PINE Technology Holdings Limited — Annual Report 2012

Oct 4, 2012

Contents

PINE Technology Holdings Limited and XFX Family of Brands

Page(s)

Financial Highlights	2
Corporate Information	3
Corporate Profi le	4
Chairman's Statement	5
Management Discussion and Analysis.	6
Management Profi le	7-8
Corporate Governance Report.	9-16
Directors' Report	17-21
Independent Auditor's Report	22-23
Consolidated Statement of Comprehensive Income	24
Consolidated Statement of Financial Position	25-26
Consolidated Statement of Changes in Equity	27-28
Consolidated Statement of Cash Flows	29-30
Notes to the Consolidated Financial Statements.	31-80
Summarised Statement of Financial Position of the Company	81
Financial Summary.	82

PINE Technology Holdings Limited and XFX Family of Brands

BASIC (LOSS) EARNINGS PER SHARE

Corporate Information

PINE Technology Holdings Limited and XFX Family of Brands

Board of Directors

Executive Directors Mr. Chiu Hang Tai Chairman and Chief Executive Officer Mr. Chiu Samson Hang Chin Deputy Chairman

Non-Executive Director Mr. Chiu Herbert H T

Independent Non-Executive Directors Mr. Li Chi Chung Mr. So Stephen Hon Cheung Dr. Huang Zhijian

Company Secretary Mr. Leung Yiu Ming

Audit Committee

Mr. Li Chi Chung Chairman Mr. So Stephen Hon Cheung Dr. Huang Zhijian

Remuneration Committee

Mr. So Stephen Hon Cheung Chairman Mr. Li Chi Chung Mr. Chiu Hang Tai

Nomination Committee

Mr. Chiu Hang Tai Chairman Mr. Li Chi Chung Mr. So Stephen Hon Cheung

Registered Office

Clarendon House 2 Church Street Hamilton HM 11 Bermuda

Head Office and Principal Place of Business

Unit A, 32/F Manulife Tower, 169 Electric Road, North Point Hong Kong

Principal Bankers

China Construction Bank (Asia) Corporation Limited DBS Bank (Hong Kong) Limited Manufacturers Bank Toronto-Dominion Bank United Overseas Bank Limited Wing Hang Bank, Ltd.

Principal Share Registrar and Transfer Office

HSBC Securities Services (Bermuda) Limited 6 Front Street Hamilton HM 11 Bermuda

Hong Kong Branch Share Registrar and Transfer Office

Tricor Secretaries Limited 26th Floor, Tesbury Centre 28 Queen's Road East Hong Kong

Auditors

Deloitte Touche Tohmatsu Certified Public Accountants

Legal Advisers

As to Bermuda Law: Conyers Dill & Pearman

As to Hong Kong Law: Chan, Tang & Kwok Solicitors

Stock Quote

1079

Website of the Company

www.pinegroup.com

Corporate Profile

PINE Technology Holdings Limited and XFX Family of Brands

PINE Technology Holdings Limited ("PINE" or "the Group") is one of the world's leading companies in the design, manufacturing and distribution of PC based products. It has two core business divisions-the XFX division, the one core focus of it is specializing in the design and manufacturing of Video Graphic products for the PC and PC upgrade market under the XFX brand. Leveraging on the strong Gamers' following of the XFX brand, XFX has extended its product family to the design and distribution of the Gaming Power Supply Unit ("PSU") family to further enhance the gaming experience of the XFX enthusiasts. In addition, witnessing and anticipating the fast growing and sprouting business opportunities of the Mobile Devices market, the Group has created a brand new business entity under the Brand of AviiQ, focus on the Digital Mobility market. AviiQ is focusing to the design and distribution of all kind of accessories for this Digital Mobility community, and also to leverage on the existing global channel of XFX. The Distribution division distributes a wide range of PC components and peripherals of many world class manufacturers through the Group's extensive global distribution network.

The Group's strategy is to continue to leverage the success of its global XFX branding to expand its market share of the global PC gamers' market, to team up with strategic partners to develop innovative products and deliver them to the market through its national and regional distributors, system builders, resellers, retailers and etailers.

The Group is headquartered in the Hong Kong Special Administrative Region (Hong Kong SAR) with its state-of-the-art manufacturing facilities located in mainland China. PINE has its research & development facilities setup in Asia, and its global distribution and service network located throughout North America, Europe, and Asia.

Founded in 1989, PINE has been listed on the GEM board of the Hong Kong Stock Exchange (HKGEM: 8013) on 26 November 1999 and listing of shares has been transferred to the Main Board of the Hong Kong Stock Exchange since 18 November 2010 (HKSE: 1079).

Chairman's Statement

PINE Technology Holdings Limited and XFX Family of Brands

This is another challenging year for the Group. The global economy is still weak, and overall market demand is soft. Recently, Intel lowered its Q3 forecast by up to 10% from its earlier projection. And the Thailand flood in October last year disrupted the supply chain of PC components severely. There are many unfavorable external factors that are not under our control. As a result, the Group suffered another year of loss.

Business review

In this fiscal year, the Group's revenue was US\$231,953,000, which is 11% drop from last year. The gross profit was US\$22,056,000, similar to last year. The gross margin is 9.51%, compared to 8.52% last year. We incurred a loss of US\$3,438,000, compared to a US\$5,179,000 loss last year.

Since the yield and supply of the latest 28 nanometer wafer was much lower than expected, it has severely affected the supply of our highly anticipated 7 series family, which is the bread and butter of XFX's Performance and Enthusiast's graphics cards. Fortunately, our solid brand equity and channel position allow us to increase our profit margin nicely.

We had solid business in our other product families. The gaming Power Supply Unit ("PSU") business grew by 20%. The Aviiq digital mobility business is starting to get traction. Its enhanced Charging Station has received rave reviews globally. At the same time, we are about to launch a whole set of accessories for the Apple iPhone 5 and iPad Mini. We believe this new lineup will further establish Aviiq's brand equity and channel position, and contribute towards the Group's bottom line.

For the Distribution Division, we are expanding beyond our PC-centric product categories by creating a new category of non-PC products, which include office furniture, home appliances, food, etc. This allows us to grow our Distribution business beyond PC.

On the operations side, over the last year, we have completed the consolidation and transfer of our Europe's Accounting and Operations functions to HK and China. We will continue this consolidation exercise to our other offices in Asia and North America to leverage on our global infrastructure and to maximize the group synergy.

Business outlook

Looking ahead, we are cautiously optimistic that the revenue will rebound back to the level of fiscal year 2011. We believe that the supply for our 7 series graphics family will improve, and the growth of our PSU and Aviiq digital mobility products will continue. We believe that the Distribution Division's business will remain steady. Also, we will continue to tighten the overhead and capital expenditure.

With discipline and determination, we are confident that these measures will bring us back to profitability.

Chiu Hang Tai

Chairman

Hong Kong, 21 September 2012

Management Discussion and Analysis

PINE Technology Holdings Limited and XFX Family of Brands

Liquidity, financial resources and charge of group asset

As at 30 June 2012, the Group's borrowings comprised short-term loans of US\$27,402,000 (30 June 2011: US\$26,016,000) and longterm loans of US\$2,289,000 (30 June 2011: US\$2,344,000). The aggregate borrowings US\$29,691,000 (30 June 2011: US\$28,360,000) were partially secured by pledged deposits or by all assets of certain subsidiaries as floating charges to banks.

As at 30 June 2012, total pledged deposits, and all assets of certain subsidiaries as floating charges were amounted US\$2,430,000 and US\$41,528,000 respectively (30 June 2011: US\$3,284,000 and US\$41,919,000). The Group continued to maintain a healthy financial and cash position. As at 30 June 2012, the total cash on hand amounted US\$12,636,000 (30 June 2011: US\$10,310,000).

Capital structure

The Group's overall treasury policies are prudent, with a focus on risk management.

Significant investments and material acquisitions

During the year under review, the Group had no material acquisitions and disposals of subsidiaries and affiliated companies.

Employee

As at 30 June 2012, the Group had 304 employees, a 8% decrease from 331 employees since 30 June 2011, at market remuneration with employee benefits such as medical coverage, insurance plan, retirement benefits schemes, discretionary bonus and employee share option scheme. Staff cost, including director's emoluments, was US\$11,118,000 for the year ended 30 June 2012 as compared with that of US\$13,327,000 for the preceding financial year.

Gearing ratio

As at 30 June 2012, the gearing ratio of the Group based on total liabilities over total assets was 44% (30 June 2011: 38%).

Exchange risk

During the year under review, the Group's major foreign exchange payments arose from the import of components and materials, and repayments of foreign currency loans, that were principally denominated in US dollars, Hong Kong dollars and Canadian dollars. For settlement of import payments and foreign currency loans, the Group maintained its foreign exchange balance by its export revenue, that were principally denominated in US dollars and Canadian dollars. The unsecured risk will be foreign currency payables and loan exceeds its foreign currency revenue. During the year, the Group has used forward foreign currency contracts to minimise its exposure to currency fluctuations risk of certain trade payables denominated in foreign currencies.

Contingent liabilities

The Group had no material contingent liabilities as at 30 June 2012 (30 June 2011: Nil).

Segment information

Group's brand products

For the year, the segment's revenue dropped by 19% to US\$132,615,000 from US\$164,614,000 last year, the segment incurred a loss of US\$1,693,000, compare to a loss US\$3,650,000 last year. Going forward, we will be lighter and faster to better react to the dynamics of the uncertain business environment and to defend our business.

Other brand products

The turnover of the distribution division for the year was increased by 5% to US\$99,338,000 from US\$94,945,000 last year, the segmental profit was decreased to US\$472,000 from US\$527,000 last year. We will continue to improve the backend execution for the reverse logistics business and for the fulfillment of the online business for the mass merchants.

Management Profile

PINE Technology Holdings Limited and XFX Family of Brands

Executive Directors

Mr. Chiu Hang Tai, aged 52, is the chairman of the Company and co-founder of the Group. He was also appointed as the chief executive officer of the Group in January 2003. He is responsible for overall strategic planning and formulation of corporate strategy of the Company. He holds a bachelor degree of science in economics from Salem State College in the US and a master degree in Business Administration from Northeastern University in the United States. He has over 23 years of experience in the computer industry and also served as director of two health food companies. Chiu was awarded the 1999 Young Industrialist Award of Hong Kong. He is the brother of Mr. Chiu Samson Hang Chin and Mr. Chiu Herbert H T.

Mr. Chiu Samson Hang Chin, aged 53, is the deputy-chairman of the Company and co-founder of the Group. He is responsible for overall strategic planning and formulation of corporate strategy for the Sales and Distribution Division. He holds a bachelor degree in applied science from Queen's University in Canada and a master degree in business administration from York University in Canada. Chiu has over 28 years of experience in the PC industry. Chiu was awarded the Year 2005 ACCE Chinese Canadian Entrepreneur of year. He is the brother of Mr. Chiu Hang Tai and Mr. Chiu Herbert H T.

Non-executive Director

Mr. Chiu Herbert H T, aged 58, obtained his Bachelor degree of Business Management from Ryerson University, Toronto, Canada in 1978. After working in the field of public accounting specializing in mining and financial services for six years, Mr. Chiu has then spent 26 years in building and leading Ginco Enterprises Inc. and HFW Holdings Limited (formerly W-W Airview Farms Limited) of which he has been both the president

and the majority shareholder. Mr. Chiu has considerable knowledge and experience in the investment, finance, agriculture, and commodity fields. Mr. Chiu is a member of The Canadian Institute of Chartered Accountants. He is the brother of Mr. Chin Hang Tai and Mr. Chiu Samson Hang Chin.

Independent Non-Executive Directors

Mr. Li Chi Chung, aged 44, was appointed as an independent non-executive director of the Company in June 2000. Mr. Li is currently a solicitor practising in Hong Kong. Mr. Li obtained a bachelor degree in laws from The University of Sheffield in England in 1990. He was admitted as a solicitor of the High Court of Hong Kong in 1993 and his practice has been focused on commercial related matters. Mr. Li is an independent non-executive director of Eagle Nice (International) Holdings Limited (Stock Code: 2368) and Kenford Group Holdings Limited (Stock Code: 0464), which are companies listed on the main board of The Stock Exchange of Hong Kong Limited (the "Stock Exchange"). From 23 March 2007 to 12 December 2011, Mr. Li was a nonexecutive director of Richfield Group Holdings Limited (Stock Code: 0183), a company listed on the main board of the Stock Exchange. He is the company secretary of China Financial International Investments Limited (Stock Code: 0721) and China Environmental Investment Holdings Limited (Stock Code: 0260), both of which are companies listed on the main board of the Stock Exchange, and China Nonferrous Metals Company Limited (Stock Code: 8306) which is a company listed on the Growth Enterprise Market of the Stock Exchange.

Mr. So Stephen Hon Cheung, aged 56, a director of the accounting firm T.M Ho, So & Leung CPA Limited, is a fellow member of the Hong Kong Institute of Certified Public Accountants, a member of the Canadian Institute of Chartered Accountants, a member of the Society of Certified Management Accountants of Canada, a member of the Chartered Institute of Management Accountants and a fellow member of the Association of International Accountants. He holds a bachelor degree in commerce from the University of British Columbia, Canada and is now a visiting professor of various universities and colleges in Beijing, Liaoning, Sichuan, Xinjiang, Qinghai and Guangdong of China. He has extensive experience in the commercial sector of manufacturing, wholesale and trading and in public practice working for various companies in Hong Kong, China and Canada. He is also acting as independent nonexecutive director of Skyworth Digital Holdings Limited (Stock Code: 0751) and Milan Station Holdings Limited (Stock Code: 1150), which are companies listed on the main board of the Stock Exchange. He was appointed as an independent non-executive director of the Company in September, 2002.

Dr. Huang Zhijian, aged 66, graduated from Tsinghua University in Beijing, the People's Republic of China in 1968 and had been a lecturer at Tsinghua University during the period from 1984 to 1986. He received a Master of Science degree in 1982 and a Doctor of Philosophy degree in 1984 from the Institute of Science and Technology of the University of Manchester, the United Kingdom. Dr. Huang had held senior executive and managerial positions in various companies since 1986 including China Resources Development and Investment Co., Ltd. Dr. Huang has ample experience in and been involved in the evaluation, negotiation, equity transaction and/ or management of various investment projects in different industries including the information technology industry, the telecommunication industry and the electronics industry. He is also served as an executive director of Grand Investment International Limited (Stock Code: 1160), a company listed on the main board of the Stock Exchange.

Company Secretary

Mr. Leung Yiu Ming, aged 41, is the Company Secretary of the Company. He holds a bachelor degree in commerce from the Australian National University. He is a member of the Hong Kong Institute of Certified Public Accountants, the CPA Australia, the Hong Kong Institute of Chartered Secretaries and the Institute of Chartered Secretaries and Administrators. Prior to joining the Group in 1998, he was with a major international accounting firm.

Senior Management

Mr. Ng Royson Khing Fah, aged 53, is the president of Samtack Inc. (Canada). Mr. Ng is responsible for managing the Group's operations in Canada and oversees the development of Mass Merchant Strategies. He holds a masters degree in business administration from the University of Sarasota in the US. He has over 19 years experience in the PC industry in North America and Canada. Prior to joining the Group in September 1997, he held various management positions in the retail industry.

Mr. Eddie Memon, aged 40, is the president of XFX USA. He holds a bachelor degree in management information system from San Jose State University. Eddie currently heads the team of XFX USA with sole purpose of managing the brand to reach new heights of equity of PINE Group. He joined the Group in 1997.

Corporate Governance Report

PINE Technology Holdings Limited and XFX Family of Brands

CORPORATE GOVERNANCE PRACTICES

The board of directors (the "Board") of the Company has committed to maintaining high corporate governance standards.

The Board believes that high corporate governance standards are essential in providing a framework for the Company to safeguard the interests of shareholders and to enhance corporate value and accountability.

The Company has applied the principles set out in the Code on Corporate Governance Practices (the "Former CG Code") contained in Appendix 14 to the Listing Rules, which came into effect on 1 January, 2005 and was revised and renamed as the Corporate Governance Code (the "New CG Code") with effect from 1 April, 2012.

The Board is of the view that throughout the year ended 30 June 2012, the Company has complied with all the code provisions as set out in the Former CG Code and the New CG Code during the respective applicable periods, save and except for code provision A.2.1 and A.4.2, details of which will be explained below.

DIRECTORS' SECURITIES TRANSACTIONS

The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (the "Model Code") as set out in Appendix 10 to the Listing Rules.

Specific enquiry has been made of all the directors and the directors have confirmed that they have complied with the Model Code throughout the year ended 30 June 2012.

The Company has also established written guidelines on no less exacting terms than the Model Code (the "Employees Written Guidelines") for securities transactions by employees who are likely to be in possession of unpublished price-sensitive information of the Company.

No incident of non-compliance of the Employees Written Guidelines by the employees was noted by the Company.

BOARD OF DIRECTORS

The Board of the Company comprises the following directors:

Executive Directors:

Mr. Chiu Hang Tai (Chairman and Chief Executive Officer) Mr. Chiu Samson Hang Chin (Deputy Chairman)

Non-executive Director: Mr. Chiu Herbert H T

Independent Non-executive Directors: Mr. Li Chi Chung Mr. So Stephen Hon Cheung Dr. Huang Zhijian

The biographical information of the directors are set out in the management profile on pages 7 to 8 of this annual report.

Mr. Chiu Samson Hang Chin, Mr. Chiu Hang Tai and Mr. Chiu Herbert H T are brothers.

Chairman and Chief Executive Officer

Code provision A.2.1 stipulates that the roles of Chairman and Chief Executive Officer ("CEO") should be separate and should not be performed by the same individual. The division of responsibilities between the Chairman and CEO should be clearly established and set out in writing.

The Chairman and CEO of the Company are held by Mr. Chiu Hang Tai who is the founder of the Company and has extensive knowledge about the management as well as the business operations of the Company. The Board believes that vesting the roles of the Chairman and CEO in the same person provides the Company with strong and consistent leadership and allows for effective and efficient planning and implementation of business decisions and strategies. Under the supervision of the Board and its independent non-executive directors, a balancing mechanism exists so that the interests of shareholders are adequately and fairly represented. The Company considers that there is no imminent need to change this structure.

Independent Non-executive Directors

During the year ended 30 June 2012, the Board at all times met the requirements of the Listing Rules relating to the appointment of at least three Independent Non-executive Directors representing at least one-third of the Board with one of whom possessing appropriate professional qualifications or accounting or related financial management expertise.

The Company has received written annual confirmation from each of the Independent Non-executive Directors in respect of his independence in accordance with the independence guidelines set out in Rule 3.13 of the Listing Rules. The Company considers all Independent Non-executive Directors are independent.

Non-executive Directors and Directors' Re-election

Code provision A.4.1 of the CG Code stipulates that Non-executive Directors shall be appointed for a specific term, subject to re-election, whereas code provision A.4.2 states that all directors appointed to fill a casual vacancy shall be subject to election by shareholders at the first general meeting after appointment and that every director, including those appointed for a specific term, shall be subject to retirement by rotation at least once every three years.

Mr. Chiu Herbert H T, the non-executive director of the Company, is appointed for a specific term of 2 years and is subject to the retirement provisions contained in the Byelaws of the Company.

The Company's Bye-laws provides that one third of the directors, with the exception of Chairman or Deputy Chairman, Managing Director or joint Managing Director, shall retire from office by rotation at each annual general meeting. Notwithstanding the provisions of the Company's Bye-laws, the Company intends to comply with the code provision A.4.2 by way of having one-third of all the Company's directors subject to retirement by rotation at each annual general meeting. At the forthcoming 2012 annual general meeting, Mr. Chiu Herbert H T and Dr. Huang Zhijian shall retire from office and both of them, being eligible, shall offer themselves for re-election.

Responsibilities, Accountabilities and Contributions of the Board and Management

The Board is responsible for leadership and control of the Company and oversees the Group's businesses, strategic decisions and performance and is collectively responsible for promoting the success of the Company by directing and supervising its affairs. Directors of the Board take decisions objectively in the interests of the Company.

All directors, including Non-executive Director and Independent Non-executive Directors, have brought a wide spectrum of valuable business experience, knowledge and professionalism to the Board for its efficient and effective functioning.

All directors have full and timely access to all the information of the Company as well as the service and advice from the company secretary and senior management. The directors may, upon request, seek independent professional advice in appropriate circumstances, at the Company's expenses for discharging their duties to the Company.

The directors shall disclose to the Company details of other offices held by them and the Board regularly reviews the contribution required from each director to perform his responsibilities to the Company.

The Board reserves for its decision all major matters relating to policy matters, strategies and budgets, internal control and risk management, material transactions (in particular those that may involve conflict of interests), financial information, appointment of directors and other significant operational matters of the Company. Responsibilities relating to implementing decisions of the Board, directing and co-ordinating the daily operation and management of the Company are delegated to the management.

Continuous Professional Development of Directors

Every newly appointed director will receive formal, comprehensive and tailored induction on the first occasion of his/her appointment to ensure appropriate understanding of the business and operations of the Company and full awareness of director's responsibilities and obligations under the Listing Rules and relevant statutory requirements.

Directors are continually updated on developments in the statutory and regulatory regime and the business environment to facilitate the discharge of their responsibilities. Continuing briefing and professional development for directors will be arranged where necessary.

All directors have provided their training records to the Company.

BOARD COMMITTEES

The Board has established three committees, namely, the Audit Committee, Remuneration Committee and Nomination Committee, for overseeing particular aspects of the Company's affairs. All Board committees of the Company are established with defined written terms of reference. The terms of reference of the Board committees are posted on the Company's website and the Stock Exchange's website and are available to shareholders upon request.

The majority of the members of each Board committee are Independent Non-executive Directors and the list of the chairman and members of each Board committee is set out under "Corporate Information" on page 3.

Audit Committee

The main duties of the Audit Committee are to assist the Board in reviewing the financial information and reporting process, internal control procedures and risk management system, audit plan and relationship with external auditors, and arrangements to enable employees of the Company to raise, in confidence, concerns about possible improprieties in financial reporting, internal control or other matters of the Company.

12CORP ORATE GOVERNAN CE REP ORT

The Audit Committee held two meetings to review interim and annual financial results and reports in respect of the year ended 30 June 2012 and significant issues on the financial reporting and compliance procedures, internal control and risk management systems, scope of work and appointment of external auditors, and arrangements for employees to raise concerns about possible improprieties.

The Audit Committee met the external auditors once during the year ended 30 June 2012. In view of the code provision C.3.3 under the New CG Code, the Audit Committee has scheduled two meetings to be held with the external auditors for the year ending 30 June 2013.

Remuneration Committee

The primary functions of the Remuneration Committee include reviewing and making recommendations to the Board on the remuneration packages of individual Executive Directors, Non-executive Director and senior management, the remuneration policy and structure for all directors and senior management; and establishing transparent procedures for developing such remuneration policy and structure to ensure that no director or any of his/her associates will participate in deciding his/her own remuneration.

The Remuneration Committee met once to review and make recommendation to the Board on the remuneration policy and structure of the Company, and the remuneration packages of the Executive Directors, Nonexecutive directors and senior management and other related matters.

Nomination Committee

The principal duties of the Nomination Committee include reviewing the Board composition, developing and formulating relevant procedures for the nomination and appointment of directors, making recommendations to the Board on the appointment and succession planning of directors, and assessing the independence of Independent Non-executive Directors.

The Nomination Committee of the Company was established on 29 March 2012. It will meet at least once every year to review the structure, size and composition of the Board and the independence of the Independent Non-executive Directors, and to consider the qualifications of the retiring directors standing for election at the Annual General Meeting. Additional meetings may be held as and when required.

Corporate Governance Functions

The Audit Committee is responsible for performing the functions set out in the code provision D.3.1 of the New CG Code.

The Audit Committee will meet to review the Company's corporate governance policies and practices, training and continuous professional development of directors and senior management, the Company's policies and practices on compliance with legal and regulatory requirements, the compliance of the Model Code and Written Employee Guidelines, and the Company's compliance with the New CG Code.

ATTENDANCE RECORD OF DIRECTORS AND COMMITTEE MEMBERS

The attendance record of each director at the Board and Board Committee meetings and the general meeting of the Company held during the year ended 30 June 2012 is set out in the table below:

Name of Director	Board	Remuneration Committee	Audit Committee	2011 Annual General Meeting
Executive Directors
Mr. Chiu Hang Tai Mr. Chiu Samson Hang Chin	8/8 8/8	1/1 –	– –	1/1 0/1
Non-executive Director
Mr. Chiu Herbert H T	3/8	–	–	0/1
Independent Non-executive Director
Mr. Li Chi Chung Mr. So Stephen Hon Cheung Dr. Huang Zhijian	3/8 3/8 3/8	1/1 1/1 –	2/2 2/2 2/2	*0/1 1/1 0/1

* Mr. Li, chairman of the Audit Committee, nominated a delegate to attend the 2011 AGM for him.

The Nomination Committee was established on 29 March 2012 and meeting has not yet been held.

Apart from regular Board meetings, the Chairman also held a meeting with all the Nonexecutive Directors (including Independent Non-executive Directors) without the presence of the Executive Director during the year.

DIRECTORS' RESPONSIBILITY IN RESPECT OF THE FINANCIAL STATEMENTS

The directors acknowledge their responsibility for preparing the financial statements of the Company for the year ended 30 June 2012.

The directors are not aware of any material uncertainties relating to events or conditions that may cast significant doubt upon the Company's ability to continue as a going concern.

The statement of the independent auditors of the Company about their reporting responsibilities on the financial statements is set out in the Independent Auditors' Report on pages 22 to 23.

AUDITORS' REMUNERATION

During the year ended 30 June 2012, the remuneration paid to the Company's external auditors, Messrs. Deloitte Touche Tohmatsu, in respect of audit services and non-audit services for the year ended 30 June 2012 amounted to US\$425,000 and US\$10,000 respectively.

An analysis of the remuneration paid to the external auditors of the Company, Messrs Deloitte Touche Tohmatsu, in respect of audit services and non-audit services for the year ended 30 June 2012 is set out below:

Service Category	Fees Paid/Payable US\$
Audit Services Non-audit Services – tax services for the Group – agreed upon procedures on Group's annual result announcement	425,000 10,000
	435,000

INTERNAL CONTROLS

During the year under review, the Board conducted a review of the effectiveness of the internal control system of the Company, including the adequacy of resources, staff qualifications and experience, training programmes and budget of the Company's accounting and financial reporting function.

SHAREHOLDERS' RIGHTS

To safeguard shareholder interests and rights, a separate resolution is proposed for each substantially separate issue at shareholder meetings, including the election of individual directors. All resolutions put forward at shareholder meetings will be voted by poll pursuant to the Listing Rules and poll results will be posted on the websites of the Company and of the Stock Exchange after each shareholder meeting.

1. Convening a Special General Meeting by Shareholders

• 1.1 Shareholders holding not less than one-tenth of the paid-up capital of the Company as at the date of the deposit of the requisition carrying the right of voting at general meetings of the Company, may by written requisition deposit at the Company's registered office at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda for the attention of the Board, to require a special general meeting to be called by the Board.
• 1.2 the requisition must state the purposes of the meeting, and must be signed by the requisitionists and may consist of several documents in like form each signed by one of more requisitionists.
• 1.3 The signatures and the requisition will be verified by the Company's share registrars. The Board will proceed to convene a special general meeting for the transaction of any business specified in the requisition within 21 days from the date of deposit of such requisition if it has been validly raised.
• 1.4 If the Board does not within 21 days from the date of the deposit of a valid requisition, proceed duly to convene a meeting, the requisitionists, or any of them representing more than one half of the total voting rights of all of them, may themselves, convene a meeting, but any meeting so convened shall not be held after the expiration of three months from the said date. A meeting convened by the requisitionists shall be convened in the same manner, as nearly as possible, as that in which meetings are to be convened by the Board.

2. Putting Forward Proposals at General Meetings

• 2.1 On the requisition in writing of (i) either any number of Shareholders representing not less than onetwentieth of the total voting rights of all the Shareholders having at the date of the requisition a right to vote at the meeting to which the requisition relates, or (ii) not less than one hundred Shareholders, the Company shall be under a duty to:
• (a) give to Shareholders entitled to receive notice of the next annual general meeting notice of any resolution which may properly be moved and is intended to be moved at that meeting;
• (b) circulate to Shareholders entitled to have notice of any general meeting sent to them any statement of not more than one thousand words with respect to the matter referred to in any proposed resolution or the business to be dealt with at that meeting.
• 2.2 The requisition must be signed by the requisitionists and deposited at the registered office of the Company at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda for the attention of the Board and

• (i) in the case of requisition requiring notice of a resolution, not less than six weeks before the meeting; and in the case of any other requisition, not less than one week before the meeting.

• (ii) there is deposited or tendered with the requisition a sum reasonably sufficient to meeting the Company's expenses in giving effect thereto.

• 2.3 The signatures and the requisition will be verified by the Company's share registrars. Upon confirming that the requisition is proper and in order, notice of any such intended resolution shall be given, and any such statement shall be circulated, to Shareholders entitled to have notice of the meeting sent to them by serving a copy of the resolution or statement on each such Shareholder in any manner permitted for service of notice of the meeting, and notice of any such resolution shall be given to any other shareholders of the Company by giving notice of the general effect of the resolution in any manner permitted for giving him notice of meetings of the Company, provided that the copy shall be served, or notice of the effect of the resolution shall be given, as the case may be, in the same manner and, so far as practicable, at the same time as notice of the meeting and, where it is not practicable for it to be served or given at that time, it shall be served or given as soon as practicable thereafter.

3. Putting Forward Enquiries to the Board

For putting forward any enquiries to the Board of the Company, shareholders may send written enquiries to the Company.

Note: The Company will not normally deal with verbal or anonymous enquiries.

4. Contact Details

Shareholders may send their enquiries or requests as mentioned above to the following:

Address: Unit A, 32/F., Manulife Tower, 169 Electric Road, North Point, Hong Kong (For the attention of the Board of Directors) Fax: 2334-0775 Email: investors@pinegroup.com

For the avoidance of doubt, shareholder(s) must provide their full name, contact details and identification in order that the Company can give them a reply. Shareholders' information may be disclosed as required by law.

Shareholders may call the Company at 2773-9911 for any assistance.

COMMUNICATION WITH SHAREHOLDERS AND INVESTORS/ INVESTOR RELATIONS

The Company considers that effective communication with shareholders is essential for enhancing investor relations and investor understanding of the Group's business performance and strategies. The Company endeavours to maintain an on-going dialogue with shareholders and in particular, through annual general meetings and other general meetings.

During the year under review, the Company has not made any changes to its Bye-laws. An updated version of the Company's Bye-laws is also available on the Company's website and the Stock Exchange's website.

Directors' Report

PINE Technology Holdings Limited and XFX Family of Brands

Directors' Report

The directors have pleasure in presenting their annual report and the audited consolidated financial statements of the Company for the year ended 30 June 2012.

Principal Activities

The Company acts as an investment holding company. The principal activities of its principal subsidiaries are set out in note 35 to the consolidated financial statements.

Results and Appropriations

The results of the Group for the year ended 30 June 2012 are set out in the consolidated statement of comprehensive income on page 24.

The directors of the Company do not recommend a dividend for the year ended 30 June 2012. (2011: Nil)

Property, Plant and Equipment

During the year, the Group acquired additional property, plant and equipment at a cost of approximately US\$548,000.

Details of these and other movements during the year in the property, plant and equipment of the Group are set out in note 13 to the consolidated financial statements.

Share Capital and Share Options Schemes

Details of the Company's share capital and share option schemes are set out in notes 25 and 27 to the consolidated financial statements respectively.

Distributable Reserves of the Company

Details of the movements during the year in the reserves of the Group are set out in the consolidated statement of changes in equity on pages 27 to 28 and the Company's reserves available for distribution to shareholders as at 30 June 2012 were as follows:

	2012 US\$'000	2011 US\$'000
Contributed surplus Retained profits	9,036 401	9,036 238
	9,437	9,274

Under the Companies Act 1981 at Bermuda (as amended), the contributed surplus account of a company is available for distribution. However, a company cannot declare or pay a dividend, or make a distribution out of contributed surplus if:

• (a) it is, or would after the payment be, unable to pay its liabilities as they become due; or
• (b) the realisable value of its assets would thereby be less than the aggregate of its liabilities and its issued share capital and share premium accounts.

Purchase, Sale of Redemption of Listed Securities

During the year, neither the Company nor any of its subsidiaries has purchased, sold or redeemed any of the Company's listed securities.

Directors

The directors of the Company during the year and up to the date of this report are:

Executive directors:

Mr. Chiu Hang Tai-Chairman Mr. Chiu Samson Hang Chin-Deputy Chairman

Non-executive director:

Mr. Chiu Herbert H T

Independent non-executive directors:

Mr. Li Chi Chung Mr. So Stephen Hon Cheung Dr. Huang Zhijian

The Company's Bye-law provides that onethird of the directors, with the exception of chairman, Deputy Chairman, Managing Director and joint Managing Director, shall retire from office by rotation at each annual general meeting. In order to put in place good corporate governance practice, notwithstanding the provisions of the Company's Bye-laws, the Company intends to have one-third of all the Company's directors subject to retirement by rotation at each annual general meeting. At the forthcoming 2012 annual general meeting, Mr. Chiu Herbert H T and Dr. Huang Zhijian will retire from office and both of them, being eligible, shall offer themselves for re-election pursuant to Bye-law 111.

Directors' Service Contracts

Mr. Li Chi Chung, Mr. So Stephen Hon Cheung and Dr. Huang Zhijian were appointed for a term of 2 years expiring on 8 June 2014, 12 September 2014 and 28 June 2014 respectively.

Save as disclosed above, none of the directors being proposed for re-election at the forthcoming annual general meeting has a service contract with the Company or any of its subsidiaries which is not determinable by the Group within one year without payment of compensation, other than statutory compensation.

Directors' Interests in Shares

At 30 June 2012, the interests of the directors and their associates in the shares capital of the Company as recorded in the register maintained by the Company pursuant to Section 352 of the Securities and Futures Ordinance ("SFO"), or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies, were as follows:

Long positions:

(a) Ordinary shares of HK\$0.1 each of the Company

Name of director	Capacity	Number of issued ordinary shares held	Percentage of the issued share capital of the Company
Mr. Chiu Hang Tai	Controlled corporation/ Beneficial owner (note)	211,175,958	22.93%
Mr. Chiu Samson Hang Chin	Beneficial owner	169,663,056	18.42%
Mr. Chiu Herbert H T	Beneficial owner	60,824,958	6.60%

Note: Of the 211,175,958 ordinary shares, 14,675,958 shares are registered in the personal name of Mr. Chiu Hang Tai, and the remaining 196,500,000 shares are beneficially owned by and registered in the name of Alliance Express Group Limited, which is incorporated in the British Virgin Islands ("BVI") and its entire issued share capital is beneficially owned by Mr. Chiu Hang Tai, an executive director of the Company.

(b) Share options

Name of director	Capacity	Number of share options held	Number of shares underlying
Mr. Chiu Hang Tai	Beneficial owner	8,946,600	8,946,600
Mr. Chiu Samson Hang Chin	Beneficial owner	7,454,400	7,454,400

In addition to the above, Mr. Chiu Hang Tai and Madam Leung Sin Mei, spouse of Mr. Chiu Hang Tai, both beneficially owned 600,000 non-voting deferred shares in Pineview Industries Limited, a subsidiary of the Company as at 30 June 2012. The non-voting deferred shares practically carry no rights to dividends or to receive notice of or to attend or vote at any general meeting of the subsidiary. On winding up, the holders of the deferred shares are entitled to distribution out of the remaining assets of the subsidiary only after the distribution of HK\$1,000 million, as specified in the Articles of Association of the subsidiary, to holders of ordinary shares.

Save as disclosed above, and other than certain nominee shares in subsidiaries held by directors in trust for the Company's subsidiaries as at 30 June 2012, none of the directors nor their associates had any interests or short positions in any shares, underlying shares or debentures of the Company or any of its associated corporations.

Share Options

Particulars of the Company's share option schemes are set out in note 27 to the consolidated financial statements.

The Company's share option scheme adopted by the shareholders pursuant to a resolution passed on 16 April 2003 (the "Scheme") is for the purpose of providing incentives to directors and eligible employees or any persons who have contributed or will contribute to the Group and, unless otherwise cancelled or amended, will expire on 15 April 2013.

Details of share options outstanding as at 30 June 2012 which have been granted under the Scheme to certain directors to subscribe for shares in the Company are as follows:

Name of director	Date of grant	Exercisable period	Exercise price	Number of share options at 30 June 2012
		(both dates inclusive)	HK\$
Mr. Chiu Hang Tai	5.10.2007	5.10.2009 to 4.10.2012	0.464	2,976,600
	30.3.2010	30.3.2011 to 29.3.2014	0.275	5,970,000
Mr. Chiu Samson Hang Chin	5.10.2007	5.10.2009 to 4.10.2012	0.464	1,984,400
____	30.3.2010	30.3.2011 to 29.3.2014	0.275	5,470,000
				16,401,000

No share options were granted, exercised or cancelled during the year.

Arrangement to Acquire Shares or Debentures

Other than the share option schemes disclosed above, at no time during the year was the Company or any of its subsidiaries a party to any arrangement to enable the directors of the Company to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate.

Directors' Interests in Contracts of Significance

No contract of significance, to which the Company subsidiaries was a party and in which a director of the Company had a material interest, whether directly or indirectly, subsisted at the end of the year or at any time during the year.

Directors' Interest in Competing Business

None of the directors and their respective associates has any competing interests which require to be disclosed pursuant to Rule 8.10 (2)(b)&(c) of the Listing Rules during the year.

Substantial Shareholders

As at 30 June 2012, the register of substantial shareholders maintained by the Company pursuant to Section 336 of SFO shows that other than the interests disclosed above in respect of certain directors, the following shareholders had notified the Company of relevant interests and long positions in the issued share capital of the Company.

Name of shareholder	Capacity	Number of issued ordinary shares held (long positions)	Percentage of the issued share capital of the Company
Alliance Express Group Limited	Beneficial owner (Note 1)	196,500,000	21.34%
Chiu Hang Tung Jason (Note 2)	Beneficial owner	62,718,084	6.81%
Chiu Man Wah (Note 2)	Beneficial owner	62,718,084	6.81%

Notes: 1) These shares are beneficially owned by and registered in the name of Alliance Express Group Limited, which is incorporated in BVI and its entire issued share capital is beneficially owned by Mr. Chiu Hang Tai, an executive director of the Company.

2) The holders are siblings of Mr. Chiu Hang Tai, Mr. Chiu Samson Hang Chin, and Mr. Chiu Herbert H T, who are directors of the Company.

Other than as disclosed above, the Company has not been notified of any other relevant interests or short positions in the issued share capital of the Company as at 30 June 2012.

Convertible Securities, Options, Warrants or Similar Rights

Other than the share options as set out in note 27 to the consolidated financial statements, the Company had no other outstanding convertible securities, options, warrants or other similar rights as at 30 June 2012.

Major Customers and Suppliers

For the year ended 30 June 2012, the top five suppliers of the Group together accounted for approximately 55.6% of the Group's total purchases and the largest supplier accounted for approximately 33.9% of the Group's total purchases.

None of the directors, their respective associates or any shareholders of the Company who owns more than 5% of the issued share capital of the Company has any interests in the Group's five largest customers and suppliers during the year.

For the year ended 30 June 2012, the Group's five largest customers accounted for less than 30% of the total sales of the Group.

Emolument Policy

The emolument policy of the employees of the Group is set up by the board of directors on the basis of their merit, qualifications and competence.

The emoluments of the directors and senior management of the Company are determined by the board of directors. The Remuneration Committee reviewed and made recommendations to the Board on the Company's policy and structure for the remuneration of all directors and senior management, having regard to the Company's operating results, individual performance and comparable market statistics.

The Company has adopted a share option scheme as an incentive to directors and eligible employees, details of the schemes are set out in note 27 to the consolidated financial statements.

Sufficiency of Public Float

The Company has maintained a sufficient public float throughout the year ended 30 June 2012.

Pre-Emptive Rights

There are no provisions for pre-emptive rights under the Company's Bye-laws, or the laws of Bermuda, which would oblige the Company to offer new shares on a pro-rata basis to existing shareholders.

Auditor

A resolution will be submitted to the annual general meeting to re-appoint Messrs. Deloitte Touche Tohmatsu as auditor of the Company.

On behalf of the Board

Chiu Hang Tai

CHAIRMAN

Hong Kong, 21 September 2012

Independent Auditor's Report

TO THE MEMBERS OF PINE TECHNOLOGY HOLDINGS LIMITED 松景科技控股有限公司 (Incorporated in Bermuda with limited liability)

We have audited the consolidated financial statements of PINE Technology Holdings Limited (the "Company") and its subsidiaries (collectively referred to as the "Group") set out on pages 24 to 80, which comprise the consolidated statement of financial position as at 30 June 2012, and the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

Directors' Responsibility for the Consolidated Financial Statements

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

Auditor's Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit and to report our opinion solely to you, as a body, in accordance with Section 90 of the Bermuda Companies Act, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. We conducted our audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

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

Independent Auditor's Report

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

Opinion

In our opinion, the consolidated financial statements give a true and fair view of the state of affairs of the Group as at 30 June 2012, and of the Group's loss and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards and have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance.

Deloitte Touche Tohmatsu

Certified Public Accountants Hong Kong 21 September 2012

Consolidated Statement of Comprehensive Income

For the year ended 30 June 2012

	NOTES	2012 US\$'000	2011 US\$'000
Turnover	5	231,953	259,559
Cost of sales		(209,897)	(237,451)
Gross profit		22,056	22,108
Other income		361	314
Selling and distribution expenses		(7,825)	(7,789)
General and administrative expenses		(17,733)	(20,519)
Other gains and losses	6	783	1,495
Finance costs	7	(880)	(1,020)
Loss before tax		(3,238)	(5,411)
Income tax (expense) credit	10	(200)	232
Loss for the year	11	(3,438)	(5,179)
Other comprehensive income (expense) Exchange differences arising from the translation
of foreign operations		393	466
Fair value loss on available-for-sale investments		(32)	(240)
Other comprehensive income for the year		361	226
Total comprehensive expense for the year		(3,077)	(4,953)
Loss per share	12
Basic (US cents)		(0.37)	(0.56)
Diluted (US cents)		(0.37)	(0.56)

24

Consolidated Statement of Financial Position

At 30 June 2012

	NOTES	2012 US\$'000	2011 US\$'000
Non-current assets
Property, plant and equipment	13	7,795	10,386
Development costs	14	1,920	1,766
Trademarks	15	280	185
Available-for-sale investments	16	70	102
Deposit placed with an insurance company	17	384	–
Rental deposit		66	–
		10,515	12,439
Current assets
Inventories	18	56,890	45,847
Trade, bills and other receivables	19	45,977	47,683
Tax recoverable		212	1,371
Pledged bank deposits	20	2,046	3,284
Bank balances and cash	21	12,636	10,310
		117,761	108,495
Current liabilities
Trade, bills and other payables	22	25,628	16,507
Tax payable		1,329	1,366
Obligations under finance leases	23	3	3
Bank borrowings	24	27,402	26,016
		54,362	43,892
Net current assets		63,399	64,603
		73,914	77,042

Consolidated Statement of Financial Position

At 30 June 2012

NOTES	2012 US\$'000	2011 US\$'000
		11,844
	59,650	62,720
	71,494	74,564
		4
		2,344
26	130	130
	2,420	2,478
		77,042
	25 23 24	11,844 1 2,289 73,914

The consolidated financial statements on pages 24 to 80 were approved and authorised for issue by the Board of Directors on 21 September 2012 and are signed on its behalf by:

Chiu Hang Tai Chiu Samson Hang Chin DIRECTOR DIRECTOR

Y

Consolidated Statement of Changes in Equity

For the year ended 30 June 2012

	Share capital US\$'000	Share premium US\$'000	Surplus account US\$'000	Exchange reserve US\$'000	Capital reserve US\$'000	Investments revaluation reserve US\$'000	Share options reserve US\$'000	Retained profits US\$'000	Total US\$'000
At 1 July 2010	11,934	27,159	2,954	2,785	63	119	478	35,291	80,783
Loss for the year	–	–	–	–	–	–	–	(5,179)	(5,179)
Other comprehensive income (expense) for the year Exchange differences arising on translation
of foreign operations Fair value loss on available-for-sale	–	–	–	466	–	–	–	–	466
investments	–	–	–	–	–	(240)	–	–	(240)
	–	–	–	466	–	(240)	–	–	226
Total comprehensive income (expense) for the year	–	–	–	466	–	(240)	–	(5,179)	(4,953)
Recognition of equity-settled share-based payments Issue of shares under share option scheme	– 25	– 56	– –	– –	– –	– –	131 (30)	– –	131 51
Dividends recognised as distribution (note 34) Share repurchased and cancelled	– (115)	– (152)	– –	– –	– –	– –	– –	(1,181) –	(1,181) (267)
Transfer upon forfeiture of share options	–	–	–	–	–	–	(24)	24	–
At 30 June 2011	11,844	27,063	2,954	3,251	63	(121)	555	28,955	74,564
Loss for the year	–	–	–	–	–	–	–	(3,438)	(3,438)
Other comprehensive income (expense) for the year
Exchange differences arising on translation of foreign operations	–	–	–	393	–	–	–	–	393
Fair value loss on available-for-sale investments	–	–	–	–	–	(32)	–	–	(32)
	–	–	–	393	–	(32)	–	–	361
Total comprehensive income (expense) for the year	–	–	–	393	–	(32)	–	(3,438)	(3,077)
Recognition of equity-settled share-based payments	–	–	–	–	–	–	7	–	7
Transfer upon forfeiture/expiry of share options	–	–	–	–	–	–	(171)	171	–
At 30 June 2012	11,844	27,063	2,954	3,644	63	(153)	391	25,688	71,494

Consolidated Statement of Changes in Equity

For the year ended 30 June 2012

Notes:

• (1) Surplus account of the Group represents the difference between the nominal amount of the share capital issued by the Company and the aggregate of the nominal amount of the issued share capital and other reserve accounts of Pine Technology (BVI) Limited, the subsidiary which was acquired by the Company pursuant to the group reorganisation in previous years.
• (2) Capital reserve represents statutory reserves transferred from retained profits as required by the relevant laws and regulations applicable to the Company's subsidiaries in the People's Republic of China ("PRC") at the discretion of the board of directors of respective subsidiaries.

Consolidated Statement of Cash Flows

For the year ended 30 June 2012

	2012 US\$'000	2011 US\$'000
OPERATING ACTIVITIES
Loss before tax	(3,238)	(5,411)
Adjustments for:
Finance costs	880	1,020
Interest income	(39)	(13)
Loss (gain) on disposal of property, plant and equipment Reversal of allowance for doubtful debts, net	231 (844)	(10) (777)
Allowance for inventories	1,765	975
Amortisation of development costs	1,455	1,196
Amortisation of trademarks	19	14
Written off of trademarks	17	–
Depreciation of property, plant and equipment Share option expenses	2,987 7	3,133 131
Operating cash flow before movements in working capital	3,240	258
(Increase) decrease in inventories	(12,419)	26,974
Decrease in trade, bills and other receivables	2,693	7,186
Increase (decrease) in trade, bills and other payables	8,864	(16,640)
Cash generated from operations	2,378	17,778
Interest paid on bank borrowings	(879)	(1,019)
Interest paid on finance leases	(1)	(1)
Hong Kong Profits Tax paid	(47)	(44)
PRC income tax paid Overseas tax paid	(155) (1)	(380) (651)
Overseas tax refunded	1,146	–
NET CASH FROM OPERATING ACTIVITIES	2,441	15,683
INVESTING ACTIVITIES Interest received	18	13
Proceeds from disposal of property, plant and equipment	49	18
Purchase of property, plant and equipment	(548)	(4,207)
Development expenditure incurred	(1,601)	(1,868)
Acquisition of trademark Decrease in pledged bank deposits	(131) 1,238	(87) 841
Deposit placed with an insurance company	(363)	–
NET CASH USED IN INVESTING ACTIVITIES	(1,338)	(5,290)

Consolidated Statement of Cash Flows

For the year ended 30 June 2012

	2012 US\$'000	2011 US\$'000
FINANCING ACTIVITIES
Dividends paid	–	(1,181)
New bank borrowings raised	84,698	113,327
Proceeds from issue of equity shares Repayment of bank borrowings	– (83,478)	51 (122,937)
Repayment of obligations under finance leases	(3)	(3)
Payment on repurchase of shares	–	(267)
NET CASH FROM (USED IN) FINANCING ACTIVITIES	1,217	(11,010)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	2,320	(617)
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR	10,310	10,919
EFFECT OF FOREIGN EXCHANGE RATE CHANGES	6	8
CASH AND CASH EQUIVALENTS AT END OF THE YEAR	12,636	10,310
ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS Bank balances and cash	12,636	10,310

For the year ended 30 June 2012

1. GENERAL

The Company is incorporated in Bermuda as an exempted company with limited liability and its share are listed on the Main Board of The Stock Exchange of Hong Kong Limited (the "Stock Exchange"). The addresses of the registered office and principal place of business of the Company are Clarendon House, 2 Church Street, Hamilton HM11, Bermuda and Unit A, 32/F Manulife Tower, 169 Electric Road, North Point, Hong Kong, respectively.

The consolidated financial statements are presented in United States dollars, which is the same as the functional currency of the Company.

The principal activities of the Group are the manufacturing and sales of high-quality computer components and computer related consumer electronic products.

The Company acts as an investment holding company. Details of the principal activities of the subsidiaries are set out in note 35.

2. APPLICATION OF HONG KONG FINANCIAL REPORTING STANDARDS ("HKFRSs")

In the current year, the Group has applied the following revised standard and amendments ("new and revised HKFRSs") issued by the Hong Kong Institute of Certified Public Accountants ("HKICPA").

Amendments to HKFRSs	Amendments to HKAS 1, HKAS 34, HKFRS 7 and
	HK(IFRIC)-Int 13 as part of Improvements to
	HKFRSs issued in 2010
Amendments to HK(IFRIC)-Int 14	Prepayments of a Minimum Funding Requirement
Amendments to HKFRS 7	Financial Instruments: Disclosures-Transfers of Financial Assets
HKAS 24 (Revised 2009)	Related Party Disclosures

The application of the new and revised HKFRSs in the current year has had no material impact on the Group's financial performance and positions for the current and prior years and/or on the disclosures set out in these consolidated financial statements.

For the year ended 30 June 2012

2. APPLICATION OF HONG KONG FINANCIAL REPORTING STANDARDS ("HKFRSs") (Continued)

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

Amendments to HKFRSs Amendments to HKFRS 7	Annual Improvements to HKFRSs 2009-2011 Cycle1 Disclosures-Offsetting Financial Assets and Financial
Amendments to HKFRS 9 and HKFRS 7 Amendments to HKFRS 10,	Liabilities1 Mandatory Effective Date of HKFRS 9 and Transition Disclosures2 Consolidated Financial Statements, Joint Arrangements
HKFRS 11 and HKFRS 12	and disclosure of Interests in Other Entities: Transition Guidance1
HKFRS 9	Financial Instruments2
HKFRS 10	Consolidated Financial Statements1
HKFRS 11	Joint Arrangements1
HKFRS 12	Disclosure of Interests in Other Entities1
HKFRS 13	Fair Value Measurement1
Amendments to HKAS 1	Presentation of Items of Other Comprehensive Income3
Amendments to HKAS 12	Deferred Tax-Recovery of Underlying Assets4
HKAS 19 (Revised 2011)	Employee Benefits1
HKAS 27 (Revised 2011)	Separate Financial Statements1
HKAS 28 (Revised 2011)	Investments in Associates and Joint Ventures1
Amendments to HKAS 32 HK(IFRIC)-Int 20	Offsetting Financial Assets and Financial Liabilities5 Stripping Costs in the Production Phase of a Surface
	Mine1

• 1 Effective for annual periods beginning on or after 1 January 2013.
• 2 Effective for annual periods beginning on or after 1 January 2015.

3 Effective for annual periods beginning on or after 1 July 2012.

4 Effective for annual periods beginning on or after 1 January 2012.

5 Effective for annual periods beginning on or after 1 January 2014.

HKFRS 9 Financial Instruments

HKFRS 9 issued in 2009 introduces new requirements for the classification and measurement of financial assets. HKFRS 9 amended in 2010 includes the requirements for the classification and measurement of financial liabilities and for derecognition.

HKFRS 9 requires all recognised financial assets that are within the scope of HKAS 39 Financial Instruments: Recognition and Measurement to be subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent accounting periods. All other debt investments and equity investments are measured at their fair values at the end of subsequent reporting periods.

For the year ended 30 June 2012

2. APPLICATION OF HONG KONG FINANCIAL REPORTING STANDARDS ("HKFRSs") (Continued)

HKFRS 9 Financial Instruments (Continued)

HKFRS 9 is effective for annual periods beginning on or after 1 January 2015, with earlier application permitted.

The directors anticipate that HKFRS 9 will be adopted in the Group's consolidated financial statements for the annual period beginning 1 July 2015. Based on the consolidated statement of financial position of the Group as at 30 June 2012, the directors anticipate that the application of HKFRS 9 is not expected to have a significant impact on the amounts reported in respect of the Group's financial assets and financial liabilities.

New and revised standards on consolidation, joint arrangements, associates and disclosures

In June 2011, a package of five standards on consolidation, joint arrangements, associates and disclosures was issued, including HKFRS 10, HKFRS 11, HKFRS 12, HKAS 27 (as revised in 2011) and HKAS 28 (as revised in 2011).

Key requirements of these five standards which are relevant to the Group are described below:

HKFRS 10 replaces the parts of HKAS 27 Consolidated and Separate Financial Statements that deal with consolidated financial statements and HK(SIC)-Int 12 Consolidation-Special Purpose Entities has been withdrawn upon the issuance of HKFRS 10. HKFRS 10 includes a new definition of control that contains three elements: (a) power over an investee, (b) exposure, or rights, to variable returns from its involvement with the investee, and (c) the ability to use its power over the investee to affect the amount of the investor's returns. Extensive guidance has been added in HKFRS 10 to deal with complex scenarios.

HKFRS 12 is a disclosure standard and is applicable to entities that have interests in subsidiaries, joint arrangements, associates and/or unconsolidated structured entities. In general, the disclosure requirements in HKFRS 12 are more extensive than those in the current standards.

These five standards are effective for annual periods beginning on or after 1 January 2013. Earlier application is permitted provided that all of these five standards are applied early at the same time.

The directors anticipate that these standards will be adopted in the Group's consolidated financial statements for the annual period beginning 1 July 2013. However, the application of these standards is not expected to have significant impact on amounts reported in the consolidated financial statements.

For the year ended 30 June 2012

2. APPLICATION OF HONG KONG FINANCIAL REPORTING STANDARDS ("HKFRSs") (Continued)

HKFRS 13 Fair Value Measurement

HKFRS 13 establishes a single source of guidance for fair value measurements and disclosures about fair value measurements. The Standard defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements. The scope of HKFRS 13 is broad; it applies to both financial instrument items and nonfinancial instrument items for which other HKFRSs require or permit fair value measurements and disclosures about fair value measurements, except in specified circumstances. In general, the disclosure requirements in HKFRS 13 are more extensive than those in the current standards. For example, quantitative and qualitative disclosures based on the threelevel fair value hierarchy currently required for financial instruments only under HKFRS 7 Financial Instruments: Disclosures will be extended by HKFRS 13 to cover all assets and liabilities within its scope.

HKFRS 13 is effective for annual periods beginning on or after 1 January 2013, with earlier application permitted.

The directors anticipate that HKFRS 13 will be adopted in the Group's consolidated financial statements for the annual period beginning 1 July 2013. However, the application of the standard is not expected to have significant impact on amounts reported in the consolidated financial statements.

Amendments to HKAS 1 Presentation of Items of Other Comprehensive Income

The amendments to HKAS 1 retain the option to present profit or loss and other comprehensive income in either a single statement or in two separate but consecutive statements. However, the amendments to HKAS 1 require additional disclosures to be made in the other comprehensive income section such that items of other comprehensive income are grouped into two categories: (a) items that will not be reclassified subsequently to profit or loss; and (b) items that may be reclassified subsequently to profit or loss when specific conditions are met. Income tax on items of other comprehensive income is required to be allocated on the same basis.

The amendments to HKAS 1 are effective for the Group for annual period beginning on 1 July 2013. The presentation of items of other comprehensive income will be modified accordingly when the amendments are applied in the future accounting periods.

Except as described above, the directors anticipate that the application of the other new and revised HKFRSs will have no material impact on the consolidated financial statements.

For the year ended 30 June 2012

3. SIGNIFICANT ACCOUNTING POLICIES

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

The consolidated financial statements have been prepared on the historical cost basis except for certain financial instruments that are measured at fair values, as explained in the accounting policies set out below. Historical cost is generally based on the fair value of the consideration given in exchange for goods.

Basis of consolidation

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

The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition and up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group.

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

Revenue recognition

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

Revenue from the sale of goods is recognised when the goods are delivered and title has passed, at which time all the following conditions are satisfied:

• the Group has transferred to the buyer the significant risks and rewards of ownership of the goods;
• the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
• the amount of revenue can be measured reliably;

For the year ended 30 June 2012

3. SIGNIFICANT ACCOUNTING POLICIES (Continued) Revenue recognition (Continued)

• it is probable that the economic benefits associated with the transaction will flow to the Group; and
• the cost incurred or to be incurred in respect of the transaction can be measured reliably.

Interest income from a financial asset is recognised when it is probable that economic benefits will flow to the Group and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount on initial recognition.

Property, plant and equipment

Property, plant and equipment including freehold land and building are held for use in the production or supply of goods, or for administrative purpose. Property, plant and equipment, other than freehold land, are stated in the consolidated statement of financial position at cost less subsequent accumulated depreciation and accumulated impairment losses, if any. No depreciation is provided for freehold land which is stated at cost less subsequent accumulated impairment losses, if any.

Depreciation is recognised to write off the cost of items of property, plant and equipment less their residual value over their estimated useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets. However, when there is no reasonable certainty that ownership will be obtained by the end of the lease term, assets are depreciated over the shorter of the lease term and their useful lives.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.

For the year ended 30 June 2012

3. SIGNIFICANT ACCOUNTING POLICIES (Continued) Intangible assets Trademark

Intangible assets acquired separately and with finite useful lives are carried at costs less accumulated amortisation and any accumulated impairment losses. Amortisation for trademark with finite useful lives is provided on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.

Research and development expenditure

Expenditure on research activities is recognised as an expense in the period in which it is incurred.

An internally-generated intangible asset arising from development activities (or from the development phase of an internal project) is recognised if, and only if, all of the following have been demonstrated:

• the technical feasibility of completing the intangible asset so that it will be available for use or sale;
• the intention to complete the intangible asset and use or sell it;
• the ability to use or sell the intangible asset;
• how the intangible asset will generate probable future economic benefits;
• the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and
• the ability to measure reliably the expenditure attributable to the intangible asset during its development.

The amount initially recognised for internally-generated intangible asset is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally-generated intangible asset can be recognised, development expenditure is charged to profit or loss in the period in which it is incurred.

Subsequent to initial recognition, internally-generated intangible asset is measured at cost less accumulated amortisation and accumulated impairment losses (if any), on the same basis as intangible assets acquired separately.

For the year ended 30 June 2012

3. SIGNIFICANT ACCOUNTING POLICIES (Continued) Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is calculated using the first-in, first-out method. Net realisable value represents the estimated selling price for inventories less all estimated assets of completion and costs necessary to make the sale.

Impairment losses on tangible and intangible assets

At the end of the reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

Recoverable amount is the higher of 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 for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or a cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or a cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or a cash generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately.

Financial instruments

Financial assets and financial liabilities are recognised in the consolidated statement of financial position when a group entity becomes a party to the contractual provisions of the instrument.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

For the year ended 30 June 2012

3. SIGNIFICANT ACCOUNTING POLICIES (Continued) Financial instruments (Continued) Financial assets

The Group's financial assets are classified as loans and receivables and available-forsale financial assets. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

Effective interest method

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

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

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, loans and receivables (including deposit placed at an insurance company, trade, bills and other receivables, pledged bank deposits and bank balances and cash) are carried at amortised cost using the effective interest method, less any identified impairment losses (see accounting policy on impairment loss on financial assets below).

Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated or not classified as financial assets at fair value through profit or loss, loans and receivables or heldto-maturity investments.

Available-for-sale financial assets are measured at fair value at the end of the reporting period. Changes in fair value are recognised in other comprehensive income and accumulated in investments revaluation reserve, until the financial asset is disposed of or is determined to be impaired, at which time, the cumulative gain or loss previously recognised in the investments revaluation reserve is reclassified to profit or loss (see accounting policy on impairment loss on financial assets below).

For the year ended 30 June 2012

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Financial instruments (Continued) Financial assets (Continued)

Impairment loss on financial assets

Financial assets are assessed for indicators of impairment at the end of the reporting period. Financial assets are considered to be impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the financial assets have been affected.

For an available-for-sale equity investment, a significant or prolonged decline in fair value of that investment below its cost is considered to be objective evidence of impairment.

For all other financial assets, objective evidence of impairment could include:

• significant financial difficulty of the issuer or counterparty; or
• breach of contract, such as default or delinquency in interest or principal payments; or
• it becoming probable that the borrower will enter bankruptcy or financial reorganisation.

For certain categories of financial assets, including trade receivables that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group's past experience of collecting payments, an increase in the number of delayed payments in the portfolio, observable changes in national or local economic conditions that correlate with default on receivables.

For financial assets carried at amortised cost, the amount of impairment loss recognised is the difference between the asset's carrying amount and the present value of the estimated future cash flow discounted at the financial asset's original effective interest rate.

When an available-for-sale financial asset is considered to be impaired, cumulative gains or losses previously recognised in other comprehensive income are reclassified to profit or loss in the period in which the impairment takes place.

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

For the year ended 30 June 2012

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Financial instruments (Continued)

Financial assets (Continued)

Impairment loss on financial assets (Continued)

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

Impairment losses on available-for-sale equity investments will not be reversed through profit or loss. Any increase in fair value subsequent to impairment loss is recognised directly in other comprehensive income and accumulated in investments revaluation reserve.

Financial liabilities and equity instruments

Financial liabilities and equity instruments issued by a group entity are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments issued by the Company are recognised at the proceeds received, net of direct issue costs.

Repurchase of the Company's own equity instruments is recognised and deducted directly in equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Company's own equity instruments.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

Interest expense is recognised on an effective interest basis.

Financial liabilities

Financial liabilities including trade, bills and other payables and bank borrowings are subsequently measured at amortised cost, using the effective interest method.

For the year ended 30 June 2012

3. SIGNIFICANT ACCOUNTING POLICIES (Continued) Financial instruments (Continued) Derecognition

The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity.

On derecognition of a financial assets in its entirety, the difference between the carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in profit or loss.

The Group derecognises financial liabilities when, and only when, the Group's obligation are discharged, cancelled or expired. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

Leasing

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

Assets held under finance leases are recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the consolidated statement of financial position as a finance lease obligation.

Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are charged immediately to profit or loss.

Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily 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.

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

Taxation

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

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the consolidated statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

For the year ended 30 June 2012

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Taxation (Continued)

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax base used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of the reporting period and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset is realised, based on tax rate (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Current and deferred tax are recognised in profit or loss, except when it relates to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively.

Foreign currencies

In preparing the financial statements of each individual group entity, transactions in currencies other than the functional currency of that entity (foreign currencies) are recorded in the respective functional currency (i.e. the currency of the primary economic environment in which the entity operates) at the rates of exchanges prevailing on the dates of the transactions. At the end of the reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

For the year ended 30 June 2012

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Foreign currencies (Continued)

Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are recognised in profit or loss in the period in which they arise.

For the purposes of presenting the consolidated financial statements, the assets and liabilities of the Group's foreign operations are translated into the presentation currency of the Group (i.e. United States dollars) at the rate of exchange prevailing at the end of the reporting period, and their income and expenses are translated at the average exchange rates for the year. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity under the heading of the exchange reserve.

Share-based payment transactions

Equity-settled share-based payment transactions

Share options granted to employees after 7 November 2002 and vested after 1 January 2005 The fair value of services received determined by reference to the fair value of share options granted at the grant date is expensed on a straight-line basis over the vesting period, with a corresponding increase in equity (share options reserve).

At the end of the reporting period, the Group revises its estimate of the number of options that are expected to ultimately vest. The impact of the revision of the original estimates during the vesting period, if any, is recognised in profit or loss such that the cumulated expense reflects the revised estimate, with a corresponding adjustment to the share options reserve.

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

Retirement benefits costs

Payments to the defined contribution retirement benefits schemes and Mandatory Provident Fund Scheme are recognised as an expense when employees have rendered service entitling them to contributions.

4. KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Group's accounting policies, which are described in note 3, the directors of the Company are required to make estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

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

The followings are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets within the next financial year.

For the year ended 30 June 2012

4. KEY SOURCES OF ESTIMATION UNCERTAINTY (Continued)

Impairment of property, plant and equipment, development costs and trademarks

As at 30 June 2012, the directors of the Company conducted a review of the relevant assets belonged to the Group's brand products operating division as there was recurring loss for the Group's brand products operating division. The relevant assets comprised the Group's certain items of property, plant and equipment of US\$3,733,000 (see note 13), development cost of US\$1,920,000 (see note 14) and trademarks of US\$280,000 (see note 15). Determining whether these assets are impaired requires an estimation of the value in use of Group's brand products operating division which is the cash-generating unit to which these assets have been allocated. The value in use calculation requires the Group to estimate the future cash flows expected to arise from these assets based on the latest financial budgets approved by the management and a suitable discount rate in order to calculate the present value of these assets. Based on the assessment, the directors of the Company considered that there is no impairment loss in respect of these assets and any reasonably possible change in the key assumptions is unlikely to result in a material impairment loss based on the sensitivity analysis of the recoverable amount of these assets. Where the actual future cash flows are less than expected, a material impairment loss may arise.

Net realisable value of inventories

Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs to completion and estimated selling expenses. The amount written off to the profit or loss is the difference between the carrying value and net realisable value of the inventories. These estimates are based on the current market condition and the historical experience of selling products of a similar nature. It could change significantly as a result of changes in customer preference and competitor actions in response to market conditions. As at 30 June 2012, the carrying amount of inventories is approximately of US\$56,890,000 (net of allowance for inventories approximately of US\$2,584,000) (2011: carrying amount approximately of US\$45,847,000, net of allowance for inventories approximately of US\$819,000).

Estimated impairment of trade receivables

When there is objective evidence of impairment loss of trade receivables, the Group takes into consideration the estimation of future cash flows of respective trade receivable. The amount of the impairment loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset's original effective interest rate (i.e. the effective interest rate computed at initial recognition). Where the actual future cash flows are less than expected, a material impairment loss may arise. As at 30 June 2012, the carrying amount of trade receivables is approximately of US\$42,600,000 (net of allowance for doubtful debts of US\$2,769,000) (2011: carrying amount approximately of US\$45,676,000, net of allowance for doubtful debts approximately of US\$3,814,000).

For the year ended 30 June 2012

5. TURNOVER AND SEGMENT INFORMATION

Turnover represents the amounts received and receivable for goods sold by the Group to outside customers, net of discounts and sales related taxes.

Information reported to the executive directors of the Company, being the chief operating decision maker ("CODM"), for the purpose of resources allocation and assessment of performance focuses on the sales of brands of products provided by the Group's operating divisions. The Group is currently organised into two operating divisions, which are sales of Group's brand products and other brand products. These two operating divisions form the basis of internal reports about components of the Group that are regularly reviewed by the CODM for the purpose of resources allocation and performance assessment. The Group's operating and reportable segments under HKFRS 8 are therefore as follows:

Group's brand products –		manufacture and sales of market video graphic cards and
		other computer components under the Group's brand name
Other brand products	–	distribution of other manufacturers' computer components

The following is an analysis of the Group's revenue and results by operating and reportable segment.

2012

	Group's brand products US\$'000	Other brand products US\$'000	Consolidated US\$'000
TURNOVER
External sales	132,615	99,338	231,953
SEGMENT RESULT	(1,693)	472	(1,221)
Interest income Unallocated corporate expense Finance costs			39 (1,176) (880)
Loss before tax			(3,238)
2011
	Group's brand	Other brand

	products US\$'000	products US\$'000	Consolidated US\$'000
TURNOVER External sales	164,614	94,945	259,559
SEGMENT RESULT	(3,650)	527	(3,123)
Interest income Unallocated corporate expense Finance costs			13 (1,281) (1,020)
Loss before tax			(5,411)

For the year ended 30 June 2012

5. TURNOVER AND SEGMENT INFORMATION (Continued)

The accounting policies of the operating segments are the same as the Group's accounting policies described in note 3. Segment result represents the gross profit generated from each segment, net of selling and distribution costs and administration costs directly attributable to each segment without allocation of interest income, corporate expense and finance costs. This is the measure reported to the CODM for the purposes of resource allocation and performance assessment.

Revenue from major products

The Group's major products are derived from the sales of market video graphic cards included in Group's brand products operating segment amounting to US\$127,351,000 (2011: US\$159,067,000). Others are derived from the sales of other computer components.

Geographical information

The Group's revenue from external customers mainly derive from customers located in Canada and the United States and information about its non-current assets by geographical location of the assets are detailed as below:

	Revenue by
	external customers	Non-current assets
	2012 2011		2012	2011
	US\$'000	US\$'000	US\$'000	US\$'000
Canada	78,369	73,542	587	585
United States	77,520	97,743	3,729	3,723
PRC	–	–	2,788	5,407
Others	76,064	88,274	2,957	2,622
	231,953	259,559	10,061	12,337

Note: Non-current assets exclude financial instruments.

Information about major customers

Included in revenue arising from sales of other brand products of US\$99,338,000 (2011: US\$94,945,000) are revenues of US\$18,314,000 (2011: US\$18,006,000) which arose from sales to the Group's largest customer.

No segment asset, liabilities and other segment information in the measure of Group's segment result and segment assets are presented as the information is not reported to the CODM for the purposes of resource allocation and performance assessment.

For the year ended 30 June 2012

6. OTHER GAINS AND LOSSES

	2012 US\$'000	2011 US\$'000
Exchange gain, net	187	708
(Loss) gain on disposal of property, plant and equipment	(231)	10
Reversal of allowance for doubtful debts, net	844	777
Written off of trademark	(17)	–
	783	1,495
FINANCE COSTS
	2012 US\$'000	2011 US\$'000
Interest on:
Bank borrowings wholly repayable
– within five years	723	1,006 13
– over five years Finance leases	156 1	1

8. DIRECTORS' REMUNERATION

	2012 US\$'000	2011 US\$'000
Fees:
Executive directors	62	62
Non-executive director	15	15
Independent non-executive directors	45	45
	122	122
Other emoluments to executive directors:
Basic salaries and other benefits	371	378
Retirement benefits schemes contributions Share-based payment expenses	2 –	2 94
	373	474
	495	596

S

N

Notes to the Consolidated Financial Statements

For the year ended 30 June 2012

8. DIRECTORS' REMUNERATION (Continued)

The details of emoluments of the directors are as follows:

	Directors' fees		Basic salaries Retirement benefits		Share-based
							and other benefits			schemes contributions		payment expenses
	2012	2011	2012	2011	2012	2011	2012	2011	2012	2011
	US\$'000	US\$'000	US\$'000	US\$'000	US\$'000	US\$'000	US\$'000	US\$'000	US\$'000	US\$'000
Executive directors
Mr. Chiu Hang Tai	31	31	231	227	2	2	–	49	264	309
Mr. Chiu Samson Hang Chin	31	31	140	151	–	–	–	45	171	227
	62	62	371	378	2	2	–	94	435	536
Non-executive director
Mr. Chiu Herbert H T	15	15	–	–	–	–	–	–	15	15
Independent non-executive directors
Mr. Li Chi Chung	15	15	–	–	–	–	–	–	15	15
Mr. So Stephen Hon Cheung	15	15	–	–	–	–	–	–	15	15
Dr. Huang Zhijian	15	15	–	–	–	–	–	–	15	15
	45	45	–	–	–	–	–	–	45	45
	122	122	371	378	2	2	–	94	495	596

No director waived any emoluments during the year ended 30 June 2012 and 2011.

For the year ended 30 June 2012

9. EMPLOYEES' REMUNERATION

The five highest paid individuals of the Group include two (2011: two) executive directors of the Company, whose emoluments are included in note 8 above. The emoluments of the remaining three (2011: three) individuals of which they are senior management are as follows:

	2012 US\$'000	2011 US\$'000
Basic salaries and other benefits Contributions to retirement benefits schemes	341 14	483 28
	355	511

Their emoluments were within the following bands:

	2012 Number of employees	2011 Number of employees
US\$Nil to US\$129,000	2	1
US\$129,001 to US\$193,000 US\$193,001 to US\$257,000	1 –	– 2

During each of the two years ended 30 June 2012, no emolument was paid by the Group to the directors or the five highest paid individuals (including directors and employees) as an inducement to join or upon joining the Group or as compensation for loss of office.

For the year ended 30 June 2012

10. INCOME TAX EXPENSE (CREDIT)

	2012 US\$'000	2011 US\$'000
Current tax
Hong Kong	6	6
PRC Enterprise Income Tax	104	160
Other jurisdictions	91	(694)
(Over)under provision in prior years
Hong Kong	(1)	(1)
PRC Enterprise Income Tax	–	42
Deferred taxation (note 26)	200 –	(487) 255
	200	(232)

Hong Kong Profits Tax is calculated at 16.5% of the estimated assessable profit for both years.

Other jurisdictions mainly included the United States and Canada.

Taxation arising in other region in the PRC and other jurisdictions (of which United States is at 40%) is calculated at the rates prevailing in the respective jurisdictions.

Pursuant to the Macao SAR's Offshore Law, Pine Technology (Macao Commercial Offshore) Ltd., a subsidiary of the Company is exempted for all taxes in Macao, including income tax, industrial tax and stamp duties.

東莞嘉耀電子有限公司, a subsidiary of the Company, was entitled to the two year's exemption from Enterprise Income Tax followed by three years of 50% tax deduction commencing from the first profit-making year with effect from 2008.

For the year ended 30 June 2012

10. INCOME TAX EXPENSE (CREDIT) (Continued)

The tax expense (credit) for the year can be reconciled to the loss per the consolidated statement of comprehensive income as follows:

	2012 US\$'000	2011 US\$'000
Loss before tax	(3,238)	(5,411)
Tax at the applicable tax rate of 40% (2011: 40%) (note)	(1,295)	(2,164)
Tax effect of expenses not deductible for tax purpose	73	127
Tax effect of income not taxable for tax purpose	(225)	(276)
Tax effect of utilisation of tax losses previously not recognised	(25)	–
Tax effect of tax losses not recognised	2,202	1,600
Tax effect of reversal of deferred tax
assets recognised in prior years	–	303
(Over)underprovision in respect of prior years	(1)	41
Effect of tax exemption granted to a Macao subsidiary	(368)	(140)
Effect of income tax on concessionary rate	(156)	(71)
Effect of different tax rates of subsidiaries
operating in other jurisdictions	(27)	270
Others	22	78
Tax expense (credit) for the year	200	(232)

Note: The tax rate in the jurisdiction where the operation of the Group substantially based is used as the applicable tax rate.

For the year ended 30 June 2012

11. LOSS FOR THE YEAR

	2012 US\$'000	2011 US\$'000
Loss for the year has been arrived at after charging (crediting):
Amortisation charges:
Development costs	1,455	1,196
Trademarks	19	14
Auditor's remuneration	425	385
Cost of inventories recognised as an expense,
including allowance for inventories of approximately
US\$1,765,000 (2011: US\$975,000) Depreciation of property, plant and equipment	210,537 2,987	237,451 3,133
Operating lease rentals in respect of land and buildings	1,599	1,756
Research and development costs	449	779
Staff costs including directors' remuneration	11,118	13,327
Less: Staff costs capitalised in development costs	(441)	(559)
	10,677	12,768
Interest income on bank deposits Interest income on deposit placed with an insurance company	(18) (21)	(13) –

12. LOSS PER SHARE

The calculation of the basic and diluted loss per share attributable to the owners of the Company is based on the following data:

	2012 US\$'000	2011 US\$'000
Loss for the purposes of basic and diluted loss per share (loss for the year attributable to owners of the Company)	(3,438)	(5,179)
	'000	'000
Weighted average number of ordinary shares for the purpose of basic and diluted loss per share	920,985	921,035

The calculation of diluted loss per share does not assume the exercise of the Company's share options as the exercise of the share options would result in a reduction in loss per share for both years.

For the year ended 30 June 2012

13. PROPERTY, PLANT AND EQUIPMENT

	Freehold land and building in the	Leasehold	Plant and	Motor	Furniture, fixtures and	Computer
	United States US\$'000	improvements US\$'000	machinery US\$'000	vehicles US\$'000	equipment US\$'000	equipment US\$'000	Total US\$'000
COST
At 1 July 2010	–	5,201	14,910	398	881	3,007	24,397
Exchange adjustments	–	141	604	4	5	44	798
Additions	3,416	–	336	48	7	400	4,207
Disposals	–	–	(161)	(56)	(27)	(5)	(249)
At 30 June 2011	3,416	5,342	15,689	394	866	3,446	29,153
Exchange adjustments	–	38	267	–	–	44	349
Additions	–	284	107	–	91	66	548
Disposals/written off	–	(350)	(1,177)	(51)	(52)	(251)	(1,881)
At 30 June 2012	3,416	5,314	14,886	343	905	3,305	28,169
DEPRECIATION AND AMORTISATION
At 1 July 2010	–	3,947	8,794	324	535	1,782	15,382
Exchange adjustments	–	102	356	2	2	31	493
Provided for the year	–	254	2,222	56	117	484	3,133
Eliminated on disposals	–	–	(155)	(55)	(26)	(5)	(241)
At 30 June 2011	–	4,303	11,217	327	628	2,292	18,767
Exchange adjustments	–	22	164	–	–	35	221
Provided for the year	79	142	2,136	15	132	483	2,987
Eliminated on disposals/written off	–	(290)	(1,028)	(31)	(34)	(218)	(1,601)
At 30 June 2012	79	4,177	12,489	311	726	2,592	20,374
CARRYING VALUES
At 30 June 2012	3,337	1,137	2,397	32	179	713	7,795
At 30 June 2011	3,416	1,039	4,472	67	238	1,154	10,386

Included in freehold land and building is freehold land of US\$1,064,000 (2011: US\$1,064,000) which can be separated reliably.

54

For the year ended 30 June 2012

13. PROPERTY, PLANT AND EQUIPMENT (Continued)

The above items of property, plant and equipment, except for freehold land, are depreciated on a straight-line basis over the following estimated useful lives:

		Estimated useful lives
	Building	35 years
	Leasehold improvements	2-10 years
	Plant and machinery	2-10 years
	Motor vehicles Furniture, fixtures and equipment	4-6 years 4-6 years
	Computer equipment	4-5 years
14.	DEVELOPMENT COSTS
		US\$'000
	COST
	At 1 July 2010	12,101
	Exchange adjustments	404
	Additions	1,868

At 30 June 2011 Exchange adjustments Additions Written off	14,373 50 1,601 (9,802)
At 30 June 2012	6,222
AMORTISATION At 1 July 2010 Exchange adjustments Provided for the year	11,051 360 1,196
At 30 June 2011 Exchange adjustments Provided for the year Written off	12,607 42 1,455 (9,802)
At 30 June 2012	4,302
CARRYING VALUES

At 30 June 2011	1,766

At 30 June 2012 1,920

The amortisation period for development costs is two years.

For the year ended 30 June 2012

15. TRADEMARKS

	US\$'000
COST At 1 July 2010 Exchange adjustments Addition	186 5 87
At 30 June 2011 Exchange adjustments Addition Written off	278 (2) 131 (77)
At 30 June 2012	330
AMORTISATION At 1 July 2010 Exchange adjustments Provided for the year	76 3 14
At 30 June 2011 Exchange adjustments Provided for the year Written off	93 (2) 19 (60)
At 30 June 2012	50
CARRYING VALUES At 30 June 2012	280
At 30 June 2011	185

The above trademarks have finite useful lives and are amortised straight-line basis over twenty years.

For the year ended 30 June 2012

16. AVAILABLE-FOR-SALE INVESTMENTS

	2012 US\$'000	2011 US\$'000
Equity securities listed in Hong Kong, at fair value	70	102

As at the end of the reporting period, all available-for-sale investments are stated at fair value, which have been determined by reference to the latest market bid price quoted in active markets.

17. DEPOSIT PLACED WITH AN INSURANCE COMPANY

	2012 US\$'000	2011 US\$'000
Deposits placed with an insurance
company and due after one year	384	–

The Group entered into a life insurance policy with an insurance company to insure an executive director. Under the policy, the beneficiary and policy holder is a subsidiary of the Company and the total insured sum is approximately US\$800,000 (2011: Nil). The Group is required to pay an upfront payment of US\$400,000, including a premium charge at inception of the policy amounting to US\$37,000. The Group may request full surrender of the policy at any time and receive cash back based on the value of the policy at the date of withdrawal, which is determined by the gross premium paid plus accumulated guaranteed interest earned and minus insurance premium charged at inception (the "Cash Value"). If such withdrawal is made between the 1st to 20th policy year, a pre-determined specified surrender charge would be imposed on the Group.

At the inception date, the upfront payment is separated into deposit placed and prepayment of life insurance premium. The prepayment of life insurance premium is amortised to profit or loss over the insured period and the deposit placed is carried at amortised cost using the effective interest method. The insurance company will pay the Group a guaranteed interest rate of 3% per annum. The effective interest rate for the deposit placed on initial recognition is 3.45% per annum, which was determined by discounting the estimated future cash receipts through the expected life of the insurance policy of 29 years, excluding the financial effect of surrender charge.

The carrying amount of deposit placed for life insurance policy as at 30 June 2012 approximated the Cash Value of the insurance policy and the expected life of the policy remained unchanged from the initial recognition. The directors considered that the financial impact of the option to terminate the policy was insignificant.

For the year ended 30 June 2012

18. INVENTORIES

	2012 US\$'000	2011 US\$'000
Raw materials	21,244	17,299
Work in progress	1,825	1,145
Finished goods	33,821	27,403
	56,890	45,847

19. TRADE, BILLS AND OTHER RECEIVABLES

	2012 US\$'000	2011 US\$'000
Trade and bills receivables	45,369	49,490
Less: Allowance for doubtful debts	(2,769)	(3,814)
	42,600	45,676
Deposits, prepayments and other receivables	3,377	2,007
	45,977	47,683

The Group allows a credit period of 1 to 180 days (2011: 1 to 180 days) to its trade customers. The following is an aged analysis of trade and bills receivables, net of allowance for doubtful debts, presented based on the invoice date at the end of the reporting period:

	2012 US\$'000	2011 US\$'000
1 to 30 days	20,757	21,203
31 to 60 days	5,455	9,930
61 to 90 days	2,891	2,955
Over 90 days	13,497	11,588
	42,600	45,676

Before accepting any new customer, the Group has assessed the potential customer's credit quality and defined credit rating limits for each customer. Limits attributed to customers are reviewed once a year. 65% (2011: 72%) of the trade receivables are neither past due nor impaired that are in good credit quality as long credit periods are granted to the respective customers, who have long business relationship with the Group and strong financial position.

For the year ended 30 June 2012

19. TRADE, BILLS AND OTHER RECEIVABLES (Continued)

Included in the Group's trade receivables balance are debtors with aggregate carrying amount of US\$13,226,000 (2011: US\$15,779,000) which are past due at the end of reporting period for which the Group has not provided for impairment loss. Although no collateral over these balances is held, the Group has assessed the creditworthiness, past payment history and substantial settlement after the end of the reporting period, and considered that the default risk is low, and accordingly no impairment has been provided.

Aging of trade receivables (by due date) which are past due but not impaired:

	2012 US\$'000	2011 US\$'000
1 to 30 days	4,196	6,062
31 to 60 days	1,749	2,274
61 to 90 days	949	974
Over 90 days	6,332	6,469
Total	13,226	15,779

Movements in the allowance for doubtful debts:

	2012 US\$'000	2011 US\$'000
At 1 July Exchange realignment Impairment losses reversed, net Amounts written off as uncollectible	(3,814) (17) 844 218	(4,959) (6) 777 374
At 30 June	(2,769)	(3,814)

Allowance for doubtful debts is considered on an individual basis and provided for those nonrecoverable. The Group does not hold any collateral over these balances. In determining the recoverability of a trade receivable, the Group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date.

For the year ended 30 June 2012

20. PLEDGED BANK DEPOSITS

The pledged bank deposits have been placed in designated bank accounts in favour of the banks as part of the security for the short-term banking facilities granted to the Group.

The pledged bank deposits, which carry variable interest rates ranging from 0.03% to 0.25% (2011: 0.01% to 0.23%) per annum, will be released upon settlement of relevant bank borrowings.

21. BANK BALANCES AND CASH

Bank balances and cash comprise certain short-term bank deposits at interest rates ranging from 0.001% to 0.25% (2011: 0.001% to 0.25%) per annum with an original maturity of three months or less.

22. TRADE, BILLS AND OTHER PAYABLES

The following is an aged analysis of trade payables presented based on the invoice date at the end of the reporting period:

	2012 US\$'000	2011 US\$'000
1 to 30 days	8,268	6,215
31 to 60 days	6,065	3,494
61 to 90 days	2,295	1,196
Over 90 days	2,846	975
Trade and bills payables	19,474	11,880
Deposits in advance, accruals and other payables	6,154	4,627
	25,628	16,507

The average credit period on purchase of goods is 30 to 60 days (2011: 30 to 60 days). The Group has financial risk management policies in place to ensure that all payables are settled within the credit time frame.

For the year ended 30 June 2012

23. OBLIGATIONS UNDER FINANCE LEASES

It is the Group's policy to lease certain of its fixtures and equipment under finance leases. The average lease term is three years. Interest rates underlying all obligations under finance leases are fixed at respective contract dates at 6% (2011: 6%) per annum. No arrangement have been entered into for contingent rental payments.

	Minimum lease payments		Present value of minimum lease payments
	2012 US\$'000	2011 US\$'000	2012 US\$'000	2011 US\$'000
Amounts payable under finance leases
Within one year	4	4	3	3
In more than one year but not more than two years	1	3	1	3
In more than two years but not more than three years	–	1	–	1
Less: Future finance charges	5 (1)	8 (1)	4	7
Present value of lease obligations	4	7
Less: Amount due for settlement within 12 months (shown under current liabilities)			(3)	(3)
Amount due for settlement after 12 months			1	4

For the year ended 30 June 2012

24. BANK BORROWINGS

	2012 US\$'000	2011 US\$'000
Bank borrowings comprise the following:
Trust receipts, export and import loans – secured	14,220	13,480
Other bank loans
– secured – unsecured	14,086 1,385	12,880 2,000
	15,471	14,880
	29,691	28,360
	2012 US\$'000	2011 US\$'000
Carrying amounts of bank loans that do not contain repayable on demand clause and are repayable based on the scheduled repayment dates set out in the loan agreements:
Within one year More than one year, but not exceeding two years More than two years, but not more than five years More than five years	44 44 148 2,097	43 43 146 2,155
	2,333	2,387
Carrying amounts of bank loans that contain a repayable on demand clause (shown under current liabilities) and the maturity analysis based on the scheduled repayment set out in the loan agreements are: Within one year More than one year, but not exceeding two years More than two years, but not more than five years	26,588 616 154	24,588 615 770
	27,358	25,973
	29,691	28,360
Less: amounts due within one year shown under current liabilities	(27,402)	(26,016)
Amounts shown under non-current liabilities	2,289	2,344

For the year ended 30 June 2012

24. BANK BORROWINGS (Continued)

The ranges of effective interest rates (which are also equal to contracted interest rates) on the Group's variable-rate bank borrowings are 2.18% to 6.38% (2011: 1.76% to 6.38%).

The carrying amounts of the Group's borrowings are analysed as follows:

Denominated in	Interest rate per annum	2012 US\$'000	2011 UD\$'000
Hong Kong dollars (Note)	Hong Kong Interbank Offered Rate ("HIBOR") plus 1% to 2.5%	4,087	5,600
United States dollars	London Interbank Offered Rate ("LIBOR") plus 1.5% to 2%	18,455	16,328
	Singapore Interbank Offered Rate ("SIBOR") plus 1.5%	1,845	2,334
	7-year Federal Home Loan Bank Rate of San Francisco ("FHLB") plus 3.25%	2,333	2,387
Canadian dollars	Canadian Prime Rate plus 1%	2,971	1,711
		29,691	28,360

Note: These borrowings are denominated in currencies other than functional currencies of the relevant group entities.

For the year ended 30 June 2012

25. SHARE CAPITAL

Details of the share capital of the Company were as follows:

			United States dollars
	Number of shares	Value HK\$'000	equivalent US\$'000
Ordinary shares of HK\$0.1 each:
Authorised At 1 July 2010, 30 June 2011 and 30 June 2012	2,000,000,000	200,000	25,747
Issued and fully paid
At 1 July 2010	928,000,783	92,801	11,934
Shares repurchased and cancelled	(9,000,000)	(900)	(115)
Issue of share under share option scheme	1,984,000	198	25
At 30 June 2011 and 30 June 2012	920,984,783	92,099	11,844

None of the Company's subsidiaries purchased, sold or redeemed any of the Company's listed securities during the year.

26. DEFERRED TAXATION

The following are the major deferred tax liabilities (assets) recognised and movements thereon during the current and prior years:

	Accelerated tax
	depreciation US\$'000	Tax losses US\$'000	Others US\$'000	Total US\$'000
At 1 July 2010 (Credit) charge to profit	47	(11)	(157)	(121)
or loss for the year	(44)	8	291	255
Exchange adjustments	1	–	(5)	(4)
At 30 June 2011 (Credit) charge to profit	4	(3)	129	130
or loss for the year	(4)	3	1	–
At 30 June 2012	–	–	130	130

For the year ended 30 June 2012

26. DEFERRED TAXATION (Continued)

At 30 June 2012, the Group has estimated tax losses of approximately US\$7,793,000 (2011: US\$7,232,000) available for offset against future profits. No deferred tax asset has been recognised in respect of such losses (2011: A deferred tax asset has been recognised in respect of US\$26,000 of such losses). No deferred tax asset has been recognised in respect of the remaining estimated tax losses of US\$6,871,000 (2011: US\$7,206,000) due to the unpredictability of future profit streams. Included in unrecognised tax losses are losses of US\$2,503,000 (2011: US\$5,601,000) that will expire in 2032 (2011: 2019). Other losses may be carried forward indefinitely.

During the year, a subsidiary registered in Netherlands completed the wind-up process and its unused tax loss of approximately US\$5,777,000 (including US\$5,601,000 at 30 June 2011) upon wind-up has not been recognised as deferred tax assets.

At 30 June 2012, the aggregate amount of temporary differences associated with undistributed earnings of subsidiaries was US\$5,651,000 (2011: US\$6,280,000). A deferred tax liability has been recognised in respect of US\$1,300,000 (2011: US\$1,290,000) of such temporary difference. No liability has been recognised in respect of US\$4,351,000 (2011: US\$4,990,000) because the Group is in a position to control the timing of the reversal of the temporary differences and it is probable that such differences will not reverse in the foreseeable future.

27. SHARE OPTIONS

The Company's share option scheme adopted by the shareholders pursuant to a resolution passed on 16 April 2003 (the "Scheme") is for the purpose of providing incentives to directors and eligible employees and, unless otherwise cancelled or amended, will expire on 15 April 2013. Under the Scheme, the Board of Directors of the Company may grant options to eligible employees, including executive directors of the Company, any of its subsidiaries, or any persons who have contributed or will contribute to the Group, to subscribe for shares in the Company.

The total number of shares in respect of which options may be granted under the Scheme and any other schemes is not permitted to exceed 10% of the shares of the Company in issue at the date of shareholders' approval of the Scheme (the "Scheme Mandate Limit") or, if such 10% limit is refreshed, at the date of shareholders' approval of the renewal of the Scheme Mandate Limit. The maximum aggregate number of shares which may be issued upon the exercise of all outstanding options granted and yet to be exercised under the Scheme and any other share option schemes, must not exceed 30% of the total number of shares of the Company in issue from time to time. The number of shares in respect of which options may be granted to any individual in any one year is not permitted to exceed 1% of the shares of the Company then in issue, without prior approval from the Company's shareholders. Each grant of options to any director, chief executive or substantial shareholder must be approved by independent non-executive directors. Where any grant of options to a substantial shareholder or an independent non-executive director or any of their respective associates would result in the shares of the Company issued and to be issued upon exercise of options already granted and to be granted in excess of 0.1% of the Company's issued share capital and with a value in excess of HK\$5,000,000 in the 12-month period up to the date of grant, then the grant must be approved in advance by the Company's shareholders.

For the year ended 30 June 2012

27. SHARE OPTIONS (Continued)

Options granted must be taken up within 21 days from the date of grant, upon payment of HK\$1 per option. An option may be exercised in accordance with the terms of the Scheme at any time during the effective period of the Scheme to be notified by the board of directors which shall not be later than 10 years from the date of grant. The exercise price is determined by the directors of the Company, and will not be less than the highest of the closing price of the Company's share on the date of grant, the average closing price of the share on the Stock Exchange for the five business days immediately preceding the date of grant, and the nominal value.

Details of the share options granted under the Scheme during the two years ended 30 June 2012 to subscribe for the shares in the Company are as follows:

2012

					Number					Number of
				Exercise	of share options at					share options at 30 June
Granted to	Date of grant	Vesting period	Exercisable period	price	1 July 2011	Granted	Exercised	Expired	Forfeited	2012
			(both dates inclusive)	HK\$
Directors	30.3.2007	30.3.2007 – 31.12.2008	1.1.2009 – 31.12.2011	0.250	2,678,940	–	–	(2,678,940)	–	–
	5.10.2007	5.10.2007 – 4.10.2009	5.10.2009 – 4.10.2012	0.464	4,961,000	–	–	–	–	4,961,000
	30.3.2010	30.3.2010 – 29.3.2011	30.3.2011 – 29.3.2014	0.275	11,440,000	–	–	–	–	11,440,000
Senior
management	5.10.2007	5.10.2007 – 4.10.2009	5.10.2009 – 4.10.2012	0.464	3,968,800	–	–	–	–	3,968,800
	30.3.2010	30.3.2010 – 29.3.2011	30.3.2011 – 29.3.2014	0.275	3,000,000	–	–	–	–	3,000,000
Employees	30.3.2007	30.3.2007 – 31.12.2008	1.1.2009 – 31.12.2011	0.250	7,937,600	–	–	(6,945,400)	(992,200)	–
	5.10.2007	5.10.2007 – 4.10.2009	5.10.2009 – 4.10.2012	0.464	6,895,790	–	–	–	(942,590)	5,953,200
	6.10.2009	N/A	6.10.2009 – 5.10.2013	0.150	4,000,000	–	–	–	–	4,000,000
	30.3.2010	30.3.2010 – 29.3.2011	30.3.2011 – 29.3.2014	0.275	1,200,000	–	–	–	–	1,200,000
	25.3.2011	25.3.2011 – 24.3.2013	25.3.2013 – 24.3.2021	0.207	1,000,000	–	–	–	–	1,000,000
					47,082,130	–	–	(9,624,340)	(1,934,790)	35,523,000
Exercisable at the end of the year										34,523,000
Weighted average exercise price					0.321	–	–	0.250	0.354	0.338

For the year ended 30 June 2012

27. SHARE OPTIONS (Continued)

2011

				Exercise	Number of share options at					Number of share options at 30 June
Granted to	Date of grant	Vesting period	Exercisable period (both dates inclusive)	price HK\$	1 July 2010	Granted	Exercised	Expired	Forfeited	2011
Directors	30.3.2007	30.3.2007 – 31.12.2008	1.1.2009 – 31.12.2011	0.250	2,678,940	–	–	–	–	2,678,940
	5.10.2007	5.10.2007 – 4.10.2009	5.10.2009 – 4.10.2012	0.464	4,961,000	–	–	–	–	4,961,000
	30.3.2010	30.3.2010 – 29.3.2011	30.3.2011 – 29.3.2014	0.275	11,440,000	–	–	–	–	11,440,000
Senior
management	21.6.2006	21.6.2006 – 31.12.2007	1.1.2008 – 31.12.2010	0.198	1,984,400	–	(1,984,000)	(400)	–	–
	5.10.2007	5.10.2007 – 4.10.2009	5.10.2009 – 4.10.2012	0.464	3,968,800	–	–	–	–	3,968,800
	30.3.2010	30.3.2010 – 29.3.2011	30.3.2011 – 29.3.2014	0.275	3,000,000	–	–	–	–	3,000,000
Employees	30.3.2007	30.3.2007 – 31.12.2008	1.1.2009 – 31.12.2011	0.250	8,929,800	–	–	–	(992,200)	7,937,600
	5.10.2007	5.10.2007 – 4.10.2009	5.10.2009 – 4.10.2012	0.464	7,689,550	–	–	–	(793,760)	6,895,790
	6.10.2009	N/A	6.10.2009 – 5.10.2013	0.150	4,000,000	–	–	–	–	4,000,000
	30.3.2010	30.3.2010 – 29.3.2011	30.3.2011 – 29.3.2014	0.275	1,200,000	–	–	–	–	1,200,000
	25.3.2011	25.3.2011 – 24.3.2013	25.3.2013 – 24.3.2021	0.207	–	1,000,000	–	–	–	1,000,000
					49,852,490	1,000,000	(1,984,000)	(400)	(1,785,960)	47,082,130
Exercisable at the end of the year										46,082,130
Weighted average exercise price					0.319	0.207	0.198	0.198	0.345	0.321

No share option is exercised during the year. In respect of the share options exercised during the year ended 30 June 2011, the weighted average share price at the dates of exercise is HK\$0.31.

The fair value of the options granted during the year ended 30 June 2011 was calculated using The Black-Scholes option pricing model. The inputs into the model were as follows:

25.3.2011
HK\$0.205
HK\$0.207
36%
10 years
2.55%
Nil

For the year ended 30 June 2012

27. SHARE OPTIONS (Continued)

Expected volatility was determined by using the historical volatility of the Company's share price over the previous three years.

The estimated fair value of options granted during the year ended 30 June 2011 amounted to approximately US\$14,000. The Group recognised the total expense of US\$7,000 (2011: US\$131,000) for the year ended 30 June 2012.

The Black-Scholes option pricing model has been used to estimate the fair value of the options. The variables and assumptions used in computing the fair value of the share options are based on the director's best estimate. The value of an opinion varies with different variables of certain subjective assumptions.

28. PLEDGE OF ASSETS

Assets of certain subsidiaries with the following carrying amounts have been pledged to secure the Group's borrowings of US\$12,818,000 (2011: US\$11,598,000).

	2012 US\$'000	2011 US\$'000
Fixed charge:
Freehold land and building	3,337	3,416
Floating charges:
Property, plant and equipment	1,031	892
Inventories	15,781	16,161
Trade and other receivables	19,760	20,532
Bank balances	1,619	918
	41,528	41,919

In addition, deposit placed with an insurance company of US\$384,000 (2011: Nil) and pledged bank deposits of US\$2,046,000 (2011: US\$3,284,000) as disclosed in the consolidated statement of financial position have been pledged to secured the Group's borrowings of US\$15,488,000 (2011: US\$14,762,000).

For the year ended 30 June 2012

29. OPERATING LEASE COMMITMENTS

At the end of the reporting period, the Group had commitments for future minimum lease payments under non-cancellable operating leases which fall due as follow:

	2012 US\$'000	2011 US\$'000
Within one year	1,365	1,275
In the second to fifth year inclusive	2,958	2,555
More than five years	1,181	1,674
	5,504	5,504

Operating lease payments represent rentals payable by the Group for certain of its office properties, staff quarters and factory.

Leases are negotiated for terms ranging from one to ten years at initial and rentals are fixed for the period of the lease.

30. RETIREMENT BENEFITS SCHEMES

During the year, the Group operated defined contribution retirement benefit schemes in various regions outside Hong Kong for all qualifying employees and the Group also operated a defined contribution scheme for its qualifying employees in Hong Kong prior to 1 December 2000 (collectively "Defined Contribution Schemes"). The assets of the Defined Contribution Schemes are held separately from those of the Group in funds under the control of independent trustees.

Where there are employees who leave the Defined Contribution Schemes prior to vesting fully in the contributions, the contributions payable by the Group are reduced by the amount of forfeited contributions.

The Defined Contribution Schemes are funded by monthly contributions from both employees and the Group at rates ranging from 5% to 15% of the employee's basic salary, depending on the length of service with the Group.

With effect from 1 December 2000, the Group joined a Mandatory Provident Fund Scheme ("MPF Scheme") for all employees in Hong Kong. The MPF Scheme is registered with the Mandatory Provident Fund Scheme Authority under the Mandatory Provident Fund Schemes Ordinance. The assets of the MPF Scheme are held separately from those of the Group in funds under the control of independent trustees.

For the year ended 30 June 2012

30. RETIREMENT BENEFITS SCHEMES (Continued)

Under the rules of the MPF Scheme, the Group contributes 5% of relevant payroll costs or HK\$1,250 per month to the scheme with effective from 1 June 2012 (HK\$1,000 per month before 1 June 2012) which contribution is matched by the employee, depending on the length of service with the Group. The only obligation of the Group with respect of the MPF Scheme is to make the required contributions under the scheme.

The retirement benefits schemes contributions in respect of the Defined Contribution Schemes and the MPF Scheme charged to the consolidated statement of comprehensive income represent contributions payable to the funds by the Group at rates specified in the rules of the schemes.

The details of retirement benefits schemes contributions for the Group's employees, net of forfeited contributions, which have been dealt with in the consolidated statement of comprehensive income of the Group are as follows:

	2012 US\$'000	2011 US\$'000
Gross retirement benefits schemes contributions Less: Forfeited contributions for the year	99 –	127 –
Net retirement benefits schemes contributions	99	127

At the end of the reporting period, the Group had no significant forfeited contributions available to reduce the contributions payable by the Group in the future years.

31. RELATED PARTY DISCLOSURES

• (a) Mr. Chiu Samson Hang Chin, the executive director and substantial shareholder of the Company, had assigned his life insurance policy with a face value of US\$2,000,000 (2011: US\$2,000,000) to a bank as a collateral for general banking facilities granted to the Group amounting to US\$9,000,000 (2011: US\$15,000,000) during the period from 1 July 2011 to 27 April 2012 (date of release of this collateral). The facilities utilised by the Group at the date of release of this collateral amounted to US\$7,500,000 (2011: US\$7,500,000).
• (b) The remuneration of executive and non-executive directors and other members of key management during the year was as follows:

	2012 US\$'000	2011 US\$'000
Short-term employee benefits Post-employment benefits	834 16	1,077 30
	850	1,107

For the year ended 30 June 2012

32. CAPITAL RISK MANAGEMENT

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

The capital structure of the Group consists of net debts, which includes bank borrowings as disclosed in note 24, net of cash and cash equivalents, and equity attributable to the owner of the Company, comprising issued share capital and reserves.

The directors of the Company review the capital structure periodically. As part of this review, the directors consider the cost of capital and the risks associated with each class of capital. Based on recommendations of the directors, the Group will balance its overall capital structure through the payment of dividends, new share issues and share buy-backs as well as the issue of new debt or the repayment of existing debt.

33. FINANCIAL INSTRUMENTS

a. Categories of financial instruments

	2012 US\$'000	2011 US\$'000
Financial assets
Loans and receivables (including
cash and cash equivalents)	60,483	59,684
Available-for-sale investments	70	102
	60,553	59,786
Financial liabilities
At amortised costs	51,836	41,571

b. Financial risk management objectives and policies

The Group's financial instruments include available-for-sale investments, deposit placed with an insurance company, trade, bills and other receivables, pledged bank deposits, bank balances and cash, trade, bills and other payables and bank borrowings. Details of these financial instruments are disclosed in respective notes.

The directors of the Company have overall responsibility for the establishment and oversight of the Group's risk management framework. The Group's risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls to monitor risks and adherence to market conditions and the Group's activities. The Group, through its training and management standards and procedures, aims to develop a constructive control environment in which all employees understand their roles and obligations.

For the year ended 30 June 2012

33. FINANCIAL INSTRUMENTS (Continued)

b. Financial risk management objectives and policies (Continued)

The directors of the Company monitor and manage the financial risks relating to the operations of the Group to ensure appropriate measures are implemented on a timely and effective manner. These risks include market risk (including foreign currency risk, interest rate risk and other price risk), credit risk and liquidity risk.

Market risk

(i) Currency risk

Certain financial assets and liabilities of the Group are denominated in foreign currencies. The management monitors foreign exchange exposure and will further consider hedging significant foreign currency should the need arise.

The carrying amounts of the Group's foreign currency denominated monetary assets and monetary liabilities including inter-company balances at the end of the reporting period are as follows:

	Assets		Liabilities
	2012 2011		2012	2011
	US\$'000	US\$'000	US\$'000	US\$'000
Group
Hong Kong dollars ("HKD")	3,821	4,243	7,535	9,165
European dollars ("EURO")	5	118	–	–
Renminbi ("RMB")	7	12	34	66
United States dollars ("USD")	3,344	1,665	3,729	2,603
Inter-company balances
RMB	5,215	2,626	3,763	2,031

Sensitivity analysis

In the opinion of directors of the Company, since HKD is pegged to USD, the exposure to exchange fluctuation is limited and hence no sensitivity analysis in relation to HKD against USD is presented. The Group therefore mainly exposes to the currency of EURO, RMB and USD, when USD and Canadian dollars ("CAD") are the functional currency of the relevant subsidiaries.

The following table details the Group's sensitivity to a 5% (2011: 5%) increase and decrease in EURO and RMB relative to USD and in USD relative to CAD.

For the year ended 30 June 2012

33. FINANCIAL INSTRUMENTS (Continued)

b. Financial risk management objectives and policies (Continued) Market risk (Continued)

(i) Currency risk (Continued)

5% (2011: 5%) is the sensitivity rate used for the management's assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and also inter-company balances denominated in foreign currencies and adjusts their translation at the year end for a 5% (2011: 5%) change in foreign currency rates. The sensitivity analysis of the Group also includes currency risk exposure on inter-company balances.

The following table details the Group's sensitivity to a 5% (2011: 5%) when EURO and RMB strengthen 5% (2011: 5%) against USD or USD strengthens 5% (2011: 5%) against CAD. There would be an equal and opposite impact when the EURO and RMB weaken 5% (2011: 5%) against USD or USD weakens 5% (2011: 5%) against CAD.

	Decrease in post tax loss (increase in post tax loss)
	2012 US\$'000	2011 US\$'000
Group EURO against USD	–	4
RMB against USD USD against CAD	(1) (14)	(2) (33)
Inter-company balances RMB against USD	73	30

(ii) Interest rate risk

The Group is exposed to cash flow interest rate risk in relation to variable-rate pledged bank deposits, bank balances and bank borrowings. The management will consider hedging significant interest rate exposure should the need arise.

The management considered that the exposure to cash flow interest rate risk in relation to variable-rate pledged bank deposits and bank balances is minimal, accordingly, no sensitivity analysis is presented for both years.

In addition, the Group is exposed to cash flow interest rate risk due to the fluctuation of the prevailing market interest rate on variable-rate bank borrowings. The Group's cash flow interest rate risk is mainly concentrated on the fluctuation of HIBOR, LIBOR, SIBOR, FHLB and Canadian Prime Rate arising from the Group's borrowings denominated in HKD, USD and CAD.

For the year ended 30 June 2012

33. FINANCIAL INSTRUMENTS (Continued)

b. Financial risk management objectives and policies (Continued)

Market risk (Continued)

(ii) Interest rate risk (Continued) Sensitivity analysis

The sensitivity analysis below has been determined based on the exposure to interest rates for variable-rate bank borrowings. The analysis is prepared assuming the amount of asset and liability outstanding at the end of the reporting period was existed for the whole year. A 50 (2011: 50) basis point increase or decrease represents management's assessment of the reasonably possible change in interest rates.

If interest rates had been 50 (2011: 50) basis points higher/lower and all other variables were held constant, the Group's post tax loss for the year ended 31 June 2012 would increase/decrease by US\$122,000 (2011: US\$119,000).

(iii) Other price risk

The Group's investments in equity instruments are measured at fair values at the end of the reporting period. Therefore, the Group is exposed to equity price risk in relation to these investments. The management manages this exposure by reviewing the fair value of investments regularly.

Other price sensitivity

The sensitivity analysis below has been determined based on the exposure of equity instruments to price risks at the reporting date. If the market price of the equity instruments had been 15% (2011: 15%) higher while all other variables were held constant, the investments revaluation reserve for the year ended 30 June 2012 would increase by US\$10,500 (2011: US\$15,000). However, if the market price of the equity instruments had been 15% (2011: 15%) lower while all other variables were held constant, the loss for the year may increase by US\$10,500 when the drop is considered as an impairment (2011: US\$15,000). This is mainly due to changes in fair value of equity instruments investments.

Credit risk

The Group's maximum exposure to credit risk which will cause a financial loss to the Group due to failure to discharge an obligation by the counterparties is arising from the carrying amount of the respective recognised financial assets as stated in the consolidated statement of financial position.

For the year ended 30 June 2012

33. FINANCIAL INSTRUMENTS (Continued)

b. Financial risk management objectives and policies (Continued) Credit risk (Continued)

The Group's credit risk is primarily attributable to its trade receivables. The Group is exposed to concentration of credit risk as a substantial portion of its trade receivables is generated from a limited number of customers of certain foreign countries. The top five customers of the Group accounted for about 36% (2011: 34%) of the Group's trade receivables as at 30 June 2012. The Group manages its credit risk by closely monitoring the granting of credit period and credit limit and follow-up action is taken to recover overdue debts. In addition, the Group reviews the recoverable amount of each individual trade debt at the end of each reporting period to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the directors of the Company consider that the Group's credit risk is significantly reduced.

The credit risk on liquid funds is limited because the counterparties are banks with good reputation.

Liquidity risk

In the management of the liquidity risk, the Group monitors and maintains a level of cash and cash equivalents deemed adequate by the management to finance the Group's operations and mitigate the effects of fluctuations in cash flows. The management monitors the utilisation of bank borrowings and ensures compliance with loan covenants.

The following tables detail the Group's contractual maturity for its financial liabilities. The table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. Specifically, bank loans with a repayment on demand clause are included in the earliest time band regardless of the probability of the banks choosing to exercise their rights. The maturity dates for other non-derivative financial liabilities are based on the agreed repayment dates.

The table includes both interest and principal cash flow. To the extent interest flows are floating rate, the undiscounted amount is derived from interest rate at the end of the reporting period.

For the year ended 30 June 2012

33. FINANCIAL INSTRUMENTS (Continued)

b. Financial risk management objectives and policies (Continued) Liquidity risk (Continued)

	Weighted average effective interest rate %	On demand or less than 3 months US\$'000	4 to 6 months US\$'000	7 to 9 months US\$'000	10 to 12 months US\$'000	Over 1 year US\$'000	Total undiscounted cash flows US\$'000	Carrying amount at 30 June US\$'000
2012
Trade, bills and other payables	–	21,385	760	–	–	–	22,145	22,145
Obligations under finance leases	5.95	1	1	1	1	1	5	4
Bank borrowings at variable interest rate	3.71	27,541	48	48	48	2,971	30,656	29,691
		48,927	809	49	49	2,972	52,806	51,840
2011
Trade, bills and other payables	–	12,834	377	–	–	–	13,211	13,211
Obligations under finance leases	10.80	1	1	1	1	4	8	7
Bank borrowings at variable interest rate	3.44	26,021	48	48	48	3,178	29,343	28,360
		38,856	426	49	49	3,182	42,562	41,578

Bank loans with a repayment on demand clause are included in the "on demand or less than 3 months" time band in the above maturity analysis. As at 30 June 2012 and 30 June 2011, the carrying amounts of these bank loans amounted to US\$27,358,000 and US\$25,973,000 respectively.

As at 30 June 2012, included in the Group's bank borrowings classified as current liabilities are bank borrowings of US\$7,500,000 that were in breach of loan covenants and the bank has the right to demand for immediate payment. This loan balance is included in bank loans that contain a repayable on demand clause repayable within one year, as set out in note 24 and in bank borrowings that are repayable on demand or less than 3 months in the above maturity analysis. Subsequent to the end of the reporting period, the Group had obtained written consent from the bank which confirmed that they have agreed to waive the right to demand for immediate repayment of such a loan balance at the end of the reporting period.

Taking into account the Group's financial position, the directors do not believe that it is probable that the banks will exercise their discretionary rights to demand immediate repayment. The directors believe that such bank loans will be repaid within five years after the reporting date in accordance with the scheduled repayment dates set out in the loan agreements. During that period, the aggregate principal and interest cash outflows will amount to US\$27,520,000 (2011: US\$26,387,000).

For the year ended 30 June 2012

33. FINANCIAL INSTRUMENTS (Continued)

b. Financial risk management objectives and policies (Continued) Liquidity risk (Continued)

			Maturity Analysis-Term loans subject to a repayment on demand clause based on scheduled repayments		Total undiscounted
	Less than 3 months US\$'000	4 to 6 months US\$'000	7 to 12 months US\$'000	Over 1 year US\$'000	cash outflows US\$'000	Carrying amount US\$'000
30 June 2012	26,258	161	319	782	27,520	27,358
30 June 2011	22,069	2,208	20	2,090	26,387	25,973

c. Fair value of financial instruments

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

• the fair value of the available-for-sale investments traded on active liquid markets are determined with reference to quoted market bid prices; and
• the fair value of other financial assets and financial liabilities are determined in accordance with generally accepted pricing models based on discounted cash flow analysis.

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

d. Fair value measurements recognised in the consolidated statement of financial position

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable.

• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active market for identical assets or liabilities.
• Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

For the year ended 30 June 2012

33. FINANCIAL INSTRUMENTS (Continued)

d. Fair value measurements recognised in the consolidated statement of financial position (Continued)

	Level 1
	2012 US\$'000	2011 US\$'000
Available-for-sale investments	70	102

34. DIVIDEND

No dividend in respect of the year ended 30 June 2011 (2011: the dividend of HK\$0.01 per ordinary share in respect of the year ended 30 June 2010) has been paid during the year. The directors of the Company do not recommend a dividend in respect of the year ended 30 June 2012.

35. PARTICULARS OF PRINCIPAL SUBSIDIARIES

Particulars of the Company's principal subsidiaries at 30 June 2012 and 2011 were as follows:

Name of subsidiary	Place of incorporation or registration/ operations	Issued and fully paid share capital	Proportion of nominal value of issued capital/ registered capital held by the Company		Principal activities
			2012 %	2011 %
Advance Always Limited	British Virgin Islands	US\$1	100	100	Investment holding
Eastcom, Inc.	United States of America	US\$1,000	100	100	Wholesaling and distribution of computer components
Elite View Development Ltd.	Hong Kong	HK\$1	100	100	Provision of services to group companies
Green Privado Asset Holdings LLC	United States of America	US\$1	100	100	Property investment
i. Concept Inc.	Samoa	US\$1	100	100	Investment holding
東莞嘉耀电子有限公司 (Note a)	PRC	RMB26,265,224 contributed capital	100	100	Manufacturing of electronics and computer digital audio device
Pan Eagle Limited	British Virgin Islands	US\$100	100	100	Investment holding
Pine Group Hong Kong Limited	Hong Kong	HK\$2	100	100	Investment holding
Pine Group Limited	British Virgin Islands	US\$10,000 common shares US\$2,995,729	100	100	Investment holding

Class A shares

For the year ended 30 June 2012

35. PARTICULARS OF PRINCIPAL SUBSIDIARIES (Continued)

Particulars of the Company's principal subsidiaries at 30 June 2012 and 2011 were as follows: (Continued)

Name of subsidiary	Place of incorporation or registration/ operations	Issued and fully paid share capital	Proportion of nominal value of issued capital/ registered capital held by the Company		Principal activities
			2012 %	2011 %
Pine Lab TW Co. Ltd.	Republic of China	NTW1,000,000	100	100	Provision of research and development services
Pine Technology (Macao Commercial Offshore) Ltd	Macao	MOP100,000	100	100	Wholesaling and distribution of computer components
Pine Technology Limited	Hong Kong	HK\$3	100	100	Wholesaling and distribution of computer components
Pine Technology Netherlands B.V. (Note b)	Netherlands	EUR18,200	–	100	Wholesaling and distribution of computer components
Pine Technology (BVI) Limited (Note c)	British Virgin Islands	US\$10,000	100	100	Investment holding
Pineview Industries Limited (Note d)	Hong Kong	HK\$1,000 Ordinary shares and HK\$2,400,000 Non-voting 5% deferred shares	100	100	Provision of production and other facilities to group companies
Quality Eagle Technology Dongguan Ltd (品嘉电子(東莞)有限公司) (Note c)	PRC	RMB44,200,217 contributed capital	100	100	Manufacturing of electronics and computer digital audio device
Samtack Inc.	Canada	CAD5 Common share CAD2,041,250 Class A shares	100	100	Wholesaling and distribution of computer components

Notes:

• (a) Subsidiaries in the PRC are wholly foreign owned enterprises.
• (b) Pine Technology Netherlands B.V. completed the wind-up process during the year ended 30 June 2012.
• (c) The Company directly holds the entire interest in Pine Technology (BVI) Limited. The interests of all other companies are indirectly held by the Company.

For the year ended 30 June 2012

35. PARTICULARS OF PRINCIPAL SUBSIDIARIES (Continued)

(d) Deferred shares of the company amounting to HK\$1,800,000 are not held by the Group. The deferred shares practically carry no right to dividend or to receive notice of or to attend or vote at any general meeting of the company. On winding up, the holders of the deferred shares are entitled to distribution out of the remaining assets of the company only after the distribution of HK\$1,000 million, as specified in the Articles of Association, to holders of ordinary shares.

The directors of the Company are of the opinions that a complete list of the particulars of all subsidiaries of the Company will be excessive length and therefore the above list contains only the particulars of subsidiaries which principally affect the result of the Group.

None of the subsidiaries had any debt securities outstanding at 30 June 2012 or at any time during the year.

Summarised Statement of Financial Position of the Company

	2012 US\$'000	2011 US\$'000
ASSETS AND LIABILITIES
Investment of subsidiaries	9,087	9,087
Amounts due from subsidiaries Other assets	39,518 236	39,517 237
Amounts due to subsidiaries	(110)	(109)
	48,731	48,732
CAPITAL AND RESERVES
Share capital	11,844	11,844
Share premium	27,063	27,063
Reserves	9,824	9,825
	48,731	48,732

Financial Summary

		Year ended 30 June
	2008	2009	2010	2011	2012
	US\$'000	US\$'000	US\$'000	US\$'000	US\$'000
RESULTS
Turnover	505,511	313,487	351,420	259,559	231,953
Cost of sales	(459,699)	(282,496)	(311,411)	(237,451)	(209,897)
Gross profit	45,812	30,991	40,009	22,108	22,056
Other income	340	153	287	314	361
Selling and distribution expenses	(8,906)	(6,305)	(9,355)	(7,789)	(7,825)
General and administrative expenses	(24,879)	(21,808)	(22,042)	(20,519)	(17,733)
Other gains and losses	(964)	296	(2,639)	1,495	783
Finance costs	(3,813)	(1,520)	(727)	(1,020)	(880)
Profit (loss) before tax	7,590	1,807	5,533	(5,411)	(3,238)
Income tax (expense) credit	(1,274)	(695)	(1,484)	232	(200)
Profit (loss) for the year	6,316	1,112	4,049	(5,179)	(3,438)

	As at 30 June
	2008 US\$'000	2009 US\$'000	2010 US\$'000	2011 US\$'000	2012 US\$'000
ASSETS, LIABILITIES AND EQUITY
Total assets	180,365	135,769	153,364	120,934	128,276
Total liabilities	(104,751)	(59,742)	(72,581)	(46,370)	(56,782)
	75,614	76,027	80,783	74,564	71,494
Equity attributable to owners of the Company	75,614	76,027	80,783	74,564	71,494