 4 — — 4 4
			4

— 154 —

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

11 Income tax expense

(a) Income tax expense in the consolidated statements of comprehensive income represents:

Current tax — PRC enterprise income tax — (Over)/under- provision in prior year Deferred tax_(Note 17)_ — attributable to the origination and reversal of temporary differences	Year ended 31 December 2011 2012 2013 RMB’000 RMB’000 RMB’000 11,814 14,344 17,343 (43) 492 4 11,771 14,836 17,347 (100) 133 (986) 11,671 14,969 16,361	Six months ended 30 June 2013 2014 RMB’000 RMB’000 (unaudited) 8,260 9,363 4 (544) 8,264 8,819 (149) (1,537) 8,115 7,282

PRC enterprise income tax is charged at the statutory rate of 25% of the assessable income as determined with the relevant tax rules and regulations of the PRC, except that certain subsidiaries in the PRC are subject to a preferential tax rate of 15% throughout the Relevant Periods.

— 155 —

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APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

11 Income tax expense (Continued)
(b) Reconciliation between income tax expense and accounting profit at applicable tax rates:

Profit before taxation Tax calculated at the statutory PRC tax rate of 25% Exemption/reduction of income tax under preferential tax treatment Tax effect of: Share of results of associates Income not subject to tax Expenses not deductible for tax purposes Unrecognised tax losses and other deferred tax assets Utilisation of previously unrecognised tax losses and other deferred tax assets (Over)/under- provision in prior year Income tax expense	Year ended 31 December 2011 2012 2013 RMB’000 RMB’000 RMB’000 47,253 63,425 65,589 11,813 15,856 16,397 (2,332) (2,677) (2,824) (51) 36 89 (55) – – 797 1,288 1,300 1,673 341 2,477 (131) (367) (1,082) (43) 492 4 11,671 14,969 16,361	Six months ended 30 June 2013 2014 RMB’000 RMB’000 (unaudited) 33,637 42,828 8,409 10,707 (1,135) (1,444) 84 (20) – (165) 107 330 1,037 130 (391) (1,712) 4 (544) 8,115 7,282

— 156 —

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

12 Dividends

(a) Dividends payable to equity shareholders of Target Company attributable to the Relevant Periods:

	Year	ended 31 December	ended 31 December	At 30 June
	2011	2012	2013	2014
	RMB’000	RMB’000	RMB’000	RMB’000
Final dividends proposed after the
balance sheet dates of
RMB0.3 cents per share	34,520	34,520	34,520	—

The final dividends proposed after the balance sheet dates had not been recognised as liabilities at the respective balance sheet dates as they are subject to the approval of the Target Company’s shareholders at the forthcoming annual general meetings.

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

Final dividends in respect of the previous financial year, approved and paid during the year/period — RMB0.2 cents per share — RMB0.3 cents per share	Year ended 31 December 2011 2012 2013 RMB’000 RMB’000 RMB’000 23,014 — — — 34,520 34,520 23,014 34,520 34,520	At 30 June 2014 RMB’000 — 34,520
		34,520

— 157 —

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

13 Investment properties

The Target Group and the Target Company

Cost:
As at 1 January 2011
Additions
As at 31 December 2011, 31 December 2012 and 1 January 2013
Additions
Disposals
As at 31 December 2013 and 1 January 2014
Additions
At 30 June 2014
Accumulated depreciation:
As at 1 January 2011
Charge for the year
As at 31 December 2011 and 1 January 2012
Charge for the year
As at 31 December 2012 and 1 January 2013
Charge for the year
Written back on disposals
As at 31 December 2013 and 1 January 2014
Charge for the period
At 30 June 2014

RMB’000
56,730
3,748
60,478
5,783
(20)
66,241
176
66,417
41,340
2,132
43,472
1,961
45,433
1,779
(13)
47,199
812
48,011

— 158 —

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

13 Investment properties (Continued)

The Target Group and the Target Company (Continued)

Carrying value: As at 31 December 2011 As at 31 December 2012 As at 31 December 2013 As at 30 June 2014	RMB’000 17,006

	15,045

	19,042

	18,406

The investment properties are held under medium term leases in the PRC.

In the opinion of the directors, the fair values of the investment properties are approximately RMB660,588,000, RMB745,141,000, RMB602,114,000 and RMB602,114,000 as at 31 December 2011, 2012 and 2013 and 30 June 2014, respectively. The valuations were arrived at by reference to the market evidence of transaction prices for similar properties, which are categorised as level 2 fair value hierarchy as defined in HKFRS 13 “Fair Value Measurement”.

— 159 —

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

14 Property, plant and equipment

The Target Group

Cost: As at 1 January 2011 Additions Transfer from construction in progress Disposals As at 31 December 2011 and 1 January 2012 Additions Disposals As at 31 December 2012 and 1 January 2013 Additions Disposals As at 31 December 2013 and 1 January 2014 Additions Disposals As at 30 June 2014	Buildings RMB’000 105,226 — — (30,465) 74,761 — (7,114) 67,647 — — 67,647 — — 67,647	Leasehold improvements RMB’000 23,639 209 3,663 (33) 27,478 245 — 27,723 1,374 — 29,097 76 — 29,173	Plant, machinery and equipment Transportation equipment and motor vehicles RMB’000 RMB’000 77,762 5,478 9,231 126 — — (2,871) (473) 84,122 5,131 3,808 601 (12,715) (813) 75,215 4,919 21,429 321 (22,438) (218) 74,206 5,022 1,006 798 (599) (623) 74,613 5,197	Construction in progress RMB’000 3,663 — (3,663) — — — — — — — — — — —	Total RMB’000 215,768 9,566 — (33,842)
					191,492 4,654 (20,642)
					175,504 23,124 (22,656)
					175,972 1,880 (1,222)
					176,630

— 160 —

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

14 Property, plant and equipment (Continued)

The Target Group (Continued)

Accumulated depreciation and impairment losses: As at 1 January 2011 Charge for the year Written back on disposals As at 31 December 2011 and 1 January 2012 Charge for the year Impairment loss Written back on disposals As at 31 December 2012 and 1 January 2013 Charge for the year Written back on disposals As at 31 December 2013 and 1 January 2014 Charge for the period Written back on disposals As at 30 June 2014 Carrying value: As at 31 December 2011 As at 31 December 2012 As at 31 December 2013 As at 30 June 2014	Buildings RMB’000 59,571 2,705 (24,976) 37,300 2,318 3,455 (7,114) 35,959 2,144 — 38,103 1,073 — 39,176 37,461 31,688 29,544 28,471	Leasehold improvements RMB’000 10,848 5,566 (33) 16,381 5,334 — — 21,715 3,636 — 25,351 1,050 — 26,401 11,097 6,008 3,746 2,772	Plant, machinery and equipment Transportation equipment and motor vehicles RMB’000 RMB’000 52,289 3,416 8,291 367 (1,534) (473) 59,046 3,310 8,385 398 — — (11,107) (731) 56,324 2,977 8,742 1,007 (21,243) (207) 43,823 3,777 3,970 197 (436) (532) 47,357 3,442 25,076 1,821 18,891 1,942 30,383 1,245 27,256 1,755	Construction in progress RMB’000 — — — — — — — — — — — — — — — — — —	Total RMB’000 126,124 16,929 (27,016)
					116,037 16,435 3,455 (18,952)
					116,975 15,529 (21,450)
					111,054 6,290 (968)
					116,376
					75,455

					58,529

					64,918

					60,254

— 161 —

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

14 Property, plant and equipment (Continued)

The Target Company

Cost: As at 1 January 2011 Additions Transfer from construction in progress Disposals As at 31 December 2011 and 1 January 2012 Additions As at 31 December 2012 and 1 January 2013 Additions Disposals As at 31 December 2013 and 1 January 2014 Additions Disposals As at 30 June 2014	Buildings RMB’000 12,860 — — (10,588) 2,272 — 2,272 — — 2,272 — — 2,272	Leasehold improvements RMB’000 16,184 — 3,468 — 19,652 — 19,652 — — 19,652 76 — 19,728	Plant, machinery and equipment Transportation equipment and motor vehicles RMB’000 RMB’000 3,688 2,617 18 — — — — — 3,706 2,617 28 — 3,734 2,617 146 — (338) — 3,542 2,617 16 798 (129) (497) 3,429 2,918	Construction in progress RMB’000 3,468 — (3,468) — — — — — — — — — —	Total RMB’000 38,817 18 — (10,588)
					28,247 28
					28,275 146 (338)
					28,083 890 (626)
					28,347

— 162 —

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

14 Property, plant and equipment (Continued)

The Target Company (Continued)

Accumulated depreciation and impairment losses: As at 1 January 2011 Charge for the year Written back on disposals As at 31 December 2011 and 1 January 2012 Charge for the year As at 31 December 2012 and 1 January 2013 Charge for the year Written back on disposals As at 31 December 2013 and 1 January 2014 Charge for the period Written back on disposals As at 30 June 2014 Carrying value: As at 31 December 2011 As at 31 December 2012 As at 31 December 2013 As at 30 June 2014	Buildings RMB’000 8,393 407 (7,176) 1,624 72 1,696 72 — 1,768 36 — 1,804 648 576 504 468	Leasehold improvements RMB’000 7,109 4,008 — 11,117 3,804 14,921 2,577 — 17,498 635 — 18,133 8,535 4,731 2,154 1,595	Plant, machinery and equipment Transportation equipment and motor vehicles RMB’000 RMB’000 2,783 1,132 134 203 — — 2,917 1,335 135 203 3,052 1,538 146 786 (321) — 2,877 2,324 73 96 (91) (473) 2,859 1,947 789 1,282 682 1,079 665 293 570 971	Construction in progress RMB’000 — — — — — — — — — — — — — — — —	Total RMB’000 19,417 4,752 (7,176)
					16,993 4,214
					21,207 3,581 (321)
					24,467 840 (564)
					24,743
					11,254

					7,068

					3,616

					3,604

— 163 —

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

14 Property, plant and equipment (Continued)

The buildings are located on land under medium term leases in the PRC.

At each balance sheet date, the Group carried out a review of recoverable amount of property, plant and equipment. In 2012, the review led to the recognition of an impairment loss of RMB3,455,000 in profit or loss due to technical obsolescence.

15 Subsidiaries

Unlisted investments, at cost Less: Impairment loss	At 31 December 2011 2012 2013 RMB’000 RMB’000 RMB’000 46,183 40,183 39,200 (5,733) (6,576) (8,650) 40,450 33,607 30,550	At 30 June 2014 RMB’000 39,200 (8,650) 30,550

— 164 —

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

15 Subsidiaries (Continued)

All subsidiaries are incorporated and operated in the PRC. Particulars of the subsidiaries as at 30 June 2014 are as follows:

		Percentage	of equity
		attributable to the
		Target Company
Name	Registered capital	Directly	Indirectly	Principal activities
Dongguan Jingbanghua	RMB5,000,000	80%	—	Provision of sub-contracting
Electronics Co., Ltd.				services
Dongguan XingJingwah Plastic	RMB1,000,000	55%	—	Manufacture and sale of
Products Co., Ltd.				plastic packing materials
Shenzhen Jingjia Property	RMB1,000,000	50%	50%	Property management
Management Co., Ltd.
Shenzhen Jingwah Internet	RMB5,000,000	95%	5%	Provision of sub-contracting
Electronic Co., Ltd. (formly				services
known as Shenzhen
Jingwah Plastic Co., Ltd.)
Shenzhen Jingwah Property	RMB1,000,000	90%	10%	Property management
Management Co., Ltd.
Shenzhen Jialihua	RMB3,000,000	30%	70%	Inactive
Electronics Co., Ltd.
Shenzhen Jingwah Audio and	RMB1,000,000	—	62%	Sale of customer
Video Sales Co., Ltd.				electronic products
(“JW Audio”)
Shenzhen Jingwah Information	RMB20,000,000	62%	—	Development, manufacture
Technology Co., Ltd.				and sale of customer
(“JW Information”)				electronic products

— 165 —

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

15 Subsidiaries (Continued)

		Percentage	of equity
		attributable to the
		Target Company
Name	Registered capital	Directly	Indirectly	Principal activities
Shenzhen Jingwah LED	RMB3,000,000	100%	—	Inactive
Light Technology Co., Ltd.
Shenzhen Jingwah Multi-media	RMB5,000,000	100%	—	Manufacture and sale of
Technology Co., Ltd.				motor vehicles electronic
				products
Shenzhen Jingwah Digital	RMB5,000,000	—	62%	Manufacture and sale of
Technology Co., Ltd.				computer software
(“JW Digital”)				and hardware
Shenzhen Jingyu Electronics	HKD8,500,000	100%	—	Manufacture and sale of
Co., Ltd.				electronic products
Shenzhen Longgang Jingwah	RMB3,500,000	100%	—	Leasing of investment
Electronics Co., Ltd.				properties
Shenzhen XingJingwah Packing	RMB1,000,000	55%	—	Inactive
Products Co., Ltd.

On 1 January 2012, the Target Company’s 100% equity interests in JW Audio and JW Digital were transferred to JW Information, a subsidiary as 62% owned by the Target Company, at a consideration of RMB6,000,000. Because of this transfer, the Target Company’s effective interest in JW Audio and JW Digital was reduced from 100% to 62%.

During the year ended 31 December 2013, Shenzhen Jingyi Electronics Co., Ltd. and Shenzhen Lok Wah Electronics Co., Ltd., in which the Target Company holds 60% and 50% equity interest, respectively, were deregistered.

— 166 —

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

15 Subsidiaries (Continued)

The following table lists out the information relating to JW Information, the only subsidiary of the Target Group which has material non-controlling interest (“NCI”). The summarised financial information presented below represents the amounts before any inter-company elimination.

NCI percentage Current assets Non-current assets Current liabilities Net assets Carrying amount of NCI Revenue Profit and total comprehensive income for the year/period Profit allocated to NCI Dividend paid to NCI Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities	At 31 December 2011 2012 2013 RMB’000 RMB’000 RMB’000 38% 38% 38% 99,779 163,659 125,830 15,503 17,361 29,478 (35,545) (88,525) (79,082) 79,737 92,495 76,226 30,300 35,148 28,966 664,971 1,105,316 1,466,538 16,803 22,759 23,730 6,385 8,648 9,017 (1,900) (3,800) (15,200) 57,767 31,146 49,347 (7,314) (8,594) (69,442) (5,000) (10,000) (20,000)	At 30 June 2014 RMB’000 38% 121,965 26,467 (59,409) 89,023 33,829 322,730 12,797 4,863 – (23,244) 11,558 (7,600)

— 167 —

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

16 Associates

The Target Group

Share of net assets The Target Company Unlisted investments, at cost	At 31 December 2011 2012 2013 RMB’000 RMB’000 RMB’000 1,895 1,579 919 At 31 December 2011 2012 2013 RMB’000 RMB’000 RMB’000 892 892 892	At 30 June 2014 RMB’000 1,022

		At 30 June 2014 RMB’000 892

Particulars of the Target Group’s associates, which are all incorporated and operated in the PRC, as at 30 June 2014 were as follows:

	Percentage	of equity
	attributable to the
	Target Company
Name	Directly	Indirectly	Principal activities
Shenzhen Jingfa Plastics Packing	38%	—	Manufacture and sale of
Products Co., Ltd.			plastics packing materials
(“JF Plastics”)
Shenzhen Jingwah Network	—	40%	Sales of electronics
Marketing Co., Ltd.			components and parts
(“JW Network”)
Shenzhen Jingyin Electronics	45%	—	Sales of electronics
Co., Ltd. (“JY Electronics”)			components and parts

All of the above associates are unlisted corporated entities whose quoted market price is not available, and are accounted for using the equity method in the Financial Information.

— 168 —

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

16 Associates (Continued)

Summarised financial information of the associates, are disclosed below:

At 31 December 2011

Operating result Turnover Profit/(loss) before income tax Income tax Profit/(loss) and total comprehensive Income/(loss) for the year Profit/(loss) and comprehensive income/(loss) for the year attributable to the Target Group Dividends received from the associates during the year attributable to the Target Group Financial position Non-current assets Current assets Current liabilities Net assets The Target Group’s share of net assets of associates	JF Plastics RMB’000 4,877 19 — 19 7 — 594 3,650 (1,593) 2,651 1,008	JW Network RMB’000 154 (70) — (70) (28) — 3 435 (8) 430 172	JY Electronics RMB’000 7,608 682 (208) 474 214 180 93 4,010 (2,513) 1,590 715	Total RMB’000 12,639 631 (208) 423 193 180 690 8,095 (4,114) 4,671 1,895

— 169 —

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

16 Associates (Continued)

At 31 December 2012

Operating result Turnover (Loss)/profit before income tax Income tax (Loss)/profit and total comprehensive (loss)/income for the year (Loss)/profit and comprehensive (loss)/income for the year attributable to the Target Group Dividends received from the associates during the year attributable to the Target Group Financial position Non-current assets Current assets Current liabilities Net assets The Target Group’s share of net assets of associates	JF Plastics RMB’000 3,543 (766) — (766) (291) — 474 3,238 (1,831) 1,881 717	JW Network RMB’000 2,742 48 — 48 19 — 6 1,262 (789) 479 191	JY Electronics RMB’000 5,372 411 (110) 301 136 180 69 3,104 (1,682) 1,491 671	Total RMB’000 11,657 (307) (110) (417) (136) 180 549 7,604 (4,302) 3,851 1,579

— 170 —

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

16 Associates (Continued)

At 31 December 2013

Operating result Turnover (Loss)/profit before income tax Income tax (Loss)/profit and total comprehensive (loss)/income for the year (Loss)/profit and comprehensive (loss)/income for the year attributable to the Target Group Dividends received from the associates during the year attributable to the Target Group Financial position Non-current assets Current assets Current liabilities Net assets The Target Group’s share of net assets of associates	JF Plastics RMB’000 385 (1,166) — (1,166) (445) — — 715 — 715 272	JW Network RMB’000 9,546 (13) — (13) (5) — 4 2,473 (2,012) 465 186	JY Electronics RMB’000 4,898 275 (70) 205 92 302 46 2,468 (1,490) 1,024 461	Total RMB’000 14,829 (904) (70) (974) (358) 302 50 5,656 (3,502) 2,204 919

— 171 —

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

16 Associates (Continued)

At 30 June 2014

Operating result Turnover (Loss)/profit before income tax Income tax (Loss)/profit and total comprehensive (loss)/income for the period (Loss)/profit and comprehensive (loss)/income for the period attributable to the Target Group Financial position Non-current assets Current assets Current liabilities Net assets The Target Group’s share of net assets of associates	JF Plastics RMB’000 — (33) — (33) (13) — 682 — 682 259	JW Network RMB’000 8,821 193 (48) 145 58 4 3,037 (2,430) 611 245	JY Electronics RMB’000 2,295 168 (40) 128 58 37 2,343 (1,228) 1,152 518	Total RMB’000 11,116 328 (88) 240 103 41 6,062 (3,658) 2,445 1,022

— 172 —

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

17 Deferred taxation

(a) The components of deferred tax assets recognised in the balance sheets and the movements during the Relevant Periods are as follows:

The Target Group

As at 1 January 2011 Credited to profit or loss_(Note 11(a)) As at 31 December 2011 and 1 January 2012 Charged to profit or loss(Note 11(a)) As at 31 December 2012 and 1 January 2013 (Charged)/credited to profit or loss(Note 11(a)) As at 31 December 2013 and 1 January 2014 Credited/ (charged) to profit or loss(Note 11(a))_ As at 30 June 2014	Write-down of inventories RMB’000 87 65 152 (100) 52 (52) — — —	Trade and other receivables RMB’000 170 35 205 (33) 172 (102) 70 1,577 1,647	Trade and other payables RMB’000 — — — — — 390 390 (40) 350	Other temporary differences RMB’000 — — — — — 750 750 — 750	Total RMB’000 257 100
					357 (133)
					224 986
					1,210 1,537
					2,747

— 173 —

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

17 Deferred taxation (Continued)

(a) The components of deferred tax assets recognised in the balance sheets and the movements during the Relevant Periods are as follows: (Continued)

The Target Company

As at 1 January 2011 Charged to profit or loss As at 31 December 2011 and 1 January 2012 Credited to profit or loss As at 31 December 2012 and 1 January 2013 (Charged)/credited to profit or loss As at 31 December 2013 and 1 January 2014 Credited to profit or loss As at 30 June 2014	Trade and other receivables RMB’000 54 (2) 52 8 60 (52) 8 1,578 1,586	Other temporary differences RMB’000 — — — — — 750 750 — 750	Total RMB’000 54 (2) 52 8 60 698 758 1,578 2,336

(b) At 31 December 2011, 2012 and 2013 and 30 June 2014, the Target Group has unused tax losses of RMB11,256,000, RMB11,111,000, RMB13,000,000 and RMB10,551,000, respectively available for offsetting against future profits. No deferred tax asset has been recognised in respect of such losses due to the unpredictability of future profit streams. These tax losses will expire within five years.

— 174 —

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

18 Inventories

Raw materials Work in progress Finished goods	At 31 December 2011 2012 2013 RMB’000 RMB’000 RMB’000 5,999 12,618 9,209 29,801 47,475 26,431 14,826 36,960 18,916 50,626 97,053 54,556	At 30 June 2014 RMB’000 17,633 32,448 11,594
		61,675

19 Trade and bills receivables

Trade receivable Less: Provision for impairment Bills receivable Due from associates Due from a shareholder Total trade and bills receivables	At 31 December 2011 2012 2013 RMB’000 RMB’000 RMB’000 22,142 22,545 21,526 (842) (307) (131) 21,300 22,238 21,395 6,953 9,632 10,193 48 476 1,982 2,365 — — 30,666 32,346 33,570	At 30 June 2014 RMB’000 37,728 (108)
		37,620 6,985 2,424 630
		47,659

(a) The Target Group allows a credit period ranging from 30 to 120 days to its trade customers.

— 175 —

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

19 Trade and bills receivables (Continued)

(b) The following is the ageing analysis of trade and bills receivables, net of provision for impairment:

Within 1 year 1 to 2 years 2 to 3 years Over 3 years	At 31 December 2011 2012 2013 RMB’000 RMB’000 RMB’000 30,518 31,683 33,126 54 578 67 24 20 377 70 65 — 30,666 32,346 33,570	At 30 June 2014 RMB’000 46,790 862 7 —
		47,659

Up to 3 months Over 3 months	At 31 December 2011 2012 2013 RMB’000 RMB’000 RMB’000 7,809 6,924 7,180 2,140 2,765 709 9,949 9,689 7,889	At 30 June 2014 RMB’000 5,550 2,430
		7,980

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

— 176 —

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

19 Trade and bills receivables (Continued)

(d) The movements in provision for impairment were as follows:

At 1 January Impairment loss recognised Uncollectible amounts written off	At 31 December 2011 2012 2013 RMB’000 RMB’000 RMB’000 388 842 307 454 164 177 — (699) (353) 842 307 131	At 30 June 2014 RMB’000 131 43 (66) 108

20 Deposits, prepayments and other receivables

The Target Group

Other receivables Deposits and prepayments Less: Provision for impairment Due from a shareholder Due from associates Total deposits, prepayments and other receivables	At 31 December 2011 2012 2013 RMB’000 RMB’000 RMB’000 2,718 2,660 2,635 2,673 6,056 1,275 (347) (471) (290) 5,044 8,245 3,620 29 — — 1,613 949 224 6,686 9,194 3,844	At 30 June 2014 RMB’000 2,802 1,233 (283) 3,752 — 245 3,997

— 177 —

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

20 Deposits, prepayments and other receivables (Continued)

The Target Company

Dividend receivables Other receivables Less: Provision for impairment Due from associates Due from subsidiaries Total deposits, prepayments and other receivables	At 31 December 2011 2012 2013 RMB’000 RMB’000 RMB’000 — 1,000 12,400 378 602 298 (207) (239) (32) 171 1,363 12,666 1,576 949 224 60,988 58,538 49,093 62,735 60,850 61,983	At 30 June 2014 RMB’000 12,400 137 (36) 12,501 245 47,593 60,339

The above balances with related parties are unsecured, interest-free and repayable on demand.

21 Other financial assets

At 31 December 2013, other financial assets of the Target Group of RMB76,000,000 and of the Target Company of RMB20,000,000 represented short-term wealth management products managed by banks in the PRC which undertake return of principal and income yield of 3.6% - 6.3% per annum upon maturity.

At 30 June 2014, other financial assets of the Target Group of RMB41,000,000 represented short-term wealth management products managed by banks in the PRC. Major investment targets of these products are debt securities issued by banks in the PRC, the PRC exchange traded debt securities; and money market, trust plan and other financial products.

— 178 —

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

22 Cash and cash equivalents

The Target Group

Bank deposits Cash on hand	At 31 December 2011 2012 2013 RMB’000 RMB’000 RMB’000 203,857 235,238 185,865 547 446 314 204,404 235,684 186,179	At 30 June 2014 RMB’000 194,551 283
		194,834

The Target Company

Bank deposits Cash on hand	At 31 December 2011 2012 2013 RMB’000 RMB’000 RMB’000 107,183 122,395 125,059 55 19 13 107,238 122,414 125,072	At 30 June 2014 RMB’000 146,122 39
		146,161

— 179 —

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

22 Cash and cash equivalents (Continued)

Cash and cash equivalents that are denominated in currencies other than the functional currency of the relevant group entities are set out below:

The Target Group

USD HKD The Target Company HKD 23 Share capital The Target Company Registered, issued and fully paid: 115,068,000 shares of RMB1.00 each	At 31 December 2011 2012 2013 RMB’000 RMB’000 RMB’000 3,096 — 3,856 25 24 26 3,121 24 3,882 At 31 December 2011 2012 2013 RMB’000 RMB’000 RMB’000 25 23 25 At 31 December 2011 2012 2013 RMB’000 RMB’000 RMB’000 115,068 115,068 115,068	At 30 June 2014 RMB’000 256 25
		281

		At 30 June 2014 RMB’000 25

		At 30 June 2014 RMB’000 115,068

— 180 —

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

24 Reserves

The Target Company

As at 1 January 2011 Profit and total comprehensive income for the year Dividend approved in respect of the previous year As at 31 December 2011 and 1 January 2012 Profit and total comprehensive income for the year Dividend approved in respect of the previous year As at 31 December 2012 and 1 January 2013 Profit and total comprehensive income for the year Dividend approved in respect of the previous year As at 31 December 2013 and 1 January 2014 Profit and total comprehensive income for the period Dividend approved in respect of the previous year As at 30 June 2014	Capital reserve RMB’000 19,601 — — 19,601 — — 19,601 — — 19,601 — — 19,601	Statutory common funds RMB’000 60,188 — — 60,188 — — 60,188 — — 60,188 — — 60,188	Accumulated profits RMB’000 7,124 25,888 (23,014) 9,998 34,823 (34,520) 10,301 49,859 (34,520) 25,640 13,584 (34,520) 4,704	Total RMB’000 86,913 25,888 (23,014) 89,787 34,823 (34,520) 90,090 49,859 (34,520) 105,429 13,584 (34,520) 84,493

— 181 —

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

24 Reserves (Continued)

Capital reserve mainly arose from (i) the difference between the aggregate of the consideration for business combination under common control and the aggregate of the historical costs of the assets and liabilities of the entities being acquired; and (ii) the difference between the amount paid or received for any transaction related to the change of shareholding in a subsidiary without the overall gain or loss of control in that subsidiary and the non-controlling interest being acquired or disposed of.

According to relevant laws and regulations of the PRC, the Target Company and its subsidiaries incorporated in the PRC are required to make an appropriation at 10 percent of the profit for the year as shown in the respective entity’s PRC statutory financial statements, prepared in accordance with the PRC Accounting Standards, to the statutory common funds until the balance reaches 50 percent of the registered capital of that entity. The reserve appropriated can only make up losses or use to increase the registered capital of that entity and is not distributable.

25 Trade payables

Trade payables Due to related companies Total trade payables	At 31 December 2011 2012 2013 RMB’000 RMB’000 RMB’000 41,364 111,632 71,108 — 4,953 2,046 41,364 116,585 73,154	At 30 June 2014 RMB’000 67,585 3,061
		70,646

— 182 —

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

25 Trade payables (Continued)

(a) The following is an ageing analysis of trade payables:

Within 1 year 1 to 2 years 2 to 3 years Over 3 years	At 31 December 2011 2012 2013 RMB’000 RMB’000 RMB’000 40,908 116,326 73,031 372 96 32 49 138 — 35 25 91 41,364 116,585 73,154	At 30 June 2014 RMB’000 70,510 45 — 91
		70,646

The average credit period on purchase of goods is 30 to 90 days. The Target Group has financial risk management policies in place to ensure that payables are settled within the credit timeframe.

(b) Trade payables that are denominated in a currency other than the functional currency of the relevant group entities are set out below:

		31 December		At 30 June
	2011	2012	2013	2014
	RMB’000	RMB’000	RMB’000	RMB’000
USD	—	4,953	2,046	3,061

— 183 —

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

26 Accruals and other payables

The Target Group

Accruals and other payables Due to associates Due to a fellow subsidiary Due to shareholders Total accruals and other payables	At 31 December 2011 2012 2013 RMB’000 RMB’000 RMB’000 49,329 26,472 58,193 1,910 1,912 228 — 24 24 439 439 439 51,678 28,847 58,884	At 30 June 2014 RMB’000 38,493 272 24 15,319
		54,108

The Target Company

Accruals and other payables Due to an associate Due to shareholders Due to subsidiaries Total accruals and other payables	At 31 December 2011 2012 2013 RMB’000 RMB’000 RMB’000 26,058 27,718 31,054 — — 228 439 439 439 4,844 3,790 3,383 31,341 31,947 35,104	At 30 June 2014 RMB’000 35,164 228 15,319 7,017
		57,728

The above balances with related parties are unsecured, interest-free and repayable on demand.

— 184 —

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

27 Cash generated from operations

Profit before taxation Adjustments for: Interest income Write-off of accruals and other payables Gain on disposals of investment properties Loss on disposals of property, plant and equipment Exchange losses/(gains) Depreciation of investment properties Depreciation of property, plant and equipment Impairment loss recognised on trade and other receivables Impairment loss recognised on property, plant and equipment Write-down/(reversal of write- down)of inventories Share of results of associates Operating cash flows before changes in working capital Decrease/(increase) in inventories (Increase)/decrease in trade and bills receivables (Increase)/decrease in deposits, prepayments and other receivables Increase/(decrease) in trade payables Increase/(decrease) in accruals and other payables Net cash generated from operations	Year 2011 RMB’000 47,253 (2,909) (895) — 4,087 7 2,132 16,929 469 — 2,840 (193) 69,720 15,983 (1,906) (2,180) 16,451 10,648 108,716	ended 31 December 2012 2013 RMB’000 RMB’000 63,425 65,589 (3,788) (3,764) (128) (1,625) — (41) 639 725 138 33 1,961 1,779 16,435 15,529 320 181 3,455 — (138) 263 136 358 82,455 79,027 (46,289) 42,234 (3,781) 105 (3,357) 4,621 70,268 (40,524) (22,729) 33,346 76,567 118,809	Six months ended 30 June 2013 2014 RMB’000 RMB’000 (unaudited) 33,637 42,828 (2,072) (3,572) (1,260) — — — 422 159 33 (206) 1,144 812 8,675 6,290 230 36 — — — — 324 (103) 41,133 46,244 (53,996) (7,119) (1,218) (13,060) 1,087 (125) 28,682 (3,523) 8,937 (19,700) 24,625 2,717

— 185 —

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

28 Operating lease arrangements

(a) The Target Group had future minimum lease receipts under non-cancellable operating leases which are receivable as follows:

Within 1 year 2-5 years After 5 years	At 31 December 2011 2012 2013 RMB’000 RMB’000 RMB’000 53,157 56,060 56,585 155,876 109,188 98,666 74,910 41,040 41,361 283,943 206,288 196,612	At 30 June 2014 RMB’000 56,028 83,163 33,290
		172,481

Operating lease receipts represent rental payable by tenants for the use of the Target Group’s properties. Leases are negotiated for an average term of 1 to 10 years with fixed rentals.

(b) The Target Group had future minimum lease payments under non-cancellable operating leases which are payable as follows:

Within 1 year 2-5 years	At 31 December 2011 2012 2013 RMB’000 RMB’000 RMB’000 696 2,082 323 870 323 — 1,566 2,405 323	At 30 June 2014 RMB’000 2,801 4,298
		7,099

Operating lease payments represent rental payable by the Target Group for certain of its office properties. Leases are negotiated for an average term of 1 to 3 years with fixed rentals.

— 186 —

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

29 Related party transactions

(a) Transactions with key management personnel

The remuneration of directors and other members of key management was as follows:

Salaries and other allowances Retirement benefit scheme contributions	Year 2011 RMB’000 2,600 114 2,714	ended 31 December 2012 2013 RMB’000 RMB’000 3,266 3,813 131 184 3,397 3,997	Six months ended 30 June 2014 2013 2014 RMB’000 RMB’000 (unaudited) 556 569 95 84 651 653	Six months ended 30 June 2014 2013 2014 RMB’000 RMB’000 (unaudited) 556 569 95 84 651 653
				653

— 187 —

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

29 Related party transactions (Continued)

(b) Transactions with other related parties

The Target Group entered into the following material related party transactions during the Relevant Periods.

				Six months
	Year	ended 31 December		ended 30 June 2014
	2011	2012	2013	2013	2014
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
				(unaudited)
A shareholder
Sales of components
and parts	579,667	631,083	1,160,430	604,251	64,247
Fellow subsidiaries
Sales of components
and parts	338	6,240	11	11	24
Interest income	—	150	155	150	219
Associates
Sales of components
and parts	—	285	8,702	4,002	8,032
Purchase of components
and parts	443	249	354	214	273
Income from welfare
and support services	—	—	7	7	—
Related companies #
Sales of components
and parts	52,951	287,355	229,617	115,772	210,180
Purchase of components
and parts	45,888	142,550	224,673	112,249	128,057

Being companies with common key management personnel with certain major subsidiaries of the Target Group.

The Target Group placed deposits of RMBnil, RMB10,150,000, RMB10,304,000 and RMB20,524,000 as at 31 December 2011, 2012 and 2013 and 30 June 2014 respectively, with a fellow subsidiary, being a financial institution in the PRC. Other balances with related parties are disclosed in note 19, 20, 25 and 26.

— 188 —

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IV

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP (Continued)

30 Subsequent event

Except as disclosed elsewhere in the Financial Information, there was no significant event after the Relevant Periods.

III. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by the Target Company and any of its subsidiaries in respect of any period subsequent to 30 June 2014.

Yours faithfully,

Baker Tilly Hong Kong Limited

Certified Public Accountants

Hong Kong, 5 November 2014

Chan Kwan Ho, Edmond Practising certificate number P02092

— 189 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX V

I. UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The following is an illustrative and unaudited pro forma statement of assets and liabilities of the Enlarged Group (the “Unaudited Pro Forma Financial Information”), which has been prepared on the basis of the notes set out below and in accordance with Rule 4.29 of the Listing Rules for the purpose of illustrating the effects of the Equity Transfer on the Group, assuming that the Equity Transfer had been completed on 30 June 2014.

The Unaudited Pro Forma Financial Information has been prepared using accounting policies consistent with that of the Group, as set out in the Company’s 2014 Interim Report.

The Unaudited Pro Forma Financial Information of the Enlarged Group should be read in conjunction with the financial information contained in this circular and the accountant’s report on the Target Group as set out in Appendix IV to this circular.

The Unaudited Pro Forma Financial Information has been prepared by the Directors for illustrative purposes only and is based on a number of assumptions, estimates, uncertainties and currently available information. Because of its hypothetical nature, the Unaudited Pro Forma Financial Information may not reflect the true picture of the financial position of the Enlarged Group had the Equity Transfer been completed at 30 June 2014 or at any future date.

— 190 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX V

II. UNAUDITED PRO FORMA STATEMENT OF ASSETS AND LIABILITIES OF THE ENLARGED GROUP

Assets Non-current assets Investment properties Land use rights Property, plant and equipment Subsidiaries Associates Available-for-sale equity securities Deferred tax assets Current assets Inventories Trade and bills receivables Amounts due from customers for contact work Deposits, prepayments and other receivables Other financial assets Restricted bank deposits Cash and cash equivalents Total assets EQUITY Capital and reserves attributable to equity shareholders of the Company Share capital Share premium and reserves Non-controlling interests Total equity	Unaudited consolidated statement of assets and liabilities of the Group at 30 June 2014 Audited consolidated statement of assets and liabilities of the Target Group at 30 June 2014 RMB’000 RMB’000 Note 1 Note 2 — 18,406 73,231 — 807,073 60,254 — — 568,076 1,022 3,650 — 399 2,747 1,452,429 82,429 240,462 61,675 876,907 47,659 159,354 — 336,630 3,997 395,000 41,000 76,356 — 689,639 194,834 2,774,348 349,165 4,226,777 431,594 913,839 115,068 2,234,516 142,923 3,148,355 257,991 4,659 41,573 3,153,014 299,564	Pro Forma Adjustments Unaudited pro forma consolidated statement of assets and liabilities of the Enlarged Group at 30 June 2014 RMB’000 RMB’000 RMB’000 Note 3 Note 4 — — 18,406 — — 73,231 — — 867,327 50,366 (50,366) — — (98,121) 470,977 — — 3,650 — — 3,146 50,366 (148,487) 1,436,737 — — 302,137 — — 924,566 — — 159,354 — (24) 340,603 — — 436,000 — — 76,356 (50,366) — 834,107 (50,366) (24) 3,073,123 — (148,511) 4,509,860 — (115,068) 913,839 — (180,207) 2,197,232 — (295,275) 3,111,071 — 146,788 193,020 — (148,487) 3,304,091

— 191 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX V

II. UNAUDITED PRO FORMA STATEMENT OF ASSETS AND LIABILITIES OF THE ENLARGED GROUP (Continued)

LIABILITIES Non-current liabilities Deferred tax liabilities Current liabilities Bank borrowings Trade payables Accruals and other payables Tax payable Total liabilities Total equity and liabilities Net current assets Total assets less current liabilities	Unaudited consolidated statement of assets and liabilities of the Group at 30 June 2014 Audited consolidated statement of assets and liabilities of the Target Group at 30 June 2014 RMB’000 RMB’000 Note 1 Note 2 194 — 164,615 — 605,226 70,646 299,804 54,108 3,924 7,276 1,073,569 132,030 1,073,763 132,030 4,226,777 431,594 1,700,779 217,135 3,153,208 299,564	Pro Forma Adjustments RMB’000 RMB’000 Note 3 Note 4 — — — — — — — (24) — — — (24) — (24) — (148,511) (50,366) — — (148,487)	Unaudited pro forma consolidated statement of assets and liabilities of the Enlarged Group at 30 June 2014 RMB’000 194
			164,615 675,872 353,888 11,200
			1,205,575
			1,205,769

			4,509,860

			1,867,548

			3,304,285

— 192 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX V

III. NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

(1) The balances are extracted from the unaudited condensed consolidated balance sheet of the Group at 30 June 2014 as set out in the Company’s 2014 Interim Report.
(2) The balances are extracted from the audited consolidated balance sheet of the Target Group at 30 June 2014 as set out in Appendix IV to this circular.
(3) Pursuant to the Equity Transfer Agreement, the total consideration for the Equity Transfer is RMB50,365,830, which will be satisfied by internal resources of the Group by way of cash.
(4) Upon completion of the Equity Transfer, the Company’s equity interest in the Target Company will be increased from 38.03% to 43.10% and the Company will be able to control a majority of the board of the directors of the Target Company. Accordingly, the Target Company, currently an associate of the Company, will be regarded as a subsidiary.

Pro forma adjustments made represent:

(i) the deemed disposal of the existing 38.03% of equity interests held in the Target Company as recorded as an interest in associates.
(ii) the adjustments to eliminate the Company’s net investment in the Target Company and the current accounts between the Group and the Target Group.
(5) No other adjustments have been made to reflect any trading results or other transactions of the Group and the Target Group entered into subsequent to 30 June 2014.

— 193 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX V

IV. REPORT ON UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The following is the text of a report received from Baker Tilly Hong Kong Limited, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this circular.

BAKER TILLY HONG KONG| 天職香港

INDEPENDENT REPORTING ACCOUNTANT’S ASSURANCE REPORT ON THE COMPILATION OF UNAUDITED PRO FORMA FINANCIAL INFORMATION

TO THE DIRECTORS OF NANJING PANDA ELECTRONICS COMPANY LIMITED

We have completed our assurance engagement to report on the compilation of unaudited pro forma financial information of Nanjing Panda Electronics Company Limited (the “Company”) and its subsidiaries (together the “Group”), and Shenzhen Jingwah Electronics Co., Ltd. (the “Target Company”) and its subsidiaries (together the “Target Group”) (together the “Enlarged Group”) by the directors for illustrative purposes only. The unaudited pro forma financial information consists of the unaudited pro forma combined statement of assets and liabilities as at 30 June 2014 and related notes (the “Unaudited Pro Forma Financial Information”) as set out on pages 190 to 193 of the Company’s circular dated 5 November 2014 in connection with the proposed equity transfer of 5.07% equity interest in the Target Company (the “Equity Transfer”) to the Company. The applicable criteria on the basis of which the directors have compiled the Unaudited Pro Forma Financial Information are on page 193 of the circular.

The Unaudited Pro Forma Financial Information has been compiled by the directors to illustrate the impact of the Equity Transfer on the Group’s financial position as at 30 June 2014 as if the Equity Transfer had taken place at 30 June 2014. As part of this process, information about the Group’s financial position has been extracted by the directors from the Group’s financial statements for the six-month period ended 30 June 2014, on which a review report has been published.

Directors’ responsibility for the Unaudited Pro Forma Financial Information

The directors are responsible for compiling the Unaudited Pro Forma Financial Information in accordance with paragraph 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and with reference to Accounting Guideline 7 “Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars” (“AG 7”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

— 194 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX V

IV. REPORT ON UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP (Continued)

Reporting accountant’s responsibilities

Our responsibility is to express an opinion, as required by paragraph 4.29(7) of the Listing Rules, on the Unaudited Pro Forma Financial Information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the Unaudited Pro Forma Financial Information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

We conducted our engagement in accordance with Hong Kong Standard on Assurance Engagements 3420 “Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus” issued by the HKICPA. This standard requires that the reporting accountant complies with ethical requirements and plans and performs procedures to obtain reasonable assurance about whether the directors have compiled the Unaudited Pro Forma Financial Information in accordance with paragraph 4.29 of the Listing Rules and with reference to AG 7 issued by the HKICPA.

For purposes of this engagement, we are not responsible for updating or reissuing any reports or opinions on any historical financial information used in compiling the Unaudited Pro Forma Financial Information, nor have we, in the course of this engagement, performed an audit or review of the financial information used in compiling the Unaudited Pro Forma Financial Information.

The purpose of unaudited pro forma financial information included in a circular is solely to illustrate the impact of a significant event or transaction on unadjusted financial information of the entity as if the event had occurred or the transaction had been undertaken at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome of the Equity Transfer at 30 June 2014 would have been as presented.

A reasonable assurance engagement to report on whether the Unaudited Pro Forma Financial Information has been properly compiled on the basis of the applicable criteria involves performing procedures to assess whether the applicable criteria used by the directors in the compilation of the Unaudited Pro Forma Financial Information provide a reasonable basis for presenting the significant effects directly attributable to the event or transaction, and to obtain sufficient appropriate evidence about whether:

The related pro forma adjustments give appropriate effect to those criteria; and
The Unaudited Pro Forma Financial Information reflects the proper application of those adjustments to the unadjusted financial information.

— 195 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX V

IV. REPORT ON UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP (Continued)

Reporting accountant’s responsibilities (Continued)

The procedures selected depend on the reporting accountant’s judgment, having regard to the reporting accountant’s understanding of the nature of the Group, the event or transaction in respect of which the unaudited pro forma financial information has been compiled, and other relevant engagement circumstances.

The engagement also involves evaluating the overall presentation of the Unaudited Pro Forma Financial Information.

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

Opinion

In our opinion:

(a) the Unaudited Pro Forma Financial Information has been properly compiled on the basis stated;
(b) such basis is consistent with the accounting policies of the Group; and
(c) the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.

Baker Tilly Hong Kong Limited

Certified Public Accountants

Hong Kong, 5 November 2014 Chan Kwan Ho, Edmond Practising certificate number P02092

— 196 —

MANAGEMENT DISCUSSION AND ANALYSIS ON SHENZHEN JINGWAH

APPENDIX VI

The following management discussion and analysis is based on the Financial Information from the accountant’s report on the Target Group as set out in Appendix IV to this circular.

A. REVIEW OF FINANCIAL RESULTS

Before the Equity Transfer, the Company, PEGL and other shareholders held 38.03%, 5.07% and 56.9% interests in Shenzhen Jingwah, respectively.

The consolidated financial information of Shenzhen Jingwah for the three financial years ended 31 December 2011, 2012 and 2013 and six months ended 30 June 2014 is set out below.

— 197 —

MANAGEMENT DISCUSSION AND ANALYSIS ON SHENZHEN JINGWAH

APPENDIX VI

Operating revenue
Profit before tax
Profit after tax and
exceptional items
Total assets
Total liabilities
Net assets

For the six
months ended
30 June 2014
For the year
ended 31
December 2013
For the year
ended 31
December 2012
For the year
ended 31
December 2011
(Audited)
(Audited)
(Audited)
(Audited)
RMB’000
RMB’000
RMB’000
RMB’000
401,338
1,648,281
1,294,126
833,176
42,828
65,589
63,425
47,253
35,546
49,228
48,456
35,582
At 30 June
2014
At 31 December
2013
At 31 December
2012
At 31 December
2011
(Audited)
(Audited)
(Audited)
(Audited)
RMB’000
RMB’000
RMB’000
RMB’000
431,594
440,238
449,654
387,095
132,030
141,700
150,424
98,001
299,564
298,538
299,230
289,094

For 2011, 2012, 2013 and January to June 2014, the operating revenue of Shenzhen Jingwah amounted to RMB833,176,000, RMB1,294,126,000, RMB1,648,281,000 and RMB401,338,000 respectively, and its net profit amounted to RMB35,582,000, RMB48,456,000, RMB49,228,000 and RMB35,546,000 respectively, indicating relatively stable operating results.

— 198 —

MANAGEMENT DISCUSSION AND ANALYSIS ON SHENZHEN JINGWAH

APPENDIX VI

Shenzhen Jingwah is principally engaged in the production and sales of consumer electronics products, its major products include tablet computers, automotive navigation devices, car audios and integrated circuit recorders. In addition, it is engaged in property leasing (management) business. For 2011, 2012, 2013 and January to June 2014, its revenue from electronic products and leasing is detailed in the table as follows,

Type of products Revenue from electronic products Revenue from leasing Other Operation Total	January - June 2014 Amount Proportion RMB'000 % 356,266 88.77% 37,055 9.23% 8,017 2.00% 401,338 100.00%	2013 Amount Proportion RMB’000 % 1,560,363 94.67% 72,482 4.40% 15,436 0.93% 1,648,281 100.00%	2012 Amount Proportion RMB’000 % 1,209,858 93.49% 68,344 5.28% 15,924 1.23% 1,294,126 100.00%	2011 Amount Proportion RMB’000 % 750,701 90.10% 63,714 7.65% 18,761 2.25% 833,176 100.00%	2011 Amount Proportion RMB’000 % 750,701 90.10% 63,714 7.65% 18,761 2.25% 833,176 100.00%
					100.00%

Shenzhen Jingwah mainly derives its revenue from export of electronic products. For the years 2011 to 2013, revenue from export of electronic products accounted for more than 95% of the sales revenue for the period. In the first half of 2014, the selling price of products decreased due to the fluctuations of overseas economies. Therefore, Shenzhen Jingwah gave up orders with lower gross profit margin. The revenue from export of electronic products thus decreased as compared with the corresponding period of the previous year, and such revenue still accounted for more than 90% for the period. The revenue from property leasing was stable level.

For the years 2011, 2012, 2013 and January to June 2014, the gross margins of Shenzhen Jingwah were 12.69%, 11.30%, 9.56% and 16.64% respectively, indicating relatively stable profitability.

As stated above, Shenzhen Jingwah has not taken up orders with low gross profit margins and hence the gross profit margins increased from January to June 2014.

The consumer electronics business of Shenzhen Jingwah may be affected by economic fluctuations and exchange rates as well as market competition.

— 199 —

MANAGEMENT DISCUSSION AND ANALYSIS ON SHENZHEN JINGWAH

APPENDIX VI

The production and sales of consumer electronics products may be affected by the macroeconomy to a greater extent. The cyclical fluctuations of the global economy and domestic macroeconmy may affect the production and consumption of consumer electronics products in the PRC. When the macroeconomy is in a stage of expansion, consumer electronics industry will develop rapidly and consumption of electronic products will increase. On the contrary, development of consumer electronics industry and consumption of electronic products will slow down when the macroeconomy is in a stage of contraction.

Shenzhen Jingwah exports its major products to overseas markets, and some of its raw materials and machinery equipment are purchased from suppliers overseas. In the event of any significant changes in the RMB exchange rates, the costs of imported raw materials and export prices of the products of Shenzhen Jingwah will be directly affected, and it may incur higher exchange loss, which may affect the operating results of the Target Company.

Consumer electronics products are characterized by huge market potential, rapidly changing market, fierce competition and rapid technological substitution. Shenzhen Jingwah has to press on with technological innovation, follow latest technologies in domestic and overseas consumer electronics industry, tap into latest customer demand and step up research and development on new products for keeping its leading position in the PRC.

B. CAPITAL STRUCTURE, LIQUIDITY AND FINANCIAL RESOURCES

As at 31 December 2011, 31 December 2012, 31 December 2013 and 30 June 2014, the gearing ratio (consolidated) (the ratio of total liabilities to total assets) of Shenzhen Jingwah was 25.32%, 33.45%, 32.19% and 30.59%, respectively, indicating lower gearing ratio.

As at 31 December 2011, 31 December 2012, 31 December 2013 and 30 June 2014, Shenzhen Jingwah had no short term loans or any other long term loans.

As at 31 December 2011, 31 December 2012, 31 December 2013 and 30 June 2014, cash and bank balances (consolidated) was RMB204,404,000, RMB235,684,000 RMB186,179,000 and RMB194,834,000, respectively, representing 52.80%, 52.41%, 42.29% and 45.14% of the total assets (consolidated) for the same period, respectively. Cash and bank balances remain relatively sufficient.

— 200 —

MANAGEMENT DISCUSSION AND ANALYSIS ON SHENZHEN JINGWAH

APPENDIX VI

The carrying value of cash and cash equivalents held by Shenzhen Jingwah is denominated in RMB.

Shenzhen Jingwah conducts its financial activities, including financing, investment and operation in compliance with the applicable laws and regulations and according to the requirements of Accounting Standards for Business Enterprises 《企業會計準則》and Internal Control Regulations 《內部控制規範》, for the purpose of normal organized financial activities, controlling financial risk, ensuring financial security and improving capital efficiency, as well as, formulating and strictly enforced its own policy documents, such as Accounting System and Financial Management System and other policy documents.

C. PLEDGE OF ASSETS

As at 31 December 2011, 31 December 2012, 31 December 2013 and 30 June 2014, Shenzhen Jingwah has no assets pledged.

D. MATERIAL INVESTMENT

The material investments held by Shenzhen Jingwah are long term equity investment and investment properties. As at 31 December 2011, 31 December 2012, 31 December 2013 and 30 June 2014, the long term equity investment (consolidated) of Shenzhen Jingwah amounted to RMB1,895,000, RMB1,579,000, RMB919,000 and RMB1,022,000, respectively; and the investment properties (consolidated) amounted to RMB17,006,000, RMB15,045,000, RMB19,042,000 and RMB18,406,000, respectively. In the relevant period, Shenzhen Jingwah had no material investments.

E. MATERIAL ACQUISITION AND DISPOSAL

Shenzhen Jingwah had no material acquisition or disposal of subsidiaries or associates in the relevant period.

F. PLAN FOR MATERIAL INVESTMENT OR ACQUISITION OF CAPITAL ASSETS IN THE FUTURE

Shenzhen Jingwah has no plan for material investment or acquisition of capital assets in the future.

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MANAGEMENT DISCUSSION AND ANALYSIS ON SHENZHEN JINGWAH

APPENDIX VI

G. SEGMENT INFORMATION

Shenzhen Jingwah and its subsidiaries are mainly engaged in the manufacture and sale of consumer electronic products and property leasing and management business of Huaqing North and Jingwah Industrial Park in Pinghu, Longgang. The principal business of Shenzhen Jingwah in the future will remain unchanged.

H. RISK OF EXCHANGE RATE FLUTUATIONS AND HEDGING

In the years of 2012 and 2013, Shenzhen Jingwah exported its major products to foreign markets and purchased certain raw materials, machines and equipment from foreign suppliers. Greater fluctuation in the RMB exchange rate will directly affect the cost of imported raw materials and the price of exported products of Shenzhen Jingwah, resulting in greater amount of foreign exchange gains and losses in foreign exchange income and expenses and thus affecting the operating results of Shenzhen Jingwah but the impact is not significant.

The Target Group has not used any financial instruments for hedging purposes, nor foreign currency borrowings. The management of the Target Group would constantly monitor any changes in the exchange rate and regularly analyzes the impact of exchange rate changes on its business, as well as mitigates the impact of exchange rate fluctuations by entering into contracts to adjust the domestic and foreign procurement, developing settlement system etc.

I. EMPLOYEE REMUNERATION AND RELATIONS

Number of Employees and Remuneration

As of 31 December 2011, 2012 and 2013, Shenzhen Jingwah had 2,030, 2,209 and 2,102 employees respectively.

As of 30 June 2014, Shenzhen Jingwah had 1,020 employees. The five highest paid employees were research and development as well as sales personnel.

For the three years ended 31 December 2013 and the six months ended 30 June 2014, the total staff cost of Shenzhen Jingwah were approximately RMB77,745,000, RMB87,511,000, RMB104,191,000 and RMB31,367,000, respectively.

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MANAGEMENT DISCUSSION AND ANALYSIS ON SHENZHEN JINGWAH

APPENDIX VI

Remuneration Policies

Since 2011, Shenzhen Jingwah adopts a position-based remuneration determination policy and enforces varied remuneration systems based on position-based performance salary and the nature of different positions. In particular, an annual salary system is implemented for persons in charge of operating units; position-based performance salary system for administrative and managerial staff; a combination of position-based performance salary and project-based salary system (distribution of allowances or royalties by project) for scientific research staff; base salary plus commission or position-based performance salary system for sales staff; and piecerate salary or position-based performance salary system for production staff.

Training Programs

Since 2011, Shenzhen Jingwah organizes surveys on training demand on a yearly basis, and, based on the survey results, formulates training programs, which are oriented with purposes to all staff with focus on scientific research staff, key personnel in respect of operation, management and production.

Bonus and Share Option Plans

Since 2011, apart from general remuneration policies, Shenzhen Jingwah does not have any other bonus and share option plans.

J. PROSPECTS

Shenzhen Jingwah was founded in 1984 and has engaged in the consumer electronics industry for three decades, with advanced technical experience and broad market coverages for tablet computers, car navigation systems and other electronic products. Synergies generated by this transaction will help to further enhance the comprehensive competitiveness of Shenzhen Jingwah and hence of the Target Group, enlarge its income scale and improve enhance the antirisk capability and capacity for sustainable development.

After the completion of this transaction, the Company will intensify its cooperation with Shenzhen Jingwah on its existing technology, brand, management and operations, and will further strengthen the operational management of Shenzhen Jingwah in order to maintain and enhance its competitive position in the domestic and international markets. Meanwhile, the Company will make full grasp of this cooperation opportunity with Shenzhen Jingwah on the expansion in terms of consumer electronic products to create new revenue opportunities for Shenzhen Jingwah and its subsidiaries.

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LETTER FROM THE BOARD IN RELATION TO THE PROFIT FORECAST OF SHENZHEN JINGWAH

APPENDIX VII

The following is the text of a letter from the Board prepared for the purpose of incorporation in this circular.

The Listing Division of The Stock Exchange of Hong Kong Limited

11/F., One International Finance Centre
1 Harbour View Street, Central, Hong Kong

Dear Sirs,

Reference is made to the profit forecast of Shenzhen Jingwah Electronics Co., Ltd. (“ the Profit Forecast ”) set out in the section headed “Profit Forecast of Shenzhen Jingwah” in the “Letter from the Board” in the circular (“ the Circular ”) of Nanjing Panda Electronics Company Limited (“ the Company ”).

All Directors of the Company confirm that the Profit Forecast was made after due and careful enquiry.

For and on behalf of

The Board of Directors Nanjing Panda Electronics Company Limited Xia Dechuan

Non-executive Director

11 August 2014

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LETTER FROM BAKER TILLY HONG KONG LIMITED IN RELATION TO THE PROFIT FORECAST OF SHENZHEN JINGWAH

APPENDIX VIII

The following is the text of a letter received from Baker Tilly Hong Kong Limited, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this circular.

BAKER TILLY

HONG KONG| 天職香港

5 November 2014

The Board of Directors

Nanjing Panda Electronics Company Limited

Dear Sirs,

Nanjing Panda Electronics Company Limited (the “Company”) and its subsidiaries (together the “Group”) Shenzhen Jingwah Electronics Co., Ltd. and its subsidiaries (together the “Target Group”)

We refer to the forecasts of the consolidated profit attributable to equity shareholders of Shenzhen Jingwah Electronics Co., Ltd. for the six months ending 31 December 2014 and the year ending 31 December 2015 (the “Profit Forecasts”) set forth in the section headed “Profit Forecast of Shenzhen Jingwah” in the letter from the board included in the circular dated 5 November 2014 (the “ Circular ”) of the Company.

The Profit Forecasts have been prepared by the directors of the Company and reviewed by天職國際會計師事務所(特殊普通合夥), the statutory auditor of Shenzhen Jingwah Electronics Co., Ltd., in accordance with the Other Business Assurance Standards for Certified Public Accountants of China No. 3111 “The Examination of Prospective Financial Information” issued by the Chinese Institute of Certified Public Accountants. Copy of the review report issued by天職國際會計師事務所(特殊普通合夥) dated 15 August 2014 was set out in the Company’s announcements (Chinese version) dated 27 August 2014.

Responsibilities

The directors of the Company are solely responsible for the Profit Forecasts.

It is our responsibility to form an opinion on the accounting policies and calculations of the Profit Forecasts based on our procedures.

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LETTER FROM BAKER TILLY HONG KONG LIMITED IN RELATION TO THE PROFIT FORECAST OF SHENZHEN JINGWAH

APPENDIX VIII

Basis of opinion

We carried out our work in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 500 “Reporting on Profit Forecasts, Statements of Sufficiency of Working Capital and Statements of Indebtedness” and with reference to Hong Kong Standard on Assurance Engagements 3000 “Assurance Engagements Other Than Audits or Reviews of Historical Financial Information” issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”). Those standards require that we plan and perform our work to obtain reasonable assurance as to whether, so far as the accounting policies and calculations are concerned, the Company’s directors have properly compiled the Profit Forecasts in accordance with the assumptions made by the directors of the Company and as to whether the Profit Forecasts are presented on a basis consistent in all material respects with the accounting policies normally adopted by the Target Group. Our work is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing issued by the HKICPA. Accordingly, we do not express an audit opinion.

Opinion

In our opinion, the Profit Forecasts, so far as the calculations and accounting policies are concerned, have been properly compiled in accordance with the assumptions made by the directors of the Company as set out on pages 11 and 12 of the Circular, and is presented on a basis consistent in all material respects with the accounting policies normally adopted by the Target Group as set out in our accountant’s report on the Target Group, the text of which is set out in Appendix IV to the Circular, and by the Group.

Yours faithfully,

Baker Tilly Hong Kong Limited

Certified Public Accountants

Hong Kong Chan Kwan Ho, Edmond Practising certificate number P02092

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AI assistant

Nanjing Panda Electronics Company Limited — Proxy Solicitation & Information Statement 2014

49292_rns_2014-11-04_d3643ec4-be0f-4c1e-b9c8-abe8a087d25d.pdf

MAJOR AND CONNECTED TRANSACTION IN RELATION TO EQUITY TRANSFER OF 5.07% OF EQUITY INTEREST IN SHENZHEN JINGWAH

DEFINITIONS

MAJOR AND CONNECTED TRANSACTION IN RELATION TO

EQUITY TRANSFER OF 5.07% OF EQUITY INTEREST IN SHENZHEN JINGWAH

1. INTRODUCTION

2. THE EQUITY TRANSFER/SIGNIFICANT ASSET PURCHASE

BACKGROUND INFORMATION

PARTICULARS OF THE EQUITY TRANSFER AGREEMENT

2. Parties:

3. Assets transferred

4. Consideration and payment terms

5. Profit or loss attributable to the Sale Interest during the transitional period

6. Transfer of ownership

7. Conditions precedent

AUTHORIZATION TO THE BOARD

INFORMATION ON THE GROUP AND PEGL

INFORMATION ON SHENZHEN JINGWAH

FINANCIAL INFORMATION OF SHENZHEN JINGWAH

PROFIT FORECAST OF SHENZHEN JINGWAH

LETTER FROM THE BOARD

REASONS FOR AND BENEFITS OF THE EQUITY TRANSFER

1. Enhancing the Company’s scale of income and overall competitiveness

2. Improving the standard management of investee companies

3. Expanding the Company’s consumer electronic products field

FINANCIAL EFFECT OF THE EQUITY TRANSFER

REQUIREMENTS UNDER THE LISTING RULES

3. THE EGM

4. PROXY ARRANGEMENT

5. VOTING BY POLL

6. RECOMMENDATION

7. ADDITIONAL INFORMATION

EQUITY TRANSFER, EQUITY TRANSFER AGREEMENT AND TRANSACTION CONTEMPLATED THEREUNDER

Ms. Zhang Xiuhua Ms. Liu Danping Mr. Chu Wai Tsun, Vincent

MAJOR AND CONNECTED TRANSACTION IN RELATION TO THE EQUITY TRANSFER OF 5.07% EQUITY INTERESTS IN SHENZHEN JINGWAH

INTRODUCTION

LETTER FROM GRAM CAPITAL

BASIS OF OUR OPINION

LETTER FROM GRAM CAPITAL

PRINCIPAL FACTORS AND REASONS CONSIDERED

1. Background of and reasons for the Equity Transfer

Business overview of the Group

Information on PEGL

Information on Shenzhen Jingwah

2. Reasons for the Equity Transfer

3. Terms of the Equity Transfer Agreement

Date

Parties

Consideration and payment terms

4. Possible financial effects of the Equity Transfer

Effect on net asset value and gearing

Effect on working capital and earnings

RECOMMENDATION

Yours faithfully,

1. RESPONSIBILITY STATEMENT

2. DISCLOSURE OF INTERESTS

(A) Interests of Directors

(B) Interests of Substantial Shareholders

(i) Interests in the shares of the Company

Name of Director/Supervisor

Position held in NEIIC

Name of Director/Supervisor

Position held in PEGL

(ii) Interests in non-wholly owned subsidiaries of the Company

3. LITIGATION

4. SERVICE CONTRACTS

5. COMPETING INTERESTS

6. DIRECTORS’ INTERESTS IN CONTRACTS AND ASSETS

7. MATERIAL ADVERSE CHANGE

8. MATERIAL CONTRACTS

9. EXPERTS AND CONSENTS

Name

Qualifications

10. DOCUMENTS AVAILABLE FOR INSPECTION

11. GENERAL

THE PURPOSE OF VALUATION

THE TARGET AND SCOPE OF VALUATION

VALUATION BASE DATE

Nanjing Panda Electronics Company Limited Proxy Solicitation & Information Statement 2014