THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of the Offer, this Composite Document and/or the accompanying Form of Acceptance or as to the action to be taken, you should consult a licensed securities dealer or registered institution in securities, a bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in United Pacific Industries Limited, you should at once hand this Composite Document and the accompanying Form of Acceptance to the purchaser(s) or transferee(s) or to the bank, licensed securities dealer or registered institution in securities or other agent through whom the sale or transfer was effected for transmission to the purchaser(s) or transferee(s).

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

This Composite Document should be read in conjunction with the accompanying Form of Acceptance, the contents of which form part of the terms and conditions of the Offer.

SUPER FAME HOLDINGS LIMITED

(incorporated in the British

Virgin Islands with limited liability)

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(Stock Code: 176)

Websites: www.upi.com.hk www.irasia.com/listco/hk/upi

COMPOSITE DOCUMENT RELATING TO VOLUNTARY CONDITIONAL CASH OFFER BY VMS SECURITIES LIMITED FOR AND ON BEHALF OF SUPER FAME HOLDINGS LIMITED TO ACQUIRE ALL THE ISSUED SHARES OF UNITED PACIFIC INDUSTRIES LIMITED

Joint financial advisers to the Offeror

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VMS Securities Limited

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Financial adviser to the Company

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Independent Financial Adviser to the Independent Board Committee of United Pacific Industries Limited

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Capitalised terms used on this cover shall have the same meanings as those defined in this Composite Document unless the content requires otherwise.

A letter from VMS Securities containing, among other things, the details of the terms and conditions of the Offer is out on pages 5 to 14 of this Composite Document. A letter from the Board is set on pages 15 to 23 of this Composite Document. A letter from the Independent Board Committee containing its recommendation in respect of the Offer to the Independent Shareholders is set out on pages 24 to 25 of this Composite Document. A letter from VBG Capital containing its advice to the Independent Board Committee in respect of the Offer is set out on pages 26 to 41 of this Composite Document.

The procedures for acceptance and settlement of the Offer are set out on pages 42 to 50 in Appendix I to this Composite Document and in the accompanying Form of Acceptance. Acceptances of the Offer must be received by the Registrar, Tricor Secretaries Ltd, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong by no later than 4:00 p.m. on Wednesday, 25 January 2017, or such later time and/or date as the Offeror may determine and announce with the consent of the Executive and in accordance with the Takeovers Code.

Any persons including, without limitation, custodians, nominees and trustees, who would, or otherwise intend to, forward this Composite Document and/or the accompanying Form of Acceptance to any jurisdiction outside Hong Kong should read the section headed “Overseas Independent Shareholders’’ in the “Letter from VMS Securities” and Appendix I to this Composite Document before taking any action. It is the responsibility of the Overseas Independent Shareholders who wish to accept the Offer to satisfy themselves as to the full observance of the laws and regulations of the relevant jurisdictions in connection with the acceptance of the Offer, including the obtaining of any governmental, exchange control or other consent and any registration or filing which may be required or the compliance with other necessary formalities, regulatory and/or legal requirements and the payment of any transfer or other taxes due in respect of such jurisdictions. Overseas Independent Shareholders are advised to seek professional advice on deciding whether to accept the Offer.

23 December 2016

CONTENT

	Pages
Expected timetable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	ii
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from VMS Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	24
Letter from the Independent Financial Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	26
Appendix I: Further terms and procedures of acceptance of the Offer . . . . . . . . . . . .	42
Appendix II: Financial Information of the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	51
Appendix III: General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	150

Accompanying document — Form of Acceptance

−i −

EXPECTED TIMETABLE

The expected timetable set out below is indicative only and is subject to change. Any changes to the timetable will be jointly announced by the Offeror and the Company.

Despatch date of this Composite Document and the accompanying Form of Acceptance and commencement date of the Offer (Note 1) . . . . . . . . . . . . . . . . . . . . Friday, 23 December 2016
Latest time and date for acceptance of the Offer on the first Closing Date (Note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4:00 p.m. on Wednesday, 25 January 2017
First Closing Date (Note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Wednesday, 25 January 2017 Announcement of the results of the Offer as at the first Closing Date, to be posted on the website of the Stock Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . no later than 7:00 p.m. on Wednesday, 25 January 2017
Latest date for posting of remittances for the amount due in respect of valid acceptances received under the Offer on or before 4:00 p.m. on the first Closing Date assuming the Offer become or are declared unconditional on the first Closing Date (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Wednesday, 1 February 2017
Latest time and date for the Offer remaining open for acceptance on the final Closing Date assuming the Offer become or are declared unconditional on the first Closing Date (Note 5) . . . . . . . . . . . . . . . . 4:00 p.m. on Wednesday, 8 February 2017
Final Closing Date (Note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Wednesday, 8 February 2017 Announcement of the results of the Offer as at the final Closing Date, to be posted on the website of the Stock Exchange . . . . . . . . . . . . . . . . . . . . . . . . . no later than 7:00 p.m. on Wednesday, 8 February 2017
Latest date for posting of remittances for the amount due in respect of valid acceptances received under the Offer on or before 4:00 p.m. on the Final Closing Date, being the latest date on which the Offer remains open for acceptances assuming the Offer becomes or is declared unconditional on the first Closing Date (Note 4) . . . . . . . . . . . . . . . Monday, 13 February 2017

−ii −

EXPECTED TIMETABLE

Latest time and date by which the Offer can
become or be declared unconditional as to acceptances (Note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . no later than 7:00 p.m. on Tuesday 21 February 2017

Notes:

The Offer is open for acceptance on and from 23 December 2016, being the date of posting of this Composite Document, and are capable of acceptance on and from that date until the Closing Date.
Beneficial owners of Shares who hold their Shares in CCASS directly as an investor participant or indirectly via a broker or custodian participant should note the timing requirements (as set out in Appendix I to this Composite Document) for causing instructions to be made to CCASS in accordance with the General Rules of CCASS and CCASS Operational Procedures.
The Offer will initially remain open for acceptances until 4:00 p.m. on 25 January 2017 unless the Offeror revises or extends the Offer in accordance with the Takeovers Code. The Offeror has the right under the Takeovers Code to extend the Offer until such date as it may determine in accordance with the Takeovers Code (or as permitted by the Executive in accordance with the Takeovers Code). The Offeror will issue an announcement in relation to any extension of the Offer, which announcement will state either the next Closing Date or, if the Offer is at that time unconditional as to acceptances, a statement that the Offer will remain open until further notice. In the latter case, at least 14 days’ notice in writing must be given before the Offer is closed to those Shareholders who have not accepted the Offer.
Subject to the Offer becoming unconditional, remittances in respect of the cash consideration for the Offer Shares tendered under the Offer will be despatched to the accepting Shareholder(s) (to the address specified on the relevant Shareholder’s Form of Acceptance) by ordinary post at his/her/its own risk as soon as possible, but in any event within three (3) Business Days following the later of the date of receipt by the Registrar of all the relevant documents to render the acceptance under the Offer complete, valid and in compliance with Note 1 to Rule 30.2 of the Takeovers Code, and the date on which the Offer becomes or is declared unconditional in all respects.
In accordance with the Takeovers Code, where the Offer becomes or is declared unconditional in all respects, the Offer should remain open for acceptance for not less than 14 days thereafter. In such case, at least 14 days’ notice in writing must be given before the Offer is closed. The Offeror has the right, subject to the Takeovers Code, to extend the Offer until such date as the Offeror determines or as permitted by the Executive, in accordance with the Takeovers Code. The Offeror will issue a press announcement in relation to any extension of the Offer, which will state the next closing date or, if the Offer has become or is at that time unconditional, that the Offer will remain open until further notice.
In accordance with the Takeovers Code, except with the consent of the Executive, the Offer may not become or be declared unconditional as to acceptances after 7:00 p.m. on 21 February 2017, being the 60th day after the day this Composite Document is posted. Accordingly, unless the Offer has previously become unconditional as to acceptances, the Offer will lapse on 21 February 2017 unless extended with the consent of the Executive and in accordance with the Takeovers Code. In addition, unless the Offer becomes or is declared unconditional in all respects within 21 days of the Offer becoming or is being declared unconditional as to acceptances, the Offer will lapse. Therefore, the last day by which the Offer can become or be declared unconditional in all respects is 14 March 2017.

−iii −

EXPECTED TIMETABLE

The latest time and date for acceptance of the Offer and the latest date for posting of remittances for the amounts due under the Offer in respect of valid acceptances will not take effect if there is a tropical cyclone warning signal number 8 or above, or a “black rainstorm warning”, in force in Hong Kong at any local time between 12:00 noon and 4:00 p.m. on the latest date for acceptance of the Offer and the latest date for posting of remittances for the amounts due under the Offer in respect of valid acceptances. Instead the latest time for acceptance of the Offer and the posting of remittances will be rescheduled to 4:00 p.m. on the following Business Day which does not have either of those warnings in force at any time between 9:00 a.m. and 4:00 p.m.

All references to date and time contained in this Composite Document and the Form of Acceptance refer to Hong Kong date and time.

−iv −

DEFINITIONS

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

“acting in concert”

has the meaning ascribed to it under the Takeovers Code

“associate”

has the meaning ascribed to it under the Takeovers Code

“Best Service” Best Service Holdings Limited, a company incorporated in the British Virgin Islands, being a substantial Shareholder interested in 281,313,309 Shares as at the Latest Practicable Date
“Best Service Irrevocable the irrevocable undertaking given by Best Service in favour Undertaking” of the Offeror to accept the Offer in respect of the Shares held by it
“Board”
the board of Directors
“Business Day(s)” a day on which the Stock Exchange is open for the transaction of business
“CCASS”
the Central Clearing and Settlement System established and operated by the Hong Kong Securities Clearing Company Limited
“Closing Date”
25 January 2017, the closing date of the Offer, or if the Offer is extended, any subsequent closing date as the Offeror may determine and announce with the consent of the Executive and in accordance with the Takeovers Code
“Company”
United Pacific Industries Limited, a company incorporated in Bermuda with limited liability, the issued shares of which are listed on the Main Board of the Stock Exchange (stock code: 00176)
“Composite Document” this composite document to be issued, in accordance with the Takeovers Code and the Listing Rules, jointly by the Offeror and the Company in relation to the Offer
“Conditions”
the conditions to the Offer, as set out in the section sub headed “Conditions to the Offer” of this Composite Document
“controlling shareholder” has the meaning ascribed to it under the Listing Rules
“Director(s)”
the director(s) of the Company

−1 −

DEFINITIONS

“Executive”

“Form of Acceptance”
“Group”
“HKSCC”
“Hong Kong”
“HK$”
“Independent Board Committee”
“Independent Financial Adviser” or “VBG Capital”
“Independent Shareholder(s)”
“Irrevocable Undertakings”
“Joint Announcement”
“KGI Capital Asia”
“Kingage International”

the Executive Director of the Corporate Finance Division of the Securities and Futures Commission or any delegate of the Executive Director

the form of acceptance in respect of the Offer accompanying this Composite Document

the Company and its subsidiaries

the Hong Kong Securities Clearing Company Limited

the Hong Kong Special Administrative Region of the PRC

Hong Kong dollars, the lawful currency of Hong Kong

the independent board committee, comprising one non-executive Director, namely Dato’ Choo Chuo Siong and all independent non-executive Directors, namely, Dr. Wong Ho Ching, Mr. Lan Yen-Po and Ms. Hu Gin Ing, established for the purpose of making a recommendation to the Independent Shareholders in relation to the Offer

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

holder(s) of the Shares, other than the Offeror and the parties acting in concert with it

the Best Service Irrevocable Undertaking and the Kingage International Irrevocable Undertaking

the joint announcement issued by the Offeror and the Company dated 25 November 2016 in relation to, among other things, the Offer and the Irrevocable Undertakings KGI Capital Asia Limited, a corporation licensed to carry out type 1 (dealing in securities), type 4 (advising on securities) and type 6 (advising on corporate finance) regulated activities under the SFO, and acting as the financial adviser to the Company
Kingage International Limited, a company incorporated in the British Virgin Islands, being a substantial Shareholder interested in 163,336,303 Shares as at the Latest Practicable Date

−2 −

DEFINITIONS

“Kingage International Irrevocable Undertaking”
the irrevocable undertaking given by Kingage International in favour of the Offeror to accept the Offer in respect of the Shares held by it
“Last Trading Day” 21 November 2016, being the last trading day immediately prior to suspension of trading in the Shares pending the release of the Joint Announcement
“Latest Practicable Date” 21 December 2016, being the latest practicable date prior to the printing of this Composite Document for ascertaining certain information contained herein
“Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange
“Main Board”

Main Board of the Stock Exchange (excludes the option market) operated by the Stock Exchange which is independent from and operated in parallel with the Growth Enterprise Market of the Stock Exchange

“Mr. Lee”
Mr. Lee Chi Shing, Caesar, a substantial shareholder and director of the Offeror
“Ms. Yeung” Ms. Yeung So Lai, a substantial shareholder and director of the Offeror
“Offer”
a voluntary conditional cash offer to be made by VMS Securities for and on behalf of the Offeror to acquire all of the Offer Shares in accordance with the terms and conditions set out in this Composite Document
“Offer Period”
the period commencing from 25 November 2016, being the date of the announcement in relation to the, among other things, the Offer and the Irrevocable Undertakings and the start of offer period, up to the Closing Date
“Offer Price”
the price at which the Offer will be made, being HK$0.493 per Offer Share
“Offer Share(s)”
any and all of the issued Share(s)
“Offeror”
Super Fame Holdings Limited (超名控股有限公司), a company incorporated in the British Virgin Islands with the address of its registered office at P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands

−3 −

DEFINITIONS

“Overseas Independent	Independent Shareholder(s) whose address(es) as stated in
Shareholder(s)”	the register of members of the Company is (are) outside Hong
	Kong
“PRC”	the People’s Republic of China which, for the purpose of this
	Composite Document, shall exclude Hong Kong, Macau
	Special Administrative Region of the PRC and Taiwan
“Registrar”	Tricor Secretaries Limited, the Hong Kong branch share
	registrar and transfer office of the Company, with its address
	at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong
	Kong
“Relevant Period”	the period commencing on 25 May 2016, being the date
	falling six months before the date of the Joint Announcement
	in relation to the Offer and the start of the Offer Period, up
	to and including the Latest Practicable Date
“SFC”	the Securities and Futures Commission of Hong Kong
“SFO”	Securities and Futures Ordinance (Chapter 571 of the Laws of
	Hong Kong)
“Share(s)”	The ordinary share(s) of HK$0.1 each in the share capital of
	the Company
“Shareholder(s)”	holder(s) of the issued Share(s)
“Shining”	Shining International Holdings Limited, a corporation
	licensed to carry out business in type 4 (advising on
	securities), type 5 (advising on futures contracts), type 6
	(advising on corporate finance) and type 9 (asset
	management)
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Takeovers Code”	the Codes on Takeovers and Mergers and Share Buy-backs
	issued by the SFC
“Veda Capital”	Veda Capital Limited, a corporation licensed to carry out
	business in type 6 (advising on corporate finance) regulated
	activity under the SFO
“VMS Securities”	VMS Securities Limited, a corporation licensed to carry out
	business in type 1 (dealing in securities), type 4 (advising on
	securities), type 6 (advising on corporate finance) and type 9
	(asset management) regulated activities under the SFO
‘‘%’’	per cent.

−4 −

LETTER FROM VMS SECURITIES

23 December 2016

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VMS Securities Limited

To the Independent Shareholders,

Dear Sir or Madam,

VOLUNTARY CONDITIONAL CASH OFFER BY VMS SECURITIES LIMITED FOR AND ON BEHALF OF SUPER FAME HOLDINGS LIMITED TO ACQUIRE ALL THE ISSUED SHARES OF UNITED PACIFIC INDUSTRIES LIMITED

INTRODUCTION

On 25 November 2016, the Offeror and the Company jointly announced that, among other things, voluntary conditional cash offer would be made by VMS Securities, for and on behalf of the Offeror to acquire all of the Shares in the entire issued share capital of the Company.

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

THE OFFER

VMS Securities, on behalf of the Offeror, hereby makes the voluntary conditional cash offer to all Independent Shareholders to acquire all of the Shares in the entire issued share capital of the Company on the following basis:

The Offer

For each Offer Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . HK$0.493 in cash

The Shares to be acquired under the Offer shall be fully paid and shall be acquired free from all liens, charges, encumbrances, rights of pre-emption and any other third party rights of any nature and together with all rights attaching thereto, including the right to receive in full all dividends and other distributions, if any, declared, paid or made on or after the date on which the Offer is made, being the date of despatch of this Composite Document. Any dividends or other distributions the record date of which is before the date of this Composite Document will be paid by the Company to the Shareholders who are qualified for such dividends or distributions.

−5 −

LETTER FROM VMS SECURITIES

As at the Latest Practicable Date, there are 1,318,279,590 Shares in issue, and the Offeror and the parties acting in concert with it are not interested in any Share (other than as a result of the execution of the Irrevocable Undertakings).

Further details of the terms of the Offer and the procedures for acceptance are set out in Appendix I to this Composite Document and the accompanying Form of Acceptance.

The Offer Price

The Offer Price of HK$0.493 per Offer Share represents:

(i) a premium of approximately 0.61% over the closing price of HK$0.490 per Share as quoted on the Stock Exchange on the Latest Practicable Date;
(ii) a premium of approximately 8.35% over the closing price of HK$0.455 per Share as quoted on the Stock Exchange on the Last Trading Day;
(iii) a premium of approximately 5.12% over the average of the closing prices of the Shares as quoted on the Stock Exchange for the five (5) consecutive trading days up to and including the Last Trading Day of approximately HK$0.469 per Share;
(iv) a premium of approximately 3.79% over the average of the closing prices of the Shares as quoted on the Stock Exchange for the ten (10) consecutive trading days up to and including the Last Trading Day of approximately HK$0.475 per Share;
(v) a premium of approximately 4.67% over the average of the closing prices of the Shares as quoted on the Stock Exchange for the thirty (30) consecutive trading days up to and including the Last Trading Day of approximately HK$0.471 per Share; and
(vi) a premium of approximately 40.06% over the unaudited consolidated net asset value per Share as at 30 June 2016 of approximately HK$0.352 (which was calculated by dividing the sum of the unaudited consolidated net asset value of the Group as at 30 June 2016 of approximately HK$464,528,000 by 1,318,279,590 Shares in issue as at the Latest Practicable Date).

Highest and Lowest Share Prices

The highest closing price of the Shares as quoted on the Stock Exchange during the Relevant Period was HK$0.57 on 13 September 2016, 14 September 2016 and 15 September 2016 respectively and the lowest closing price of the Shares as quoted on the Stock Exchange during the Relevant Period was HK$0.39 on 10 August 2016.

−6 −

LETTER FROM VMS SECURITIES

Value of the Offer

As at the Latest Practicable Date, there are 1,318,279,590 Shares in issue. There are no outstanding warrants, options, derivatives or securities convertible into Shares and the Company has not entered into any agreement for the issue of such warrants, options, derivatives or securities convertible into Shares as at the date of the Latest Practicable Date.

Assuming that there is no change in the issued share capital of the Company and on the basis of the Offer Price at HK$0.493 per Offer Share, the entire issued share capital of the Company would be valued at HK$649,911,837.87.

Confirmation of financial resources

The Offeror intends to finance the consideration payable by the Offeror’s internal financial resources.

VMS Securities, Veda Capital and Shining, as the joint financial advisers to the Offeror in respect of the Offer, are satisfied that sufficient financial resources are available to the Offeror to satisfy the total consideration in respect of full acceptance of the Offer.

Conditions to the Offer

The Offer is conditional upon the satisfaction of the following Conditions:

(a) valid acceptances of the Offer being received (and not, where permitted, withdrawn) by 4:00 p.m. on the Closing Date (or such later time or date as the Offeror may, subject to the Takeovers Code, decide) in respect of such number of Shares which, together with Shares acquired or agreed to be acquired before or during the Offer, will result in the Offeror and the parties acting in concert with it together holding not less than 50% of the voting rights of the Company;
(b) the Shares remaining listed and traded on the Stock Exchange up to the Closing Date save for any temporary suspension(s) of trading in the Shares as a result of the Offer and no indication being received on or before the Closing Date from the SFC and/or the Stock Exchange to the effect that the listing of the Shares on the Stock Exchange is or is likely to be withdrawn, other than as a result of the Offer; and
(c) no events, up to the Closing Date, having occurred which would make the Offer or the acquisition of any of the Shares under the Offer void, unenforceable or illegal or their implementation being prohibited or which would impose material conditions, limitations or obligations with respect to the Offer.

As at the Latest Practicable Date, no events have occurred which would make the Offer or the acquisition of any of the Shares under the Offer void, unenforceable or illegal or their implementation being prohibited or which would impose material conditions, limitations or obligations with respect to the Offer.

−7 −

LETTER FROM VMS SECURITIES

The Offeror reserves the right to waive, in whole or in part, Condition (b). Conditions (a) and (c) cannot be waived.

Pursuant to Note 2 to Rule 30.1 of the Takeovers Code, the Offeror should not invoke Condition (c) so as to cause the Offer to lapse unless the circumstances which give rise to the right to invoke any such Conditions are of material significance to the Offeror in the context of the Offer.

The Offeror reserves the right to revise the terms of the Offer in accordance with the Takeovers Code.

In accordance with Rule 15.3 of the Takeovers Code, the Offeror must publish an announcement when the Offer becomes unconditional as to acceptances and when the Offer become unconditional in all respects. The Offer must also remain open for acceptance for at least fourteen (14) days after the Offer become unconditional in all respects. Independent Shareholders should note that Offeror does not have any obligation to keep the Offer open for acceptance beyond this 14-day period.

WARNING: Shareholders and/or potential investors of the Company should note that the Offer is subject to the satisfaction or waiver (where applicable) of the Conditions. Accordingly, the Offer may or may not become unconditional. Shareholders, and/or potential investors of the Company should therefore exercise caution when dealing in the securities of the Company. Persons who are in doubt as to the action they should take should consult their licensed securities dealers or registered institutions in securities, bank managers, solicitors, professional accountants or other professional advisers.

Overseas Independent Shareholders

The Offeror intends to make the Offer available to all Independent Shareholders, including those who are not resident in Hong Kong. The availability of the Offer to persons who are not resident in Hong Kong may be affected by the laws of the relevant overseas jurisdictions. The making of the Offer to persons with a registered address in jurisdictions outside Hong Kong may be prohibited or affected by the laws or regulations of the relevant jurisdictions. Such Independent Shareholders who are citizens, residents or nationals of a jurisdiction outside Hong Kong should observe relevant applicable legal or regulatory requirements and, where necessary, seek legal advice. It is the responsibility of the individual Independent Shareholders who wish to accept the Offer to satisfy themselves as to the full observance of the laws and regulations of the relevant jurisdictions in connection with the acceptance of the Offer (including the obtaining of any regulatory or other consent which may be required or the compliance with other necessary formalities and the payment of any transfer or other taxes due in respect of such jurisdictions).

As at the Latest Practicable Date, based on the record in the Company’s register of members, outside of Hong Kong, the Company had one Overseas Independent Shareholder with registered address located in Switzerland, one Overseas Independent Shareholder with registered address located in Thailand, one Overseas Independent Shareholder with registered address located in the US, three Overseas Independent Shareholders with registered addresses located in Taiwan. The Company and the Offeror have enquired about the legal restrictions under the applicable securities legislation of the relevant jurisdictions and the requirements of the relevant regulatory body or stock exchange with

−8 −

LETTER FROM VMS SECURITIES

respect to the extension of the Offer to such Overseas Independent Shareholders. The Offeror was advised by the relevant legal advisers that the Composite Document and the accompanying Forms of Acceptance may be despatched to such Overseas Independent Shareholders and will do so accordingly.

This Composite Document will not be filed, nor approval for its issuance sought, under the applicable securities or equivalent legislation or rules of any jurisdiction other than Hong Kong. Whether or not the Composite Document is sent to the Overseas Independent Shareholders, the Composite Document will be published on the websites of the Company and the Stock Exchange, and will be available for collection in the office of the share Registrar. It is the responsibility of the individual Independent Shareholders who wish to accept the Offer to satisfy themselves as to the full observance of the laws and regulations of the relevant jurisdictions in connection with the acceptance of the Offer (including the obtaining of any regulatory or other consent which may be required or the compliance with other necessary formalities and the payment of any transfer or other taxes due in respect of such jurisdictions).

Any acceptance by any Independent Shareholder who is not resident in Hong Kong will be deemed to constitute a representation and warranty from such Independent Shareholder to the Offeror that the local laws and requirements have been complied with. All such Independent Shareholders should consult their professional advisers if in doubt.

Stamp Duty

Seller’s ad valorem stamp duty at a rate of 0.1% of the market value of the Shares or consideration payable by the Offeror in respect of the relevant acceptances of the Offer, whichever is higher, will be deducted from the amount payable to the relevant Shareholder on acceptance of the Offer. The Offeror will arrange for payment of the sellers’ ad valorem stamp duty on behalf of the accepting Shareholders and pay the buyer’s ad valorem stamp duty in connection with the acceptance of the Offer and the transfer of the Shares.

IRREVOCABLE UNDERTAKINGS

On 21 November 2016 (after trading hours), Kingage International executed the Kingage International Irrevocable Undertaking in favour of the Offeror, pursuant to which Kingage International has irrevocably undertaken to the Offeror to accept the Offer in respect of the Shares held by Kingage International subject to the Conditions of the Offer.

As at the Latest Practicable Date, (i) Best Service is interested in 281,313,309 Shares, representing approximately 21.34% of the issued share capital of the Company; and (ii) Kingage International is interested in 163,336,303 Shares, representing approximately 12.39% of the issued share capital of the Company.

−9 −

LETTER FROM VMS SECURITIES

Prior to the closing, lapse or withdrawal of the Offer, each of Best Service and Kingage International has undertaken not to sell or transfer (or cause the same to be done) or otherwise dispose of (or permit any such action to occur in respect of) any interest in any Shares interested by Best Service and Kingage International.

The Irrevocable Undertakings will remain effective unless the Offer lapse or are withdrawn. Save for disclosed above, there are no other circumstances under which the Irrevocable Undertakings may cease to be binding.

INFORMATION OF THE OFFEROR

The Offeror is an investment holding company incorporated in the British Virgin Islands with limited liability and is owned as to 55% by Ms. Yeung and 45% by Mr. Lee.

Ms. Yeung So Lai, aged 38, is currently an executive director of Sun Century Group Limited (stock code: 1383). Ms. Yeung is presently a director of a number of private companies engaged in the business of bird’s nest trading and investment holding and is experienced in corporate management. Ms. Yeung was also executive director and chief executive officer of JF Household Furnishings Limited (Stock Code: 0776) from September 2012 to July 2016. The shares of these companies are listed on the Main Board of the Stock Exchange.

Mr. Lee Chi Shing Caesar, aged 53, obtained a Professional Diploma in Accountancy from the Hong Kong Polytechnic (now known as Hong Kong Polytechnic University) in 1985 and a Bachelor of Arts in Business Studies from the City Polytechnic of Hong Kong (now known as the City University of Hong Kong) in 1994. He had worked in the Inland Revenue Department for over 15 years after his graduation. In 2000, he joined Ernst and Young, an international accounting firm, as a senior manager. He later obtained a Master degree in International Accountancy from the City University of Hong Kong in 2001. He was an executive director of Southwest Securities International Securities Limited (formerly known as Tanrich Financial Holdings Limited) (stock code: 812), a company listed on the Main Board of the Stock Exchange, from 1 November 2004 to 29 June 2005. He was also an executive director of Sage International Group Limited (formerly known as Info Communication Holdings Limited) (stock code: 8082), a company listed on the Growth Enterprise Market of the Stock Exchange, from 23 November 2007 to 1 September 2010. He was the executive director of Sun International Resources Limited (formerly known as Sun International Group Limited) (stock code: 8029), a company listed on the Growth Enterprise Market of the Stock Exchange from 14 August 2006 to 30 November 2015. He is experienced in corporate management and internal control. He is a fellow member of both the Hong Kong Institute of Certified Public Accountants and the Association of Chartered Certified Accountants. In addition, he is a member of the Society of Registered Financial Planners.

As at the Latest Practicable Date, Ms. Yeung and Mr. Lee are the directors of the Offeror.

−10 −

LETTER FROM VMS SECURITIES

INFORMATION ON THE GROUP

Principal activities

The Company is an investment holding company. The Group is principally engaged in design and manufacture of consumer electronic products which are principally audio and video baby monitors. These products are being sold as OEM/ODM products.

Your attention is drawn to the details of the information of the Group as set out under the section headed “Information on the Group” in the “Letter from the Board” and in Appendices II and III to this Composite Document.

INTENTIONS OF THE OFFEROR IN RELATION TO THE GROUP

The Offeror intends to continue the existing businesses of the Group. As at the Latest Practicable Date, the Offeror has no plan to inject any assets or businesses into the Group or to procure the Group to acquire or dispose of any assets.

Immediately after the close of the Offer, the Offeror will conduct a review of the financial position and operations of the Group in order to formulate a long-term strategy for the Group and explore other business/investment opportunities for enhancing its future development and strengthening its revenue bases. As at the Latest Practicable Date, the Offeror has not identified such investment or business opportunities.

The Offeror has no intention to terminate the employment of any employees of the Group or to make significant changes to any employment (except for the proposed change of the Board composition as detailed in the section sub-headed “Proposed change to the Board composition of the Company” below) or to dispose of or re-allocate the Group’s assets which are not in the ordinary and usual course of business of the Group.

The Board is aware of the Offeror’s intention regarding the Group and its employees and the proposed change of Board composition, and is willing to render co-operation with the Offeror and would continue to act in the best interests of the Group and the Shareholders as a whole.

Reasons for the Offer

The Offeror believes that if the Offer becomes unconditional, the Group would be able to leverage on (i) Ms. Yeung So Lai’s extensive commercial network for being an experienced business management who has managed various Hong Kong listed companies which include Sun Century Group Limited (stock code: 1383) and JF Household Furnishings Limited (Stock Code: 0776), the business segments of which include manufacturing of furnishings, home products and accessories involving a more diversified and varied consumer electronic products. Upon the Offeror becoming a controlling shareholder of the Company, the Group would be able to leverage on Ms. Yeung’s experience in running electronic products business; and (ii) and Mr. Lee Chi Shing Caesar’s extensive commercial network for being an experienced business management who has managed various Hong Kong listed companies which include Southwest Securities International Securities Limited (formerly known as Tanrich Financial Holdings Limited) (stock code: 812), Sage International Group Limited

−11 −

LETTER FROM VMS SECURITIES

(formerly known as Info Communication Holdings Limited) (stock code: 8082) and Sun International Resources Limited (formerly known as Sun International Group Limited) (stock code: 8029), the business segments of which includes in the provision of funeral services on various funeral customs and activities. Upon the Offeror becoming a controlling shareholder of the Company, the Group would be able to leverage on Mr. Lee’s extensive commercial network to promote and support the Group’s funeral business segment in Taiwan and to promote and develop the funeral services to Hong Kong (as set out in the section headed “INFORMATION OF THE OFFEROR” above).

In addition, it is believed that upon the Offeror becoming the single largest shareholder of the Company, the incentive for the Offeror to play a greater role in directing the future development of the Group would increase significantly, which will create greater value for the Shareholders in long term perspective.

The Offeror further believes that the Offer provides an opportunity for the Independent Shareholders to realise some or all of their Shares in return for immediate cash. The Offer represents a premium of approximately 8.35% over the closing price per Share on the Last Trading Day and approximately 4.67% over the average closing price of approximately HK$0.471 per Share for the last 30 consecutive trading days. Given the recent trading levels, the Offeror believes that the Offer represents an attractive premium to the prices at which the market has valued the Company.

Proposed Change to the Board Composition of the Company

Upon the closing of the Offer, all existing Directors will resign with effect from the earliest time as permitted under the Takeovers Code.

The Offeror intends to nominate new directors to the Board upon the Offer becoming unconditional in all respects or such later date.

Any changes to the Board will be made in compliance with the Takeovers Code and the Listing Rules and further announcement will be made as and when appropriate.

Maintaining the Listing Status of the Company

The Offeror has no intention to privatise the Group and intends to maintain the listing of the Shares on the Stock Exchange. The directors of the Offeror and any new Director(s) to be appointed to the Board will jointly and severally undertake to the Stock Exchange to take appropriate steps after the close of the Offer to ensure that not less than 25% of the entire issued share capital of the Company will continue to be held by the public at all times.

The Stock Exchange has stated that if, upon closing of the Offer, less than the minimum prescribed percentage applicable to the Company, being 25% of the issued Shares, are held by the public or if the Stock Exchange believes that:

(i) a false market exists or may exist in the Shares; or
(ii) there are insufficient Shares in public hands to maintain an orderly market,

−12 −

LETTER FROM VMS SECURITIES

The Stock Exchange will consider exercising its discretion to suspend dealing in the Shares.

ACCEPTANCE OF THE OFFER

Procedures for acceptance

To accept the Offer, you should complete and sign the accompanying Form of Acceptance in accordance with the instructions printed thereon, which instructions form part of the terms and conditions of the Offer.

The duly completed and signed Form of Acceptance, should be sent, together with the relevant share certificate(s) and/or other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof), to the Registrar, Tricor Secretaries Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong, marked “ United Pacific Offer ” on the envelope, in any event not later than 4:00 p.m., on the Closing Date or such later time and/ or date as the Offeror may determine and announce with the consent of the Executive and in accordance with the Takeovers Code.

No acknowledgment of receipt of any Form of Acceptance, share certificate(s) and/or transfer receipt(s) and/or other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) will be given.

Your attention is drawn to “Further terms and procedures of acceptance of the Offer” as set out in Appendix I to this Composite Document and the accompanying Form of Acceptance.

Settlement of the Offer

Subject to the Offer becoming unconditional, remittances in respect of the cash consideration for the Offer Shares tendered under the Offer will be despatched to the accepting Shareholder(s) (to the address specified on the relevant Shareholder’s Form of Acceptance) by ordinary post at his/her/its own risk as soon as possible, but in any event within three (3) Business Days following the later of (i) the date of receipt by the Registrar (in the case of Offer Shares) of all the relevant documents to render the acceptance under the Offer complete, valid and in compliance with Note 1 to Rule 30.2 of the Takeovers Code; and (ii) the date on which the Offer becomes or is declared unconditional in all respects.

No fractions of a cent will be payable and the amount of cash consideration payable to a Shareholder (as the case may be) who accepts the Offer will be rounded up to the nearest cent.

Nominee registration

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

−13 −

LETTER FROM VMS SECURITIES

Taxation advice

Independent Shareholders are recommended to consult their own professional advisers if they are in any doubt as to the taxation implications of accepting or rejecting the Offer. None of the Offeror and the parties acting in concert with it, the Company, VMS Securities, Veda Capital, Shining, KGI Capital Asia, VBG Capital, the Registrar and their respective ultimate beneficial owners, directors, officers, agents or associates or any other person involved in the Offer accepts any responsibility for any taxation effects on, or liabilities of, any persons as a result of their acceptance or rejection of the Offer.

COMPULSORY ACQUISITION

The Offeror does not intend to exercise any right which may be available to them under the provisions of the laws of Bermuda to compulsorily acquire any outstanding Offer Shares not acquired pursuant to the Offer after the close of the Offer.

GENERAL

All documents and remittances will be sent to the Shareholders by ordinary post at such Shareholder’s own risk. These documents and remittances will be sent to them at their respective addresses as they appear in the register of members of the Company, or in the case of joint Shareholders, to the Shareholder whose name appears first in the said register of members, unless otherwise specified in the accompanying Form of Acceptance completed, returned and received by the Registrar. None of the Offeror, the Company, their ultimate beneficial owners and the parties acting in concert with any of them, VMS Securities, Veda Capital, Shining, KGI Capital Asia, VBG Capital, the Registrar or any of their respective directors, officers or associates or any other person involved in the Offer will be responsible for any loss or delay in transmission of such documents and remittances or any other liabilities that may arise as a result thereof.

ADDITIONAL INFORMATION

Your attention is drawn to the additional information regarding the Offer set out in the appendices to this Composite Document and the accompanying Form of Acceptance, which form part of this Composite Document. In addition, your attention is also drawn to the “Letter from the Board”, the “Letter from the Independent Board Committee” and the letter of advice by the independent financial adviser to the Independent Board Committee as set out in the “Letter from VBG Capital” contained in this Composite Document.

Yours faithfully, For and on behalf of VMS Securities Limited Stefanie Chan

Director

−14 −

LETTER FROM THE BOARD

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==> picture [148 x 63] intentionally omitted <==

(Stock Code: 176)

Websites: www.upi.com.hk

www.irasia.com/listco/hk/upi

Executive Director:

Ms. Kelly Lee (Deputy Chairman and Chief Executive Officer)

Non-executive Directors:

Dato’ Choo Chuo Siong (Chairman) Mr. Sun Jih-Hui

Principal Place of Business in Hong Kong: Unit 503C 5/F., Golden Centre 188 Des Voeux Road Central Hong Kong

Registered office:

Independent non-executive Directors: Dr. Wong Ho Ching Mr. Lan Yen-Po Ms. Hu Gin Ing

Clarendon House 2 Church Street Hamilton HM 11 Bermuda

23 December 2016

To the Shareholders,

Dear Sir or Madam,

VOLUNTARY CONDITIONAL CASH OFFER BY

VMS SECURITIES LIMITED FOR AND ON BEHALF OF SUPER FAME HOLDINGS LIMITED TO ACQUIRE ALL THE ISSUED SHARES OF UNITED PACIFIC INDUSTRIES LIMITED

INTRODUCTION

Reference is made to the Joint Announcement whereby the Offeror and the Company jointly announced that, on 25 November 2016, a voluntary conditional cash offer would be made by VMS Securities, for and on behalf of the Offeror, to acquire all of the Shares in the entire issued share capital of the Company.

−15 −

LETTER FROM THE BOARD

The purpose of the Composite Document (of which this letter forms part) is to provide you with, among other things: (i) further information relating to the Group, the Offeror and the Offer; (ii) the “Letter from VMS Securities” containing details of the Offer; (iii) the “Letter from the Independent Board Committee” containing its recommendations to the Independent Shareholders in relation to the Offer; and (iv) the “Letter from VBG Capital” containing its advice to the Independent Board Committee on whether the terms of the Offer are fair and reasonable so far as the Independent Shareholders are concerned and on acceptance in respect of the Offer.

Unless the context otherwise requires, terms defined in the Composite Document shall have the same meanings when used in this letter.

INDEPENDENT BOARD COMMITTEE AND INDEPENDENT FINANCIAL ADVISER

Under Rule 2.1 of the Takeovers Code, a board which receives an offer or which is approached with a view to an offer being made, must, in the interests of shareholders, establish an independent committee of the board to make a recommendation: (i) as to whether the offer is, or is not, fair and reasonable; and (ii) as to acceptance.

The Independent Board Committee, comprising one non-executive Director, namely Dato’ Choo Chuo Siong and all independent non-executive Directors, namely, Dr. Wong Ho Ching, Mr. Lan Yen-Po and Ms. Hu Gin Ing, has been formed to advise the Independent Shareholders as to whether the terms of the Offer are fair and reasonable and as to acceptance of the Offer. The non-executive Director, namely Mr. Sun Jih-Hui, is not included in the Independent Board Committee. As Kingage International, which is wholly owned by Mr. Sun Jih-Hui, has irrevocably undertaken, pursuant to the Kingage International Irrevocable Undertaking, to the Offeror to accept the Offer in respect of the Shares held by Kingage International, Mr. Sun Jih-Hui is considered as having direct interest in the Offer.

As disclosed in the announcement of the Company dated 29 November 2016, VBG Capital has been appointed as the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the Offer. Such appointment has been approved by the Independent Board Committee.

The full texts of the letter from the Independent Board Committee addressed to the Independent Shareholders and the letter from VBG Capital addressed to the Independent Board Committee and the Independent Shareholders are set out in this Composite Document. You are advised to read both letters and the additional information contained in the appendices to this Composite Document carefully before taking any action in respect of the Offer.

−16 −

LETTER FROM THE BOARD

THE OFFER

As disclosed in the “Letter from VMS Securities”, VMS Securities, on behalf of the Offeror, makes the voluntary conditional cash offer to all Independent Shareholders to acquire all the issued Shares on the following basis:

For each Offer Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . HK$0.493 in cash

Comparison of value

The Offer Price of HK$0.493 per Offer Share represents:

(i) a premium of approximately 0.61% over the closing price of HK$0.490 per Share as quoted on the Stock Exchange on the Latest Practicable Date;
(ii) a premium of approximately 8.35% over the closing price of HK$0.455 per Share as quoted on the Stock Exchange on the Last Trading Day;
(iii) a premium of approximately 5.12% over the average of the closing prices of the Shares as quoted on the Stock Exchange for the five (5) consecutive trading days up to and including the Last Trading Day of approximately HK$0.469 per Share;
(iv) a premium of approximately 3.79% over the average of the closing prices of the Shares as quoted on the Stock Exchange for the ten (10) consecutive trading days up to and including the Last Trading Day of approximately HK$0.475 per Share;
(v) a premium of approximately 4.67% over the average of the closing prices of the Shares as quoted on the Stock Exchange for the thirty (30) consecutive trading days up to and including the Last Trading Day of approximately HK$0.471 per Share; and
(vi) a premium of approximately 40.06% over the unaudited consolidated net asset value per Share as at 30 June 2016 of approximately HK$0.352 (which was calculated by dividing the sum of the unaudited consolidated net asset value of the Group as at 30 June 2016 of approximately HK$464,528,000 by 1,318,279,590 Shares in issue as at the Latest Practicable Date).

Highest and Lowest Share Prices

−17 −

LETTER FROM THE BOARD

Conditions to the Offer

The Offer is conditional upon the satisfaction of the following Conditions:

(a) valid acceptances of the Offer being received (and not, where permitted, withdrawn) by 4:00 p.m. on the Closing Date (or such later time or date as the Offeror may, subject to the Takeovers Code, decide) in respect of such number of Shares which, together with Shares acquired or agreed to be acquired before or during the Offer, will result in the Offeror and the parties acting in concert with it together holding not less than 50% of the voting rights of the Company;
(b) the Shares remaining listed and traded on the Stock Exchange up to the Closing Date save for any temporary suspension(s) of trading in the Shares as a result of the Offer and no indication being received on or before the Closing Date from the SFC and/or the Stock Exchange to the effect that the listing of the Shares on the Stock Exchange is or is likely to be withdrawn, other than as a result of the Offer; and
(c) no events, up to the Closing Date, having occurred which would make the Offer or the acquisition of any of the Shares under the Offer void, unenforceable or illegal or their implementation being prohibited or which would impose material conditions, limitations or obligations with respect to the Offer.

The Offeror reserves the right to waive, in whole or in part, Condition (b). Conditions (a) and (c) cannot be waived.

The Offeror reserves the right to revise the terms of the Offer in accordance with the Takeovers Code.

In accordance with Rule 15.3 of the Takeovers Code, the Offeror must publish an announcement when the Offer becomes unconditional as to acceptances and when the Offer become unconditional in all respects. The Offer must also remain open for acceptance for at least fourteen (14) days after the Offer becomes unconditional in all respects. Independent Shareholders should note that Offeror does not have any obligation to keep the Offer open for acceptance beyond this 14-day period.

−18 −

LETTER FROM THE BOARD

WARNING: Shareholders and/or potential investors of the Company should note that the Offer is subject to the satisfaction or waiver (where applicable) of the Conditions. Accordingly, the Offer may or may not become unconditional. Shareholders and/or potential investors of the Company should therefore exercise caution when dealing in the securities of the Company. Persons who are in doubt as to the action they should take should consult their licensed securities dealers or registered institutions in securities, bank managers, solicitors, professional accountants or other professional advisers.

IRREVOCABLE UNDERTAKINGS

The Irrevocable Undertakings will remain effective unless the Offer lapse or are withdrawn. Save as disclosed above, there are no other circumstances under which the Irrevocable Undertakings may cease to be binding.

−19 −

LETTER FROM THE BOARD

INFORMATION ON THE GROUP

Principal activities

Financial Information

Set out below is a summary of the financial information of the Group extracted from (i) the annual report of the Company for fifteen months ended 31 December 2015; (ii) the second interim report of the Company for the twelve months ended 30 September 2015; (iii) annual report of the Company for the year ended 30 September 2014; and (iv) the interim report of the Company for the six months ended 30 June 2016, which have been prepared in accordance with Hong Kong Financial Reporting Standards.

	Fifteen	Twelve
	months ended	months ended	Year ended
	31 December	30 September	30 September
	2015	2015	2014
	(audited)	(unaudited)	(audited)
	(HK$’000)	(HK$’000)	(HK$’000)
Revenue	167,625	135,490	286,249
Profit/(Loss) before taxation	(5,305)	(7,729)	61,492
Profit/(Loss) after taxation	(8,926)	(10,268)	49,911
		As at	As at
		30 June	31 December
		2016	2015
		(unaudited)	(audited)
		(HK$’000)	(HK$’000)
Total assets		512,972	510,250
Total liabilities		48,444	46,294
Net assets		464,528	463,956

−20 −

LETTER FROM THE BOARD

Shareholding structure of the Company

As at the Latest Practicable Date, there were 1,318,279,590 Shares in issue, details of which are set out in the section headed “Share capital of the Company” in Appendix III to this Composite Document.

The shareholding structure of the Company as at the Latest Practicable Date was as follows:

	As at the
Shareholders	Latest Practicable	Date
	No. of Shares	%
Best Service	281,313,309	21.34
Kingage International	163,336,303	12.39
Sub-total	444,649,612	33.73
Public Shareholders	873,629,978	66.27
Total	1,318,279,590	100.00

As at the Latest Practicable Date, the Company has no outstanding options, warrants, derivatives or other securities that are convertible or exchangeable into Shares or other types of equity interest in the Company.

Your attention is drawn to Appendices II and III to this Composite Document which contain further financial and general information of the Group.

INTENTIONS OF THE OFFEROR IN RELATION TO THE GROUP

As stated in the “Letter from VMS Securities”, the Offeror intends to continue the existing businesses of the Group. As at the Latest Practicable Date, the Offeror has no plan to inject any assets or businesses into the Group or to procure the Group to acquire or dispose of any assets.

−21 −

LETTER FROM THE BOARD

Proposed change to the Board composition of the Company

As stated in the “Letter from VMS Securities”, upon the closing of the Offer, all existing Directors will resign with effect from the earliest time as permitted under the Takeovers Code.

The Offeror intends to nominate new directors to the Board upon the Offer becoming unconditional in all respects or such later date.

Any changes to the Board will be made in compliance with the Takeovers Code and the Listing Rules and further announcement will be made as and when appropriate.

Maintaining the Listing Status of the Company

As stated in the “Letter from VMS Securities”, the Offeror has no intention to privatise the Group and intends to maintain the listing of the Shares on the Stock Exchange. The directors of the Offeror and any new Director(s) to be appointed to the Board will jointly and severally undertake to the Stock Exchange to take appropriate steps after the close of the Offer to ensure that not less than 25% of the entire issued share capital of the Company will continue to be held by the public at all times.

(i) a false market exists or may exist in the Shares; or
(ii) there are insufficient Shares in public hands to maintain an orderly market,

The Stock Exchange will consider exercising its discretion to suspend dealing in the Shares.

Your attention is drawn to the section sub-headed “Information on the Offeror” in the “Letter from VMS Securities” for information on the Offeror.

COMPULSORY ACQUISITION

As stated in the “Letter from VMS Securities”, the Offeror does not intend to exercise any right which may be available to them under the provisions of the laws of Bermuda to compulsorily acquire any outstanding Offer Shares not acquired pursuant to the Offer after the close of the Offer.

−22 −

LETTER FROM THE BOARD

RECOMMENDATION

Your attention is drawn to (i) the “Letter from the Independent Board Committee” as set out on pages 24 to 25 of this Composite Document, which contains its recommendation to the Independent Shareholders in respect of the Offer, and (ii) the “Letter from VBG Capital” as set out on pages 26 to 41 of this Composite Document, which contains, among other things, its advice to the Independent Board Committee and the Independent Shareholders in relation to the Offer and the principal factors considered by it before arriving at its recommendation.

ADDITIONAL INFORMATION

You are also advised to read this Composite Document together with the accompanying Form of Acceptance in respect of the acceptance and settlement procedures of the Offer. Your attention is drawn to the additional information contained in the appendices to this Composite Document.

In considering what action to take in connection with the Offer, you should consider your own tax positions, if any, and, in case of any doubt, consult your professional advisers.

Yours faithfully, By order of the Board United Pacific Industries Limited Kelly Lee

Executive Director

−23 −

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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(Stock Code: 176)

Websites: www.upi.com.hk www.irasia.com/listco/hk/upi

23 December 2016

To the Independent Shareholders,

Dear Sir or Madam,

VOLUNTARY CONDITIONAL CASH OFFER BY VMS SECURITIES LIMITED FOR AND ON BEHALF OF SUPER FAME HOLDINGS LIMITED TO ACQUIRE ALL THE ISSUED SHARES OF UNITED PACIFIC INDUSTRIES LIMITED

We refer to the Composite Document dated 23 December 2016 issued jointly by the Offeror and the Company of which this letter forms part. Unless the context requires otherwise, terms used in this letter shall have the same meaning as those defined in the Composite Document.

We have been appointed to form the Independent Board Committee to consider the terms of the Offer and to give recommendations to the Independent Shareholders as to whether, in our opinion, the terms of the Offer is fair and reasonable so far as they are concerned and as to the acceptance of the Offer. VBG Capital has been appointed as the independent financial adviser to advise us in this respect. Detail of its advice and the principal factors and reasons taken into consideration in arriving at its advice are set out in the “Letter from VBG Capital” on pages 26 to 41 of the Composite Document.

We also wish to draw your attention to the “Letter from the Board”, the “Letter from VMS Securities” and the additional information set out in the appendices to the Composite Document.

We, being the members of the Independent Board Committee, have declared that, save for our interests in Shares as disclosed in Appendix III to this Composite Document, we are independent and do not have any conflict of interest in respect of the Offer and are therefore able to consider the terms of the Offer and to make recommendations to the Independent Shareholders.

−24 −

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

RECOMMENDATIONS

Having considered the terms of the Offer and the advice from VBG Capital, in particular the factors, reasons and recommendations as set out in the “Letter from VBG Capital”, we concur with the view of the Independent Financial Adviser and consider that the terms of the Offer are fair and reasonable so far as the Independent Shareholders are concerned, and recommend the Independent Shareholders to accept the Offer.

Notwithstanding our recommendations, the Independent Shareholders are reminded that their decision to realise or to hold their investment in the Company depends on their own individual circumstances and investment objectives. If in any doubt, the Independent Shareholders should consult their own professional advisers for professional advice.

Yours faithfully, For and on behalf of the

Independent Board Committee

Dr. Wong Ho Ching Mr. Lan Yen-Po Ms. Hu Gin Ing Dato’ Choo Chuo Siong Independent Independent Independent Non-executive non-executive Director non-executive Director non-executive Director Director

−25 −

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the full text of a letter of advice from VBG Capital to the Independent Board Committee in relation to the Offer, which has been prepared for the purpose of inclusion in this Composite Document.

VBG Capital Limited

==> picture [11 x 11] intentionally omitted <==

18th Floor Prosperity Tower 39 Queen’s Road Central Hong Kong

23 December 2016

To: The Independent Board Committee of United Pacific Industries Limited

Dear Sirs,

VOLUNTARY CONDITIONAL CASH OFFER BY VMS SECURITIES LIMITED ON BEHALF OF SUPER FAME HOLDINGS LIMITED TO ACQUIRE ALL THE ISSUED SHARES OF UNITED PACIFIC INDUSTRIES LIMITED

INTRODUCTION

We refer to our engagement as the Independent Financial Adviser to make recommendations to the Independent Board Committee of United Pacific Industries Limited in relation to the voluntary conditional cash offer made by VMS Securities Limited on behalf of Super Fame Holdings to acquire all the issued shares of the Company. Details of the Offer are disclosed in the Composite Document in respect of the Offer jointly issued by the Offerors and the Company dated 23 December 2016, of which this letter forms part. Capitalised terms used in this letter shall have the same meanings as those defined in the Composite Document unless the context otherwise requires.

Details of the Offer and the Offeror are set out in the “Letter from VMS Securities” and Appendix I to this Composite Document and the Form(s) of Acceptance.

THE INDEPENDENT BOARD COMMITTEE

Pursuant to Rule 2.1 and Rule 2.8 of the Takeover Code, the Independent Board Committee, comprising one non-executive Director, namely Dato’ Choo Chuo Siong and all independent non-executive Directors, namely, Dr. Wong Ho Ching, Mr. Lan Yen-Po and Ms. Hu Gin Ing, has been formed to advise the Independent Shareholders as to whether the terms of the Offer are fair and reasonable and as to acceptance of the Offer. The non-executive Director, namely Mr. Sun Jih-Hui,

−26 −

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

is not included in the Independent Board Committee. As Kingage International, which is wholly owned by Mr. Sun Jih-Hui, has irrevocably undertaken, pursuant to the Kingage International Irrevocable Undertaking, to the Offeror to accept the Offer in respect of the Shares held by Kingage International, Mr. Sun Jih-Hui is considered as having direct interest in the Offer.

We, VBG Capital Limited, have been appointed by the Company as the independent financial adviser to the Independent Board Committee in relation to the Offer. Our appointment has been approved by the Independent Board Committee. Our role as the independent financial adviser is to give our recommendation to the Independent Board Committee as to (i) whether the Offer is fair and reasonable so far as the Independent Shareholders are concerned; and (ii) whether the Offer should be accepted.

OUR INDEPENDENCE

In the last two years, we have not acted as an independent financial adviser in respect of the Company’s other transactions. As at the Latest Practicable Date, other than this appointment as the independent financial adviser to the Independent Board Committee and the Independent Shareholders in connection with the Offer, we were not in the same group as the financial or other professional adviser (including a stockbroker) to the Offeror or the Company or who has, or had, a significant connection, financial or otherwise, with either the Offeror or the Company, or the controlling shareholder(s) of either of them, of a kind reasonably likely to create, or to create the perception of, a conflict of interest or reasonably likely to affect the objectivity of our advice. We are independent from the Company pursuant to Rule 13.84 of the Listing Rules and our appointment by the Independent Board Committee is in compliance with Rule 2 of the Takeovers Code.

BASIS AND ASSUMPTIONS OF OUR OPINION

In formulating our advice and recommendation, we have relied on the information and facts supplied, and the opinions expressed, by the Directors and management of the Company, which we have assumed to be true, accurate and complete. We have reviewed the published information on the Company, including but not limited to, the annual report of the Company for the fifteen months ended 31 December 2015 (the “ 2015 Annual Report ”), the second interim report of the Company for the twelve months ended 30 September 2015 (the “ 2015 Second Interim Report ”), the latest interim report of the Company for the six months ended 30 June 2016 (the “ 2016 Interim Report ”) and other information contained in this Composite Document. We have reviewed the trading performance of the Shares on the Stock Exchange. We have also discussed with and reviewed the information provided by the management of the Group (the “Management” ) regarding the business and outlook of the Group.

We have assumed that all information and representations that have been provided by the Directors, for which they are solely and wholly responsible, are true and accurate at the time when they were made and continue to be so as at the Latest Practicable Date, and should there be any material changes to our opinion after the Latest Practicable Date, Shareholders would be notified as soon as possible. We have also assumed that all statements of belief, opinion, expectation and intention made by the Directors and the Offeror (where applicable) in the Composite Document were reasonably made after due enquiry and careful consideration. We have no reason to suspect that any material facts or information have been withheld or to doubt the truth, accuracy and completeness of

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

the information and facts contained in the Composite Document, or the reasonableness of the opinions expressed by the Company, its advisers and/or the Directors and the Offeror (where applicable), which have been provided to us. Our opinion is based on the Directors’ and the Offeror’s representation and confirmation that there are no undisclosed private agreements/arrangements or implied understanding with anyone concerning the Offer. We consider that we have taken sufficient and necessary steps on which to form a reasonable basis and an informed view for our opinion in compliance with Rule 13.80 of the Listing Rules and Rule 2 of the Takeovers Code.

The Directors jointly and severally accept full responsibility for the accuracy of the information contained in the Composite Document (other than the information relating to the Offeror and parties acting in concert with it), and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in the Composite Document have been arrived at after due and careful consideration and there are no other facts not contained in the Composite Document, the omission of which would make any statement contained in the Composite Document misleading. The Directors only take responsibility for the correctness of the reproduction or presentation of the information contained in the Composite Document (other than the information relating to the Offeror and parties acting in concert with it). We, as the Independent Financial Adviser, take no responsibility for the contents of any part of the Composite Document, save and except for this letter of advice.

We consider that we have been provided with sufficient information to reach an informed view and to provide a reasonable basis for our opinion. We have not, however, conducted any independent in-depth investigation into the business and affairs of the Company, the Offeror, or their respective subsidiaries or associates (if applicable), nor have we considered the taxation implication on the Group or the Shareholders as a result of the Offer. The Company has been separately advised by its own professional advisers with respect to the Offer and the preparation of the Composite Document (other than this letter).

We have assumed that the Offer will be consummated in accordance with the terms and conditions set forth in the Offer Document without any waiver, amendment, addition or delay of any terms or conditions. We have assumed that in connection with the receipt of all the necessary governmental, regulatory or other approvals and consents as required for the Offer, no delay, limitation, condition or restriction will be imposed that would have a material adverse effect on the contemplated benefits expected to be derived from the Offer. In addition, our opinion is necessarily based on the financial, market, economic, industry-specific and other conditions as they existed on, and the information made available to us as at the Latest Practicable Date. The Independent Shareholders will be notified of any material changes as soon as possible in accordance with Rule 9.1 of the Takeovers Code.

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

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

PRINCIPAL TERMS OF THE OFFER

For each Offer Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . HK$0.493 in cash

The Shares to be acquired under the Offer shall be fully paid and shall be acquired free from all liens, charges, encumbrances, rights of pre-emption and any other third party rights of any nature and together with all rights attaching to them as at the Closing Date or subsequently becoming attached to them, including the right to receive in full all dividends and other distributions, if any, the record date of which is on or after the Closing Date. Any dividends or other distributions the record date of which is before the Closing Date will be paid by the Company to the Shareholders who are qualified for such dividends or distributions.

Further details of the terms of the Offer and the procedures for acceptance are set out in Appendix I to this Composite Document and the accompanying Form of Acceptance.

CONDITIONS TO THE OFFER

The Offer is conditional upon the satisfaction of the following Conditions:

(a) valid acceptances of the Offer being received (and not, where permitted, withdrawn) by 4:00 p.m. on the Closing Date (or such later time or date as the Offeror may, subject to the Takeovers Code, decide) in respect of such number of Shares which, together with Shares acquired or agreed to be acquired before or during the Offer, will result in the Offeror and the parties acting in concert with it together holding not less than 50% of the voting rights of the Company;
(b) the Shares remaining listed and traded on the Stock Exchange up to the Closing Date save for any temporary suspension(s) of trading in the Shares as a result of the Offer and no indication being received on or before the Closing Date from the SFC and/or the Stock Exchange to the effect that the listing of the Shares on the Stock Exchange is or is likely to be withdrawn, other than as a result of the Offer; and
(c) no events, up to the Closing Date, having occurred which would make the Offer or the acquisition of any of the Shares under the Offer void, unenforceable or illegal or their implementation being prohibited or which would impose material conditions, limitations or obligations with respect to the Offer.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Offeror reserves the right to waive, in whole or in part, Condition (b). Conditions (a) and (c) cannot be waived.

The Offeror reserves the right to revise the terms of the Offer in accordance with the Takeovers Code.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating our opinion and recommendation with regard to the Offer, we have taken into account the following principal factors and reasons:

1. Information on the Group

The Company was incorporated in Bermuda with limited liability, the Shares of which are listed on the Main Board of the Stock Exchange. The Group is principally engaged in the design and manufacture of consumer electronics products which mainly are primarily audio and video baby monitors.

(a) Historical financial performance of the Group

Set out below is a summary of the financial information of the Group extracted from (i) the 2015 Annual Report; (ii) the 2015 Second Interim Report; and (iii) the 2016 Interim Report, which have been prepared in accordance with Hong Kong Financial Reporting Standards.

			Fifteen	Six months	Six months
	Year ended	Year ended	months ended	ended	ended
	30 September	30 September	31 December	30 June	30 June
	2014	2015	2015	2015	2016
	(Audited)	(Unaudited)	(Audited)	(Unaudited)	(Unaudited)
	(HK$’000)	(HK$’000)	(HK$’000)	(HK$’000)	(HK$’000)
Revenue	286,249	135,490	167,625	51,537	53,689
Profit/(Loss) before
taxation	61,492	(7,729)	(5,305)	(3,431)	1,848
Profit/(Loss) for the
period/ year	(178,759)	(10,268)	(8,926)	(4,983)	(529)
	(Note 1)

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

	As at	As at	As at	As at
	30 September	30 September	31 December	30 June
	2014	2015	2015	2016
	(Audited)	(Unaudited)	(Audited)	(Unaudited)
	(HK$’000)	(HK$’000)	(HK$’000)	(HK$’000)
Non-current assets	154,833	148,895	156,417	151,186
Current assets	401,803	372,547	353,833	361,786
Non-current liabilities	73,101	381	1,703	511
Current liabilities	81,226	59,337	44,591	47,933
Net assets	402,309	461,724	463,956	464,528

Notes:

The profit for the year from continuing operations is approximately HK$49,911,000.

Year ended 30 September 2015 versus financial year ended 30 September 2014

For the year ended 30 September 2015, the revenue of the Group decreased significantly from approximately HK$286.2 million to approximately HK$135.5 million, representing a decrease of approximately 52.7% as compared with the previous year.

The Group posted a loss of approximately HK$10.3 million from continuing operations for the year ended 30 September 2015 as compared to a profit of approximately HK$49.9 million for the corresponding period in 2014. The substantial decrease in turnover, and the loss incurred by the Group for the Reporting Period, were mainly attributed to lower demand from a key customer in the United States of America (“ Key Customer ”), resulting in reduced sales and a decline in the Group’s gross profit margin. The turnover of the Key Customer decreased to approximately HK$94.7 million for the year ended 30 September 2015 from approximately HK$257.9 million for the same period in 2014, representing 69.9% and 90.1% respectively to the Group’s total turnover, caused by keen competition amongst OEM manufacturers.

During the year ended 30 September 2015, the cost of materials remained relatively steady and a weakening of the Renminbi against the US dollar provided a slightly positive effect on costs. However, the Group’s gross profit margin for the year ended 30 September 2015 dropped substantially to 7.2% as compared with 14.5% for the same period in 2014 due to the significant drop in turnover versus largely unchanged fixed costs such as rental expenses and the increased wage rate in the PRC.

On 25 September 2015, the Group holds 27.9% interest in Yuji Development Corporation (“Yuji”) , an after-life services company based in Taiwan, which operates three columbarium towers and one outdoor cemetery in Taipei. Its revenue mostly contributed by the sale of columbarium units and cemetery plots. Yuji contributed a profit of approximately HK$17.3 million and approximately HK$9.6 million to the Group for the year ended 30 September 2015 and 30 September 2014 respectively.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As at 30 September 2015, the Group’s net current assets, total assets and equity attributable to the owners of the Company amounted to approximately HK$320.6 million, approximately HK$556.7 million and approximately HK$402.3 million respectively.

As at 30 September 2015, the net assets of the Group increased by approximately HK$59.4 million as compared to that of 30 September 2014. Such increase was primarily due to the exercise of conversion rights of the convertible bonds issued by the Group on 15 August 2014 with principal amount of approximately HK$77 million to Kingage International Limited. On 30 September 2015, the convertible bonds were fully converted into shares of the Company of HK$0.10 each at the conversion price of HK$0.47142 per share. Accordingly, a total of 163,336,303 ordinary shares of HK$0.10 each were allotted and issued.

Six months ended 30 June 2016 versus six months ended 30 June 2015

For the six months ended 30 June 2016, the revenue of the Group increased slightly from approximately HK$51.5 million to approximately HK$53.7 million, representing an increase of approximately 4.3%.

For the six months ended 30 June 2016, the Group posted a loss of approximately HK$0.5 million as compared to a loss of approximately HK$5.0 million for the six months ended 30 June 2015.

Gross profit margin improved to 7.2% as compared with 3.1% for the six months ended 30 June 2015, reflecting stringent control efforts, especially on labour costs, with more outsourcing to allow flexibility in production arrangements. Cost of materials and overheads were largely maintained at a steady level through continual production process improvements. Administrative costs for the period under review decreased to approximately HK$12.7 million for the six months ended 30 June 2016, as a consequence of decreased legal and professional services requirements.

The Group holds 27.9% interest in Yuji, which contributed a profit of approximately HK$10.5 million and approximately HK$8.6 million to the Group for the six months ended 30 June 2016 and 30 June 2015, respectively.

As at 30 June 2016, the Group’s net current assets, total assets and equity attributable to the owners of the Company amounted to approximately HK$313.9 million, approximately HK$513.0 million and approximately HK$464.5 million, respectively.

2. Prospects of the Group

As disclosed in the 2016 Interim Report, the Board believed that the consumer electronics industry was facing softening global demand and was in the decline stage of product and technology lifecycles.

United States of America remained the biggest market for the consumer electronics division (the “Division” ) of the Group, generating 61.0% of total sales, United Kingdom came second, generating 21.8% of total sales, while Europe came third, generating 11.6% of total sales.

−32 −

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

According to the statistics from the “September 2016 Monthly Retail Trade and Food Services Report” issued by the United States Census Bureau, the sales amount under the category of “Electronics and appliance stores” from July to September dropped from approximately US$25,172 million in 2015 to approximately US$24,260 million in 2016, representing a decrease of 3.62%. The sales amount of the same category from January to September also recorded a drop from approximately US$72,974 million in 2015 to approximately US$70,735 million in 2016, representing a decrease of 3.07%. In light of the softening demand in the major market, the Group aimed to increase market share and expand geographical mix.

To counter the effects of the decline stage of the product and technology lifecycles, the Group has started to test new product models and commenced printed circuit board assembly for healthcare products, though future earnings contribution from these new business initiatives is uncertain at this stage.

In view of (i) the softening global demand on consumer electronics products in the United States of America market in 2016 compared to the same period in 2015, being major markets of the Group; (ii) it is uncertain whether the Company can keep up with the technological and project advancement and achieve a balanced product and market mix in the near future; and (iii) it is uncertain whether the Group can expand its sources of income either by business expansion or by improving geographical penetration in the near future, we are of the opinion that there remain uncertainties in the future performance of the Group.

3. Irrevocable Undertakings

On 21 November 2016 (after trading hours), Best Service executed the Best Service Irrevocable Undertaking in favour of the Offeror, pursuant to which Best Service has irrevocably undertaken to the Offeror to accept the Offer in respect of the Shares held by Best Service subject to the Conditions of the Offer. On 21 November 2016 (after trading hours), Kingage International executed the Kingage International Irrevocable Undertaking in favour of the Offeror, pursuant to which Kingage International has irrevocably undertaken to the Offeror to accept the Offer in respect of the Shares held by Kingage International subject to the Conditions of the Offer.

The Irrevocable Undertakings will remain effective unless the Offer lapse or is withdrawn. Save for disclosed above, there are no other circumstances under which the Irrevocable Undertakings may cease to be binding.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

4. Offer Price comparison

(a) Historical price performance and liquidity of the Shares

The chart below illustrates the closing price level of the Shares as quoted on the Stock Exchange for a period of around twelve months preceding the Joint Announcement, from (i) 1 December 2015 up to 21 November 2016, being the Last Trading Day prior to the suspension of trading in Shares pending for the publication of the Joint Announcement on 25 November 2016, and (ii) 28 November 2016 up to the Latest Practicable Date ((i) and (ii) together constitutes the “ Review Period ”).

==> picture [453 x 209] intentionally omitted <==

Source: Stock Exchange

Notes:

Rule 3.7 Announcement refers to the Company’s announcement dated 22 November 2016 issued pursuant to Rule 3.7 of the Takeovers Code.
During the Review Period, trading in Shares of the Company were suspended from 22 November 2016 to 24 November 2016.

The closing prices of the Shares ranged from HK$0.39 to HK$0.57 during the period from 1 December 2015 to 21 November 2016, with an average closing price of approximately HK$0.47.

Trading in the Shares was suspended from 22 November 2016 to 24 November 2016 pending for the release of the Joint Announcement. The Shares resumed trading on 25 November 2016 subsequent to the publication of the Joint Announcement and experienced a rise in the Share price, eventually closed at HK$0.54. Since then and up to the Latest Practicable Date, the Share price closed below the Offer Price in the range between HK$0.49 and HK$0.54 per Share and closed at HK$0.49 as at the Latest Practicable Date.

−34 −

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

During the Review Period, the highest and lowest closing price of the Shares during the Review Period were HK$0.57 per Share recorded on 13 September 2016, 14 September 2016 and 15 September 2016 (the “ Highest Price ”) and HK$0.39 per Share recorded on 10 August 2016 (the “ Lowest Price ”), respectively. The Offer Price represents (i) a discount of approximately 13.5% to the Highest Price; and (ii) a premium of approximately 26.4% over the Lowest Price.

In summary, the Offer Price of HK$0.493 per Offer Share represents:

(1) a discount of approximately 0.61% to the closing price of HK$0.49 per Share as quoted on the Stock Exchange on the Latest Practicable Date;
(2) a premium of approximately 8.35% over the closing price of HK$0.455 per Share as quoted on the Stock Exchange on the Last Trading Day;
(3) a premium of approximately 5.12% over the average of the closing prices of the Shares as quoted on the Stock Exchange for the five (5) consecutive trading days up to and including the Last Trading Day of approximately HK$0.469 per Share;
(4) a premium of approximately 3.79% over the average of the closing prices of the Shares as quoted on the Stock Exchange for the ten (10) consecutive trading days up to and including the Last Trading Day of approximately HK$0.475 per Share;
(5) a premium of approximately 4.67% over the average of the closing prices of the Shares as quoted on the Stock Exchange for the thirty (30) consecutive trading days up to and including the Last Trading Day of approximately HK$0.471 per Share; and
(6) a premium of approximately 40.06% over the unaudited consolidated net asset value per Share as at 30 June 2016 of approximately HK$0.352 (which was calculated by dividing the sum of the unaudited consolidated net asset value of the Group as at 30 June 2016 of approximately HK$464,528,000 by 1,318,279,590 Shares in issue as at the Latest Practicable Date).

−35 −

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Set out in the table below are the total monthly trading volumes of the Shares and the percentages of average daily trading volume to the total number of issued Shares and public float of the Company during the Review Period:

					Approximate	Approximate
						% of
				Approximate		average
				% of		daily
				average		trading
	Total			daily	volume to
	monthly		Average	trading	the Shares
	trading	No. of	daily	volume to	constituting
	volume of	trading	trading	total issued	the public
	the Shares	days	volume	Shares		float
	(No. of		(No. of	(Note 1)		(Note 2)
	Shares)		Shares)
2015
December	3,896,480	22	177,113	0.01%		0.02%
2016
January	1,366,000	20	68,300	0.01%		0.01%
February	706,001	18	39,222	0.00%		0.00%
March	744,000	21	35,429	0.00%		0.00%
April	1,584,600	20	79,230	0.01%		0.01%
May	688,000	21	32,762	0.00%		0.00%
June	4,332,000	21	206,286	0.02%		0.02%
July	3,372,400	20	168,620	0.01%		0.02%
August	1,589,191	22	72,236	0.01%		0.01%
September	1,536,000	21	73,143	0.01%		0.01%
October	1,499,813	19	78,938	0.01%		0.01%
1 November to 21
November (Note 3)	3,248,000	15	216,533	0.02%		0.02%
Daily average during
the Undisturbed
Period	24,562,485	240	102,344	0.01%		0.01%
25 November to the
Latest Practicable
Date	27,773,275	19	1,461,751	0.11%		0.17%

Source: Stock Exchange Notes:

The calculation is based on the number of Shares in issue as at the end of respective months/periods.
The calculation is based on the number of Shares in issue as set out in note 1 above excluding the Shares held by the substantial shareholders of the Company in the corresponding months/periods. Your attention is drawn to the section sub-headed “Shareholding structure of the Company” in the “Letter from the Board” for information on the number of Shares held by Public Shareholders.

−36 −

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The trading in Shares was suspended from 9 a.m. on 22 November 2016 to 24 November 2016 pending release of the Joint Announcement. Trading in Shares was resumed on 25 November 2016 following the release of the Joint Announcement on 25 November 2016.

We note from the above table that the average daily trading volume of the Shares has been thin in general during the Review Period. The average daily trading volume of the Shares during the period from 1 December 2015 to 21 November 2016, being the Last Trading Day prior to the publication of Joint Announcement (the “ Undisturbed Period ”) was within the range from approximately 0.00% to 0.02% of the total Shares in issue with an average of approximately 0.01%, and ranging from approximately 0.00% to 0.02% of the issued Shares constituting the public float of the Company, with an average of approximately 0.01%. The average number of Shares traded daily from 25 November 2016, being the first trading day immediately following the publication of the Joint Announcement, up to and including the Latest Practicable Date represented approximately 0.11% and 0.17% of the total Shares in issue and the issued Shares constituting the public float of the Company, respectively. A relatively higher trading volume was recorded during the period from 25 November 2016 and up to the Latest Practicable Date which we believe was primarily due to the market reaction to the publication of the Joint Announcement, however, the sustainability of the recent growth in trading volume is uncertain.

Given the thin historical average daily trading volume of the Shares, it is uncertain as to whether there would be sufficient liquidity in the Shares for the Independent Shareholders to dispose of a significant number of Shares in the open market without causing an adverse impact on the market price level of the Shares. As it is uncertain whether the Share price would be sustained after the completion of the Offer, therefore, the Offer represents an opportunity for the Independent Shareholders, particularly for those who hold a large number of Shares, to dispose of all or part of their holdings at the Offer Price if they so wish.

(b) Comparison with comparable companies

Price-to-earnings ratio (“ P/E Ratio(s) ”) and price-to-book ratio (“ P/B Ratio(s) ”) are the most commonly adopted valuation tools for evaluating the value of a company. Particularly, for companies that generate recurring revenue and income, P/E Ratio analysis is the most appropriate approach for valuation. However, as the Group is loss making for the six months ended 30 June 2016 and for the financial year ended 31 December 2015, the use of P/E Ratio is not practicable. Therefore, we have adopted a P/B Ratio analysis to assess the fairness and reasonableness of the terms of the Offer.

We have tried to identify listed companies that (i) are engaged in similar principal business to that of the Group (i.e. consumer electronics) ; (ii) have positive net asset value based on their latest published financial statements; (iii) have total market capitalization in the range of HK$500 million to HK$800 million as at the Latest Practicable Date; (iv) have target markets not completely different from the Company; and (v) are listed on the Stock Exchange. Based on the above criteria, we have identified 5 companies (the “ Comparable Companies ”, as listed below). The Comparable Companies represent an exhaustive list of companies meeting the selection criteria listed above.

−37 −

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The table below illustrates the level of P/B Ratios of each of the Comparable Companies and the Company:

				Latest published
				consolidated net
				asset value
				attributable to
			Market	equity holders
Company name	Stock code	Share price	capitalisation	of the Company	P/B Ratio
		(Note 1)	(Note 1)	(Note 1)	(Note 2)
		HK$	HK$ million	HK$	Times
IDT International
Limited	167.HK	0.260	676	280,000,000	2.41
Shihua Development
Company Limited	485.HK	0.148	540	378,877,000	1.43
SIM Technology Group
Limited	2000.HK	0.305	780	1,998,384,000	0.39
CircuTech International
Holdings Limited	8051.HK	0.680	569	70,268,000	8.10
Suga International
Holdings Limited	912.HK	2.250	624	667,331,000	0.94
				Highest	8.10
				Lowest	0.39
				Average	2.65
				Median	1.43
The Company	176.HK	0.493	650	464,528,000	1.40
		(Note 3)	(Note 4)		(Note 5)

Notes:

The closing share price and market capitalisation of the Comparable Companies as at the Latest Practicable Date are sourced from the website of Stock Exchange. The market capitalisation of the Comparable Companies is calculated based on their respective closing share prices and number of issued shares as at the Latest Practicable Date. The latest published consolidated net asset value attributable to equity holders are extracted from the respective latest annual/interim reports/announcements of the Comparable Companies.
The P/B Ratios of the Comparable Companies are calculated based on their market capitalisation as at the Latest Practicable Date and their latest published consolidated net asset value attributable to equity holders.
The Offer Price of HK$0.493.
We have taken the Offer Price and the issued share capital of the Company of 1,318,279,590 Shares as at the Latest Practicable Date for the purpose of determining the theoretical market capitalisation of the Company.
The P/B Ratio of the Company is calculated based on the theoretical market capitalisation of the Company pursuant to the Offer Price of HK$0.493 and its latest published consolidated net asset value attributable to equity holders of the Company as at 30 June 2016.

−38 −

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As shown in the table above, the P/B Ratios of the Comparable Companies ranged from approximately 0.39 times to approximately 8.10 times with an average of approximately 2.65 times ( “Average” ). However, by excluding CircuTech International Holdings Limited (8051) given its exceptionally high P/B ratio compared with those of the other Comparable Companies, the average of the P/B Ratios of the remaining Comparable Companies would be approximately 1.29 times (“ Adjusted Average ”).

According to publicly available information, the P/B ratio of CircuTech International Holdings Limited (8051) was exceptionally high because (i) the company has a relatively small net asset value compared with other Comparable Companies due to the annual losses it recorded since financial year 2012 and (ii) the market capitalisation of the company increased by more than 150% in April 2016 following an announcement dated 15 April 2016 regarding acquisition of shares in the company by Foxconn (Far East) Limited. Share price of the company fell subsequently and the closing price of the company’s shares as of 20 December 2016 was HK$0.67, which was still approximately 80% higher than the average share price of HK$0.37 for the period between 21 December 2015 and 12 April 2016 (as the last trading day before the announcement of the said acquisition). We are of the view that the current market capitalization of the company is not a fair reflection of the company’s operating performance and hence, the P/B ratio of the company may not be a meaningful data point for our analysis. Accordingly, we believe the inclusion of the P/B Ratio of CircuTech International Holdings Limited in calculation the average P/B ratio of the Comparable Companies will distort the result and in turn lead to a misleading conclusion. Therefore, we have not included the P/B Ratio of CircuTech International Holdings Limited in calculating the Adjusted Average.

The median of the P/B Ratios of the Comparable Companies is 1.43 ( “Median” ).

Having considered that the P/B Ratio of the Company calculated based on the theoretical market capitalisation represented by the Offer Price, being approximately 1.40 times, is (i) higher than the Adjusted Average of 1.29 times; (ii) close to the Median; and (iii) higher than two out of five of the P/B Ratio of the Comparable Companies, we consider that the Offer Price is fair and reasonable.

We have not performed any analysis on the implied dividend yield of the Company as the Board did not recommend the payment of interim/final dividend for the six months ended 30 June 2016 and for the year ended 31 December 2015.

−39 −

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

5. Public float and listing status of the Company

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

The Stock Exchange has stated that if, at the close of the Offer, less than the minimum prescribed percentage applicable to the listed issuer, being 25% of the issued Shares, are held by the public, or if the Stock Exchange believes that:

(i) a false market exists or may exist in the trading of the Shares; or
(ii) there are insufficient Shares in public hands to maintain an orderly market,

then the Stock Exchange may exercise its discretion to suspend dealings in the Shares. The directors of the Offeror and the new Directors to be nominated by the Offeror will jointly and severally undertake to the Stock Exchange to take appropriate steps to ensure that sufficient public float exists in the Shares after the Offer Period.

RECOMMENDATION

Having considered the abovementioned principal factors and reasons set out in this letter, in particular:

(i) In view of (a) the softening global demand on consumer electronics products in the United States of America market in 2016 compared to the same period in 2015, being major markets of the Group; (b) it is uncertain whether the Company can keep up with the technological and project advancement and achieve a balanced product and market mix in the near future; and (c) it is uncertain whether the Group can expand its sources of income either by business expansion or by improving geographical penetration in the near future, we are of the opinion that there remain uncertainties in the future performance of the Group;
(ii) the average daily trading volume of the Shares has been thin in general during the Review Period and the Independent Shareholders may find it difficult to dispose of a significant number of Shares in the open market without causing an adverse impact on the market price level of the Shares;
(iii) the Offer Price represents a premium of approximately 40.06% over the audited consolidated net asset value attributable to equity holders of the Company of approximately HK$0.352 per Share as at 30 June 2016, the date to which the latest unaudited consolidated financial results of the Company were made up; and
(iv) The P/B Ratio of the Company calculated based on the theoretical market capitalisation represented by the Offer Price, being approximately 1.40 times, is (i) higher than the Adjusted Average of 1.29 times; (ii) close to the Median; and (iii) higher than two out of five of the P/B Ratio of the Comparable Companies.

−40 −

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We consider that the Offer Price is fair and reasonable.

Accordingly, we recommend the Independent Board Committee to advise the Independent Shareholders to accept the Offer.

However, the Independent Shareholders who would like to realise part or all of their investments, are reminded to monitor the trading price and liquidity of the Shares during the Offer Period and should, having regard to their own circumstances, consider selling their Shares in the open market instead of accepting the Offer if the net proceeds obtained from such disposal of the Shares (after deducting all transaction costs) would be higher than the net proceeds from accepting the Offer.

The Independent Shareholders who hold a positive view on the future prospect of the Group may wish to retain some or all of their investments in the securities of the Company, are reminded to closely monitor the development of the Group and any announcements of the Company during the Offer Period.

As different Independent Shareholders would have different investment criteria, objectives, risk preference and tolerance level and/or circumstances, we would recommend any Independent Shareholder who may require advice in relation to any aspect of this Composite Document, or as to the action to be taken, to consult a licensed securities dealer, bank manager, solicitor, professional accountant, tax adviser or other professional adviser before making the decision to, whether or not, accept the Offer.

Yours faithfully, For and on behalf of VBG Capital Limited Anthony Ng Managing Director

−41 −

FURTHER TERMS AND PROCEDURES OF ACCEPTANCE OF THE OFFER

APPENDIX I

1. PROCEDURES FOR ACCEPTANCE

(a) If you accept the Offer, you should complete and sign the Form of Acceptance in accordance with the instructions printed thereon, which form part of the terms and conditions of the Offer.
(b) If the share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/ or any satisfactory indemnity or indemnities required in respect thereof) in respect of your Shares is/are in your name, and you wish to accept the Offer in respect of your Shares, the duly completed and signed Form of Acceptance should be sent, together with the relevant share certificate(s) and/or transfer receipt(s) and/or other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof), to the Registrar, Tricor Secretaries Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong, marked “ United Pacific Offer ” on the envelope, in any event not later than 4:00 p.m., on the Closing Date or such later time and/or date as the Offeror may determine and announce with the consent of the Executive and in accordance with the Takeovers Code.
(c) If the share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/ or any satisfactory indemnity or indemnities required in respect thereof) in respect of your Shares is/are in the name of a nominee company or a name other than your own, and you wish to accept the Offer in respect of your Shares in full or in part, you must either:
(i) lodge your share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) with the nominee company, or other nominee, with instructions authorising it to accept the Offer on your behalf and requesting it to deliver the duly completed and signed Form of Acceptance together with the relevant share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) for the number of Shares in respect of which you intend to accept the Offer to the Registrar; or
(ii) arrange for the Shares to be registered in your name by the Company through the Registrar, and deliver the duly completed and signed Form of Acceptance together with the relevant share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof), to the Registrar; or
(iii) if your Shares have been lodged with your licensed securities dealer/registered institution in securities/custodian bank through CCASS, instruct your licensed securities dealer/registered institution in securities/custodian bank to authorize HKSCC to accept the Offer on your behalf on or before the deadline set out by HKSCC. In order to meet the deadline set by HKSCC, you should check your licensed securities dealer/registered institution in securities/custodian bank for the timing on the processing of your instruction, and submit your instruction to your licensed securities dealer/registered institution in securities/custodian bank as required by them; or

−42 −

FURTHER TERMS AND PROCEDURES OF ACCEPTANCE OF THE OFFER

APPENDIX I

(iv) if your Offer Shares have been lodged with your investor participant stock account with CCASS, authorise your instruction via the CCASS phone system or CCASS internet system on or before the deadline set out by HKSCC Nominees Limited (which is normally one Business Day before the latest date on which acceptances of the Offer must be received by the Registrar).
(d) If you have lodged transfer(s) of any of your Shares for registration in your name and have not yet received your share certificate(s), and you wish to accept the Offer in respect of your Shares, you should nevertheless complete and sign the Form of Acceptance and deliver it to the Registrar together with the transfer receipt(s) duly signed by yourself. Such action will constitute an authority to the Offerors and/or VMS Securities or their respective agent(s) to collect from the Company or the Registrar on your behalf the relevant share certificate(s) when issued and to deliver such share certificate(s) to the Registrar as if it was/they were delivered to the Registrar with the Form of Acceptance.
(e) If the share certificate(s) and/or transfer receipt(s) and/or other document(s) of title in respect of your Shares is/are not readily available or is/are lost, as the case may be, and you wish to accept the Offer in respect of your Shares, you should nevertheless complete and sign the Form of Acceptance and deliver it to the Registrar together with a letter stating that you have lost one or more of your share certificate(s) and/or transfer receipt(s) and/or other document(s) of title in respect of your Shares or that it/they is/are not readily available. If you find such document(s) or if it/they become(s) available, the relevant share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title should be forwarded to the Registrar as soon as possible thereafter. If you have lost your share certificate(s) and/or transfer receipt(s) and/or other document(s) of title, you should also write to the Registrar requesting a letter of indemnity which, when completed in accordance with the instructions given, should be returned to the Registrar.
(f) Acceptance of the Offer will be treated as valid only if the duly completed and signed Form of Acceptance is received by the Registrar by no later than 4:00 p.m. on the Closing Date (or such later time and/or date as the Offerors may determine and announce with the consent of the Executive and in accordance with the Takeovers Code), and the Registrar has recorded that the Form of Acceptance and any relevant documents as required under this paragraph have been so received and is:
(i) accompanied by the relevant share certificate(s) and/or transfer receipt(s) and/or other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) and, if the share certificate(s) and/or transfer receipt(s) and/or other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) is/are not in your name, such other documents (e.g. a duly stamped transfer of the relevant Share(s) in blank or in favour of the acceptor executed by the registered holder) in order to establish your right to become the registered holder of the relevant Offer Shares; or

−43 −

FURTHER TERMS AND PROCEDURES OF ACCEPTANCE OF THE OFFER

APPENDIX I

(ii) from a registered Shareholder or his/her/its personal representative (but only up to the amount of the registered holding and only to the extent that the acceptance relates to the Offer Shares which are not taken into account under another sub-paragraph of this paragraph (f)); or

(iii) certified by the Registrar or the Stock Exchange.

(g) If the Form of Acceptance is executed by a person other than the registered Shareholder, appropriate documentary evidence of authority to the satisfaction of the Registrar must be produced.
(h) Seller’s ad valorem stamp duty for transfer of Offer Shares arising in connection with acceptances of the Offer will be payable by the relevant Independent Shareholders at a rate of 0.1% of (i) the market value of the Offer Shares; or (ii) the consideration payable by the Offeror in respect of the relevant acceptances of the Offer, whichever is higher. An amount equivalent to the aforesaid stamp duty will be deducted from the cash amount payable by the Offeror to such Independent Shareholder who accepts the Offer (where the stamp duty calculated includes a fraction of HK$1, the stamp duty would be rounded-up to the nearest HK$1). The Offeror will arrange for payment of the seller’s ad valorem stamp duty on behalf of the relevant Independent Shareholders accepting the Offer and will pay the buyer’s ad valorem stamp duty in connection with the acceptances of the Offer and the transfer of the Offer Shares in accordance with the Stamp Duty Ordinance (Chapter 117 of the Laws of Hong Kong).
(i) No acknowledgement of receipt of any Form of Acceptance, share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) will be given.
(j) If the Offer does not become, or is not declared, unconditional in all respects within the time permitted by the Takeovers Code, the share certificate(s) and/or transfer receipt(s) and/or other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) received by the Registrar will be returned to the Shareholders who have accepted the Offer by ordinary post at the Shareholders’ own risk as soon as possible but in any event within 10 days after the Offer has lapsed.
(k) References to the Offer in this Composite Document and in the Form of Acceptance shall include any extension and/or revision thereof.
(l) In making their decision, Independent Shareholders must rely on their own examination of the Group and the terms of the Offer, respectively, including the merits and risks involved. The contents of this Composite Document, including any general advice or recommendation contained herein together with the Form of Acceptance, shall not be construed as any legal or business advice on the part of any of the Offeror, the Company, VMS Securities, or their respective professional advisers. Shareholders should consult their own professional advisers for professional advice.

−44 −

FURTHER TERMS AND PROCEDURES OF ACCEPTANCE OF THE OFFER

APPENDIX I

(m) The English text of this Composite Document and of the accompanying Form of Acceptance shall prevail over the Chinese text for the purpose of interpretation.

2. ACCEPTANCE PERIOD AND REVISION

(a) Unless the Offer has previously been revised or extended with the consent of the Executive and in accordance with the Takeovers Code, to be valid, the Form of Acceptance must be received by the Registrar by 4:00 p.m. on the Closing Date in accordance with the instructions printed on the relevant Form of Acceptance and the Offer will close on the Closing Date.
(b) The Offerors and the Company will jointly issue an announcement through the website of the Stock Exchange no later than 7:00 p.m. on the Closing Date stating the results of the Offer and whether the Offer has been extended, revised or have expired.
(c) If the Offer is extended, the announcement of such extension will state the next Closing Date or a statement that the Offer will remain open until further notice. In the latter case, at least 14 days’ notice in writing must be given to the Independent Shareholders before the Offer is closed to those Independent Shareholders who have not accepted the Offer.
(d) If, in the course of the Offer, the Offeror revise the terms of the Offer, all Independent Shareholders, whether or not they have already accepted the Offer, will be entitled to accept the revised Offer under the revised terms. The revised Offer must be kept open for at least 14 days following the date on which the revised offer document(s) are posted and shall not close earlier than the Closing Date.
(e) If the Closing Date is extended, any references in this Composite Document and the Form of Acceptance to the Closing Date shall, except where the context otherwise requires, be deemed to refer to the subsequent closing date.

3. ANNOUNCEMENT

(a) By 6:00 p.m. on a Closing Date (or such later time and/or date as the Executive may in exceptional circumstances permit), the Offeror must inform the Executive and the Stock Exchange of their decision in relation to the revision, extension or expiry of the Offer. The Offeror must publish an announcement on the Stock Exchange’s website by 7:00 p.m. on the Closing Date stating, amongst other information required under Rule 19.1 of the Takeovers Code, whether the Offer has been revised or extended or have expired.

Such announcement must state the following:

(i) the total number of Shares and rights over Shares for which acceptance of the Offer has been received;
(ii) the total number of Shares and rights over Shares, controlled or directed by the Offeror or the parties acting in concert with it before the commencement date of the Offer Period;

−45 −

FURTHER TERMS AND PROCEDURES OF ACCEPTANCE OF THE OFFER

APPENDIX I

(iii) the total number of Shares and rights over shares acquired or agreed to be acquired by the Offeror or the parties acting in concert with it during the Offer Period;
(iv) details of any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in the Company which the Offeror or any the parties acting in concert with it has borrowed or lent, save for any borrowed shares which have been either on-lent or sold; and
(v) the percentages of the relevant classes of share capital of the Company and the percentages of voting rights of the Company represented by these numbers of shares.
(b) In computing the total number of Shares represented by acceptances, acceptances which are not in all respects in complete and good order may only be included where they could be counted towards fulfilling the acceptance conditions under paragraphs (1)(f) and (1)(g) of this Appendix.

4. RIGHT OF WITHDRAWAL

The Offer is conditional upon fulfilment of the Conditions set out in the “Letter from VMS Securities” in this Composite Document and being declared unconditional in all respects. Acceptance of the Offer tendered by Shareholders, shall be irrevocable and cannot be withdrawn, except in the circumstances set out in the subparagraph (a) and (b) below:

(a) in compliance with Rule 17 of the Takeovers Code, which provides that an acceptor of the Offer shall be entitled to withdraw his/her/its consent after 21 days from the first Closing Date (being, 25 January 2017) if the Offer has not by then become unconditional as to acceptances. An acceptor of the Offer may withdraw his/her/its acceptance by lodging a notice in writing signed by the acceptor (or his/her/its agent duly appointed in writing and evidence of whose appointment is produced together with the notice) to the Registrar;
(b) in the circumstances set out in Rule 19.2 of the Takeovers Code (which is to the effect that if the Offeror is unable to comply with any of the requirements of making announcements relating to the Offer as described under the paragraph headed “3. Announcement” above), the Executive may require that acceptors be granted a right of withdrawal, on terms acceptable to the Executive, until such requirements can be met.

In such case, when the Independent Shareholders withdraw their acceptance(s), the Offeror shall, as soon as possible but in any event within 10 days thereof, return by ordinary post the share certificate(s) and/or transfer receipt(s) and/ or other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) lodged with the Form of Acceptance to the relevant Independent Shareholder(s).

Save as aforesaid, acceptances of the Offer shall be irrevocable and not capable of being withdrawn.

−46 −

FURTHER TERMS AND PROCEDURES OF ACCEPTANCE OF THE OFFER

APPENDIX I

5. SETTLEMENT

(a) If you accept the Offer, provided that the accompanying Form of Acceptance, together with the relevant share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) are valid, complete and in good order in all respects and have been received by the Registrar by no later than 4:00 p.m. on the Closing Date, settlement of the consideration, less seller’s ad valorem stamp duty, will be made by cheque as soon as possible, but in any event within three (3) Business Days following the later of (i) the date of receipt by the Registrar of all relevant documents which render such acceptance complete, valid and in compliance with Note 1 to Rule 30.2 of the Takeovers Code; and (ii) the date on which the Offer becomes or is declared unconditional in all respects. Each cheque will be despatched by ordinary post to the address specified on the relevant Shareholder’s Form of Acceptance at his/her/its own risk.
(b) Settlement of the consideration to which any accepting Independent Shareholders is entitled under the Offer will be implemented by the Offeror in full in accordance with the terms of the Offer (save with respect to the payment of seller’s ad valorem stamp duty) set out in this Composite Document (including this Appendix) and the accompanying Form of Acceptance without regard to any lien, right of set-off, counterclaim or other analogous right to which the Offeror may otherwise be, or claim to be, entitled against such Independent Shareholders.
(c) No fractions of a cent will be payable and the amount of cash consideration payable to a Shareholder who accepts the Offer will be rounded up to the nearest cent.

6. OVERSEAS INDEPENDENT SHAREHOLDERS

The Offeror intends to make the Offer available to all Independent Shareholders, including those who are not resident in Hong Kong. The availability of the Offer to persons who are not resident in Hong Kong may be affected by the laws of the relevant overseas jurisdictions. The making of the Offer to persons with a registered address in jurisdictions outside Hong Kong may be prohibited or affected by the laws or regulations of the relevant jurisdictions. Such Independent Shareholders who are citizens, residents or nationals of a jurisdiction outside Hong Kong should observe relevant applicable legal or regulatory requirements and, where necessary, seek legal advice. This Composite Document will not be filed, nor approval for its issuance sought, under the applicable securities or equivalent legislation or rules of any jurisdiction other than Hong Kong.

Whether or not the Composite Document is sent to the Overseas Independent Shareholders, the Composite Document will be published on the websites of the Company and the Stock Exchange, and will be available for collection in the office of the share registrar. It is the responsibility of the individual Independent Shareholders who wish to accept the Offer to satisfy themselves as to the full observance of the laws and regulations of the relevant jurisdictions in connection with the acceptance of the Offer (including the obtaining of any regulatory or other consent which may be required or the compliance with other necessary formalities and the payment of any transfer or other taxes due in respect of such jurisdictions).

−47 −

FURTHER TERMS AND PROCEDURES OF ACCEPTANCE OF THE OFFER

APPENDIX I

7. NOMINEE REGISTRATION

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

8. TAX IMPLICATIONS

None of the Offeror, the Company, their ultimate beneficial owners and the parties acting in concert with any of them, VMS Securities, Veda Capital, Shining, KGI Capital Asia, VBG Capital, the Registrar or any of their respective directors or any persons involved in the Offer is in a position to advise the Independent Shareholders on their individual tax implications. Independent Shareholders are recommended to consult their own professional advisers if they are in any doubt as to the taxation implications of accepting or rejecting the Offer. It is emphasised that none of the Offeror, the Company, their ultimate beneficial owners and the parties acting in concert with any of them, VMS Securities, Veda Capital, Shining, KGI Capital Asia, VBG Capital, the Registrar or any of their respective directors, officers or associates or any persons involved in the Offer accepts responsibility for any taxation effects on, or liabilities of, any person or persons as a result of their acceptance or rejection of the Offer.

9. GENERAL

(a) All communications, notices, the Form of Acceptance, share certificates, transfer receipts, other documents of title (and/or any satisfactory indemnity or indemnities required in respect thereof) and remittances to be delivered by or sent to or from the Shareholders will be delivered by or sent to or from them, or their designated agents, by ordinary post at their own risk. Such communications, notices, documents and remittances will be sent to Shareholders at their addresses, in the case of Shareholders, specified on the relevant Form of Acceptance. None of the Offeror, the Offeror’s ultimate beneficial owners, the Company and the parties acting in concert with any of them, VMS Securities, Veda Capital, Shinning, KGI Capital Asia, VBG Capital, the Registrar or any of their respective directors, officers or associates, or any other person involved in the Offer, accepts any liability for any loss in postage or delay in transmission or such other liabilities whatsoever which may arise as a result.

−48 −

FURTHER TERMS AND PROCEDURES OF ACCEPTANCE OF THE OFFER

APPENDIX I

(b) If no number of Shares is specified in the Form of Acceptance or the number of hares specified by the acceptor in the Form of Acceptance is greater than the number of Shares registered in the name of the acceptor as holder or the number of Shares represented by the relevant share certificate(s) and/or transfer receipt(s) and/or other document(s) of title (and/or any satisfactory indemnity or indemnities in respect thereof) that are forwarded by the acceptor to the Registrar, the Form of Acceptance will be returned to the acceptor for correction. Any corrected Form of Acceptance must be re-submitted and received by the Registrar on or before the latest time of acceptance of the Offer in order for it to be counted towards fulfilling the acceptance condition.
(c) Acceptance of the Offer by any person or persons will be deemed to constitute a warranty by such person or persons to the Offeror, VMS Securities and the Company that the Shares acquired under the Offer are sold by such person or persons free from all liens, charges, encumbrances, rights of pre-emption and any other third party rights of any nature and together with all rights attaching thereto including, the right to receive in full all dividends and other distributions, if any, declared, paid or made on or after the date on which the Offer is made, being the date of despatch of this Composite Document.
(d) Acceptance of the Offer by any nominee will be deemed to constitute a warranty by such nominee to the Offeror that the number of Shares it has indicated in the Form of Acceptance is the aggregate number of Shares for which such nominee has received authorisations from the beneficial owners to accept the Offer on their behalf.
(e) The provisions set out in the Form of Acceptance and form part of the terms of the Offer.
(f) The accidental omission to despatch this Composite Document and/or Form of Acceptance or any of them to any person to whom the Offer is made will not invalidate the Offer in any way.
(g) The Offer is, and all acceptances will be, governed by and construed in accordance with the laws of Hong Kong. Execution of a Form of Acceptance by or on behalf of an Independent Shareholder will constitute such Independent Shareholder’s agreement that the courts of Hong Kong shall have exclusive jurisdiction to settle any dispute which may arise in connection with the Offer.
(h) Due execution of the Form of Acceptance will constitute an irrevocable authority to the Offeror and/or the VMS Securities (or such person or persons as the Offeror and/or the VMS Securities may direct) to complete and execute any document on behalf of the person accepting the Offer and to do any other act that may be necessary or expedient for the purposes of vesting in either Offeror (or such person or persons as it may direct) the Shares in respect of which such person has accepted the Offer.

−49 −

FURTHER TERMS AND PROCEDURES OF ACCEPTANCE OF THE OFFER

APPENDIX I

(i) The Offer is made in accordance with the Takeovers Code.
(j) References to the Offer in this Composite Document and in the Form of Acceptance shall include any extension and/or revision thereof.
(k) In making their decision, Independent Shareholders must rely on their own examination of the Group and the terms of the Offer, including the merits and risks involved. The contents of this Composite Document, including any general advice or recommendation contained herein together with the Form of Acceptance, shall not be construed as any legal or business advice on the part of any of the Offeror, the Company, VMS Securities, or their respective professional advisers. Shareholders should consult their own professional advisers for professional advice.
(l) The English text of this Composite Document and of the accompanying Form of Acceptance shall prevail over the Chinese text for the purpose of interpretation.

−50 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

1. FINANCIAL SUMMARY

The following is a summary of the audited financial results of the Group for each of the two financial years ended 30 September 2013 and 2014, and fifteen months ended 31 December 2015, as extracted from the annual report of the Company for the year ended 30 September 2014 and the annual report for fifteen months ended 31 December 2015; and the unaudited financial results of the Group for the six months ended 30 June 2016 and 30 June 2015 as extracted from the interim reports of the Company for the six months ended 30 June 2016, respectively.

			For	the fifteen
	For the six months		months ended		For the year ended
	ended 30 June		31	December	30 September
	2016	2015		2015	2014	2013
	HK$’000	HK$’000		HK$’000	HK$’000	HK$’000
	(Unaudited) (Unaudited)			(Audited)	(Audited)	(Audited)
						(Restated)
Revenue	53,689	51,537		167,625	286,249	226,282
Profit/ (loss) before tax	1,848	(3,431)		(5,305)	61,492	(3,662)
Income tax expense	(2,377)	(1,552)		(3,621)	(11,581)	(2,529)
Profit/ (loss) for the
period/ year	(529)	(4,983)		(8,926)	(178,759)	53,376
Earnings/(loss) per
share attributable to
owners of the
Company for the
period/year	HK cents	HK cents		HK cents	HK cents	HK cents
— Basic	(0.04)	(0.43)		(0.75)	(16.78)	5.42
— Diluted	(0.04)	(0.43)		(0.75)	(16.31)	5.42
Dividends per share
(Note)	—	—		—	—	0.50
Dividends declared
(HK$’000)	—	—		—	—	5,037

Note: Dividend of HK$0.005 per Share relating to the financial year ended 30 September 2013 has been declared and paid.

The Group had no exceptional or extraordinary items which were exceptional because of its size, nature or incidence for fifteen months ended 31 December 2015, the years ended 30 September 2014 and 30 September 2013, as well as for six months ended 30 June 2016 and 30 June 2015 respectively. The auditor of the Company has expressed an unqualified audit opinion on each of the financial statements of the Group for the fifteen months ended 31 December 2015, the years ended 30 September 2014 and 30 September 2013.

−51 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

2. FINANCIAL INFORMATION OF THE COMPANY FOR FIFTEEN MONTHS ENDED 31 DECEMBER 2015

Set out below is the full text of the audited consolidated financial statements of the Company for fifteen months ended 31 December 2015 extracted from the annual report of the Company for fifteen months ended 31 December 2015.

−52 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

CONSOLIDATED STATEMENT OF PROFIT OR LOSS

For the fifteen months ended 31 December 2015

		Fifteen
		months ended	Year ended
		31 December	30 September
	Notes	2015	2014
		HK$’000	HK$’000
Continuing operations
Revenue Cost of sales	6	167,625 (155,467)	286,249 (244,786)
Gross profit		12,158	41,463
Other income Interest income Selling and distribution costs	7 8	1,355 3,904 (4,694)	61,033 87 (12,106)
Administrative costs Finance costs Gain on dilution of interest in an associate Share of results of an associate	10 19 19	(40,099) (3,675) 1,152 24,594	(37,754) (814) — 9,583
(Loss)/profit before tax	11	(5,305)	61,492
Income tax expense	13	(3,621)	(11,581)
(Loss)/profit for the period/year from continuing operations		(8,926)	49,911
Discontinued operations
Net results from discontinued operations	37	—	(228,670)
Loss for the period/year		(8,926)	(178,759)
(Losses)/earnings per share	15
From continuing and discontinued operations
Basic		(0.75) cents	(16.78) cents
Diluted		(0.75) cents	(16.31) cents
From continuing operations
Basic		(0.75) cents	4.69 cents
Diluted		(0.75) cents	4.60 cents
From discontinued operations
Basic		N/A	(21.47) cents
Diluted		N/A	(20.91) cents

United Pacific Industries

− 53 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the fifteen months ended 31 December 2015

		Fifteen
		months ended	Year ended
		31 December	30 September
	Notes	2015	2014
		HK$’000	HK$’000
Loss for the period/year		(8,926)	(178,759)
Other comprehensive income
Item that will not be reclassified to profit or loss:
Recognition of actuarial losses on defined benefit
pension plan (net of tax)		—	(53,143)
Items that may be reclassified subsequently
to profit or loss:
Exchange differences arising on the translation
of interest in a foreign associate	19	(7,517)	(1,706)
Exchange differences arising on the translation of foreign operations		(873)	868
Cash flow hedge loss recognised in equity		—	(361)
Cash flow hedge recycled to the statement of profit or loss		—	712
Deficit on revaluation of available-for-sale financial assets Realised exchange differences on the sale of a disposal		(160)	(957)
group recycled to the statement of profit or loss		—	57,122
Impairment of available-for-sale financial assets
recycled to the statement ofprofit or loss		—	1,702
Other comprehensive income for the period/year,
net of tax		(8,550)	4,237
Total comprehensive income for the period/year
attributable to owners of the Company		(17,476)	(174,522)

Annual Report 2015

− 54 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At 31 December 2015

		31 December	30 September
	Notes	2015	2014
		HK$’000	HK$’000
NON-CURRENT ASSETS
Property, plant and equipment	16	3,957	4,362
Interest in an associate Available-for-sale financial assets	19 20	152,383 77	150,234 237
		156,417	154,833
CURRENT ASSETS
Inventories Trade and other receivables Cash and bank balances	21 22 23	12,599 34,565 306,669	18,182 96,440 287,181
		353,833	401,803
CURRENT LIABILITIES
Trade and other payables	24	37,004	62,023
Interest-bearing bank borrowings	25	—	6,020
Obligations under finance leases Taxpayable	26	— 7,587	9 13,174
		44,591	81,226
NET CURRENT ASSETS		309,242	320,577
TOTAL ASSETS LESS CURRENT LIABILITIES		465,659	475,410

United Pacific Industries

− 55 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At 31 December 2015

		31 December	30 September
	Notes	2015	2014
		HK$’000	HK$’000
NON-CURRENT LIABILITIES
Convertible bonds	30	—	73,101
Deferred tax liabilities	31	1,703	—
		1,703	73,101
NET ASSETS		463,956	402,309
CAPITAL AND RESERVES
Share capital	32	133,171	116,087
Reserves	34	330,785	286,222
TOTAL EQUITY ATTRIBUTABLE TO OWNERS
OF THE COMPANY		463,956	402,309

The consolidated financial statements on pages 28 to 105 were approved and authorised for issue by the Board of Directors on 23 March 2016 and are signed on its behalf by:

DATO‘ CHOO CHUO SIONG DIRECTOR

KELLY LEE DIRECTOR

Annual Report 2015

− 56 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the fifteen months ended 31 December 2015

						Convertible
			Treasury	Share		bonds	Capital				Investment
	Share	Share	share	option	Other	equity	redemption	Capital	Translation	Hedging	revaluation	Retained
	capital	premium*	reserve*	reserve*	reserve*	reserve*	reserve*	reserve*	reserve*	reserve*	reserve*	profits*	Total
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
At 1 October 2013	100,744	42,406	(4,968)	513	40	—	1,442	19,870	(55,336)	(351)	(794)	371,001	474,567
Exercise of share options	600	1,456	—	(178)	—	—	—	—	—	—	—	—	1,878
Share-based compensation expense	—	—	—	208	—	—	—	—	—	—	—	—	208
Equity component of convertible bonds (note 30)	—	—	—	—	—	4,349	—	—	—	—	—	—	4,349
Issuance of shares for acquisition
of on associate (note 19)	14,743	81,086	—	—	—	—	—	—	—	—	—	—	95,829
Transactions with owners	15,343	82,542	—	30	—	4,349	—	—	—	—	—	—	102,264
Loss for the year	—	—	—	—	—	—	—	—	—	—	—	(178,759)	(178,759)
Other comprehensive income:
Exchange differences arising on the translation
of foreign operations	—	—	—	—	—	—	—	—	868	—	—	—	868
Exchange differences arising on the translation
of interest in a foreign associate (note 19)	—	—	—	—	—	—	—	—	(1,706)	—	—	—	(1,706)
Cash flow hedge loss recognised in equity	—	—	—	—	—	—	—	—	—	(361)	—	—	(361)
Cash flow hedge recycled to the statement
of profit or loss	—	—	—	—	—	—	—	—	—	712	—	—	712
Realised exchange differences on the sale
of a disposal group recycled to the statement
of profit or loss	—	—	—	—	—	—	—	—	57,122	—	—	—	57,122
Deficit on revaluation of available-for-sale
financial assets	—	—	—	—	—	—	—	—	—	—	(957)	—	(957)
Impairment loss on available-for-sale financial assets
recycled to the statement of profit or loss	—	—	—	—	—	—	—	—	—	—	1,702	—	1,702
Recognition of actuarial losses on defined
benefit pension plan (net of tax)	—	—	—	—	—	—	—	—	—	—	—	(53,143)	(53,143)
Total comprehensive income for the year	—	—	—	—	—	—	—	—	56,284	351	745	(231,902)	(174,522)
At 30 September 2014	116,087	124,948	(4,968)	543	40	4,349	1,442	19,870	948	—	(49)	139,099	402,309

United Pacific Industries

− 57 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the fifteen months ended 31 December 2015

==> picture [409 x 286] intentionally omitted <==

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

Convertible
Treasury Share bonds Capital Investment
Share Share share option Other equity redemption Capital Translation revaluation Retained
capital premium reserve reserve reserve reserve reserve reserve reserve reserve profits Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
At 1 October 2014 116,087 124,948 (4,968) 543 40 4,349 1,442 19,870 948 (49) 139,099 402,309
Exercise of share options 750 2,182 — (584) — — — — — — — 2,348
Exercise of conversion rights (note 30) 16,334 64,749 — — — (4,349) — — — — — 76,734
Share-based compensation expense — — — 41 — — — — — — — 41
Transactions with owners 17,084 66,931 — (543) — (4,349) — — — — — 79,123
Loss for the period — — — — — — — — — — (8,926) (8,926)
Other comprehensive income:
Exchange differences arising on the
translation of foreign operations — — — — — — — — (873) — — (873)
Exchange differences arising on the
translation of interest in a foreign
associate (note 19) — — — — — — — — (7,517) — — (7,517)
Deficit on revaluation of available-
for-sale financial assets — — — — — — — — — (160) — (160)
Total comprehensive income
for the period — — — — — — — — (8,390) (160) (8,926) (17,476)
At 31 December 2015 133,171 191,879 (4,968) — 40 — 1,442 19,870 (7,442) (209) 130,173 463,956
----- End of picture text -----

The total reserves at 31 December 2015 is HK$330,785,000 (30 September 2014: HK$286,222,000).

Annual Report 2015

− 58 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

CONSOLIDATED STATEMENT OF CASH FLOWS

For the fifteen months ended 31 December 2015

		Fifteen
		months ended	Year ended
		31 December	30 September
	Notes	2015	2014
		HK$’000	HK$’000
Cash flows from operating activities: (Loss)/profit before tax from continuing operations		(5,305)	61,492
Loss before tax from discontinued operations	37	—	(225,424)
Adjustments for:
Interest income Interest on interest-bearing bank borrowings and overdrafts		(3,904) 42	(842) 1,844
Interest on obligations under finance leases		—	308
Imputed interest on convertible bonds		3,633	450
Interest on retirement benefit obligations		—	4,922
Bargain purchase on acquisition of an associate		—	(60,440)
Prolonged decline in fair value of available-for-sale
financial assets Retirement benefit plan expenses		— —	1,702 4,146
Share of results of an associate Gain on dilution of interest in an associate Depreciation of property, plant and equipment		(24,594) (1,152) 1,648	(13,599) — 12,086
Gain on disposal of property, plant and equipment
previously written off		(384)	—
Amortisation of prepaid land lease payments
under operating leases		—	17
Property, plant and equipment written off		—	145
Impairment loss on non-current assets	38	—	170,283
Reversal of impairment loss on trade receivables		(92)	(465)
Impairment loss on inventories		717	786
Cash flow hedge recycled to the statement of profit or loss		—	712
Share-based compensation expenses		41	208
Net loss on disposal of subsidiaries	36	—	117,537
Restructuringcosts charged to the statement ofprofit or loss		—	4,112
Operating cash flows before movements in working capital Decrease/(increase) in inventories Decrease/(increase) in trade and other receivables (Decrease)/increase in trade and other payables		(29,350) 4,866 47,337 (25,019)	79,980 (13,415) (57,049) 44,146
Restructuring costs paid		—	(5,992)
Employer contributions to the defined benefitpensionplan		—	(12,955)
Net cash (used in)/generated from operations		(2,166)	34,715
Income taxpaid		(7,525)	(9,524)
Net cash (used in)/generated from operatingactivities		(9,691)	25,191

United Pacific Industries

− 59 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

CONSOLIDATED STATEMENT OF CASH FLOWS

For the fifteen months ended 31 December 2015

		Fifteen
		months ended	Year ended
		31 December	30 September
	Notes	2015	2014
		HK$’000	HK$’000
Cash flows from investing activities: Purchase of property, plant and equipment		(1,390)	(6,728)
Proceeds from disposal of property,
plant and equipment previously written off		384	—
Interest received		3,904	842
Acquisition of an associate	19	—	(131,440)
Net cash inflow from disposal of subsidiaries	36	—	2,242
Dividend received from an associate		30,712	—

Net cashgenerated from/(used in)investingactivities		33,610	(135,084)

Cash flows from financing activities:
Principal repayment of obligations under finance leases		(9)	(4,748)
Interest paid on interest-bearing bank borrowings
and bank overdrafts		(42)	(7,074)
Net cash inflow on trust receipts and export loans		—	2,331
Repayment of bank borrowings		(6,020)	(14,560)
New bank borrowings raised		—	35,925
Proceeds from issue of convertible bonds		—	77,000
Proceeds from issue of ordinary shares upon acquisition
of an associate		—	130,720
Repayment of bridge loan in relation to
the acquisition of an associate	19	—	(130,720)
Proceeds from bridge loan in relation to
the acquisition of an associate	19	—	130,720
Proceeds from exercise of share options		2,348	1,878
Net cash(used in)/generated from financingactivities		(3,723)	221,472
Net increase in cash and cash equivalents Effect of foreign exchange rates Cash and cash equivalents at beginningofperiod/year		20,196 (708) 287,181	111,579 2,597 173,005
Cash and cash equivalents at end ofperiod/year		306,669	287,181
Analysis of the balance of cash and cash equivalents:
Cash and bank balances	23	306,669	287,181

Details of major non-cash transactions are set out in note 35 to the consolidated financial statements.

Annual Report 2015

− 60 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. CHANGE OF FINANCIAL YEAR END DATE

On 5 November 2015, the Company announced to change its financial year end date from 30 September to 31 December so as to unify the financial year end date of the Company and its principal operating subsidiary which is incorporated in the People’s Republic of China (the “PRC”). As a result of this, the final results covered a period of fifteen months ended 31 December 2015.

2. GENERAL

The Company was incorporated in Bermuda as an exempted company with limited liability with its shares listed on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”). The addresses of the registered office and principal place of business of the Company are disclosed in the Corporate Information section to the annual report.

The Company is an investment holding company. The activities of its principal subsidiaries and associate are set out in notes 45 and 19, respectively.

The consolidated financial statements are presented in Hong Kong dollars, which is also the functional currency of the Company.

These financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) which collectively include all applicable HKFRSs, Hong Kong Accounting Standards (“HKASs”) and Interpretations issued by the Hong Kong Institute of Certified Public Accountants and the applicable disclosure requirements of the Hong Kong Companies Ordinance which concern the preparation of financial statements. The financial statements also include the applicable disclosure requirements of the Rules Governing the Listing of Securities on the Stock Exchange (the “Listing Rules”).

3. ADOPTION OF HONG KONG FINANCIAL REPORTING STANDARDS

(a) Adoption of new/revised HKFRSs — effective 1 October 2014

HKFRSs (Amendments) Annual Improvements 2010-2012 Cycle HKFRSs (Amendments) Annual Improvements 2011-2013 Cycle

As explained below, the adoption of these amendments has no material impact on the Group’s financial statements.

Annual Improvements 2010-2012 Cycle and 2011-2013 Cycle

The amendments issued under the annual improvements process make small, non-urgent changes to a number of standards where they are currently unclear. They include amendments to HKAS 16 Property, Plant and Equipment to clarify how the gross carrying amount and accumulated depreciation are treated where an entity uses the revaluation model. The carrying amount of the asset is restated to revalued amount. The accumulated depreciation may be eliminated against the gross carrying amount of the asset. Alternatively, the gross carrying amount may be adjusted in a manner consistent with the revaluation of the carrying amount of the asset and the accumulated depreciation is adjusted to equal the difference between the gross carrying amount and the carrying amount after taking into account accumulated impairment loss.

The adoption of the amendments to HKAS 16 has no impact on these financial statements as the Group does not use revaluation model for its property, plant and equipment.

United Pacific Industries

− 61 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3. ADOPTION OF HONG KONG FINANCIAL REPORTING STANDARDS (Continued)

(b) New/revised HKFRSs that have been issued but are not yet effective

The following new/revised HKFRSs, potentially relevant to the Group’s financial statements, have been issued, but are not yet effective and have not been early adopted by the Group.

HKFRSs (Amendments) Annual Improvements 2012-2014 Cycle[1] Amendments to HKAS 1 Disclosure Initiative[1] HKFRS 9 (2014) Financial Instruments[2] Amendments to HKFRS 10 and HKAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture[3] HKFRS 15 Revenue from Contracts with Customers[2]

1 Effective for annual periods beginning on or after 1 January 2016

2 Effective for annual periods beginning on or after 1 January 2018

3 Effective date is deferred

Amendments to HKAS 1 - Disclosure Initiative

The amendments are designed to encourage entities to use judgement in the application of HKAS 1 when considering the layout and content of their financial statements.

An entity’s share of other comprehensive income from equity accounted interests in associates and joint ventures will be split between those items that will and will not be reclassified to profit or loss, and presented in aggregate as a single line item within those two groups.

HKFRS 9 (2014) - Financial Instruments

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

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

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

Annual Report 2015

− 62 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3. ADOPTION OF HONG KONG FINANCIAL REPORTING STANDARDS (Continued)

(b) New/revised HKFRSs that have been issued but are not yet effective (Continued) Amendments to HKFRS 10 and HKAS 28 - Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

The amendments clarify the extent of gains or losses to be recognised when an entity sells or contributes assets to its associate or joint venture. When the transaction involves a business the gain or loss is recognised in full, conversely when the transaction involves assets that do not constitute a business the gain or loss is recognised only to the extent of the unrelated investors’ interests in the joint venture or associate.

HKFRS 15 - Revenue from Contracts with Customers

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

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

Step 1: Identify the contract(s) with a customer Step 2: Identify the performance obligations in the contract Step 3: Determine the transaction price Step 4: Allocate the transaction price to each performance obligation Step 5: Recognise revenue when each performance obligation is satisfied

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

The Group is in the process of making an assessment of the potential impact of these new/revised HKFRSs and the Directors are not yet in a position to quantity the effects on the Group’s financial statements.

The provisions of the new Companies Ordinance, Cap. 622, in relation to the preparation of financial statements apply to the Company in this financial year.

The directors consider that there is no impact on the Group’s financial position or performance, however the new Companies Ordinance, Cap. 622, impacts on the presentation and disclosures in the consolidated financial statements. For example, the statement of financial position of the Company is now presented in the notes to the financial statements rather than as a primary statement and related notes to the statement of financial position of the Company are generally no longer presented.

United Pacific Industries

− 63 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

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

The consolidated financial statements have been prepared under the historical cost basis, except for availablefor-sale financial assets, which are stated at their fair value. The measurement bases are fully described in the accounting policies below.

It should be noted that accounting estimates and assumptions are used in the preparation of the financial statements. Although these estimates are based on management’s best knowledge and judgment of current events and actions, actual results may ultimately differ from those estimates. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 5.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries (together referred to as “the Group”) made up to 31 December each year.

Subsidiaries

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

The results of subsidiaries acquired or disposed of during the period are included in the statement of profit or loss from the effective date of acquisition or 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 in line with those used by other members of the Group.

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

In the Company’s statement of financial position, subsidiaries are carried at cost less any impairment loss. The results of the subsidiaries are accounted for by the Company on the basis of dividends received and receivable at the end of the reporting period.

Annual Report 2015

− 64 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Business combinations

The acquisition of businesses are accounted for using the acquisition method. The cost of an acquisition is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Group, liabilities incurred by the Group to former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. Acquisition related costs are recognised in the consolidated statement of profit or loss as incurred unless they are incurred in issuing equity instruments in which case the costs are deducted from equity.

At the acquisition date, the acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under HKFRS 3 (Revised) are recognised at their fair values, except that: deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised and measured in accordance with HKAS 12 Income Taxes and HKAS 19 Employee Benefits respectively; liabilities or equity instruments related to the replacement by the Group of an acquiree’s share-based payment awards are measured in accordance with HKFRS 2 Share-based Payments; and assets (or disposal groups) that are classified as held for sale in accordance with HKFRS 5 Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with that Standard. Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the Group’s interest in the fair value of the acquiree’s identifiable net assets exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree (if any) the excess is recognised immediately in profit or loss as a bargain purchase gain. Noncontrolling interests that represent present ownership interests may be initially measured either at fair value or at the non-controlling interests’ proportionate share of the fair value of the acquiree’s identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis. All other non-controlling interests are measured at fair value unless another measurement basis is required by HKFRSs.

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

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

United Pacific Industries

− 65 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Business combinations (Continued)

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

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

Interest in an associate

An associate is an entity in which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influences is the power to participate in the financial and operating policy decisions of the investee but not control or joint control over these policies.

The results and assets and liabilities of an associate are incorporated in the consolidated financial statements using the equity method of accounting. Under the equity method, an investment in an associate is carried in the statement of financial position at cost, as adjusted for post-acquisition changes in the Group’s share of the net assets of the associate. When the Group’s share of losses of an associate equals or exceeds its interest in that associate (which includes any long-term interests that, in substance, form part of the Group’s net investment in the associate), the Group discontinues recognising its share of further losses. An additional share of losses is provided for and a liability is recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of that associate.

Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the associate recognised at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment and is assessed for impairment as part of the investment. Any excess of the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in the profit or loss.

Where a Group entity transacts with an associate of the Group, profits and losses are eliminated to the extent of the Group’s interest in the relevant associate.

Annual Report 2015

− 66 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Revenue recognition

Revenue is measured at fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts and sales related taxes. Revenue is recognised when it is probable that the economic benefits will flow to the Group and when the revenue and costs, if applicable, can be measured reliably, on the following bases:

(a) Sales of goods are recognised when goods are delivered and title has been passed. This is usually taken as the time when the goods are delivered and the customer has accepted the goods.
(b) Rental income, including rentals invoiced in advance from freehold land and building under operating leases, is recognised on a straight-line basis over the term of the lease.
(c) Interest income from a financial asset is recognised as it accrues using the effective interest method.

Property, plant and equipment

Property, plant and equipment, other than freehold land, are stated at cost less accumulated depreciation and accumulated impairment loss.

Freehold land is stated at cost and related carrying amounts are not depreciated, as freehold land is considered infinite.

Depreciation is provided to write off the cost of property, plant and equipment net of expected residual value over their estimated useful lives, using the straight-line method. The useful lives, residual value and depreciation method are reviewed, and adjusted if appropriate, at the end of each reporting period.

The property, plant and equipment are depreciated on a straight-line basis at the following rates per annum:

Freehold land	Nil
Land and buildings	Over the remaining unexpired term of the lease or fifty years,
	whichever is shorter
Leasehold improvements	Over the remaining unexpired term of the lease or five years,
	whichever is shorter
Furniture, fixtures and equipment	10% - 25%
Motor vehicles	20% - 25%
Plant and machinery	10% - 331/3%

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, the term of the relevant lease.

For owner-occupied leasehold land and buildings, where the allocation between the land and building elements cannot be made reliably, the leasehold interests in land are accounted for as property, plant and equipment and measured using the cost model, as appropriate.

United Pacific Industries

− 67 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Property, plant and equipment (Continued)

The 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 the profit or loss.

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

Financial instruments

Financial assets and financial liabilities are recognised on the 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 the profit or loss.

Financial assets

The Group’s financial assets are classified into loans and receivables and available-for-sale financial assets. 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. The accounting policies adopted in respect of each category of financial assets are set out below.

The Group assesses, at the end of each reporting period, whether there is any objective evidence that the financial asset is impaired. A financial asset is impaired if there is objective evidence of impairment as a result of one or more events that have occurred after the initial recognition of the asset and that event has an impact on the estimated future cash flows of the financial asset that can be reliably estimated. Evidence of impairment may include, but not be limited to: significant financial difficulty of the debtor; a breach of contract, such as a default or delinquency in interest or principal payments; the granting of a concession to a debtor due to financial difficulties; and it becoming probable that the debtor will enter bankruptcy or any other financial reorganisation.

Annual Report 2015

− 68 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Financial instruments (Continued) Financial assets (Continued)

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. At each reporting date subsequent to initial recognition, loans and receivables (including trade receivables and bank balances) are carried at amortised cost using the effective interest method, less any identified impairment loss. An impairment loss is recognised in the profit or loss when there is objective evidence that the asset is impaired. Objective evidence of impairment includes observable data that comes to the attention of the Group about one or more of the following loss events:

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

If any such evidence exists, the impairment loss for receivables is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate. The carrying amount of the financial asset is reduced through the use of an allowance account. When any part of the financial asset is determined as un-collectible, it is written off against the allowance account for the relevant financial asset.

Impairment loss are reversed in subsequent periods when an increase in the asset’s recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to a restriction 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.

United Pacific Industries

− 69 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Financial instruments (Continued)

Financial assets (Continued)

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 held-to-maturity investments. At each reporting date subsequent to initial recognition, available-for-sale financial assets are measured at fair value. Changes in fair value are recognised in other comprehensive income, until the financial asset is disposed of or is determined to be impaired, at which time, the cumulative gain or loss previously recognised in other comprehensive income is recognised in the profit or loss. Any impairment loss on available-for-sale financial assets is recognised in the profit or loss. For available-for-sale equity investments, any increase in fair value subsequent to an impairment loss is recognised in other comprehensive income. If, in a subsequent period, the fair value of a debt instrument classified as available-for-sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in the profit or loss, the impairment loss shall be reversed, with the amount of the reversal recognised in the profit or loss.

For available-for-sale financial assets that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity instruments, they are measured at cost less any identified impairment loss at the end of each reporting period subsequent to initial recognition. An impairment loss is recognised in the profit or loss when there is objective evidence that the asset is impaired. The amount of the impairment loss is measured as the difference between the carrying amount of the asset and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset.

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

Annual Report 2015

− 70 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Financial instruments (Continued)

Financial liabilities and equity

Financial liabilities and equity instruments issued by a Group entity are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. The accounting policies adopted in respect of financial liabilities and equity instruments are set out below.

Bank borrowings

Interest-bearing bank loans and overdrafts are initially recognised at fair value, and are subsequently measured at amortised cost, using the effective interest method. Any difference between the proceeds (net of transaction costs) and the settlement or redemption of borrowings is recognised over the term of the borrowings in accordance with the Group’s accounting policy for borrowing costs.

Other financial liabilities

Other financial liabilities including trade payables are subsequently measured at amortised cost, using the effective interest method.

Equity instruments

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

When any entity within the Group purchases the Company’s ordinary shares (treasury shares), the consideration paid, including any directly attributable incremental costs, net of income taxes, is deducted from equity attributable to the Company’s owners and presented as “treasury shares” within equity, until they are cancelled, sold or reissued.

When treasury shares are cancelled, the cost of the treasury shares is deducted against the share capital account if the shares are purchased out of capital of the Company, or against the retained profits of the Company if the shares are purchased out of profits of the Company.

When treasury shares are subsequently sold or reissued, the cost of the treasury shares is reversed from the treasury shares account and the realised gain or loss on sale or reissue, net of any directly attributable incremental transaction costs and related income tax, is taken to equity as other reserve of the Company.

United Pacific Industries

− 71 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Financial instruments (Continued)

Financial liabilities and equity (Continued)

Convertible bonds

Convertible bonds issued by the Group that contain both the liability and conversion option components are classified separately into their respective components on initial recognition. Conversion option that will be settled by the exchange of a fixed amount of cash or another financial asset for a fixed number of the Company’s own equity instruments is classified as an equity instrument.

On initial recognition, the fair value of the liability component is determined using the prevailing market interest of similar non-convertible debts. The difference between the proceeds of the issue of the convertible bonds and the fair value assigned to the liability component, representing the conversion option for the holder to convert the loan notes into equity, is included in equity (convertible bonds equity reserve).

In subsequent periods, the liability component of the convertible bonds is carried at amortised cost using the effective interest method. The equity component, represented by the option to convert the liability component into ordinary shares of the Company, will remain in convertible bonds equity reserve until the embedded option is exercised (in which case the balance stated in convertible bonds equity reserve will be transferred to share premium). Where the option remains unexercised at the expiry date, the balance stated in convertible bonds equity reserve will be released to the retained earnings. No gain or loss is recognised upon conversion or expiration of the option.

Derecognition

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

Financial liabilities are derecognised when the obligation specified in the relevant contract is discharged, cancelled or expires. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in the profit or loss.

Annual Report 2015

− 72 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Borrowing costs

Borrowing costs attributable directly to the acquisition, construction or production of assets which require a substantial period of time to be ready for their intended use or sale, are capitalised as part of the cost of those assets. Income earned on temporary investments of specific borrowings pending their expenditure on those assets is deducted from borrowing costs capitalised. All other borrowing costs are recognised in the profit or loss in the period in which they are incurred.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Cost is calculated using the first-in, first-out method. Net realisable value represents the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

Cash and cash equivalents

For the purpose of the consolidated statement of cash flows, cash and cash equivalents comprise cash in hand and demand deposits, and short term highly liquid investments that are readily convertible into known amounts of cash, are subject to an insignificant risk of changes in value, and have a short maturity of generally within three months when acquired, less bank overdrafts which are repayable on demand and form an integral part of the Group’s cash management.

For the purpose of the statement of financial position, cash and cash equivalents comprise cash in hand and at banks, including term deposits, and assets similar in nature to cash, which are not restricted as to use.

Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle that obligation and a reliable estimate of the amount of the obligation can be made. Provisions are measured at the Directors’ best estimate of the expenditure required to settle the obligation at the reporting date, and are discounted to present value where the effect is material.

United Pacific Industries

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Impairment of assets

At each reporting date, the Group reviews the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount unless the relevant asset is carried at a revalued amount under the Group’s accounting policy. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessment of time value of money and the risk specific to the asset. An impairment loss is recognised as an expense immediately.

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

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

Taxation

Taxation represents the sum of the tax paid or currently payable and deferred tax. The tax currently paid and payable is based on taxable profit for the period. Taxable profit differs from profit as reported in the consolidated statement of profit or loss because it excludes items of income or expense that are taxable or deductible in other periods and it further excludes profit or loss items that are never taxable or deductible.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at the end of each 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.

Annual Report 2015

− 74 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Taxation (Continued)

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited to the profit or loss, except when it relates to items charged or credited directly to other comprehensive income, in which case the deferred tax is also dealt with in other comprehensive income.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associate, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not be reversed in the foreseeable future.

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 each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing on the reporting date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are recognised in profit or loss in the period in which they arise. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in the profit or loss for the period.

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. Hong Kong dollars) at the rate of exchange prevailing at that date, and their income and expenses are translated at the average monthly exchange rates for the period, unless exchange rates fluctuate significantly during the period, in which case, the exchange rates prevailing at the dates of transactions are used. Exchange differences arising, if any, are recognised as a separate component of other comprehensive income (the translation reserve). Such exchange differences are recognised in the profit or loss in the period in which the foreign operation is disposed of.

Goodwill and fair value adjustments arising on the acquisition of a foreign operation on or after 1 April 2005 have been treated as assets and liabilities of the foreign operation and translated in Hong Kong dollars at the closing rates.

United Pacific Industries

− 75 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Leases

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

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.

Prepaid land lease payments under operating leases

Leasehold interests in land are up-front payments to acquire the land use rights. The payments are stated at cost less accumulated amortisation and any impairment loss. Amortisation is calculated on the straight-line basis to write off the up-front payments over the lease terms.

The Group as lessee

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

Assets held under finance leases are recognised as assets of the Group at fair values at 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 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. Subsequent accounting for assets held under finance lease agreements corresponds to those applied to comparable acquired assets. Finance charges are charged directly to the profit or loss.

Retirement benefits costs

Payments to the defined contribution retirement plans are charged as expenses when employees have rendered service entitling them to contributions.

The Group operates a defined contribution retirement benefits scheme under the Mandatory Provident Fund Schemes Ordinance (the “MPF Scheme”), for employees who are eligible to participate in the MPF Scheme. Contributions are made based on a percentage of the employees’ basic salaries and are charged to the profit or loss as they become payable in accordance with the rules of the MPF Scheme. The assets of the MPF Scheme are held separately from those of the Group in an independently administered fund. The Group’s employer contributions vest fully with the employees when contributed into the MPF Scheme, except for the Group’s employer voluntary contributions, which are refunded to the Group when the employee leaves employment prior to the contributions vesting fully, in accordance with the rules of the MPF Scheme.

The employees of the Company’s subsidiaries which operate in Mainland China are required to participate in a central pension scheme operated by the local municipal government. The subsidiaries are required to contribute a certain percentage of its payroll costs to the central pension scheme. The contributions are charged to the profit or loss as they become payable in accordance with the rules of the central pension scheme.

Annual Report 2015

− 76 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Equity-settled share-based payment transactions

Share options granted to Directors of the Company and employees of the Group 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 option reserve).

At the end of each reporting period, the Group revises its estimates of the number of options that are expected to ultimately vest. The impact of the revision of the original estimates, if any, is recognised in the profit or loss over the remaining vesting period, with a corresponding adjustment to share option reserve.

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

Financial guarantees issued

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

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

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

United Pacific Industries

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Related parties

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

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

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

(i) that person’s children and spouse or domestic partner;
(ii) children of that person’s spouse or domestic partner; and
(iii) dependents of that person or that person’s spouse or domestic partner.

Annual Report 2015

− 78 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Segmental reporting

The Group has identified its operating segments and prepared segmental information based on regular internal financial information reported to the Group’s Executive Directors for their decisions about resources allocation to the Group’s business components and review of these components’ performance.

The business components in the internal reporting to the Executive Directors are determined following the Group’s principal activities.

Under HKFRS 8, reported segmental information is based on internal management reporting information that is regularly reviewed by the Executive Directors. The measurement policies the Group uses for reporting segment results under HKFRS 8 are the same as those used in the HKFRS financial statements except for cash flow hedges recycled from other comprehensive income, realised exchange differences on the liquidation of a subsidiary undertaking recycled from other comprehensive income and corporate income and expenses that are not directly attributable to the business activities of any operating unit and income tax.

Segment assets include all assets but exclude deferred tax assets, goodwill, other intangible assets, interest in an associate, available-for-sale financial assets, consolidation and Group assets unrelated to the business activities of any operating segment.

Segment liabilities include all liabilities but exclude deferred tax liabilities and consolidation and Group liabilities unrelated to the business activities of any operating segment.

Segment revenue, expense, assets and liabilities are determined before intra-group balances and intra-group transactions are eliminated as part of the consolidation process, except to the extent that such intra-group balances and transactions are between group entities within a single segment.

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

5. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

The key sources of estimation uncertainty at the end of each reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are disclosed below.

Inventories

Inventories are measured at the lower of cost and net realisable value. The management of the Group reviews the carrying amount of the inventory at the end of each reporting period, and makes allowance for any inventory items identified to be carried at a recoverable value that is lower than cost through estimation of the expected selling prices under current market conditions.

Impairment of trade receivables

Management assesses the recoverability of the trade receivables based on the estimate on their financial status and their ability to repay their obligations when they fall due. Judgment is required in assessing the ultimate realisation of these receivables, and the financial conditions of the debtors may undergo adverse changes since the last management evaluation. If the financial conditions of the customers were to deteriorate, resulting in an impairment of their ability to make payments, additional provision may be required in future accounting periods.

United Pacific Industries

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

6. REVENUE AND SEGMENT INFORMATION

Up until 30 May 2014, the Group’s principal segments for internal reporting purposes were: the contract manufacturing, on OEM and EMS bases, of a wide range of power-related and electrical/electronic products (“Contract Manufacturing”); the manufacture, procurement and distribution of a broad line of hand, lawn and garden tools (“Tools”); the procurement and assembly of magnetic tools and products including the provision of magnetic-based industrial solutions (“Magnetic Technologies”); the manufacture, assembly and procurement of metrology and measurement tools (“Precision Measurement”); and the manufacture of electronic consumer products (“Consumer Electronics”). On 30 May 2014, the Company sold its entire shareholdings in Pantene Global Holdings Limited (“PGH”) and Pantronics Holdings Limited (“PHL”). PGH was the holding company of the Tools, Magnetic Technologies and Precision Measurement segments while PHL was the holding company of the Contract Manufacturing segment.

At the reporting date, there is one remaining business segment, Consumer Electronics, upon which the Group reports its primary segment information.

Revenue represents the total invoiced value of goods supplied less discounts and returns.

	Consumer
	Electronics
	HK$’000
For the fifteen months ended 31 December 2015
Revenue
External customers	167,625
Loss before tax
Segment loss	(5,616)
Net finance credits	342
Reportable segment loss	(5,274)
Assets
Segment assets	83,765
Liabilities
Segment liabilities	34,397
Other information Additions of property, plant and equipment Depreciation of property, plant and equipment	1,341 1,273
Income tax credit Reversal of impairment loss on trade receivables	(1,298) (92)
Reversal of impairment loss on inventories	(717)

Annual Report 2015 55

− 80 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

6. REVENUE AND SEGMENT INFORMATION (Continued)

REVENUE AND SEGMENT INFORMATI	N(Continued)
	Consumer	Discontinued
	Electronics	Operations	Total
	HK$’000	HK$’000	HK$’000
For the year ended 30 September 2014
Revenue
External customers	286,249	875,395	1,161,644
Inter-segment sales	—	7,210	7,210
	286,249	882,605	1,168,854
Profit before tax
Segment profit	19,298	68,447	87,745
Restructuring costs	—	(4,112)	(4,112)
Share of results of an associate	—	4,016	4,016
Impairment loss on non-current assets (note 38)	—	(170,283)	(170,283)
Net finance costs	(287)	(5,955)	(6,242)
Reportable segmentprofit/(loss)	19,011	(107,887)	(88,876)
Assets
Segment assets	120,414	—	120,414
Liabilities
Segment liabilities	65,721	—	65,721
Other information
Additions of property, plant and equipment	1,857	6,785	8,642
Depreciation of property, plant and equipment	2,222	9,730	11,952
Amortisation of prepaid land lease
payments under operating leases	—	17	17
Income tax expense	8,654	3,246	11,900
(Reversal of impairment loss)/impairment loss
on trade receivables	(474)	9	(465)
Impairment loss/(reversal of impairment loss)
on inventories	1,236	(450)	786

Inter-segment sales are charged at prevailing market rates.

United Pacific Industries

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

6. REVENUE AND SEGMENT INFORMATION (Continued)

The totals presented for the Group’s operating segments reconciled to the Group’s key financial figures is presented in the financial statements as follows:

Fifteen
months ended	Year ended
31 December	30 September
2015	2014
HK$’000	HK$’000
Reportable segment revenues 167,625	1,168,854
Discontinued operations —	(882,605)
Total revenue 167,625	286,249
Fifteen
months ended	Year ended
31 December	30 September
2015	2014
HK$’000	HK$’000
Reportable segment loss (5,274)	(88,876)
Less: Segment loss from discontinued operations —	(107,887)
Gain on dilution of interest in an associate 1,152 Share of results of an associate 24,594	— 9,583
Unallocated corporate (costs)/credits# (25,664)	32,811
Unallocated corporate net finance(charge)/credits (113)	87
(Loss)/profit from continuingoperations before income tax (5,305)	61,492
31 December	30 September
2015	2014
HK$’000	HK$’000
Reportable segment assets 83,765	120,414
Interest in an associate 152,383	150,234
Available-for-sale financial assets 77	237
Unallocated corporate assets 274,025*	285,751
Total assets 510,250	556,636

The unallocated corporate (costs)/credits mainly comprises bargain purchase on acquisition of Yuji, staff costs including directors’ remuneration, legal and professional fee, exchange difference and office rental.

The unallocated corporate assets mainly represents cash and bank balances retained at corporate level.

Annual Report 2015

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

6. REVENUE AND SEGMENT INFORMATION (Continued)

REVENUE AND SEGMENT INFORMATION(Continued)
	31 December	30 September
	2015	2014
	HK$’000	HK$’000
Reportable segment liabilities	34,397	65,721
Deferred tax liabilities Consolidation and Groupliabilities	1,703 10,194	— 88,606
Total liabilities	46,294	154,327

Geographical information

The following table provides an analysis of the Group’s revenue from external customers by location of delivery of goods and/or services to the customers:

Revenue by geographical market

Continuing operations Fifteen months ended 31 December Year ended 30 September 2015 2014 HK$’000 HK$’000 Mainland China 243 1,011 HongKong(place of domicile) 271 328	Discontinued operations Total Fifteen months ended 31 December Year ended 30 September Fifteen months ended 31 December Year ended 30 September 2015 2014 2015 2014 HK$’000 HK$’000 HK$’000 HK$’000 — 26,913 243 27,924 — 6,293 271 6,621
514 1,339 United States of America 102,485 215,351 United Kingdom 32,095 24,593 Australia 931 2,847 France — — Others 31,600 42,119	— 33,206 514 34,545 — 148,223 102,485 363,574 — 264,125 32,095 288,718 — 131,185 931 134,032 — 93,285 — 93,285 — 205,371 31,600 247,490
167,625 286,249	— 875,395 167,625 1,161,644

”Others”, above, represents sales to various countries which individually represent less than 10% of the total revenue of the Group.

United Pacific Industries

− 83 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

6. REVENUE AND SEGMENT INFORMATION (Continued)

Revenue from the major customers, who accounted for 10% or more of the Group’s revenue from continuing and discontinued operations, is set out below:

	Fifteen
	months ended		Year ended
	31 December		30 September
	2015	Weighting	2014	Weighting
	HK$’000	%	HK$’000	%
Customer A — Consumer Electronics	117,756	70	257,890	22
Customer B — Consumer Electronics	29,058	17	—	—

The following is an analysis of the carrying amount of non-current assets (excluding deferred tax assets and financial assets) analysed by the geographical areas in which the assets are located:

Carrying amount of non-current assets:

	31 December	30 September
	2015	2014
	HK$’000	HK$’000
Mainland China	2,875	3,015
HongKong	1,082	1,347
	3,957	4,362

7. OTHER INCOME

Continuing operations Fifteen months ended 31 December Year ended 30 September 2015 2014 HK$’000 HK$’000 Bargain purchase on acquisition of Yuji (note 19) — 60,440 Property rental income — — Gain on disposal of property, plant and equipment previously written off 384 — Others 971 593	Discontinued operations Total Fifteen months ended 31 December Year ended 30 September Fifteen months ended 31 December Year ended 30 September 2015 2014 2015 2014 HK$’000 HK$’000 HK$’000 HK$’000 — — — 60,440 — 817 — 817 — 383 384 383 — 3,723 971 4,316
1,355 61,033	— 4,923 1,355 65,956

Annual Report 2015

− 84 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

8. INTEREST INCOME

Continuing operations Fifteen months ended 31 December Year ended 30 September 2015 2014 HK$’000 HK$’000 Interest on bank deposits and balances 3,904 87	Discontinued operations Total Fifteen months ended 31 December Year ended 30 September Fifteen months ended 31 December Year ended 30 September 2015 2014 2015 2014 HK$’000 HK$’000 HK$’000 HK$’000 — 755 3,904 842

9. RESTRUCTURING COSTS

Continuing operations Fifteen months ended 31 December Year ended 30 September 2015 2014 HK$’000 HK$’000 Manufacturing reorganisation — — Other costs — —	Discontinued operations Total Fifteen months ended 31 December Year ended 30 September Fifteen months ended 31 December Year ended 30 September 2015 2014 2015 2014 HK$’000 HK$’000 HK$’000 HK$’000 — 3,264 — 3,264 — 848 — 848
— —	— 4,112 — 4,112

The manufacturing reorganisation costs relate to retrenchment costs in the Company’s UK subsidiaries and the relocation of certain sourcing operations in the PRC.

10. FINANCE COSTS

FINANCE COSTS
Continuing operations Fifteen months ended 31 December Year ended 30 September 2015 2014 HK$’000 HK$’000 Interest on interest-bearing bank borrowings and overdrafts 42 364 Imputed interest on convertible bonds 3,633 450 Interest on retirement benefit obligations — — Interest on obligations under finance leases — —	Discontinued operations Total Fifteen months ended 31 December Year ended 30 September Fifteen months ended 31 December Year ended 30 September 2015 2014 2015 2014 HK$’000 HK$’000 HK$’000 HK$’000 — 1,480 42 1,844 — — 3,633 450 — 4,922 — 4,922 — 308 — 308
3,675 814	— 6,710 3,675 7,524

United Pacific Industries

− 85 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

11. (LOSS)/PROFIT BEFORE TAX

(Loss)/profit before tax has been arrived at after charging/(crediting):

Continuing operations Fifteen months ended 31 December Year ended 30 September 2015 2014 HK$’000 HK$’000 Labour and related costs: Directors’ remuneration 3,772 7,790 Staff salaries, allowances and welfare 10,922 16,480 Defined contribution plans — — Provident fund contributions 2,270 1,996 Mandatory provident fund obligations 560 440 Defined benefit retirement plan charge Current service charge — — Administration costs — — Direct labour costs 23,516 23,291	Discontinued operations Total Fifteen months ended 31 December Year ended 30 September Fifteen months ended 31 December Year ended 30 September 2015 2014 2015 2014 HK$’000 HK$’000 HK$’000 HK$’000 — 1,429 3,772 9,219 — 90,308 10,922 106,788 — 2,984 — 2,984 — 3,757 2,270 5,753 — 250 560 690 — 2,092 — 2,092 — 2,054 — 2,054 — 55,237 23,516 78,528
41,040 49,997	— 158,111 41,040 208,108
Other items: Amortisation of lease payments under operating leases — — Auditors’ remuneration 1,442 926 Exchange losses 6,393 389 Depreciation of property, plant and equipment 1,648 2,356 (Reversal of impairment loss)/ impairment loss on trade receivables (92) (474) (Reversal of impairment loss)/impairment loss on inventories (717) 1,236 Minimum lease payments in respect of rented premises 3,516 2,651 Cost of inventories recognised as expenses 155,467 244,786 Cash flow hedge recycled from other comprehensive income — — Prolonged decline in fair value of available-for-sale financial assets — 1,702 Restructuring costs — — Interest income (3,904) (87)	— 17 — 17 — 1,306 1,442 2,232 — 1,708 6,393 2,097 — 9,730 1,648 12,086 — 9 (92) (465) — (450) (717) 786 — 6,807 3,516 9,458 — 590,883 155,467 835,669 — 712 — 712 — — — 1,702 — 4,112 — 4,112 — (755) (3,904) (842)

Continuing operations
Fifteen
months ended
31 December
Year ended
30 September
2015
2014
HK$’000
HK$’000
Labour and related costs:
Directors’ remuneration
3,772
7,790
Staff salaries, allowances and welfare
10,922
16,480
Defined contribution plans
—
—
Provident fund contributions
2,270
1,996
Mandatory provident fund obligations
560
440
Defined benefit retirement plan charge
Current service charge
—
—
Administration costs
—
—
Direct labour costs
23,516
23,291

Discontinued operations
Total
Fifteen
months ended
31 December
Year ended
30 September
Fifteen
months ended
31 December
Year ended
30 September
2015
2014
2015
2014
HK$’000
HK$’000
HK$’000
HK$’000
—
1,429
3,772
9,219
—
90,308
10,922
106,788
—
2,984
—
2,984
—
3,757
2,270
5,753
—
250
560
690
—
2,092
—
2,092
—
2,054
—
2,054
—
55,237
23,516
78,528

41,040
49,997

—
158,111
41,040
208,108

Other items:
Amortisation of lease payments
under operating leases
—
—
Auditors’ remuneration
1,442
926
Exchange losses
6,393
389
Depreciation of property, plant
and equipment
1,648
2,356
(Reversal of impairment loss)/
impairment loss on trade receivables
(92)
(474)
(Reversal of impairment loss)/impairment
loss on inventories
(717)
1,236
Minimum lease payments in respect
of rented premises
3,516
2,651
Cost of inventories recognised as expenses
155,467
244,786
Cash flow hedge recycled
from other comprehensive income
—
—
Prolonged decline in fair value of
available-for-sale financial assets
—
1,702
Restructuring costs
—
—
Interest income
(3,904)
(87)

—
17
—
17
—
1,306
1,442
2,232
—
1,708
6,393
2,097
—
9,730
1,648
12,086
—
9
(92)
(465)
—
(450)
(717)
786
—
6,807
3,516
9,458
—
590,883
155,467
835,669
—
712
—
712
—
—
—
1,702
—
4,112
—
4,112
—
(755)
(3,904)
(842)

Annual Report 2015

− 86 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

12. DIRECTORS’ AND EMPLOYEES’ EMOLUMENTS

Directors’ emoluments

The emoluments paid or payable to each of the seven (year ended 30 September 2014: thirteen) directors are as follows:

For the fifteen months ended 31 December 2015

Basic salaries and Fees allowances HK$’000 HK$’000 Executive Director: Ms. Kelly Lee — 1,500 Non-executive Directors: Dato’ Choo Chuo Siong 313 — Mr. Sun Jih-Hui — — Mr. Anthony Lee (resigned on 8 December 2014) 47 — Dr. Wong Ho Ching 313 — Mr. Lan Yen-Po 313 — Ms. Hu Gin Ing 313 —*	Retirement benefits Benefits scheme Bonuses in kind contribution Total HK$’000 HK$’000 HK$’000 HK$’000

	200 750 23 2,473


	— — — 313
	— — — —
	— — — 47
	— — — 313
	— — — 313
	— — — 313
1,299 1,500
	200 750 23 3,772

Independent Non-executive Directors

United Pacific Industries

− 87 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

12. DIRECTORS’ AND EMPLOYEES’ EMOLUMENTS (Continued)

Directors’ emoluments (Continued)

For the year ended 30 September 2014

		Basic					Retirement
		salaries	Share-based			Compensation	benefits
		and	compensation		Benefits	for loss	scheme
	Fees	allowances	expenses	Bonuses	in kind	of office	contribution	Total
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Executive Directors:
Mr. David Howard Clarke
(resigned on 15 September 2014)	—	772	91	591	—	—	—	1,454
Mr. Simon Hsu Nai-Cheng
(resigned on 30 May 2014)	—	320	70	273	—	—	10	673
Mr. Henry Woon-Hoe Lim
(resigned on 1 October 2014)	—	2,832	47	666	—	—	16	3,561
Mr. Patrick John Dyson
(resigned on 30 May 2014)	—	932	—	—	102	—	65	1,099
Ms. Kelly Lee	—	704	—	—	—	—	16	720
Non-executive Directors:
Mr. Anthony Lee	250	—	—	—	—	—	—	250
Mr. Ramon Sy Pascual*
(resigned on 15 September 2014)	250	—	—	—	—	250	—	500
Dr. Wong Ho Ching*	250	—	—	—	—	—	—	250
Mr. Lan Yen-Po*	250	—	—	—	—	—	—	250
Ms. Hu Gin Ing*
(appointed on 6 November 2013)	226	—	—	—	—	—	—	226
Mr. Robert Barry Machinist *
(resigned on 10 October 2013)	—	—	—	—	—	194	—	194
Mr. Sun Jih-Hui
(appointed on 19 August 2014)	—	31	—	—	—	—	—	31
Dato’ Choo Chuo Siong
(appointed on 15 September 2014)	—	11	—	—	—	—	—	11
	1,226	5,602	208	1,530	102	444	107	9,219

Independent Non-executive Directors

Annual Report 2015

− 88 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

12. DIRECTORS’ AND EMPLOYEES’ EMOLUMENTS (Continued)

Directors’ emoluments (Continued)

During the fifteen months ended 31 December 2015, Mr. Sun Jih-Hui waived his emoluments to the amount of HK$313,000. Save as disclosed above, no director has waived or agreed to waive any emoluments during the fifteen months ended 31 December 2015 and the year ended 30 September 2014.

No remuneration was paid by the Group to the directors as an inducement to join or upon joining the Group or as compensation for loss of office during the fifteen months ended 31 December 2015.

Except for the compensation for loss of office paid to Mr. Ramon Sy Pascual and Mr. Robert Barry Machinist amounted to HK$250,000 and HK$194,000 respectively, no remuneration was paid by the Group to the directors as an inducement to join or upon joining the Group or as compensation for loss of office during the year ended 30 September 2014.

The management considers that the executive directors of the Company are the key management of the Group.

Employees’ emoluments

The five highest paid individuals of the Group included one Director (year ended 30 September 2014: three), details of whose emoluments are set out above. The emoluments of the four (year ended 30 September 2014: two) highest paid employees, other than the Directors of the Company, are as follows:

	Fifteen
	months ended	Year ended
	31 December	30 September
	2015	2014
	HK$’000	HK$’000
Salaries and other benefits	5,305	5,057
Expenses of retirement benefitplans	90	135
	5,395	5,192

United Pacific Industries

− 89 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

12. DIRECTORS’ AND EMPLOYEES’ EMOLUMENTS (Continued)

Employees’ emoluments (Continued)

Emoluments of these employees are within the following bands:

Emoluments of these employees are within the following bands:
	Number of	employees
	Fifteen
	months ended	Year ended
	31 December	30	September
	2015		2014
Nil - HK$1,000,000	2		—
HK$1,000,001 - HK$1,500,000	—		1
HK$1,500,001 - HK$2,000,000	1		—
HK$2,000,001 - HK$2,500,000	1		—
HK$2,500,001 - HK$3,000,000	—		—
HK$3,000,001 - HK$3,500,000	—		—
HK$3,500,001 - HK$4,000,000	—		—
HK$4,000,001 - HK$4,500,000	—		1
	4		2

Emoluments of the Directors

The emoluments paid or payable to the Directors are within the following bands:

	Fifteen
months ended		Year ended
31	December	30 September
	2015	2014
Nil - HK$1,000,000 HK$1,000,001 - HK$1,500,000 HK$1,500,001 - HK$2,000,000 HK$2,000,001 - HK$2,500,000 HK$2,500,001 - HK$3,000,000 HK$3,000,001 - HK$3,500,000 HK$3,500,001 - HK$4,000,000	6 — — 1 — — —	10 2 — — — — 1
	7	13

Annual Report 2015

− 90 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

13. INCOME TAX EXPENSE

(a) The income tax charge for the period/year comprises:

Continuing operations Fifteen months ended 31 December Year ended 30 September 2015 2014 HK$’000 HK$’000 Current income tax — Hong Kong: Provision for the period/year — 1,530	Discontinued operations Total Fifteen months ended 31 December Year ended 30 September Fifteen months ended 31 December Year ended 30 September 2015 2014 2015 2014 HK$’000 HK$’000 HK$’000 HK$’000 — 1,616 — 3,146
Current income tax — Overseas: Provision for the period/year: Taiwan 3,216 2,927 Australia — — United Kingdom — — Mainland China — 1,780 Canada — — United States — — France — — New Zealand — — (Over)/under provision in respect of prior years (1,298) 5,344	— — 3,216 2,927 — 905 — 905 — 3,290 — 3,290 — 1,175 — 2,955 — 835 — 835 — (28) — (28) — 509 — 509 — 286 — 286 — — (1,298) 5,344
1,918 10,051	— 6,972 1,918 17,023
Deferred tax (note 31) 1,703 —	— (5,342) 1,703 (5,342)
3,621 11,581	— 3,246 3,621 14,827

No Hong Kong profits tax has been provided for the fifteen months ended 31 December 2015 as the Group has no estimated assessable profits.

Hong Kong profits tax is calculated at 16.5% on the estimated assessable profits for the year ended 30 September 2014. PRC Enterprise Income tax has been provided on estimated assessable profits of the subsidiary operations in the Mainland China at 25% (year ended 30 September 2014: 25%). Taxation arising in other jurisdictions is provided on the estimated taxable profits arising in those jurisdictions at the prevailing local rates.

Withholding tax is levied on profit distribution upon declaration of the undistributed earnings of an associate for the fifteen months ended 31 December 2015 at the rate of 20% (year ended 30 September 2014: 20%).

United Pacific Industries

− 91 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

13. INCOME TAX EXPENSE (Continued)

(b) The income tax charge for the period/year can be reconciled to the (loss)/profit per the consolidated statement of profit or loss as follows:

Fifteen
months ended	Year ended
31 December	30 September
2015	2014
HK$’000	HK$’000
(Loss)/profit before tax: Continuing operations (5,305)	61,492
Discontinued operations —	(225,424)
(5,305)	(163,932)
Tax thereon at domestic rates applicable to profits or losses in the jurisdictions concerned 2,512	31,975
Tax effect of expenses not deductible for tax purposes (809)	(67,450)
Tax effect of income not taxable for tax purposes 3,200	31,555
Tax effect of losses not recognised (4,903)	(3,858)
Tax effect of share of results of an associate (4,919) Utilisation of tax losses previously not recognised —	— 1,730
Over/(under) provision in respect of prior years 1,298	(5,344)
Withholding tax on dividend from an associate —	(2,927)
Others —	(508)
Tax charge for theperiod/year (3,621)	(14,827)

Annual Report 2015

− 92 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

14. DIVIDENDS

The Board does not recommend the payment of a final dividend for the fifteen months ended 31 December 2015 (year ended 30 September 2014: Nil).

15. (LOSSES)/EARNINGS PER SHARE

(a) From continuing and discontinued operations

The calculation of the basic and diluted losses per share for the fifteen months ended 31 December 2015 is based on the loss attributable to owners of the Company of HK$8,926,000 (year ended 30 September 2014: loss of HK$178,759,000 and HK$178,385,000 respectively) and the weighted average number of 1,183,812,600 (year ended 30 September 2014: 1,065,202,417 and 1,093,467,562 respectively) ordinary shares.

The calculation of adjusted loss for diluted losses per share purpose is as follows:

	Fifteen
	months ended	Year ended
	31 December	30 September
	2015	2014
	HK$’000	HK$’000
Loss for the period/year from continuing and discontinued operations	(8,926)	(178,759)
Add: Imputed interest on convertible bonds	—	450
Less: Tax impact of the imputed interest	—	(76)
	(8,926)	(178,385)

United Pacific Industries

− 93 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

15. (LOSSES)/EARNINGS PER SHARE (Continued)

(a) From continuing and discontinued operations (Continued)

The calculation of weighted average number of ordinary shares is as follows:

(i) Weighted average number of ordinary shares (basic)

	Fifteen
	months ended	Year ended
	31 December	30 September
	2015	2014
Issued ordinary shares at 1 October	1,160,871,287	1,007,443,153
Subscription of shares at 8 April 2014	—	71,088,634
Effect of share options exercised (note i)	3,130,197	98,630
Effect of conversion rights	33,239,116	—
Treasuryshares	(13,428,000)	(13,428,000)
Weighted average number of ordinary shares at 31 December/30 September	1,183,812,600	1,065,202,417
Basic lossesper share (HK cents)	(0.75)	(16.78)

(ii) Weighted average number of ordinary shares (diluted)

	Fifteen
	months ended	Year ended
	31 December	30 September
	2015	2014
Issued ordinary shares at 1 October	1,160,871,287	1,007,443,153
Subscription of shares at 8 April 2014	—	71,088,634
Effect of share options exercised (note i)	3,130,197	98,630
Effect of conversion rights	33,239,116	—
Effect of deemed issue of shares under the Company’s
share option scheme	—	7,232,799
Effect of deemed issue of shares under the Company’s
convertible bonds	—	21,032,346
Treasuryshares	(13,428,000)	(13,428,000)
Weighted average number of ordinary shares at 31 December/30 September	1,183,812,600	1,093,467,562
Diluted lossesper share (HK cents) (note ii)	(0.75)	(16.31)

Notes:

(i) This is related to the share options exercised under the Company’s share option scheme during the fifteen months ended 31 December 2015 and year ended 30 September 2014.

(ii) Diluted losses per share for the fifteen months ended 31 December 2015 is the same as basic losses per share as there is no potential dilutive shares outstanding at the end of reporting period.

Annual Report 2015

− 94 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

15. (LOSSES)/EARNINGS PER SHARE (Continued)

(b) From continuing operations

The calculation of the basic and diluted losses per share for the fifteen months ended 31 December 2015 is based on the loss from continuing operations of HK$8,926,000 and the weighted average number of ordinary shares, for basic and diluted losses per share of 1,183,812,600. The calculation of the basic and diluted earnings per share for the year ended 30 September 2014 is based on the profit from continuing operations of HK$49,911,000 and HK$50,285,000 respectively, and the weighted average number of ordinary shares for basic and diluted earnings per share of 1,065,202,417 and 1,093,467,562 respectively.

The calculation of adjusted (loss)/profit for diluted (losses)/earnings per share purpose is as follows:

	Fifteen
	months ended	Year ended
	31 December	30 September
	2015	2014
	HK$’000	HK$’000
(Loss)/profit for the period/year from continuing operations	(8,926)	49,911
Add: Imputed interest on convertible bonds	—	450
Less: Tax impact of the imputed interest	—	(76)
	(8,926)	50,285
	Fifteen
	months ended	Year ended
	31 December	30 September
	2015	2014
Basic (losses)/earningsper share (HK cents)	(0.75)	4.69
Diluted (losses)/earningsper share (HK cents)	(0.75)	4.60

Diluted losses per share for the fifteen months ended 31 December 2015 is the same as basic losses per share as there is no potential dilutive shares outstanding at the end of reporting period.

(c) From discontinued operations

The calculation of the basic and diluted losses per share for the year ended 30 September 2014 is based on the loss from discontinued operations of HK$228,670,000 and the weighted average number of ordinary shares, for basic and diluted losses per share of 1,065,202,417 and 1,093,467,562 respectively.

	Fifteen
	months ended	Year ended
	31 December	30 September
	2015	2014
Basic lossesper share (HK cents)	N/A	(21.47)
Diluted lossesper share (HK cents)	N/A	(20.91)

United Pacific Industries

− 95 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

16. PROPERTY, PLANT AND EQUIPMENT

PROPERTY, PLANT AND EQUIPMENT
Land and Leasehold buildings improvements HK$’000 HK$’000 Cost At 1 October 2013 177,330 — Additions 473 — Disposals (310) — Disposal of subsidiary undertakings (181,230) — Currencyrealignment and others 4,211 —	Furniture, fixtures and Motor equipment vehicles HK$’000 HK$’000 84,719 22,988 2,338 3,989 (950) — (74,693) (26,375) 195 543	Plant and machinery Total HK$’000 HK$’000 112,603 397,640 3,116 9,916 — (1,260) (111,502) (393,800) (1,002) 3,947
At 30 September 2014 and 1 October 2014 474 —	11,609 1,145	3,215 16,443
Transfer (474) 474 Additions — — Currencyrealignment and others — —
	— —	— —
	1,390 —	— 1,390
	(966) (67)	— (1,033)
At 31 December 2015 — 474
	12,033 1,078	3,215 16,800
Accumulated depreciation and impairment At 1 October 2013 39,342 — Provided for the year 2,465 — Disposals (165) — Impairment loss (note 38) 126,233 — Disposal of subsidiary undertakings (168,774) — Currencyrealignment and others 923 —	70,959 15,230 2,483 2,954 (950) — 7,925 7,485 (71,872) (25,917) 62 483	94,415 219,946 4,184 12,086 — (1,115) 13,407 155,050 (107,732) (374,295) (1,059) 409
At 30 September 2014 and 1 October 2014 24 —	8,607 235	3,215 12,081
Transfer (24) 24 Provided for the period — 118 Currencyrealignment and others — —
	— —	— —
	1,283 247	— 1,648
	(827) (59)	— (886)
At 31 December 2015 — 142
	9,063 423	3,215 12,843
Carrying values At 31 December 2015 — 332
	2,970 655	— 3,957
At 30 September 2014 450 —	3,002 910	— 4,362

Annual Report 2015

− 96 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

16. PROPERTY, PLANT AND EQUIPMENT (Continued)

Additions in the year ended 30 September 2014 included HK$3,188,000 in relation to assets acquired under finance leases for which there was no cash outflow included in the consolidated statement of cash flows (note 35).

As at 30 September 2014, the net book value of furniture, fixtures and equipment of HK$3,002,000 included amount of HK$13,000 in respect of assets held under finance lease.

17. PREPAID LAND LEASE PAYMENTS UNDER OPERATING LEASES

The Group’s interest in leasehold land and land use rights represents prepaid operating lease payments. The movements in their net carrying values are as follows:

	31 December	30 September
	2015	2014
	HK$’000	HK$’000
At 1 October	—	459
Amortisation	—	(17)
Disposal of subsidiaryundertakings	—	(442)
At 31 December/30 September	—	—

18. GOODWILL

GOODWILL
	31 December	30 September
	2015	2014
	HK$’000	HK$’000
At 1 October	—	2,419
Currency realignment	—	72
Impairment loss(note 38)	—	(2,491)
At 31 December/30 September	—	—

Goodwill, until 30 May 2014 was attributable to the acquisition of Baty International Limited (“Baty”), a company incorporated in the UK and engaged in the design, manufacturing and procurement of precision measuring instruments, which was acquired on 10 March 2010, through the Company’s then UK-based subsidiary, Bowers Group Limited. The goodwill in Baty forms part of the net assets sold on the disposal of subsidiary undertakings.

United Pacific Industries

− 97 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

19. INTEREST IN AN ASSOCIATE

Discontinued operations

	31 December	30 September
	2015	2014
	HK$’000	HK$’000
At 1 October	—	10,052
Currency realignment	—	(377)
Share of profit before tax	—	5,357
Share of tax	—	(1,341)
Impairment loss (note 38)	—	(12,677)
Disposal of subsidiaryundertakings	—	(1,014)
At 31 December/30 September	—	—

Up until 30 May 2014, the Group had an interest in the following associate:

					Proportion of
	Form of		Principal		registered	Proportion of
	business	Place of	place of	Registered	capital held	voting power
Name of entity	structure	registration	operation	capital	by the Group	held
Ningbo Hi-tech	Sino-foreign
Assemblies Co. Ltd.	joint venture	PRC	PRC	US$800,000	25%	25%

Ningbo Hi-tech Assemblies Co. Ltd. is involved in the manufacture and sale of magnetic, plastic and other materials and magnetic assemblies.

The summarised financial information up to the date of disposal in respect of the Group’s associate is set out below:

Fifteen
months ended	Year ended
31 December	30 September
2015	2014
HK$’000	HK$’000
Sales —	140,769
Profit for theperiod/year —	16,064
Other comprehensive income —	—
Total comprehensive income —	16,064
Share of results of an associate (net of tax) —	4,016

Annual Report 2015 73

− 98 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

19. INTEREST IN AN ASSOCIATE (Continued)

On 8 April 2014, the Group acquired 28.84% equity interest in Yuji Development Corporation (“Yuji”) at a cash consideration of New Taiwan dollars (“TWD”) 513,728,077 (equivalent to HK$130,720,000) from 40 independent persons (the “Vendors”) who aggregately controlled 28.84% in Yuji. The Vendors then used the proceeds from the transaction to subscribe for 147,428,134 new shares of the Company issued for the same consideration. The cash consideration for the acquisition of Yuji was entirely financed by a bridge loan and the bridge loan was fully repaid out of the subscription monies for the Company’s shares. In substance, the Company issued its own shares to the Vendors in exchange for their interest in Yuji. The actual cost of investment in Yuji was therefore based on the fair market value of new shares issued as at the date of acquisition of HK$95,829,000. The directly attributable expense incurred for the acquisition amounted to HK$720,000.

The share of fair values of Yuji’s net assets as at the date of acquisition is as follows:

	2014
	HK$’000
Net assets value of Yuji
Properties, plant and equipment	17,156
Columbarium units and cemetery plots for resale	570,821
Trade and other receivables	17,161
Amounts due from related parties	2,639
Other financial assets	6,657
Cash and cash equivalents	6,468
Trade payables	(17,278)
Receipt in advance	(32,202)
Other payables	(8,537)
Non-controlling interests	(15,518)
Deferred tax liabilities	(3,023)
	544,344
28.84% of net assets value	156,989
Satisfied by:
Fair value of shares of the Company issued to Vendors of Yuji at the date of acquisition	95,829
Directly attributable expense	720
Bargainpurchase on acquisition(note 7)	60,440
	156,989

Yuji engages in the after-life services in Taiwan, which is a totally new business to the Group. Management decided to invest in Yuji in order to tap into the funeral market which has growth potential, and to diversify the income source of the Group.

United Pacific Industries

− 99 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

19. INTEREST IN AN ASSOCIATE (Continued)

The bargain purchase on acquisition was mainly contributed by the profit generated by Yuji between the negotiation stage and the completion of acquisition, which the fair value of the columbarium units and cemetery plots for resale as at 8 April 2014 was in excess of its book carrying value as at that date and the market price of the subscription shares at 8 April 2014 of HK$0.65, which was substantially below the subscription price of HK$0.887 used to determine the number of subscription shares under the subscription agreement dated 8 February 2014.

Movement of interest in an associate:
	HK$’000
At 1 October 2013	—
Share of net assets of Yuji on acquisition	156,989
Share of results of an associate	9,583
Dividend received	(14,632)
Currencyrealignment	(1,706)
At 30 September 2014 and 1 October 2014 Gain on dilution of interest in an associate (note i) Share of results of an associate Dividend received Currencyrealignment	150,234 1,152 24,594 (16,080) (7,517)
At 31 December 2015	152,383

Note:

(i) During the fifteen months ended 31 December 2015, Yuji’s ordinary shares in issue were increased from 176,000,000 shares to 181,930,324 shares. The Group did not subscribe its proportionate share of the new ordinary shares which were issued at TWD15 per share. Accordingly, the Group’s equity interest in Yuji was diluted from 28.84% to 27.9%. As the Group’s share of net assets value of Yuji immediately after the issuance of new shares was in excess of the Group’s original share in net asset value of Yuji, a gain on dilution of interest in an associate of approximately HK$1,152,000 was recognised during the fifteen months ended 31 December 2015.

Annual Report 2015

− 100 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

19. INTEREST IN AN ASSOCIATE (Continued)

As at 31 December 2015, the Group had an interest in the following associate:

					Proportion of
					nominal value
	Form of		Principal	Nominal	of share
	business	Place of	place of	value of	capital held by
Name of entity	structure	incorporation	operation	share capital	the Group
				TWD
Yuji	Limited by shares	Taiwan	Taiwan	1,819,303,240	27.9%
The summarised financial information since 8 April 2014			in respect of the	Group’s associate	is set out below:
				31 December	30 September
				2015	2014
				HK$’000	HK$’000
Non-current assets				35,848	22,493
Current assets				574,056	617,691
Total assets				609,904	640,184
Current liabilities				(45,400)	(100,947)
Non-current liabilities				(2,800)	(3,016)
Total liabilities				(48,200)	(103,963)
Non-controllinginterests				(15,529)	(15,297)
Net assets				546,175	520,924
Share of an associate’s net assets				152,383	150,234
Sales				151,813	52,455
Profit for theperiod/year				87,984	33,228
Other comprehensive income				(26,948)	(5,915)
Total comprehensive income				61,036	27,313
Share of results of an associate (net of tax)				24,594	9,583

United Pacific Industries

− 101 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

20. AVAILABLE-FOR-SALE FINANCIAL ASSETS

AVAILABLE-FOR-SALE FINANCIAL ASSETS
	31 December	30 September
	2015	2014
	HK$’000	HK$’000
Listed investments Equity securities – JDO and KSL (note i) Equity securities – TCF (note ii) Less: Impairment loss Change in fair value recognised in investment revaluation reserve	— 237 — (160)	3,813 1,988 (5,515) (49)
	77	237

The movements in available-for-sale financial assets during the period/year are as follows:

	31 December	30 September
	2015	2014
	HK$’000	HK$’000
At 1 October Disposal of subsidiary undertakings (note 36) Currency realignment Change in fair value recognised in investment revaluation reserve	237 — — (160)	1,921 (754) 27 (49)
Less: Impairment loss	—	(908)
At 31 December/30 September	77	237

Notes:

(i) This represents the Group’s investment in the shares of Jed Oil Inc (“JDO”), a Canada-based company and the Company’s investment in the shares of Kuangchi Science Limited (“KSL”) (formerly known as Climax International Company Limited), a company incorporated in Bermuda with its shares listed on the Stock Exchange.

Both of these investments were fully impaired in prior years.

(ii) This represents the Group’s investment in the shares of CBM Asia Development Corp. (Symbol: TCF), a Canada listed company.

Annual Report 2015

− 102 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

21. INVENTORIES

INVENTORIES
	31 December	30 September
	2015	2014
	HK$’000	HK$’000
Raw materials	6,633	11,520
Work in progress	2,700	3,747
Finishedgoods	3,266	2,915
	12,599	18,182

The carrying amount of inventories carried at the lower of cost and net realisable value amounted to HK$12,599,000 (30 September 2014: HK$18,182,000). Reversal of impairment loss of HK$717,000 was recognised due to inventories previously impaired were used and sold during the fifteen months ended 31 December 2015 (year ended 30 September 2014: impairment loss of HK$786,000).

22. TRADE AND OTHER RECEIVABLES

	31 December	30 September
	2015	2014
	HK$’000	HK$’000
Trade receivables Less: impairmentprovisions	31,342 (881)	76,983 (973)
Trade receivables (net)	30,461	76,010
Prepayments and other receivables	4,104	20,430
	34,565	96,440

At the reporting date, the aged analysis of trade receivables, based on invoice date, is as follows:

	31 December	30 September
	2015	2014
	HK$’000	HK$’000
0 - 60 days	16,627	70,890
61 - 90 days	5,302	96
91 - 120 days	7,504	—
Greater than 120 days	1,909	5,997
	31,342	76,983

Trade receivables that were neither past due nor impaired related to a large number of customers for whom there has been no recent history of default.

United Pacific Industries

− 103 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

22. TRADE AND OTHER RECEIVABLES (Continued)

The Group allows credit periods ranging from 30 to 120 days (year ended 30 September 2014: 30 to 120 days) to its trade customers depending on their credit status and geographical location. The Directors consider that the carrying amount of trade and other receivables approximate their fair values.

Movements in the provision for impairment of trade receivables are as follows:

	31 December	30 September
	2015	2014
	HK$’000	HK$’000
At 1 October	973	7,698
Impairment loss recognised	265	75
Impairment loss reversed	(357)	(540)
Currency realignment	—	137
Uncollectible amounts written off	—	(293)
Disposal of subsidiaryundertakings	—	(6,104)
At 31 December/30 September	881	973

The Group has provided in full against those receivables where evidence suggests that the amounts outstanding are not recoverable.

The aged analysis of the Group’s trade receivables that were past due as at the reporting date but not impaired, is as follows:

			December	September
			2015	2014
			HK$’000	HK$’000
Greater than	120	days	1,028	5,997

Trade receivables that were past due but not impaired relate to a number of independent customers that have a good payment track record with the Group. Based on past experience, the Directors are of the opinion that no provision for impairment is necessary in respect of these balances as there has not been a significant change in credit quality.

Annual Report 2015

− 104 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

23. CASH AND BANK BALANCES

Cash and bank balance include short term bank deposits carrying interest at prevailing market rates. The Directors consider that the carrying values of the deposits at the reporting date approximate their fair values.

Included in cash and bank balances of the Group are bank balances denominated in Renminbi (“RMB”) of approximately HK$70,081,000 (30 September 2014: HK$8,732,000) placed with banks in Hong Kong and the PRC. RMB is not a freely convertible currency. Under the Mainland China’s Foreign Exchange Control Regulations and Administration of Settlement and Sales and Payment of Foreign Exchange Regulations, the Group is permitted to exchange RMB for foreign currencies through banks that are authorised to conduct foreign exchange business.

24. TRADE AND OTHER PAYABLES

TRADE AND OTHER PAYABLES
	31 December	30 September
	2015	2014
	HK$’000	HK$’000
Trade payables	19,021	35,305
Accruals and otherpayables	17,983	26,718
	37,004	62,023

At the reporting date, the aged analysis of trade payables, based on invoice date, is as follows:

	31 December	30 September
	2015	2014
	HK$’000	HK$’000
0 - 60 days	12,962	22,092
61 - 90 days	2,099	4,577
Greater than 90 days	3,960	8,636
	19,021	35,305

The Directors consider that the carrying amounts of trade and other payables approximate their fair values.

United Pacific Industries

− 105 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

25. INTEREST-BEARING BANK BORROWINGS

		31 December	30 September
		2015	2014
		HK$’000	HK$’000
Secured	bank borrowings due within one year comprise:
Export	invoices/loan financing	—	6,020

At 30 September 2014, the bank borrowings were denominated in US dollars.

The effective interest rates on the Group’s floating rate borrowings range from 2.5% to 5.0% per annum.

The fair values of the Group’s bank borrowings, determined as the present value of the estimated future cash flows discounted using the prevailing market rate at the reporting date, approximate their carrying values.

26. OBLIGATIONS UNDER FINANCE LEASES

The Group’s finance lease liabilities are repayable as follows:

		Present value of	Present value of
Minimum lease payments		minimum lease payments
31 December	30 September	31 December	30 September
2015	2014	2015	2014
HK$’000	HK$’000	HK$’000	HK$’000
Amounts payable under finance leases: Within one year — In the second to fifthyears inclusive —	10 —	— —	9 —
—	10	—	9
Less: Future finance charges —	(1)	—	—
Present value of lease obligations —	9	—	9

Interest rates underlying all obligations under finance leases are fixed at their respective contract rates ranging from 3.3% to 7.0% per annum. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments. Following the disposal of subsidiaries as detailed in note 36, the Group’s obligations under finance leases were all disposed except for a finance lease with carrying value of HK$9,000 as at 30 September 2014. The fair values of the Group’s finance lease obligations, determined as the present value of estimated future cash flows discounted using the prevailing market rate at the reporting date, approximate their carrying values.

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

Annual Report 2015

− 106 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

27. PROVISIONS

PROVISIONS
	Onerous	Manufacturing
	contracts	reorganisation	Total
	HK$’000	HK$’000	HK$’000
At 1 October 2013	2,180	1,680	3,860
Utilisation of provision	(815)	(4,329)	(5,144)
Provision for the year	—	3,264	3,264
Currency realignment	52	10	62
Disposal of subsidiaryundertakings(note 36)	(1,417)	(625)	(2,042)
At 30 September 2014, 1 October 2014
and 31 December 2015	—	—	—

28. DEFINED CONTRIBUTION PLANS

Hong Kong

With effect from 1 December 2000, the Group joined a Mandatory Provident Fund Scheme (the “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 an independent trustee. Under the MPF Scheme, the employer and its employees are each required to make contributions to the MPF Scheme at rates specified in the rules of the MPF Scheme. The only obligation of the Group with respect to the MPF Scheme is to make the required contributions under the MPF Scheme. For the fifteen months ended 31 December 2015, the retirement benefit scheme contributions charged to the consolidated statement of profit or loss amounted to HK$560,000 (year ended 30 September 2014: HK$690,000) (note 11), representing contributions payable to the fund by the Group at rates specified in the rules of the MPF Scheme.

Mainland China

The employees of the Company’s subsidiaries in the PRC are members of a state-managed retirement benefit scheme operated by the PRC government. The subsidiaries are required to contribute 8% of payroll costs to the retirement benefit scheme to fund the benefits. The only obligation of the Group with respect to the retirement benefit scheme is to make the specified contributions. The total contribution made for the fifteen months ended 31 December 2015 was HK$2,270,000 (year ended 30 September 2014: HK$5,753,000) (note 11). No forfeited contributions may be used by the employer to reduce the existing level of contributions.

Rest of the World

Defined pension contribution schemes are in place in the United Kingdom, France and Australasia, the assets of which are held separately from those of the Group and are held under the control of independent trustees. The only obligation of the Group with respect to the retirement benefit schemes is to make the specified contributions. The total contributions made for the fifteen months ended 31 December 2015 is Nil (year ended 30 September 2014: HK$2,984,000) (note 11).

United Pacific Industries

− 107 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

29. RETIREMENT BENEFIT OBLIGATIONS

Up until the sale of the disposal group on 30 May 2014, the Group operated a contributory defined benefit pension plan covering certain of its employees in the UK-based subsidiaries of Spear & Jackson Limited and Bowers Group Limited (the “James Neill Pension Plan”, the “Plan”). The benefits covered by the Plan were based on years of service and compensation history. The Plan’s assets were held separately from the assets of the Group and were administered by the Plan’s trustees and were managed professionally.

The latest formal actuarial valuation of the Plan was carried out at 30 May 2014 by KPMG LLP, the Company’s actuarial advisors.

The Group’s contributions from 1 October 2013 to 30 May 2014 amounted to £1.4 million (approximately HK$17.9 million) .

The principal financial assumptions used in the updated actuarial valuations at 30 May 2014 for the purpose of the accounting disclosures in the annual report were as follows:

of the accounting disclosures in the annual report were as follows:
	As at
	30 May
	2014
Long term rate of increase in pensionable salaries (note i)	0.00%
Rate of increase of benefits in payment (note ii)	3.22%
Rate of increase of benefits in payment (note iii)	2.00%
Discount rate	4.30%
Inflation assumption (Retail Prices Index (“RPI”))	3.25%
Inflation assumption (Consumer Prices Index (“CPI”)) (note iv)	2.25%

Notes:

(i) Pensionable pay was frozen with effect from 5 April 2010.
(ii) In respect of pensions in excess of the guaranteed minimum pension in the 1999 and 2001 sections of the Plan.
(iii) In respect of guaranteed minimum pension earned after 6 April 1988.
(iv) Following changes in applicable legislation, inflationary increases applied to the value of deferred members’ pension liabilities have been recalculated using CPI rather than the RPI inflation index.

The life expectancies implied by the mortality assumptions used in the pension’s valuation (making allowance for projected future improvements in mortality) are:

Pensioner currently aged 65:	Male 19.3 years	Female 21.3 years
Future pensioner when aged 65:	Male 21.0 years	Female 23.3 years

Amounts recognised in the consolidated statement of profit or loss in respect of the Plan are as follows:

	Year ended
	30 September
	2014
	HK$’000
Current service cost	2,092
Administration costs	2,054
Interest on assets	(41,860)
Interest cost	46,782
Netpension cost	9,068

The current service cost was included in the employee benefits expense in the consolidated statement of profit or loss. The net interest payable was included in the finance costs in the consolidated statement of profit or loss.

Annual Report 2015

− 108 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

29. RETIREMENT BENEFIT OBLIGATIONS (Continued)

Movements in the present value of the defined benefit obligations are as follows:

	HK$’000
At 1 October 2013	1,533,184
Currency realignment	57,500
Current service cost	2,092
Administration cost	2,054
Interest cost	46,782
Member contributions	1,071
Benefit payments	(58,607)
Actuarial losses – change in demographic assumptions	31,335
Actuarial losses – change in financial assumptions	50,464
Disposal of subsidiaryundertakings	(1,665,875)
At 30 September 2014	—

Changes in the fair values of the Plan’s assets are as follows:

	HK$’000
At 1 October 2013	1,366,933
Currency realignment	51,230
Employer contributions	17,877
Member contributions	1,071
Interest income	41,860
Benefit payments	(58,607)
Return on plan assets (excluding interest)	15,350
Disposal of subsidiaryundertakings	(1,435,714)
At 30 September 2014	—

United Pacific Industries

− 109 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

30. CONVERTIBLE BONDS

On 15 August 2014, the Company issued convertible bonds in the principal amount of HK$77,000,000 to Kingage International Limited. The convertible bonds do not carry any interest unless the Company redeem any outstanding convertible bonds on maturity, in which case a 2% per annum interest will be accrued on the outstanding convertible bonds on a 365-day basis.

The convertible bonds contain two components: liability and equity components. The equity component is presented in equity under convertible bonds equity reserve. The effective interest rate of the liability component on initial recognition is 5% per annum, as determined by Ample Appraisal Limited which is an independent valuer.

On 30 September 2015, the convertible bonds were fully converted into shares of the Company of HK$0.10 each at the conversion price of HK$0.47142 per share. Accordingly, a total of 163,336,303 ordinary shares of HK$0.10 each were allotted and issued.

	HK$’000
Face value convertible bonds issued on 15 August 2014	77,000
Equitycomponent	(4,349)
	72,651
Imputed interest on convertible bonds(note 10)	450
Liability component at 30 September 2014 and 1 October 2014 Imputed interest on convertible bonds (note 10) Exercise of conversion rights	73,101 3,633 (76,734)
Liability component at 31 December 2015	—

Annual Report 2015

− 110 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31. DEFERRED TAX LIABILITIES

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

Accelerated accounting Revaluation depreciation of properties HK$’000 HK$’000 At 1 October 2013 8,510 (10,140) Credited/(charged) to consolidated statement of profit or loss (note 13) (2,367) 10,414 Recognition of actuarial losses on defined benefit pension plan in other comprehensive income — — Currency realignment 245 (274) Disposal of subsidiaryundertakings (6,388) —	Retirement benefit Tax obligations Others losses Total HK$’000 HK$’000 HK$’000 HK$’000 33,252 1,404 164 33,190 (1,760) (945) — 5,342 13,305 — — 13,305 1,240 (69) 5 1,147 (46,037) (390) (169) (52,984)
At 30 September 2014 and 1 October 2014 — — Charged to consolidated statement ofprofit or loss (note 13) — —
	— — — —
	— (1,703) — (1,703)
At 31 December 2015 — —
	— (1,703) — (1,703)

Up until the disposal date of the PGH group of companies on 30 May 2014, the majority of the Group’s deferred tax assets related to temporary difference originating in its UK subsidiaries. Such deferred tax balances were provided at 20%.

During the current period, deferred tax liabilities related to the undistributed earnings of the Group’s associate which were provided at 20% (2014: 20%).

At the reporting date, based on the estimation of future profit streams, the Group has unrecognised gross deferred tax assets (before applying tax rates prevailing in the respective jurisdictions) in respect of unused tax losses available for offset against future profits analysed as follows:

	December	September
	2015	2014
	HK$’000	HK$’000
Unused tax losses	131,850	108,879

The Group records deferred tax assets in respect of tax losses only where there is a reasonable expectation that these tax losses will be utilised in the foreseeable future. Based on forecast income streams and having considered potential future earnings volatility, the Group does not anticipate the utilisation of any significant portion of these unrecognised tax losses or the material reversal of the other deferred tax temporary differences in the foreseeable future. As at 31 December 2015 and 30 September 2014, the tax losses solely arise in Hong Kong and can be carried forward indefinitely.

United Pacific Industries

− 111 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31. DEFERRED TAX LIABILITIES (Continued)

Pursuant to the PRC Corporate Income Tax Law, a 10% withholding tax is levied on dividends declared to foreign investment enterprises established in Mainland China. The requirement is effective from 1 January 2008 and applies to earnings after 31 December 2007. A lower withholding tax rate may be applied if there is a tax treaty between Mainland China and the jurisdiction of the foreign investors. For the Group, the applicable rate is 10%. The Group is therefore liable to withholding taxes on dividends distributed by those subsidiaries established in Mainland China in respect of earnings generated from 1 January 2008.

As at 31 December 2015 and 30 September 2014, no deferred tax has been recognised for withholding taxes that would be payable on the unremitted earnings of the Company’s subsidiaries established in Mainland China. In the opinion of Directors, it is not probable that these subsidiaries will distribute their earnings accrued after 1 January 2008 in the foreseeable future.

32. SHARE CAPITAL

Ordinary shares of HK$0.10 each

	31 December 2015	31 December 2015	30 September	2014
	Number of		Number of
	shares	Amount	shares		Amount
		HK$			HK$
Authorised:
At 1 October,
30 September
and 31 December	1,500,000,000	150,000,000	1,500,000,000	150,000,000
Issued and fully paid:
At 1 October Subscription of	1,160,871,287	116,087,129	1,007,443,153	100,744,315
shares (note 19)	—	—	147,428,134	14,742,813
Share options exercised
(note 33)	7,500,000	750,000	6,000,000	600,000
Debt conversion
rights exercised	163,336,303	16,333,630	—		—
At 31 December/
30 September	1,331,707,590	133,170,759	1,160,871,287	116,087,128

Annual Report 2015

− 112 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

33. SHARE OPTIONS

At a special general meeting of the Company held on 30 August 2004, a share option scheme was adopted (the “2004 Scheme”) for the purpose of providing incentives to the Executive Directors and eligible employees of the Company and its subsidiaries. The Board is authorised to grant options to eligible Executive Directors and employees of the Company and its subsidiaries, to subscribe for shares in the Company. The number of underlying shares available under the 2004 Scheme shall not, in aggregate, exceed 5% of the issued shares as at 30 August 2004. The number of shares issued and to be issued in respect of which options granted and may be granted to any individual in any 12 months is not permitted to exceed 1% of the issued shares at such time. Options to be offered to any participants who is also an executive director, chief executive officer, substantial shareholder of the Company or any of their respective associates (“Connected Persons”) shall require prior approval from the Independent Non-executive Directors of the Company. No option can be granted to Connected Persons in any 12 months that exceeds in aggregate over 0.1% of the issued shares and an aggregate value exceeding HK$5 million based on the closing price of the shares at the date of each grant without prior approval from the Company’s shareholders.

The exercise price of the options shall be determined by a committee administering the 2004 Scheme, and shall fall within the following prescribed parameters: they should not be less than (i) the par value of the shares, (ii) the closing price of the shares on the date of grant which must be a business day, and (iii) the average closing price of the shares over 5 consecutive trading days immediately preceding the date of grant.

The offer of a grant of share options under the 2004 Scheme may be accepted within 30 days from the date of the offer together with the payment of nominal consideration of HK$1 in total by the grantee. Options granted are vested for a period of 3 years immediately after the date of grant by one-third on each anniversary. The exercise period shall be determined by the Board of Directors but not exceeding 10 years from the date of grant. Options granted to a participant are lapsed if the participant ceased to be an eligible participant pursuant to the 2004 Scheme before the options are vested or exercised.

The 2004 Scheme expired on 29 August 2014.

The movements in the number of share options under the 2004 Scheme during the fifteen months ended 31 December 2015 and the year ended 30 September 2014 are as follows:

				Outstanding				Outstanding
				at	Granted	Exercised	Lapsed	at
		Date	Exercise	1 October	during the	during the	during the	31 December
		of grant	price	2014	period	period	period	2015
			HK$			(note ii)		(note iii)
Directors	18	June 2012	0.313	7,500,000	—	(7,500,000)	—	—
				7,500,000	—	(7,500,000)	—	—
				Outstanding				Outstanding
				at	Granted	Exercised	Lapsed	at
		Date	Exercise	1 October	during the	during the	during the	30 September
		of grant	price	2013	year	year	year	2014
			HK$			(note ii)		(note iii)
Directors	18	June 2012	0.313	13,500,000	—	(6,000,000)	—	7,500,000
				13,500,000	—	(6,000,000)	—	7,500,000

United Pacific Industries

− 113 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

33. SHARE OPTIONS (Continued)

Notes:

(i) On 18 June 2012, the Company granted 13,500,000 options to Directors of the Company under the 2004 Scheme. These options entitle the grantees to subscribe for a total of 13,500,000 new ordinary shares with nominal value of HK$0.10 per share in the capital of the Company. The exercise price of the options granted is HK$0.313 per share and they are valid for a period of ten years from 18 June 2012 to 17 June 2022. The options granted are subject to vesting in 3 equal tranches on the first, second and third anniversary of the date of the grant.

In view of the contribution of the grantees to the Company, on 10 April 2014, in accordance with the provisions of the 2004 Scheme, the board of directors, at its discretion, determined to allow Mr. David Howard Clarke, Mr. Simon Hsu Nai-Cheng and Mr. Henry Woon-Hoe Lim to exercise the whole of unexercised options and the unvested options to which they are entitled within twelve months commencing on the date of resignation of their office as Directors, and upon expiry of such period, the options granted to them shall lapse.

The following assumptions were used to derive the fair values of these share options, using the Black-Scholes option pricing model:

Date of grant	18 June 2012
Number of options	13,500,000
Expected volatility	33%
Expected life	3 years
Risk-free interest rate	1.50%
Weighted average share price	HK$0.313

The underlying expected volatility was determined by reference to historical data based on the expected life of share options.

Based on the fair values derived from the above pricing model, share-based compensation expenses of HK$41,000 were charged to the profit or loss for the fifteen months ended 31 December 2015 (30 September 2014: HK$208,000).

(ii) The following share options were exercised during the fifteen months ended 31 December 2015:

			Closing
	Number	Exercise	price prior
	of options	price	to exercise
Month	exercised	HK$	HK$
May 2015	4,500,000	0.313	0.70
July 2015	1,000,000	0.313	0.68
August 2015	1,000,000	0.313	0.67
August 2015	1,000,000	0.313	0.66
	7,500,000

The following share options were exercised during the year ended 30 September 2014:

				Closing
		Number	Exercise	price prior
		of options	price	to exercise
Month		exercised	HK$	HK$
September	2014	6,000,000	0.313	0.64

(iii) As at 31 December 2015, no share options remained outstanding (30 September 2014: 7,500,000) and the weighted average remaining life for those outstanding share options was Nil (30 September 2014: 2,816 days).

Annual Report 2015

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

34. RESERVES

The amounts of the Group’s reserves and the movements therein for both the current period and prior year are presented in the consolidated statement of changes in equity on pages 32 and 33 to the consolidated financial statements.

Share Premium

The movement in the share premium account is as follows:

	31 December	30 September
	2015	2014
	HK$’000	HK$’000
At 1 October	124,948	42,406
Issue of shares for acquisition of an associate (note i)	—	81,086
Exercise of share options	2,182	1,456
Exercise of conversion rights(note ii)	64,749	—
At 31 December/30 September	191,879	124,948

Notes:

(i) As detailed in note 19, the Group in substance acquired Yuji by the issue of 147,428,134 new shares of the Company as consideration to the Vendors of Yuji. The closing price of the Company’s shares at the date of completion is HK$0.65 per share and the share premium on 8 April 2014 amounted to approximately HK$81,086,000.
(ii) As detailed in note 30, the convertible bonds were fully converted into shares of the Company of HK$0.10 each at the conversion price of HK$0.47142 per share. Accordingly, share premium HK$64,749,000 was recognised for the fifteen months ended 31 December 2015.

Treasury Share Reserve

During the year ended 30 September 2010, the Group obtained at nil cost 14,500,000 of its own shares of HK$0.10 with a value of HK$5,365,000. The relevant shares are available for resale and have been included in the treasury share reserve, shown as a component of capital and reserves.

There is no movement in the treasury share reserve during the fifteen months ended 31 December 2015 and the year ended 30 September 2014 and the balance of treasury share reserve as at each reporting date is detailed as follows:

	Number of
	treasury	Amount
	shares	HK$’000
Treasury share reserve At 30 September 2014, 1 October 2014 and 31 December 2015	13,428,000	4,968

United Pacific Industries

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

34. RESERVES (Continued)

Share Option Reserve

At each reporting date, the Group revises its estimates of the number of options that are expected to ultimately vest. The impact of the revision of the original estimates, if any, is recognised in the consolidated statement of profit or loss over the remaining vesting period, with a corresponding adjustment to share option reserve.

The total balance was transferred to share premium account upon where all the share options granted were exercised.

Other Reserve

The other reserve represents the net gain on the disposal of the treasury shares.

Convertible Bonds Equity Reserve

The amount represents the equity component of the convertible bonds issued during the year ended 30 September 2014. The total balance was transferred to share premium account upon where the convertible bonds were fully converted into shares.

Capital Reserve

The capital reserve represents the capital reserve arising on the Group reorganisation carried out in 1994.

Translation Reserve

The translation reserve comprises the exchange differences arising on the translation of the financial statements of foreign operations.

Hedging Reserve

The hedging reserve represents the cumulative effective portion of gains or losses arising on changes in fair value of hedging instruments entered into for cash flow hedges. The cumulative gain or loss arising on changes in fair value of the hedging instruments that are recognised and accumulated under the heading of hedging reserve will be reclassified to profit or loss only when the hedged transaction affects the profit or loss, or included as a basis adjustment to the non-financial hedged item, consistent with the relevant accounting policy.

Investment Revaluation Reserve

The investment revaluation reserve comprises the change in fair value of the Group’s available-for-sale financial assets.

Annual Report 2015

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

35. MAJOR NON-CASH TRANSACTIONS

On 30 September 2015, convertible bonds with principal amount of HK$77,000,000 were fully converted into 163,336,303 ordinary shares of the Company of HK$0.10 each at conversion price of HK$0.47142 per share.

During the year ended 30 September 2014, the Group entered into finance lease arrangements in respect of assets with a total capital value at the inception of the lease of approximately HK$3,188,000 (note 16).

36. DISPOSAL OF SUBSIDIARY UNDERTAKINGS

On 30 May 2014, the Company completed the sale of the entire share capital of PGH and PHL, to Kings Victory Limited (“KVL”) and New Wave Capital Limited (“NWC”), for a consideration of US$2.5 million (approximately HK$19.4 million) and US$22.5 million (approximately HK$174.6 million), respectively. The Company concluded the sale of its 100% equity interests in PGH and PHL for a net consideration of HK$6.6 million and HK$155.5 million, respectively, after deducting the applicable direct costs on disposal and settlement of shareholder’s loans, payable in cash. PGH is the holding company of the Tools, Magnetics Technologies and Precision Measurement divisions and PHL is the holding company of the Contract Manufacturing division.

KVL and NWC are companies incorporated in the British Virgin Islands with limited liability and beneficially owned by Mr. Simon Hsu Nai-Cheng, who up until 30 May 2014, was an Executive Director and the Executive Vice-Chairman of the Company.

On 8 February 2014, the Company entered into a share purchase agreement with KVL and NWC for the sale of the entire share capital of PGH and PHL, respectively. Being substantial in nature, the Listing Rules required that the transaction be approved by independent shareholders and the approval for this transaction was duly obtained at a Special General Meeting held on 1 April 2014. Completion was achieved on 30 May 2014.

United Pacific Industries

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

36. DISPOSAL OF SUBSIDIARY UNDERTAKINGS (Continued)

The net assets of PGH and PHL at the disposal date are as follows:

	PGH	PHL	Total
	HK$’000	HK$’000	HK$’000
Property, plant and equipment	299	19,185	19,484
Prepaid land lease payments under operating leases	—	442	442
Available-for-sale financial assets	754	—	754
Interest in associate	1,014	—	1,014
Deferred tax assets	52,984	—	52,984
Inventories	244,271	39,991	284,262
Trade and other receivables	209,703	61,723	271,426
Cash and bank balances	77,203	82,698	159,901
Trade and other payables	(183,311)	(51,131)	(234,442)
Amounts due from/(owed to) group companies	3,180	(16,820)	(13,640)
Bank overdrafts	(338)	—	(338)
Other interest-bearing bank borrowings	(47,923)	(18,213)	(66,136)
Obligations under finance leases	(9,390)	—	(9,390)
Provisions	(1,742)	(300)	(2,042)
Derivative financial instruments	(611)	—	(611)
Tax payable	(6,580)	(4,369)	(10,949)
Retirement benefit obligations	(230,161)	—	(230,161)
Net book value at disposal	109,352	113,206	222,558
Less: Sale proceeds	(19,375)	(160,967)	(180,342)
Add: Transaction costs	12,758	5,441	18,199
Cumulative exchange differences in respect
of the net assets of the subsidiary reclassified
from equity to profit or loss on disposal
of the subsidiaryundertakings	53,265	3,857	57,122
Net loss/(gain) on disposal	156,000	(38,463)	117,537
Satisfied by:
Net cash considerations after settlement of
shareholder’s loans	19,375	160,967	180,342
Transaction costs directlyattributable to the disposal	(12,758)	(5,441)	(18,199)
	6,617	155,526	162,143
Net cash inflow arising from the disposal:
Net cash considerations after settlement of
shareholder’s loans	19,375	160,967	180,342
Transaction costs directly attributable to the disposal	(12,758)	(5,441)	(18,199)
Cash and cash equivalents disposed of	(77,203)	(82,698)	(159,901)
	(70,586)	72,828	2,242

Annual Report 2015

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

37. DISCONTINUED OPERATIONS

On 30 May 2014, the Company concluded the sale of its 100% equity interests in PGH and PHL (collectively, the “Disposal Group”), for a net consideration of HK$6.6 million and HK$155.5 million, respectively, after deducting the applicable direct costs on disposal and settlement of shareholder’s loans, payable in cash.

The revenues, results and cash flows of the Disposal Group are as follows:

		Year ended
		30 September
	Notes	2014
		HK$’000
Revenue	6	875,395
Cost of sales		(590,883)
Gross profit		284,512
Other income	7	4,923
Interest income	8	755
Selling and distribution costs		(144,197)
Administrative costs		(76,079)
Restructuring costs	9	(4,112)
Finance costs	10	(6,710)
Share of results of an associate	19	4,016
Cash flow hedge recycled from other comprehensive income		(712)
Impairment loss on non-current assets	38	(170,283)
	11	(107,887)
Net loss on disposal	36	(117,537)
Loss before tax from discontinued operations		(225,424)
Income tax expense		(3,246)
Net results from discontinued operations		(228,670)

The cash flows from the discontinued operations are as follows:

	Year ended
	30 September
	2014
	HK$’000
Net cash generated from operating activities	24,364
Net cash used in investing activities	(2,841)
Net cash generated from financing activities	16,320
Effect of foreign exchange rate	(1,330)
	36,513

United Pacific Industries

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

38. IMPAIRMENT LOSS ON NON-CURRENT ASSETS

As discussed in note 37 above, on 30 May 2014, the Company concluded the disposal of PGH and PHL.

For 31 March 2014 interim financial report purposes, although the Company had entered into an agreement to dispose PGH and PHL prior to the reporting date, the Disposal Group (including the Tools, Magnetic Technologies, Precision Measurement and Contract Manufacturing divisions) was not classified as held for sales or as a discontinued operation, because the agreement contained certain conditions which affected the immediate availability for sale of PGH and PHL at the reporting date.

However, given that the consideration of US$2,500,000 for PGH Group was significantly lower than its carrying value at 31 March 2014, the non-current assets of each cash generating unit (“CGU”) in the PGH Group were tested for impairment. The aggregate impairment loss recognised for each class of asset at 31 March 2014, are as follows:

	Carrying	Recoverable	Impairment
	value as at	amount as at	loss of
	31 March 2014	31 March 2014	non-current assets
	HK$’000	HK$’000	HK$’000
Assets of the PGH Group at 31 March 2014
Property, plant and equipment	155,050	—	155,050
Goodwill	2,491	—	2,491
Other intangible assets	65	—	65
Interest in an associate	12,677	—	12,677
Available-for-sale financial assets	749	749	—
Deferred tax assets	46,150	46,150	—
Inventories	261,433	261,433	—
Trade and other receivables	229,355	229,355	—
Cash and bank balances	73,026	73,026	—
	780,996	610,713	170,283

The impairment loss were calculated by comparing the recoverable amount to the carrying value of the PGH Group’s net assets at 31 March 2014. Impairment loss were allocated to the goodwill and non-current assets of each CGU of the PGH Group as follows:

			Operating segments
		Precision	Magnetic
	Tools	Measurement	Technologies	Corporate	Total
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Class of assets:
Property, plant and equipment	27,218	25,500	3,587	98,745	155,050
Goodwill	—	2,491	—	—	2,491
Other intangible assets	65	—	—	—	65
Interest in an associate	—	—	12,677	—	12,677
	27,283	27,991	16,264	98,745	170,283

Annual Report 2015

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

39. CONTINGENT LIABILITIES

As at 31 December 2015 and 30 September 2014, the Group did not have any significant contingent liabilities.

40. OPERATING LEASE COMMITMENTS

As Lessee

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

	31 December	30 September
	2015	2014
	HK$’000	HK$’000
Operating leases which expire:
Within one year	1,674	1,979
In the second to fifthyears inclusive	1,300	807
	2,974	2,786

Operating lease payments represent rentals payable by the Group for certain of its office properties and factories. The leases run for an initial period of 1 to 3 years (year ended 30 September 2014: 1 to 2 years), with an option to renew the leases and renegotiate the terms at the expiry date or dates as mutually agreed between the Group and the respective landlords. None of the leases contain contingent rentals.

41. RELATED PARTY TRANSACTIONS

The remuneration of the Directors and other members of key management during the period/year is as follows:

	Fifteen
	months ended	Year ended
	31 December	30 September
	2015	2014
	HK$’000	HK$’000
Basic salaries and allowances, bonuses and benefits in kind	3,749	6,035
Mandatory provident fund contribution	23	32
	3,772	6,067

Eclipse Magnetics Limited, which was until 30 May 2014, a subsidiary undertaking of the Company, purchases manufactured products directly from Ningbo Hi-tech Assemblies Co. Ltd. (“Ningbo Hi-tech”), a company in which it has a 25% interest (note 19). For the year ended 30 September 2014, goods to the value of approximately HK$25,016,000 were purchased from Ningbo Hi-tech.

United Pacific Industries

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

41. RELATED PARTY TRANSACTIONS (Continued)

On 8 February 2014, the Company entered into a disposal agreement with two purchasers, both wholly owned by Mr. Simon Hsu Nai-Cheng, the former Director of the Company who resigned with effect from 30 May 2014, to dispose of its entire interests in PHL and PGH at a total consideration of US$25 million. The completion of the disposal took place on 30 May 2014.

On 8 February 2014, Rise Up International Limited, a wholly owned subsidiary of the Company, entered into an acquisition agreement to acquire approximately 28.84% of the total issued share capital of Yuji, a company indirectly owned by an associate of Ms. Kelly Lee, the Director of the Company. The acquisition, settled by the Company’s shares valued at HK$95.8 million, was completed on 8 April 2014.

Up until 30 May 2014, the Group operated a contributory defined benefit pension plan covering certain of its employees in its then UK based subsidiaries of Spear & Jackson Limited and Bowers Group Limited (the “Plan”). The Group pays contributions to the Plan each year according to a schedule of contributions agreed between the Plan’s trustees and the Group. Full details of the contributions paid by the Group to the Plan during the year are disclosed in note 29.

Other than the emoluments paid to the Executive Directors of the Company, as disclosed in note 12, who are also considered as the key management of the Group and the transactions referred to above, the Group has not entered into any other related party transactions.

42. CAPITAL MANAGEMENT POLICIES AND RISK

The Group’s objectives are: to provide returns for shareholders; to safeguard the Group’s ability to continue as a going concern so that it continues to provide returns and benefits for its stakeholders; to support the Group’s stability and growth; and to provide capital for the purpose of strengthening the Group’s risk management capability.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividend paid to shareholders, return capital to shareholders and issue new shares to reduce its debt level.

Consistent with other industries, the Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total interest-bearing bank borrowings, obligations under finance leases and convertible bonds less cash and cash equivalents and bank deposits. Total capital represents total equity, as shown in the consolidated statement of financial position.

	31 December	30 September
	2015	2014
	HK$’000	HK$’000
Total net debt	N/A	N/A
Total capital	463,956	402,309
Gearingratio	N/A	N/A

Annual Report 2015

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

43. FINANCIAL RISK MANAGEMENT AND POLICIES

The Group is exposed to a variety of financial risks: including foreign currency risk, fair value risk, credit risk and liquidity risk. The Group’s overall risk management focuses on unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance. Risk management is carried out by key management under the policies approved by the Board of Directors. The Group does not have written risk management policies. However, the Board of Directors meets regularly and co-operates closely with key management to identify and evaluate risks and to formulate strategies to manage financial risks.

Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group’s exposure to the risk of changes in foreign exchange rates relates primarily to the Group’s operating activities.

The Group’s financial assets are primarily denominated in Hong Kong dollars (“HK$”), RMB, US dollars and Australian dollars (“AUD”). The currencies to which the Group had significant exposure on its monetary financial assets and liabilities included RMB, US dollars and AUD. At 31 December 2015 and 30 September 2014, in view of the fact that the Hong Kong dollars is pegged to the US dollars, the Company’s exposure to US dollars is considered to be minimal. The net exposure in original currency is as follows:

31 December 2015	31 December 2015	30 September	2014
RMB’000	AUD’000	RMB’000	AUD’000
Trade and other receivables 1,987 Cash and bank balances 59,547 Trade and otherpayables (15,876)	— 412 —	2,892 6,919 (27,202)	— 407 —
Overall net exposure 45,658	412	(17,391)	407

The following table demonstrates the sensitivity at the end of the reporting period to a reasonably possible change in the foreign currency exchange rate on the net positions denominated in RMB and AUD, with all other variables held constant, of the Group’s profit or loss before tax.

		Increase/
		(decrease)
	Change in	in profit
	exchange rate	before tax
	%	HK$’000
31 December 2015
If HK$ weakens against RMB	5	2,687
If HK$ strengthens against RMB	5	(2,687)
If HK$ weakens against AUD	5	117
If HK$ strengthens against AUD	5	(117)

United Pacific Industries

− 123 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

43. FINANCIAL RISK MANAGEMENT AND POLICIES (Continued)

Foreign currency risk (Continued)

Foreign currency risk (Continued)
		Increase/
		(decrease)
	Change in	in profit
	exchange rate	before tax
	%	HK$’000
30 September 2014
If HK$ weakens against RMB	5	(1,097)
If HK$ strengthens against RMB	5	1,097
If HK$ weakens against AUD	5	138
If HK$ strengthens against AUD	5	(138)

Fair value risk

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

Credit risk

The Group’s credit risk is primarily attributable to trade receivables. The Group has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis.

The Group is exposed to concentration risk as a significant portion of its business is derived from its largest customers. As at 31 December 2015, trade receivables of HK$30,260,000 (30 September 2014: HK$76,049,000) were contributed by the top five customers. In order to minimise any credit risk, the management of the Group has delegated a team to be responsible for determination of credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Group reviews the recoverable amount of each individual trade debt on a regular basis to ensure that adequate impairment loss are made for irrecoverable amounts. Management does not expect any significant losses of trade receivables that have not been provided for by way of an allowance.

The credit risk on liquid funds is limited because the counterparts are banks with high credit ratings assigned by international credit rating agencies.

Annual Report 2015

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

43. FINANCIAL RISK MANAGEMENT AND POLICIES (Continued)

Liquidity risk

The Group’s objective is to ensure that adequate funds are available to meet commitments associated with its financial liabilities.

The Group manages its liquidity needs by carefully monitoring short term and long term cash outflows on a regular basis. The Group mainly utilises cash to meet its liquidity requirements for periods up to 30 days. Funding for long term liquidity needs will be considered when liquidity requirements in the long term are identified.

The table below analyses the Group’s financial liabilities that will be settled on a net basis into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The contractual maturity analysis below is based on the undiscounted cash flows of the financial liabilities.

At 31 December 2015

At 31 December 2015
	More than
Within one	one year
year	but less	Total
or on	than	undiscounted	Carrying
demand	five years	amount	amount
HK$’000	HK$’000	HK$’000	HK$’000
Non-derivative financial liabilities: Trade payables 19,021 Accruals and otherpayables 17,983	— —	19,021 17,983	19,021 17,983
37,004	—	37,004	37,004

At 30 September 2014

		More than
	Within one	one year
	year	but less	Total
	or on	than	undiscounted	Carrying
	demand	five years	amount	amount
	HK$’000	HK$’000	HK$’000	HK$’000
Non-derivative financial liabilities:
Trade payables	35,305	—	35,305	35,305
Accruals and other payables	26,718	—	26,718	26,718
Interest-bearing bank borrowings	6,120	—	6,120	6,020
Convertible bonds (note 30)	—	80,080	80,080	73,101
Obligations under finance leases	10	—	10	9
	68,153	80,080	148,233	141,153

100

United Pacific Industries

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

43. FINANCIAL RISK MANAGEMENT AND POLICIES (Continued)

Categories of financial assets and liabilities by category

The carrying amounts of financial assets and liabilities presented in the consolidated statement of financial position relates to the following categories:

Financial assets:

31 December	30 September
2015	2014
HK$’000	HK$’000
Loans and receivables: Cash and cash equivalents 306,669	287,181
Trade and other receivables 34,565	96,440
Available-for-sale financial assets 77	237
341,311	383,858
Financial liabilities:
31 December	30 September
2015	2014
HK$’000	HK$’000
Financial liabilities measured at amortised cost: Trade and other payables 37,004	62,023
Interest-bearing bank borrowings —	6,020
Obligations under finance leases — Convertible bonds —	9 73,101
37,004	141,153

101

Annual Report 2015

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

43. FINANCIAL RISK MANAGEMENT AND POLICIES (Continued)

Fair value measurements recognised in the statement of financial position

The following table presents financial assets and liabilities measured at fair value in the statement of financial position in accordance with the fair value hierarchy. This hierarchy groups financial assets and liabilities into three levels based on the relative reliability of significant inputs used in measuring the fair value of these financial assets and liabilities as follows:

Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities;

Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly or indirectly; and

Level 3: inputs for the asset or liability that are not based on observable market data.

The level in the fair value hierarchy within which the financial asset or liability is categorised in its entirety is based on the lowest level of input that is significant to the fair value measurement. The financial assets and liabilities that are measured at fair value in the statement of financial position are grouped into the fair value hierarchy as follows:

		31 December 2015	31 December 2015			30 September	2014
	Level 1	Level 2	Level 3	Total	Level 1	Level 2	Level 3	Total
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Assets:
Available-for-sale investments
– Listed	77	—	—	77	237	—	—	237
Net fair value	77	—	—	77	237	—	—	237

Listed Securities

The fair value of the listed securities is determined with reference to their quoted bid prices at the reporting date and has been translated using the spot foreign currency rates at the end of the reporting period where appropriate.

102

United Pacific Industries

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

44. STATEMENT OF FINANCIAL POSITION AND RESERVE MOVEMENT OF THE COMPANY

COMPANY
		31 December	30 September
	Notes	2015	2014
		HK$’000	HK$’000
NON-CURRENT ASSETS
Property, plant and equipment		964	1,290
Investment in subsidiaries Available-for-sale financial assets		21,440 77	21,440 237
		22,481	22,967
CURRENT ASSETS
Trade and other receivables Amounts due from subsidiaries Cash and cash equivalents		1,076 333,901 29,814	806 113,979 268,839
		364,791	383,624
CURRENT LIABILITIES Trade and otherpayables		10,187	12,397
NET CURRENT ASSETS		354,604	371,227
TOTAL ASSETS LESS CURRENT LIABILITIES		377,085	394,194
NON-CURRENT LIABILITIES
Convertible bonds		—	73,101
NET ASSETS		377,085	321,093
CAPITAL AND RESERVES
Share capital	32	133,171	116,087
Reserves		243,914	205,006
TOTAL EQUITY		377,085	321,093

The statement of financial position of the Company was approved and authorised for issue by the Board of Directors on 23 March 2016 and are signed on its behalf by:

DATO‘ CHOO CHUO SIONG DIRECTOR

KELLY LEE DIRECTOR

103

Annual Report 2015

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

44. STATEMENT OF FINANCIAL POSITION AND RESERVE MOVEMENT OF THE COMPANY (Continued)

Reserve movement of the Company

Convertible Share bonds Capital Investment Share option Other equity redemption revaluation Contributed premium reserve reserve reserve reserve reserve surplus HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (note i) (note i) (note i) (note i) (note i) (note ii) At 1 October 2013 42,406 513 725 — 1,442 (794) 70,911	Accumulated losses Total HK$’000 HK$’000 (11,771) 103,432
Exercise of share options 1,456 (178) — — — — — Share-based compensation expenses — 208 — — — — — Equity component of convertible bonds — — — 4,349 — — — Issuance of shares for acquisition of an associate 81,086 — — — — — —	— 1,278 — 208 — 4,349 — 81,086
Transactions with owners 82,542 30 — 4,349 — — —	— 86,921
Profit for the year — — — — — — — Other comprehensive income: Deficit on revaluation of available-for-sale financial assets — — — — — (957) — Impairment loss on available- for-sale financial assets — — — — — 1,702 —	13,908 13,908 — (957) — 1,702
Total comprehensive income for the year — — — — — 745 —	13,908 14,653
At 30 September 2014 and 1 October 2014 124,948 543 725 4,349 1,442 (49) 70,911	2,137 205,006
Exercise of share options 2,182 (584) — — — — — Exercise of conversion rights 64,749 — — (4,349) — — — Share-based compensation expenses — 41 — — — — —
	— 1,598
	— 60,400
	— 41
Transactions with owners 66,931 (543) — (4,349) — — —
	— 62,039
Profit for the period — — — — — — — Other comprehensive income: Deficit on revaluation of available-for-sale financial assets — — — — — (160) —
	(22,971) (22,971)


	— (160)
Total comprehensive income for the period — — — — — (160) —
	(22,971) (23,131)
At 31 December 2015 191,879 — 725 — 1,442 (209) 70,911
	(20,834) 243,914

Notes:

(i) Please refer to note 34 to the consolidated finanical statements for details.

(ii) The contributed surplus represents the difference between the book values of the underlying assets of the Company’s subsidiaries, PHL and its subsidiaries, at the date on which the shares of these companies were acquired, and the nominal amount of the share capital issued by the Company under a Group reorganisation in 1994.

In addition to retained profits, under company law in Bermuda, the contributed surplus account of a company is also available for distribution. However, the Company cannot pay or declare a dividend, or make a distribution out of contributed surplus if: it is, or would after the payment be, unable to pay its liabilities as they become due; or 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.

United Pacific Industries

104

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

45. PRINCIPAL SUBSIDIARIES

Particulars of the principal subsidiaries are as follows:

	Place of	Issued and	Proportion of	Proportion of
	incorporation	fully paid	ownership interest held
	or registration/	share capital/	by the Company
Name of company	operation	registered capital	Directly	Indirectly	Principal activities
Alford Industries Limited	Hong Kong/	Ordinary	—	100%	Design and distribution of
	Hong Kong	HK$2,000,000			consumer electronic products
Foshan Shunde Alford	PRC*/PRC	Registered capital	—	100%	Manufacture and design of
Electronics Co. Ltd.		HK$ 22,074,000			consumer electronic products
Rise Up International Limited	British Virgin	Ordinary	100%	—	Investment holding
	Islands/Hong Kong	US$1

Established in the PRC as a wholly owned foreign enterprise.

The above list includes the subsidiaries of the Company which, in the opinion of the Directors, principally affected the results for the period or formed a substantial portion of the assets and liabilities of the Group. To give details of all the other subsidiaries would, in the opinion of the Directors, result in particulars of excessive length.

None of the subsidiaries had any debt securities subsisting at 31 December 2015 or at any time during the period (year ended 30 September 2014: Nil).

105

Annual Report 2015

− 130 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

3. FINANCIAL INFORMATION OF THE COMPANY FOR THE SIX MONTHS ENDED 30 JUNE 2016

Set out below is the full text of the unaudited consolidated financial statements of the Company for the six months period ended 30 June 2016 extracted from the interim report of the Company for the six months ended 30 June 2016.

−131 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS

For the six months ended 30 June 2016

		Six months	ended 30 June
	Notes	2016	2015
		HK$’000	HK$’000
		(Unaudited)	(Unaudited)
Revenue	3	53,689	51,537
Cost of sales		(49,807)	(49,946)

Gross profit		3,882	1,591
Other income		379	225
Interest income		929	2,407
Selling and distribution costs		(1,198)	(1,293)
Administrative costs		(12,676)	(14,222)
Finance costs	4	—	(1,823)
Gain on dilution of interest in an associate		—	1,058
Share of results of an associate	10	10,532	8,626

Profit/(loss) before tax	5	1,848	(3,431)
Income tax expense	6	(2,377)	(1,552)

Loss for theperiod		(529)	(4,983)

Loss per share
Basic and diluted	8	(0.04) HK cents	(0.43) HK cents

Interim Report 2016

− 132 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 June 2016

		Six months ended 30 June	Six months ended 30 June
	Notes	2016	2015
		HK$’000	HK$’000
		(Unaudited)	(Unaudited)
Loss for the period Other comprehensive income Items that may be reclassified subsequently to profit or loss Exchange differences arising from the translation of foreign operations		(529) (85)	(4,983) (10)
Exchange differences arising from the translation
of interest in a foreign associate	10	1,180	1,125
Change in fair value on available-for-sale financial assets		6	(151)
Other comprehensive income for theperiod, net of tax		1,101	964
Total comprehensive income for the period,
attributable to owners of the Company		572	(4,019)

8 United Pacific Industries

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At 30 June 2016

		30 June	31 December
	Notes	2016	2015
		HK$’000	HK$’000
		(Unaudited)	(Audited)
NON-CURRENT ASSETS
Property, plant and equipment	9	3,496	3,957
Interest in an associate Available-for-sale financial assets	10	147,607 83	152,383 77
		151,186	156,417
CURRENT ASSETS
Inventories Trade and other receivables Cash and bank balances	11	10,268 42,120 309,398	12,599 34,565 306,669
		361,786	353,833
CURRENT LIABILITIES
Trade and other payables Taxpayable	12	36,783 11,150	37,004 7,587
		47,933	44,591
NET CURRENT ASSETS		313,853	309,242
TOTAL ASSETS LESS CURRENT LIABILITIES		465,039	465,659

NON-CURRENT LIABILITIES
Deferred tax liabilities	13	511	1,703

		511	1,703

NET ASSETS		464,528	463,956

CAPITAL AND RESERVES
Share capital	14	133,171	133,171
Reserves		331,357	330,785

TOTAL EQUITY ATTRIBUTABLE TO
OWNERS OF THE COMPANY		464,528	463,956

Interim Report 2016

− 134 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2016

Share
capital
Share
premium
Treasury
share
reserve
Share
option
reserve
Other
reserve
Convertible
bonds
equity
reserve*
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
At 1 January 2015 (Unaudited)
116,087
124,948
(4,968)
559
40
4,349
Exercise of share options
450
1,294
—
(335)
—
—
Share-based compensation expense
—
—
—
29
—
—

Capital
redemption
reserve
Capital
reserve
Translation
reserve
Investment
revaluation
reserve
Retained
profits*
Total
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
1,442
19,870
(1,121)
(49)
136,425
397,582
—
—
—
—
—
1,409
—
—
—
—
—
29

Transaction with owners
450
1,294
—
(306)
—
—
Loss for the period
—
—
—
—
—
—
Other comprehensive income
Exchange difference arising
from the translation of foreign
operations
—
—
—
—
—
—
Exchange differences arising
from the translation of interest in
a foreign associate
—
—
—
—
—
—
Change in fair value on
available-for-sale financial assets
—
—
—
—
—
—
Total comprehensive income
for theperiod
—
—
—
—
—
—
At 30 June 2015 (Unaudited)
116,537
126,242
(4,968)
253
40
4,349

—
—
—
—
—
1,438

—
—
—
—
(4,983)
(4,983)
—
—
(10)
—
—
(10)
—
—
1,125
—
—
1,125
—
—
—
(151)
—
(151)
—
—
1,115
(151)
(4,983)
(4,019)
1,442
19,870
(6)
(200)
131,442
395,001

10 United Pacific Industries

− 135 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2016

Share capital Share premium Treasury share reserve Other reserve Capital redemption* reserve Capital reserve Translation reserve Investment revaluation* reserve HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 At 1 January 2016 (Audited) 133,171 191,879 (4,968) 40 1,442 19,870 (7,442) (209)*	Retained profits Total HK$’000 HK$’000*
	130,173 463,956
Loss for the period — — — — — — — — Other comprehensive income Exchange differences arising from the translation of foreign operations — — — — — — (85) — Exchange differences arising from the translation of interest in a foreign associate — — — — — — 1,180 — Change in fair value on available-for-sale financial assets — — — — — — — 6
	(529) (529)

	— (85)
	— 1,180
	— 6
Total comprehensive income for the period — — — — — — 1,095 6
	(529) 572
At 30 June 2016 (Unaudited) 133,171 191,879 (4,968) 40 1,442 19,870 (6,347) (203)
	129,644 464,528

The total reserves at 30 June 2016 is HK$331,357,000 (30 June 2015: HK$278,464,000).

Interim Report 2016

− 136 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the six months ended 30 June 2016

	Six months ended 30 June	Six months ended 30 June
	2016	2015
	HK$’000	HK$’000
	(Unaudited)	(Unaudited)
Cash flows from operating activities Net cash generated from/(used in) operations	2,102	(3,314)
Income taxpaid	—	(2,927)
Net cashgenerated from/(used in) operating activities	2,102	(6,241)
Cash flows from investing activities Purchase of property, plant and equipment	(229)	(341)
Dividend received from an associate Interest received	— 929	14,632 2,407
Net cashgenerated from investing activities	700	16,698
Cash flows from financing activities
Repayments of bank borrowings	—	(1,946)
Interest paid on interest-bearing bank borrowings and bank overdrafts	—	(7)
Proceeds from exercise of share options	—	1,409
Principal repayment of obligations under finance leases	—	(4)
Net cash used in financing activities	—	(548)
Net increase in cash and cash equivalents Effect of foreign exchange rates Cash and cash equivalents at the beginning of theperiod	2,802 (73) 306,669	9,909 (11) 298,414
Cash and cash equivalents at the end of theperiod	309,398	308,312
Analysis of balances of cash and cash equivalents
Cash and bank balances	309,398	308,312

United Pacific Industries

− 137 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the six months ended 30 June 2016

1. GENERAL INFORMATION

On 5 November 2015, the Group announced to change its financial year end date from 30 September to 31 December so as to unify the financial year end date of the Company and its principal operating subsidiary which is incorporated in the People’s Republic of China (the “PRC”). Accordingly, the current interim results covered a period of six months from 1 January 2016 to 30 June 2016 and the comparative figures presented for the condensed consolidated statement of profit or loss, the condensed consolidated statement of comprehensive income, condensed consolidated statement of changes in equity and condensed consolidated statement of cash flows covered a period of six months from 1 January 2015 to 30 June 2015.

The unaudited condensed consolidated interim financial statements of the Group (the “Interim Financial Statements”) are presented in Hong Kong dollars, which is also the functional currency of the Company.

The Interim Financial Statements have been prepared in accordance with Hong Kong Accounting Standard (“HKAS”) 34, “Interim Financial Reporting” issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”) and the applicable disclosure provisions of the Rules Governing the Listing of Securities on the Stock Exchange (the “Listing Rules”).

The Interim Financial Statements have been prepared in accordance with the same accounting policies adopted in the consolidated financial statements for the fifteen months ended 31 December 2015, except for the adoption of the new and revised Hong Kong Financial Reporting Standards (“HKFRSs”) (which include individual HKFRSs, HKASs and Interpretations) as disclosed in note 2 to the Interim Financial Statements.

The preparation of the Interim Financial Statements in conformity with HKAS 34 requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

The Interim Financial Statements are unaudited, but have been reviewed by BDO Limited in accordance with Hong Kong Standard on Review Engagements 2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the HKICPA.

The Interim Financial Statements do not include all the information and disclosures required in the consolidated financial statements for the fifteen months ended 31 December 2015, and should be read in conjunction with the Group’s consolidated financial statements for the fifteen months ended 31 December 2015.

Interim Report 2016

− 138 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the six months ended 30 June 2016

2. ADOPTION OF NEW OR REVISED HKFRSs

A number of new or revised Standards, Amendments and Interpretations are effective for the Group’s financial period beginning on or after 1 January 2016. The adoption of the new and revised Standards, Amendments and Interpretations had no material effect on how the results and financial position for the current and prior accounting periods have been prepared and presented.

The Group has not early adopted the following new standards and amendments of the HKFRSs potentially relevant to the Group’s Interim Financial Statements, which have been issued but not yet effective for the financial period beginning on 1 January 2016.

HKFRS 15 Revenue from Contracts with Customers[1] HKFRS 9 Financial Instruments[1] HKFRS 16 Leases[2]

1 Effective for annual periods beginning on or after 1 January 2018

2 Effective for annual periods beginning on or after 1 January 2019

The directors of the Company (the ”Directors”) anticipate that all of the pronouncements will be adopted in the Group’s accounting policies for the first period beginning on or after the effective date of the pronouncement.

3. REVENUE AND SEGMENT INFORMATION

The Group’s segment information is based on regular internal financial information reported to the Company’s executive director and management for their decisions about resources allocation to the Group’s business components and their review of these components’ performance. For management purposes, the Group has only one reportable operating segment which is the manufacture of consumer electronics products. Since this is the only reportable operating segment of the Group, no further operating segment analysis thereof is presented.

Revenue represents the total invoiced value of goods supplied less discounts and returns.

The totals presented for the Group’s operating segments reconcile to the Group’s key financial figures as presented in the Interim Financial Statements as follows:

presented in the Interim Financial Statements as follows:
	Six months ended 30 June
	2016	2015
	HK$’000	HK$’000
	(Unaudited)	(Unaudited)
Reportable segment loss	(2,311)	(4,987)
Gain on dilution of interest in an associate	—	1,058
Share of results of an associate	10,532	8,626
Unallocated corporate costs	(6,373)	(8,128)
Profit/(loss) before tax	1,848	(3,431)

The unallocated corporate costs mainly comprise staff cost (including directors’ remuneration), legal and professional fee, exchange differences and office rental.

United Pacific Industries

− 139 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the six months ended 30 June 2016

3. REVENUE AND SEGMENT INFORMATION (Continued)

Geographical information

The following provides an analysis of the Group’s revenue by geographical market, irrespective of the origin of the goods:

The following provides an analysis of the Group’s revenue by geographical market, irrespective of the origin of the goods:	The following provides an analysis of the Group’s revenue by geographical market, irrespective of the origin of the goods:
Six months ended 30 June
2016	2015
HK$’000	HK$’000
(Unaudited)	(Unaudited)
PRC Mainland China 135	1,550
HongKong(place of domicile) 368	254
503	1,804
United States of America 32,761	36,106
United Kingdom 11,683	4,622
Europe 6,212	7,521
Others 2,530	1,484
53,689	51,537

4. FINANCE COSTS

FINANCE COSTS
	Six months ended 30 June
	2016	2015
	HK$’000	HK$’000
	(Unaudited)	(Unaudited)
Interest on interest-bearing bank borrowings and bank overdrafts	—	7
Imputed interest on convertible bonds	—	1,816
	—	1,823

5. PROFIT/(LOSS) BEFORE TAX

Profit/(loss) before tax has been arrived at after charging/(crediting):

	Six months ended 30 June	Six months ended 30 June
	2016	2015
	HK$’000	HK$’000
	(Unaudited)	(Unaudited)
Depreciation of property, plant and equipment	672	379
Impairment loss on trade receivables, net	213	243
Impairment loss on inventories	948	115
Interest income	(929)	(2,407)
Cost of inventories recognised as expense	49,807	49,946

Interim Report 2016

− 140 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the six months ended 30 June 2016

6. INCOME TAX EXPENSE

The income tax expense for the period comprises:

Six months ended 30 June	Six months ended 30 June
2016	2015
HK$’000	HK$’000
(Unaudited)	(Unaudited)
Current income tax — Hong Kong: Provision for theperiod —	—
Current income tax — Mainland China: Provision for the period 271 Overprovision inprioryears —	— (173)
271	(173)
Withholding tax on dividend income 3,298 Deferred tax(note 13) (1,192)	— 1,725
2,377	1,552

No Hong Kong profits tax has been provided for the six months ended 30 June 2016 as the Group had no estimated assessable profits arising in or derived from Hong Kong (six months ended 30 June 2015: nil).

PRC Enterprise Income tax has been provided on estimated assessable profits of the subsidiary operating in Mainland China at 25% (six months ended 30 June 2015: 25%).

Withholding tax is levied on profit distribution upon declaration of the undistributed earnings of an associate for the six months ended 30 June 2016 at the rate of 20% (six months ended 30 June 2015: 20%).

7. DIVIDEND

The Board does not recommend the payment of an interim dividend for the six months ended 30 June 2016 (six months ended 30 June 2015: nil).

United Pacific Industries

− 141 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the six months ended 30 June 2016

8. LOSS PER SHARE

The calculation of the basic and diluted loss per share for the six months ended 30 June 2016 is based on the loss attributable to owners of the Company of HK$529,000 (six months ended 30 June 2015: loss of HK$4,983,000) and the weighted average number of 1,318,279,590 (six months ended 30 June 2015: 1,148,313,453) ordinary shares.

The calculation of weighted average number of ordinary shares is as follows:

	Six months	ended 30 June
	2016	2015
	(Unaudited)	(Unaudited)
Issued ordinary shares at 1 January 2016/1 January 2015	1,331,707,590	1,160,871,287
Effect of share options exercised (note (i))	—	870,166
Treasuryshares	(13,428,000)	(13,428,000)
Weighted average number of ordinaryshares at 30 June	1,318,279,590	1,148,313,453
Basic and diluted lossper share (HK cents) (note (ii))	(0.04)	(0.43)

Notes:

(i) This is related to the share options exercised under the Company’s share option scheme during the six months ended 30 June 2015.
(ii) The basic and diluted loss per share are the same for the six months ended 30 June 2016 and 2015. For the six months ended 30 June 2016, there were no potential dilutive shares outstanding. For the six months ended 30 June 2015, the basic and diluted loss per share are the same as the effect of the share options outstanding and the effect of the conversion of outstanding convertible bonds were anti-dilutive.

9. PROPERTY, PLANT AND EQUIPMENT

During the six months ended 30 June 2016, additions to property, plant and equipment amounted to HK$229,000 (six months ended 30 June 2015: HK$341,000).

Interim Report 2016

− 142 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the six months ended 30 June 2016

10. INTEREST IN AN ASSOCIATE

INTEREST IN AN ASSOCIATE
	HK$’000	HK$’000
	(Unaudited)	(Audited)
Movements of interest in an associate are as follows: At 1 January 2016/1 October 2014 Gain on dilution of interest in an associate (note) Share of results of an associate Dividend declared/received Currencyrealignment	152,383 — 10,532 (16,488) 1,180	150,234 1,152 24,594 (16,080) (7,517)
At 30 June 2016/31 December 2015	147,607	152,383

Note: During the fifteen months ended 31 December 2015, ordinary shares in issue of Yuji Development Corporation (“Yuji”) were increased from 176,000,000 shares to 181,930,324 shares. The Group did not subscribe its proportionate share of the new ordinary shares which were issued at New Taiwan dollars 15 per share. Accordingly, the Group’s equity interest in Yuji was diluted from 28.84% to 27.9%. As the Group’s share of net asset value of Yuji immediately after the issuance of new shares was in excess of the Group’s original share in net asset value of Yuji, a gain on dilution of interest in an associate of approximately HK$1,152,000 was recognised during the fifteen months ended 31 December 2015.

United Pacific Industries

− 143 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the six months ended 30 June 2016

10. INTEREST IN AN ASSOCIATE (Continued)

As at 30 June 2016, the Group had an interest in the following associate:

					Proportion of
					nominal value of
					share capital
	Form of business	Place of	Principal place	Nominal value of	held by
Name of entity	structure	incorporation	of operation	share capital	the Group
				TWD
Yuji	Limited by shares	Taiwan	Taiwan	1,819,303,240	27.9%
The summarised financial information in respect of the Group’s associate				is set out below:
				30 June	31 December
				2016	2015
				HK$’000	HK$’000
				(Unaudited)	(Audited)
Non-current assets Current assets				37,522 670,114	35,848 574,056
Total assets				707,636	609,904
Current liabilities Non-current liabilities				(160,157) (2,797)	(45,400) (2,800)
Total liabilities				(162,954)	(48,200)
Non-controllinginterests				(15,624)	(15,529)
Net assets				529,058	546,175
Share of an associate’s net assets				147,607	152,383
Sales				62,299	151,813
Profit for theperiod				37,718	87,984
Other comprehensive income				4,229	(26,948)
Total comprehensive income				41,947	61,036
Share of results of an associate (net of tax)				10,532	24,594

Interim Report 2016

− 144 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the six months ended 30 June 2016

11. TRADE AND OTHER RECEIVABLES

	30 June	31 December
	2016	2015
	HK$’000	HK$’000
	(Unaudited)	(Audited)
Trade receivables Less: Impairmentprovisions	19,387 (1,094)	31,342 (881)
Trade receivables - net	18,293	30,461
Dividend receivable from an associate Prepayments and other receivables	16,488 7,339	— 4,104
	42,120	34,565

At the reporting date, the ageing analysis of trade receivables, based on invoice date, is as follows:

	30 June	31 December
	2016	2015
	HK$’000	HK$’000
	(Unaudited)	(Audited)
0 - 60 days	17,496	16,627
61 - 90 days	386	5,302
91 - 120 days	411	7,504
Greater than 120 days	1,094	1,909
	19,387	31,342

Trade receivables that are neither past due nor impaired relate to a number of customers for whom there has been no recent history of default.

The Group allows credit periods ranging from 30 to 120 days (31 December 2015: 30 to 120 days) to its trade customers depending on their credit status and geographical location. The Directors consider that the carrying amounts of trade and other receivables approximate to their fair values.

Movements in the provision for impairment of trade receivables are as follows:

	HK$’000	HK$’000
	(Unaudited)	(Audited)
At 1 January 2016/1 October 2014	881	973
Impairment losses recognised	238	265
Impairment losses reversed	(25)	(357)
At 30 June 2016/31 December 2015	1,094	881

The Group has provided in full against those receivables where evidence suggests that the amounts outstanding are not recoverable.

United Pacific Industries

− 145 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the six months ended 30 June 2016

12. TRADE AND OTHER PAYABLES

	30 June	31 December
	2016	2015
	HK$’000	HK$’000
	(Unaudited)	(Audited)
Trade payables	16,213	19,021
Accruals and otherpayables	20,570	17,983
	36,783	37,004

At the reporting date, the ageing analysis of trade payables, based on invoice date, is as follows:

	30 June	31 December
	2016	2015
	HK$’000	HK$’000
	(Unaudited)	(Audited)
0 - 60 days	11,107	12,962
61 - 90 days	2,407	2,099
Greater than 90 days	2,699	3,960
	16,213	19,021

The Directors consider that the carrying amounts of trade and other payables approximate to their fair values.

13. DEFERRED TAX LIABILITIES

The following are the major deferred tax liabilities recognised and movements thereon during the current and prior periods:

	HK$’000	HK$’000
	(Unaudited)	(Audited)
At 1 January 2016/1 October 2014	1,703	—
(Credited)/charged to the statement ofprofit or loss for theperiod(note 6)	(1,192)	1,703
At 30 June 2016/31 December 2015	511	1,703

During the current period, deferred tax liabilities were related to the undistributed earnings of the Group’s associate which were provided at 20% (31 December 2015: 20%).

Interim Report 2016

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the six months ended 30 June 2016

13. DEFERRED TAX LIABILITIES (Continued)

	30 June	31 December
	2016	2015
	HK$’000	HK$’000
	(Unaudited)	(Audited)
Unused tax losses	133,473	131,850

The Group records deferred tax assets in respect of tax losses only where there is a reasonable expectation that these tax losses will be utilised in the foreseeable future. Based on forecast income streams and having considered potential future earnings volatility, the Group does not anticipate the utilisation of any significant portion of these unrecognised tax losses or the material reversal of the other temporary differences in the foreseeable future. As at 30 June 2016 and 31 December 2015, the tax losses arise solely in Hong Kong and can be carried forward indefinitely.

14. SHARE CAPITAL

Ordinary shares of HK$0.10 each

	Number of
	shares	HK$’000
Authorised:
At 30 June 2016 and
31 December 2015	1,500,000,000	150,000
Issued and fully paid:
At 30 June 2016 and
31 December 2015	1,331,707,590	133,171

United Pacific Industries

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APPENDIX II

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the six months ended 30 June 2016

15. RELATED PARTY TRANSACTIONS

The remuneration of the key management during the period is as follows:

	Six months ended 30 June	Six months ended 30 June
	2016	2015
	HK$’000	HK$’000
	(Unaudited)	(Unaudited)
Basic salaries and allowances, bonuses and benefits in kind	1,418	1,400
Mandatory provident fund contribution	9	9
	1,427	1,409

Other than the disclosures above, the Group has not entered into any other related party transactions.

16. OPERATING LEASE COMMITMENTS

As Lessee

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

	30 June	31 December
	2016	2015
	HK$’000	HK$’000
	(Unaudited)	(Audited)
Operating leases which expire:
Within one year	2,669	1,674
In the second to fifthyears inclusive	1,830	1,300
	4,499	2,974

Operating lease payments represent rentals payable by the Group for certain of its office properties and factories. The leases run for an initial period of 1 to 3 years (31 December 2015: 1 to 3 years), with an option to renew the leases and renegotiate the terms at the expiry date or dates as mutually agreed between the Group and the respective landlords. None of the leases contain contingent rentals.

Interim Report 2016

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APPENDIX II

4. INDEBTEDNESS

As at the close of business on 31 October 2016, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this Composite Document, apart from unsecured and unguaranteed bank borrowings of HK$655,000 and normal trade and other payables, the Group did not have any mortgages, charges, debentures, loan capital, bank overdrafts, loans, hire purchase or finance lease obligations or any guarantees or other material contingent liabilities. The Directors confirmed that there had been no material change in the indebtedness of the Group since 31 October 2016 up to the Latest Practicable Date.

5. MATERIAL CHANGE

As at the Latest Practicable Date, the Directors confirm that save and except for the followings, there has been no material change in the financial or trading position or outlook of the Group since 31 December 2015, being the date to which the latest audited consolidated financial statements of the Group were made up and up to the Latest Practicable Date.

As disclosed in the interim report of the Group for the six months ended 30 June 2016 (the “2016 Interim Report”) published on 19 September 2016, the Group recorded a net loss of approximately HK$0.5 million for the six months ended 30 June 2016 as compared to a net loss of approximately HK$5.0 million for the same period in 2015. Such decrease in loss was mainly attributable to the following:

(i) the improvement of gross profit margin to 7.2% for the six months ended 30 June 2016 as compared to 3.1% for the same period in 2015 resulting from the more stringent control efforts of the Group, with outsourcing in labour to allow flexibility in production arrangements;
(ii) decrease in administrative costs to approximately HK$12.7 million for the six months ended 30 June 2016 as compared to approximately HK$14.2 million for the same period in 2015 resulting from decrease in legal and professional services requirement; and
(iii) increase in share of results of an associate, Yuji Development Corporation, to approximately HK$10.5 million for the six months ended 30 June 2016 as compared to approximately HK$8.6 million for the same period in 2015 resulting from improvements in the sales of columbarium units and cemetery plots of this associate.

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GENERAL INFORMATION

APPENDIX III

1. RESPONSIBILITY STATEMENT

This Composite Document includes particulars given in compliance with the Takeovers Code for the purpose of giving information with regard to the Offer, the Offeror and the Group.

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

The directors of the Offeror accept full responsibility for the accuracy of the information contained in this Composite Document (other than the information relating to the Group and any of the parties acting in concert with it), and confirm, having made all reasonable inquiries, that to the best of their knowledge, opinions expressed in this Composite Document (other than the information relating to the Group and any of the parties acting in concert with it) have been arrived at after due and careful consideration and there are no other facts not contained in this Composite Document, the omission of which would make any statement contained in this Composite Document misleading.

2. SHARE CAPITAL OF THE COMPANY

As at the Latest Practicable Date, the Company had an authorised ordinary share capital of HK$150,000,000 divided into 1,500,000,000 Shares of HK$0.10 each. The authorised and issued ordinary share capital of the Company as at the Latest Practicable Date were as follows:

As at the Latest Practicable Date	HK$
*Authorised:*
1,500,000,000 Shares	150,000,000
*Issued and fully paid:*
1,318,279,590 Shares	131,827,959

All the existing Shares in issue are fully paid up and rank pari passu in all respects with each other in all respects, including all rights in respect of capital, dividends and voting.

Since 31 December 2015 (being the date to which the Company’s latest published audited accounts were prepared) and up to the Latest Practicable Date, save for the cancellation of treasury shares of 13,428,000 Shares on 29 September 2016, no new Shares had been issued or repurchased by the Company.

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APPENDIX III

As at the Latest Practicable Date, the Company does not have any outstanding options, derivatives, warrants, or securities which are convertible or exchangeable into Shares and has not entered into any agreement for the issue of such options, derivatives, warrants or securities which are convertible or exchangeable into Shares, and the Company has no other relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code).

3. MARKET PRICES

The table below sets out the closing prices of the Shares on the Stock Exchange on (i) the last Business Day of each of the calendar months during the Relevant Period; (ii) the Last Trading Day; and (iii) the Latest Practicable Date:

	Closing price
Date	per Share
	HK$
2016
31 May	0.450
30 June	0.400
29 July	0.400
31 August	0.410
30 September	0.485
31 October	0.480
21 November (Last Trading Day)	0.455
30 November	0.550
Latest Practicable Date	0.490

Note: Trading of the Shares on the Stock Exchange was suspended from 9:00 a.m. on 22 November 2016 to 24 November 2016 pending the release of the Joint Announcement.

During the Relevant Period, The highest closing price of the Shares as quoted on the Stock Exchange was HK$0.57 on 13 September 2016, 14 September 2016 and 15 September 2016 respectively and the lowest closing price of the Shares as quoted on the Stock Exchange was HK$0.39 on 10 August 2016.

4. DISCLOSURE OF INTERESTS

(i) Interests and short positions in the securities of the Company and its associated corporations of the Directors and chief executive

As at the Latest Practicable Date, the following Directors and chief executives had, or were deemed to have, interests and short positions in the Shares, underlying Shares and debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO), which are (i) required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under

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APPENDIX III

such provisions of the SFO), or which are (ii) required, pursuant to Section 352 of the SFO, to be entered into the register referred to therein, or which are (iii) required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers set out in Appendix 10 to the Listing Rules, to be notified to the Company and the Stock Exchange:

(i) Interests in the Company

			Approximate
			percentage of
			the total
			issued share
		Number of	capital of the
Name of Director	Capacity/ Nature of interest	Shares held	Company
Mr. Sun Jih-Hui (Note)	Interests in controlled	163,336,303	12.39%
	corporation/ Corporate interest

Note: These shares are held by Kingage International which is wholly owned by Mr. Sun Jih-Hui.

(ii) Interests in associated corporation

					Percentage
					of the
			Number of	Issued	associated
Name of			shares of	shares of	corporation’s
associated	Name of	Capacity/	associated	associated	issued
corporation	director	Nature of interest	corporation	corporation	shares
Yuji Development	Dato’ Choo	Interests in controlled	26,222,056	181,930,324	14.41%
Corporation	Chuo Siong	corporation/ Corporate
	(Note)	interest
	Sun Jih-Hui	Beneficial owner/	38,143	181,930,324	0.02%
		Beneficial interest
		Interests of spouse/	24,090	181,930,324	0.01%
		Family interest

Note: Dato’ Choo Chuo Siong holds 100% direct interest in Sino Market Global Limited (“ Sino Market ”) and is accordingly deemed to have interest in the shares of Yuji Development Corporation held by Sino Market.

Save as disclosed above, as at the Latest Practicable Date, except for nominee shares in a subsidiary held in trust for the Group, neither the Directors, nor any of their associates, had any interests or short positions in any shares, underlying shares, or debentures of the Company or any of its associated corporations.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors nor the chief executive of the Company had or was deemed to have any interests or short positions in the shares,

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APPENDIX III

underlying shares or debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) (i) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) which were otherwise required to notify the Company and the Stock Exchange pursuant to the Model Code.

(ii) Interests and short positions of substantial Shareholders

As at the Latest Practicable Date, so far as is known to any Director or chief executive of the Company, the following persons (other than a Director or chief executive of the Company) had interests or short positions in the Shares or underlying shares of the Company which would fall to be disclosed to the Company under the provisions Divisions 2 and 3 of Part XV of the SFO, or, who was, directly or indirectly, interested in 5% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group.

			Approximate
			percentage of
			the total
			issued share
		Number of	capital of the
Name of Shareholders	Capacity/ Nature of interest	Shares held	Company
Best Service	Beneficial owner/Beneficial	281,313,309	21.34%
	interest
Ever Team Global Limited	Interests of controlled	281,313,309	21.34%
(“Ever Team”) (Note 1)	corporation/ Corporate interest
The Goldenlife PTC	Interests of controlled	281,313,309	21.34%
Limited (“Goldenlife”)	corporation/ Other interest
(Note 1)
Kingage International	Beneficial owner/Beneficial	163,336,303	12.39%
	interest
Ms. Chou Chi-Chin	Interests of spouse/ Family	163,336,303	12.39%
(Note 2)	interest

Notes:

Goldenlife, as trustee of a discretionary trust, holds 100% direct interest in Ever Team and is accordingly deemed to have interest in the ordinary shares interested by or deemed to be interested by Ever Team for the purpose of Part XV of the SFO. The founder of the said trust is Mr. Lee Shih-Tsung. Ever Team holds 100% direct interest in Best Service and is accordingly deemed to have an interest in the ordinary shares interested by Best Service for the purpose of Part XV of the SFO.
Ms. Chou Chi-Chin, being the spouse of Mr. Sun Jih-Hui who wholly owns Kingage International, is accordingly deemed to have interest in the ordinary shares interested by or deemed to be interested by Mr. Sun Jih-Hui for the purpose of Part XV of the SFO.

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APPENDIX III

Save as disclosed above, as at the Latest Practicable Date, the Directors were not aware of any other person (other than the Directors and the chief executive of the Company) who had, or was deemed to have, interests or short positions in the Shares or underlying Shares (including any interests in options in respect of such capital), which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who was directly or indirectly interested in 5% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of the Group, or which would be required to be disclosed pursuant to the requirements of the Takeovers Code.

(iii) Disclosure of interests of the Offeror

As at the Latest Practicable Date, save for the Irrevocable Undertakings, the Offeror and its ultimate beneficial owners or the parties acting in concert with it are not interested in and have not dealt in any other shares, underlying shares, debentures or other relevant securities (as defined under Note 4 to Rule 22 of the Takeovers Code) of the Company.

The Offeror intends to finance the consideration payable under the Offer by the Offeror’s internal financial resources. The Offeror is an investment holding company incorporated in the British Virgin Islands with limited liability and is owned as to 55% by Ms. Yeung and 45% by Mr. Lee.

As at the Latest Practicable Date, there was no agreement, arrangement or understanding that the securities acquired in pursuance of the Offer would be transferred, charged or pledged to any other persons.

5. ADDITIONAL DISCLOSURE OF INTERESTS AND DEALING

As at the Latest Practicable Date:

(a) none of the Offeror, the directors of the Offeror or any the parties acting in concert with it owned or controlled any Shares, convertible securities, warrants, options or derivatives of the Company and save as provided under the Irrevocable Undertakings, none of the Offeror, the directors of the Offeror or any the parties acting in concert with them had dealt for value in any such securities during the Relevant Period;
(b) save for the Irrevocable Undertakings, no person had irrevocably committed himself or intend to accept or reject the Offer;
(c) none of the Offeror and/or its associates and/or any of the parties acting in concert with them had entered into any arrangement (whether by way of option, indemnity or otherwise) of the kind referred to in Note 8 to Rule 22 of the Takeovers Code with any other persons;
(d) none of the Offeror, the Offeror’s directors or any of the parties acting in concert with them had borrowed or lent any Shares or any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in the Company;

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(e) save for the Irrevocable Undertakings, there was no agreement, arrangement or understanding (including any compensation arrangement) between the Offeror or any party acting in concert with it and any Directors, recent Directors, Shareholders or recent Shareholders having any connection with or dependence upon the Offer;
(f) there was no agreement or arrangement to which the Offeror is a party which relates to circumstances in which it may or may not invoke or seek to invoke a pre-condition or a condition to the Offer;
(g) there was no arrangement of the kind referred to in the third paragraph of Note 8 to Rule 22 of the Takeovers Code which exists between the Offeror, or any party acting in concert with it, and any other person;
(h) the Company did not have any beneficial interest in the shares, convertible securities, warrants, options and derivatives of the Offeror, and the Company had not dealt for value in any shares, convertible securities, warrants, options or derivatives of the Offeror during the Relevant Period;
(i) none of the Directors had any interests in any shares, convertible securities, warrants, options or other derivatives of the Offeror, and none of the Director had dealt for value in any shares, convertible securities, warrants, options or other derivatives of the Offeror during the Relevant Period;
(j) none of the Directors had dealt for value in any shares, convertible securities, warrants, options or other derivatives of the Company during the Relevant Period;
(k) none of (i) the subsidiaries of the Company; (ii) the pension fund of the Company or of a subsidiary of the Company; or (iii) any advisers to the Company (as specified in class (2) of the definition of “associate” under the Takeovers Code) had any interest in the Shares, convertible securities, warrants, options or derivatives of the Company and none of them had dealt in any Shares, convertible securities, warrants, options or derivatives of the Company during the Relevant Period;
(l) no person had any arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code with the Company or with any person who is an associate of the Company by virtue of classes (1), (2), (3) and (4) of the definition of “associate” under the Takeovers Code, and no such person had dealt in any Shares, convertible securities, warrants, options or derivatives of the Company during the Relevant Period;
(m) no Shares, convertible securities, warrants, options or derivatives issued by the Company were managed on a discretionary basis by any fund managers connected with the Company and none of them had dealt in any Shares, convertible securities, warrants, options or derivatives of the Company during the Relevant Period;
(n) no Shares or other securities of the Company carrying voting rights or convertible securities, warrants, options or derivatives of the Company had been borrowed or lent by any of the Directors or by the Company;

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GENERAL INFORMATION

APPENDIX III

(o) no benefit (other than statutory compensation) had been or would be given to any Director as compensation for loss of office in any members of the Group or otherwise in connection with the Offer;
(p) save for the Irrevocable Undertakings there was no agreement or arrangement between any Director and any other person which is conditional on or dependent upon the outcome of the Offer or otherwise connected with the Offer; and
(q) there was no material contract entered into by the Offeror in which any Director has a material personal interest.

6. DIRECTORS’ SERVICE CONTRACTS

Ms. Kelly Lee, the executive Director, entered into an appointment letter dated 1 October 2016 to renew her directorship in the Company for a term of twenty-seven (27) months from 1 October 2016 to 31 December 2018, with no fixed or variable remuneration, but that remuneration is determined on a discretionary basis by the Board with reference to the Director’s duties and responsibilities within the Group (including but not limited to running the business and implementing the Group’s strategic plans and business goals and monitoring on the Company’s performance to achieve agreed goals and objectives of the Company) and the Director’s performance. The terms of such re-appointment are identical with those of the appointment letter for the period from 1 October 2014 to 30 September 2016. Ms. Kelly Lee also entered into an employment contract dated 24 June 2013 with the Company, for no fixed term but which can be terminated by either party to the contract by serving not less than one (1) month’s written notice to the other party. Ms. Kelly Lee was promoted to become the Chief Executive Officer of the Company since 1 October 2014 and appointed as Deputy Chairman of the Company on 8 December 2014, for no fixed term. Effective from 1 January 2016, Ms. Kelly Lee’s monthly entitlements under the employment contract have been adjusted from HK$100,000 per month to HK$103,000 per month; while housing benefits remain the same at HK$50,000 per month since she held the position of Chief Executive Officer on 1 October 2014; and Ms. Kelly Lee was paid a discretionary bonus (determined based on Director’s performance as approved by the Board) of HK$200,000 for the fifteen months ended 31 December 2015 and will be paid a discretionary bonus of HK$206,000 for the year ended 31 December 2016.

Dato’ Choo Chuo Siong, the non-executive Director, entered into an appointment letter dated 1 October 2016 to renew his directorship in the Company for a term of twenty-seven (27) months from 1 October 2016 to 31 December 2018, with no fixed or variable remuneration, but that remuneration is determined on a discretionary basis by the Board with reference to the Director’s duties and responsibilities within the Group (including but not limited to providing leadership and strategic direction for the Board, chairing Board meetings and monitoring on the Company’s performance to achieve agreed goals and objectives of the Company) and the Director’s performance. The terms of such re-appointment are identical with those of the appointment letter for the period from 1 October 2014 to 30 September 2016. Dato’ Choo Chuo Siong was paid HK$250,000 for each of the twelve month period ended 30 September 2016 and for the previous twelve month period ended 30 September 2015, as determined by the Board.

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APPENDIX III

Mr. Sun Jih-Hui, the non-executive Director, entered into an appointment letter dated 1 October 2016 to renew his directorship in the Company for a term of twenty-seven (27) months from 1 October 2016 to 31 December 2018, with no fixed or variable remuneration, but that remuneration is determined on a discretionary basis by the Board with reference to the Director’s duties and responsibilities within the Group (including but not limited to participating in Board meetings and monitoring on the Company’s performance to achieve agreed goals and objectives of the Company) and the Director’s performance. The terms of such re-appointment are identical with those of the appointment letter for the period from 1 October 2014 to 30 September 2016. Mr. Sun Jih-Hui has waived his director’s fee with effect from 1 October 2014.

Dr. Wong Ho Ching, the independent non-executive Director, entered into an appointment letter dated 1 October 2016 to renew his directorship in the Company for a term of twenty-seven (27) months from 1 October 2016 to 31 December 2018, with no fixed or variable remuneration, but that remuneration is determined on a discretionary basis by the Board with reference to the Director’s duties and responsibilities within the Group (including but not limited to participating in Board meetings and serving as chairman on the nominating and corporate governance committee, serving as member on the audit and remuneration committees and monitoring on the Company’s performance to achieve agreed goals and objectives of the Company) and the Director’s performance. The terms of such re-appointment are identical with those of the appointment letter for the period from 1 October 2014 to 30 September 2016. Dr. Wong Ho Ching was paid HK$250,000 for each of the twelve month period ended 30 September 2016 and for the previous twelve month period ended 30 September 2015, as determined by the Board.

Mr. Lan Yen-Po, the independent non-executive Director, entered into an appointment letter dated 1 October 2016 to renew his directorship in the Company for a term of twenty-seven (27) months from 1 October 2016 to 31 December 2018, with no fixed or variable remuneration, but that remuneration is determined on a discretionary basis by the Board with reference to the Director’s duties and responsibilities within the Group (including but not limited to participating in Board meetings and serving as member on the audit committee, nominating and corporate governance committee and remuneration committee and monitoring on the Company’s performance to achieve agreed goals and objectives of the Company) and the Director’s performance. The terms of such re-appointment are identical with those of the appointment letter for the period from 1 October 2014 to 30 September 2016. Mr. Lan Yen-Po was paid HK$250,000 for each of the twelve month period ended 30 September 2016 and for the previous twelve month period ended 30 September 2015, as determined by the Board.

Ms. Hu Gin Ing, the independent non-executive Director, entered into an appointment letter dated 1 October 2016 to renew her directorship in the Company for a term of twenty-seven (27) months from 1 October 2016 to 31 December 2018, with no fixed or variable remuneration, but that remuneration is determined on a discretionary basis by the Board with reference to the Director’s duties and responsibilities within the Group (including but not limited to participating in Board meetings and serving as chairman on the audit and remuneration committees, serving as member to the nominating and corporate governance committees and monitoring on the Company’s performance to achieve agreed goals and objectives of the Company) and the Director’s performance. The terms of such re-appointment are identical with those of the appointment letter for the period from 1 October 2014 to 30 September 2016. Ms. Hu Gin Ing was paid HK$250,000 for each of the twelve month period ended 30 September 2016 and for the previous twelve month period ended 30 September 2015, as determined by the Board.

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APPENDIX III

As at the Latest Practicable Date, save as disclosed above, none of the Directors had any existing service contracts with any member of the Group or any associated company of the Group:

(a) which (including both continuous and fixed contracts) have been entered into or amended within the Relevant Period;
(b) which are continuous contracts with a notice period of 12 months or more; or
(c) which are fixed term contracts with more than 12 months to run irrespective of the notice period.

7. MATERIAL CONTRACTS

As at the Latest Practicable Date, the Group has not entered into any material contract (being a contract not entered into in the ordinary course of business carried on or intended to be carried on by the Group) within the two years immediately preceding the commencement of the Offer Period, and up to and including the Latest Practicable Date, which is or may be material.

8. LITIGATION

As at the Latest Practicable Date, neither the Company nor any other member of the Group was engaged in any litigation, arbitration or claim of material importance and no litigation, arbitration or claim of material importance were known to the Directors to be pending or threatened against any member of the Group.

9. EXPERTS’ QUALIFICATIONS AND CONSENTS

The followings are the qualification of the experts who have given opinions or advice contained in this Composite Document:

Name Qualification VMS Securities a corporation licensed to carry out business in type 1 (dealing in securities), type 4 (advising on securities), type 6 (advising on corporate finance) and type 9 (asset management) regulated activities under the SFO Veda Capital a corporation licensed to carry out business in type 6 (advising on corporate finance) regulated activity under the SFO KGI Capital Asia a corporation licensed to carry out business in type 1 (dealing in securities), type 4 (advising on securities) and type 6 (advising on corporate finance) regulated activities under the SFO

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Shining a corporation licensed to carry out business in type 4 (advising on securities), type 5 (advising on futures contracts), type 6 (advising on corporate finance) and type 9 (asset management) regulated activities under the SFO VBG Capital a corporation licensed to carry out business in type 1 (dealing in securities) and type 6 (advising on corporate finance) regulated activities under the SFO

Each of VMS Securities, Veda Capital, Shining, KGI Capital Asia, and VBG Capital has given and has not withdrawn its written consent to the issue of this Composite Document with the inclusion herein of its advice or report, as the case may be, and reference to its name in the form and context in which they are respectively included.

As at the Latest Practicable Date, each of VMS Securities, Veda Capital, Shining, KGI Capital Asia, and VBG Capital was not beneficially interested in the share capital of any member of the Group nor did they have any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

As at the Latest Practicable Date, none of VMS Securities, Veda Capital, Shining, KGI Capital Asia, and VBG Capital had any direct or indirect interest in any assets which have been acquired, disposed of by or leased to, or which were proposed to be acquired, disposed of by or leased to, any member of the Group since 31 December 2015 (the date to which the latest published audited financial statements of the Company were made up).

10. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection (i) on the website of the Company (www.upi.com.hk); (ii) on the website of the SFC (www.sfc.hk); and (iii) during normal business hours from 9 a.m. to 5 p.m. (other than Saturdays, Sundays and public holidays) at the head office and principal place of business of the Company at Unit 503C, 5/F, Golden Centre, 188 Des Voeux Road Central, Hong Kong from the date of this Composite Document up to and including the Closing Date or the date on which the Offer lapse or are withdrawn (whichever is earlier):

(i) the Bye-laws of the Company;
(ii) the memorandum and articles of association of the Offeror;
(iii) the annual report of the Company for the fifteen months ended 31 December 2015;
(iv) the annual report of the Company for the year ended 30 September 2014;
(v) the second interim report of the Company for the twelve months ended 30 September 2015;
(vi) the interim report of the Company for the six months ended 31 March 2015;
(vii) the interim report of the Company for the six months ended 30 June 2016;

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GENERAL INFORMATION

APPENDIX III

(viii) the letter from VMS Securities, the text of which is set out on pages 5 to 14 of this Composite Document;
(ix) the letter from the Board, the text of which is set out on pages 15 to 23 of this Composite Document;
(x) the letter from the Independent Board Committee to the Independent Shareholders, the text of which is set out on pages 24 to 25 of this Composite Document;
(xi) the letter of advice from VBG Capital to the Independent Board Committee and the Independent Shareholders, the text of which is set out on pages 26 to 41 of this Composite Document;
(xii) the written consents referred to under the paragraph headed “Experts’ Qualifications and Consents” of this Appendix III;
(xiii) the service contracts referred to in under the paragraph headed “Directors’ Service Contracts” in this Appendix III;
(xiv) the Best Service Irrevocable Undertaking; and
(xv) the Kingage International Irrevocable Undertaking.

11. MISCELLANEOUS

(i) The registered office of the Company is situated at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda and its head office and principal place of business in Hong Kong is situated at Unit 503C, 5/F, Golden Centre, 188 Des Voeux Road Central, Hong Kong.
(ii) The correspondence address of one of the directors of the Offeror, Ms. Yeung, is Flat 37H, 37/F., Block 1, No. 1 Tong Tak Street, Tseung Kwan O Plaza, Tseung Kwan O, New Territories, Hong Kong.
(iii) The correspondence address of one of the directors of the Offeror, Mr. Lee, is 2/F., On On Mansion, 125 Lockhart Road, Wanchai, Hong Kong.
(iv) The branch share registrar and transfer office of the Company in Hong Kong is Tricor Secretaries Limited, which is situated at Level 22, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong.
(v) The Offeror is an investment holding company and is owned as to 55% by Ms. Yeung and 45% by Mr. Lee.
(vi) The principal members of the Offeror’s concert group are the Offeror, Ms. Yeung and Mr. Lee.

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GENERAL INFORMATION

APPENDIX III

(vii) The registered office of the Offeror is situated at P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands. The correspondence address of the Offeror is situated at Unit 1201, 12/F, China Merchants Tower, Shun Tak Centre, 168-200 Connaught Road Central, Hong Kong.
(viii) The registered office of VMS Securities is situated at Suites 4112-4114, 41/F, Jardine House, 1 Connaught Place, Central, Hong Kong.
(ix) The registered office of Veda Capital is situated at Room 1106, 11/F, Wing On Centre, 111 Connaught Road Central, Hong Kong.
(x) The registered office of Shining is situated at Unit 1205, 12/F, China Merchants Tower, Shun Tak Centre, 168-200 Connaught Road Central, Hong Kong.
(xi) The registered office of VBG Capital is situated at 18/F, Prosperity Tower, 39 Queen’s Road Central, Hong Kong.

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

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AI assistant

Richly Field China Development Limited — M&A Activity 2016

49117_rns_2016-12-22_b422dd93-1785-4889-9345-f94a12fe9cc1.pdf

SUPER FAME HOLDINGS LIMITED

COMPOSITE DOCUMENT RELATING TO VOLUNTARY CONDITIONAL CASH OFFER BY VMS SECURITIES LIMITED FOR AND ON BEHALF OF SUPER FAME HOLDINGS LIMITED TO ACQUIRE ALL THE ISSUED SHARES OF UNITED PACIFIC INDUSTRIES LIMITED

Joint financial advisers to the Offeror

VMS Securities Limited

Financial adviser to the Company

Independent Financial Adviser to the Independent Board Committee of United Pacific Industries Limited

Accompanying document — Form of Acceptance

EXPECTED TIMETABLE

EXPECTED TIMETABLE

DEFINITIONS

DEFINITIONS

DEFINITIONS

VMS Securities Limited

VOLUNTARY CONDITIONAL CASH OFFER BY VMS SECURITIES LIMITED FOR AND ON BEHALF OF SUPER FAME HOLDINGS LIMITED TO ACQUIRE ALL THE ISSUED SHARES OF UNITED PACIFIC INDUSTRIES LIMITED

INTRODUCTION

THE OFFER

The Offer

The Offer Price

Highest and Lowest Share Prices

Value of the Offer

Confirmation of financial resources

Conditions to the Offer

Overseas Independent Shareholders

Stamp Duty

IRREVOCABLE UNDERTAKINGS

INFORMATION OF THE OFFEROR

INFORMATION ON THE GROUP

Principal activities

INTENTIONS OF THE OFFEROR IN RELATION TO THE GROUP

Reasons for the Offer

LETTER FROM VMS SECURITIES

Proposed Change to the Board Composition of the Company

Maintaining the Listing Status of the Company

ACCEPTANCE OF THE OFFER

Procedures for acceptance

Settlement of the Offer

Nominee registration

Taxation advice

COMPULSORY ACQUISITION

GENERAL

ADDITIONAL INFORMATION

(Stock Code: 176)

VOLUNTARY CONDITIONAL CASH OFFER BY

VMS SECURITIES LIMITED FOR AND ON BEHALF OF SUPER FAME HOLDINGS LIMITED TO ACQUIRE ALL THE ISSUED SHARES OF UNITED PACIFIC INDUSTRIES LIMITED

INTRODUCTION

LETTER FROM THE BOARD

INDEPENDENT BOARD COMMITTEE AND INDEPENDENT FINANCIAL ADVISER

THE OFFER

Comparison of value

Highest and Lowest Share Prices

Conditions to the Offer

IRREVOCABLE UNDERTAKINGS

INFORMATION ON THE GROUP

Principal activities

Financial Information

Shareholding structure of the Company

INTENTIONS OF THE OFFEROR IN RELATION TO THE GROUP

Proposed change to the Board composition of the Company

Maintaining the Listing Status of the Company

COMPULSORY ACQUISITION

RECOMMENDATION

ADDITIONAL INFORMATION

(Stock Code: 176)

VOLUNTARY CONDITIONAL CASH OFFER BY VMS SECURITIES LIMITED FOR AND ON BEHALF OF SUPER FAME HOLDINGS LIMITED TO ACQUIRE ALL THE ISSUED SHARES OF UNITED PACIFIC INDUSTRIES LIMITED

RECOMMENDATIONS

Yours faithfully, For and on behalf of the

Independent Board Committee

VBG Capital Limited

VOLUNTARY CONDITIONAL CASH OFFER BY VMS SECURITIES LIMITED ON BEHALF OF SUPER FAME HOLDINGS LIMITED TO ACQUIRE ALL THE ISSUED SHARES OF UNITED PACIFIC INDUSTRIES LIMITED

INTRODUCTION

THE INDEPENDENT BOARD COMMITTEE

OUR INDEPENDENCE

BASIS AND ASSUMPTIONS OF OUR OPINION

PRINCIPAL TERMS OF THE OFFER

CONDITIONS TO THE OFFER

PRINCIPAL FACTORS AND REASONS CONSIDERED

1. Information on the Group

Richly Field China Development Limited M&A Activity 2016