Weichai Power Co., Ltd. - M&A Activity 2013

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect about this Composite Offer Document or as to the action to be taken, you should consult your licensed securities dealer or registered institution in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares and/or bonus warrants in V.S. International Group Limited, you should at once hand this Composite Offer Document, together with the accompanying Form of Acceptance and/or Form of Warrant Offer 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).

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

Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsibility for the contents of this Composite Offer Document, 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 Offer Document.

==> picture [127 x 53] intentionally omitted <==

V.S. INDUSTRY BERHAD

(Company No: 88160-P)

(incorporated in Malaysia with limited liability)

V.S. INTERNATIONAL GROUP LIMITED 威鋮國際集團有限公司

(incorporated in the Cayman Islands with limited liability) (stock code: 1002)

VOLUNTARY UNCONDITIONAL PARTIAL CASH OFFER BY KIM ENG SECURITIES (HONG KONG) LIMITED ON BEHALF OF V.S. INDUSTRY BERHAD TO ACQUIRE UP TO 224,890,025 OFFER SHARES IN THE ORDINARY SHARE CAPITAL OF V.S. INTERNATIONAL GROUP LIMITED FROM QUALIFYING SHAREHOLDERS AND OPTION OFFER AND WARRANT OFFER TO QUALIFYING OPTIONHOLDERS AND QUALIFYING WARRANTHOLDERS TO ACQUIRE UP TO 250,731 OUTSTANDING SHARE OPTIONS AND 17,738,083 OUTSTANDING BONUS WARRANTS

Financial adviser to the Offeror

Independent financial adviser to the Independent Board Committee

A letter from the Board is set out on pages 7 to 22 of this Composite Offer Document.

A letter from Kim Eng containing, among other things, details of the terms of the Partial Offer, the Option Offer and the Warrant Offer is set out on pages 23 to 35 of this Composite Offer Document.

A letter from the Independent Board Committee to the Qualifying Shareholders, the Qualifying Optionholders and the Qualifying Warrantholders containing its recommendations in respect of the Partial Offer, the Option Offer and the Warrant Offer is set out on pages 36 and 37 of this Composite Offer Document.

A letter from Somerley containing its advice to the Independent Board Committee in respect of the Partial Offer, the Option Offer and the Warrant Offer is set out on pages 38 to 71 of this Composite Offer Document.

The procedures for acceptance and other related information are set out in Appendix I to this Composite Offer Document and in the accompanying Form of Acceptance, Form of Option Offer Acceptance and/or Form of Warrant Offer Acceptance (as the case may be). Acceptances should be received by the Computershare at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong by no later than 4:00 p.m. on Friday, 28 June 2013, being the Closing Date.

Custodians, nominees and trustees who would, or otherwise intend to, forward this Composite Offer Document and/or the accompanying Form of Acceptance, Form of Option Offer Acceptance and/or Form of Warrant Offer Acceptance (as the case may be) to any jurisdiction outside Hong Kong should read carefully the paragraph headed “Overseas Shareholders, Overseas Optionholders and Overseas Warrantholders” in the Letter from Kim Eng and in Appendix I to this Composite Offer Document.

7 June 2013

	Page
Expected timetable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	ii
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Letter from Kim Eng . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	23
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . .	36
Letter from Somerley . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	38
Appendix I – Further terms of the Partial Offer, the Option Offer and
the Warrant Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-1
Appendix II – Financial information of the Group . . . . . . . . . . . . . . . . . . . . . .	II-1
Appendix III – Property valuation report of the Group . . . . . . . . . . . . . . . . . . .	III-1
Appendix IV – General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	IV-1
Appendix V – Financial information of the Offeror. . . . . . . . . . . . . . . . . . . . . .	V-1

– i –

EXPECTED TIMETABLE

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

Partial Offer, Option Offer and Warrant Offer open

for acceptance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Friday, 7 June 2013
Latest time for acceptance of the Partial Offer, the Option Offer and the Warrant Offer on the Closing Date (Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4:00 p.m. on Friday, 28 June 2013
Closing Date (Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Friday, 28 June 2013
Announcement on the results of the Partial Offer,
the Option Offer and the Warrant Offer as at the Closing Date to be posted on the website of the Stock Exchange (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . no later than 7:00 p.m. on Friday, 28 June 2013
Latest date for posting of remittances for
amounts due under the Partial Offer,
the Option Offer and the Warrant Offer in respect of valid acceptances received on or before 4:00 p.m. on Wednesday, 10 July 2013 and taken up by the Offeror (Note 3) . . . . . . . . . . . . . . . . . . . Wednesday, 10 July 2013

Notes:

In order to accept the Partial Offer, the Option Offer and the Warrant Offer, Qualifying Shareholders, Qualifying Optionholders and Qualifying Warrantholders are required to submit the duly completed Form of Acceptance, Form of Option Offer Acceptance and/or Form of Warrant Offer Acceptance (as the case may be) to Computershare on or before 4:00 p.m. on Friday, 28 June 2013, being the Closing Date. The Offer Period will not be extended.
The announcement on the results of the Partial Offer, the Option Offer and the Warrant Offer will be jointly issued by the Offeror and the Company and posted on the Stock Exchange’s website by 7:00 p.m. on the Closing Date. Such announcement will comply with the disclosure requirements under Rule 19.1 and Note 7 to Rule 19 of the Takeovers Code and will include, amongst other things, the results of the Partial Offer, the Option Offer and the Warrant Offer and details of the way in which each Accepting Shareholder’s, Accepting Optionholder’s, Accepting Warrantholder’s pro rata entitlement was determined.
Remittances in respect of the Offer Shares and Bonus Warrants tendered for acceptance and taken up by the Offeror under the Partial Offer and the Warrant Offer (after deducting seller’s ad valorem stamp duty), and remittances in respect of the Share Options tendered and taken up by the Offeror for cancellation under the Option Offer will be posted to the relevant Accepting Shareholders, Accepting Optionholders and Accepting Warrantholders, respectively by ordinary post at their own risk as soon as possible, but in any event within seven Business Days following the Closing Date.

All references to times and dates in this Composite Offer Document, and Form of Acceptance, Form of Option Offer Acceptance and Form of Warrant Offer Acceptance refer to Hong Kong times and dates.

– ii –

DEFINITIONS

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

“Accepting Shareholder(s)” Qualifying Shareholder(s) accepting the Partial Offer
“Accepting Optionholder(s)” Qualifying Optionholder(s) accepting the Option Offer
“Accepting Warrantholder(s)” Qualifying Warrantholder(s) accepting the Warrant Offer
“acting in concert” has the meaning ascribed to it under the Takeovers Code
“associate(s)” has the meaning ascribed to it under the Takeovers Code
“Board” the board of Directors
“Bonus Warrant(s)” bonus warrant(s) granted by the Company in connection with its rights issue completed on 16 March 2011 according to the prospectus of the Company dated 18 February 2011, entitling the Warrantholder(s) to subscribe for new Share(s)

“Business Day” a day (other than Saturdays, Sundays and public holidays) on which banks are open for business in Hong Kong

“CCASS”
the Central Clearing and Settlement System established and operated by Hong Kong Securities Clearing Company Limited
“Closing Date” the closing date of the Partial Offer, the Option Offer and the Warrant Offer as set out in the section headed “Expected timetable” in this Composite Offer Document
“Company”

V.S. International Group Limited, a company incorporated in the Cayman Islands with limited liability, the Shares of which are listed on the Main Board of the Stock Exchange

“Composite Offer Document”
this composite offer document in respect of the Partial Offer, the Option Offer and the Warrant Offer jointly issued by the Offeror and the Company in accordance with the Takeovers Code

– 1 –

DEFINITIONS

“Computershare” or “Share Computershare Hong Kong Investor Services Limited, Registrar” or “Warrant being the Hong Kong branch share registrar and Registrar” warrant registrar and transfer office of the Company, whose address is situated at Shops 1712-1716, 17/F, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong
“Director(s)” the director(s) of the Company “Executive” the Executive Director of the Corporate Finance Division of the SFC or any delegate of the Executive Director
“Form of Acceptance” the form of acceptance and transfer in respect of the Partial Offer accompanying this Composite Offer Document
“Form of Option Offer the form of acceptance in respect of the Option Offer Acceptance” accompanying this Composite Offer Document
“Form of Warrant Offer the form of acceptance in respect of the Warrant Offer Acceptance” accompanying this Composite Offer Document
“Group” the Company and its subsidiaries from time to time
“HK$” Hong Kong dollar(s), the lawful currency of Hong Kong
“Hong Kong” the Hong Kong Special Administrative Region of the PRC
“Independent Board Committee”
an independent committee of the Board, comprising Mr. Diong Tai Pew and Mr. Lee Soo Gee, being the independent non-executive Directors who have no direct or indirect interest in the Partial Offer, the Option Offer and the Warrant Offer (other than as a Director who is also a Shareholder), which has been established by the Company to advise the Qualifying Shareholders, the Qualifying Optionholders and the Qualifying Warrantholders in respect of the Partial Offer, the Option Offer and the Warrant Offer according the Rule 2.8 of the Takeovers Code
“Initial Announcement”
the joint announcement issued by the Offeror and the Company in relation to, among others, the making of the Partial Offer, the Option Offer and the Warrant Offer on 3 April 2013

– 2 –

DEFINITIONS

“Kim Eng”

Kim Eng Securities (Hong Kong) Limited, a licensed corporation holding a licence under the SFO to conduct Type 1 (dealing in securities), Type 4 (advising on securities) and Type 6 (advising on corporate finance) regulated activities, which is the financial adviser to the Offeror in respect of the Partial Offer, the Option Offer and the Warrant Offer

“Land” a land comprising an area of approximately 300,000 sq.m. owned by V.S. Technology Industry Park (Zhuhai) Co., Ltd, a wholly-owned subsidiary of the Company
“Last Trading Day” 26 March 2013, being the last full trading day of the Shares on the Stock Exchange prior to suspension of trading in the Shares with effect from 9:00 a.m. on 27 March 2013, pending the issue of the Initial Announcement
“Latest Practicable Date” 4 June 2013, being the latest practicable date prior to the despatch of this Composite Offer Document for the purpose of ascertaining certain information contained herein
“Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange
“Macau”
the Macau Special Administrative Region of the PRC
“Offer Period”
has the meaning ascribed to it under the Takeovers Code and commencing from 3 April 2013, being the date of the Initial Announcement
“Offer Price” HK$0.355 per Offer Share
“Offer Share(s)”
the Share(s) which are the subject of the Partial Offer, being 224,890,025 Shares
“Offeror”
V.S. Industry Berhad, a company incorporated in Malaysia with limited liability, the shares of which are listed on the Main Market of Bursa Malaysia Securities Berhad

– 3 –

DEFINITIONS

“Option Offer” the offer made by the Offeror to the Qualifying Optionholders to acquire up to 250,731 outstanding Share Options (representing approximately 39.23% of the Share Options then held by the Qualifying Optionholders as at the date of the Initial Announcement) pursuant to Rule 13.1 of the Takeovers Code
“Optionholder(s)” holder(s) of the Share Option(s)
“Overseas Optionholder(s)” Qualifying Optionholder(s) whose address(es) is/are outside Hong Kong according to the information on the letter of grant of the Share Option(s)
“Overseas Shareholder(s)” Qualifying Shareholder(s) whose address(es) as stated in the Register is/are outside Hong Kong
“Overseas Warrantholder(s)” Qualifying Warrantholder(s) whose address(es) as stated in the register of holders of Bonus Warrants is/are outside Hong Kong
“Partial Offer” the voluntary unconditional partial cash offer to be made by Kim Eng for and on behalf of the Offeror to acquire up to 224,890,025 Offer Shares at the Offer Price in cash from the Qualifying Shareholders in accordance with the Takeovers Code on the basis to be set out in this Composite Offer Document and accompanying Form of Acceptance, and any subsequent revision of such offer
“PRC” the People’s Republic of China (which, for the purposes of this Composite Offer Document excludes Hong Kong, Macau and Taiwan)
“Public”
holders of the Shares, Options and/or Bonus Warrants, other than (a) the Offeror and parties acting in concert with it; and (b) the Directors
“Public Shareholders”
Shareholders, other than (a) the Offeror and parties acting in concert with it; and (b) the Directors
“Qualifying Optionholder(s)” Optionholder(s), other than the Offeror and parties acting in concert with it
“Qualifying Shareholder(s)” Shareholder(s), other than the Offeror and parties acting in concert with it

– 4 –

DEFINITIONS

“Qualifying Warrantholder(s)” Warrantholder(s), other than the Offeror and parties acting in concert with it “Register” the register of members of the Company “Relevant Period” the period commencing on 3 October 2012 (being the date falling six months prior to 3 April 2013, the commencement date of the Offer Period) and up to the Latest Practicable Date “RM” Malaysian Ringgit, the lawful currency of Malaysia “RMB” Renminbi, the lawful currency of the PRC “SFC” the Securities and Futures Commission of Hong Kong “SFO” Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “Share(s)” ordinary share(s) of HK$0.05 each in the share capital of the Company “Shareholder(s)” the holder(s) of the Share(s) “Share Option(s)” share option(s) granted by the Company pursuant to the share option schemes adopted on 20 January 2002 and 21 September 2012, entitling the Optionholder(s) to subscribe for new Share(s) “Share Option Scheme(s)” the share option schemes adopted by the Company on 20 January 2002 and 21 September 2012 “Somerley” Somerley Limited, a licensed corporation under the SFO to conduct Type 1 (dealing in securities), Type 4 (advising on securities), Type 6 (advising on corporate finance) and Type 9 (asset management) regulated activities, which is the independent financial adviser to the Independent Board Committee in respect of the Partial Offer, the Option Offer and the Warrant Offer

“sq.m.” square metres

“Stock Exchange” The Stock Exchange of Hong Kong Limited
“Substantial Shareholder(s)”

Shareholders who have an interest representing 5% or more of the issued share capital of the Company, in accordance with Part XV of the SFO

– 5 –

DEFINITIONS

“Takeovers Code” the Hong Kong Code on Takeovers and Mergers “Warrantholder(s)” holder(s) of the Bonus Warrant(s) “Warrant Offer” the offer made by the Offeror to the Qualifying Warrantholders to acquire up to 17,738,083 outstanding Bonus Warrants (representing approximately 39.23% of the Bonus Warrants then held by the Qualifying Warrantholders as at the date of the Initial Announcement) pursuant to Rule 13.1 of the Takeovers Code “%” per cent.

In the event of inconsistency, the English text of this Composite Offer Document shall prevail over the Chinese text.

– 6 –

LETTER FROM THE BOARD

V.S. INTERNATIONAL GROUP LIMITED 威鋮國際集團有限公司

(incorporated in the Cayman Islands with limited liability)

(stock code: 1002)

Executive Directors: Mr. Beh Kim Ling Mr. Gan Sem Yam Madam Gan Chu Cheng Mr. Zhang Pei Yu

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

Independent non-executive Directors:

Mr. Diong Tai Pew Mr. Lee Soo Gee Mr. Tang Sim Cheow Non-executive Director: Mr. Gan Tiong Sia

Head office and principal place of business in Hong Kong: 40th Floor Jardine House 1 Connaught Place Hong Kong 7 June 2013

To the Qualifying Shareholders, the Qualifying Optionholders and the Qualifying Warrantholders

Dear Sir or Madam,

VOLUNTARY UNCONDITIONAL PARTIAL CASH OFFER

BY KIM ENG SECURITIES (HONG KONG) LIMITED

ON BEHALF OF V.S. INDUSTRY BERHAD

TO ACQUIRE UP TO 224,890,025 OFFER SHARES IN THE ORDINARY SHARE CAPITAL OF V.S. INTERNATIONAL GROUP LIMITED FROM QUALIFYING SHAREHOLDERS AND OPTION OFFER AND WARRANT OFFER TO QUALIFYING OPTIONHOLDERS AND QUALIFYING WARRANTHOLDERS TO ACQUIRE UP TO 250,731 OUTSTANDING SHARE OPTIONS AND 17,738,083 OUTSTANDING BONUS WARRANTS

INTRODUCTION

– 7 –

LETTER FROM THE BOARD

would extend an appropriate offer to the Qualifying Optionholders and the Qualifying Warrantholders to acquire up to 250,731 outstanding Share Options and 17,738,083 outstanding Bonus Warrants pursuant to Rule 13.1 of the Takeovers Code.

As at the Latest Practicable Date, the total number of issued Shares was 1,307,728,929 Shares and there were outstanding Share Options and Bonus Warrants, entitling the Optionholders and the Warrantholders to subscribe for a total of 33,234,772 and 138,391,996 new Shares, respectively (representing approximately 2.54% and 10.58%, respectively of the issued share capital of the Company as at the Latest Practicable Date). As at the Latest Practicable Date, the Qualifying Shareholders held 574,928,149 Shares, while the Qualifying Optionholders and the Qualifying Warrantholders were entitled to subscribe for a total of 639,130 and 43,515,607 new Shares, respectively under the outstanding Share Options and the outstanding Bonus Warrants.

The Independent Board Committee, comprising Mr. Diong Tai Pew and Mr. Lee Soo Gee, has been formed to advise the Qualifying Shareholders, the Qualifying Optionholders and the Qualifying Warrantholders in respect of the Partial Offer, the Option Offer and the Warrant Offer and Somerley has been appointed as the independent financial adviser to advise the Independent Board Committee in respect of the Partial Offer, the Option Offer and the Warrant Offer. The appointment of Somerley has been approved by the Independent Board Committee.

The purpose of this Composite Offer Document, of which this letter forms a part, is to provide you with, among other things, (i) the information relating to the Group, the Partial Offer, the Option Offer and the Warrant Offer; (ii) the Letter from Kim Eng containing details of the Partial Offer, the Option Offer and the Warrant Offer; (iii) the Letter from the Independent Board Committee containing its recommendation and advice to the Qualifying Shareholders, the Qualifying Optionholders and the Qualifying Warrantholders in respect of the Partial Offer, the Option Offer and the Warrant Offer; and (iv) the Letter from Somerley containing its advice to the Independent Board Committee in respect of the Partial Offer, the Option Offer and the Warrant Offer.

TERMS OF THE PARTIAL OFFER, THE OPTION OFFER AND THE WARRANT OFFER

The Partial Offer is not subject to any condition. As the Offeror and the parties acting in concert with it altogether held 732,800,780 Shares, representing approximately 56.04% of the existing issued share capital in the Company as at the Latest Practicable Date, which was more than 50% of the voting rights of the Company, the Partial Offer is not conditional upon (i) acceptance being received in respect of a specified number of Offer Shares; and (ii) approval of the Partial Offer by the Qualifying Shareholders who are recognised as Shareholders in the Register holding over 50% of the Shares not held by the Offeror and persons acting in concert with it, signified by means of a separate box on the form of acceptance, specifying the number of Offer Shares in respect of which the Partial Offer is approved.

The Option Offer and the Warrant Offer are not subject to any condition.

– 8 –

LETTER FROM THE BOARD

Kim Eng, on behalf of the Offeror, is making the Partial Offer to acquire up to 224,890,025 Offer Shares, the Option Offer to acquire and cancel up to 250,731 Share Options and the Warrant Offer to acquire up to 17,738,083 Bonus Warrants on the following basis:

(a) Offer Price

For each Offer Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . HK$0.355 For each Share Option/Bonus Warrant . . . . HK$0.355 less the exercise price in respect of the relevant Share Option[(1)] /Bonus Warrant[(2)]

Notes:

(1) The offer price per Share Option under the Option Offer is illustrated in the following table:

Date of grant Period during which Share Options outstanding are exercisable Exercise price per Share Option (HK$) 3 February 2010 1 August 2010 to 31 July 2013 0.169 3 February 2010 1 August 2011 to 31 July 2013 0.169 3 February 2010 1 August 2012 to 31 July 2013 0.169 Total	Number of new Shares to be issued upon exercise of outstanding Share Options by all Optionholders as at the Latest Practicable Date Offer price per Share Option (HK$) 9,970,431 0.186 9,970,431 0.186 13,293,910 0.186 33,234,772

(2) The offer price per Bonus Warrant under the Warrant Offer is illustrated in the following table:

			Number of new
			Shares to be
			issued upon
			exercise
			of outstanding
	Period during		Bonus Warrants
	which Bonus	Exercise	by all
	Warrants	price per	Warrrantholders	Offer price
	outstanding are	Bonus	as at the Latest	per Bonus
Date of grant	exercisable	Warrant	Practicable Date	Warrant
		(HK$)		(HK$)
14 March 2011	16 March 2011 to	0.12	138,391,996	0.235
	15 March 2014

– 9 –

LETTER FROM THE BOARD

(b) Other terms

Partial Offer

Pursuant to the Partial Offer, the Offeror would acquire up to 224,890,025 Shares, which represent:

approximately 39.23% of the issued share capital of the Company held by the Qualifying Shareholders as at the date of the Initial Announcement; and
approximately 17.20% of the issued share capital of the Company as at the Latest Practicable Date.

Qualifying Shareholders may accept the Partial Offer in respect of some or all of the Offer Shares held by them. If valid acceptances are received for no more than 224,890,025 Offer Shares, all Offer Shares validly accepted will be taken up. If valid acceptances are received for more than 224,890,025 Offer Shares, the total number of Offer Shares to be taken up by the Offeror from each Qualifying Shareholder will be determined by the total number of Offer Shares tendered for acceptance in accordance with the following formula:

A × C B

A: 224,890,025 Offer Shares (being the total number of Offer Shares for which the Partial Offer is made)
B: the total number of Offer Shares tendered by all Qualifying Shareholders under the Partial Offer
C: the number of Offer Shares tendered by the relevant individual Qualifying Shareholder under the Partial Offer

As a result, it is possible that if a Qualifying Shareholder tenders all his/her Offer Shares to the Offeror under the Partial Offer, not all of such Offer Shares will be taken up. Fractions of Offer Shares will not be taken up under the Partial Offer and, accordingly, the number of Offer Shares that the Offeror will take up from each Qualifying Shareholder in accordance with the above formula will be rounded up or down to the nearest whole number at the discretion of the Offeror.

The Qualifying Shareholders are required to specify the number of Shares they would like to sell in the accompany Form of Acceptance.

– 10 –

LETTER FROM THE BOARD

Option Offer and Warrant Offer

Pursuant to the Option Offer, the Offeror would acquire up to 250,731 outstanding Share Options and 17,738,083 outstanding Bonus Warrants, which represent:

approximately 39.23% of the issued Share Options and Bonus Warrants held by the Qualifying Optionsholders and the Qualifying Warrantholders (as the case may be) as at the date of the Initial Announcement;
as to the Option Offer, approximately 0.75% of the outstanding Share Options as at the Latest Practicable Date; and
as to the Warrant Offer, approximately 12.82% of the outstanding Bonus Warrant as at the Latest Practicable Date.

Qualifying Optionholders and Qualifying Warrantholders may accept the Option Offer and the Warrant Offer in respect of some or all of the Share Options and the Bonus Warrants held by them. If valid acceptances are received for no more than 250,731 Share Options and 17,738,083 Bonus Warrants, all Share Options and Bonus Warrants validly accepted will be taken up. If valid acceptances are received for more than 250,731 Share Options and 17,738,083 Bonus Warrants, the total number of Share Options and Bonus Warrants to be taken up by the Offeror from each Qualifying Optionholder and each Qualifying Warrantholder (as the case may be) will be determined by the total number of Share Options and Bonus Warrants tendered for acceptance in accordance with the following formula:

X × Z Y

X: 250,731 Share Options or 17,738,083 Bonus Warrants held by the Qualifying Optionholders or the Qualifying Warrantholders (as the case may be)
Y: the total number of Share Options or Bonus Warrants tendered by all Qualifying Optionholders or Qualifying Warrantholders (as the case may be) under the Option Offer or the Warrant Offer
Z: the number of Share Options or Bonus Warrants tendered by the relevant individual Qualifying Optionholder or Qualifying Warrantholder (as the case may be) under the Option Offer or the Warrant Offer

– 11 –

LETTER FROM THE BOARD

will not be taken up under the Option Offer or the Warrant Offer and, accordingly, the number of Share Options or Bonus Warrants that the Offeror will take up from each Qualifying Optionholder or Qualifying Warrantholder (as the case may be) in accordance with the above formula will be rounded up or down to the nearest whole number at the discretion of the Offeror. Share Options and Bonus Warrants that are not tendered for acceptance under the Option Offer and the Warrant Offer will not be deemed to have lapsed as a result of the closing of the Partial Offer, the Option Offer and the Warrant Offer.

The Qualifying Optionholders are required to specify the number of Share Options they would like to sell in the accompanying Form of Option Offer Acceptance.

The Qualifying Warrantholders are required to specify the number of Bonus Warrants they would like to sell in the accompanying Form of Warrant Offer Acceptance.

The full terms and conditions of the Partial Offer, the Option Offer and the Warrant Offer are set out in Appendix I to this Composite Offer Document and the accompanying Form of Acceptance, Form of Option Offer Acceptance and Form of Warrant Offer Acceptance. The Partial Offer, the Option Offer and the Warrant Offer are made in compliance with the Takeovers Code.

EFFECT OF ACCEPTING THE PARTIAL OFFER, THE OPTION OFFER AND THE WARRANT OFFER

By validly accepting the Partial Offer, Qualifying Shareholders will sell their tendered Offer Shares which are finally taken up by the Offeror in accordance with the above formula (if applicable) to the Offeror free from all encumbrances and together with all rights and benefits at any time accruing thereto including all rights to any dividend or other distributions declared, made or paid on or after the Closing Date. Any dividends or other distributions declared, made or paid before the Closing Date will be paid by the Company to the Shareholders who are qualified for such dividends or distributions.

By validly accepting the Option Offer, Qualifying Optionholders will sell their tendered Share Options which are finally taken up by the Offeror in accordance with the above formula (if applicable) to the Offeror and the tendered and finally taken up Share Options will be cancelled on the Closing Date.

By validly accepting the Warrant Offer, Qualifying Warrantholders will sell their tendered Bonus Warrants which are finally taken up by the Offeror in accordance with the above formula (if applicable) to the Offeror and the Offeror is entitled to exercise the tendered and finally taken up Bonus Warrants on or after the Closing Date.

– 12 –

LETTER FROM THE BOARD

VALUE OF THE PARTIAL OFFER

The Offer Price of HK$0.355 represents:

(i) a premium of approximately 14.52% over the closing price of HK$0.310 per Share as quoted on the Stock Exchange on the Latest Practicable Date;
(ii) a premium of approximately 7.58% over the closing price of HK$0.330 per Share as quoted on the Stock Exchange on the Last Trading Day;
(iii) a premium of approximately 12.70% over the average closing price of HK$0.315 per Share as quoted on the Stock Exchange for the last five consecutive trading days up to and including the Last Trading Day;
(iv) a premium of approximately 17.55% over the average closing price of approximately HK$0.302 per Share as quoted on the Stock Exchange for the last 10 consecutive trading days up to and including the Last Trading Day;
(v) a premium of approximately 24.56% over the average closing price of approximately HK$0.285 per Share as quoted on the Stock Exchange for the last 30 consecutive trading days up to and including the Last Trading Day;
(vi) a premium of approximately 46.09% over the average closing price of approximately HK$0.243 per Share as quoted on the Stock Exchange for the last 90 consecutive trading days up to and including the Last Trading Day;
(vii) a premium of approximately 76.62% over the average closing price of approximately HK$0.201 per Share as quoted on the Stock Exchange for the last 180 consecutive trading days up to and including the Last Trading Day; and
(viii) a premium of approximately 4.41% over the unaudited consolidated net asset value of the Group attributable to the Shareholders of approximately HK$0.34 per Share as at 31 January 2013.

The Partial Offer for 224,890,025 Offer Shares is being valued at approximately HK$79,836,000 based on the Offer Price of HK$0.355 per Offer Share. On the basis of the Offer Price of HK$0.355 per Offer Share, the entire issued share capital of the Company is valued at approximately HK$464,243,770.

As at the Latest Practicable Date, the Company had 1,307,728,929 Shares in issue.

HIGHEST AND LOWEST CLOSING PRICES OF THE SHARES

The highest and lowest closing prices of the Shares as quoted on the Stock Exchange during the Relevant Period, were HK$0.335 per Share on 24 April 2013 and HK$0.155 per Share on 3 October 2012.

– 13 –

LETTER FROM THE BOARD

STAMP DUTY

Seller’s ad valorem stamp duty at the rate of HK$1.00 for every HK$1,000 (or part thereof) of the market value of the tendered Offer Shares and Bonus Warrants finally taken up by the Offeror or the value of the consideration arising on acceptance of the Partial Offer and the Warrant Offer whichever is the higher, will be payable by the Qualifying Shareholders and the Qualifying Warrantholders who accept the Partial Offer and the Warrant Offer (as the case may be). The relevant amount of stamp duty payable by the Qualifying Shareholders and the Qualifying Warrantholders will be deducted from the consideration payable to the Qualifying Shareholders and the Qualifying Warrantholders under the Partial Offer and the Warrant Offer (as the case may be).

The Offeror will bear its own portion of buyer’s ad valorem stamp duty at the rate of HK$1.00 for every HK$1,000 (or part thereof) of the consideration payable in respect of relevant acceptances of the Partial Offer and the Warrant Offer and will be responsible to account to the Stamp Office of Hong Kong for all the stamp duty payable for sale and purchase of the Offer Shares and the Bonus Warrants which are validly tendered for acceptance and finally taken up by the Offeror under the Partial Offer and the Warrant Offer.

ODD LOTS

The Shares and Bonus Warrants are currently traded in board lots of 4,000 Shares and 20,000 Bonus Warrants each respectively. Such board lot size will not be changed as a result of the implementation of the Partial Offer and the Warrant Offer.

An Accepting Shareholder and/or Accepting Warrantholder may, as a result of accepting the Partial Offer and the Warrant Offer (as the case may be), hold odd lots of the Shares and/or Bonus Warrant.

For this purpose, Kim Eng Securities (Hong Kong) Limited, whose address is at Level 30, Three Pacific Place, 1 Queen’s Road East, Hong Kong (Contact person: Ms. Rose Mak/ Ms. Marian Lam; telephone number: (852) 2268 0395 / 2268 0398 during office hours) has been appointed by the Offeror as the designated broker to match sales and purchases of odd lot holdings of Shares and Bonus Warrants in the market, on a best effort basis, for a period of six weeks from the Closing Date to enable Accepting Shareholders and Accepting Warrantholders to dispose of their odd lots or to top up their odd lots to whole board lots of 4,000 Shares and/or 20,000 Bonus Warrants (as the case may be). Shareholders and Warrantholders should note that the matching of odd lots is not guaranteed.

An Accepting Optionholder may, as a result of accepting the Option Offer, hold Share Options entitling him/her to subscribe for odd lots of the Shares. Pursuant to the terms of the Share Option Scheme, Share Options are not transferable and no matching sales or purchases of the resultant odd lot holdings of the Share Options will be arranged.

– 14 –

LETTER FROM THE BOARD

PAYMENT

Pursuant to Rule 20.1(b) of the Takeovers Code, payment in cash in respect of acceptance of the Partial Offer, the Option Offer and the Warrant Offer will be made as soon as possible but in any event within 7 Business Days following the Closing Date.

TOTAL CONSIDERATION FOR THE PARTIAL OFFER, THE OPTION OFFER AND THE WARRANT OFFER AND FINANCIAL RESOURCES OF THE OFFEROR

Assuming full acceptance of the Partial Offer, the cash consideration payable by the Offeror at the Offer Price of HK$0.355 per Offer Share will amount to not more than HK$79,836,000. Assuming full acceptance of the Option Offer and the Warrant Offer by the Qualifying Optionholders and the Qualifying Warrantholders, the aggregate cash consideration payable by the Offeror for the Option Offer and the Warrant Offer will not exceed HK$4,216,000 in any event. Assuming full acceptance of the Partial Offer, the Option Offer and the Warrant Offer, the total cash consideration payable by the Offeror for the Partial Offer, the Option Offer and the Warrant Offer will amount to no more than HK$84,052,000.

The Offeror would settle the payment of consideration pursuant to the Partial Offer, the Option Offer and the Warrant Offer by loans from Malayan Banking Berhad and internal funding of the Offeror. Kim Eng, the financial adviser to the Offeror in relation to the Partial Offer, the Option Offer and the Warrant Offer, is satisfied that resources are available to the Offeror to satisfy full acceptance of the Partial Offer, the Option Offer and the Warrant Offer.

OVERSEAS SHAREHOLDERS, OVERSEAS OPTIONHOLDERS AND OVERSEAS WARRANTHOLDERS

The Partial Offer, the Option Offer and the Warrant Offer will be made to Overseas Shareholders, Overseas Optionholders and Overseas Warrantholders. A copy of this Composite Offer Document and Form of Acceptance, Form of Option Offer Acceptance and/ or Form of Warrant Offer Acceptance will be sent to Overseas Shareholders, Overseas Optionholders and/or Overseas Warrantholders (as the case may be). Based on the Register, the letters of grant of the Share Options and the register of holders of Bonus Warrants, as at the Latest Practicable Date, there were two Overseas Shareholders holding in aggregate 684,666 Shares, 639,130 Share Options and 91,333 Bonus Warrants with registered addresses in the PRC and Singapore which are jurisdictions outside Hong Kong.

This Composite Offer Document will not be filed under the applicable securities or equivalent legislation or rules of any jurisdiction other than Hong Kong. The Company has been advised by its legal advisers on laws of Singapore and laws of the PRC, respectively, that the Company would be exempt from obtaining approval from and/or registration with the relevant regulatory authorities under the applicable laws and regulations of Singapore and the PRC of this Composite Offer Document and the Form of Acceptance, the Form of Option Offer Acceptance and/or the Form of Warrant Offer Acceptance in respect of the Partial Offer, the Option Offer and/or the Warrant Offer.

– 15 –

LETTER FROM THE BOARD

The making of the Partial Offer, the Option Offer and the Warrant Offer to Shareholders, Optionholders and Warrantholders who are citizens, residents or nationals of jurisdictions outside Hong Kong may be subject to the laws of the relevant jurisdictions. Such relevant Shareholders, Optionholders and Warrantholders may be prohibited or affected by laws of the relevant jurisdictions and it is the responsibility of each relevant Shareholder, Optionholder and Warrantholder who wishes to accept the Partial Offer, the Option Offer and the Warrant Offer to satisfy himself/herself as to the full observance of the laws of the relevant jurisdiction in connection therewith, including the obtaining of any governmental, exchange control or other consents which may be required in compliance with all necessary formalities or legal requirements and the payment of any transfer or other taxes due in such relevant jurisdictions.

Any acceptance by any Shareholder, Optionholder and Warrantholder will be deemed to constitute a representation and warranty from such Shareholder, Optionholder and Warrantholder, as the case may be, to the Company and the Offeror that the local laws and requirements have been complied with. Shareholders, Optionholders and Warrantholders should consult their professional advisers if in doubt.

DEALINGS IN SECURITIES

Save as disclosed, neither the Offeror nor parties acting in concert with it hold any Shares or any outstanding warrants, options or securities of the Company which are convertible into new Shares, nor are there any outstanding derivatives in respect of the securities of the Company entered into by the Offeror or parties acting in concert with it as at the Latest Practicable Date.

As at the Latest Practicable Date, neither the Offeror nor parties acting in concert with it has received any irrevocable commitment to accept or reject the Partial Offer, the Option Offer and the Warrant Offer or has borrowed or lent any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in the Company.

The Offeror has confirmed that it has no other arrangements (whether by way of option, indemnity or otherwise) in relation to the Shares, the Share Options and the Bonus Warrants of the Company and shares of the Offeror which might be material to the Partial Offer, the Option Offer and the Warrant Offer.

CHANGES IN SHAREHOLDING STRUCTURE

The following table shows the shareholding structure of the Company (i) as at the Latest Practicable Date, (ii) immediately after completion of the Partial Offer, the Option Offer and the Warrant Offer, subject to any exercise of Share Options by any Optionholders and Bonus Warrants by any Warrantholders; and (iii) immediately after completion of the Partial Offer, the Option Offer and the Warrant Offer, assuming all of the then outstanding Share Options and Bonus Warrants (immediately after the Closing Date) are fully exercised, for both (ii) and (iii) on the assumptions that: (aa) the Partial Offer, the Option Offer and the Warrant Offer have been accepted in full by the Qualifying Shareholders, Qualifying Optionholders and Qualifying Warrantholders respectively; and (bb) no additional Shares

– 16 –

LETTER FROM THE BOARD

will be issued or repurchased by the Company from the Latest Practicable Date up to and including the date of completion of the Partial Offer, the Option Offer and the Warrant Offer:

Name of Shareholders Offeror V.S. Industry Berhad Parties acting in concert with the Offeror Gan Sem Yam (Notes 1, 12 and 13) Beh Kim Ling (Notes 2, 12 and 13) Gan Chu Cheng (Notes 3, 12 and 13) Gan Tiong Sia (Notes 4, 12 and 13) Beh Hwee Sze (Note 5) Beh Chern Wei (Note 6) Gan Pee Yong (Note 7) Tang Sim Cheow (Notes 11 and 12) Offeror and the parties acting in concert with it Other Directors as non-public shareholders Zhang Pei Yu (Note 8) Diong Tai Pew (Notes 9, 12 and 13) Lee Soo Gee (Note 10) Other Directors as non-public shareholders Public Shareholders Qualifying Shareholders Total	As at the Latest Practicable Date Number of Shares Approx % 497,716,400 38.06 23,530,000 1.80 52,267,699 4.00 69,227,706 5.29 29,637,700 2.27 19,654,000 1.50 – – 40,767,275 3.12 – – 732,800,780 56.04 2,000 0.00 682,666 0.05 – – 684,666 0.05 574,243,483 43.91 574,928,149 43.96 1,307,728,929 100.00	Immediately after completion of the Partial Offer, the Option Offer and the Warrant Offer Number of Shares Approx % 722,606,425 55.26 23,530,000 1.80 52,267,699 4.00 69,227,706 5.29 29,637,700 2.27 19,654,000 1.50 – – 40,767,275 3.12 – – 957,690,805 73.24 1,218 0.00 415,633 0.03 – – 416,851 0.03 349,621,273 26.73 350,038,124 26.76 1,307,728,929 100.00	Immediately after completion of the Partial Offer, the Option Offer and the Warrant Offer, assuming all of the then outstanding Share Options and Bonus Warrants (immediately after the Closing Date) are fully exercised Number of Shares Approx % 803,204,258 54.30 35,737,117 2.42 67,962,027 4.59 97,502,038 6.59 36,215,074 2.45 20,774,000 1.40 100,000 0.01 40,767,275 2.76 639,130 0.04 1,102,900,919 74.56 1,218 0.00 858,135 0.06 – – 859,353 0.06 375,344,694 25.38 376,204,047 25.44 1,479,104,966 100.00	Immediately after completion of the Partial Offer, the Option Offer and the Warrant Offer, assuming all of the then outstanding Share Options and Bonus Warrants (immediately after the Closing Date) are fully exercised Number of Shares Approx % 803,204,258 54.30 35,737,117 2.42 67,962,027 4.59 97,502,038 6.59 36,215,074 2.45 20,774,000 1.40 100,000 0.01 40,767,275 2.76 639,130 0.04 1,102,900,919 74.56 1,218 0.00 858,135 0.06 – – 859,353 0.06 375,344,694 25.38 376,204,047 25.44 1,479,104,966 100.00
				100.00

– 17 –

LETTER FROM THE BOARD

Notes:

Mr. Gan Sem Yam, an executive Director, is also an executive director of the Offeror.
Mr. Beh Kim Ling, an executive Director, is also an executive director of the Offeror.
Madam Gan Chu Cheng, an executive Director, is also an executive director of the Offeror.
Mr. Gan Tiong Sia, a non-executive Director, is also an executive director of the Offeror.
Miss Beh Hwee Sze is the daughter of Mr. Beh Kim Ling and Madam Gan Chu Cheng.
Mr. Beh Chern Wei is the son of Mr. Beh Kim Ling and Madam Gan Chu Cheng.
Mr. Gan Pee Yong is the son of Mr. Gan Sem Yam.
Mr. Zhang Pei Yu, an executive Director, holds no directorship in the Offeror and any of its subsidiaries. Mr. Zhang Pei Yu has no other relationship or connection with the Offeror and is not a party acting in concert with the Offeror.
Mr. Diong Tai Pew, an independent non-executive Director, holds no directorship in the Offeror and any of its subsidiaries. Mr. Diong Tai Pew has no other relationship or connection with the Offeror and is not a party acting in concert with the Offeror.
Mr. Lee Soo Gee, an independent non-executive Director, holds no directorship in the Offeror and any of its subsidiaries. Mr. Lee Soo Gee has no other relationship or connection with the Offeror and is not a party acting in concert with the Offeror.
Mr. Tang Sim Cheow, an independent non-executive Director, is also an independent non-executive director of the Offeror.
Each of Mr. Beh Kim Ling, Mr. Gan Sem Yam, Madam Gan Chu Cheng, Mr. Gan Tiong Sia, Mr. Diong Tai Pew and Mr. Tang Sim Cheow holds interests in the Share Options granted by the Company under the Share Option Scheme adopted by the Company on 20 January 2002:

				Number of Shares	Number of Shares
				that would be
				allotted and
				issued upon
		Exercise		exercise of the
Name of Director	Date of grant	price	Exercise period	Share Options
Beh Kim Ling	3 February 2010	HK$0.169	1 August 2010 to	(i)	2,748,260
			31 July 2013
			1 August 2011 to	(ii)	2,748,260
			31 July 2013
			1 August 2012 to	(iii)	3,664,347
			31 July 2013
Gan Sem Yam	3 February 2010	HK$0.169	1 August 2010 to	(i)	2,748,260
			31 July 2013
			1 August 2011 to	(ii)	2,748,260
			31 July 2013
			1 August 2012 to	(iii)	3,664,347
			31 July 2013

– 18 –

LETTER FROM THE BOARD

				Number of Shares	Number of Shares
				that would be
				allotted and
				issued upon
		Exercise		exercise of the
Name of Director	Date of grant	price	Exercise period	Share Options
Gan Chu Cheng	3 February 2010	HK$0.169	1 August 2010 to	(i)	2,748,260
			31 July 2013
			1 August 2011 to	(ii)	2,748,260
			31 July 2013
			1 August 2012 to	(iii)	3,664,347
			31 July 2013
Gan Tiong Sia	3 February 2010	HK$0.169	1 August 2010 to	(i)	1,342,173
			31 July 2013
			1 August 2011 to	(ii)	1,342,173
			31 July 2013
			1 August 2012 to	(iii)	1,789,565
			31 July 2013
Diong Tai Pew	3 February 2010	HK$0.169	1 August 2010 to	(i)	191,739
			31 July 2013
			1 August 2011 to	(ii)	191,739
			31 July 2013
			1 August 2012 to	(iii)	255,652
			31 July 2013
Tang Sim Cheow	3 February 2010	HK$0.169	1 August 2010 to	(i)	191,739
			31 July 2013
			1 August 2011 to	(ii)	191,739
			31 July 2013
			1 August 2012 to	(iii)	255,652
			31 July 2013

Each of Mr. Beh Kim Ling, Mr. Gan Sem Yam, Madam Gan Chu Cheng, Mr. Gan Tiong Sia, Mr. Diong Tai Pew, Miss Beh Hwee Sze and Mr. Beh Chern Wei holds interests in the Bonus Warrants granted by the Company pursuant to rights issue completed on 16 March 2011:

				Number of
				Shares that
				would be
				allotted and
				issued upon
Name of Director and				exercise of the
party acting in concert		Exercise		Bonus
with the Offeror	Date of grant	price	Exercise period	Warrants
Beh Kim Ling	14 March 2011	HK$0.12	16 March 2011 to	6,533,461
			15 March 2014
Gan Sem Yam	14 March 2011	HK$0.12	16 March 2011 to	3,046,250
			15 March 2014
Gan Chu Cheng	14 March 2011	HK$0.12	16 March 2011 to	19,113,465
			15 March 2014
Gan Tiong Sia	14 March 2011	HK$0.12	16 March 2011 to	2,103,463
			15 March 2014
Diong Tai Pew	14 March 2011	HK$0.12	16 March 2011 to	91,333
			15 March 2014
Beh Hwee Sze	14 March 2011	HK$0.12	16 March 2011 to	1,120,000
			15 March 2014
Beh Chern Wei	14 March 2011	HK$0.12	16 March 2011 to	100,000
			15 March 2014

– 19 –

LETTER FROM THE BOARD

INFORMATION ON THE GROUP

The Company is a company incorporated in the Cayman Islands with limited liability, the Shares of which are listed on the Main Board of the Stock Exchange. The subsidiaries of the Company are principally engaged in the manufacturing and sales of plastic moulded products and parts, assembling of electronic products and moulds design and fabrication.

INFORMATION ON THE OFFEROR

The Offeror is an investment holding company incorporated in Malaysia with limited liability, the Shares of which are listed on the Main Market of Bursa Malaysia Securities Berhad. The subsidiaries of the Offeror are principally engaged in manufacturing, assembly and sale of plastic moulded components and parts, and electrical products.

REASONS FOR THE PARTIAL OFFER

The Partial Offer is in line with the Offeror’s objective of consolidating its position in Hong Kong or the PRC electronic manufacturing services industry regionally. The Offeror believes that it will be able to generate synergistic benefits, through leveraging on core competencies of both the Offeror and the Company upon successfully increasing its stake in the Company via the Partial Offer. The Offeror further believes that by increasing its shareholding in the Company, which may result from the Partial Offer and Warrant Offer, the Offeror would demonstrate to Shareholders its commitment and dedication to the Group.

The Offeror recognises that the Shares were, in general, relatively thinly traded since 2010. The Partial Offer would offer an opportunity to those Shareholders who wish to realise part of their investment to do so at a premium to the current share price without having to incur the brokerage fees, transaction levies and trading fees which are customarily payable when disposing of shares in the open market, whilst retaining the balance of their equity interest in the Company in order to participate in the future growth of the Group.

Through the Partial Offer (assuming full acceptances of the Partial Offer by all the Qualitying Shareholders), subject to any exercise of Share Options by any Optionholders and Bonus Warrants by any Warrantholders, the interests of the Offeror and parties acting in concert with it in the voting rights of the Company will increase from approximately 56.04% to approximately 73.24%. The Offeror intends to maintain the listing status of the Company and has no intention to privatise the Company. As such, the Offeror has decided to proceed with the Partial Offer instead of a general offer.

– 20 –

LETTER FROM THE BOARD

INTENTIONS OF THE OFFEROR

The Offeror intends to continue the existing businesses of the Group and does not intend to introduce any major changes to the existing business strategies and operations of the Group. The Offeror also intends that the employment of the employees of the Group will be continued and there will be no redeployment of financial resources or fixed assets of the Group not in the course of normal ordinary business. The Company and the Offeror and the parties acting in concert with it do not have any agreement, arrangement, understanding, intention or negotiation with regard to any disposal or termination or scaling-down of the current business of the Group. As at the Latest Practicable Date, the Offeror and the parties acting in concert with it had no intention to inject any assets to the Company or conduct any fund raising activities after completion of the Partial Offer.

The Board acknowledges the intentions of the Offeror in respect of the Group. In particular, the Directors consider that the successful implementation of the Partial Offer, the Option Offer and the Warrant Offer would allow the Offeror to reinforce its commitment and dedication to the Group. The Board also welcomes the Offeror’s intention to continue the employment of the employees of the Group.

The Offeror intends to maintain the listing status of the Company on the Stock Exchange upon completion of the Partial Offer, the Option Offer and the Warrant Offer. As at the Latest Practicable Date, the Company had a public float of approximately 43.91% of the entire issued share capital of the Company. Assuming full acceptances of the Partial Offer by all Qualifying Shareholders subject to any exercise of Share Options and Bonus Warrants by any Optionholders and Warrantholders, the Company will have a public float of approximately 26.73% of the entire issued share capital of the Company immediately following completion of the Partial Offer, the Option Offer and the Warrant Offer. Assuming full acceptances of the Partial Offer by all Qualifying Shareholders and all of the then outstanding Share Options and Bonus Warrants are fully exercised by the Optionholders and the Warrantholders, the Company will have a public float of not less than 25% of the entire issued share capital of the Company immediately after completion of the Partial Offer, the Option Offer and the Warrant Offer.

In the event that all of the then outstanding Share Options and Bonus Warrants are exercised except for those held by the Public, the public float of the entire issued share capital of the Company will fall below 25% upon completion and full acceptance of the Partial Offer, the Option Offer and the Warrant Offer. As at the Latest Practicable Date, the Offeror and the parties acting in concert with it, together with the Directors not acting in concert with the Offeror namely, Mr. Zhang Pei Yu, Mr. Diong Tai Pew and Mr. Lee Soo Gee held in aggregate 33,234,772 Share Options and 94,967,722 Bonus Warrants. Each of them had undertaken with the Company that it/he/she will not exercise any of the outstanding Share Options and Bonus Warrants if the public float falls below 25%.

Accordingly, the number of Shares in public hands will continue to meet the public float requirement under Rule 8.08 of the Listing Rules. The Offeror does not intend to avail itself of any power of compulsory acquisition.

– 21 –

LETTER FROM THE BOARD

INTERESTED PARTIES

The parties acting in concert with the Offeror, namely Mr. Beh Kim Ling, Mr. Gan Sem Yam, Madam Gan Chu Cheng, Mr. Gan Tiong Sia, Mr. Tang Sim Cheow, Miss Beh Hwee Sze, Mr. Beh Chern Wei and Mr. Gan Pee Yong, were interested in approximately 41.52% of the issued share capital of the Offeror as at the Latest Practicable Date. Mr. Beh Kim Ling, Mr. Gan Sem Yam, Madam Gan Chu Cheng, Mr. Gan Tiong Sia and Mr. Tang Sim Cheow were also the directors of the Offeror as at the Latest Practicable Date. Accordingly, neither Mr. Beh Kim Ling, Mr. Gan Sem Yam, Madam Gan Chu Cheng, Mr. Gan Tiong Sia and Mr. Tang Sim Cheow has joined with the rest of the Board in giving their views on the Partial Offer, the Option Offer or the Warrant Offer, or the recommendations to the Qualifying Shareholders, the Qualifying Optionholders and the Qualifying Warrantholders as set out in this letter.

RECOMMENDATION OF THE BOARD

Having taken into account the terms of the Partial Offer, the Option Offer and the Warrant Offer and the advice of Somerley, the Board (including the members of the Independent Board Committee) considers that the terms of the Partial Offer, the Option Offer and the Warrant Offer are fair and reasonable so far as the Qualifying Shareholders, the Qualifying Optionholders and the Qualifying Warrantholders are concerned. Your attention is drawn to the Letter from Kim Eng, the Letter from the Independent Board Committee and the Letter from Somerley, which form part of this Composite Offer Document.

Yours faithfully For and on behalf of the Board of V.S. International Group Limited Beh Kim Ling Chairman

– 22 –

LETTER FROM KIM ENG

Kim Eng Securities (Hong Kong) Limited Level 30, Three Pacific Place 1 Queen’s Road East Hong Kong Telephone +852 2268 0800 Facsimile +852 2537 1548 www.kimeng.com.hk A member of Maybank Group

7 June 2013

To the Qualifying Shareholders, Qualifying Optionholders and Qualifying Warrantholders Dear Sir or Madam,

VOLUNTARY UNCONDITIONAL PARTIAL CASH OFFER BY KIM ENG SECURITIES (HONG KONG) LIMITED ON BEHALF OF V.S. INDUSTRY BERHAD

TO ACQUIRE UP TO 224,890,025 OFFER SHARES IN THE ORDINARY SHARE CAPITAL OF V.S. INTERNATIONAL GROUP LIMITED FROM QUALIFYING SHAREHOLDERS AND EXTEND AN APPROPRIATE OFFER TO QUALIFYING OPTIONHOLDERS AND QUALIFYING WARRANTHOLDERS TO ACQUIRE UP TO 250,731 OUTSTANDING SHARE OPTIONS AND 17,738,083 OUTSTANDING BONUS WARRANTS

INTRODUCTION

On 3 April 2013, the Offeror and the Company jointly announced that Kim Eng, on behalf of the Offeror, intended to make a voluntary unconditional partial cash offer to acquire up to 224,890,025 Offer Shares (representing approximately 39.23% of the issued share capital of the Company held by the Qualifying Shareholders as at the date of the Initial Announcement, or approximately 17.20% of the existing issued share capital of the Company as at the Latest Practicable Date) from the Qualifying Shareholders at the Offer Price of HK$0.355 per Offer Share in cash, payable by the Offeror. The Offeror would extend an appropriate offer to the Qualifying Optionholders and the Qualifying Warrantholders to acquire up to 250,731 outstanding Share Options and 17,738,083 outstanding Bonus Warrants pursuant to Rule 13.1 of the Takeovers Code.

The Partial Offer, Option Offer, and Warrant Offer are not subject to any condition, and the corresponding offer period would not be extended . The Partial Offer, Option Offer, and Warrant Offer will be made in compliance with the Takeovers Code.

– 23 –

LETTER FROM KIM ENG

The purpose of this letter is to provide you with, among other things, the terms of the Partial Offer, Option Offer and Warrant Offer, whose further details are set out in Appendix I to this Composite Offer Document, the accompanying Form of Acceptance, Form of Option Offer Acceptance and Form of Warrant Offer Acceptance (as the case may be).

TERMS OF THE PARTIAL OFFER, THE OPTION OFFER AND THE WARRANT OFFER

Kim Eng, on behalf of the Offeror, is making the Partial Offer to acquire up to 224,890,025 Offer Shares, the Option Offer to acquire up to 250,731 Share Options and the Warrant Offer to acquire up to 17,738,083 Bonus Warrants on the following basis:

(a) Offer Price

Notes:

(1) The offer price per Share Option under the Option Offer is illustrated in the following table:

Date of grant Period during which Share Options outstanding are exercisable Exercise price per Share (HK$) 3 February 2010 1 August 2010 to 31 July 2013 0.169 3 February 2010 1 August 2011 to 31 July 2013 0.169 3 February 2010 1 August 2012 to 31 July 2013 0.169 Total	Number of new Shares issued upon exercise of outstanding Share Options by all Optionholders as at the Latest Practicable Date Offer price per Share Option (HK$) 9,970,431 0.186 9,970,431 0.186 13,293,910 0.186 33,234,772

– 24 –

LETTER FROM KIM ENG

(2) The offer price per Bonus Warrant under the Warrant Offer is illustrated in the following table:

			Number of new
			Shares issued
			upon exercise
			of outstanding
	Period during		Bonus Warrants
	which Bonus		by all
	Warrants	Exercise	Warrrantholders	Offer price
	outstanding are	price per	as at the Latest	per Bonus
Date of grant	exercisable	Share	Practicable Date	Warrant
		(HK$)		(HK$)
14 March 2011	16 March 2011 to	0.12	138,391,996	0.235
	15 March 2014

(b) Other Terms

Partial Offer

Pursuant to the Partial Offer, the Offeror would acquire up to 224,890,025 Shares, which represent:

approximately 39.23% of the issued share capital of the Company held by the Qualifying Shareholders as at the date of the Initial Announcement, and
approximately 17.20% of the issued share capital of the Company as at the Latest Practicable Date.

A × C B

A: 224,890,025 Offer Shares (being the total number of Offer Shares for which the Partial Offer is made)
B: the total number of Offer Shares tendered by all Qualifying Shareholders under the Partial Offer
C: the number of Offer Shares tendered by the relevant individual Qualifying Shareholder under the Partial Offer

– 25 –

LETTER FROM KIM ENG

The Qualifying Shareholders are required to specify the number of Shares they would like to sell in the accompanying Form of Acceptance.

Option Offer and Warrant Offer

Pursuant to the Option Offer, the Offeror would acquire up to 250,731 outstanding Share Options and 17,738,083 outstanding Bonus Warrants, which represent:

approximately 39.23% of the issued Share Options and Bonus Warrants held by the Qualifying Optionsholders and Qualifying Warrantholders (as the case may be) as at the date of the Initial Announcement,
as to the Option Offer, approximately 0.75% of the outstanding Share Options as at the Latest Practicable Date, and
as to the Warrant Offer, approximately 12.82% of the outstanding Bonus Warrant as at the Latest Practicable Date.

==> picture [72 x 24] intentionally omitted <==

X: 250,731 Share Options or 17,738,083 Bonus Warrants held by the Qualifying Optionholders or the Qualifying Warrantholders (as the case may be)
Y: the total number of Share Options or Bonus Warrants tendered by all Qualifying Optionholders or Qualifying Warrantholders (as the case may be) under the Option Offer or the Warrant Offer

– 26 –

LETTER FROM KIM ENG

Z: the number of Share Options or Bonus Warrants tendered by the relevant individual Qualifying Optionholder or Qualifying Warrantholder (as the case may be) under the Option Offer or the Warrant Offer

As a result, it is possible that if a Qualifying Optionholder or Qualifying Warrantholder tenders all his/her Share Options or Bonus Warrants to the Offeror under the Option Offer or the Warrant Offer, not all of such Share Options or Bonus Warrants will be taken up. Fractions of Share Options or Bonus Warrants will not be taken up under the Option Offer or the Warrant Offer and, accordingly, the number of Share Options or Bonus Warrants that the Offeror will take up from each Qualifying Optionholder or Qualifying Warrantholder (as the case may be) in accordance with the above formula will be rounded up or down to the nearest whole number at the discretion of the Offeror.

Share Options and Bonus Warrants that are not tendered for acceptance under the Option Offer and the Warrant Offer will not be deemed to have lapsed as a result of the closing of the Partial Offer, the Option Offer and the Warrant Offer.

The Qualifying Optionholders are required to specify the number of Share Options they would like to sell in the accompanying Form of Option Offer Acceptance.

The Qualifying Warrantholders are required to specify the number of Bonus Warrants they would like to sell in the accompanying Form of Warrant Offer Acceptance.

VALUE OF THE PARTIAL OFFER

The Offer Price of HK$0.355 represents:

(i) a premium of approximately 14.52% over the closing price of HK$0.310 per Share as quoted on the Stock Exchange on the Latest Practicable Date;
(ii) a premium of approximately 7.58% over the closing price of HK$0.330 per Share as quoted on the Stock Exchange on the Last Trading Day;
(iii) a premium of approximately 12.70% over the average closing price of HK$0.315 per Share as quoted on the Stock Exchange for the last five consecutive trading days up to and including the Last Trading Day;
(iv) a premium of approximately 17.55% over the average closing price of approximately HK$0.302 per Share as quoted on the Stock Exchange for the last 10 consecutive trading days up to and including the Last Trading Day;

– 27 –

LETTER FROM KIM ENG

(v) a premium of approximately 24.56% over the average closing price of approximately HK$0.285 per Share as quoted on the Stock Exchange for the last 30 consecutive trading days up to and including the Last Trading Day;
(vi) a premium of approximately 46.09% over the average closing price of approximately HK$0.243 per Share as quoted on the Stock Exchange for the last 90 consecutive trading days up to and including the Last Trading Day;
(vii) a premium of approximately 76.62% over the average closing price of approximately HK$0.201 per Share as quoted on the Stock Exchange for the last 180 consecutive trading days up to and including the Last Trading Day;
(viii) a premium of approximately 4.41% over the unaudited consolidated net asset value of the Group attributable to the Shareholders of approximately HK$0.34 per Share as at 31 January 2013.

As at the Latest Practicable Date, the Company had 1,307,728,929 Shares in issue.

HIGHEST AND LOWEST CLOSING PRICES OF THE SHARES

The highest and lowest closing prices of the Shares as quoted on the Stock Exchange during the Relevant Period, were HK$0.335 per Share on 24 April 2013 and HK$0.155 per Share on 3 October 2012.

EFFECT OF ACCEPTING THE PARTIAL OFFER, THE OPTION OFFER AND THE WARRANT OFFER

– 28 –

LETTER FROM KIM ENG

TOTAL CONSIDERATION FOR THE PARTIAL OFFER, THE OPTION OFFER AND THE WARRANT OFFER AND FINANCIAL RESOURCES OF THE OFFEROR

Assuming full acceptance of the Partial Offer, the cash consideration payable by the Offeror at the Offer Price of HK$0.355 per Offer Share will amount to not more than HK$79,836,000. Assuming full acceptance of the appropriate offer by the Qualifying Optionholders and the Qualifying Warrantholders, the cash consideration payable by the Offeror for the Option Offer and the Warrant Offer will not exceed HK$4,216,000 in any event. Assuming full acceptance of the Partial Offer, the Option Offer and the Warrant Offer, the total cash consideration payable by the Offeror for the Partial Offer, the Option Offer and the Warrant Offer will amount to no more than HK$84,052,000.

The Offeror would settle the payment of consideration pursuant to the Partial Offer, Option Offer and Warrant Offer by loans from Malayan Banking Berhad and internal funding of the Offeror. The payment of interests thereon will not depend on the business of the Company. Kim Eng, the financial advisor to the Offeror in relation to the Partial Offer, the Option Offer and the Warrant Offer, is satisfied that resources are available to the Offeror to satisfy full acceptance of the Partial Offer, the Option Offer and the Warrant Offer.

PROCEDURES FOR ACCEPTANCE

The details of procedures for acceptance are set out on General Procedures for Acceptance of Appendix I on pages I-1 to I-4 of this Composite Offer Document.

NOMINEE REGISTRATION OF SHARES

To ensure equality of treatment of all Qualifying Shareholders and Qualifying Warrantholders, those Qualifying Shareholders and Qualifying Warrantholders who hold Shares and Bonus Warrants as nominees for 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 and Bonus Warrants whose investments are registered in nominee names (including those whose interests in Shares and Bonus Warrants are held through CCASS) to accept the Partial Offer and Warrant Offer, it is essential that they provide instructions to their nominees of their intentions with regard to the Partial Offer and Warrant Offer.

INFORMATION ON THE OFFEROR

The Offeror is an investment holding company incorporated in Malaysia with limited liability, the Shares of which are listed on the Main Market of Bursa Malaysia Securities Berhad. The subsidiaries of the Offeror are principally engaged in the manufacturing, assembly and sale of plastic moulded components and parts, and electrical products.

– 29 –

LETTER FROM KIM ENG

The Offeror and the parties acting in concert with it altogether held 732,800,780 Shares, representing approximately 56.04% of the existing issued share capital in the Company as at the Latest Practicable Date. The parties acting in concert with the Offeror, namely Mr. Beh Kim Ling, Mr. Gan Sem Yam, Madam Gan Chu Cheng, Mr. Gan Tiong Sia, Mr. Tang Sim Cheow, Miss Beh Hwee Sze, Mr. Beh Chern Wei and Mr. Gan Pee Yong, are interested in approximately 41.52% of the issued share capital of the Offeror as at the Latest Practicable Date. Mr. Beh Kim Ling, Mr. Gan Sem Yam, Madam Gan Chu Cheng, Mr. Gan Tiong Sia and Mr. Tang Sim Cheow are also the directors of the Offeror.

REASONS FOR THE PARTIAL OFFER

Through the Partial Offer (assuming full acceptances of the Partial Offer by all the Qualifying Shareholders), subject to any exercise of Share Options by any Optionholders and Bonus Warrants by any Warrantholders, the interests of the Offeror and parties acting in concert with it in the voting rights of the Company will increase from approximately 56.04% to approximately 73.24%. The Offeror intends to maintain the listing status of the Company and has no intention to privatise the Company. As such, the Offeror has decided to proceed with the Partial Offer instead of a general offer.

INTENTIONS OF THE OFFEROR AND MAINTAINING THE LISTING STATUS OF THE COMPANY

The Offeror intends to continue the existing businesses of the Group and does not intend to introduce any major changes to the existing business strategies and operations of the Group. The Offeror also intends that the employment of the employees of the Group will be continued and there will be no redeployment of financial resources or fixed assets not in the course of normal ordinary business. The Company and the Offeror and the parties acting in concert with it do not have any agreement, arrangement, understanding, intention or negotiation with regard to any disposal or termination or scaling-down of the current business of the Group. As at the Latest Practicable Date, the Offeror and the parties acting in concert with it have no intention to inject any assets to the Company or conduct any fund raising activities after completion of the Partial Offer.

– 30 –

LETTER FROM KIM ENG

The Offeror intends to maintain the listing status of the Company on the Stock Exchange upon completion of the Partial Offer, the Option Offer and the Warrant Offer. As at the Latest Practicable Date, the Company had a public float of approximately 43.91% of the entire issued share capital of the Company. Assuming full acceptances of the Partial Offer by all Qualifying Shareholders subject to any exercise of Share Options and Bonus Warrants by any Optionholders and Warrantholders, the Company will have a public float of approximately 26.73% of the entire issued share capital of the Company immediately following completion of the Partial Offer, the Option Offer and the Warrant Offer. Assuming full acceptances of the Partial Offer by all Qualifying Shareholders and all of the then outstanding Share Options and Bonus Warrants are fully exercised by the Optionholders and Warrantholders, the Company will have a public float of not less than 25% of the entire issued share capital of the Company immediately after completion of the Partial Offer, the Option Offer and the Warrant Offer.

Accordingly the number of Shares in public hands will continue to meet the public float requirement under Rule 8.08 of the Listing Rules. The Offeror does not intend to avail itself any power of compulsory acquisition.

OVERSEAS SHAREHOLDERS, OVERSEAS OPTIONHOLDERS AND OVERSEAS WARRANTHOLDERS

– 31 –

LETTER FROM KIM ENG

and the PRC of this Composite Offer Document and the Form of Acceptance, the Form of Option Offer Acceptance and/or the Form of Warrant Offer Acceptance in respect of the Partial Offer, the Option Offer and/or the Warrant Offer.

Any acceptance by any Shareholder, Optionholder and Warrantholder will be deemed to constitute a representation and warranty from such Shareholder, Optionholder and Warrantholder (as the case may be) to the Company and the Offeror that the local laws and requirements have been complied with. Shareholders, Optionholders and Warrantholders should consult their professional advisors if in doubt.

STAMP DUTY IMPLICATIONS

ODD LOTS

– 32 –

LETTER FROM KIM ENG

An Accepting Shareholder and/or Accepting Warrantholder may, as a result of accepting the Partial Offer and the Warrant Offer (as the case may be), hold odd lots of the Shares and/or Bonus Warrant.

For this purpose, Kim Eng, whose address is at Level 30, Three Pacific Place, 1 Queen’s Road East, Hong Kong (Contact person: Ms. Rose Mak/Ms. Marian Lam; telephone number: (852) 2268 0395/2268 0398) has been appointed by the Offeror as the designated broker to match sales and purchases of odd lot holdings of Shares and Bonus Warrants in the market, on a best effort basis, for a period of six weeks from the Closing Date to enable Accepting Shareholders and Accepting Warrantholder to dispose of their odd lots or to top up their odd lots to whole board lots of 4,000 Shares and/or 20,000 Bonus Warrants (as the case may be). Shareholders and Warrantholders should note that the matching of odd lots is not guaranteed.

An Accepting Optionholder may, as a result of accepting the Option Offer, hold Share Options entitling him/her to subscribe for odd lots of the Shares. Share Options are not transferable pursuant to the terms of the Share Option Scheme, and no matching sales or purchases of the resultant odd lot holdings of the Share Options will be arranged.

PAYMENT

RESPONSIBILITY FOR DOCUMENTS

All communications, notices, Forms of Acceptance, Forms of Option Offer Acceptance, Forms of Warrant Offer Acceptance, Share certificates, Bonus Warrant certificate(s), letter(s) of grant for the Share Options, transfer receipts, other documents of title (and/or any indemnity or indemnities in respect thereof) and remittances to be delivered or sent by, to or from any Shareholder, Optionholder and Warrantholder will be delivered or sent by, to and from them, or their designated agents, at their own risks and none of the Offeror, the Company, Kim Eng, the Share Registrar and/or Warrant Registrar or any of their respective directors or any other person involved in the Partial Offer, the Option Offer and Warrant Offer accepts any liability for any loss or any other liabilities whatsoever which may arise as a result.

SETTLEMENT

The details of settlement are set out on in the paragraph headed “7. Settlement” of Appendix I on pages I-8 to I-9 of this Composite Offer Document.

CONSENT FROM THE EXECUTIVE

Pursuant to 28.1 of the Takeovers Code, the Executive has consented to the Offeror making the Partial Offer.

– 33 –

LETTER FROM KIM ENG

UNCONDITIONAL OFFERS

The Option Offer and the Warrant Offer are not subject to any condition.

CLOSING

Pursuant to Rule 15.3 of the Takeovers Code, the Closing Date would be the 14th day after the earlier of the date on which the Partial Offer, Option Offer and the Warrant Offer are declared unconditional in all respects, but since the Partial Offer, Option Offer and Warrant Offer are unconditional, the Closing Date will be at least 21 days from the date of this Composite Offer Document in any event.

TAX IMPLICATIONS

Qualifying Shareholders, Qualifying Optionholders and Qualifying Warrantholders are recommended to consult their own professional advisors if they are in any doubt as to the taxation implications of their acceptance of the Partial Offer, the Option Offer and Warrant Offer (as the case may be). It is emphasised that none of the Company and the Offeror, their ultimate beneficial owners and parties acting in concert with any of them, Kim Eng, Somerley, the Share Registrar and/or Warrant Registrar or any of their respective directors or any persons involved in the Partial Offer, Option Offer and Warrant Offer accepts responsibility for any taxation effects on, or liabilities of, any person or persons as a result of their acceptance of the Partial Offer, Option Offer and Warrant Offer.

GENERAL

In accordance with Rule 3.8 of the Takeovers Code, associates of the Company and the Offeror are hereby reminded to disclose their dealings in any securities of the Company pursuant to the requirements of the Takeovers Code.

Pursuant to Note 11 of Rule 22 of the Takeovers Code, stockbrokers, banks and others who deal in relevant securities on behalf of clients have a general duty to ensure, so far as they are able, that those clients are aware of the disclosure obligations attaching to associates and (including shareholders holding 5% or more of any class of relevant securities under class (6) of the definition of associates under the Takeovers Code) other persons under Rule 22 of the Takeovers Code and that those clients are willing to comply with them.

– 34 –

LETTER FROM KIM ENG

Principal traders and dealers who deal directly with investors should, in appropriate cases, likewise draw attention to the relevant Rules of the Takeovers Code. However, this does not apply when the total value of dealings (excluding stamp duty and commission) in any relevant security undertaken for a client during any seven day period is less than HK$1,000,000. This dispensation does not alter the obligation of principals, associates and other persons themselves to initiate disclosure of their own dealings, whatever total value is involved. Intermediaries are expected to co-operate with the Executive in its dealings enquiries. Therefore, those who deal in relevant securities should appreciate that stockbrokers and other intermediates will supply the Executive with relevant information in those dealings, including identities of clients, as part of that co-operation.

Further details on the terms and conditions of the Partial Offer, the Option Offer and Warrant Offer including, amongst other things, procedures for acceptance and settlement, acceptance period and taxation matters, are set out in Appendix I to this Composite Offer Document, the accompanying Form of Acceptance, Form of Option Offer Acceptance and Form of Warrant Offer Acceptance (as the case may be).

Qualifying Shareholders, Qualifying Optionholders and Qualifying Warrantholders are strongly advised to consider carefully the information as contained in the Letter from the Board, the recommendation as contained in the Letter from the Independent Board Committee and the advice of Somerley as contained in the Letter from Somerley in this Composite Offer Document, and to consult their professional advisors as they see fit.

Your attention is also drawn to the information as set out in the appendices to this Composite Offer Document which form part of this Composite Offer Document.

Yours faithfully For and on behalf of

Kim Eng Securities (Hong Kong) Limited Cecil Ng Managing Director

– 35 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

V.S. INTERNATIONAL GROUP LIMITED 威鋮國際集團有限公司

(incorporated in the Cayman Islands with limited liability)

(stock code: 1002)

The Independent Board Committee: Mr. Diong Tai Pew Mr. Lee Soo Gee

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

Head office and principal place of business in Hong Kong: 40th Floor Jardine House 1 Connaught Place Hong Kong

7 June 2013

To the Qualifying Shareholders, the Qualifying Optionholders and the Qualifying Warrantholders

Dear Sir or Madam,

VOLUNTARY UNCONDITIONAL PARTIAL CASH OFFER BY KIM ENG SECURITIES (HONG KONG) LIMITED ON BEHALF OF V.S. INDUSTRY BERHAD

We refer to this composite offer document issued jointly by the Company and the Offeror to the Qualifying Shareholders, the Qualifying Optionholders and the Qualifying Warrantholders dated 7 June 2013 (the “ Composite Offer Document ”) of which this letter forms a part. Unless the context otherwise requires, terms defined in the Composite Offer Document have the same meanings when used in this letter.

– 36 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

We have been appointed as members of the Independent Board Committee to consider and to make a recommendation to you (i) as to whether or not the terms of the Partial Offer, the Option Offer and the Warrant Offer are fair and reasonable; and (ii) as to the acceptance of the Partial Offer, the Option Offer and the Warrant Offer, taking into account the advice from Somerley, the independent financial adviser to the Independent Board Committee.

Your attention is drawn to the letter from the Board as set out on pages 7 to 22 of the Composite Offer Document, the letter from Kim Eng as set out on pages 23 to 35 of the Composite Offer Document and Appendix I to the Composite Offer Document containing detailed terms of the Partial Offer, the Option Offer and the Warrant Offer, and the letter from Somerley as set out on pages 38 to 71 of the Composite Offer Document, which contains its advice and recommendation to us in respect of the Partial Offer, the Option Offer and the Warrant Offer, as well as the principal factors and reasons for its opinion and recommendation.

Having considered the factors and reasons considered by, and the opinion and recommendation of Somerley as stated in the aforementioned letter of advice, we are of the opinion that the terms of the Partial Offer, the Option Offer and the Warrant Offer are fair and reasonable so far as Qualifying Shareholders, Qualifying Optionholders and Qualifying Warrantholders are concerned. As regards acceptance, we recommend that:

the Qualifying Shareholders to accept the Partial Offer; and
the Qualifying Optionholders and the Qualifying Warrantholders who hold the Share Options and Bonus Warrants to accept the Option Offer and Warrant Offer respectively.

Those Qualifying Shareholders and Qualifying Warrantholders who wish to realise more than 39.1% or 40.8% of their holdings in the Company which may be taken up under the terms of the Partial Offer and the Warrant Offer (as the case may be), may consider selling their Shares or Bonus Warrants in the open market if the market prices of the Shares or Bonus Warrants exceed the respective offer prices during the Offer Period and the sales proceeds, net of transaction costs, from disposal of the Shares or the Bonus Warrants in the open market exceed the amount receivable under the Partial Offer or the Warrant Offer.

Yours faithfully, For and on behalf of Independent Board Committee V.S. International Group Limited Mr. Diong Tai Pew Mr. Lee Soo Gee

– 37 –

LETTER FROM SOMERLEY

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

SOMERLEY LIMITED

20th Floor

Aon China Building 29 Queen’s Road Central Hong Kong

7 June 2013

To: The Independent Board Committee of V.S. International Group Limited

Dear Sirs,

VOLUNTARY UNCONDITIONAL PARTIAL CASH OFFER BY KIM ENG SECURITIES (HONG KONG) LIMITED ON BEHALF OF V.S. INDUSTRY BERHAD

INTRODUCTION

We refer to our appointment to advise the Independent Board Committee in connection with the voluntary partial cash offer by Kim Eng on behalf of the Offeror to acquire up to 224,890,025 Offer Shares (representing approximately 17.20% of the existing issued share capital of the Company as at the Latest Practicable Date, or approximately 39.23% of the existing issued share capital of the Company held by Qualifying Shareholders as at the date of the Initial Announcement) from the Qualifying Shareholders at the Offer Price of HK$0.355 per Offer Share in cash, payable by the Offeror. The Offeror will extend an appropriate offer to Qualifying Optionholders and Qualifying Warrantholders to acquire up to 250,731 outstanding Share Options and 17,738,083 outstanding Bonus Warrants (representing approximately 39.23% of the Share Options and Bonus Warrants held by the Qualifying Optionholders and Qualifying Warrantholders (as the case may be) as at the date of the Initial Announcement) pursuant to Rule 13.1 of the Takeovers Code. Details of the Partial Offer, Option Offer and Warrant Offer (collectively the “ Offers ”) are contained in the letter from the Board of the Composite Offer Document to Qualifying Shareholders, Qualifying Optionholders and Qualifying Warrantholders dated 7 June 2013, of which this letter forms a part. Terms used in this letter shall have the same meanings as those defined in the Composite Offer Document unless the context otherwise requires.

– 38 –

LETTER FROM SOMERLEY

On 3 April 2013, the Offeror and the Company jointly announced that Kim Eng will make the Offers on behalf of the Offeror in accordance with the Takeovers Code. The Offers are not subject to any condition, and the corresponding Offer Period would not be extended .

The Board comprises four executive Directors, one non-executive Director and three independent non-executive Directors. Both Mr. Tang Sim Cheow, the independent non-executive Director and also the independent non-executive director of the Offeror, and Mr. Gan Tiong Sia, the non-executive Director and also an executive director of the Offeror, are concert parties of the Offeror. Therefore, the Independent Board Committee, comprising the remaining independent non-executive Directors, namely Mr. Diong Tai Pew and Mr. Lee Soo Gee, none of whom has any direct or indirect interest in the Offers, has been established to advise Qualifying Shareholders, Qualifying Optionholders and Qualifying Warrantholders in connection with the Offers. The Independent Board Committee has approved the appointment of us as the independent financial adviser to the Independent Board Committee in the same regard.

We are not associated or connected with the Company or the Offeror, their respective substantial shareholders or any party acting, or presumed to be acting, in concert with any of them and, accordingly, are considered eligible to give independent advice on the Offers. Apart from normal professional fees payable to us in connection with this appointment, no arrangement exists whereby we will receive any fees or benefits from the Company or the Offeror, their respective substantial shareholders or any party acting, or presumed to be acting, in concert with any of them.

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 Group, which we have assumed to be true, accurate and complete. We have reviewed the published information on the Company, including its interim report for the six months ended 31 January 2013, annual reports for the five years ended 31 July 2012 and the independent property valuation report as set out in appendix III to the Composite Offer Document. We have reviewed the trading performance of the Shares on the Stock Exchange. We have sought and received confirmation from the Directors that no material facts have been omitted from the information supplied and opinions expressed by them. We consider that the information we have received is sufficient for us to reach our opinion and advice as set out in this letter. We have no reason to doubt the truth and accuracy of the information provided to us or to believe that any material facts have been omitted or withheld. We have, however, not conducted any independent investigation into the business and affairs of the Group, nor have we carried out any independent verification of the information supplied. We have also assumed that all representations contained or referred to in the Composite Offer Document are true at the time they were made and at the date of the Composite Offer Document and will continue to be true until the end of the Offer Period and the Shareholders, the Optionholders and the Warrantholders will be notified of any material changes as soon as possible, if any.

We have not considered the tax and regulatory implications on Qualifying Shareholders of acceptance or non-acceptance of the Partial Offer nor Qualifying Optionholders of acceptance or non-acceptance of the Option Offer nor Qualifying Warrantholders of

– 39 –

LETTER FROM SOMERLEY

acceptance or non-acceptance of the Warrant Offer since these depend on their individual circumstances. In particular, Qualifying Shareholders, Qualifying Optionholders and Qualifying Warrantholders who are residents overseas or subject to overseas taxes or Hong Kong taxation on securities dealings should consider their own tax positions and, if in any doubt, should consult their own professional advisers.

PRINCIPAL TERMS OF THE OFFERS

Kim Eng, on behalf of the Offeror, is making the Offers in compliance with the Takeovers Code on the following terms:

Offer	Price	for	each	Offer	Share	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	HK$0.355	in	cash
Offer	price	for	each	Share	Option		.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	HK$0.186	in	cash
Offer	price	for	each	Bonus	Warrant				.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	HK$0.235	in	cash

The offer prices for each Share Option and Bonus Warrant are the see-through prices which are equal to the Offer Price of HK$0.355 per Share less the respective exercise prices of the relevant Share Options and Bonus Warrants, which are HK$0.169 per Share and HK$0.120 per Share respectively.

The Offers are not subject to any condition.

By validly accepting the Partial Offer, Qualifying Shareholders will sell their tendered Offer Shares which are finally taken up by the Offeror in accordance with the formula as set out in the letter from Kim Eng in the Composite Offer Document (if applicable) to the Offeror free from all encumbrances and together with all rights and benefits at any time accruing thereto including all rights to any dividend or other distributions declared, made or paid on or after the Closing Date. Any dividends or other distributions declared, made or paid before the Closing Date will be paid by the Company to the Shareholders who are qualified for such dividends or distributions.

By validly accepting the Option Offer, Qualifying Optionholders will sell their tendered Share Options which are finally taken up by the Offeror in accordance with the formula as set out in the letter from Kim Eng in the Composite Offer Document (if applicable) to the Offeror and the tendered and finally taken up Share Options will be cancelled on the Closing Date.

By validly accepting the Warrant Offer, Qualifying Warrantholders will sell their tendered Bonus Warrants which are finally taken up by the Offeror in accordance with the formula as set out in the letter from Kim Eng in the Composite Offer Document (if applicable) to the Offeror and the Offeror is entitled to exercise the tendered and finally taken up Bonus Warrants on or after the Closing Date.

Share Options and Bonus Warrants that are not tendered for acceptance under the Option Offer and the Warrant Offer will not be deemed to have lapsed after the closing of the Offers.

– 40 –

LETTER FROM SOMERLEY

Qualifying Shareholders, Qualifying Optionholders and Qualifying Warrantholders may accept the Offers in respect of some or all of the Offer Shares, Share Options and Bonus Warrants held by them. If valid acceptances are received for no more than 224,890,025 Offer Shares, 250,731 Share Options and 17,738,083 Bonus Warrants, all of such tendered Offer Shares, Share Options and Bonus Warrants will be taken up.

The Shares and Bonus Warrants are currently traded in board lots of 4,000 Shares and 20,000 Bonus Warrants each. Such board lot size will not be changed as a result of the implementation of the Partial Offer and the Warrant Offer. If valid acceptances are received for more than 224,890,025 Offer Shares, 250,731 Share Options and 17,738,083 Bonus Warrants, such Offer Shares, Share Options and Bonus Warrants will be taken up on a pro rata basis that Qualifying Shareholders, Qualifying Optionholders and Qualifying Warrantholders who tender their Shares, Share Options and Bonus Warrants may hold odd lots of the Shares (for Optionholders, upon full exercise of the Share Options) and/or Bonus Warrants (as the case may be).

Matching services will be provided by Kim Eng, a designated broker as appointed by the Offeror, to enable Accepting Shareholders and Accepting Warrantholders to dispose of their odd lots or to top up their odd lots to whole board lots of 4,000 Shares and/or 20,000 Bonus Warrants (as the case may be) but the matching of odd lots is not guaranteed. An Accepting Optionholder may, as a result of accepting the Option Offer, hold Share Options entitling him/her to subscribe for odd lots of the Shares but NO matching sales or purchases of the resultant odd lot holdings of the Share Options could be arranged as they are non-transferable pursuant to the terms of the Share Option Scheme.

Accepting Shareholders, Accepting Optionholders and Accepting Warrantholders should read carefully the detailed terms and conditions of the Offers, in particular to the formula for determining the number of Offer Shares to be taken up by the Offeror from each Qualifying Shareholder, the number of Share Options to be taken up by the Offeror from each Qualifying Optionholder and the number of Bonus Warrants to be taken up by the Offeror from each Qualifying Warrantholder which are set out in the letter from Kim Eng on pages 23 to 35 of the Composite Offer Document and the procedures for acceptance of the Offers which are set out in appendix I to the Composite Offer Document.

– 41 –

LETTER FROM SOMERLEY

PRINCIPAL FACTORS AND REASONS CONSIDERED

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

1. Background information of the Group

The Company is a company incorporated in the Cayman Islands with limited liability, the Shares and the Bonus Warrants of which are listed on the Main Board of the Stock Exchange. The principal activity of the Company is investment holding and the Group is principally engaged in (i) manufacturing and sales of plastic moulded products and parts; (ii) assembling of electronic products; and (iii) mould design and fabrication.

==> picture [427 x 188] intentionally omitted <==

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

Offeror and its concert parties
56.04%
The Company
Assembling of Plastic injection Mould design
electronic products and moulding and fabrication
Total assets [(Note)] : HK$205.3 million Total assets [(Note)] : HK$780.9 million Total assets [(Note)] : HK$108.1 million
Total liabilities [(Note)] : HK$90.3 million Total liabilities [(Note)] : HK$186.0 million Total liabilities [(Note)] : HK$10.3 million
----- End of picture text -----

Note: The segment total assets and total liabilities of the Company as at 31 January 2013 were extracted from the interim report of the Company for the six months ended 31 January 2013.

Comments

The Company, being controlled by the Offeror and its concert parties as to about 56.04%, is engaged in capital intensive businesses with total assets of HK$1,285.7 million as at 31 January 2013. Assets for plastic injection and moulding accounted for 71.4% and 64.9% of the Group’s segment total assets and total liabilities respectively as at 31 January 2013.

2. Rationale and benefits of the Offers

Set out below are the statement by the Offeror and its financial adviser as extracted from the letter from Kim Eng in the Composite Offer Document:

(i) The Partial Offer is in line with the Offeror’s objective of consolidating its position in Hong Kong or the PRC electronics manufacturing services (“ EMS ”) industry regionally. The Offeror believes that it will be able to generate synergistic benefits, through leveraging on core competencies of both the Offeror and the Company upon successfully increasing its stake in the Company via the

– 42 –

LETTER FROM SOMERLEY

Partial Offer. The Offeror further believes that by increasing its shareholding in the Company, which may result from the Partial Offer and Warrant Offer, the Offeror would demonstrate to Shareholders its commitment and dedication to the Group.

(ii) The Offeror recognises that the Shares were, in general, relatively thinly traded since 2010. The Partial Offer would offer an opportunity to those Shareholders who wish to realise part of their investment to do so at a premium to the current share price without having to incur the brokerage fees, transaction levies and trading fees which are customarily payable when disposing of shares in the open market, whilst retaining the balance of their equity interest in the Company in order to participate in the future growth of the Group.
(iii) Through the Partial Offer (assuming full acceptances of the Partial Offer by all Qualifying Shareholders), subject to any exercise of Share Options by any Optionholders and Bonus Warrants by any Warrantholders, the interests of the Offeror and parties acting in concert with it in the voting rights of the Company will increase from approximately 56.04% to approximately 73.24%. The Offeror intends to maintain the listing status of the Company and has no intention to privatise the Company. As such, the Offeror has decided to proceed with the Partial Offer instead of a general offer.

Comments

If the Offers are accepted in full (assuming no outstanding Share Options and Bonus Warrants are exercised), the Offeror and its concert parties will increase their shareholding from 56.04% to 73.24%. We generally concur with the rationale and benefits of the Offers as stated above but we consider the key benefit from the Qualifying Shareholders’ perspective is that the Partial Offer will provide a guaranteed cash exit for them to dispose of a portion of their shareholdings in the Company during the Offer Period at a price which is higher than the trading price of the Shares for the past 5 years. Similar exit opportunities are also available for Optionholders and Warrantholders. Our analysis of the Offer Price is further discussed in the sections below.

– 43 –

LETTER FROM SOMERLEY

3. Analyses of the financial information of the Group

(a) Income statement

Set out below are the summarised consolidated income statements of the Company for the five years ended 31 July 2012 and six months ended 31 January 2013.

TABLE 1: SUMMARISED CONSOLIDATED INCOME STATEMENTS OF THE COMPANY

Turnover Cost of sales Gross profit Other net income/(loss) Distribution costs Administrative expenses Profit/(Loss) from operations Finance costs Share of profits less losses of associates Gain on disposal of associates Profit/(Loss) before taxation Income tax expense Profit/(Loss) for the period/year Attributable to the Shareholders Dividend for the period/year (HK$ per Share)	Six months ended 31 January 2013 HK$’million (Unaudited) 683.2 (615.9) 67.3 17.9 (26.6) (38.2) 20.4 (12.3) (1.7) – 6.4 (3.6) 2.8 2.8 Nil	2012 HK$’million (Audited) 1,513.1 (1,364.6) 148.5 (19.2) (68.4) (84.7) (23.8) (35.9) (0.6) 0.9 (59.4) (14.3) (73.7) (73.8) Nil	Year ended 31 July 2011 2010 2009 HK$’million HK$’million HK$’million (Audited) (Audited) (Audited) 1,629.5 1,496.9 1,198.8 (1,489.2) (1,329.2) (1,093.1) 140.3 167.7 105.7 28.3 (2.4) (4.0) (68.4) (60.3) (37.6) (103.2) (85.8) (82.0) (3.0) 19.2 (17.9) (39.8) (34.2) (47.3) 3.8 4.7 0.9 – – – (39.0) (10.3) (64.3) (22.1) (3.6) (4.6) (61.1) (13.9) (68.9) (61.0) (14.3) (68.7) Nil Nil Nil	2008 HK$’million (Audited) 1,374.2 (1,231.5)
				142.7 31.0 (33.6) (81.9)
				58.2 (47.7) 1.9 5.3
				17.7 (6.6)
				11.1
				11.5

				Nil

– 44 –

LETTER FROM SOMERLEY

(i) Segment turnover

The full text of the audited consolidated income statement of the Company for the two years ended 31 July 2012 extracted from the annual report of the Company for the year ended 31 July 2012 and a summary of the unaudited consolidated income statements of the Company for the six months ended 31 January 2013 extracted from the interim report of the Company for the six months ended 31 January 2013 are set out in appendix II to the Composite Offer Document, to which the attention of Qualifying Shareholders, Qualifying Optionholders and Qualifying Warrantholders is drawn. Set out below is a summary of the Company’s segment revenue (from external customers):

TABLE 2: SEGMENT TURNOVER OF THE COMPANY

Plastic injection and moulding Assembling of electronic products Mould design and fabrication Total	Six months ended 31 January 2013 HK$’million (Unaudited) 400.8 245.9 36.5 683.2	2012 HK$’million (Audited) 924.1 488.9 100.1 1,513.1	Year ended 31 July 2011 2010 2009 HK$’million HK$’million HK$’million (Audited) (Audited) (Audited) 952.5 876.0 801.3 578.5 531.4 254.9 98.5 89.5 142.6 1,629.5 1,496.9 1,198.8	2008 HK$’million (Audited) 981.3 211.9 181.0
				1,374.2

The plastic injection and moulding division had been the major revenue contributor to the Group while the assembling of electronic products division exhibited satisfactory growth during the review period as the Group secured a few sizeable new customers for this segment. The Group’s turnover during the review period had been stable except for the years ended 31 July 2009 and 31 July 2012. For the year ended 31 July 2009, the Company lost one of the key customers which had adversely impacted on the plastic injection and moulding division. During the same year, the mould design and fabrication division was also adversely affected by the economic downturn as customers reduced the development of new models which had a direct negative impact on the division’s turnover. For the year ended 31 July 2012, turnover from the assembling of electronic products division decreased due to the decline in the demand of customers’ end products.

– 45 –

LETTER FROM SOMERLEY

(ii) Gross margin

During the review period, the gross margin of the Group ranged from 3.5% to 7.8%. The gross margins of the Group and its business divisions during the review period are set out below:

TABLE 3: SEGMENT GROSS MARGIN OF THE COMPANY

	Six months
	ended 31			Year ended 31 July
	January
	2013	2012	2011	2010	2009	2008
	HK$’million	HK$’million	HK$’million	HK$’million	HK$’million	HK$’million
	(Unaudited)	(Audited)	(Audited)	(Audited)	(Audited)	(Audited)
The Group	4.8%	3.5%	4.1%	6.5%	5.5%	7.8%
By segments:
Plastic injection and
moulding	4.1%	3.3%	2.9%	4.8%	3.7%	7.1%
Assembling of electronic
products	5.6%	1.6%	5.0%	7.0%	4.7%	1.9%
Mould design and
fabrication	6.5%	14.6%	10.3%	20.1%	16.4%	18.9%

The gross margin of the plastic injection and moulding division for the year ended 31 July 2009 deteriorated to 3.7% from 7.1% in the prior year mainly due to rising labour cost in the PRC. Thereafter, the gross margin of this division maintained in the range of 2.9% to 4.8% in the subsequent years. The Group’s assembling of electronic products division received more orders for the year ended 31 July 2010 with the gross margin of 7.0% in the same year. The gross margin of this division for the year ended 31 July 2011 declined to 5.0% and fell further to 1.6% in the following year due to higher raw material consumption. The mould design and fabrication division had the highest gross margin across all three divisions with its gross margin ranging from 6.5% to 20.1% during the review period but its sales orders remained unsatisfactory in the recent four years as compared to the year ended 31 July 2008 as customers reduced the development of new models.

(iii) Distribution costs and administrative expenses

The Group’s distribution cost of HK$60.3 million registered a 60.4% increase for the year ended 31 July 2010 as compared to HK$37.6 million in the prior year. The increase was primarily due to higher packaging and transportation cost incurred on certain products for one of the major customers. Thereafter, the distribution costs remained stable and were the same at HK$68.4 million for the two years ended 31 July 2011 and 2012.

– 46 –

LETTER FROM SOMERLEY

The administrative expenses over the years were stable ranging from HK$81.9 million to HK$85.8 million except for a surge for the year ended 31 July 2011 to HK$103.2 million. Such increase was mainly due to increase in employees cost of HK$10.1 million as a result of recruitment of additional management staff and provision of doubtful debts of HK$8.6 million.

(iv) Net profit/(loss)

The Company reported net losses attributable to the Shareholders for the four consecutive years ended 31 July 2012 and became profitable in the six months ended 31 January 2013. Set out below is a breakdown of segment results for the five years ended 31 July 2012 and six months ended 31 January 2013:

TABLE 4: SEGMENT RESULTS OF THE COMPANY

Plastic injection and moulding Assembling of electronic products Mould design and fabrication Total	Six months ended 31 January 2013 HK$’million (Unaudited) 16.5 13.8 2.4 32.7	2012 HK$’million (Audited) 30.8 7.9 14.6 53.3	Year ended 31 July 2011 2010 2009 HK$’million HK$’million HK$’million (Audited) (Audited) (Audited) 27.6 42.0 30.0 28.9 37.0 12.0 10.2 18.0 23.5 66.7 97.0 65.5	2008 HK$’million (Audited) 69.5 4.0 34.3
				107.8

The above segment results had not taken into account the share of profits/ losses of associates, finance costs and unallocated depreciation and amortisation and head office and corporate expenses. Plastic injection and moulding division has been the core business of the Group contributing over 40% of the total reportable segment profit with gross margin ranging from 2.9% to 7.1% during the review period. Contribution from assembling of electronic products division showed continued growth in the first three years during the review period and outgrew the mould design and fabrication division for the years ended 31 July 2010 and 2011. Mould design and fabrication division, with the highest gross margin, was unsatisfactory in the recent four and a half year as the customers developed less new models of products.

After netting the finance cost and unallocated depreciation and amortisation and head office and corporate expenses, the Company reported net losses in four consecutive years since 31 July 2009 and returned to a profit for the six months ended 31 January 2013 mainly due to HK$16.3 million exchange gains for the period.

– 47 –

LETTER FROM SOMERLEY

(v) Dividend

The Company did not pay dividend during the review period.

Comments

The Company had been loss-making since the year ended 31 July 2009 when it lost one of the key customers which moved its business operations to other region where overheads were lower. In the subsequent years, the EMS industry was competitive with numerous domestic and foreign EMS providers. The Group’s profit margins were squeezed by the rising wages and raw material prices of manufacturing operations in the PRC and the appreciation of RMB against USD as most of the Group’s revenue is denominated in USD. Over the years, the Group strived to improve production efficiency and increase productivity by continual introduction of wide-ranging integrated manufacturing services which include product design services, mould design and fabrication services and implementation of cost control. Due to the unsatisfactory results, the Company did not pay dividend in the past five and a half year. Although the Company returned to net profit of HK$2.8 million for the six months ended 31 January 2013 mainly due to the exchange gains of HK$16.3 million, such gain is non-recurrent in nature and subject to fluctuations from time to time and therefore it remains uncertain as to whether the Group will continue to be profitable in the future. This is further discussed in section 4 below.

(a) Financial position and property valuation

The full text of the audited consolidated balance sheets of the Company as at 31 July 2012 and 31 July 2011 as extracted from the annual report of the Company for the year ended 31 July 2012 and the full text of the unaudited consolidated balance sheet of the Company as at 31 January 2013 as extracted from the interim report of the Company for the six months ended 31 January 2013 are set out in appendix II to the Composite Offer Document, to which the attention of Qualifying Shareholders, Qualifying Optionholders and Qualifying Warrantholders is drawn. Set out below are the summarised consolidated balance sheets of the Company as at 31 July 2008, 2009, 2010, 2011 and 2012 and 31 January 2013:

TABLE 5: SUMMARISED CONSOLIDATED BALANCE SHEETS OF THE COMPANY

	As at 31 January			As at 31 July
	2013	2012	2011	2010	2009	2008
	HK$’million	HK$’million	HK$’million	HK$’million	HK$’million	HK$’million
	(Unaudited)	(Audited)	(Audited)	(Audited)	(Audited)	(Audited)
Non-current assets
Property, plant and
equipment	650.9	672.4	782.5	830.2	856.8	821.1
Interests in leasehold
land held for own use
under operating leases	25.4	25.1	25.6	24.8	24.8	25.5
Goodwill	2.2	2.2	2.2	2.2	2.2	2.2
Deferred tax asset	2.4	–	–	14.7	6.5	–

– 48 –

LETTER FROM SOMERLEY

Interest in associate(s) Deferred assets Current assets Inventories Trade and other receivables Derivative financial instruments Deposits with banks Cash and cash equivalents Current liabilities Trade and other payables Interest-bearing borrowings Obligations under finance leases Loan from a substantial shareholder Current taxation Net current liabilities Total assets less current liabilities Non-current liabilities Other payables Interest-bearing borrowings Obligations under finance leases Loan from a substantial shareholder Deferred tax liabilities NET ASSETS	As at 31 January 2013 HK$’million (Unaudited) 23.5 – 704.4 110.2 352.4 5.9 35.2 77.6 581.3 330.4 258.4 – – 8.5 597.3 (16.0) 688.4 – 241.8 – – 2.7 244.5 443.9	2012 HK$’million (Audited) 25.3 – 725.0 143.8 366.6 – 39.2 90.9 640.5 367.4 316.2 – – 10.4 694.0 (53.5) 671.5 11.1 257.1 – – 2.2 270.4 401.1	2011 HK$’million (Audited) 27.0 6.6 843.9 245.0 463.5 – 60.7 115.3 884.5 525.0 454.9 8.0 4.9 7.5 1,000.3 (115.8) 728.1 6.3 248.8 – – 1.8 256.9 471.2	As at 31 July 2010 HK$’million (Audited) 27.0 – 898.9 227.2 452.1 – 74.5 96.9 850.7 488.8 411.4 10.1 6.5 9.4 926.2 (75.5) 823.4 29.8 322.6 6.7 4.9 1.8 365.8 457.6	2009 HK$’million (Audited) 22.7 – 913.0 144.9 307.2 – 50.6 100.4 603.1 343.9 334.8 8.3 7.3 8.2 702.5 (99.4) 813.6 17.1 307.0 14.1 9.7 1.4 349.3 464.3	2008 HK$’million (Audited) 21.9 –
						870.7 163.5 347.1 – 56.2 115.6
						682.4 319.5 354.3 3.3 4.9 0.9
						682.9
						(0.5)

						870.2

						– 318.6 – 14.7 2.1
						335.4
						534.8

– 49 –

LETTER FROM SOMERLEY

CAPITAL AND RESERVES Share capital Reserves Total equity attributable to Shareholders Non-controlling interests TOTAL EQUITY	As at 31 January 2013 HK$’million (Unaudited) 65.2 378.7 443.9 – 443.9	2012 HK$’million (Audited) 57.8 343.3 401.1 – 401.1	2011 HK$’million (Audited) 57.8 410.8 468.6 2.6 471.2	As at 31 July 2010 HK$’million (Audited) 43.3 411.6 454.9 2.7 457.6	2009 HK$’million (Audited) 43.3 417.4 460.7 3.6 464.3	2008 HK$’million (Audited) 43.3 487.8
						531.1 3.7
						534.8

Set out below is the breakdown of the Group’s assets and liabilities by principal business activities:

TABLE 6: THE GROUP’S ASSETS AND LIABILITIES BY PRINCIPAL BUSINESS ACTIVITIES

*Reportable segment* *assets* Plastic injection and moulding Assembling of electronic products Mould design and fabrication Total *Reportable segment* *liabilities* Plastic injection and moulding Assembling of electronic products Mould design and fabrication Total	As at 31 January 2013 HK$’million (Unaudited) 780.9 205.3 108.1 1,094.3 186.0 90.3 10.3 286.6	2012 HK$’million (Audited) 820.0 220.2 114.4 1,154.6 203.5 109.9 17.9 331.3	2011 HK$’million (Audited) 921.0 329.7 158.3 1,409.0 266.4 147.5 33.1 447.0	As at 31 July 2010 HK$’million (Audited) 941.6 377.7 143.2 1,462.5 330.8 141.3 28.7 500.8	2009 HK$’million (Audited) 754.3 263.4 157.4 1,175.1 216.5 99.8 24.6 340.9	2008 HK$’million (Audited) 833.8 193.3 166.4
						1,193.5

						210.1 38.5 36.7
						285.3

– 50 –

LETTER FROM SOMERLEY

(i) Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. As at 31 July 2012, property, plant and equipment was HK$672.4 million accounted for about half of the Group’s total assets. About 44.5% of such amount is attributable to the property interests held by the Group and the rest is mainly plant and machinery owned by the Group. The properties are used as the Group’s production facilities, warehouses and ancillary offices which are located in Zhuhai and Qingdao. An independent valuation of these property interests based on their existing uses as at 31 March 2013 are set out in appendix III to the Composite Offer Document to which the attention of Qualifying Shareholders, Qualifying Optionholders and Qualifying Warrantholders is drawn. As set out in “5. Property interests” in appendix II to the Composite Offer Document, the management of the Group estimated the valuation surplus arising from the property interests attributable to the Group as at 31 March 2013 to be at HK$259.9 million, having adjusted for the carrying value of such property interests as at 31 March 2013. As set out in the property valuation report, DTZ Debenham Tie Leung Limited (“ DTZ ”), the independent property valuer, has applied depreciated replacement cost approach in valuing the properties of the Group due to the absence of relevant market data to arrive at the market values of the Group properties by market-based evidence. Details in respect of the valuation methodology adopted by DTZ are set out in the property valuation report in appendix III to the Composite Offer Document.

We have interviewed DTZ and discussed with them the rationale of adopting the valuation methodology, bases and assumptions for valuing the properties held by the Group and examined the sample comparables used by DTZ in the depreciated replacement cost approach. We consider the valuation methodology, and basis and assumptions adopted for the valuation of the properties of the Group by DTZ to be reasonable.

On 31 December 2012, the Company announced that V.S. Technology Industry Park (Zhuhai) Co., Ltd (“ VS Zhuhai ”), a wholly-owned subsidiary of the Company, intended to apply for inclusion of the Land under an urban redevelopment scheme of the government of Zhuhai (the “ Zhuhai Government ”) in relation to aged factories, towns and villages (the “ Application ”). We were advised by the management of the Group that the Application has been made on 31 December 2012 to the Zhuhai Government for inclusion of the Land under the urban redevelopment scheme which may involve changing the use of the Land from industrial to residential and/or commercial. The Group does not have any intention to take part in the development of the Land into residential properties or commercial properties. The Land together with the buildings thereon was valued by DTZ at RMB364.1 million or RMB1,150 per sq.m. (appraised value of RMB364.1 million divided by the total site area of 316,498.29 sq.m.) or solely the Land at RMB129.6 million or RMB409 per sq.m. (appraised value of RMB129.6 million divided by the total site area of 316,498.29 sq.m.). In the absence of details of redevelopment plan of the Land including the gross floor area, plot ratios and the actual use of the Land, it is impracticable, as advised by

– 51 –

LETTER FROM SOMERLEY

DTZ, to arrive at a valuation on the assumption that the Application is approved by the Zhuhai Government. We have looked into the statistics of the Zhuhai City Land Resources Bureau（珠海市國土資源局）for the period between 1 January 2012 and the Latest Practicable Date for some price indications for the Land. A total of 3 pieces of land in the nearby area of the Land were sold through public auction in 2012 which can be developed into residential and/or commercial properties. The prices of those 3 transactions varied depending on the location of the sites ranging from RMB1,600 per sq.m. to RMB6,000 per sq.m. with an average of RMB3,633 per sq.m.. Subject to the resumption of the Land by the Zhuhai Government at a reasonable price acceptable to VS Zhuhai which may be dependent on the result of public auction of the Land, the Group intends to use the net proceeds from the disposal of the Land to reduce the Group’s bank borrowings. The Land, as advised by the management of the Group, will only be sold if the price is acceptable and such disposal is beneficial to the Group after taking into account all possible costs to be incurred in respect of relocation of existing production facilities on the Land to a new site.

Should the Land be sold, the Group intends to relocate the Group’s production facilities in Zhuhai to a nearby vacant land currently owned by Mr. Beh Kim Ling, an executive Director and the ultimate controlling shareholder of the Company. The terms of the use of such land will be subject to further negotiations between the Company and Mr. Beh. As at the Latest Practicable Date, the management of the Group advised that there had been no progress or update from the Zhuhai Government since the Application was made.

(ii) Inventories

Inventories represented largely raw materials, work-in-progress and finished goods for production of plastic moulded products and parts and assembling of electronic products. The changes in inventories during the review period were generally in line with the changes in the Group’s turnover until the year ended 31 July 2012 when the Group tightened its procurement policy by strictly adhering to the actual requirements under the sales orders. The Group’s inventories was HK$143.8 million as at 31 July 2012, representing a 41.3% decrease as compared to that at prior year end, and reduced a further 23.4% to HK$110.2 million as at 31 January 2013.

(iii) Trade receivables and payables

Trade receivables and payables during the review period generally increased in line with the Group’s turnover and cost of sales. Similar to the Group’s inventories, trade receivables and payable as at 31 July 2012 were 20.9% and 30.0% lower than those as at the previous year end as a result of the implementation of a tightened credit control over accounts receivables during the same year.

Allowance for doubtful debts during the review period increased gradually from HK$1.5 million as at 31 July 2008 to HK$7.9 million as at 31 January 2013.

– 52 –

LETTER FROM SOMERLEY

(iv) Borrowings

The Group’s interest-bearing borrowings represented bank borrowings. The Group’s gearing ratio, representing the ratio of total bank debts to total assets, were over 40% during the past five financial years and reduced to 38.9% as at 31 January 2013. As advised by the management of the Group, the effective interest rates of the borrowings during the review period ranged from 2.0% to 7.6%.

As at 31 July 2012, the combined balance of inventory and trade and other receivables of the Group was reduced by HK$198.1 million as compared to that of the prior year. The positive operating cash flow enabled the Group to reduce its net borrowings by HK$97.3 million from HK$540.5 million to HK$443.2 as at 31 July 2012.

(v) Net current liabilities and net asset value

The Group was in net current liabilities positions throughout the review period. The Group recorded the highest net current liabilities of HK$115.8 million as at 31 July 2011 and gradually dropped back to HK$16.0 million as at 31 January 2013.

Net assets value (“ NAV ”) attributable to the Shareholders had in general decreased over the years mainly due to losses incurred by the Company during the review period. The NAV attributable to the Shareholders was HK$531.1 million as at 31 July 2008 against HK$443.9 million as at 31 January 2013. During the review period, the Company conducted several fund raising exercises raising about HK$32.7 million by way of rights issue in February 2011 and about HK$19.2 million by subscription of new Shares by independent third parties in November 2012.

Set out below are the computation of the NAV attributable to the Shareholders having adjusted the revaluation surplus arising from the valuation of property interests of the Group as at 31 March 2013 to reflect the current fair value of the property interests of the Group on the bases discussed above and set out in the property valuation report (the “ Reassessed NAV ”).

– 53 –

LETTER FROM SOMERLEY

TABLE 7: REASSESSED NAV

	NAV	NAV/
	attributable	Reassessed
	to the	NAV per
	Shareholders	Share
(Unaudited)	(HK$’million)	(HK$)
As at 31 January 2013	443.9	0.34
Add: Revaluation surplus arising from the independent property
valuation of property interests of the Group as at 31 March
2013 (Note)	259.9	0.20
Reassessed figure having adjusted for the current valuation of
property interests of the Group as at 31 March 2013	703.8	0.54

Note: Based on the reconciliation of the net book value of the relevant property interests as at 31 July 2012 to their fair value as stated in the property valuation report, which is set out in “5. Property interests” in appendix II to the Composite Offer Document.

The NAV attributable to the Shareholders per Share, based on the unaudited consolidated balance sheet of the Company as at 31 January 2013, before the valuation was approximately HK$0.34. The Reassessed NAV per Share after adjusting for the current fair value of the property interests of the Group, were approximately HK$0.54. Qualifying Shareholders, Qualifying Optionholders and Qualifying Warrantholders should note that the Reassessed NAV per Share of HK$0.54 has not taken into account the appreciation potential of the Land which is subject to the change of its use being approved by the Zhuhai Government.

Comments

With an annual turnover of over HK$1,500 million and property, plant and equipment of over HK$650 million, the operations of the Group had been mainly financed by the interest bearing borrowings and Shareholders’ fund. The Group was in net current liabilities positions over the years. The auditors of the Company had also mentioned in the past annual reports of the Company that the net current liabilities and continued losses indicated the existence of a material uncertainty which may cast significant doubt on the Group’s ability to continue as a going concern. It seems liquidity is a concern of the Group. In the year ended 31 July 2011, the management of the Group took proactive efforts to negotiate with its main banker to reschedule its term loan facilities and managed to extend the repayment of HK$304.7 million to year 2015. To further improve liquidity, the Group strived to tighten the procurement requirements and credit controls over the account receivables during the year ended 31 July 2012.

The Group is involved in manufacturing and production and is classified as an industrial stock. The Group’s property, plant and equipments accounted for 50.6% of its total assets as at January 2013 and are occupied by the Group as production facilities or office premises for its business operations. The Company plans to dispose of the Land subject to the approval of the change of its use from industrial to residential and/or commercial by the Zhuhai Government. The management of the Group is of the view that such disposal may or

– 54 –

LETTER FROM SOMERLEY

may not materialise but if it is approved by the Zhuhai Government and the Land is sold through the public auction, the NAV of the Group may increase and the proceeds will be used to reduce the bank borrowings. The Reassessed NAV per Share of HK$0.54 has not taken into account the appreciation potential of the Land which is subject to the Application being approved by the Zhuhai Government. Qualifying Shareholders, Qualifying Optionholders and Qualifying Warrantholders who wish to capture the appreciation of the value of the Company as a result of the disposal of the Land at an attractive consideration to the Group, which may or may not proceed successfully, even though there has been sustained low Share prices and liquidity during the review periods as discussed in section 5 below, may opt to retain all or part of their investment in the Shares, Share Options and Bonus Warrants.

As stated in the letter from Kim Eng in the Composite Offer Document, the Company and the Offeror and its concert parties do not have any agreement, arrangement, understanding, intention or negotiation with regard to any disposal or termination or scaling-down of the current business of the Group. In addition, the Offeror intends to continue the existing businesses of the Group and does not intend to introduce any major changes to the existing business strategies and operations of the Group. As such, we consider the value of the Shareholders’ investment in the Company should primarily be determined with reference to its peers’ valuation instead of its break-up value.

4. Future outlook of the Group

Plastic products are one of the key raw materials to many manufacturing industries and are widely used in various industries such as automotive, construction materials, machinery, medical products, personal care products, packaging, household appliances, consumer electronics, toys, and other consumer products. Owing to China’s rapid economic expansion since the Reform and Opening Up（改革開放）introduced by the Chinese government in the late 1980’s which followed by an influx of multinational corporations that entered the Chinese market and utilised plastic products in their businesses, China’s plastics industry has grown to a substantial size.

China is currently the largest plastic products producer and consumer in the world. According to the China Plastic & Rubber Journal, during the 11th Five-Year Plan（十一五規劃） (the “ 11-FYP ”) period, the plastics industry witnessed its fastest growing period whereby the industry recorded a compounded annual growth rate (“ CAGR ”) of approximately 20.1% in terms of output volume and a CAGR of approximately 22.3% in terms of production volume. In 2010, the total production value of China plastics industry accounted for approximately 3.6% of China’s GDP of that year and approximately 10.3% of that of the total production value of China’s light industry.

In 2011, according to the statistics of the National Bureau of Statistics（國家統計局）, plastic products produced by enterprises above designated size (i.e. enterprises with an annual revenue above RMB20,000,000) (“ EADS ”) reached 54,743.1 kilotons, representing an increase of approximately 22.4% from that of 2010. According to the China National Light Industry Information Center（中國輕工業信息中心）(the “ CNLIIC ”), in 2011 the total output value generated by EADS in the plastics industry reached RMB1,608.0 billion, representing an increase of approximately 27.5% from that of 2010. The CNLIIC also

– 55 –

LETTER FROM SOMERLEY

reported that EADS in plastics industry generated RMB1,398.8 billion revenue from main operations in 2011, representing an increase of approximately 27.7% on an year-on-year basis.

However, the above measures are only partial in respect of the current status of the plastics industry. Although EADS in plastics industry recorded significant increases in outputs and revenue as discussed above, these companies together recorded a total loss of RMB4.4 billion in 2011, such loss represented an increase of approximately 43.7% when compared to that of 2010. According to the CNLIIC, in 2011, there is high percentage of enterprises suffering from losses. The recent losses of the plastics industry can be attributable to a number of factors which can be broadly divided into macro-economic factors and factors associated with the structure of the industry. The macro-economic factors are mainly, among others, the international economic downturns caused by the Euro-zone debt crisis which had a knock-on effect on external demands for plastic goods and the rising inflation of China which caused a gradual increase in material costs as well as labour costs that are critical cost components of the plastic enterprises. On the other hand, the plastics industry is embattled with structure issues which call for an upgrade of technology and industry consolidation.

The future of China’s plastics industry remains uncertain. On the one hand, the industry has accumulated valuable industry experience and achieved leading status during the 11-FYP period, while backed by China’s vibrant economy. On the other hand, the industry continues to be confronted by macro-economic shocks as well as its own structural issues which may prove to be testing.

Comments

Having taken into account the current status of the plastics industry, we generally concur with the management of the Group that the operating environment of the Group will continue to be challenging.

– 56 –

LETTER FROM SOMERLEY

5. Analysis of market price of the Shares

(a) Market price compared to the offer prices

			Premium
		Premium	over
		over	HK$0.235
		HK$0.355	per Bonus
		per Share	Warrant
(i)	the closing price of HK$0.310 per Share or HK$0.180
	per Bonus Warrant as quoted on the Stock Exchange	14.52%	30.56%
	on the Latest Practicable Date
(ii)	the closing price of HK$0.330 per Share or HK$0.178
	per Bonus Warrant as quoted on the Stock Exchange	7.58%	32.02%
	on the Last Trading Day
(iii)	the average closing price of HK$0.315 per Share or
	approximately HK$0.166 per Bonus Warrant as
	quoted on the Stock Exchange for the last 5	12.70%	41.57%
	consecutive trading days up to and including the
	Last Trading Day
(iv)	the average closing price of approximately HK$0.302
	per Share or HK$0.163 per Bonus Warrant as quoted
	on the Stock Exchange for the last 10 consecutive	17.55%	44.17%
	trading days up to and including the Last Trading
	Day
(v)	the average closing price of approximately HK$0.285
	per Share or HK$0.155 per Bonus Warrant as quoted
	on the Stock Exchange for the last 30 consecutive	24.56%	51.61%
	trading days up to and including the Last Trading
	Day
(vi)	the average closing price of approximately HK$0.243
	per Share or HK$0.123 per Bonus Warrant as quoted
	on the Stock Exchange for the last 90 consecutive	46.09%	91.06%
	trading days up to and including the Last Trading
	Day
(vii)	the average closing price of approximately HK$0.201
	per Share or HK$0.087 per Bonus Warrant as quoted
	on the Stock Exchange for the last 180 consecutive	76.62%	170.11%
	trading days up to and including the Last Trading
	Day
(viii)	the unaudited consolidated NAV attributable to the
	Shareholders of approximately HK$0.34 per Share	4.41%	n.a.
	as at 31 January 2013

The Offer Price represents premiums over the Share prices in different periods before the Initial Announcement ranging from 7.6% to 76.6% and 4.4% premium over unaudited consolidated NAV attributable to the Shareholders per Share as at 31 January

– 57 –

LETTER FROM SOMERLEY

The offer price for the Bonus Warrants also represents premiums over the Bonus Warrant prices in different periods before the Initial Announcement ranging from 32.0% to 170.1%.

(b) Closing Share prices over a 5-year period

(i) Shares

Set out below is the movement of the closing prices of the Shares on the Stock Exchange from 7 April 2008 to the Latest Practicable Date (the “ Relevant Period ”):

FIGURE 1: SHARE PRICE CHART

==> picture [390 x 201] intentionally omitted <==

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

0.4
Offer Price = HK$0.355 140,000,000
0.35
Possible
redevelopment of the 120,000,000
0.3 Investment in a mining business in Heilongjiang nonAcquired 10%interests in a-wholly owned Land
subsidiary 100,000,000
0.25
Profit warning Rights issue Acquired 19% interests
announcement in a non-wholly owned 80,000,000
0.2 subsidiary
Disposal of
machineries
60,000,000
0 . 15 P ro fit warn ng i
announcement Subscription of new
Shares by independent
0.1 third parties 40,000,000
0.05 20,000,000
0
7 April 2008 7 April 2009 7 April 2010 7 April 2011 7 April 2012 7 April 2013
Share price (HK$)
Trading volume (Shares)
----- End of picture text -----

Source: Bloomberg and the website of the Stock Exchange

The Shares traded all time below the Offer Price during the Relevant Period.

During the Relevant Period, the Company announced several transactions. On 19 June 2008, the Group entered into an investment agreement with an independent third party to obtain 51% interest in a company which is principally engaged in the exploration of natural resources in Heilongjiang Province in the PRC. The Group had also explored the investment in the exploration of natural resources in Inner Mongolia, the PRC. Since the capital injection for the Heilongjiang project was not completed as at 31 July 2010, the management of the Group stated its decision to abort the two natural resources projects and focus on the existing principal business of the Group in the annual report for the year ended 31 July 2011 which was published in November 2011.

In February 2010 and February 2012, the Company announced to acquire additional interests in a non-wholly owned subsidiary which is engaged in assembling and selling of electronic products, parts and components from

– 58 –

LETTER FROM SOMERLEY

connected persons. Upon completion of the latter acquisition, such company became a wholly-owned subsidiary of the Company. In January 2012, the Company announced to dispose of certain machineries for manufacturing of electronic products, parts and components to a connected person.

In December 2010 and November 2012, the Company announced to raise HK$32.7 million by way of rights issue and HK$19.2 million by subscription of new Shares by independent third parties.

The Share price dropped significantly following the announcement of the Heilongjiang project to its lowest at HK$0.054 in March 2009 when the Hong Kong stock market was in doldrums. The Shares closed thereafter between HK$0.05 and HK$0.20 most of the time. During the Relevant Period before Last Trading Day, the Shares closed higher than or equal to HK$0.20 in only 113 days out of a total of 1,233.

On 31 December 2012, the Company published a voluntary announcement about the possible redevelopment of the Land at which its main production facilities are situated. The Shares closed above HK$0.25 thereafter and rose further to HK$0.33 before the Initial Announcement. The Offer Price is still higher than the prevailing Share prices which might have been uplifted by such announcement.

(ii) Bonus Warrants

Set out below is the movement of the closing prices of the Bonus Warrants on the Stock Exchange from 16 March 2011 (being the first date of dealing in the Bonus Warrants) to the Latest Practicable Date:

FIGURE 2: BONUS WARRANT PRICE CHART

==> picture [408 x 202] intentionally omitted <==

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

0.25
140,000,000
0.2 120,000,000
100,000,000
0.15 Bonus Warrant offer price = HK$0.235
80,000,000
0.1 60,000,000
40,000,000
0.05
20,000,000
0
16 March 2011 16 September 2011 16 March 2012 16 September 2012 16 March 2013
Bonus Warrant price (HK$)
Trading volume (Bonus Warrants)
----- End of picture text -----

Source: Bloomberg and the website of the Stock Exchange

– 59 –

LETTER FROM SOMERLEY

The Bonus Warrants were issued by the Company pursuant to the rights issue of 288,992,000 Shares in the proportion of 1 rights share for every 3 Shares held with the Bonus Warrants on the basis of 1 warrant for every 2 rights shares subscribed by the Shareholders in 2011. The Bonus Warrants are exercisable into Shares until 15 March 2014. The Bonus Warrants commenced dealings on 16 March 2011. As shown in the figure above, the Bonus Warrants traded at a price below HK$0.10 ranging from HK$0.01 to HK$0.08 before 1 December 2012, which was substantially below the Bonus Warrant offer price. Since the liquidity of the Bonus Warrants was low, correlation between the prices of the Shares and the Bonus Warrants had also been low until December 2012. In December 2012, the Bonus Warrant price moved in accordance with the Share price and surged significantly to above HK$0.10.

(c) Liquidity of the Shares

(i) Shares

Set out in the table below are the total monthly trading volumes of the Shares and the percentages of such total monthly trading volumes to the total issued share capital and public float of the Company from the start of 2012 to the Latest Practicable Date:

TABLE 8: TRADING VOLUME OF THE SHARES

		Percentage of the
		total monthly	Percentage of the
		trading volume	total monthly
	Total monthly	of the Shares to	trading volume
	trading volume	the total issued	of the Shares to
	of the Shares	Shares (1)	public float (2)
2012
January	13,608,052	1.2%	2.4%
February	12,288,586	1.1%	2.1%
March	6,484,000	0.6%	1.1%
April	3,356,451	0.3%	0.6%
May	5,176,000	0.4%	0.9%
June	38,922,801	3.4%	6.8%
July	3,843,999	0.3%	0.7%
August	6,543,812	0.6%	1.1%
September	5,696,000	0.5%	1.0%
October	25,930,740	2.2%	4.5%
November	7,732,000	0.7%	1.3%
December	127,283,485	9.8%	22.2%

– 60 –

LETTER FROM SOMERLEY

		Percentage of the
		total monthly	Percentage of the
		trading volume	total monthly
	Total monthly	of the Shares to	trading volume
	trading volume	the total issued	of the Shares to
	of the Shares	Shares (1)	public float (2)
2013
January	51,508,006	4.0%	9.0%
February	13,940,042	1.1%	2.4%
March	26,403,337	2.0%	4.6%
April	18,744,559	1.4%	3.3%
May	7,800,000	0.6%	1.4%
From 1 June 2013 to the
Latest Practicable Date	12,000	0.0%	0.0%

Source: Bloomberg and the website of the Stock Exchange

Notes:

1. The calculation is based on the monthly total trading volumes of the Shares divided by the total issued share capital of the Company at the end of each month during the period.

2. The calculation is based on monthly total trading volumes of the Shares divided by the total number of Shares in public hand of 574,243,483 as at the Latest Practicable Date.

Based on the above table, in our view the liquidity of the Shares was generally thin during the start of 2012 until the surge in trading in December 2012. In the same month, the Company announced the possible redevelopment of the Land at which the Group’s main production facilities are situated. As the Shares cannot be regarded as having been actively traded, the Offers are considered valuable opportunities for Qualifying Shareholders, Qualifying Optionholders and Qualifying Warrantholders to exit unconditionally at a fixed cash price.

– 61 –

LETTER FROM SOMERLEY

(ii) Bonus Warrants

Set out in the table below are the total monthly trading volumes of the Bonus Warrants and the percentages of such total monthly trading volumes to the total number of Bonus Warrants in issue and the total Bonus Warrants held by Qualifying Warrantholders from the start of 2012 to the Latest Practicable Date:

TABLE 9: TRADING VOLUME OF THE BONUS WARRANTS

			Percentage of the
			total monthly
			trading volume
			of the Bonus
		Percentage of the	Warrants to the
		total monthly	total number of
		trading volume	Bonus Warrants
	Total monthly	of the Warrants	held by
	trading volume	to the total	Qualifying
	of the Bonus	issued Bonus	Warrantholders
	Warrants	Warrants (1)	(2)
2012
January	78,000	0.1%	0.2%
February	440,000	0.3%	1.0%
March	1,394,000	1.0%	3.2%
April	60,000	0.0%	0.1%
May	–	–	–
June	4,349,644	3.0%	10.0%
July	20,000	0.0%	0.0%
August	501,790	0.3%	1.2%
September	800,649	0.6%	1.8%
October	12,230,297	8.5%	28.1%
November	5,810,464	4.0%	13.4%
December	4,120,643	2.9%	9.5%
2013
January	4,077,999	2.9%	9.4%
February	1,948,666	1.4%	4.5%
March	3,594,543	2.6%	8.3%
April	838,346	0.6%	1.9%
May	1,019,333	0.7%	2.3%
From 1 June 2013 to the
Latest Practicable Date	40,000	0.0%	0.1%

Source: Bloomberg and the website of the Stock Exchange

Notes:

1. The calculation is based on the monthly total trading volumes of the Bonus Warrants divided by the total Bonus Warrants in issue at the end of each month during the period.

2. The calculation is based on monthly total trading volumes of the Shares divided by the total number of Bonus Warrants held by Qualifying Warrantholders of 43,515,607 as at the Latest Practicable Date.

– 62 –

LETTER FROM SOMERLEY

Based on the above table, the liquidity of the Bonus Warrant was also thin most of the time during the review period. The surge in trading is seen in October and November 2012. The management of the Group advised us that it is unaware of the reasons for such increase in trading volume.

Comments

The Shares closed all time below the Offer Price during the 5-year review period with the 90-day average price of HK$0.243. The Bonus Warrants also closed significantly lower than its offer price since it started dealing on 16 March 2013 with 90-day average price of HK$0.123. With significant premiums represented by the offer prices over the respective prevailing Share prices and Bonus Warrant prices and the thin trading volume of both the Shares and the Bonus Warrants during the review period, the Partial Offer and Warrant Offer represent valuable exit opportunities for Qualifying Shareholders and Qualifying Warrantholders to realise a portion of their investments at a fixed cash price.

6. Comparable analysis

(a) Comparable Companies

As set out in Table 2, the major contributor to the Group’s turnover was the Group’s plastic injection and moulding division which accounted for approximately 61.1% (2011: 58.5%) of its total turnover for the year ended 31 July 2012, for our comparison purposes, we have focused on identifying companies with a focus on this segment. Given the Offeror and the Company are listed in Malaysia and Hong Kong respectively, to assess the fairness and reasonableness of the Offer Price, based on Bloomberg’s equity screening tools and with reference to the relevant company descriptions, we have looked at, on a best effort basis, all Hong Kong, Malaysia and Singapore (being a close neighbour country to Malaysia) listed companies which are primarily engaged in the manufacture of plastic injection moulded components and products (i.e. having over 50% of their revenue derived from plastic injection and moulding) with their manufacturing facilities located in the PRC and total revenue over HK$700 million as recorded in their latest annual report (being about half of the Group’s turnover for the year ended 31 July 2012) and substantial of which are generated from the PRC (which has a similar operation model as that of the Company). On this basis, 5 companies, (the “ Comparable Companies ”) were found and are set out in the table below. Taking into account that the Company has a majority of its revenue derived from plastic injection and moulding, we are of the view that the Comparable Companies represent a fair and representative sample. We have performed a comparison of price-to-earnings ratios (“ PER ”) and price-to-book ratios (“ PBR ”) between the Comparable Companies and the Company.

– 63 –

LETTER FROM SOMERLEY

TABLE 10: COMPARISON OF COMPARABLE COMPANIES

							Market
							capitalisation as
							at the Latest
							Practicable
Company	Place of listing	Principal activities	Sales revenue	PER		PBR	Date
			(HK$ million)(1)	(times)(2)		(times)(3)	(HK$ million)(4)
Hi-P International Ltd	Singapore	Manufacture of precision plastic injection	7,198.5	38.19		1.18	4,217.5
(stock code: H17)		moulding, mould design and
		fabrication, assembly, ancillary
		value-added services and precision
		metal stamping
Memtech	Singapore	Manufacture and sale of customised	889.8	N/A_(5)_		0.37	314.0
International Ltd		precision moulded components such as
(stock code: M26)		high-end silicone rubber, plastic and
		silicone rubber-plastic hybrid keypads,
		mainly for the mobile phone and
		automotive industries
Fu Yu Corp Ltd	Singapore	Manufacture and sale of precision plastic	1,932.4	N/A_(5)_		0.32	311.6
(stock code: F13)		injection moulds and plastic
		components
Yusei Holdings Ltd	Hong Kong	Design, development and fabrication of	1,231.0	2.79		0.46	144.3
(stock code: 0096)		precision plastic injection moulds and
		plastic components
Huan Hsin Holdings	Singapore	Manufacture and sale of electronics and	3,205.9	N/A_(5)_		0.12	116.0
Ltd (stock code:		electrical products and components
H16)		including wire and cable, mould,
		moulded plastic products and finished
		products assembly, metal stamping,
		printed circuit boards, and surface
		mount technology assembly
	Simple average			20.49		0.49
	Maximum			38.19		1.18
	Minimum			2.79		0.12
The Company:
Offer Price			1,513.9	N/A(5)		1.04( 6)	405.3
Offer Price			1,513.9	N/A	(5)	0.66(7)	405.3

Source: Bloomberg and the websites of the Stock Exchange and Singapore Stock Exchange Limited

Notes:

(1) As referenced from the most recently published annual reports of the respective companies.
(2) Unless as otherwise specified, the PERs of the Comparable Companies are calculated based on the market capitalisation of the respective companies as at the Latest Practicable Date divided by the audited consolidated earnings attributable to shareholders of the respective companies as referenced from their most recently published annual reports.
(3) Unless as otherwise specified, the PBRs of the Comparable Companies are calculated based on the market capitalisation of the respective companies as at the Latest Practicable Date divided by the NAV attributable to shareholders of the relevant companies as referenced from their most recently published annual reports.
(4) Singapore dollar (“ SGD ”) denominated sales revenue and market capitalisation figures are translated based on the exchange rate of SGD1 = HK$6.17.
(5) The PERs of the Comparable Companies and that of the Company are not available as these companies recorded losses as reported in their most recently published annual reports.

– 64 –

LETTER FROM SOMERLEY

(6) The PBR of the Company is calculated based on the Offer Price divided by the NAV attributable to the Shareholders as at 31 January 2013 as referenced from its interim report for the six months ended 31 January 2013.
(7) The PBR implied by the Offer Price is calculated based on the Offer Price of HK$0.355 per Share and the Reassessed NAV per Share of HK$0.54.

(i) PER

As shown above, the PERs of the Comparable Companies ranged from approximately 2.79 times to 38.19 times and with a simple average of 20.49 times.

No PERs could be appraised for the Company based on its results in the latest financial year. The PER analysis may not be very useful for comparison purposes.

We tend to place more weight on the analysis of the PBR below.

(ii) PBR

The PBRs of the Comparable Companies ranged between approximately 0.12 times and 1.18 times and with a simple average of 0.49 times.

The PBR represented by the Offer Price based on NAV attributable to the Shareholders as at 31 January 2013 per Share is approximately 1.04 times and the PBR implied by the Offer Price based on the Reassessed NAV per Share is approximately 0.66 times. The decrease of Company’s PBR from 1.04 times to 0.66 times, as implied by the Offer Price, is largely as a result of having taken into account the valuation surplus of the Group’s property interests of approximately HK$259.9 million. Attention of Qualifying Shareholders, Qualifying Optionholders and Qualifying Warrantholders is drawn to the section headed “5. Property Interests” in appendix II and appendix III to the Composite Offer Document regarding the revaluation surplus and the valuation of the property interests of the Group respectively.

Comments

Qualifying Shareholders, Qualifying Optionholders and Qualifying Warrantholders should note that the Comparable Companies, listed in either Hong Kong or Singapore, may differ from the Company in terms of, for example, accounting standards and policies, business strategies, regulatory environment and future prospects. Certain facts and circumstances of the Comparable Companies may differ from those of the Company, but we consider the analysis of the Comparable Companies appropriate, which can be relied upon for comparison purpose.

We do not find the PER analysis useful when considering the circumstances of the Company which reported losses in four consecutive years since 31 July 2009. We tend to place more weight on the PBR analysis. Given the PBR based on the Reassessed NAV implied by the Offer Price is within the range of and well above the average of those of the Comparable Companies, we consider the Offer Price is fair and reasonable. As the offer

– 65 –

LETTER FROM SOMERLEY

prices for the Share Option and Bonus Warrant are based on the “see-through” concept with reference to the Offer Price of HK$0.355, we also consider the offer prices for the Share Option and Bonus Warrant to be fair and reasonable.

(b) Partial Cash Offer Precedents

We have compared the Partial Offer with other partial cash offer precedents in Hong Kong as identified from the website of the Stock Exchange. On a best effort basis, we have identified all the partial cash offer proposals in the past 10 years involving Hong Kong listed companies. These precedents involved companies in different industries and with different underlying reasons for their respective partial offers.

TABLE 11: PARTIAL CASH OFFER PRECEDENTS

								Premium/
								(Discount)
								over/to the
			Market	Premium/(Discount) of offer		price	over/to	consolidated
			capitalisation	the average share price		prior	to	NAV per	Shareholding of the
			as at the	the partial offer proposal				Share	Offeror in	the company
			Latest							after the
Announcement			Practicable	10 trading	30 trading	180 trading			before the	offer if it is
date	Company name	Sector	Date	days	days		days		offer	successful(4)
			(HK$
			million)
20 May 2005	Qingling Motors Co. Ltd	Manufacture and sale of	5,684.4	8.5%	16.3%		58.5%	(29.7)%(1)	6.9%	20.0%
	(stock code: 1122)	automobile and parts
12 November	Gold Peak Industries (stock	Manufacture and	698.4	15.7%	14.3%		8.2%	(46.9)%(1)	32.0%	48.0%
2007	code: 40)	distribution of batteries
6 May 2009	Royale Furniture Holdings	Manufacture and sales of	580.7	(4.6)%	(7.2)%		(17.8)%	(65.6)%(1)	24.9%	51.0%
	Limited (stock code:	home furniture
	1198) (“Royale
	Furniture”)
28 January 2011	SOCAM Development	Property development,	4,998.0	27.2%	31.5%		29.1%	(31.9)%(1)	37.6%	48.6%
	Limited (Previously	asset management,
	known as Shui On	cement production and
	Construction and	construction business
	Material Limited) (stock
	code: 983)
14 December	CSI Properties Limited	Property repositioning and	3,378.9	31.4%	26.9%		8.1%	(61.9)%(1)	35.0%	51.7%
2011	(stock code: 497)	investment
	Simple average			20.7%(3)	22.2%(3)		25.9%(3)	(47.2)%
	Maximum			31.4%(3)	31.5%(3)		58.5%(3)	(29.7)%
	Minimum			8.5%(3)	14.3%(3)		8.1%(3)	(65.6)%
	The Company		405.3	17.6%	24.6%		76.6%	4.4%(2)	56.04%	73.24%

Notes:

(1) NAVs of the partial cash offer precedents refer to net asset values of the companies in the then latest financial statements. None of the partial cash offer precedents provided reassessed NAV in the relevant circular.
(2) It is calculated based on the Offer Price divided by the unaudited consolidated NAV attributable to the Shareholders as at 31 January 2013. The Offer Price represents 34.3% discount to the Reassessed NAV per Share.

– 66 –

LETTER FROM SOMERLEY

(3) Royale Furniture, an outlier with discount of offer price to prevailing share prices, is excluded.
(4) All of the above partial cash offer precedents were successful with valid acceptances received over the maximum acceptances.

We note that there are 5 partial cash offer precedents, their discounts to consolidated NAV per share as represented by their respective offer prices ranged from 29.7% to 65.6% with an average discount of 47.2%.

The Offer Price represents a 4.4% premium over the unaudited consolidated NAV attributable to the Shareholders as at 31 January 2013 as compared to discounts to their NAVs in all partial cash offer precedents. In addition, the Offer Price represents a 34.3% discount to the Reassessed NAV per Share, which falls within the discounts of all the partial cash offer precedents.

As compared to the prevailing share prices, the offer prices in 4 out of 5 partial cash offer precedents represented premiums over their respective prevailing share prices except for Royale Furniture. Royale Furniture’s offer price was lower than the prevailing share prices in different periods during review.

Excluding Royale Furniture, the average premiums in the partial cash offer precedents ranged from 8.5% to 31.4%, 14.3% to 31.5% and 8.1% to 58.5% over their respective 10-day, 30-day and 180-day average share prices with averages of 20.7%, 22.2% and 25.9% respectively. The premiums offered by the Offer Price over the 10-day and 30-day average Share price were 17.6% and 24.6% respectively, within the range of all the partial cash offer precedents. The Offer Price represents a substantial premium of 76.6% over the 180-day average Share price, well above all the partial cash offer precedents.

Comments

The above partial cash offer precedents involved companies which are engaged in different businesses from the Company in terms of business activities, structure, size and geographical spread of assets and operations. However, the premium over the prevailing share prices and discount to consolidated NAV per share as represented by the offer price are generally the key consideration for shareholders in offer proposals.

The premium over the prevailing share prices in terms of 10-day and 30-day average Share prices and discount to consolidated NAV per share as represented by the Offer Price fell within the ranges of those partial cash offer precedents. The substantial premium over the 180-day average Share price as represented by the Offer Price indicates that the Shares traded substantially below the Offer Price in the past 6 months and even a longer period as discussed in section 5 above.

– 67 –

LETTER FROM SOMERLEY

DISCUSSION AND ANALYSIS

(i) The Offers

The Offers are unconditional but they are the partial ones.

Only 39.1% of the Shares, 39.2% of Share Options and 40.8% Bonus Warrants will be finally taken up by the Offeror if all the Shares, Share Options and Bonus Warrants held by Qualifying Shareholders, Qualifying Optionholders and Qualifying Warrantholders are tendered. Depending on the level of acceptance of the Partial Offer, Option Offer and Warrant Offer by the Qualifying Shareholders, Qualifying Optionholders and Qualifying Warrantholders, the resulting percentages of acceptance of their Shares, Share Options and Bonus Warrants tendered would range from 39.1% to 100%, 39.2% to 100% and 40.8% to 100% respectively in accordance with the formula as set out in the letter from Kim Eng in the Composite Offer Document.

Qualifying Shareholders, Qualifying Optionholders and Qualifying Warrantholders who tender their Shares, Share Options and Bonus Warrants may hold odd lots of the Shares (for Optionholders, upon full exercise of the Share Options) and Bonus Warrants after taking up by the Offeror of the Shares, Share Options and Bonus Warrants tendered by the Accepting Shareholders, Accepting Optionholders and Accepting Warrantholders on an equitable basis in accordance with the formula as set out in the letter from Kim Eng in the Composite Offer Document. Odd lots are generally less marketable and consequently, less realisable or, if realised, might be at less market value.

Accepting Shareholders, Accepting Optionholders and Accepting Warrantholders should have regard for realising existing odd lot holdings and avoiding creating residual odd lot holdings through accepting the Offers. Kim Eng has been appointed to match sales and purchase of odd lot holdings of Shares and Bonus Warrants in the market on best effort basis, for a period of six weeks following the close of the Offers to enable Qualifying Shareholders and Qualifying Warrantholders to dispose of their odd lots or to top up their odd lots to whole board lots. Since the Share Options are not transferable, NO matching sales or purchases will be arranged for any resultant odd lot holding of Share Option of Qualifying Optionholders.

(ii) Factors in reaching our opinion and recommendation

In forming our opinion and recommendation below, we have taken into account all the factors set out under the headed “Principal factors and reasons considered” above, which are summarised below:

(a) Premium over the prevailing Share and Bonus Warrant prices

The Offer Price is higher than the market price of Shares prevailing for the entire 5-year review period prior to the date of the Initial Announcement and until the Last Practicable Date. The Bonus Warrant also traded below the Bonus Warrant offer price since it is listed.

– 68 –

LETTER FROM SOMERLEY

The premiums of the Offer Price over the prevailing Share price are 17.6%, 24.6% and 76.6% based on 10-, 30- and 180-day average prices. The premiums based on 10- and 30-day average prices are within the range of the partial cash offer precedents. The premium based on 180-day average price in our opinion is substantial, higher than all the partial cash offer precedents.

(b) Liquidity

The opportunities under the Offers for all Qualifying Shareholders, Qualifying Optionholders and Qualifying Warrantholders to be able to sell their Shares, Share Options and Bonus Warrants at fixed cash prices are valuable. Based on Tables 8 and 9 above, the Shares and the Bonus Warrants have not, in our opinion, generally been actively traded during the respective review periods. The Offers permit Qualifying Shareholders and Qualifying Warrantholders in particular to sell a higher proportion of any large holding of Shares and Bonus Warrants held by them in a single trade which may not normally be possible given average daily trading volumes in Shares and Bonus Warrants at or above the market price prevailing before the Offers were made.

(c) Discount to NAV

The premium of the Offer Price over the Group’s book value as at 31 January 2013 is 4.4% as compared to discounts to NAVs in all partial cash offer precedents. The Offer Price represents a discount of 34.3% to the Reassessed NAV per Share, which is within the range of the partial cash offer precedents.

The PBR implied by the Offer Price based on Reassessed NAV per Share is 0.66 times, which is higher than the average of those of the Comparable Companies.

(d) Financial performance and outlook of the Group

The Company reported net losses in 4 consecutive years since 31 July 2009. Though it returned to a profit for the six months ended 31 January 2013, its profit is mainly attributable to the exchange gains during the period. Such gains are non-recurrent and subject to fluctuations from time to time that cannot be relied upon to assess the Group’s future financial performance. The Group is highly geared with outstanding bank borrowings of HK$477.1 million as at 31 March 2013 and net current liabilities of HK$16.0 million as at 31 January 2013. It seems liquidity is a concern of the Group. The Group intends to dispose of the Land by changing its use from industrial to residential and/or commercial. Application has been made with the Zhuhai Government in this regard but there is no progress as advised by the management of the Group as at the Latest Practicable Date. The management of the Group is of the view that such disposal may or may not materialise but if it is approved by the Zhuhai Government and the Land is sold through the public auction, the NAV of the Group may increase and the proceeds will be used to reduce bank borrowings.

– 69 –

LETTER FROM SOMERLEY

Although the disposal of the Land might potentially increase the NAV of the Group, such disposal may or may not materialise. Given the plastics industry in which the Group operates remains uncertain and challenging, as discussed in sections 3 and 4 above, it remains largely uncertain as to whether the Group will be profitable in the future.

(e) Possible drop in Share and Bonus Warrant prices after the Offers close

The Offers may support the Share and Bonus Warrant prices for the time being at levels higher than they might otherwise be. Without the Offers, the Share and the Bonus Warrant prices might be lower than they were on the Latest Practicable Date in view of the price performance of the Shares and Bonus Warrants during the review periods.

Opinion and recommendation

We consider that the terms of the Offers are fair and reasonable so far as Qualifying Shareholders, Qualifying Optionholders and Qualifying Warrantholders are concerned, principally because the Group’s past financial performance and the Share price performance as compared to its peers and the partial cash offer precedents. We consider these factors the key consideration when assessing offer terms for industrial companies such as the Company.

Qualifying Shareholders, Qualifying Optionholders and Qualifying Warrantholders should consider the Offers from the point of view of their own individual risk profiles and circumstances. The Offers are partial offers which facilitate Qualifying Shareholders, Qualifying Optionholders and Qualifying Warrantholders not to completely “exit” the Group but retain part of their Shares, Share Options and Bonus Warrants.

As regards acceptance, we recommend that:

the Qualifying Shareholders to accept the Partial Offer; and
the Qualifying Optionholders and the Qualifying Warrantholders who hold the Share Options and Bonus Warrants to accept the Option Offer and Warrant Offer respectively.

– 70 –

LETTER FROM SOMERLEY

Yours faithfully, for and on behalf of SOMERLEY LIMITED Kenneth Chow Jenny Leung Managing Director – Director Corporate Finance

– 71 –

APPENDIX I FURTHER TERMS OF THE PARTIAL OFFER, THE OPTION OFFER AND THE WARRANT OFFER

PROCEDURES FOR ACCEPTANCE AND SETTLEMENT

1. General procedures for acceptance

Partial Offer

1.1 Only ONE Form of Acceptance will be accepted from each Qualifying Shareholder by the Share Registrar. If any information in the Form of Acceptance is missing, incomplete or erroneous, the acceptance of the Partial Offer by such Shareholder will not be considered as valid until such missing, incomplete or erroneous information has been completed and rectified in such Form of Acceptance before the Closing Date.
1.2 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 in respect thereof) (if applicable) in respect of the Shares is/are in the name of the Qualifying Shareholder(s), and he/she wishes to accept the Partial Offer whether in full or in respect of part of his/her holding of Shares, he/she should complete and return the accompanying Form of Acceptance in accordance with the instructions printed in this Composite Offer Document and the instructions printed on the Form of Acceptance. The instructions in this Composite Offer Document should be read together with the instructions on the Form of Acceptance (which form part of the terms of the Partial Offer).
1.3 In order to be valid, the completed Form of Acceptance should be forwarded, together with the share certificate(s), transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) (if applicable) for the exact number of Shares in respect of which the relevant Qualifying Shareholder wishes to accept the Partial Offer, by post or by hand to the Share Registrar, at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong, in an envelope marked “ V.S. International Group Limited – Partial Offer ” as soon as possible after receipt of the Form of Acceptance but in any event so as to reach the Share Registrar by no later than 4:00 p.m. (Hong Kong time) on 28 June 2013, being the Closing Date. The Partial Offer will be open for acceptance for 21 days from the date of this Composite Offer Document. The Closing Date will not be extended.
1.4 If the Form of Acceptance is executed by a person other than the registered holder, appropriate evidence of authority (e.g. a grant of probate or certified copy of a power of attorney) to the satisfaction of the Share Registrar must be delivered to the Share Registrar with the completed Form of Acceptance.
1.5 No acknowledgement of receipt of any Form of Acceptance, share certificate(s), transfer receipt(s) or other document(s) of title (and/or any indemnity or indemnities in respect thereof) (if applicable) will be given.

– I-1 –

APPENDIX I FURTHER TERMS OF THE PARTIAL OFFER, THE OPTION OFFER AND THE WARRANT OFFER

1.6 In relation to any acceptance(s) of the Partial Offer in respect of Shares held in CCASS, the Company reserves the right to make such alterations, additions or modifications to the terms of the Partial Offer as may be necessary or desirable to give effect to any purported acceptance of the Partial Offer, whether to comply with the facilities or requirements of CCASS or otherwise, provided such alterations, additions or modifications are consistent with the requirements of the Takeovers Code or are otherwise made with the Executive’s consent.

Option Offer

1.7 Only ONE Form of Option Offer Acceptance will be accepted from each Qualifying Optionholder by the Share Registrar. If any information in the Form of Option Offer Acceptance is missing, incomplete or erroneous, the acceptance of the Option Offer by such Optionholder will not be considered as valid until such missing, incomplete or erroneous information has been completed and rectified in such Form of Option Offer Acceptance before the Closing Date.
1.8 To accept the Option Offer, whether in full or in respect of part of his/her holding of Share Options, Qualifying Optionholders should complete and sign the accompanying Form of Option Offer Acceptance in accordance with the instructions printed in this Composite Offer Document and the instructions printed on the Form of Option Offer Acceptance. The instructions in this Composite Offer Document should be read together with the instructions on the Form of Option Offer Acceptance (which form part of the terms of the Option Offer).
1.9 In order to be valid, the completed and signed Form of Option Offer Acceptance, stating the number of Shares underlying the Share Options in respect of which the Qualifying Optionholder intends to accept the Option Offer for those Share Options should be forwarded, together with all the letter(s) of grant of the Share Options for all exercise periods that have not lapsed, by post or by hand to the Share Registrar at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong in an envelope marked “ V.S. International Group Limited – Option Offer ”, as soon as possible after receipt of the Form of Option Offer Acceptance but in any event so as to reach the Share Registrar by no later than 4:00 p.m. Hong Kong time on 28 June 2013, being the Closing Date. If the number of Shares underlying the Share Options as evidenced in the letter(s) of grant of the Share Options for all exercise periods that have not lapsed is less than the number of Shares underlying the Share Options stated in the Form of Option Offer Acceptance, or the Qualifying Optionholder fails to submit all the letter(s) of grant of the Share Options for all exercise periods that have not lapsed, his/her acceptance would be invalid. Acceptance will only be valid if the Share Options tendered by the Qualifying Optionholder have not lapsed as at the Closing Date. The Closing Date will not be extended.

– I-2 –

APPENDIX I FURTHER TERMS OF THE PARTIAL OFFER, THE OPTION OFFER AND THE WARRANT OFFER

1.10 Where the Offeror is only taking up part but not all of the Share Options tendered by a Qualifying Optionholder, and the Share Options have different exercise periods, the Share Options to be taken up by the Offeror and cancelled on the Closing Date in respect of the Share Options with different exercise periods will be determined on a pro-rata basis in accordance with the following formula:

==> picture [85 x 25] intentionally omitted <==

T: Total number of Shares underlying the Share Options held by the relevant individual Qualifying Optionholder under the respective exercise period
U: Total number of Shares underlying the Share Options held by the relevant individual Qualifying Optionholder
V: Total number of Shares underlying the Share Options tendered by the relevant individual Qualifying Optionholder to be taken up by the Offeror and cancelled on the Closing Date

Qualifying Optionholders will have the right to elect how many Shares underlying the Share Options to tender for acceptance under the Option Offer. In the Form of Option Offer Acceptance, Qualifying Optionholders will be requested to indicate the number of Shares underlying the Share Options they wish to tender.

If a Qualifying Optionholder wants to tender any or all of his/her Share Options, he/she must enclose all the letter(s) of grant of the Share Options for all exercise periods that have not lapsed as the Offeror will apply a pro-rata mechanism across the Share Options for all exercise periods on a pro-rata basis. In other words, Qualifying Optionholders cannot choose which exercise periods of Share Options to tender. Failure to attach all the letter(s) of grant for the Share Options for all exercise periods that have not lapsed would render the acceptance of the Option Offer null and void. Fraction of Share Option arising from the above formula will be rounded up or down to the nearest whole number at the discretion of the Offeror.

Warrant Offer

1.11 Only ONE Form of Warrant Offer Acceptance will be accepted from each Qualifying Warrantholder by the Warrant Registrar. If any information in the Form of Warrant Offer Acceptance is missing, incomplete or erroneous, the acceptance of the Warrant Offer by such Warrantholder will not be considered as valid until such missing, incomplete or erroneous information has been completed and rectified in such Form of Warrant Offer Acceptance before the Closing Date.
1.12 If the Bonus Warrant certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities in respect thereof) (if applicable) in respect of the Bonus Warrant(s) is/are in the name of

– I-3 –

APPENDIX I FURTHER TERMS OF THE PARTIAL OFFER, THE OPTION OFFER AND THE WARRANT OFFER

the Qualifying Warrantholder(s), and he/she wishes to accept the Warrant Offer whether in full or in respect of part of his/her holding of Bonus Warrant(s), he/she should complete and return the accompanying Form of Warrant Offer Acceptance in accordance with the instructions printed in this Composite Offer Document and the instructions printed on the Form of Warrant Offer Acceptance. The instructions in this Composite Offer Document should be read together with the instructions on the Form of Warrant Offer Acceptance (which form part of the terms of the Warrant Offer).

1.13 To be valid, the completed Form of Warrant Offer Acceptance should be forwarded, together with the Bonus Warrant certificate(s), transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) (if applicable) for the exact number of Bonus Warrant(s) in respect of which the relevant Qualifying Warrantholder wishes to accept the Warrant Offer, by post or by hand to the Warrant Registrar, at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong, in an envelope marked “ V.S. International Group Limited – Warrant Offer ” as soon as possible after receipt of the Form of Warrant Offer Acceptance but in any event so as to reach the Warrant Registrar by no later than 4:00 p.m. (Hong Kong time) on 28 June 2013, being the Closing Date. The Warrant Offer will be open for acceptance for 21 days from the date of the Composite Offer Document. The Closing Date will not be extended.
1.14 If the Form of Warrant Offer Acceptance is executed by a person other than the registered holder, appropriate evidence of authority (e.g. a grant of probate or certified copy of a power of attorney) to the satisfaction of the Warrant Registrar must be delivered to the Warrant Registrar with the completed Form of Warrant Offer Acceptance.
1.15 No acknowledgement of receipt of any Form of Warrant Offer Acceptance, Bonus Warrant certificate(s), transfer receipt(s) or other document(s) of title (and/or any indemnity or indemnities in respect thereof) (if applicable) will be given.
1.16 In relation to any acceptance(s) of the Warrant Offer in respect of Bonus Warrants held in CCASS, the Company reserves the right to make such alterations, additions or modifications to the terms of the Warrant Offer as may be necessary or desirable to give effect to any purported acceptance of the Warrant Offer, whether to comply with the facilities or requirements of CCASS or otherwise, provided such alterations, additions or modifications are consistent with the requirements of the Takeovers Code or are otherwise made with the Executive’s consent.

2. Nominee holdings

2.1 If the share certificate(s), Bonus Warrant certificate(s), transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) (if applicable) in respect of a Qualifying Shareholder’s

– I-4 –

APPENDIX I FURTHER TERMS OF THE PARTIAL OFFER, THE OPTION OFFER AND THE WARRANT OFFER

Share(s) or a Qualifying Warrantholder’s Bonus Warrant(s) is/are in the name of a nominee company or some name other than his/her own, and such Qualifying Shareholder or Qualifying Warrantholder wishes to accept the Partial Offer or Warrant Offer (either in full or in respect of part of his/her holding(s) of Shares or Bonus Warrants), he/she must either:

(i) lodge the share certificate(s), Bonus Warrant certificate(s), transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) (if applicable) with the nominee company, or other nominee, with instructions authorising it to accept the Partial Offer or the Warrant Offer on his/her behalf and requesting it to deliver the Form of Acceptance or the Form of Warrant Offer Acceptance duly completed together with the relevant share certificate(s), Bonus Warrant certificate(s), transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) (if applicable) to the Share Registrar or the Warrant Registrar (as the case may be), within such deadline (which may be earlier than the deadline specified under the Partial Offer or the Warrant Offer) as may be stipulated by the nominee; or
(ii) arrange for the Shares or Bonus Warrants to be registered in his/her name by the Company through the Share Registrar or the Warrant Registrar (as the case may be), and send the Form of Acceptance or the Form of Warrant Offer Acceptance duly completed and signed together with the relevant share certificate(s), Bonus Warrant certificate(s), transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) (if applicable) to the Share Registrar or the Warrant Registrar (as the case may be) before 4:00 p.m. on 28 June 2013, being the Closing Date; or
(iii) where his/her Shares or Bonus Warrants are deposited in CCASS via his/her licensed securities dealer/broker/custodian bank, instruct his/her licensed securities dealer/broker/ custodian bank to authorise HKSCC Nominees Limited to approve and/or accept the Partial Offer or the Warrant Offer on his/her behalf on or before the deadline set by HKSCC Nominees Limited or any other date as shall be determined by HKSCC Nominees Limited. In order to meet the deadline set by HKSCC Nominees Limited, that Qualifying Shareholder or Qualifying Warrantholder should check with his/her licensed securities dealer/broker/custodian bank for the timing on processing his/her instruction, and submit such instruction to his/her licensed securities dealer/ broker/custodian bank as required by them; or
(iv) if the Shares or Bonus Warrants have been lodged with his/her Investor Participant Account with CCASS, authorise his/her instruction via the CCASS Phone System or CCASS Internet System no later than one Business Day before the deadline set by HKSCC Nominees Limited or any other date as shall be determined by HKSCC Nominees Limited.

– I-5 –

APPENDIX I FURTHER TERMS OF THE PARTIAL OFFER, THE OPTION OFFER AND THE WARRANT OFFER

2.2 Qualifying Shareholders or Qualifying Warrantholders with such a nominee holding of Shares or Bonus Warrants should ensure that they undertake the above applicable course of action promptly to allow their nominee(s) sufficient time to complete the acceptance procedure on his/her behalf before the Closing Date.

3. Recent transfers

If a Qualifying Shareholder or Qualifying Warrantholder has lodged transfer(s) of Shares or Bonus Warrants for registration in his/her name and has not yet received the share certificate(s) or Bonus Warrant certificate(s) and wishes to accept the Partial Offer or Warrant Offer, he/she should nevertheless complete and sign the Form of Acceptance or the Form of Warrant Offer Acceptance (as the case may be) and deliver it to the Share Registrar or Warrant Registrar (as the case may be) together with the transfer receipt(s) duly signed by him/her. Such action will be deemed to be an irrevocable authority to the Offeror and/or Kim Eng and/or any of their respective agent(s) or such other person(s) as any of them may direct for the purpose of collecting from the Company, the Share Registrar or Warrant Registrar (as the case may be) on his/her behalf the relevant share certificate(s) or Bonus Warrant Certificate(s) when issued and to deliver such share certificate(s) or Bonus Warrant Certificate(s), subject to the terms of the Partial Offer or the Warrant Offer, as if it was/they were delivered to the Share Registrar or Warrant Registrar with the Form of Acceptance or the Form of Warrant Offer Acceptance.

4. Lost or unavailable share certificate(s) or Bonus Warrant certificate(s)

4.1 If the share certificate(s) or Bonus Warrant certificate(s), transfer receipt(s) and/or any other document(s) of title is/are not readily available and/or is/are lost and a Qualifying Shareholder or Qualifying Warrantholder wishes to accept the Partial Offer or the Warrant Offer, the Form of Acceptance or the Form of Warrant Offer Acceptance should nevertheless be completed, signed and delivered, together with a letter stating that he/she has lost one or more of his/her share certificate(s) or Bonus Warrant certificate(s) and/or transfer receipts and/or other document(s) of title or that it/they is/are not readily available, to the Share Registrar or Warrant Registrar (as the case may be) so as to reach the Share Registrar or Warrant Registrar no later than 4:00 p.m. on 28 June 2013, being the Closing Date. If the Qualifying Shareholder or Qualifying Warrantholder finds such document(s) or if it/they become available, the relevant share certificate(s), Bonus Warrant certificate(s), transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) (if applicable) should be forwarded to the Share Registrar or Warrant Registrar (as the case may be) as soon as possible thereafter and in any event no later than 4:00 p.m. on 28 June 2013, being the Closing Date.
4.2 If a Qualifying Shareholder or Qualifying Warrantholder has lost his/her share certificate(s), Bonus Warrant certificate(s), transfer receipt(s) and/or any other document(s) of title, he/she should write to the Share Registrar or Warrant Registrar (as the case may be) and request a letter of indemnity in respect of the lost share certificate(s), Bonus Warrant certificate(s), transfer receipt(s) and/or any

– I-6 –

APPENDIX I FURTHER TERMS OF THE PARTIAL OFFER, THE OPTION OFFER AND THE WARRANT OFFER

other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) (as the case may be) which, when completed in accordance with the instructions given, should be returned, together with the Form of Acceptance or the Form of Warrant Offer Acceptance (as the case may be) and any share certificate(s), Bonus Warrant certificate(s), transfer receipt(s) and/or any other document(s) of title which are available, to the Share Registrar or Warrant Registrar (as the case may be) either by post or by hand, so as to reach the Share Registrar or Warrant Registrar (as the case may be) no later than 4:00 p.m. on 28 June 2013, being the Closing Date. In such cases, the Qualifying Shareholder or Qualifying Warrantholder will be informed of the fees and/or expenses payable to the Share Registrar or Warrant Registrar (as the case may be) for which he/she will be responsible.

5. Lost letter(s) of grant in respect of the Share Options

If the letter(s) of grant of the Share Option(s) is/are not readily available or is/are lost, and a Qualifying Optionholder wishes to accept the Option Offer or exercise the Share Option and accept the Partial Offer, he/she must:

if he/she wishes to accept the Option Offer, complete, sign and deliver the Form of Option Offer Acceptance and deliver the same to the Share Registrar, together with a letter stating he/she has lost one or more of his/her letter(s) of grant and an indemnity (a form which is available from the Company), so as to reach the Share Registrar, no later than 4:00 p.m. on 28 June 2013, being the Closing Date.
if he/she wishes to accept the Partial Offer, exercise the Share Options to the extent exercisable as indicated in paragraph 9 in this Appendix below, but so that the relevant exercise notice, cheque for payment of the subscription monies must reach the corporate finance director of the Company at 40th Floor, Jardine House, 1 Connaught Place, Hong Kong, and the Form of Acceptance must reach the Share Registrar 7 Business Days before the Closing Date. He/she should at the same time deliver to the Share Registrar, a letter stating that he/she has lost one or more of his/her letter(s) of grant, and an indemnity (in a form available from the Company).

6. Additional Form of Acceptance, Form of Option Offer Acceptance and Form of Warrant Offer Acceptance

If a Qualifying Shareholder, Qualifying Optionholder or Qualifying Warrantholder has lost the accompanying Form of Acceptance, Form of Option Offer Acceptance or Form of Warrant Offer Acceptance or such original has become unusable, and requires a replacement of such form, he/she should write to the Share Registrar or Warrant Registrar or visit the Share Registrar or the Warrant Registrar at its office and request an additional Form of Acceptance, Form of Option Offer Acceptance or Form of Warrant Offer Acceptance for completion by such Qualifying Shareholder, Qualifying Optionholder or Qualifying Warrantholder. Alternatively, he/she could download the forms from the website of the Stock Exchange at www.hkexnews.hk or the website of the Company at www.vs-ig.com.

– I-7 –

FURTHER TERMS OF THE PARTIAL OFFER, THE OPTION OFFER AND THE WARRANT OFFER

APPENDIX I

7. Settlement

Partial Offer and Warrant Offer

7.1 Provided that a duly completed Form of Acceptance or Form of Warrant Offer Acceptance, accompanied by the relevant share certificate(s), Bonus Warrant certificate(s), transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) (if applicable) are received by the Share Registrar or Warrant Registrar (as the case may be) by no later than 4:00 p.m. on 28 June 2013, being the Closing Date, and are in order in all respects and in accordance with the Takeovers Code, the Share Registrar or Warrant Registrar (as the case may be) will send to the relevant Accepting Shareholder or Accepting Warrantholder by ordinary post, at his/her own risks: (i) if valid acceptance are received for no more than 224,890,025 Offer Shares and no more than 17,738,083 Bonus Warrants, a remittance for the amount due to him/her under the Partial Offer or Warrant Offer (taking into account of any stamp duty); or (ii) if valid acceptances are received for more than 224,890,025 Offer Shares and/or more than 17,738,083 Bonus Warrants, a remittance for the amount due to him/her under the Partial Offer or Warrant Offer, together with any share certificate(s) or Bonus Warrant certificate(s) and/or any transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities in respect thereof) (if applicable) for Shares or Bonus Warrants not taken up or, if applicable, share certificate(s) or Bonus Warrant certificate(s) in respect of the balance of such Shares or Bonus Warrants (taking account of any scaling down of his/her acceptance, stamp duty and the fees payable to the Share Registrar or Warrant Registrar in respect of lost or unavailable share certificate(s) or Bonus Warrant certificate(s)) in accordance with the authority and provisions contained in the Form of Acceptance or the Form of Warrant Offer Acceptance as soon as possible but in any event within 7 Business Days following the Closing Date.
7.2 Settlement of the consideration to which any Accepting Shareholder or Accepting Warrantholder is entitled under the Partial Offer or Warrant Offer (as the case may be) will be implemented in full in accordance with the terms of the Partial Offer or Warrant Offer (save with respect to payment of seller’s ad valorem stamp duty) without regard to any lien, right of set-off, counterclaim, or other analogous right to which the Offeror may otherwise be, or claim to be, entitled against such Accepting Shareholder or Accepting Warrantholder.

Option Offer

7.3 Provided that a duly completed Form of Option Offer Acceptance, accompanied by the letter(s) of grant and/or other document(s) as set out in this Appendix (if applicable) are received by the Share Registrar no later than 4:00 p.m. on 28 June 2013, being the Closing Date, and are in order in all respects, a cheque for the amount due to each Qualifying Optionholder in respect of the Share Options surrendered by him/her under the Option Offer and the letter(s) of grant in

– I-8 –

APPENDIX I FURTHER TERMS OF THE PARTIAL OFFER, THE OPTION OFFER AND THE WARRANT OFFER

relation to the Share Options which are not successfully tendered and/or accepted under the Option Offer will be despatched to the Qualifying Optionholder by ordinary post at his/her own risk as soon as possible but in any event within 7 Business Days following the Closing Date.

7.4 Settlement of the consideration to which any Accepting Optionholder is entitled under the Option Offer will be implemented in full in accordance with the terms of the Option Offer without regard to any lien, right of set-off, counterclaim or other analogous right to which the Offeror may otherwise be, or claim to be, entitled against such Accepting Optionholder.

8. New Shareholders or New Warrantholder

Any new Shareholder or new Warrantholder may collect a copy of this Composite Offer Document, together with a blank Form of Acceptance or Form of Warrant Offer Acceptance (as appropriate) from the Share Registrar or the Warrant Registrar (as the case may be) at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong during the period from the date of this Composite Offer Document to the Closing Date (both days inclusive), between 9:00 a.m. and 4:00 p.m. (Hong Kong time) from Monday to Friday (other than public holidays). Such Shareholder or Warrantholder may also contact the Share Registrar or the Warrant Registrar (as the case may be) (through the enquiry general telephone line at 2862 8555) and request a copy of this Composite Offer Document and a blank Form of Acceptance or Form of Warrant Offer Acceptance (as appropriate) to be sent to his/her registered address as recorded in the Register or the register of holders of Bonus Warrants (as the case may be).

9. Exercise of Share Options

A Qualifying Optionholder who wishes to accept the Partial Offer instead of the Option Offer may exercise the Share Options (to the extent exercisable) by completing, signing and delivering a notice for exercising the Share Options together with a cheque for payment of the subscription monies and the related letter(s) of grant for the Share Options to the corporate finance director of the Company at 40th Floor, Jardine House, 1 Connaught Place, Hong Kong 7 Business Days before the Closing Date. The Qualifying Optionholder should at the same time complete and sign the Form of Acceptance and deliver it to the Share Registrar together with a copy of the set of the documents delivered to the corporate finance director for exercising the Share Options. Exercise of the Share Options is subject to the terms and conditions of the Share Option Schemes and the terms attaching to the grant of the relevant Share Options. Delivery of the completed and signed Form of Acceptance to the Share Registrar will not serve to complete the exercise of the Share Options but will only be deemed to be an irrevocable authority to the Offeror and/or Kim Eng and/or any of their respective agent(s) or such other person(s) as they may direct to collect from the Company or the Share Registrar on his/her behalf the relevant share certificate(s) when issued on exercise of the Share Options as if it was/they were delivered to the Share Registrar with the Form of Acceptance. If a Qualifying Optionholder fails to exercise his/her Share Options as aforesaid, there is no guarantee that the Company may issue the relevant share certificate in

– I-9 –

APPENDIX I FURTHER TERMS OF THE PARTIAL OFFER, THE OPTION OFFER AND THE WARRANT OFFER

respect of the Shares allotted pursuant to his/her exercise of the Share Option(s) to such Qualifying Optionholder in time for him/her to accept the Partial Offer as a Qualifying Shareholder of such Shares under the terms of the Partial Offer.

10. Exercise of Bonus Warrants

A Qualifying Warrantholder who wishes to accept the Partial Offer instead of the Warrant Offer may exercise the Bonus Warrant by completing, signing and delivering a notice for exercising the Bonus Warrants together with a cheque for payment of the subscription monies and the related certificate(s) for the Bonus Warrants to the Warrant Registrar at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong 7 Business Days before the Closing Date. The Qualifying Warrantholder should at the same time complete and sign the Form of Acceptance and deliver it to the Share Registrar together with a copy of the set of the documents delivered to the Warrant Registrar for exercising the Bonus Warrants. Exercise of the Bonus Warrants is subject to the terms and conditions of the prospectus of the Company dated 18 February 2011 and the terms attaching to the grant of the relevant Bonus Warrants. Delivery of the completed and signed Form of Acceptance to the Share Registrar will not serve to complete the exercise of the Bonus Warrants but will only be deemed to be an irrevocable authority to the Offeror and/or Kim Eng and/or any of their respective agent(s) or such other person(s) as they may direct to collect from the Company or the Share Registrar on his/her behalf the relevant share certificate(s) when issued on exercise of the Bonus Warrants as if it was/they were delivered to the Share Registrar with the Form of Acceptance. If a Qualifying Warrantholder fails to exercise his/her Bonus Warrants as aforesaid, there is no guarantee that the Company may issue the relevant share certificates in respect of the Shares allotted pursuant to his/her exercise of the Bonus Warrants to such Qualifying Warrantholder in time for him/her to accept the Partial Offer as a Qualifying Shareholder of such Shares under the terms of the Partial Offer.

11. Lapse of Share Options

Nothing in this Composite Offer Document nor the Option Offer will serve to extend the life of any Share Option which lapses under the Share Option Scheme. No exercise of Share Options nor acceptance of the Option Offer may be made in relation to any Share Option that has lapsed.

12. Lapse of Bonus Warrants

Nothing in this Composite Offer Document nor the Warrant Offer will serve to extend the life of any Bonus Warrant which lapses according to the terms attaching to the grant of the relevant Bonus Warrants. No exercise of Bonus Warrant nor acceptance of the Warrant Offer may be made in relation to any Bonus Warrant that has lapsed.

– I-10 –

FURTHER TERMS OF THE PARTIAL OFFER, THE OPTION OFFER AND THE WARRANT OFFER

APPENDIX I

EFFECT OF ACCEPTANCE OF THE PARTIAL OFFER BY QUALIFYING SHAREHOLDERS, THE OPTION OFFER BY QUALIFYING OPTIONHOLDERS AND THE WARRANT OFFER BY QUALIFYING WARRANTHOLDERS

By validly accepting the Partial Offer, the Qualifying Shareholders will sell their tendered Offer Shares which are finally taken up by the Offeror, free from all encumbrances and together with all rights and benefits at any time accruing thereto including all rights to any dividends or other distributions declared, made or paid on or after the Closing Date. Any dividends or other distributions declared, made or paid before the Closing Date will be paid by the Company to the Shareholders who are qualified for such dividends or distributions.

By validly accepting the Option Offer, the Qualifying Optionholders will tender their Share Options for cancellation which are finally taken up by the Offeror and such tendered and finally taken up Share Options will be cancelled on the Closing Date.

By validly accepting the Warrant Offer, the Qualifying Warrantholders will tender their Bonus Warrants which are finally taken up by the Offeror and the Offeror is entitled to exercise the tendered and finally taken up Bonus Warrants on or after the Closing Date.

A Qualifying Optionholder or Qualifying Warrantholder may exercise all or any part of the Share Options or Bonus Warrants, to the extent exercisable, in accordance with the Share Option Scheme or terms pursuant the Bonus Warrants that were granted. Any Shares allotted as a result of the exercise of any Share Options or Bonus Warrants will be subject to and be eligible to participate in accepting the Partial Offer. He/she who has no intention to, or is not yet able to exercise any of his/her Share Options or Bonus Warrants that has not yet been vested, may accept the Option Offer or Warrant Offer in respect of their Share Options or Bonus Warrants in accordance with its terms as set out in this Appendix and in the Letter from Kim Eng on pages 23 to 35 of this Composite Offer Document. Qualifying Optionholders or Qualifying Warrantholders who do nothing will continue to hold the Share Options or Bonus Warrants in accordance with the terms of the Share Option Scheme and the terms attaching to the grant of the relevant Bonus Warrants.

Each Qualifying Shareholder, Qualifying Optionholder or Qualifying Warrantholder by whom, or on whose behalf, a Form of Acceptance, Form of Option Offer Acceptance or Form of Warrant Offer Acceptance (as the case may be) is executed irrevocably undertakes, represents, warrants and agrees to and with the Offeror and Kim Eng (so as to bind him/her, his/her personal representatives, heirs, successors and assigns) to the effect:

1. Irrevocable acceptances

That the Form of Acceptance, the Form of Option Offer Acceptance or the Form of Warrant Offer Acceptance (as the case may be) which has been duly completed and received by the Share Registrar or the Warrant Registrar (as the case may be) will constitute irrevocable acceptance of the Partial Offer, the Option Offer or the Warrant Offer (as the case may be), except in the circumstances that the Executive requires that such Accepting

– I-11 –

FURTHER TERMS OF THE PARTIAL OFFER, THE OPTION OFFER AND THE WARRANT OFFER

APPENDIX I

Shareholder, Accepting Optionholder or Accepting Warrantholder is granted a right to withdraw in accordance with Rule 19.2 of the Takeovers Code. Rule 19.2 of the Takeovers Code relates to failure to announce the results of the Partial Offer, the Option Offer and the Warrant Offer as set out in the paragraph headed “Announcement” in this Appendix below and provides that the Executive may require that Accepting Shareholders, Accepting Optionholders and Accepting Warrantholders be granted a right of withdrawal, on terms acceptable to the Executive, until the requirements of Rule 19 of the Takeovers Code can be met.

If the Partial Offer, the Option Offer or the Warrant Offer is withdrawn with the consent of the Executive in accordance with the Takeovers Code, the Offeror shall, as soon as possible but in any event within 7 Business Days thereof, return the relevant share certificate(s), letter(s) of grant in respect the Share Options or Bonus Warrant 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) (if applicable) in respect of such number of Shares, Share Options or Bonus Warrants lodged with the Form of Acceptance, the Form of Option Offer Acceptance or the Form of Warrant Offer Acceptance (as the case may be) to the relevant Accepting Shareholder(s), Accepting Optionholder(s) or Accepting Warrantholder(s) by ordinary post at his/her own risk.

2. Execution

That the execution of the Form of Acceptance, the Form of Option Offer Acceptance or the Form of Warrant Offer Acceptance subject to Rule 19.2 of the Takeovers Code, shall constitute an acceptance by the relevant Qualifying Shareholder, Qualifying Optionholder or Qualifying Warrantholder of the Partial Offer, the Option Offer or the Warrant Offer in respect of the number of the Shares, the Share Options or the Bonus Warrants set out in the Form of Acceptance, the Form of Option Offer Acceptance or the Form of Warrant Offer Acceptance (as the case may be) and subject to the terms and conditions set out or referred to in this Composite Offer Document and the Form of Acceptance, the Form of Option Offer Acceptance or the Form of Warrant Offer Acceptance and that, once lodged, such acceptance shall be irrevocable, unless withdrawn in accordance with the Takeovers Code.

3. Representations and warranties

(a) That he/she has full power and authority to tender, sell, assign and transfer all the Shares, Share Options or Bonus Warrants (together with all rights accruing or attaching thereto) specified in such Form of Acceptance under the Partial Offer, the Form of Option Offer Acceptance under the Option Offer or the Form of Warrant Offer Acceptance under the Warrant Offer and that the Shares, the Share Options and Bonus Warrants (as the case may be) are free from all liens, charges, options, claims, equities, adverse interests, third party rights or encumbrances whatsoever and together with all rights accruing or attaching thereto, including, without limitation, the right to receive dividends and other distributions declared, made or paid, if any, on or after the Closing Date; and

– I-12 –

APPENDIX I FURTHER TERMS OF THE PARTIAL OFFER, THE OPTION OFFER AND THE WARRANT OFFER

(b) that if he/she is a resident or a citizen of a jurisdiction outside Hong Kong, he/she has fully observed any applicable legal or other requirements and that the Partial Offer, the Option Offer or the Warrant Offer (as the case may be) may be accepted by him/her lawfully under the laws of the relevant jurisdiction.

4. Appointment and authority

That the execution of the Form of Acceptance, the Form of Option Offer Acceptance or the Form of Warrant Offer Acceptance constitutes:

(a) the irrevocable appointment of any director or officer of the Offeror or Kim Eng, or such other person as any of them may direct, as the agent (“ Agent ”) of such Qualifying Shareholder, Qualifying Optionholder and Qualifying Warrantholder; and
(b) an irrevocable instruction to the Agent to complete and execute the Form of Acceptance, the Form of Option Offer Acceptance and/or the Form of Warrant Offer Acceptance and/or any other document at the Agent’s discretion on behalf of the person accepting the Partial Offer, the Option Offer and/or the Warrant Offer and to do any other acts or things (such as, among others, due execution of instruments of transfer to effect transfers of Offer Shares, Share Options and/or Bonus Warrants taken up by the Offeror pursuant to the Partial Offer, the Option Offer and/or the Warrant Offer to the Offeror and to tender the relevant share certificate(s), letter(s) of grant for the Share Option or Bonus Warrant certificate(s) for cancellation) as may in the opinion of the Agent be necessary, expedient or desirable for the purpose of the Offeror to acquire some or all of the Shares, Share Options and/or Bonus Warrants (as the Offeror may in its absolute discretion determine in accordance with the formula as set out in the paragraph headed “Terms of the Partial Offer, the Option Offer and the Warrant Offer” in the Letter from Kim Eng in respect of which such person has accepted the Partial Offer, the Option Offer and/or the Warrant Offer).

5. Undertakings

That by executing the Form of Acceptance, the Form of Option Offer Acceptance or the Form of Warrant Offer Acceptance, he/she:

(a) agrees to ratify and confirm each and every act or thing which may be done or effected by the Offeror or any Agent in the proper exercise of its or his/her powers and/or authorities under the terms of the Partial Offer, the Option Offer and/or the Warrant Offer (such as, among others, acts or things effecting the transfer of Offer Shares, Share Options and/or Bonus Warrants accepted by the Offeror pursuant to the Partial Offer, the Option Offer and/or the Warrant Offer);
(b) undertakes to deliver to the Share Registrar or the Warrant Registrar (as the case may be) the share certificate(s), letter(s) of grant for the Share Options, the Bonus Warrant certificate(s), transfer receipt(s) and/or any other document(s) of title

– I-13 –

APPENDIX I FURTHER TERMS OF THE PARTIAL OFFER, THE OPTION OFFER AND THE WARRANT OFFER

(and/or any satisfactory indemnity or indemnities required in respect thereof) (if applicable) in respect of the Shares, the Share Options and/or the Bonus Warrants for which the Partial Offer, the Option Offer and/or the Warrant Offer is accepted, or an indemnity or indemnities acceptable to the Offeror in lieu thereof, or to procure the delivery of such document(s) to the Share Registrar and the Warrant Registrar (as the case may be) as soon as possible thereafter and, in any event, no later than 4:00 p.m. on 28 June 2013, being the Closing Date (or such later date as the Offeror may, subject to the Takeovers Code, decide and announce);

(c) accepts that the provisions of the Form of Acceptance, the Form of Option Offer Acceptance or the Form of Warrant Offer Acceptance and the other terms and conditions in this Composite Offer Document are deemed to be incorporated into the terms and conditions of the Partial Offer, the Option Offer and/or the Warrant Offer;
(d) undertakes to execute any further documents, take any further action and give any further assurances which may be required in connection with his/her acceptance of the Partial Offer, the Option Offer and/or the Warrant Offer as the Offeror may consider to be necessary, expedient or desirable in accordance with the Takeovers Code, including, without limitation, to acquire any Shares in respect of which he/ she has accepted the Partial Offer, the Option Offer and/or the Warrant Offer free from all liens, charges, options, claims, equities, adverse interests, third parties rights or encumbrances whatsoever and together with all rights accruing thereto on or after the Closing Date and/or to perfect any of the authorities expressed to be given hereunder;
(e) authorises the Offeror or the Agent to procure the despatch by post of the consideration to which he/she is entitled, at his/her risk, to the address of the registered Shareholder, the registered Optionholder or the registered Warrantholders or the first-named of joint registered Shareholders or the registered Warrantholders on the Register or register of holders of Bonus Warrants (as the case may be), if different, to the name and address of the person as specified on the Form of Acceptance, the Form of Option Offer Acceptance or the Form of Warrant Offer Acceptance; and
(f) submits to the non-exclusive jurisdiction of the courts of Hong Kong in relation to all matters arising out of or in connection with the Partial Offer, the Option Offer and/or the Warrant Offer or the Form of Acceptance, the Form of Option Offer Acceptance or the Form of Warrant Offer Acceptance.

6. General

(a) Acceptance of the Partial Offer, the Option Offer and/or the Warrant Offer by any person or persons will be deemed to constitute a warranty by such person or persons to the Offeror and Kim Eng that the Shares acquired under the Partial Offer, the Option Offer and/or the Warrant Offer are fully paid and sold by any such person or persons free from all liens, charges, options, claims, equities,

– I-14 –

APPENDIX I FURTHER TERMS OF THE PARTIAL OFFER, THE OPTION OFFER AND THE WARRANT OFFER

adverse interests, third party rights or encumbrances whatsoever and together with all rights accruing or attaching thereto, including, without limitation, the right to receive dividends and other distributions declared, made or paid, if any, on or after the Closing Date.

(b) The Qualifying Shareholders, the Qualifying Optionholder and/or the Qualifying Warrantholder may accept the Partial Offer, the Option Offer and/or the Warrant Offer by completing the Form of Acceptance, the Form of Option Offer Acceptance and/or the Form of Warrant Offer Acceptance in accordance with the instructions set out in the Form of Acceptance, the Form of Option Offer Acceptance and/or the Form of Warrant Offer Acceptance (which constitute part of the terms of the Partial Offer, the Option Offer and/or the Warrant Offer). A Form of Acceptance, a Form of Option Offer Acceptance and/or a Form of Warrant Offer Acceptance may be rejected as invalid if the procedures contained in this Composite Offer Document and in the Form of Acceptance, the Form of Option Offer Acceptance and/or the Form of Warrant Offer Acceptance are not complied with.
(c) The Partial Offer, the Option Offer and/or the Warrant Offer and all acceptances of it, the Form of Acceptance, the Form of Option Offer Acceptance and/or the Form of Warrant Offer Acceptance and all contracts made pursuant to the Partial Offer, the Option Offer and/or the Warrant Offer, and all action taken or made or deemed to be taken or made pursuant to these terms will be governed by and construed in accordance with Hong Kong laws. Delivery of the Form of Acceptance, the Form of Option Offer Acceptance and/or the Form of Warrant Offer Acceptance will constitute submission to the non-exclusive jurisdiction of the Hong Kong courts.
(d) The failure of any person to receive this Composite Offer Document or the Form of Acceptance, the Form of Option Offer Acceptance and/or the Form of Warrant Offer Acceptance will not invalidate any aspect of the Partial Offer, the Option Offer and/or the Warrant Offer. Extra prints of these documents are available to any Qualifying Shareholder, Qualifying Optionholder and/or Qualifying Warrantholder at the office of the Share Registrar or the Warrant Registrar during the period from the date of this Composite Offer Document to the Closing Date (both days inclusive), between 9:00 a.m. and 4:00 p.m. (Hong Kong time) from Monday to Friday (other than public holidays), and on the Stock Exchange’s website at www.hkexnews.hk and the Company’s website at www.vs-ig.com.
(e) The Offeror reserves the right, subject to any applicable law or regulatory requirements, to amend the Offer Price. In the event of such amendment (which will not, for the avoidance of doubt, include an alteration of the total number of Offer Shares, or the number of Share Options and/or Bonus Warrants under the Option Offer or the Warrant Offer), a supplemental document and new Form of Acceptance, the Form of Option Offer Acceptance and/or the Form of Warrant Offer Acceptance will be despatched to the Qualifying Shareholders, the Qualifying Optionholders or the Qualifying Warrantholders. Any revised Partial

– I-15 –

APPENDIX I FURTHER TERMS OF THE PARTIAL OFFER, THE OPTION OFFER AND THE WARRANT OFFER

Offer, the Option Offer and/or the Warrant Offer will be kept open for at least 14 days following the date on which the revised offer document is posted. If in the course of the Partial Offer, the Option Offer and/or the Warrant Offer, the Offeror revises the terms of the Partial Offer, the Option Offer and/or the Warrant Offer, all Qualifying Shareholders, Qualifying Optionholder and/or Qualifying Warrantholder, whether they have accepted the Partial Offer, the Option Offer and/or the Warrant Offer or not, will be entitled to the revised terms.

(f) The right of acceptance of the Partial Offer, the Option Offer and/or the Warrant Offer is personal to the Qualifying Shareholders, the Qualifying Optionholder and/or the Qualifying Warrantholder and is not capable of being assigned or renounced in favour of others or otherwise transferred by the Qualifying Shareholders, the Qualifying Optionholder and/or the Qualifying Warrantholder.
(g) All questions as to the number of Offer Shares, Share Options and/or Bonus Warrants to be taken by the Offeror, the Offer Price to be paid therefor, or any alteration of such price in accordance with the terms contained in this Composite Offer Document, and the validity, form, eligibility (including the time of receipt) and acceptance for payment of any acceptance will be determined by the Offeror in its sole discretion, which determination will be final and binding on all of the parties (except as otherwise required under the applicable laws or by the Executive). The Offeror reserves the absolute right to reject any or all acceptances it determines not to be in proper form or the acceptance or payment for which may, in the opinion of the Offeror, be unlawful. An acceptance may be rejected as invalid unless all defects or irregularities have been cured or waived. In the event of a waiver, the consideration under the Partial Offer, the Option Offer and/or the Warrant Offer will not be despatched until after the Form of Acceptance, the Form of Option Offer Acceptance and/or the Form of Warrant Offer Acceptance is completed in all respects and the share certificate(s), the letter(s) of grant for Share Option(s), Bonus Warrant certificate(s), and/or transfer receipt(s) and/or other documents of title (and/or any satisfactory indemnity or indemnities required in respect thereof) (if applicable) have been received. None of the Offeror, the Company, Kim Eng, the Share Registrar, the Warrant Registrar or any of their respective directors or any other person involved in the Partial Offer, the Option Offer and/or the Warrant Offer is or will be obliged to give notice of any defects or irregularities in acceptances and none of them will incur any liability for failure to give any such notice.
(h) All communications, notices, Form(s) of Acceptance, Form(s) of Option Offer Acceptance, Form(s) of Warrant Offer Acceptance, share certificate(s), the letter(s) of grant for Share Option(s), Bonus Warrant certificate(s), transfer receipt(s), other document(s) of title (and/or any indemnity or indemnities in respect thereof) and remittances to be delivered or sent by, to or from any Shareholders, Optionholders and Warrantholders will be delivered or sent by, to and from them, or their designated agents, at their own risks and none of the Offeror, the Company, Kim Eng, the Share Registrar, the Warrant Registrar or any of their

– I-16 –

APPENDIX I FURTHER TERMS OF THE PARTIAL OFFER, THE OPTION OFFER AND THE WARRANT OFFER

respective directors or any other person involved in the Partial Offer, the Option Offer and the Warrant Offer, accepts any liability for any loss or any other liabilities whatsoever which may arise as a result.

OVERSEAS SHAREHOLDERS, OVERSEAS OPTIONHOLDERS AND OVERSEAS WARRANTHOLDERS

The making of the Partial Offer, the Option Offer and/or the Warrant Offer to Qualifying Shareholders, Qualifying Optionholders and Qualifying Warrantholders who are citizens, residents or nationals of jurisdictions outside Hong Kong may be subject to the laws of the relevant jurisdictions. Such relevant Qualifying Shareholders, Qualifying Optionholders and Qualifying Warrantholders may be prohibited or affected by laws of the relevant jurisdictions and it is the responsibility of each relevant Qualifying Shareholder who wishes to accept the Partial Offer, each relevant Qualifying Optionholder who wishes to accept the Option Offer and each relevant Qualifying Warrantholder who wishes to accept the Warrant Offer to satisfy himself/herself as to the full observance of the laws of the relevant jurisdiction in connection therewith, including the obtaining of any governmental approvals, exchange control approvals or other consents, or filing and registration requirements which may be required in compliance with all necessary formalities or legal requirements and the payment of any transfer or other taxes due in such relevant jurisdictions.

Any acceptance of the Partial Offer, the Option Offer and the Warrant Offer by any Qualifying Shareholder, any Qualifying Optionholder and any Qualifying Warrantholder will be deemed to constitute a representation and warranty from such Qualifying Shareholder, Qualifying Optionholder and Qualifying Warrantholder (as the case may be) to the Company and the Offeror that he/she has fully observed all applicable legal and other requirements and that the Partial Offer, the Option Offer and/or Warrant Offer may be accepted by him/her lawfully under the laws of the relevant jurisdiction. The Qualifying Shareholders, Qualifying Optionholders and Qualifying Warrantholders should consult their professional advisors if in doubt.

The Company shall give notice of any matter in relation to the Partial Offer, the Option Offer and the Warrant Offer to the overseas Qualifying Shareholders, the overseas Qualifying Optionholders and the overseas Qualifying Warrantholders by issuing announcements or advertisements in accordance with its articles of association and which, if so given, shall be deemed to have been sufficient for all effective purposes, despite any failure by any overseas Qualifying Shareholder, overseas Qualifying Optionholder or overseas Qualifying Warrantholder to receive the same.

– I-17 –

FURTHER TERMS OF THE PARTIAL OFFER, THE OPTION OFFER AND THE WARRANT OFFER

APPENDIX I

TAXATION

Qualifying Shareholders, Qualifying Optionholders and Qualifying Warrantholders are recommended to consult their own professional advisers if they are in any doubt as to the taxation implications of their acceptance of the Partial Offer, the Option Offer and the Warrant Offer (as the case may be). It is emphasised that none of the Offeror, the Company, their ultimate beneficial owners and parties acting in concert with any of them, Kim Eng, Somerley, Computershare or any of their respective directors or any persons involved in the Partial Offer, the Option Offer and the Warrant Offer accepts responsibility for any taxation effects on, or liabilities of, any person or persons as a result of their acceptance of the Partial Offer, the Option Offer and the Warrant Offer.

ANNOUNCEMENT

The announcement on the results of the Partial Offer, the Option Offer and the Warrant Offer will be issued by the Offeror on the website of the Stock Exchange by 7:00 p.m. on the Closing Date. Such announcement will comply with the disclosure requirements under Rule 19.1 and Note 7 to Rule 19 of the Takeovers Code and will include, amongst other things, the results of the Partial Offer, the Option Offer and the Warrant Offer, and details of the way in which each Accepting Shareholder’s, Accepting Optionholder’s and Accepting Warrantholder’s pro-rata entitlement was determined. The Offeror cannot extend the Closing Date.

The announcement shall specify the total number of Shares, the Share Options or the Bonus Warrants:–

(a) for which acceptances of the Partial Offer, the Option Offer and the Warrant Offer have been received;
(b) held, controlled or directed by the Offeror or parties acting in concert with it before the Offer Period; and
(c) acquired or agreed to be acquired during the Offer Period by the Offeror or any parties acting in concert with it.

The announcement must include the level of acceptances or the number or percentage of Accepting Shareholders, Accepting Optionholders and Accepting Warrantholders in compliance with Note 2 to Rule 19 of the Takeovers Code.

The announcement must include the details of the way in which each of the Accepting Shareholder’s, Accepting Optionholder’s and Accepting Warrantholder’s pro-rata entitlement was/is to be determined in compliance with Note 7 to Rule 19 of the Takeovers Code.

The announcement must include details of any relevant securities (as defined under Note 4 to Rule 22 of the Takeovers Code) of the Company which the Offeror or any parties acting in concert with it has borrowed or lent, save for any borrowed Shares which have been either on-lent or sold.

– I-18 –

APPENDIX I FURTHER TERMS OF THE PARTIAL OFFER, THE OPTION OFFER AND THE WARRANT OFFER

The announcement shall include the percentages of the relevant classes of share capital of the Company, and the percentages of voting rights represented by these numbers.

As required under the Takeovers Code, all announcements in relation to the Partial Offer, the Option Offer and the Warrant Offer, in respect of which the Executive and the Stock Exchange have confirmed that they have no further comments thereon, will be published on the websites of the SFC, the Stock Exchange and the Company.

INTERPRETATION

A reference in this Composite Offer Document to a Qualifying Shareholder, Qualifying Optionholder or Qualifying Warrantholder includes a reference to a person(s) who, by reason of an acquisition or transfer of Shares, Share Options or Bonus Warrants or by reason of an exercise of the Share Options or the Bonus Warrants is entitled to execute a Form of Acceptance, Form of Option Offer Acceptance or Form of Warrant Offer Acceptance and in the event of more than one person executing a Form of Acceptance, Form of Option Offer Acceptance or Form of Warrant Offer Acceptance, the provisions of this Composite Offer Document apply to them jointly and severally.
A reference in this Composite Offer Document, the Form of Acceptance, the Form of Option Offer Acceptance and the Form of Warrant Offer Acceptance to the masculine gender includes the feminine and neuter genders, and a reference to the singular includes the plural, and vice versa.

– I-19 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

1. SUMMARY OF FINANCIAL INFORMATION OF THE GROUP

Set out below is the summary of the financial information of the Group for the three financial years ended 31 July 2012, as extracted from the annual reports of the Company for the three financial years ended 31 July 2012, and for the six months ended 31 January 2012 and 31 January 2013, as extracted from the interim reports of the Company for the six months ended 31 January 2012 and 31 January 2013. The auditor of the Company has expressed an unqualified opinion on the financial statements for the three financial years ended 31 July 2012 as included in its reports dated 24 September 2010, 24 September 2011 and 22 September 2012 respectively.

For the years ended 31 July 2010, 2011 and 2012 and for the six months ended 31 January 2012 and 31 January 2013, the annual reports and the interim reports consisted of paragraphs that emphasised the going concern assumptions adopted by the Group.

The going concern basis was used by the Directors to prepare the financial statements of the Group for the three financial years ended 31 July 2010, 2011 and 2012 and six months ended 31 January 2012 and 31 January 2013. As at 31 July 2010, 2011 and 2012 and 31 January 2012 and 2013, the Group’s current liabilities exceeded its current assets by HK$75,452,000, HK$115,772,000, HK$53,495,000, HK$37,583,000 and HK$16,006,000, respectively and for the three financial years ended 31 July 2010, 2011 and 2012 and six months ended 31 January 2012, the Group incurred a loss of HK$13,921,000, HK$61,158,000, HK$73,696,000 and HK$12,250,000, respectively. These conditions indicate the existence of a material uncertainty which may cast significant doubt on the Group’s ability to continue as a going concern. The validity of the going concern basis depends upon the Group’s ability to renew its current bank loans upon expiry or secure adequate other banking facilities to enable the Group to meet its financial obligations as and when they fall due for the foreseeable future. The financial statements of the Group for the three financial years ended 31 July 2010, 2011 and 2012 and six months ended 31 January 2012 and 31 January 2013 do not include any adjustments that would result from the failure to renew or obtain such banking facilities.

– II-1 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

The financial figures in this appendix are expressed in Hong Kong dollars unless otherwise indicated.

(i) Consolidated income statements

Turnover Cost of sales Gross profit Other net (loss)/income Distribution costs Administrative expenses Profit/(loss) from operations Finance costs Share of profits less losses of associates Profit/(loss) before taxation Income tax Profit/(loss) for the year/period Attributable to: Equity shareholders of the Company Non-controlling interests Profit/(loss) for the year/period Profit/(loss) per share Basic Diluted	Audited For the year ended 31 July 2012 2011 2010 $’000 $’000 $’000 1,513,099 1,629,534 1,496,888 (1,364,572) (1,489,201) (1,329,233) 148,527 140,333 167,655 (18,342) 28,301 (2,366) (68,394) (68,399) (60,338) (84,705) (103,237) (85,830) (22,914) (3,002) 19,121 (35,903) (39,806) (34,158) (590) 3,778 4,735 (59,407) (39,030) (10,302) (14,289) (22,128) (3,619) (73,696) (61,158) (13,921) (73,785) (61,047) (14,315) 89 (111) 394 (73,696) (61,158) (13,921) (6.38) cents (6.22) cents (1.65) cents (6.38) cents (6.22) cents (1.65) cents	Unaudited For the six months ended 31 January 2013 2012 $’000 $’000 683,231 862,332 (615,948) (759,373) 67,283 102,959 17,910 (11,271) (26,589) (35,041) (38,211) (42,076) 20,393 14,571 (12,314) (19,120) (1,738) (879) 6,341 (5,428) (3,577) (6,822) 2,764 (12,250) 2,764 (12,339) – 89 2,764 (12,250) 0.23 cents (1.07) cents 0.22 cents (1.07) cents

There were no extraordinary items or dividends declared for the three financial years ended 31 July 2012 and for the six months ended 31 January 2012 and 31 January 2013.

– II-2 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(ii) Consolidated Statement of Financial Position

Non-current assets Fixed assets – Property, plant and equipment – Interests in leasehold land held for own use under operating leases Goodwill Deferred tax assets Interest in associates Deferred assets Current assets Inventories Trade and other receivables Derivative financial instruments Deposits with banks Cash and cash equivalents Current liabilities Trade and other payables Interest-bearing borrowings Obligations under finance leases Loan from a substantial shareholder Current taxation Net current liabilities Total assets less current liabilities	2012 $’000 672,430 25,107 697,537 2,172 – 25,290 – 724,999 143,825 366,554 – 39,218 90,848 640,445 367,386 316,180 – – 10,374 693,940 (53,495) 671,504	Audited At 31 July 2011 2010 $’000 $’000 782,464 830,182 25,555 24,793 808,019 854,975 2,172 2,172 – 14,674 27,047 27,004 6,602 – 843,840 898,825 245,006 227,151 463,454 452,080 – – 60,733 74,531 115,332 96,940 884,525 850,702 525,036 488,744 454,886 411,433 7,962 10,051 4,894 6,539 7,519 9,387 1,000,297 926,154 (115,772) (75,452) 728,068 823,373	Unaudited At 31 January 2013 2012 $’000 $’000 650,923 717,384 25,363 25,635 676,286 743,019 2,172 2,172 2,395 – 23,552 25,505 – 12,249 704,405 782,945 110,184 196,026 352,379 410,167 5,841 - 35,225 34,075 77,638 112,165 581,267 752,433 330,350 413,361 258,371 363,843 – 2,695 – 2,435 8,552 7,682 597,273 790,016 (16,006) (37,583) 688,399 745,362

– II-3 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Non-current liabilities Other payables Interest-bearing borrowings Obligations under finance leases Loan from a substantial shareholder Deferred tax liabilities NET ASSETS CAPITAL AND RESERVES Share capital Reserves Total equity attributable to equity shareholders of the Company Non-controlling interests TOTAL EQUITY	2012 $’000 11,081 257,125 – – 2,231 270,437 401,067 57,801 343,266 401,067 – 401,067	Audited At 31 July 2011 2010 $’000 $’000 6,303 29,794 248,814 322,621 – 6,700 – 4,877 1,745 1,762 256,862 365,754 471,206 457,619 57,798 43,349 410,778 411,529 468,576 454,878 2,630 2,741 471,206 457,619	Unaudited At 31 January 2013 2012 $’000 $’000 – – 241,759 272,712 – – – – 2,705 2,229 244,464 274,941 443,935 470,421 65,188 57,798 378,747 409,904 443,935 467,702 – 2,719 443,935 470,421	Unaudited At 31 January 2013 2012 $’000 $’000 – – 241,759 272,712 – – – – 2,705 2,229 244,464 274,941 443,935 470,421 65,188 57,798 378,747 409,904 443,935 467,702 – 2,719 443,935 470,421
				274,941
				470,421

				57,798 409,904
				467,702 2,719
				470,421

– II-4 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

2. FINANCIAL STATEMENTS

A. AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR THE YEAR ENDED 31 JULY 2012

The following are the latest published audited consolidated financial statements of the Group for the year ended 31 July 2012 with the notes therein, as extracted from the 2012 annual report of the Company.

CONSOLIDATED INCOME STATEMENT

For the year ended 31 July 2012

Note Turnover 3 Cost of sales Gross profit Other net (loss)/income 4 Distribution costs Administrative expenses Loss from operations Finance costs 5(a) Share of profits less losses of associates Loss before taxation 5 Income tax 6 Loss for the year Attributable to: Equity shareholders of the Company 9 Non-controlling interests Loss for the year Loss per share 10 Basic Diluted	2012 $’000 1,513,099 (1,364,572) 148,527 (18,342) (68,394) (84,705) (22,914) (35,903) (590) (59,407) (14,289) (73,696) (73,785) 89 (73,696) (6.38) cents (6.38) cents	2011 $’000 1,629,534 (1,489,201) 140,333 28,301 (68,399) (103,237) (3,002) (39,806) 3,778 (39,030) (22,128) (61,158) (61,047) (111) (61,158) (6.22) cents (6.22) cents

– II-5 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 July 2012 Loss for the year Other comprehensive income for the year Exchange differences on translation of financial statements of subsidiaries outside Hong Kong Total comprehensive loss for the year Attributable to: Equity shareholders of the Company Non-controlling interests Total comprehensive loss for the year	2012 $’000 (73,696) 4,781 (68,915) (69,004) 89 (68,915)	2011 $’000 (61,158) 39,501 (21,657) (21,546) (111) (21,657)

– II-6 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At 31 July 2012

Note Non-current assets Fixed assets – Property, plant and equipment – Interests in leasehold land held for own use under operating leases 11 Goodwill 12 Interest in associates 14 Deferred assets 16(d) Current assets Inventories 15 Trade and other receivables 16 Deposits with banks 17 Cash and cash equivalents 18(a) Current liabilities Trade and other payables 19 Interest-bearing borrowings 20 Obligations under finance leases 21 Loan from a substantial shareholder 29(c) Current taxation 23(a) Net current liabilities Total assets less current liabilities	2012 $’000 672,430 25,107 697,537 2,172 25,290 – 724,999 143,825 366,554 39,218 90,848 640,445 367,386 316,180 – – 10,374 693,940 (53,495) 671,504	2011 $’000 782,464 25,555 808,019 2,172 27,047 6,602 843,840 245,006 463,454 60,733 115,332 884,525 525,036 454,886 7,962 4,894 7,519 1,000,297 (115,772) 728,068

– II-7 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Note Non-current liabilities Other payables 19(c) Interest-bearing borrowings 20 Deferred tax liabilities 23(b) NET ASSETS CAPITAL AND RESERVES Share capital 24(c)(i) Reserves Total equity attributable to equity shareholders of the Company Non-controlling interests TOTAL EQUITY	2012 $’000 11,081 257,125 2,231 270,437 401,067 57,801 343,266 401,067 – 401,067	2011 $’000 6,303 248,814 1,745
		256,862
		471,206

		57,798 410,778
		468,576 2,630
		471,206

– II-8 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

STATEMENT OF FINANCIAL POSITION

At 31 July 2012

Note Non-current assets Investments in subsidiaries 13 Current assets Other receivables 16 Cash and cash equivalents 18(a) Current liabilities Other payables 19 Net current liabilities Total assets less current liabilities Non-current liabilities Deferred income 19(a) NET ASSETS CAPITAL AND RESERVES Share capital 24(c) Reserves 24(a) TOTAL EQUITY	2012 $’000 433,724 433,724 39,404 56 39,460 148,571 (109,111) 324,613 – 324,613 57,801 266,812 324,613	2011 $’000 424,843 424,843 53,196 193 53,389 143,371 (89,982) 334,861 9,250 325,611 57,798 267,813 325,611

– II-9 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 July 2012

		Attributable to equity shareholders of the Company	Attributable to equity shareholders of the Company	Attributable to equity shareholders of the Company		Total equity $’000 457,619 (61,158) 39,501
Share capital $’000 (note 24 (c(i))) 43,349 – – – – 14,449 57,798 57,798 – – – 3 – – – – 57,801	Share premium $’000 (note 24 (d)(i)) 72,006 – – – – 18,199 90,205 90,205 – – – 5 – – – – 90,210	Capital reserves $’000 (note 24 (d)(i)) 9,584 – – – – – 9,584 9,584 – – – – – – – – 9,584	Foreign exchange translation reserve $’000 (note 24 (d)(ii)) 119,036 – 39,501 39,501 – – 158,537 158,537 – 4,781 4,781 – – – – – 163,318	Employee Statutory share-based reserve capital fund reserve $’000 $’000 (note 24 (note 24 (d)(iii)) (d)(iv)) 44,015 2,911 – – – – – – – 2,596 – – 44,015 5,507 44,015 5,507 – – – – – – – – 1,601 – – 1,229 – (1,626) – – 45,616 5,110	Retained profits $’000 163,977 (61,047) – (61,047) – – 102,930 102,930 (73,785) – (73,785) – (1,601) – 1,626 258 29,428
						(21,657)
						2,596 32,648
						471,206

						471,206 (73,696) 4,781
						(68,915)
						8 – 1,229 – (2,461)
						401,067

– II-10 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 31 July 2012

Note Operating activities Cash generated from operations 18(b) Income tax paid by subsidiaries in the People’s Republic of China (“PRC”) 23(a) Net cash generated from operating activities Investing activities Payments for the purchase of fixed assets Proceeds from sale of fixed assets Refund of an investment deposit 4 Uplift of deposits with banks Proceeds from sale of an associate 14 Interest received Dividends received from an associate Payment for the acquisition of non-controlling interests 25 Net cash (used in)/generated from investing activities Financing activities Capital element of finance lease rentals paid Interest element of finance lease rentals paid 5(a) Repayment of loan from a substantial shareholder Repayment of bank loans Proceeds from new bank loans Net proceeds from issuance of shares by rights issue_(note 24(c)(ii)) Proceeds from conversion of bonus warrants to ordinary shares(note 24(c)(iii)) Other borrowing costs paid Net cash used in financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at 1 August _18 Effect of foreign exchange rates changes Cash and cash equivalents at 31 July 18	2012 $’000 190,289 (10,948) 179,341 (71,764) 27,817 – 21,845 1,600 887 504 (2,461) (21,572) (7,164) (263) (4,894) (919,799) 786,857 – 8 (35,733) (180,988) (23,219) 94,939 (4,130) 67,590	2011 $’000 90,461 (9,339) 81,122 (54,748) 31,728 4,752 17,346 – 1,872 3,735 – 4,685 (8,789) (1,226) (6,522) (1,074,529) 1,041,306 32,648 – (38,652) (55,764) 30,043 70,255 (5,359) 94,939

– II-11 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 July 2012

1 Significant accounting policies

(a) Statement of compliance

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

The HKICPA has issued certain new and revised HKFRSs that are first effective or available for early adoption for the current accounting period of the Group and the Company. Note 2 provides information on any changes in accounting policies resulting from initial application of these developments to the extent that they are relevant to the Group for the current and prior accounting periods reflected in these financial statements.

(b) Basis of preparation of the financial statements

The consolidated financial statements for the year ended 31 July 2012 comprise the Company and its subsidiaries and the Group’s interest in associates.

As at 31 July 2012, the Group’s current liabilities exceeded its current assets by $53,495,000 and the Group incurred a loss of $73,696,000 for the year ended 31 July 2012. These conditions indicate the existence of a material uncertainty which may cast significant doubt on the Group’s ability to continue as a going concern and, therefore, that the Group may be unable to realise its assets and discharge its liabilities in the normal course of business. As at 31 July 2012, the Group had undrawn banking facilities totalling $210,998,000 for working capital purposes. In addition, the Group is currently in the process of negotiating with certain banks to renew the current bank loans upon expiry or to obtain additional banking facilities in order to improve the liquidity position. The directors have evaluated all the relevant facts available to them and are of the opinion that there are good track records or relationships with banks which enhance the Group’s ability to renew the current bank loans upon expiry or to secure other adequate banking facilities to enable the Group to meet its financial obligations as and when they fall due for the foreseeable future. Accordingly, the financial statements have been prepared on a going concern basis. Should the Group be unable to operate as a going concern, adjustments would have to be made to write down the value of assets to their recoverable amounts and to provide for any further liabilities which might arise. The effect of these adjustments has not been reflected in the financial statements.

The measurement basis used in the preparation of the financial statements is the historical cost basis except that derivative financial instruments are measured at fair value (see note 1(f)).

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

– II-12 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

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

Judgements made by management in the application of HKFRSs that have significant effect on the financial statements and major sources of estimation uncertainty are discussed in note 30.

(c) Subsidiaries and non-controlling interests

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

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

Non-controlling interests represent the equity in a subsidiary not attributable directly or indirectly to the Company, and in respect of which the Group has not agreed any additional terms with the holders of those interests which would result in the Group as a whole having a contractual obligation in respect of those interests that meets the definition of a financial liability. The Group measures non-controlling interests at the proportionate share of the subsidiary’s net identifiable assets.

Non-controlling interests are presented in the consolidated statement of financial position within equity, separately from equity attributable to the equity shareholders of the Company. Non-controlling interests in the results of the Group are presented on the face of the consolidated income statement and the consolidated statement of comprehensive income as an allocation of the total profit or loss and total comprehensive income for the year between non-controlling interests and the equity shareholders of the Company.

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

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

(d) Associates

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

An investment in an associate is accounted for in the consolidated financial statements under the equity method. Under the equity method, the investment is initially recorded at cost, adjusted for any excess of the Group’s share of the acquisition-date fair values of the investee’s identifiable net assets over the cost of the investment (if any). Thereafter, the investment is adjusted for the post acquisition change in the Group’s share of the investee’s net assets and any impairment loss relating to the investment (see notes 1(e) and (i)). Any acquisition-date excess over cost, the Group’s share of the post-acquisition, post-tax results of the investees and any impairment losses for the year are recognised in the consolidated income statement, whereas the Group’s share of the post-acquisition post-tax items of the investees’ other comprehensive income is recognised in the consolidated statement of comprehensive income.

– II-13 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

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

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

When the Group ceases to have significant influence over an associate, it is accounted for as a disposal of the entire interest in that investee, with a resulting gain or loss being recognised in profit or loss. Any interest retained in that former investee at the date when significant influence is lost is recognised at fair value and this amount is regarded as the fair value on initial recognition of a financial asset or, when appropriate, the cost on initial recognition of an investment in an associate (see note 1(d)).

In the Company’s statement of financial position, investments in associates are stated at cost less impairment losses (see note 1(i)).

(e) Goodwill

Goodwill represents the excess of the net fair value of the acquiree’s identifiable assets and liabilities measured as at the acquisition date.

Goodwill is stated at cost less accumulated impairment losses. Goodwill arising on a business combination is allocated to each cash-generating unit, or groups of cash generating units, that is expected to benefit from the synergies of the combination and is tested annually for impairment (see note 1(i)).

On disposal of a cash generating unit during the year, any attributable amount of purchased goodwill is included in the calculation of the profit or loss on disposal.

(f) Derivative financial instruments

Derivative financial instruments are recognised initially at fair value. At the end of each reporting period the fair value is remeasured. The gain or loss on remeasurement to fair value is recognised immediately in profit or loss.

(g) Property, plant and equipment

The following items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses (see note 1(i)):

land held under operating leases and buildings thereon, where the fair values of the leasehold interest in the land and buildings cannot be measured separately at the inception of the lease and the building is not clearly held under an operating lease (see note 1(h));
buildings held for own use which are situated on leasehold land, where the fair value of the building could be measured separately from the fair value of the leasehold land at the inception of the lease (see note 1(h)); and
other items of plant and equipment.

– II-14 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

The cost of self-constructed items of property, plant and equipment includes the cost of materials, direct labour, the initial estimate, where relevant, of the costs of dismantling and removing the items and restoring the site on which they are located, and an appropriate proportion of production overheads and borrowing costs (see note 1(t)).

Gains or losses arising from the retirement or disposal of an item of property, plant and equipment are determined as the difference between the net disposal proceeds and the carrying amount of the item and are recognised in profit or loss on the date of retirement or disposal.

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

Buildings situated on leasehold land are depreciated over the shorter of the unexpired term of lease and their estimated useful lives, being no more than 50 years after the date of completion;
Leasehold improvements are depreciated over the shorter of their estimated useful lives, being 10 years from the date of completion, and the unexpired terms of the leases; and

–	Plant and machinery	3-10 years
–	Office equipment, furniture and fixtures	3-5 years
–	Motor vehicles	5 years

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

(h) Leased assets

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

(i) Classification of assets leased to the Group

Assets that are held by Group under leases which transfer to the Group substantially all the risks and rewards of ownership are classified as being held under finance leases. Leases which do not transfer substantially all the risks and rewards of ownership to the Group are classified as operating leases, except that land held for own use under an operating lease, the fair value of which cannot be measured separately from the fair value of a building situated thereon at the inception of the lease, is accounted for as being held under a finance lease, unless the building is also clearly held under an operating lease. For these purposes, the inception of the lease is the time that the lease was first entered into by the Group, or taken over from the previous lessee.

(ii) Assets acquired under finance leases

Where the Group acquires the use of assets under finance leases, the amounts representing the fair value of the leased asset, or, if lower, the present value of the minimum lease payments, of such assets are included in fixed assets and the corresponding liabilities, net of finance charges, are recorded as obligations under finance leases. Depreciation is provided at rates which write off the cost of the assets over the term of the relevant lease or, where it is likely the Group

– II-15 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

will obtain ownership of the asset, the life of the asset, as set out in note 1(g). Impairment losses are accounted for in accordance with the accounting policy as set out in note 1(i). Finance charges implicit in the lease payments are charged to profit or loss over the period of the leases so as to produce an approximately constant periodic rate of charge on the remaining balance of the obligations for each accounting period.

(iii) Operating lease charges

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

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

(i) Impairment of assets

(i) Impairment of receivables

Receivables that are stated at amortised cost are reviewed at the end of each reporting period to determine whether there is objective evidence of impairment. Objective evidence of impairment includes observable data that comes to the attention of the Group about one or more of the following loss events:

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

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

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

Impairment losses are written off against the corresponding assets directly, except for impairment losses recognised in respect of trade debtors and bills receivable included within trade and other receivables, whose recovery is considered doubtful but not remote. In this case, the

– II-16 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

impairment losses for doubtful debts are recorded using an allowance account. When the Group is satisfied that recovery is remote, the amount considered irrecoverable is written off against trade debtors and bills receivable directly and any amounts held in the allowance account relating to that debt are reversed. Subsequent recoveries of amounts previously charged to the allowance account are reversed against the allowance account. Other changes in the allowance account and subsequent recoveries of amounts previously written off directly are recognised in profit or loss.

(ii) Impairment of other assets

Internal and external sources of information are reviewed at the end of each reporting period to identify indications that the following assets may be impaired or, except in the case of goodwill, an impairment loss previously recognised no longer exists or may have decreased:

property, plant and equipment;
investments in subsidiaries and interests in associates;
pre-paid interests in leasehold land classified as being held under an operating lease; and
goodwill.

If any such indication exists, the asset’s recoverable amount is estimated. In addition, for goodwill, the recoverable amount is estimated annually whether or not there is any indication of impairment.

Calculation of recoverable amount

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

Recognition of impairment losses

An impairment loss is recognised in profit or loss if the carrying amount of an asset, or the cash-generating unit to which it belongs, exceeds its recoverable amount. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit (or group of units) and then, to reduce the carrying amount of the other assets in the unit (or group of units) on a pro rata basis, except that the carrying value of an asset will not be reduced below its individual fair value less costs to sell, or value in use, if determinable.

Reversals of impairment losses

In respect of assets other than goodwill, an impairment loss is reversed if there has been a favourable change in the estimates used to determine the recoverable amount. An impairment loss in respect of goodwill is not reversed.

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

– II-17 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(iii) Interim financial reporting and impairment

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

Impairment losses recognised in an interim period in respect of goodwill are not reversed in a subsequent period. This is the case even if no loss, or a smaller loss, would have been recognised had the impairment been assessed only at the end of the financial year to which the interim period relates.

(j) Inventories

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

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

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

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

(k) Trade and other receivables

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

(l) Interest-bearing borrowings

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

(m) Trade and other payables

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

– II-18 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(n) Cash and cash equivalents

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

(o) Employee benefits

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

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

Contributions to Mandatory Provident Funds (the “MPF”) as required under the Hong Kong Mandatory Provident Fund Schemes Ordinance and other retirement benefit schemes, are recognised as an expense in profit or loss as and when incurred.

Annual contributions to pension schemes operated by the government in the PRC are recognised as an expense in profit or loss as and when incurred.

(ii) Share-based payments

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

During the vesting period, the number of share options that is expected to vest is reviewed. Any resulting adjustment to the cumulative fair value recognised in prior years is charged/credited to the profit or loss for the year of the review, unless the original employee expenses qualify for recognition as an asset, with a corresponding adjustment to the capital reserve. On vesting date, the amount recognised as an expense is adjusted to reflect the actual number of options that vest (with a corresponding adjustment to the capital reserve) except where forfeiture is only due to not achieving vesting conditions that relate to the market price of the Company’s shares. The equity amount is recognised in the capital reserve until either the option is exercised (when it is transferred to the share premium account) or the option expires (when it is released directly to retained profits).

(iii) Termination benefits

Termination benefits are recognised when, and only when, the Group demonstrably commits itself to terminate employment or to provide benefits as a result of voluntary redundancy by having a detailed formal plan which is without realistic possibility of withdrawal.

(p) Income tax

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

– II-19 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

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

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

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

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

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

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

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

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

in the case of current tax assets and liabilities, the Company or the Group intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously; or
in the case of deferred tax assets and liabilities, if they relate to income taxes levied by the same taxation authority on either:
the same taxable entity; or

– II-20 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

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

(q) Financial guarantees issued, provisions and contingent liabilities

(i) Financial guarantees issued

Financial guarantees are contracts that require the issuer (i.e. the guarantor) to make specified payments to reimburse the beneficiary of the guarantee (the “holder”) for a loss the holder incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument.

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

Where the guarantee is issued by the Company in respect of banking facilities granted to its subsidiaries, the asset identified is a form of capital contribution, i.e. an addition to the cost of the investment in the subsidiaries.

The amount of the guarantee initially recognised as deferred income is amortised in profit or loss over the term of the guarantee as income from financial guarantees issued. In addition, provisions are recognised in accordance with note 1(q)(ii) if and when (i) it becomes probable that the holder of the guarantee will call upon the Group under the guarantee, and (ii) the amount of that claim on the Group is expected to exceed the amount currently carried in trade and other payables in respect of that guarantee i.e. the amount initially recognised, less accumulated amortisation.

(ii) Other provisions and contingent liabilities

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

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

– II-21 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(r) Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable. Provided it is probable that the economic benefits will flow to the Group and the revenue and costs, if applicable, can be measured reliably, revenue is recognised in profit or loss as follows:

(i) Sale of goods

Revenue is recognised when goods are delivered at the customers’ premises which is taken to be the point in time when the customer has accepted the goods and the related risks and rewards of ownership. Revenue excludes value added tax or other sales taxes and is after deduction of any trade discounts.

(ii) Rental income from operating leases

Rental income receivable under operating leases is recognised in profit or loss in equal instalments over the periods covered by the lease term, except where an alternative basis is more representative of the pattern of benefits to be derived from the use of the leased asset.

(iii) Dividends

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

(iv) Interest income

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

(s) Translation of foreign currencies

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

Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the foreign exchange rates ruling at the transaction dates.

The results of operations outside Hong Kong are translated into Hong Kong dollars at the exchange rates approximating the foreign exchange rates ruling at the dates of the transactions. Statement of financial position items are translated into Hong Kong dollars at the closing foreign exchange rates at the end of the reporting period. The resulting exchange differences are recognised in other comprehensive income and accumulated separately in equity in the exchange reserve. Goodwill arising on consolidation of an operation outside Hong Kong is translated at the foreign exchange rate that applied at the date of acquisition of the foreign operation.

On disposal of an operation outside Hong Kong, the cumulative amount of the exchange differences relating to that foreign operation is reclassified from equity to profit or loss when the profit or loss on disposal is recognised.

(t) Borrowing costs

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

– II-22 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

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

(u) Related parties

(a) A person, or a close member of that person’s family, is related to the Group if that person:
(i) has control or joint control over the Group;
(ii) has significant influence over the Group; or
(iii) is a member of the key management personnel of the Group or the Group’s parent.
(b) An entity is related to the Group if any of the following conditions applies:
(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 employees of either 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 the key management personnel of the entity (or of a parent of the entity).

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

(v) Segment reporting

Operating segments, and the amounts of each segment item reported in the financial statements, are identified from the financial information provided regularly to the Group’s most senior executive management for the purposes of allocating resources to, and assessing the performance of, the Group’s various lines of business and geographical locations.

Individually material operating segments are not aggregated for financial reporting purposes unless the segments have similar economic characteristics and are similar in respect of the nature of products and services, the nature of production processes, the type or class of customers, the methods used to distribute the products or provide the services, and the nature of the regulatory environment. Operating segments which are not individually material may be aggregated if they share a majority of these criteria.

– II-23 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

2 Changes in accounting policies

The HKICPA has issued a number of amendments to HKFRSs and HKAS that are first effective for the current accounting period of the Group and the Company. Of these, the following development is relevant to the Group’s financial statements:

Amendments to HKFRS 7, Financial instruments: Disclosures – Transfers of financial assets

The Group has not applied any new standard or interpretation that is not yet effective for the current accounting period (see note 31).

The amendments to HKFRS 7 have not yet had a material impact on the Group’s financial statements as these changes will first be effective as and when the Group enters a relevant transaction.

3 Turnover and segment reporting

(a) Turnover

The principal activities of the Group are manufacturing and sale of plastic moulded products and parts, assembling of electronic products and mould design and fabrication.

Turnover represents the sales value of goods sold. Turnover excludes value added or other sales taxes and is after deduction of any trade discounts.

An analysis of turnover derived from the principal activities of the Group is as follows:

Breakdown of turnover by principal activities Plastic injection and moulding Assembling of electronic products Mould design and fabrication	2012 $’000 924,118 488,934 100,047 1,513,099	2011 $’000 952,473 578,528 98,533
		1,629,534

The Group’s customer base is diversified and includes three customers with whom transactions have exceeded 10% of the Group’s aggregate revenues for the year ended 31 July 2012 (2011: three). Details of concentrations of credit risk arising from these customers are set out in note 26(a).

(b) Segment reporting

The Group manages its business by divisions, which are organised by a mixture of both business lines and geography. In a manner consistent with the way in which information is reported internally to the Group’s most senior executive management for the purposes of resource allocation and performance assessment, the Group has presented the following three reportable segments. No operating segments have been aggregated to form the following reportable segments.

Plastic injection and moulding : manufacturing and sale of plastic moulded products and parts Assembling of electronic products : assembling and sale of electronic products, including processing fees generated from assembling of electronic products

Mould design and fabrication : manufacturing and sale of plastic injection moulds

– II-24 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(i) Segment results, assets and liabilities

For the purposes of assessing segment performance and allocating resources between segments, the Group’s senior executive management monitors the results, assets and liabilities attributable to each reportable segment on the following bases:

Segment assets include all tangible and current assets with the exception of interests in associates and other corporate assets. Segment liabilities include trade creditors, accruals and bills payable attributable to the individual segments.

Revenue and expenses are allocated to the reportable segments with reference to sales generated by those segments and the expenses incurred by those segments or which otherwise arise from the depreciation or amortisation of assets attributable to those segments.

The measure used for reporting segment profit is “segment result”. To arrive at “segment result”, the Group’s earnings are further adjusted for items not specifically attributed to individual segments, such as head office or corporate administration costs.

In addition to receiving segment information concerning “segment result”, management is provided with segment information concerning revenue (including inter-segment sales), interest income and expense from cash balances and borrowings managed directly by the segments, depreciation, amortisation and impairment losses and additions to non-current segment assets used by the segments in their operations.

Information regarding the Group’s reportable segments as provided to the Group’s most senior executive management for the purposes of resource allocation and assessment of segment performance for the years ended 31 July 2012 and 2011 is set out below.

Turnover from external customers Reportable segment revenue Reportable segment result Depreciation and amortisation for the year Impairment of doubtful debts charged Reportable segment assets Addition to non-current segment assets during the year Reportable segment liabilities	Plastic injection and moulding 2012 2011 $’000 $’000 924,118 952,473 924,118 952,473 30,764 27,585 (55,121) (57,663) (572) (5,473) 819,988 920,955 19,214 15,175 203,458 266,355	Assembling of electronic products 2012 2011 $’000 $’000 488,934 578,528 488,934 578,528 7,893 28,946 (19,735) (27,110) – (3,077) 220,172 329,703 3,222 1,513 109,930 147,531	Mould design and fabrication Consolidated 2012 2011 2012 2011 $’000 $’000 $’000 $’000 100,047 98,533 1,513,099 1,629,534 100,047 98,533 1,513,099 1,629,534 14,593 10,194 53,250 66,725 (13,618) (12,508) (88,474) (97,281) (69) (9) (641) (8,559) 114,406 158,365 1,154,566 1,409,023 2,103 3,799 24,539 20,487 17,896 33,060 331,284 446,946

– II-25 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(ii) Reconciliations of reportable segment revenues, profit or loss, assets and liabilities

Revenue Reportable segment revenue Consolidated turnover Profit Reportable segment profit Share of profits less losses of associates Finance costs Unallocated depreciation and amortisation Unallocated head office and corporate expenses Consolidated loss before taxation Assets Reportable segment assets Interests in associates Unallocated head office and corporate assets Consolidated total assets Liabilities Reportable segment liabilities Unallocated head office and corporate liabilities Consolidated total liabilities	2012 $’000 1,513,099 1,513,099 2012 $’000 53,250 (590) (35,903) (5,860) (70,304) (59,407) 2012 $’000 1,154,566 25,290 185,588 1,365,444 2012 $’000 331,284 633,093 964,377	2011 $’000 1,629,534 1,629,534 2011 $’000 66,725 3,778 (39,806) (4,382) (65,345) (39,030) 2011 $’000 1,409,023 27,047 292,295 1,728,365 2011 $’000 446,946 810,213 1,257,159

(iii) Geographical segments

The Group’s business participates in seven (2011: seven) major economic environments.

In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of customers.

– II-26 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Turnover from external customers is analysed as follows:

PRC (other than Taiwan and Hong Kong) United States of America Hong Kong Europe Northern Asia South East Asia South Africa	2012 $’000 812,977 291,214 207,681 89,006 77,033 34,641 547 1,513,099	2011 $’000 804,896 226,535 286,822 98,510 120,184 50,149 42,438
		1,629,534

Analysis of the Group’s carrying amount of segment non-current assets has not been presented as over 90% of the non-current assets are located in the PRC.

4 Other net (loss)/income

Interest income Rentals receivable from operating leases Net foreign exchange gain Reversal of impairment losses on investment deposits Fines by local authorities_(note (i)) Change in fair value of forward foreign exchange contracts(note (ii), note 16 and note 19) Net gain on forward exchange contracts Net (loss)/gain on disposal of fixed assets(note (iii)) Gain on disposal of an associate(note 14)_ Others	2012 $’000 887 – 189 – (412) (6,412) 4,382 (25,496) 937 7,583 (18,342)	2011 $’000 1,872 33 1,683 4,752 (2,280) 1,391 4,037 14,208 – 2,605
		28,301

Notes:

(i) During the year ended 31 July 2012, a fine of $412,000 (31 July 2011: $2,280,000) was paid to the Custom Bureau in Gongbei district of the PRC ( 中華人民共和國拱北海關 ) for shortage of bonded raw materials kept by certain subsidiaries in Zhuhai, the PRC. This case was finalised and the related penalties were fully paid during the year ended 31 July 2012.
(ii) In order to minimise the foreign currency risk exposure, the Group entered into certain forward exchange contracts with aggregate notional contract amounts of US$56,400,000 during the year ended 31 July 2012 (31 July 2011: US$44,800,000). The outstanding forward exchange contracts will expire within one year. The change in fair value of the outstanding forward exchange contracts amounting to $6,412,000 at 31 July 2012 (31 July 2011: gain of $1,391,000) has been recognised as derivative financial instruments and was accounted for in profit or loss.
(iii) During the year ended 31 July 2012, the Group disposed of certain fixed assets with a net book value of $53,313,000 (2011: $17,520,000). A loss on disposal of $25,496,000 (2011: gain of $14,208,000) was recognised in profit or loss. These fixed assets mainly representing plant and machinery were acquired during the years ended 31 July 2001 to 2010 and sold to independent

– II-27 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

third parties and a subsidiary of a substantial shareholder (note 29(a)) during the year ended 31 July 2012. The Company disposed of a commercial property unit in Hong Kong during the year ended 31 July 2011, which contributed to the gain on disposal of fixed assets for the year ended 31 July 2011.

5 Loss before taxation

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

2012
$’000
(a)
Finance costs:
Interest on bank advances repayable within five years
30,087
Interest on loan from a substantial shareholder
62
Finance charges on obligations under finance leases
263
Total borrowing costs
30,412
Less: borrowing costs capitalised as construction in progress
(93)
30,319
Other charges
5,584
35,903

The borrowing costs have been capitalised at a rate of 4.7% (2011: 4.1%)
construction in progress.
2012
$’000
(b)
Staff costs:
Salaries, wages and allowances
254,087
Contribution to retirement benefit schemes
18,529
Equity settled share-based payment expenses_(note 22)_
1,229
273,845

2011
$’000
30,858
309
1,226
32,393
(72)
32,321
7,485
39,806
per annum for
2011
$’000
310,892
16,515
2,596
330,003

Staff costs include directors’ remuneration totalling $11,770,000 (2011: $17,861,000) (note 7).

Subsidiaries of the Company operating in the PRC participate in a government pension scheme whereby the subsidiaries are required to pay annual contributions at rates from 10% to 32% of the standard wages of employees determined by the relevant authorities in the PRC. Under the scheme, retirement benefits of existing and former employees are payable by the relevant authorities and the Group has no further obligations beyond the annual contributions.

Contributions to the MPF are required under the Hong Kong Mandatory Provident Fund Schemes Ordinance. The Group and its employees in Hong Kong make monthly mandatory contributions to the MPF Scheme at 5% of the employees’ relevant income as defined under the Mandatory Provident Fund Schemes Ordinance. With effective from 1 June 2012, the maximum amount of monthly relevant income for MPF mandatory contributions was changed from $20,000 to $25,000.

The Group did not operate nor participate in any other scheme for retirement benefits provided to the Group’s employees during the year.

– II-28 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

		2012	2011
		$’000	$’000
(c)	Other items:
	Cost of inventories_(note (i) and 15(b))_	1,364,572	1,489,201
	Auditors’ remuneration
	– audit services	2,018	1,882
	– other services	1,031	954
	Impairment of doubtful debts charged
	– trade receivables_(note 16(b))_	42	5,719
	– other receivables	599	2,840
	Amortisation of interests in leasehold land held
	for own use under operating leases	621	598
	Reversal of impairment
	losses on investment deposits	–	4,752
	Depreciation
	– other assets	93,713	98,736
	– assets held under finance leases	–	2,329
	Operating lease charges in respect of properties
	– factory and hostel rentals	11,023	10,423
	Fines by local authorities_(note 4(i))_	412	2,280

Note:

(i) Cost of inventories includes $292,276,000 (2011: $332,393,000) relating to staff costs, depreciation, and operating lease charges whose amounts are also included in the respective total amounts disclosed separately above or in note 5 for each type of expense.

6 Income tax in the consolidated income statement

(a) Taxation in the consolidated income statement represents:

Current tax – PRC Provision for the year Under-provision in respect of prior years Deferred tax Origination and written off of temporary differences	2012 $’000 11,987 1,816 13,803 486 14,289	2011 $’000 7,404 67
		7,471 14,657
		22,128

No provision has been made for Hong Kong Profits Tax as the Group did not earn income subject to Hong Kong Profits Tax during the years ended 31 July 2012 and 2011.

Prior to 1 January 2008, some of the Group’s PRC entities, being manufacturing foreign invested enterprises, were each entitled to a tax holiday of two-year full exemption followed by three-year 50% reduction in the income tax rate, commencing from their respective first profitmaking years from a PRC tax perspective.

– II-29 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

On 16 March 2007, the Fifth Plenary Session of the Tenth National People’s Congress passed the Corporate Income Tax Law of the PRC (“CIT Law”) which was effective from 1 January 2008. As a result of the CIT Law, taxable income for the subsidiaries of the Company in the PRC is subject to a standard PRC income tax rate of 25%, except for certain subsidiaries of the Company in the PRC which had enjoyed preferential tax rates before 1 January 2008.

For the year ended 31 July 2012, the following subsidiaries of the Company in the PRC were either subject to standard or preferential income tax rates, except that V.S. Industry (Shenzhen) Co., Ltd. (“VSI Shenzhen”), V.S. Technology Industry Park (Zhuhai) Co., Ltd. (“VS Zhuhai”), Haivs Industry (Qingdao) Co., Ltd. (“Haivs”), VSA Electronics Technology (Zhuhai) Co., Ltd. (“VSA Zhuhai”) and Qingdao GP Precision Mold Plastics Co., Ltd. (“Qingdao Mold”) sustained losses for taxation purposes for the year ended 31 July 2012:

Name of subsidiary	Period	Income tax rate
V.S. Industry (Zhuhai)	1 August 2010 to 31 December 2010	22.0%
Co., Ltd. (“VSI Zhuhai”)	1 January 2011 to 31 December 2011	24.0%
	1 January 2012 to 31 July 2012	25.0%
Qingdao GS Electronics Plastic	1 August 2010 to 31 December 2010	22.0%
Co., Ltd. (“Qingdao GS”)	1 January 2011 to 31 December 2011	24.0%
	1 January 2012 to 31 July 2012	25.0%
V.S. Electronics (Zhuhai) Co., Ltd.	1 August 2010 to 31 July 2012	25.0%
(“VSE Zhuhai”)
Qingdao GP	1 August 2010 to 31 December 2010	11.0%
Electronic Plastics	1 January 2011 to 31 December 2011	12.5%
Co., Ltd. (“Qingdao GP”)	1 January 2012 to 31 July 2012	12.5%

According to the CIT Law and its implementation rules, dividends receivable by non-PRC corporate residents from PRC enterprises are subject to withholding income tax at 10% for profits earned since 1 January 2008, unless reduced by tax treaties or arrangements. Pursuant to the SinoHong Kong Double Tax Arrangement and the related regulations, a qualified Hong Kong tax resident is eligible for a reduced withholding tax rate of 5% on dividends from a PRC enterprise if the Hong Kong tax resident is the “beneficial owner” and holds 25% or more of the equity interest of the PRC enterprise. The Group has adopted the 5% withholding tax rate for PRC withholding tax purposes.

According to the notice Caishui [2008] No.1 released by the Ministry of Finance and the State Administration of Taxation, distributions of pre-2008 retained profits of a foreign-invested enterprise to a foreign investor in 2008 or after are exempted from the PRC withholding tax. The Group is liable to withholding tax on dividends distributed from the subsidiaries incorporated in the PRC relating to profits generated on or after 1 January 2008. At 31 July 2012, the undistributed profits generated before 1 January 2008 by the subsidiaries incorporated in the PRC, which amounted to $129,791,000 (2011: $129,791,000), are not subject to the withholding tax on future distribution. As at 31 July 2012, deferred tax liabilities of $2,231,000 (2011: $1,745,000) have been recognised in respect of the temporary differences of $44,618,000 (2011: $34,892,000) which are related to the undistributed profits generated on or after 1 January 2008 by the subsidiaries incorporated in the PRC (note 23(b)).

Pursuant to the laws, rules and regulations of the Cayman Islands and the British Virgin Islands, the Group is not subject to any income tax in the Cayman Islands and the British Virgin Islands.

– II-30 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

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

Loss before taxation Notional tax on loss before taxation, calculated at the rates applicable to profits in the jurisdictions concerned Tax effect of non-deductible expenses Tax effect of unused tax losses not recognised Tax effect on withholding tax of retained earnings in the PRC subsidiaries Under-provision in prior years Tax effect of tax relief granted Actual tax expense	2012 $’000 (59,407) (10,776) 3,982 19,174 486 1,816 (393) 14,289	2011 $’000 (39,030)

		(9,877) 3,949 28,614 (17) 67 (608)
		22,128

7 Directors’ remuneration

The remuneration of directors for the year ended 31 July 2012 is set out below:

Executive directors Beh Kim Ling Gan Sem Yam Gan Chu Cheng Zhang Pei Yu Yeoh Ek Boon_(note(v))_ Non-executive director Gan Tiong Sia Independent non-executive directors Diong Tai Pew Lee Soo Gee Tang Sim Cheow	Fees $’000 – – – – – – 180 160 140 120 420 600	Salaries $’000 5,460 2,058 1,470 856 686 10,530 – – – – – 10,530	Discre– tionary bonuses (note (i)) $’000 – – – 74 – 74 – – – – – 74	Share– Retirement based scheme payments contributions (note (ii)) $’000 $’000 122 – 122 – 122 – 122 – – – 488 – 60 – 9 – – – 9 – 18 – 566 –	Total $’000 5,582 2,180 1,592 1,052 686
					11,092
					240
					169 140 129
					438
					11,770

– II-31 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

The remuneration of directors for the year ended 31 July 2011 is set out below:

Executive directors Beh Kim Ling Gan Sem Yam Gan Chu Cheng Zhang Pei Yu Yeoh Ek Boon_(note(v)) Non-executive director Gan Tiong Sia Independent non-executive directors Diong Tai Pew Cheung Kwan Hung, Anthony(note (iii)) Lee Soo Gee(note (iv))_ Tang Sim Cheow	Fees $’000 – – – – – – 180 160 70 70 120 420 600	Salaries $’000 7,205 2,866 2,048 744 2,866 15,729 – – – – – – 15,729	Discre– tionary bonuses (note (i)) $’000 – – – 62 – 62 – – – – – – 62	Share– Retirement based scheme payments contributions (note (ii)) $’000 $’000 258 – 258 – 258 – 258 – 258 – 1,290 – 126 – 18 – 18 – – – 18 – 54 – 1,470 –	Total $’000 7,463 3,124 2,306 1,064 3,124
					17,081
					306
					178 88 70 138
					474
					17,861

Notes:

(i) Each of the executive directors is entitled, on completion of every twelve months of service, to a management bonus in respect of each financial year of the Company in an amount to be determined by the board of directors which is subject to a cap.
(ii) These represent the estimated value of share options granted to the directors under the Company’s share option scheme (note 22). The value of these share options is measured according to the Group’s accounting policies for share-based payment transactions as set out in note 1(o)(ii).
(iii) Mr. Cheung Kwan Hung, Anthony resigned as an independent non-executive director with effect on 28 January 2011.
(iv) Mr. Lee Soo Gee was appointed as an independent non-executive director with effect on 28 January 2011.
(v) Mr. Yeoh Ek Boon resigned as an executive director with effect on 30 November 2011.

– II-32 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

8 Individuals with highest emoluments

Of the five individuals with the highest emoluments, three (2011: four) are directors whose emoluments are disclosed in note 7. The aggregate of the emoluments in respect of the other two individuals (2011: one individual) are as follows:

Salaries and other emoluments Discretionary bonuses Share-based payments	2012 $’000 2,356 184 44 2,584	2011 $’000 1,243 79 59
		1,381

The emoluments of the two individuals (2011: one individual) with the highest emoluments are within the following bands:

		Number	of individuals
		2012	2011
$Nil	– $1,000,000	–	–
$1,000,001	– $1,500,000	2	1

Under the Company’s Share Option Scheme described in note 22, the individual of the Company with the highest emoluments was granted 1,321,000 (2011: 2,088,000) share options during the year ended 31 July 2012 to subscribe for shares in the Company. None of the share options granted were exercised during the year ended 31 July 2012 (2011: Nil).

There were no amounts paid during the year ended 31 July 2012 (2011: Nil) to the directors or any of the five highest paid individuals as inducement to join or upon joining the Company or the Group or as compensation for loss of office.

9 Result attributable to equity shareholders of the Company

The consolidated result attributable to equity shareholders of the Company includes a loss of $13,934,000 (2011: loss of $4,834,000) which has been dealt with in the financial statements of the Company.

Reconciliation of the above amount of the Company’s (loss)/profit for the year:

Amount of consolidated loss attributable to equity shareholders dealt with in the Company’s financial statements Income recognised in respect of financial guarantees provided by the Company to its subsidiaries Company’s (loss)/profit for the year_(note 24(a))_	2012 $’000 (13,934) 11,699 (2,235)	2011 $’000 (4,834) 11,699
		6,865

– II-33 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

10 Loss per share

(a) Basic loss per share

The calculation of basic loss per share is based on the loss attributable to ordinary equity shareholders of the Company of $73,785,000 (2011: loss of $61,047,000) and the weighted average of 1,155,972,000 ordinary shares (2011: 981,086,000 shares) in issue during the year, calculated as follows:

(i) Weighted average number of ordinary shares

Issued ordinary shares at 1 August Effect of issuance of shares by rights issue (note 24(c)(ii)) Effect of conversion of bonus warrants to ordinary shares_(note 24(c)(iii))_ Weighted average number of ordinary shares at 31 July	2012 ’000 1,155,968 – 4 1,155,972	2011 ’000 866,976 114,110 –
		981,086

(b) Diluted loss per share

During the years ended 31 July 2012 and 2011, the effects of share options and bonus warrants are anti-dilutive.

– II-34 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

11 Fixed assets

(a) The Group

Cost: At 1 August 2010 Exchange adjustments Transfer Additions Disposals At 31 July 2011 At 1 August 2011 Exchange adjustments Transfer Additions Disposals At 31 July 2012 Accumulated depreciation and amortisation: At 1 August 2010 Exchange adjustments Charge for the year Written back on disposals At 31 July 2011 At 1 August 2011 Exchange adjustments Charge for the year Written back on disposals At 31 July 2012 Net book value: At 31 July 2012 At 31 July 2011	Buildings held for Leasehold own use improvements $’000 $’000 338,592 17,531 18,179 941 2,760 – 1,058 53 (7,248) – 353,341 18,525 353,341 18,525 2,299 124 143 – 3,049 906 – (1,768) 358,832 17,787 52,172 6,911 2,937 356 8,350 1,122 (1,353) – 62,106 8,389 62,106 8,389 352 52 8,720 1,121 – (1,587) 71,178 7,975 287,654 9,812 291,235 10,136	Office Plant equipment, and furniture machinery and fixtures $’0000 $’000 1,058,523 50,643 51,906 3,235 487 – 10,868 8,821 (40,620) (343) 1,081,164 62,356 1,081,164 62,356 7,272 404 588 – 21,467 2,972 (173,092) (1,250) 937,399 64,482 551,172 33,950 25,537 1,987 83,908 5,138 (29,035) (321) 631,582 40,754 631,582 40,754 3,684 249 76,333 4,397 (120,896) (853) 590,703 44,547 346,696 19,935 449,582 21,602	Motor Construction vehicles in progress $’000 $’000 23,902 4,143 1,388 94 – (3,247) 4,975 1,221 (1,289) – 28,976 2,211 28,976 2,211 217 16 – (731) 2,225 527 (5,130) – 26,288 2,023 18,947 – 1,055 – 2,547 – (1,271) – 21,278 – 21,278 – 149 – 3,142 – (4,591) – 19,978 – 6,310 2,023 7,698 2,211	Sub-total $’000 1,493,334 75,743 – 26,996 (49,500) 1,546,573 1,546,573 10,332 – 31,146 (181,240) 1,406,811 663,152 31,872 101,065 (31,980) 764,109 764,109 4,486 93,713 (127,927) 734,381 672,430 782,464	Interests in leasehold land held for own use under operating leases $’000 29,206 1,631 – – – 30,837 30,837 206 – – – 31,043 4,413 271 598 – 5,282 5,282 33 621 – 5,936 25,107 25,555	Total $’000 1,522,540 77,374 – 26,996 (49,500)
						1,577,410
						1,577,410 10,538 – 31,146 (181,240)
						1,437,854
						667,565 32,143 101,663 (31,980)
						769,391
						769,391 4,519 94,334 (127,927)
						740,317
						697,537

						808,019

– II-35 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(b) The Company

Cost: At 1 August 2010 Disposals At 31 July 2011, 1 August 2011 and 31 July 2012 Accumulated depreciation: At 1 August 2010 Charge for the year Written back on disposals At 31 July 2011, 1 August 2011 and 31 July 2012 Net book value: At 31 July 2012 and 2011	Buildings held for own use $’000 7,247 (7,247) – 1,232 121 (1,353) – –	Office equipment, furniture and fixtures $’000 200 – 200 199 1 – 200 –	Total $’000 7,447 (7,247)
			200
			1,431 122 (1,353)
			200
			–

(c) The analysis of net book value of properties is as follows:

Outside Hong Kong – Medium-term leases Representing: Buildings held for own use Interests in leasehold land held for own use under operating leases	The Group 2012 2011 $’000 $’000 312,761 316,790 312,761 316,790 287,654 291,235 25,107 25,555 312,761 316,790	The Group 2012 2011 $’000 $’000 312,761 316,790 312,761 316,790 287,654 291,235 25,107 25,555 312,761 316,790
		316,790

		291,235 25,555
		316,790

(d) At 31 July 2012 and 2011, certain fixed assets have been pledged as security for the bank loans (note 20(b)).

(e) As at 31 July 2011, the Group leased certain production plant and machinery under finance leases with remaining lease term of one year. The net book value of plant and machinery held under finance leases was $19,736,000 as at 31 July 2011. No additions to plant and machinery of the Group were financed by finance leases during the years ended 31 July 2012 and 2011.

– II-36 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

12 Goodwill

	The Group
	$’000
Cost and carrying amount:
At 31 July 2011 and 2012	2,172

The recoverable amount of goodwill is estimated by the directors annually and no impairment was considered necessary.

13 Investments in subsidiaries

	The	Company
	2012	2011
	$’000	$’000
Unlisted shares, at cost	433,724	424,843

Details of the subsidiaries at 31 July 2012 are set out below. All of these are controlled subsidiaries as defined under note 1(c) and have been consolidated into the Group’s financial statements.

					Proportion of ownership	interest
			Particulars	Group’s	Held
	Place of	Place of	of issued and	effective	by the	Held by	Principal
Name of company	incorporation	operation	paid up capital	interest	Company	subsidiaries	activity
V.S. International	BVI	Hong Kong	US$100	100%	100%	–	Investment holding
Industry Limited
(“VSIIL”)
V.S. Investment	BVI	N/A	$54,000,025	100%	100%	–	Dormant
Holdings Limited
V.S. Corporation	Hong Kong	PRC	$75,000,002	100%	–	100%	Trading of electronic
(Hong Kong) Co.			(75,000,000 non-				products, parts and
Limited (“VSHK”)			voting deferred				components
			shares of $1 each and
			2 ordinary shares of
			$1 each (note (iv)))
VSI Shenzhen	PRC	PRC	$10,000,000	100%	–	100%	Dormant
VS Zhuhai_(note (i))_	PRC	PRC	US$36,820,000	100%	–	100%	Manufacturing, assembling
							and selling of plastic
							moulded products and
							electronic products, parts
							and components
Haivs_(note (i))_	PRC	PRC	RMB32,150,000	100%	–	100%	Dormant
Qingdao GS_(note (i))_	PRC	PRC	RMB73,980,000	100%	–	100%	Manufacturing and selling of
							plastic moulded products
							and parts

– II-37 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

					Proportion of ownership	interest
			Particulars	Group’s	Held
	Place of	Place of	of issued and	effective	by the	Held by	Principal
Name of company	incorporation	operation	paid up capital	interest	Company	subsidiaries	activity
Qingdao GP_(note (ii))_	PRC	PRC	US$11,000,000	100%	–	100%	Manufacturing and selling of
							plastic moulded products
							and parts
Qingdao Mold_(note (i))_	PRC	PRC	US$3,000,000	100%	–	100%	Manufacturing and selling of
							plastic injection moulds
VSA Holding Hong	Hong Kong	PRC	$15,600,000	100%	–	100%	Investment holding
Kong Co., Limited				(note 25)
(“VSA(HK)”)
VSA Zhuhai_(note (iii))_	PRC	PRC	US$12,000,000	100%	–	100%	Assembling and selling of
							electronic products, parts
							and components
V.S. Resources	BVI	Hong Kong	US$100	100%	100%	–	Investment holding
Holdings Limited
VSI Zhuhai_(note (ii))_	PRC	PRC	US$9,540,000	100%	–	100%	Manufacturing and selling of
							plastic moulded products
							and parts
V.S. Holding Vietnam	BVI	Hong Kong	US$100	100%	100%	–	Investment holding
Limited
V.S. Industry Holding	Hong Kong	Hong Kong	$100	100%	100%	–	Investment holding
Limited
VSE Zhuhai_(note (ii))_	PRC	PRC	RMB7,250,000	100%	–	100%	Assembling and selling of
							electronic products, parts
							and components

Notes:

(i) These are wholly foreign owned enterprises established in the PRC.
(ii) These are sino-foreign equity joint venture companies established in the PRC. The registered capital is held by two of the Company’s wholly-owned subsidiaries.
(iii) This is a foreign equity joint venture company established in the PRC. The registered capital is held by three of the Company’s subsidiaries.
(iv) In accordance with the articles of association of VSHK, a shareholder holding 75,000,000 nonvoting deferred shares is not entitled to any dividend or any participation in the profits or assets of VSHK and is also not entitled to vote at any general meeting.

– II-38 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

14 Interests in associates

Share of net assets Goodwill	The Group 2012 2011 $’000 $’000 16,769 18,526 8,521 8,521 25,290 27,047	The Group 2012 2011 $’000 $’000 16,769 18,526 8,521 8,521 25,290 27,047
		27,047

The following list contains only the particulars of associates, all of which are unlisted corporate entities, which principally affected the results or assets of the Group.

					Proportion of ownership	Proportion of ownership
					interest
					Group’s
	Form of	Place of	Place of	Particulars	effective	Held by	Principal
Name of associate	business structure	incorporation	operation	of capital	interest	subsidiaries	activity
VS Industry Vietnam	Limited liability	Vietnam	Vietnam	Legal capital of	23.47%	23.47%	Manufacturing
Joint Stock	company			US$10,863,000			and selling of
Company (“VS							plastic moulded
Vietnam”)							products and
							parts
VS-Usotor (Zhuhai)	Sino-foreign equity	PRC	PRC	Registered Capital	15.3%(note)	15.3%	Manufacturing and
Co., Ltd. (“VS-	joint venture			$6,200,000			selling of metal
Usotor”)							stamped parts
							and components

Note:

As the Group has the ability to exercise significant influence over the management of VS-Usotor, including participating in the financial and operating policy decisions, it is considered to be an associate of the Group.

On 20 August 2011, the Group disposed of its entire equity interests in VS-Usotor to an independent third party at a consideration of $1.6 million. A gain on disposal of an associate of $937,000 was recognised in profit or loss.

– II-39 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Summary financial information on associates:

2012 100 per cent Group’s effective interest 2011 100 per cent Group’s effective interest	Assets $’000 449,431 105,481 502,180 115,960	Liabilities $’000 (341,676) (80,191) (385,176) (88,913)	Equity $’000 107,755 25,290 117,004 27,047	Revenues Profit/(loss) $’000 $’000 532,785 (2,515) 125,045 (590) 535,867 15,918 122,055 3,778	Revenues Profit/(loss) $’000 $’000 532,785 (2,515) 125,045 (590) 535,867 15,918 122,055 3,778

					15,918 3,778

15 Inventories
(a) Inventories in the consolidated statement of financial position comprise:

Raw materials Work-in-progress Finished goods	The Group 2012 2011 $’000 $’000 57,309 128,715 37,151 62,053 49,365 54,238 143,825 245,006	The Group 2012 2011 $’000 $’000 57,309 128,715 37,151 62,053 49,365 54,238 143,825 245,006
		245,006

(b) The analysis of the amount of inventories recognised as an expense and included in profit or loss is as follows:

Carrying amount of inventories sold Write down of inventories Reversal of write-down of inventories	The Group 2012 2011 $’000 $’000 1,351,172 1,485,846 13,461 4,095 (61) (740) 1,364,572 1,489,201	The Group 2012 2011 $’000 $’000 1,351,172 1,485,846 13,461 4,095 (61) (740) 1,364,572 1,489,201
		1,489,201

For the year ended 31 July 2012 and 2011, the reversal of write-down of inventories made in prior years arose due to an increase in the estimated net realisable value of certain goods as a result of a change in consumer preferences. Inventories are expected to be recovered within one year.

– II-40 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

16 Trade and other receivables

Trade receivables Bills receivable_(note) Less: allowance for doubtful debts Amounts due from subsidiaries Other receivables, prepayments and deposits Derivative financial instruments(note 4(ii)) Deferred assets(note 16(d))_	The Group 2012 2011 $’000 $’000 241,817 309,278 73,063 67,096 (7,771) (7,729) 307,109 368,645 – – 53,811 82,639 – 1,391 5,634 10,779 366,554 463,454	The Company 2012 2011 $’000 $’000 – – – – – – – – 39,403 53,194 1 2 – – – – 39,404 53,196	The Company 2012 2011 $’000 $’000 – – – – – – – – 39,403 53,194 1 2 – – – – 39,404 53,196
			– 53,194 2 – –
			53,196

All trade and other receivables, including amounts due from subsidiaries, are expected to be recovered or recognised as expenses within one year. Amounts due from subsidiaries are unsecured, interest free and repayable upon demand.

Note:

As at 31 July 2012, certain bills receivables amounting to $5,942,000 (2011: $6,053,000) have been pledged to banks as security in connection with certain banking facilities (note 20(b)).

(a) Ageing analysis

Included in trade and other receivables are trade debtors and bills receivable (net of allowance for doubtful debts) with the following ageing analysis as of the end of the reporting period:

Current Less than 1 month past due 1 to 3 months past due More than 3 months but less than 12 months past due More than 1 year but less than 2 years past due Total amounts past due	The Group 2012 2011 $’000 $’000 269,840 307,212 26,185 37,266 9,682 13,953 863 10,214 539 – 37,269 61,433 307,109 368,645	The Group 2012 2011 $’000 $’000 269,840 307,212 26,185 37,266 9,682 13,953 863 10,214 539 – 37,269 61,433 307,109 368,645
		37,266 13,953 10,214 –
		61,433
		368,645

Credit terms granted by the Group to customers generally range from 30 to 120 days. Further details on the Group’s credit policy are set out in note 26(a).

– II-41 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(b) Impairment of trade debtors and bills receivable

Impairment losses in respect of trade debtors and bills receivable are recorded using an allowance account unless the Group is satisfied that recovery of the amount is remote, in which case the impairment loss is written off against trade debtors and bills receivable directly (see note 1(i)(i)).

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

At 1 August Impairment loss recognised_(note 5(c))_ At 31 July	2012 $’000 7,729 42 7,771	2011 $’000 2,010 5,719
		7,729

At 31 July 2012, the Group’s trade debtors of $8,286,000 (2011: $7,821,000) were individually determined to be impaired. The individually impaired receivables related to customers that were in financial difficulties and management assessed that only a portion of the receivables is expected to be recovered. Consequently, specific allowances for doubtful debts totalling $7,771,000 have been recognised as at 31 July 2012 (2011: $7,729,000) after considering subsequent settlement and other relevant factors. The Group does not hold any collateral over these balances.

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

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

Neither past due nor impaired Less than 1 month past due 1 to 3 months past due More than 3 months but less than 12 months past due	2012 $’000 269,840 26,185 9,682 887 36,754 306,594	2011 $’000 307,212
		37,266 13,953 10,122
		61,341
		368,553

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

Receivables that were past due but not impaired relate to a number of independent customers that have good track records of transactions with the Group. Based on past experience, management believed that no impairment allowance was necessary in respect of these balances as there had not been a significant change in credit quality and the balances were still considered fully recoverable. The Group does not hold any collateral for these balances.

– II-42 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(d) Deferred assets

An analysis of current and non-current portion of deferred assets (moulds) is as follows:

To be amortised within one year To be amortised over one year Deposits with banks Deposits with banks with original maturity date over three months Pledged fixed deposits with banks	The Group 2012 2011 $’000 $’000 5,634 10,779 – 6,602 5,634 17,381 The Group 2012 2011 $’000 $’000 6,489 121 32,729 60,612 39,218 60,733	The Group 2012 2011 $’000 $’000 5,634 10,779 – 6,602 5,634 17,381 The Group 2012 2011 $’000 $’000 6,489 121 32,729 60,612 39,218 60,733
		60,733

17 Deposits with banks

Pledged fixed deposits with banks have been pledged to banks as security for certain banking facilities, including trade finance, overdrafts and bank loans (note 20(b)).

18 Cash and cash equivalents

(a) Cash and cash equivalents comprise:

Cash at bank and in hand Cash in transit Cash and cash equivalents in the statement of financial position Bank overdrafts (note 20(a)) Cash and cash equivalents in the consolidated cash flow statement	The Group 2012 2011 $’000 $’000 86,196 112,338 4,652 2,994 90,848 115,332 (23,258) (20,393) 67,590 94,939	The Company 2012 2011 $’000 $’000 56 193 – – 56 193	The Company 2012 2011 $’000 $’000 56 193 – – 56 193
			193

As at 31 July 2012, US$600,000 (equivalent to approximately $4,652,000) (2011: US$384,000, equivalent to approximately $2,994,000) of cash was being remitted to a subsidiary in the PRC through a financial institution. The cash was received by the subsidiary on 1 August 2012 (2011: 1 August 2011). Therefore, the cash being remitted was included in cash in transit as at 31 July 2012 and 2011.

– II-43 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(b) Reconciliation of loss before taxation to cash generated from operations:

Note
Loss before taxation
Adjustments for:
– Finance costs
5(a)
– Interest income
4
– Amortisation of interests in leasehold land
held for own use under operating leases
5(c)
– Depreciation
5(c)
– Share of profits less losses of associates
– Net loss/(gain) on disposal of fixed assets
4
– Equity settled share-based payment expenses
5(b)
Operating profit before changes
in working capital
Decrease/(increase) in inventories
Decrease/(increase) in trade and other receivables
(Decrease)/increase in trade and other payables
Cash generated from operations
Trade and other payables
The Group
2012
2011
$’000
$’000
Amounts due to subsidiaries
–
–
Trade payables
225,680
320,057
Bills payable
15,261
3,605
Deferred income_(note 19(a))
–
–
Payables for the purchase of
fixed assets(note 19(c))
11,470
57,255
Derivative financial instruments
(note 4(ii))_
6,412
–
Accrued expenses and other
payables
108,563
144,119
367,386
525,036

2012
2011
$’000
$’000
(59,407)
(39,030)
35,903
39,806
(887)
(1,872)
621
598
93,713
101,065
590
(3,778)
25,496
(14,208)
1,229
2,596
97,258
85,177
102,825
(5,095)
103,126
(9,863)
(112,920)
20,242
190,289
90,461
The Company
2012
2011
$’000
$’000
130,141
131,205
–
–
–
–
18,130
11,699
–
–
–
–
300
467
148,571
143,371

19 Trade and other payables

Except for the other payables mentioned in note 19(a) and (c), all of the trade and other payables, including amounts due to subsidiaries, are expected to be settled or recognised as income within one year. Amounts due to subsidiaries are unsecured, interest free and repayable upon demand.

– II-44 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(a) Deferred income

Aggregate fair values of guarantees issued by the Company to certain suppliers and banks in respect of certain credit and banking facilities utilised by its subsidiaries are recognised as deferred income. The deferred income is amortised in the income statement over the respective terms of the guarantees. The analysis of the unamortised deferred income is as follows:

Financial guarantees issued To be amortised within one year To be amortised after one year	The Company 2012 2011 $’000 $’000 18,130 20,949 (18,130) (11,699) – 9,250	The Company 2012 2011 $’000 $’000 18,130 20,949 (18,130) (11,699) – 9,250
		9,250

(b) Included in trade and other payables are trade creditors and bills payable with the following ageing analysis as of the end of the reporting period:

Due within 1 month or on demand Due after 1 month but within 3 months Due after 3 months but within 6 months	The Group 2012 2011 $’000 $’000 160,937 202,736 59,940 106,509 20,064 14,417 240,941 323,662	The Group 2012 2011 $’000 $’000 160,937 202,736 59,940 106,509 20,064 14,417 240,941 323,662
		323,662

(c) Payables for the purchase of fixed assets

The Group acquired certain fixed assets from suppliers, of which various payment terms were offered. An analysis of current and non-current portion of the amounts due to fixed assets suppliers is as follows:

Current: Within 1 year or on demand_(note) Non-current: After 1 year but within 2 years(note)_	The Group 2012 2011 $’000 $’000 11,470 57,255 11,081 6,303 22,551 63,558	The Group 2012 2011 $’000 $’000 11,470 57,255 11,081 6,303 22,551 63,558
		63,558

Note: Amounts due to suppliers in respect of acquisition of fixed assets amounting to $8,734,000 (2011: $26,479,000 and $6,303,000 recorded under current portion and under non-current portion respectively) are repayable under instalment terms, and unsecured as well as bear interest at 4.3%-7.5% (2011: 4.3%-7.5%) per annum. The remaining amounts, including the balance of $11,081,000 recorded under non-current portion as at 31 July 2012, are interest free and unsecured.

– II-45 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

20 Interest-bearing borrowings

Current: Within 1 year or on demand Non-current: After 1 year but within 2 years After 2 years but within 5 years	The Group 2012 2011 $’000 $’000 316,180 454,886 31,014 248,814 226,111 – 257,125 248,814 573,305 703,700	The Group 2012 2011 $’000 $’000 316,180 454,886 31,014 248,814 226,111 – 257,125 248,814 573,305 703,700
		248,814 –
		248,814
		703,700

(a) An analysis of current and non-current bank loans and overdrafts is as follows:

Current: Overdrafts – secured_(note 18)_ Bank loans – secured – unsecured Non-current: Bank loans – secured	The Group 2012 2011 $’000 $’000 23,258 20,393 184,905 254,570 108,017 179,923 292,922 434,493 316,180 454,886 257,125 248,814 573,305 703,700	The Group 2012 2011 $’000 $’000 23,258 20,393 184,905 254,570 108,017 179,923 292,922 434,493 316,180 454,886 257,125 248,814 573,305 703,700
		254,570 179,923
		434,493
		454,886
		248,814
		703,700

None of the non-current bank loans are expected to be settled within one year.

– II-46 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(b) Certain banking facilities, including trade finance, overdrafts and bank loans, are secured by the following assets of the Group and the Company:

Bills receivable_(note 16) Pledged fixed deposits (note 17) Buildings held for own use with aggregate carrying value (note 11(d)) Plant and machinery with aggregate carrying value(note 11(d)) Interests in leasehold land held for own use under operating leases with aggregate carrying value(note 11(d))_	The Group 2012 2011 $’000 $’000 5,942 6,053 32,729 60,612 281,946 285,181 69,143 41,143 25,107 25,555 414,867 418,544	The Company 2012 2011 $’000 $’000 – – – – – – – – – – – –	The Company 2012 2011 $’000 $’000 – – – – – – – – – – – –
			–

The above-mentioned secured banking facilities, including trade finance, overdrafts and bank loans, totalling $557,612,000 (2011: $619,453,000), were utilised to the extent of $465,288,000 (2011: $523,777,000) at 31 July 2012. The Group’s banking facilities also included certain unsecured banking facilities, totalling $226,691,000 (2011: $328,161,000), which were utilised to the extent of $108,017,000 (2011: $179,923,000) at 31 July 2012.

(c) Two (2011: three) of the Group’s banking facilities are subject to the fulfilment of covenants relating to certain of the Group’s balance sheet ratios, as are commonly found in lending arrangements with financial institutions. If the Group were to breach the covenants, the drawn down facilities would become payable on demand. The Group regularly monitors its compliance with these covenants. Further details of the Group’s management of liquidity risk are set out in note 26(b). As at 31 July 2012 and 2011, none of the covenants relating to drawn down facilities had been breached.

– II-47 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

21 Obligations under finance leases

At 31 July 2012, the Group had obligations under finance leases repayable as follows:

			The Group	The Group
		2012			2011
	Present	Interest		Present	Interest
	value of the	expense	Total	value of the	expense	Total
	minimum	relating to	minimum	minimum	relating to	minimum
	lease	future	lease	lease	future	lease
	payments	periods	payments	payments	periods	payments
	$’000	$’000	$’000	$’000	$’000	$’000
Within one year	–	–	–	7,962	213	8,175

22 Share option scheme

The Company has a share option scheme (“Share Option Scheme”) which was approved by its shareholders on 20 January 2002 whereby the directors of the Company are authorised, at their discretion, to invite eligible participants, including directors of any company in the Group, to subscribe for shares in the Company.

Pursuant to the resolution duly passed at the annual general meeting (AGM) held on 16 December 2011, the general scheme limit (“General Scheme Limit”) of the Share Option Scheme was refreshed. The total number of ordinary shares which could be allotted and issued upon exercise of all options granted or to be granted under the Share Option Scheme must not in aggregate exceed 20 percent of the shares in issue as at the date of the AGM. As at the date of the AGM, there were 1,155,968,000 shares of the Company in issue. Accordingly, the refreshed General Scheme Limit was 231,193,600 shares of the Company.

Pursuant to a resolution passed by directors in a meeting of the Board on 3 February 2010, the board approved the grant of 86,680,000 share options (“Options”) under the rules of the Share Option Scheme. The number of share options granted was adjusted to 92,322,000 as a result of the rights issue completed on 16 March 2011 (note 24(c)(ii)).

The main purpose of the Share Option Scheme is to enable the Group to grant Options to the eligible participants as incentives or rewards for their contribution to past and future performances of the Group. In appreciation of their efforts and support and/or as incentives for their continual support for the Group, it was recommended that Options be granted to the grantees under the Share Option Scheme, to subscribe for ordinary shares at an exercise price of $0.18 (“Exercise Price”) per share. The Exercise Price per share was adjusted to $0.169 as a result of the rights issue completed on 16 March 2011 (note 24(c)(ii)). The share options have a term of three years commencing 1 August 2010 and shall vest (if applicable) and become exercisable in three tranches in the proportion of approximately 30%, 30% and 40% on 1 August 2010, 1 August 2011 and 1 August 2012 respectively.

For acceptance of Options granted by the Company, an eligible participant is required to remit $1 to the Company at the principal place of business of the Company in Hong Kong within 21 days from the date of receiving the offer of the Options. As at 24 February 2010, 66 eligible participants accepted the offer of Options granted by the Company. No further Options have been granted since that date.

The Options’ fair value of $6,736,000 was measured at grant date using the binomial option pricing model (note 22(c)). The total estimated fair value of the Options is spread over the vesting period, taking into account the probability that the Options will vest. For the year ended 31 July 2012, $1,229,000 (2011: $2,596,000) was recognised as an employee cost with a corresponding increase in a capital reserve within equity.

– II-48 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

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

Date granted Vesting period Exercise period 3 February 2010 3 February 2010 1 August 2010 to 31 July 2010 to 31 July 2013 3 February 2010 1 August 2011 to 31 July 2011 to 31 July 2013 3 February 2010 1 August 2012 to 31 July 2012 to 31 July 2013	Options granted Directors Employees ’000 ’000 12,718 6,826 12,718 6,826 16,959 9,016 42,395 22,668	Total ’000 19,544 19,544 25,975
		65,063

Pursuant to the rules of the Share Option Scheme, Options will lapse when the grantee ceases to be an employee of the Group for reasons other than death, ill-health or retirement.

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

Outstanding at the beginning of the year Adjusted during the year (note (i)) Lapsed during the year (note (ii)) Outstanding at the end of the year Exercisable at the end of the year	2012 Weighted average exercise price Number of Options ’000 $0.169 85,707 – – $0.169 85,707 $0.169 (20,644) $0.169 65,063 $0.169 39,088	2011 Weighted average exercise price Number of Options ’000 $0.180 86,680 $0.169 5,642 $0.169 92,322 $0.169 (6,615) $0.169 85,707 $0.169 25,748	2011 Weighted average exercise price Number of Options ’000 $0.180 86,680 $0.169 5,642 $0.169 92,322 $0.169 (6,615) $0.169 85,707 $0.169 25,748
			92,322 (6,615)
			85,707

			25,748

(i) During the year ended 31 July 2011, the number of share options granted and the exercise price per share were adjusted to 92,322,000 and $0.169 respectively as a result of the rights issue completed on 16 March 2011 (note 24 (c)(ii)).
(ii) For the year ended 31 July 2012, 20,644,000 share options were lapsed as a director and certain employees ceased to be employees of the Group for reasons other than death, illhealth or retirement (2011: 6,615,000).

The Options outstanding at 31 July 2012 had an exercise price of $0.169 (2011: $0.169) and a weighted average remaining contracted life of one year (2011: two years).

– II-49 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(c) Fair value of options and assumptions

The fair value of services received in return for Options granted is measured by reference to the fair value of Options granted. The estimate of the fair value of the Options granted is measured based on a binomial option pricing model to reflect the impact of vesting period, exit rate and exercise pattern on the Option value.

Fair value of Options and assumptions

Fair value at measurement date (weighted average)	$6,736,000
Share price	$0.176
Exercise price	$0.169
Expected volatility (expressed as
weighted average volatility used in the
modelling under the binomial model)	85.48%
Option life (expressed as weighted
average life used in the modelling
under the binomial model)	3.5 years
Expected dividends	0%
Risk-free interest rate (based on
Hong Kong Exchange Fund Notes)	1.2195%

The expected volatility is based on the historic volatility (the Company’s share price over one year prior to the grant date and in contrast to companies with similar businesses), adjusted for any expected changes to future volatility due to publicly available information. Expected dividends are based on historical dividends. Changes in the subjective input assumptions could materially affect the fair value estimate.

Options were granted under a service condition. This condition has not been taken into account in the grant date fair value measurement of the services received. There were no market conditions associated with the Option grants.

23 Income tax in the statement of financial position

(a) Current taxation in the statement of financial position represents:

Balance of income tax provision relating to prior years Provision for PRC income tax for the year Under-provision in respect of prior years Tax paid PRC income tax payable	The Group 2012 2011 $’000 $’000 7,519 9,387 11,987 7,404 1,816 67 (10,948) (9,339) 10,374 7,519	The Group 2012 2011 $’000 $’000 7,519 9,387 11,987 7,404 1,816 67 (10,948) (9,339) 10,374 7,519
		7,519

– II-50 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

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

The components of deferred tax assets/(liabilities) recognised in the consolidated statement of financial position and the movement during the year are as follows:

The Group Withholding tax on future Deferred tax on dividend income accumulated from PRC losses of PRC subsidiaries subsidiaries (Note 6(a)) $’000 $’000 Deferred tax arising from: At 1 August 2010 14,674 (1,762) (Charged)/credited to profit or loss (14,674) 17 At 31 July 2011 – (1,745) At 1 August 2011 – (1,745) Charged to profit or loss – (486) At 31 July 2012 – (2,231) 2012 $’000 Deferred tax liability recognised in the statement of financial position (2,231)	The Group	Total $’000 12,912 (14,657) (1,745) (1,745) (486) (2,231) 2011 $’000 (1,745)

(c) Deferred tax assets not recognised:

No deferred tax assets in respect of cumulative tax losses of $202,292,000 (2011: $125,595,000) have been recognised as it is not probable that the future taxable profits against which the losses can be utilised will be generated. The tax losses incurred by subsidiaries incorporated in the PRC expire five years after they are incurred. In addition, other deferred tax assets or liabilities have not been recognised as all the deductible or temporary differences are not material.

– II-51 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

24 Capital, reserves and dividends

(a) Movements in components of equity

The reconciliation between the opening and closing balances of each component of the Group’s consolidated equity is set out in the consolidated statement of changes in equity. Details of the changes in the Company’s individual components of equity between the beginning and the end of the year are set out below:

The Company

The Company At 1 August 2010 Changes in equity for 2011: Total comprehensive income for the year Issuance of shares by rights issue_(note 24 (c)(ii)) Equity settled share-based transactions(note 22) Balance at 31 July 2011 and 1 August 2011 Changes in equity for 2012: Total comprehensive loss for the year Conversion of bonus warrants to ordinary shares(note 24(c)(iii)) Equity settled share-based transactions(note 22)_ Share options lapsed during the year Balance at 31 July 2012	Share premium $’000 (note 24 (d) (i)) 72,006 – 18,199 – 90,205 – 5 – – 90,210	Contributed surplus $’000 (note 24 (d) (i)) 138,706 – – – 138,706 – – – – 138,706	Employee share-based capital reserve $’000 (note 24 (d) (iv)) 2,911 – – 2,596 5,507 – – 1,229 (1,626) 5,110	Retained profits $’000 26,530 6,865 – – 33,395 (2,235) – – 1,626 32,786	Total $’000 240,153 6,865 18,199 2,596
					267,813 (2,235) 5 1,229 –
					266,812

(b) Dividends
(i) Dividends payable to equity shareholders of the Company attributable to the year

No dividend has been proposed by the Company after the end of the reporting period attributable to the years ended 31 July 2012 and 2011.

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

No dividends attributable to the previous financial year have been approved and paid by the Company during the reporting year.

– II-52 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(c) Share capital

(i) Authorised and issued share capital

Authorised: Ordinary shares of $0.05 each Issued and fully paid: At 1 August Shares issued by rights issue_(note 24(c)(ii)) Shares issued under bonus warrants(note 24(c)(iii))_ At 31 July	2012 Number of shares Amount ’000 $’000 4,000,000 200,000 1,155,968 57,798 – – 67 3 1,156,035 57,801	2011 Number of shares Amount ’000 $’000 4,000,000 200,000 866,976 43,349 288,992 14,449 – – 1,155,968 57,798	2011 Number of shares Amount ’000 $’000 4,000,000 200,000 866,976 43,349 288,992 14,449 – – 1,155,968 57,798

			43,349 14,449 –
			57,798

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

(ii) Rights issue with bonus warrants

On 16 March 2011, 288,992,000 ordinary shares of the Company were issued at the subscription price of $0.12 each by way of rights issue. The gross proceeds received by the Company from the rights issue were approximately $34,679,000, of which $14,449,000 was credited to the share capital account and the balance of $18,199,000 (net of professional fees of $2,031,000) was credited to the share premium account.

Upon completion of and in connection with the rights issue, an aggregate of 144,496,000 bonus warrants were issued to the subscribers on the basis of one bonus warrant for every two rights shares taken up, whereby options were issued to the subscribers to subscribe for ordinary shares at an exercise price of $0.12 per share for the period from 16 March 2011 to 15 March 2014.

(iii) Conversion of bonus warrants to ordinary shares

67,000 bonus warrants were exercised and converted as ordinary shares during the year ended 31 July 2012. An amount equivalent to par value of the shares issued of $3,000 was recognised as share capital. The premium paid on the conversion of the shares of $5,000 was charged to share premium.

– II-53 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(iv) Terms of unexpired and unexercised share options at the end of the reporting period

	2012		2011
	Exercise	Number of	Exercise	Number of
	price	options	price	options
Exercise period	$	’000	$	’000
1 August 2010 to 31
July 2013	0.169	19,544	0.169	25,748
1 August 2011 to 31
July 2013	0.169	19,544	0.169	25,748
1 August 2012 to 31
July 2013	0.169	25,975	0.169	34,211
		65,063		85,707

Each share option entitles the holder to subscribe for one ordinary share in the Company. Further details of these share options are set out in note 22 to these financial statements.

(d) Nature and purpose of reserves

(i) Share premium and contributed surplus

(a) Under the Companies Law of the Cayman Islands, the funds in the share premium account and contributed surplus account of the Company are distributable to the shareholders provided that immediately following the date on which the dividend is proposed to be distributed, the Company will be in a position to pay off its debts as they fall due in the ordinary course of business.
(b) Pursuant to a reorganisation, the Company became the holding company of the Group on 20 January 2002. The excess of the consolidated net assets represented by the shares acquired over the nominal value of shares issued by the Company in exchange under the reorganisation was transferred to contributed surplus. In the consolidated financial statements, capital reserves represents the difference between (a) the nominal value of shares of the subsidiaries acquired; and (b) the nominal value of the shares issued by the Company in exchange under the reorganisation of the Group on 20 January 2002.

(ii) Foreign exchange translation reserve

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

(iii) Statutory reserve fund

According to the articles of association of the subsidiaries of the Company in the PRC, the subsidiaries are required to transfer at least 10% of their net profit, as determined in accordance with PRC accounting rules and regulations applicable to enterprises with foreign investment, to the statutory reserve fund until the reserve balance reaches 50% of the registered capital. The transfer to this reserve must be made before distribution of a dividend to the Company.

– II-54 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

The statutory reserve fund can be used to make good previous years’ losses, if any, and may be converted into share capital.

(iv) Employee share-based capital reserve

Employee share-based capital reserve represents the fair value of the actual or estimated number of unexercised share options granted to employees of the Group in accordance with the accounting policy adopted for share-based payments in note 1(o)(ii).

(e) Distributability of reserves

As 31 July 2012, in the opinion of the directors, the reserves of the Company available for distribution to shareholders amounted to $261,702,000 (2011: $262,306,000) subject to the restrictions stated above.

(f) Capital management

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

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

The Group monitors its capital structure on the basis of a net debt-to-adjusted capital ratio. For this purpose the Group defines net debt as total debt (which includes interest-bearing borrowings, trade and other payables, obligations under finance leases and loan from a substantial shareholder), less cash and cash equivalents and deposits with banks. Adjusted capital comprises all components of equity.

The Group’s strategy is to maintain the net debt-to-adjusted capital ratio below 200%. During the year ended 31 July 2012, the Group’s net debt-to-adjusted capital ratio was 205%. In order to maintain the ratio at a reasonable level in the future, the Group may adjust the amount of dividends paid to shareholders, issue new shares, raise new debt financing or sell assets to reduce debt.

– II-55 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

The net debt-to-adjusted capital ratio at 31 July 2012 and 2011 was as follows:

Current liabilities:
Trade and other payables_(note 19)
Interest-bearing borrowings(note 20)
Obligations under finance leases(note 21)
Loan from a substantial shareholder(note 29(c))
Non-current liabilities:
Other payables(note 19(c))
Interest-bearing borrowings(note 20)
Total debt
Less: Deposits with banks(note 17)
Cash and cash equivalents(note 18)_
Net debt
Adjusted capital
Net debt-to-adjusted capital ratio

The Group
2012
2011
$’000
$’000
367,386
525,036
316,180
454,886
–
7,962
–
4,894
683,566
992,778
11,081
6,303
257,125
248,814
951,772
1,247,895
(39,218)
(60,733)
(90,848)
(115,332)
821,706
1,071,830
401,067
471,206
205%
227%

Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.

– II-56 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

25 Acquisition of non-controlling interest

In February 2012, the Group acquired an additional 19% equity interest in VSA(HK) for a consideration of $2,461,000. Upon completion of the acquisition, the Group increased its equity interest in VSA(HK) from 81% to 100%.

The following table summarises the effect of changes in the Group’s equity interest in VSA(HK) for the year ended 31 July 2012:

Equity interest in VSA(HK) at beginning of the year Effect of increase in VSA(HK)’s equity interest Share of comprehensive income during the year ended 31 July 2012 Equity interest in VSA(HK) at the end of the year	$’000 11,210 2,719 370
	14,299

26 Financial risk management and fair values

Exposure to credit, liquidity, interest rate and currency risks arises in the normal course of the Group’s business. The Group’s exposure to these risks and the financial risk management policies and practices used by the Group to manage these risks are described below.

(a) Credit risk

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

In respect of trade and other receivables, individual credit evaluations are performed on all customers requiring credit over a certain amount. These evaluations focus on the customer’s past history of making payment when due and current ability to pay, and take into account information specific to the customer as well as pertaining to the economic environment in which the customer operates. Trade receivables are due within 30 to 120 days from the date of billing. Debtors with balances that are more than 12 months past due are requested to settle all outstanding balances before any further credit is granted. Normally, the Group does not obtain collateral from customers.

The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The default risk of the industry and country in which customers operate also has an influence on credit risk but to a lesser extent. As at the end of the reporting period, the Group had a concentration of credit risk of 8% (2011: 6%) and 28% (2011: 25%) of the total trade and other receivables due from the Group’s largest customer and the five largest customers respectively.

The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the statement of financial position after deducting any impairment allowance. Except for the financial guarantees given by the Company as set out in note 28, the Group or the Company does not provide any other guarantees which would expose the Group or the Company to credit risk. The maximum exposure to credit risk in respect of these financial guarantees at the end of the reporting period is disclosed in note 28.

Further quantitative disclosures in respect of the Group’s exposure to credit risk arising from trade and other receivables are set out in note 16.

(b) Liquidity risk

Individual operating entities within the Group are responsible for their own cash management, including the short term investment of cash surpluses and the raising of loans to cover expected cash demands, subject to approval by the Company’s board when the borrowings exceed certain predetermined levels of authority. The Group’s policy is to regularly monitor current and expected liquidity requirements and its compliance with lending covenants, to ensure that it maintains sufficient reserves of cash and adequate committed lines of funding from major financial institutions to meet its liquidity requirements in the short and longer term.

– II-57 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

The following table show the remaining contractual maturities at the end of the reporting period of the Group’s and the Company’s financial liabilities, which are based on contractual undiscounted cash flows (including interest payments computed using contractual rates or, if floating, based on rates current at the end of the reporting period) and the earliest date the Group and the Company can be required to pay:

The Group

2012 Contractual undiscounted cash outflow Total contractual undiscounted cash flows Within 1 year or on demand More than 1 year but less than 2 years More than 2 years but less than 5 years $’000 $’000 $’000 $’000 378,530 367,449 11,081 – 601,517 335,948 32,032 233,537 – – – – – – – – 980,047 703,397 43,113 233,537 (441,096) (441,096) – – 434,684 434,684 – –	2012 Contractual undiscounted cash outflow Total contractual undiscounted cash flows Within 1 year or on demand More than 1 year but less than 2 years More than 2 years but less than 5 years $’000 $’000 $’000 $’000 378,530 367,449 11,081 – 601,517 335,948 32,032 233,537 – – – – – – – – 980,047 703,397 43,113 233,537 (441,096) (441,096) – – 434,684 434,684 – –	2012 Contractual undiscounted cash outflow Total contractual undiscounted cash flows Within 1 year or on demand More than 1 year but less than 2 years More than 2 years but less than 5 years $’000 $’000 $’000 $’000 378,530 367,449 11,081 – 601,517 335,948 32,032 233,537 – – – – – – – – 980,047 703,397 43,113 233,537 (441,096) (441,096) – – 434,684 434,684 – –		2011	2011	2011	2011
			Carrying amount at 31 July $’000 531,339 703,700 7,962 4,894 1,247,895	Contractual undiscounted cash outflow
Total contractual undiscounted cash flows $’000 378,530 601,517 – – 980,047 (441,096) 434,684	Within 1 year or on demand $’000 367,449 335,948 – – 703,397 (441,096) 434,684	More than 1 year but less than 2 years $’000 11,081 32,032 – – 43,113 – –		Total contractual undiscounted cash flows $’000 531,985 734,113 8,175 5,079 1,279,352 (347,246) 348,637	Within 1 year or on demand $’000 525,618 476,318 8,175 5,079 1,015,190 (347,246) 348,637	More than 1 year but less than 2 years $’000 6,367 257,795 – – 264,162 – –	More than 2 years but less than 5 years $’000 – – – –
							–

							– –

	2012 Contractual undiscounted cash outflow Total contractual undiscounted cash flows Within 1 year or on demand More than 1 year but less than 2 years More than 2 years but less than 5 years $’000 $’000 $’000 $’000 300 300 – – 130,141 130,141 – – 130,441 130,441 – – 428,123 428,123 – –	2012 Contractual undiscounted cash outflow Total contractual undiscounted cash flows Within 1 year or on demand More than 1 year but less than 2 years More than 2 years but less than 5 years $’000 $’000 $’000 $’000 300 300 – – 130,141 130,141 – – 130,441 130,441 – – 428,123 428,123 – –	2012 Contractual undiscounted cash outflow Total contractual undiscounted cash flows Within 1 year or on demand More than 1 year but less than 2 years More than 2 years but less than 5 years $’000 $’000 $’000 $’000 300 300 – – 130,141 130,141 – – 130,441 130,441 – – 428,123 428,123 – –		2011	2011	2011	2011
Carrying amount at 31 July $’000 300 130,141 130,441 18,130				Carrying amount at 31 July $’000 467 131,205 131,672 20,949	Contractual undiscounted cash outflow
	Total contractual undiscounted cash flows $’000 300 130,141 130,441 428,123	Within 1 year or on demand $’000 300 130,141 130,441 428,123	More than 1 year but less than 2 years $’000 – – – –		Total contractual undiscounted cash flows $’000 467 131,205 131,672 511,811	Within 1 year or on demand $’000 467 131,205 131,672 262,997	More than 1 year but less than 2 years $’000 – – – 248,814	More than 2 years but less than 5 years $’000 – –
								–

								–

– II-58 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

As shown in the above analysis, bank loans of the Group amounting to $335,948,000 are due to be repaid during the year ended 31 July 2013. The short-term liquidity risk inherent in this contractual maturity date will be addressed after the end of the reporting period by renewing the current bank loans upon expiry as mentioned in note 1(b).

(c) Interest rate risk

The Group’s interest rate risk arises primarily from borrowings issued at variable rates. Borrowings issued at variable rates and at fixed rates expose the Group to cash flow interest rate risk and fair value interest rate risk respectively. The Group adopts a policy of ensuring that between 10% and 30% of its net borrowings are effectively on a fixed rate basis through the contractual terms of the interest-bearing financial liabilities. The Group’s interest rate profile as monitored by management is set out in (i) below.

(i) Interest rate profile

The following table details the interest rate profile of the Group’s interest bearing borrowings at the end of the reporting period.

		The	Group
		2012		2011
	Effective		Effective
	interest		interest
	rates	Amount	rates	Amount
	%	$’000	%	$’000
Fixed rate borrowings:
Other payables		8,734		32,782
Loans from a substantial
shareholder		–	5.0%	4,894
Bank loans	6.8%	143,523	6.0%	110,171
		152,257		147,847
Variable rate borrowings:
Bank overdrafts	6.9%	23,258	7.2%	20,393
Bank loans	3.8%	406,524	4.0%	573,136
Obligations under
finance leases		–	8.1%	7,962
		429,782		601,491
Total net borrowings		582,039		749,338
Fixed rate borrowings
as a percentage of
total net borrowings		26.2%		19.7%

(ii) Sensitivity analysis

At 31 July 2012, it was estimated that a general increase/decrease of 100 basis points in interest rates, with all other variable held constant, would have increased/decreased the Group’s loss after taxation and retained profits by approximately $3,459,000 (2011: $4,444,000).

– II-59 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

The sensitivity analysis above indicates the instantaneous change in the Group’s loss after taxation (and retained profits) and other components of consolidated equity that would arise assuming that the change in interest rates had occurred at the end of the reporting period and had been applied to re-measure those financial instruments held by the Group which expose the Group to fair value interest rate risk at the end of the reporting period. In respect of the exposure to cash flow interest rate risk arising from floating rate non-derivative instruments held by the Group at the end of the reporting period, the impact on the Group’s loss after taxation (and retained profits) and other components of consolidated equity is estimated as an annualised impact on interest expense or income of such a change in interest rates. The analysis was performed on the same basis for 2011.

(d) Currency risk

(i) Forecast transactions

The Group is exposed to currency risk primarily through sales and purchases that are denominated in a currency other than the functional currency of the operations to which they relate. The currencies giving rise to this risk are primarily Hong Kong dollars (“HK$”), United States dollars (“US$”), Japanese Yen and Renminbi (“RMB”).

RMB is not freely convertible into foreign currencies. On 1 January 1994, the PRC government abolished the dual rate system and introduced a single rate of exchange as quoted by the People’s Bank of China (PBOC). With authorisation from the PRC government, on 21 July 2005 the PBOC announced that the PRC government had reformed the exchange rate regime by moving into a managed floating exchange rate regime based on market supply and demand with reference to a basket of currencies. However, it does not imply convertibility of RMB into other foreign currencies. All foreign exchange transactions continue to take place either through the PBOC or other institutions authorised to buy and sell foreign currencies. Approval of foreign currency payments, including remittances of dividends, by the PBOC or other institutions requires submitting a payment application form together with relevant supporting documents.

As the HK$ is pegged to the US$, the Group does not expect any significant currency risk of Hong Kong dollar position. Some of the Group’s sales transactions are denominated in US$. In view of the fluctuation between RMB and US$ during the year ended 31 July 2012, the Group was exposed to foreign currency risk in respect of certain trade receivables denominated in US$. In view of the foreign currency risk exposure, the Group entered into forward exchange contracts with an aggregate notional contract amount of US$56,400,000 during the year ended 31 July 2012 (2011: US$44,800,000) to hedge against the trade receivables denominated in US$. The change in fair value of the loss relating to outstanding forward foreign exchange contracts amounted to $6,412,000 (2011: gain of $1,391,000) and has been recognised as derivative financial instruments and was accounted for in the income statement (note 4).

The Group does not adopt hedge accounting as the management considers that the adoption of hedge accounting would require an assessment of the effectiveness of the hedge on an ongoing basis and, therefore, would involve expenses and delays out of proportion to the value to the shareholders of the Company.

(ii) Recognised assets and liabilities

In respect of other trade receivables and payables held in currencies other than US$ or the functional currency of the operations to which they relate, the Group ensures that the net exposure is kept to an acceptable level, by buying or selling foreign currencies at spot rates where necessary to address short-term imbalances.

The Group’s borrowings are mainly denominated in US$, HK$ and RMB. In view of the fluctuation between RMB, US$ and HK$, the Group adopts a policy to increase the portion of US$/HK$ denominated borrowings as compared to RMB denominated borrowings gradually. The balance of US$/HK$ and RMB denominated borrowings as at 31 July 2012 amounted to $440,571,000 (2011: $539,051,000) and $132,734,000 (2011: $164,649,000) respectively.

– II-60 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(iii) Exposure to currency risk

The following table details the Group’s exposure at the end of the reporting period to currency risk arising from recognised assets or liabilities denominated in a currency other than the functional currency of the entity to which they relate. For presentation purposes, the amounts of the exposure are shown in Hong Kong dollars, translated using the spot rate at the year end date. Differences resulting from the translation of the financial statements of foreign operations into the Group’s presentation currency are excluded.

Trade and other receivables Deposits with bank Cash and cash equivalents Trade and other payables Interest-bearing borrowings Overall net exposure	US$ 2012 2011 $’000 $’000 23,104 181,122 11,461 11,495 13,788 54,137 (15,475) (197,138) (71,126) (269,114) (38,248) (219,498)	The Group HK$ RMB 2012 2011 2012 2011 $’000 $’000 $’000 $’000 11,618 61,053 46,716 1,469 – – 14,125 – 1,837 243 10,409 – (11,168) (10,972) (137,511) – – (254,437) (59,760) – 2,287 (204,113) (126,021) 1,469	Japanese Yen 2012 2011 $’000 $’000 – – – – – – (6,751) (43,572) – – (6,751) (43,572)	Japanese Yen 2012 2011 $’000 $’000 – – – – – – (6,751) (43,572) – – (6,751) (43,572)
				(43,572)

(iv) Sensitivity analysis

The following table indicates the instantaneous change in the Group’s loss after taxation (and retained profits) that would arise if foreign exchange rates to which the Group has significant exposure at the end of the reporting period had changed at that date, assuming all other risk variables remained constant. In this respect, it is assumed that the pegged rate between the Hong Kong dollar and the United States dollar would be materially unaffected by any changes in movement in value of the United States dollar against other currencies.

		2012			2011
	Increase		Effect	Increase		Effect
	in foreign	Effect on	on	in foreign	Effect on	on
	exchange	loss after	retained	exchange	loss after	retained
	rates	taxation	earnings	rates	taxation	earnings
	%	$’000	$’000	%	$’000	$’000
US$	1%	(769)	769	1%	1,747	(1,747)
RMB	3%	2,955	(2,955)	5%	(70)	70
Japanese Yen	5%	328	(328)	10%	3,945	(3,945)

Results of the analysis as presented in the above table represent an aggregation of the instantaneous effects on each of the Group entities’ loss after taxation and equity measured in the respective functional currencies, translated into Hong Kong dollars at the exchange rate ruling at the end of the reporting period for presentation purposes. The same degree of weakening of the foreign exchange rates at 31 July would have had the equal but opposite effect by the amounts shown above.

The sensitivity analysis assumes that the change in foreign exchange rates had been applied to re-measure those financial instruments held by the Group which expose the Group to foreign currency risk at the end of the reporting period, including inter-company payables and receivables within the Group which are denominated in a currency other than the functional currencies of the lender or the borrower. The analysis excludes differences that would result from the translation of the financial statements of foreign operations into the Group’s presentation currency. The analysis has been performed on the same basis for 2011.

– II-61 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(e) Fair values

(i) Financial instruments carried at fair value

The following table presents the carrying value of financial instruments measured at fair value at the end of the reporting period across the three levels of the fair value hierarchy defined in HKFRS 7, Financial Instruments: Disclosures , with the fair value of each financial instrument categorised in its entirety based on the lowest level of input that is significant to that fair value measurement. The levels are defined as follows:

Level 1 (highest level): fair values measured using quoted prices (unadjusted) in active markets for identical financial instruments
Level 2: fair values measured using quoted prices in active markets for similar financial instruments, or using valuation techniques in which all significant inputs are directly or indirectly based on observable market data
Level 3 (lowest level): fair values measured using valuation techniques in which an significant input is not based on observable market data

At 31 July, the financial instruments carried at fair value were as follows:


The Group	2012	2011
	$’000	$’000
Assets
Derivative financial instruments
– Forward exchange contracts_(note 16 and note 19)_	(6,412)	1,391

During the years ended 31 July 2012 and 2011, there were no significant transfers between instruments in Level 1 and Level 2.

(ii) Fair values of financial instruments carried at other than fair value

All financial instruments are carried at amounts not materially different from their fair values as at 31 July 2012 and 2011.

(f) Estimation of fair values

The following summarises the major methods and assumptions used in estimating the fair values of financial instruments:

(i) Derivatives

Foreign exchange forward contracts are marked to market using listed market prices.

(ii) Interest-bearing loans and borrowings and finance lease liabilities

The fair value is estimated as the present value of future cash flows, discounted at current market interest rates for similar financial instruments.

(iii) Financial guarantees

The fair value of financial guarantees issued is determined by reference to fees charged in an arm’s length transaction for similar services, when such information is obtainable, or is otherwise estimated by reference to interest rate differentials, by comparing the actual rates charged by lenders when the guarantees are made available with the estimated rates that lenders would have charged, had the guarantees not been available, where reliable estimates of such information can be made.

– II-62 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(iv) Interest rate used for determining fair value

The market interest rates adopted are as follows:

		The Group
	2012	2011
Other payables	7.5%-9.7%	7.5%-9.7%
Loans and borrowings	2.4%-7.9%	2.2%-7.9%
Loan from a substantial shareholder	–	5.0%-5.6%
Finance lease liabilities	–	6.6%-8.6%

27 Commitments

(a) Capital commitments

Capital commitments outstanding at 31 July 2012 not provided for in the financial statements are as follows:


	2012	2011
	$’000	$’000
Contracted for	–	606

(b) Operating lease commitments

The Group leases a number of properties under operating leases. The leases typically run for periods from one year to two years with an option to renew the lease upon expiry when all terms are renegotiated. Lease charges in respect of these operating leases amounted to $11,023,000 (2011: $10,423,000) and were recognised as expenses in the consolidated income statement. None of the leases includes contingent rentals.

The total future minimum lease payments of properties under non-cancellable operating leases are payable as follows:


	2012	2011
	$’000	$’000
Within one year	199	456

Significant leasing arrangements in respect of machinery classified as being held under finance leases and land held under operating lease are described in notes 11 and 21.

28 Contingent liabilities

The contingent liabilities of the Company as at 31 July 2012 and 31 July 2011 were as follows:

Guarantees given to banks by the Company in respect of banking facilities utilised by certain subsidiaries Guarantees given to suppliers of credit facilities utilised by certain subsidiaries	The Company 2012 2011 $’000 $’000 382,523 486,620 12,470 9,788 394,993 496,408	The Company 2012 2011 $’000 $’000 382,523 486,620 12,470 9,788 394,993 496,408
		496,408

– II-63 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

As at the end of the reporting period, the directors do not consider it probable that a claim would be made against the Company under any of the guarantees. Deferred income in respect of the guarantees issued is disclosed in note 19.

29 Material related party transactions

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

Sales to a substantial shareholder Sales to an associate Sales of fixed assets to a subsidiary of a substantial shareholder Sales of fixed assets to a company controlled by the family member of a director Interest paid and payable to a substantial shareholder (note 29(c)) Operating lease charges paid and payable to a company controlled by a director Purchase of raw materials from an associate Purchase moulds fabricated and certain moulded productions and parts from a company controlled by the family member of a director Management fee paid and payable to a company controlled by a director Sub-contracting fee paid and payable to a company controlled by the family member of a director Repair and maintenance services paid and payable to a company controlled by the family member of a director	The Group 2012 2011 $’000 $’000 2,373 2,710 12,815 10,124 15,188 12,834 9,920 – 409 – 10,329 – 62 309 9,678 9,323 – 6,576 659 711 699 673 2,645 3,729 951 938	The Group 2012 2011 $’000 $’000 2,373 2,710 12,815 10,124 15,188 12,834 9,920 – 409 – 10,329 – 62 309 9,678 9,323 – 6,576 659 711 699 673 2,645 3,729 951 938
		12,834

		– –
		–

		309

		9,323

		6,576

		711

		673

		3,729

		938

– II-64 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(b) Amounts due from related parties included as part of trade and other receivables were as follows:

Amount due from a company controlled by a director Amount due from associates Amount due from a substantial shareholder Amount due from a company controlled by the family member of a director	The Group 2012 2011 $’000 $’000 2,816 4,821 1,429 10,329 1,729 1,660 – 817 5,974 17,627	The Group 2012 2011 $’000 $’000 2,816 4,821 1,429 10,329 1,729 1,660 – 817 5,974 17,627
		17,627

Amounts due from related parties are interest free, unsecured and have no fixed terms of repayment.

(c) Amounts due to related parties were detailed as follows:

Amount due to directors Amount due to a company controlled by a director Amount due to a company controlled by the family member of a director Amount due to associates Amount due to a substantial shareholder*	The Group 2012 2011 Trade and other payables Loan from a substantial shareholder Trade and other payables Loan from a substantial shareholder** $’000 $’000 $’000 $’000 300 – 300 – 941 – 1,013 – 751 – 1,937 – – – 501 – – – 123 4,894 1,992 – 3,874 4,894	The Group 2012 2011 Trade and other payables Loan from a substantial shareholder Trade and other payables Loan from a substantial shareholder** $’000 $’000 $’000 $’000 300 – 300 – 941 – 1,013 – 751 – 1,937 – – – 501 – – – 123 4,894 1,992 – 3,874 4,894
		4,894

Pursuant to the loan agreement entered into between the Group and the substantial shareholder of the Company dated 20 January 2002, the loan, which amounted to US$6,279,000 (equivalent to approximately $48,916,000) as at the date of the loan agreement is repayable in twenty equal consecutive half-yearly instalments on 1 February and 1 August each year commencing on 1 August 2002. The loan is unsecured and carries interest at 5% per annum (2011: 5%) on the outstanding balance. Interest paid and payable to the substantial shareholder, amounted to $62,000 (2011: $309,000) for the year ended 31 July 2012.
Except for the loan from a substantial shareholder of the Company, the amounts due to other related parties are interest free, unsecured and have no fixed terms of repayment.

(d) Key management personnel remuneration

The Group has not identified any person, other than the directors of the Company, having the authority and responsibility for planning, directing and controlling the activities of the Group. Details of the remuneration of the directors of the Company are set out in note 7.

– II-65 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

30 Accounting estimates and judgements

Note 26 contains information about the assumptions and their risk factors relating to the fair value of financial instruments. The Group believes the following critical accounting policies involve the most significant judgments and estimates used in the preparation of the financial statements:

(a) Going concern basis of preparation

As disclosed in note 1(b), the financial statements have been prepared on a going concern basis. The appropriateness of the going concern basis is assessed after taking into consideration all relevant available information about the future of the Group, including business forecasts and cash flow projections for the year ending 31 July 2013. Such forecasts and projections about the future inherently involve uncertainties. Actual results could differ significantly and hence render the adoption of the going concern basis not appropriate.

(b) Depreciation

Property, plant and equipment is depreciated on a straight-line basis over the estimated useful lives of the assets, after taking into account the estimated residual value. The Group reviews the estimated useful lives and residual values of the assets annually in order to determine the amount of depreciation to be recorded during any reporting period. The useful lives are based on the Group’s historical experience with similar assets, taking into account upgrading and improvement work performed, and anticipated technological changes. The depreciation for future periods is adjusted if there are significant changes from previous estimates.

(c) Provision for inventories

As explained in note 1(j), the Group’s inventories are stated at the lower of cost and net realisable value. Based on the Group’s recent experience and the nature of the inventories, the Group makes estimates of the selling prices, the costs to be incurred in selling the inventories and the costs of completion in case for work in progress. Uncertainty exists in these estimations.

(d) Impairment losses for bad and doubtful debts

The Group estimates impairment losses for bad and doubtful debts resulting from the inability of the customers to make the required payments. The Group bases the estimates on the ageing of the trade receivable balance, customer credit-worthiness and historical write-off experience. If the financial condition of the customers were to deteriorate, actual write-offs would be higher than estimates.

– II-66 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

31 Possible impact of amendments, new standards and interpretations issued but not yet effective for the year ended 31 July 2012

As at the date of issue of these financial statements, the HKICPA had issued a number of amendments and 9 new standards which were not yet effective for the year ended 31 July 2012 and which have not been adopted in these financial statements. These include the following which may be relevant to the Group.

	Effective for accounting
	periods beginning
	on or after
Amendments to HKAS 1,Presentation of financial statements	1 July 2012
– Presentation of items of other comprehensive income
HKFRS 10,Consolidated financial statements	1 January 2013
HKFRS 11,Joint arrangements	1 January 2013
HKFRS 12,Disclosure of interests in other entities	1 January 2013
HKFRS 13,Fair value measurement	1 January 2013
HKAS 27,Separate financial statements (2011)	1 January 2013
HKAS 28,Investments in associates and joint ventures (2011)	1 January 2013
Revised HKAS 19,Employee benefits	1 January 2013
HK(IFRIC) 20,Stripping costs in the production phase of a surface mine	1 January 2013
Amendments to HKFRS 7,Financial instruments:	1 January 2013
Disclosures – Disclosures – Offsetting financial assets and
financial liabilities
Annual improvements to HKFRSs 2009-2011 cycle	1 January 2013
Amendments to HKFRS 10,Consolidated financial statements,	1 January 2013
HKFRS 11,Joint arrangements_and HKFRS 12,_Disclosure
of interests in other entities – Transition guidance
Amendments to HKAS 32,Financial instruments:	1 January 2014
Presentation – Offsetting financial assets and financial liabilities
HKFRS 9,Financial instruments (2009)	1 January 2015
HKFRS 9,Financial instruments (2010)	1 January 2015
Amendments to HKFRS 9,_Financial instruments_and HKFRS 7,	1 January 2015
Financial instruments: Disclosures – Mandatory effective date and

transition disclosures

The Group is in the process of making an assessment of what the impact of these amendments is expected to be in the period of initial application. So far it has concluded that the adoption of them is unlikely to have a significant impact on the Group’s results of operations and financial position.

– II-67 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

B. UNAUDITED INTERIM FINANCIAL INFORMATION OF THE GROUP FOR THE SIX MONTHS ENDED 31 JANUARY 2013

The following are the unaudited condensed consolidated results of the Group for the six months ended 31 January 2013 with notes therein, as extracted from the 2013 interim report of the Company. The consolidated interim financial statements of the Group have not been audited, but have been reviewed by the Company’s auditor (appointed by the Company on 13 March 2013) in accordance with Hong Kong Standard on Review Engagement 2410 “Review of Interim Financial Information Performed by Independent Auditor of the Entity” and the audit committee of the Board.

CONDENSED CONSOLIDATED INCOME STATEMENT

For the six months ended 31 January 2013

Note
Revenue
3
Cost of sales
Gross profit
Other gains/(losses) – net
4
Other income
Distribution costs
Administrative expenses
Operating profit
Finance costs – net
5(a)
Share of losses of associates
Profit/(loss) before income tax
5
Income tax expense
6(a)
Profit/(loss) for the period
Attributable to:
Equity holders of the Company
Non-controlling interests
Profit/(loss) for the period
Earnings/(loss) per share attributable to equity holders
of the Company during the period
7
Basic
Diluted

Unaudited
Six months ended 31 January
2013
2012
HK$’000
HK$’000
683,231
862,332
(615,948)
(759,373)
67,283
102,959
16,345
(12,788)
1,565
1,517
(26,589)
(35,041)
(38,211)
(42,076)
20,393
14,571
(12,314)
(19,120)
(1,738)
(879)
6,341
(5,428)
(3,577)
(6,822)
2,764
(12,250)
2,764
(12,339)
–
89
2,764
(12,250)
0.23 HK cents
(1.07) HK cents
0.22 HK cents
(1.07) HK cents

– II-68 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 31 January 2013

Profit/(loss) for the period Other comprehensive income Exchange differences Total comprehensive income/(loss) for the period Attributable to: Equity holders of the Company Non-controlling interests Total comprehensive income/(loss) for the period	Unaudited Six months ended 31 January 2013 2012 HK$’000 HK$’000 2,764 (12,250) 15,500 10,851 18,264 (1,399) 18,264 (1,488) – 89 18,264 (1,399)

– II-69 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At 31 January 2013

Unaudited At 31 January 2013 Note HK$’000 ASSETS Non-current assets Property, plant and equipment 8 650,923 Land use rights 8 25,363 Goodwill 2,172 Interest in an associate 23,552 Deferred income tax assets 6(b) 2,395 704,405 Current assets Inventories 9 110,184 Trade and other receivables 10 352,379 Derivative financial instruments 5,841 Bank deposits 11 35,225 Cash and cash equivalents 12 77,638 581,267 Total assets 1,285,672 EQUITY Share capital 16 65,188 Reserves 378,747 Total equity attributable to equity holders of the Company 443,935	Audited At 31 July 2012 HK$’000 672,430 25,107 2,172 25,290 –
	724,999
	143,825 366,554 – 39,218 90,848
	640,445
	1,365,444

	57,801 343,266
	401,067

– II-70 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Unaudited
At 31 January
2013
Note
HK$’000
LIABILITIES
Non-current liabilities
Other payables
13
–
Borrowings
14
241,759
Deferred income tax liabilities
6(b)
2,705
244,464
Current liabilities
Trade and other payables
13
330,350
Derivative financial instruments
–
Borrowings
14
258,371
Tax payable
8,552
597,273
Total liabilities
841,737
Total equity and liabilities
1,285,672
Net current liabilities
(16,006)
Total assets less current liabilities
688,399

Audited
At 31 July
2012
HK$’000
11,081
257,125
2,231
270,437
360,974
6,412
316,180
10,374
693,940
964,377
1,365,444
(53,495)
671,504

– II-71 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 31 January 2013

		Unaudited	Unaudited	Unaudited
		Attributable to equity holders of the Company				Total HK$’000 468,576 (12,339) 10,851 (1,488) 614 – 467,702	Non- controlling interests HK$’000 2,630 89 – 89 – – 2,719	Total HK$’000 471,206
Share capital HK$’000 57,798 – – – – – 57,798	Share premium HK$’000 90,205 – – – – – 90,205	Capital reserves HK$’000 9,584 – – – – – 9,584	Foreign exchange translation reserve HK$’000 158,537 – 10,851 10,851 – – 169,388	Employee Statutory share-based reserve capital fund reserve HK$’000 HK$’000 44,015 5,507 – – – – – – – 614 – (1,017) 44,015 5,104	Retained profits HK$’000 102,930 (12,339) – (12,339) – 1,017 91,608
								(12,250) 10,851
								(1,399)
								614 –
								470,421

– II-72 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Unaudited

			Unaudited	Unaudited	Unaudited
At 1 August 2012 Profit for the period Other comprehensive income Exchange differences Total comprehensive income for the period Deregistration of a subsidiary Conversion of bonus warrants (note 16(ii)) Issuance of shares upon the exercising of share options Share options lapsed during the period Issuance of new shares At 31 January 2013			Attributable to equity holders of the Company				Total HK$’000 401,067 2,764 15,500 18,264 – 248 5,182 – 19,174 443,935	Non- controlling interests HK$’000 – – – – – – – – – –	Total HK$’000 401,067
	Share capital HK$’000 57,801 – – – – 104 1,533 – 5,750 65,188	Share premium HK$’000 90,210 – – – – 144 5,730 – 13,424 109,508	Capital reserves HK$’000 9,584 – – – – – – – – 9,584	Foreign exchange translation reserve HK$’000 163,318 – 15,500 15,500 (4,583) – – – – 174,235	Employee Statutory share-based reserve capital fund reserve HK$’000 HK$’000 45,616 5,110 – – – – – – (836) – – – – (2,081) – (80) – – 44,780 2,949	Retained profits HK$’000 29,428 2,764 – 2,764 5,419 – – 80 – 37,691
									2,764 15,500
									18,264
									– 248 5,182 – 19,174
									443,935

– II-73 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

For the six months ended 31 January 2013

Note
Cash generated from operations
Income tax paid by the subsidiaries in
the People’s Republic of China (“PRC”)
Net cash generated from operating activities
Net cash (used in)/generated from investing activities
Net cash used in financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at 1 August
12
Effect of foreign exchange
Cash and cash equivalents at 31 January
12

Unaudited
Six months ended 31 January
2013
2012
HK$’000
HK$’000
78,438
82,958
(7,560)
(6,175)
70,878
76,783
(20,402)
19,449
(61,808)
(94,661)
(11,332)
1,571
67,590
94,939
1,062
(3,826)
57,320
92,684

– II-74 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION

1 General information

V.S. International Group Limited (the “Company”) and its subsidiaries (collectively, the “Group”) are principally engaged in the manufacturing and sales of plastic moulded products and parts, assembling of electronic products, and mould design and fabrication. The Company was incorporated in the Cayman Islands on 9 July 2001 as an exempted company with limited liability under the Companies Law, Cap. 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands. The address of its registered office is Cricket Square, Huchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands.

The Company’s shares are listed on the Main Board of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”). This consolidated interim financial information is presented in Hong Kong dollar (“HK$”), unless otherwise stated.

This consolidated interim financial information for the six months ended 31 January 2013 is unaudited and has been reviewed by the external auditor in accordance with Hong Kong Standard on Review Engagement 2410 “Review of Interim Financial Information Performed by Independent Auditor of the Entity” and the audit committee of the Company. This condensed consolidated interim financial information was approved for issue by the board (the “Board”) of directors (the “Directors”) of the Company on 23 March 2013.

2 Basis of preparation and accounting policies

The Company has a financial year end date of 31 July. This condensed consolidated interim financial information for the six months ended 31 January 2013 has been prepared in accordance with Hong Kong Accounting Standard (“HKAS”) 34 “Interim Financial Reporting”. This condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 July 2012, which was prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRS”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

The preparation of interim financial information requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates. In preparing this condensed consolidated interim financial information, the significant judgments made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that were applied to the annual financial statements for the year ended 31 July 2012.

The accounting policies used in the preparation of the consolidated interim financial information are consistent with those used in the annual financial statements for the year ended 31 July 2012, except as mentioned below.

(i) Effect of adopting amendments to existing standards

The following amendments to existing standards are relevant and mandatory to the Group for accounting periods beginning on or after 1 August 2012:

•	HKAS 1 (Amendment)	“Presentation of Financial Statements”;
•	HKAS 12 (Amendment)	“Deferred Tax: Recovery of Underlying Assets”;
•	HKFRS 1 (Amendment)	“First-time Adoption of Hong Kong Financial Reporting
		Standards – Severe Hyperinflation and Removal of
		Fixed Dates for First-time Adopters”; and
•	HKFRS 7 (Amendment)	“Disclosures – Transfers of Financial Assets”.

The adoption of these amendments to standards did not result in a significant impact on the results and financial position of the Group.

– II-75 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(ii) Standards, amendments and interpretation to existing standards that are not yet effective and have not been early adopted by the Group

The following published standards, amendments and interpretation to existing standards are mandatory for the Group’s accounting periods beginning on or after 1 August 2012 or later periods and have not been early adopted by the Group:

• HKAS 19 (2011) “Employee Benefits”[1] ; • HKAS 27 (2011) “Separate Financial Statements”[1] ; • HKAS 28 (2011) “Associates and Joint Ventures”[1] ; • HKAS 32 (Amendment) “Offsetting Financial Assets and Financial Liabilities”[2] ; • HKFRS 1 (Amendment) “First-time Adoption of Hong Kong Financial Standards – Government Loans”[1] ; • HKFRS 7 (Amendment) “Disclosures – Offsetting Financial Assets and Financial Liabilities”[1] ; • HKFRS 9 “Financial Instruments”[3] ; • HKFRS 10 “Consolidated Financial Statements”[1] ; • HKFRS 11 “Joint Arrangements”[1] ; • HKFRS 12 “Disclosure of Interests in Other Entities”[1] ; • HKFRS 13 “Fair Value Measurements”[1] ; • HKFRSs 11, 12 & 13 “Transition Guidance”[1] ; (Amendments) • HKFRSs (Amendments) “Annual Improvements 2009 – 2011 Cycle”[1] ; and • HK(IFRIC)-Int 20 “Stripping Costs in the Production Phase of a Surface Mine”[1] .

1 Effective for annual periods beginning on or after 1 January 2013

2 Effective for annual periods beginning on or after 1 January 2014

3 Effective for annual periods beginning on or after 1 January 2015

The Directors anticipate that the adoption of these new standards, amendments to standards and interpretation will not result in a significant impact on the results and financial position of the Group.

As at 31 January 2013, the Group’s current liabilities exceeded its current assets by HK$16,006,000. This condition indicates the existence of a material uncertainty which may cast significant doubt on the Group’s ability to continue as a going concern and therefore, that the Group may be unable to realise its assets and discharge its liabilities in the normal course of business. As at 31 January 2013, the Group had undrawn facilities of HK$231,000,000 for working capital purposes. In addition, the Group is currently in the process of negotiating with certain banks to renew its current bank loans upon expiry or to obtain additional banking facilities in order to improve the liquidity position.

The directors have evaluated all the relevant facts available to them and are of the opinion that there are good track records or relationships with the banks which enhance the Group’s ability to renew the current bank loans upon expiry or to secure other adequate banking facilities to enable the Group to meet its financial obligations as and when they fall due for the twelve months from the balance sheet date of this interim financial information. Accordingly, the interim financial information has been prepared on a going concern basis. Should the Group be unable to operate as a going concern, adjustments would have to be made to write down the value of assets to their recoverable amounts and to provide for any further liabilities which might arise. The effect of these adjustments has not been reflected in the interim financial information.

– II-76 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

3 Segment reporting

The Group manages its business by divisions, which are organised by a mixture of both business lines and geographical locations. In a manner consistent with the way in which information is reported internally to the Group’s most senior executive management for the purpose of resource allocation and performance assessment, the Group has identified the following three reportable segments. No operating segments have been aggregated to form the following reportable segments.

(a) Segment results, assets and liabilities

Segment assets include all tangible and current assets with the exception of interests in an associate and other corporate assets. Segment liabilities include trade creditors, accruals and bills payables attributable to the individual segments.

In addition to receiving segment information concerning “segment result”, management is provided with segment information concerning revenue (including inter-segment, if any), depreciation, amortisation and impairment losses and additions to non-current segment assets used by the segments in their operations.

– II-77 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Six months ended 31 January: Revenue from external customers Reportable segment revenue Reportable segment result At 31 January/31 July: Reportable segment assets Additions to non-current segment assets during the period Reportable segment liabilities	Plastic injection and moulding 2013 2012 HK$’000 HK$’000 400,814 522,749 400,814 522,749 16,535 23,702 780,900 819,988 2,792 3,416 186,002 203,458	Assembling of electronic products 2013 2012 HK$’000 HK$’000 245,904 277,222 245,904 277,222 13,849 8,516 205,296 220,172 1,578 1,684 90,273 109,930	Mould design and fabrication 2013 2012 HK$’000 HK$’000 36,513 62,361 36,513 62,361 2,372 16,330 108,114 114,406 16 1,942 10,325 17,896	Consolidated 2013 2012 HK$’000 HK$’000 683,231 862,332 683,231 862,332 32,756 48,548 1,094,310 1,154,566 4,386 7,042 286,600 331,284	Consolidated 2013 2012 HK$’000 HK$’000 683,231 862,332 683,231 862,332 32,756 48,548 1,094,310 1,154,566 4,386 7,042 286,600 331,284
					862,332

					48,548

					1,154,566 7,042 331,284

(b) Reconciliations of reportable segment revenue, result, assets and liabilities

Turnover Reportable segment revenue Consolidated turnover Segment result Reportable segment profit Share of losses of associates Finance costs – net_(Note 5(a))_ Unallocated depreciation and amortisation Unallocated operating income and expenses Profit/(loss) before income tax	Unaudited Six months ended 31 January 2013 2012 HK$’000 HK$’000 683,231 862,332 683,231 862,332 Unaudited Six months ended 31 January 2013 2012 HK$’000 HK$’000 32,756 48,548 (1,738) (879) (12,314) (19,120) (3,433) (2,991) (8,930) (30,986) 6,341 (5,428)

– II-78 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Assets Reportable segment assets Interest in an associate Unallocated head office and corporate assets Consolidated total assets Liabilities Reportable segment liabilities Unallocated head office and corporate liabilities Consolidated total liabilities	At 31 January 2013 HK$’000 1,094,310 23,552 167,810 1,285,672 286,600 555,137 841,737	At 31 July 2012 HK$’000 1,154,566 25,290 185,588 1,365,444 331,284 633,093 964,377

(c) Revenue by geographical locations

Revenue from external customers is analysed by the following geographical locations:

Mainland China United States of America Europe Hong Kong Northern Asia South East Asia South Africa	Unaudited Six months ended 31 January 2013 2012 HK$’000 HK$’000 355,624 467,509 122,156 143,849 120,816 45,699 44,421 122,324 31,356 53,084 8,858 29,321 – 546 683,231 862,332

Analysis of the Group’s carrying amount of segment non-current assets has not been presented as over 90% of the non-current assets are located in the PRC.

4 Other gains/(losses) – net

Net foreign exchange gains Net gain/(loss) on disposal of property, plant and equipment Change in fair value of forward exchange contracts Net gain on forward foreign exchange contracts Gain on disposal of an associate	Unaudited Six months ended 31 January 2013 2012 HK$’000 HK$’000 2,204 1,333 2 (19,696) 5,841 1,843 8,298 2,795 – 937 16,345 (12,788)

– II-79 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

5 Profit/(loss) before income tax

Profit/(loss) before income tax is arrived at after charging/(crediting):

(a) Finance costs – net

Interest income from bank deposits
Interest on bank borrowings repayable within five years
Interest on loan from a substantial shareholder
Interest on obligations under finance leases
Total borrowing costs
Less: borrowing costs capitalised
as construction in progress
Other charges
Finance costs – net
(b)
Other items
Cost of inventories
Amortisation of land use rights
Depreciation
– other assets
– assets held under finance leases
Operating lease charges in respect of properties
– factory and hostel rentals
Provision for impairment on trade receivables

Unaudited
Six months ended 31 January
2013
2012
HK$’000
HK$’000
(777)
(355)
11,875
16,431
–
62
–
241
11,875
16,734
(39)
(51)
11,836
16,683
1,255
2,792
13,091
19,475
12,314
19,120
Unaudited
Six months ended 31 January
2013
2012
HK$’000
HK$’000
615,948
759,373
313
310
41,414
48,057
–
1,208
5,174
5,425
99
121

– II-80 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

6 Income tax Expense

(a) Income tax expense

Current income tax PRC corporate income tax Deferred income tax Origination and reversal of temporary differences	Unaudited Six months ended 31 January 2013 2012 HK$’000 HK$’000 5,498 6,338 (1,921) 484 3,577 6,822	Unaudited Six months ended 31 January 2013 2012 HK$’000 HK$’000 5,498 6,338 (1,921) 484 3,577 6,822
		6,822

No provision has been made for Hong Kong profits tax as the Group did not earn income subject to Hong Kong profits tax during the six months ended 31 January 2013 and 2012.

Prior to 1 January 2008, certain PRC subsidiaries of the Company were entitled to PRC income tax exemption for two years commencing from their respective first profit making year and a 50% relief from PRC income tax for the following three years.

Pursuant to the Corporate Income Tax Law (“CIT”) of the People’s Republic of China effective from 1 January 2008 onwards, the Group’s PRC subsidiaries are subject to a standard PRC income tax rate of 25%, except for those granted with preferential tax rates prior to 1 January 2008 and in which cases, the applicable tax rates would gradually increase to 25% towards the end of 2013.

Below are the preferential tax rates applicable to the Group’s PRC subsidiaries which generate taxable income for the six months ended 31 January 2013 and 2012:

		Income
Name of subsidiary	Period	tax rate
V.S. Industry (Zhuhai) Co., Ltd.	From 1 January 2011 to 31 December 2011	24.0%
	From 1 January 2012 onwards	25.0%
Qingdao GS Electronics	From 1 January 2011 to 31 December 2011	24.0%
Plastic Co., Ltd.	From 1 January 2012 onwards	25.0%
Qingdao GP Electronic	From 1 January 2011 to 31 December 2011	12.5%
Plastics Co., Ltd.	From 1 January 2012 to 31 December 2012	12.5%
	From 1 January 2013 onwards	25.0%

Pursuant to the relevant CIT rules and regulations, withholding tax is imposed on dividends declared in respect of profits earned by the Company’s PRC subsidiaries from 1 January 2008 onwards.

Pursuant to the laws, rules and regulations of the Cayman Islands and the British Virgin Islands, the Group is not subject to any income tax in the Cayman Islands and the British Virgin Islands.

– II-81 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(b) Deferred tax assets/(liabilities)

Deferred income tax is recognised on temporary differences under the liability method using the prevailing taxation rate of the regions where the temporary differences are related to.

The movement on the deferred tax account is as follows:

Deferred tax liabilities – unremitted retained profits of PRC subsidiaries

At beginning of the period Charged to the income statement At end of the period Deferred income tax assets – provisions At beginning of the period Credited to the income statement At end of the period	Unaudited Six months ended 31 January 2013 2012 HK$’000 HK$’000 (2,231) (1,745) (474) (484) (2,705) (2,229) Unaudited Six months ended 31 January 2013 2012 HK$’000 HK$’000 – – 2,395 – 2,395 –

7 Earnings/(loss) per share

(a) Basic earnings/(loss) per share

The calculation of basic earnings/(loss) per share is based on the profit attributable to equity holders of the Company of HK$2,764,000 (2012: loss of HK$12,339,000) and the weighted average ordinary shares in issue during the current and the prior period as follows:

Profit/(loss) attributable to equity holders_(HK$’000) Weighted average number of ordinary shares in issue(’000)_ Basic earnings/(loss) per share (HK cents)	Unaudited Six months ended 31 January 2013 2012 2,764 (12,339) 1,212,005 1,155,968 0.23 (1.07)

(b) Diluted earnings/(loss) per share

Diluted earnings/(loss) per share is calculated by adjusting the weighted average number of ordinary share outstanding to assume conversion of all dilutive potential ordinary shares. For the period ended 31 January 2013, the Company has the share options and bonus warrants that have dilutive potential ordinary shares.

– II-82 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

For the share options and bonus warrants, a calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average periodic market share price of the Company’s shares) based on the monetary value of the subscription rights attached to outstanding share options and bonus warrants. The number of shares calculated as below is compared with the number of shares that would have been issued assuming the exercise in full of the share options and bonus warrants.

Profit/(loss) attributable to equity holders_(HK$’000) Weighted average ordinary shares in issue(’000) Adjustment for the share options(’000) Adjustment for the bonus warrants(’000) Weighted average number of ordinary shares for the purpose of calculating diluted earnings per share(’000)_ Diluted earnings/(loss) per share (HK cents) 8 Property, plant and equipment, and land use rights	Unaudited Six months ended 31 January 2013 2012 2,764 (12,339) 1,212,005 1,155,968 3,035 – 50,507 – 1,265,547 1,155,968 0.22 (1.07)	Unaudited Six months ended 31 January 2013 2012 2,764 (12,339) 1,212,005 1,155,968 3,035 – 50,507 – 1,265,547 1,155,968 0.22 (1.07)
		1,155,968 – –
		1,155,968
		(1.07)

Cost At 31 July and 1 August 2011 Exchange differences Additions Transfer Disposals At 31 January 2012 Accumulated depreciation and amortisation At 31 July and 1 August 2011 Exchange differences Charge for the period Written back on disposals At 31 January 2012 Net book value At 31 January 2012 At 31 July 2011	Buildings held for Leasehold own use improvements HK$’000 HK$’000 353,341 18,525 5,357 275 777 – 143 – – – 359,618 18,800 62,106 8,389 940 115 4,290 401 – – 67,336 8,905 292,282 9,895 291,235 10,136	Plant and machinery HK$’000 1,081,164 14,427 7,059 588 (114,800) 988,438 631,582 7,788 39,392 (75,559) 603,203 385,235 449,582	Office equipment, furniture and fixtures HK$’000 62,356 993 1,318 – (61) 64,606 40,754 634 3,221 (59) 44,550 20,056 21,602	Motor vehicles HK$’000 28,976 429 2,225 – (1,466) 30,164 21,278 318 1,961 (1,312) 22,245 7,919 7,698	Construction in progress HK$’000 2,211 33 484 (731) – 1,997 – – – – – 1,997 2,211	Sub-total HK$’000 1,546,573 21,514 11,863 – (116,327) 1,463,623 764,109 9,795 49,265 (76,930) 746,239 717,384 782,464	Land use rights HK$’000 30,837 475 – – – 31,312 5,282 85 310 – 5,677 25,635 25,555	Total HK$’000 1,577,410 21,989 11,863 – (116,327)
								1,494,935
								769,391 9,880 49,575 (76,930)
								751,916
								743,019

								808,019

– II-83 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Cost At 31 July and 1 August 2012 Exchange differences Additions Transfer Disposals At 31 January 2013 Accumulated depreciation and amortisation At 31 July and 1 August 2012 Exchange differences Charge for the period Written back on disposals At 31 January 2013 Net book value At 31 January 2013 At 31 July 2012	Buildings held for Leasehold own use improvements HK$’000 HK$’000 358,832 17,787 8,107 405 – 1,697 1,249 – – – 368,188 19,889 71,178 7,975 1,615 165 4,519 742 – – 77,312 8,882 290,876 11,007 287,654 9,812	Plant and machinery HK$’000 937,399 18,779 2,635 – (687) 958,126 590,703 11,078 32,167 (507) 633,441 324,685 346,696	Office equipment, furniture and fixtures HK$’000 64,482 1,527 187 841 (282) 66,755 44,547 1,034 2,868 (258) 48,191 18,564 19,935	Motor vehicles HK$’000 26,288 539 499 – – 27,326 19,978 439 1,118 – 21,535 5,791 6,310	Construction in progress HK$’000 2,023 28 39 (2,090) – – – – – – – – 2,023	Sub-total HK$’000 1,406,811 29,385 5,057 – (969) 1,440,284 734,381 14,331 41,414 (765) 789,361 650,923 672,430	Land use rights HK$’000 31,043 711 – – – 31,754 5,936 142 313 – 6,391 25,363 25,107	Total HK$’000 1,437,854 30,096 5,057 – (969)
								1,472,038
								740,317 14,473 41,727 (765)
								795,752
								676,286

								697,537

As at 31 January 2013 and 31 July 2012, certain land use rights, property, plant and equipment have been pledged as security for bank loans (note 14(b)).

9 Inventories

(a) Inventories in the consolidated statement of financial position comprise:

Raw materials Work-in-progress Finished goods	At 31 January 2013 HK$’000 58,898 26,642 24,644 110,184	At 31 July 2012 HK$’000 57,309 37,151 49,365
		143,825

– II-84 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

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

Cost of inventories sold (Write-back of provision)/provision for impairment of inventories	Unaudited Six months ended 31 January 2013 2012 HK$’000 HK$’000 618,162 754,603 (2,214) 4,770 615,948 759,373	Unaudited Six months ended 31 January 2013 2012 HK$’000 HK$’000 618,162 754,603 (2,214) 4,770 615,948 759,373
		759,373

10 Trade and other receivables

Trade receivables Bills receivable_(note)_ Trade and bills receivables – gross Less: provision for impairment Trade and bills receivables – net Other receivables, prepayments and deposits	At 31 January 2013 HK$’000 232,461 79,129 311,590 (7,870) 303,720 48,659 352,379	At 31 July 2012 HK$’000 241,817 73,063
		314,880 (7,771)
		307,109 59,445
		366,554

Note:

As at 31 January 2013, no bills receivable were pledged to banks as security in connection with banking facilities.

As at 31 July 2012, bills receivable amounting to HK$5,942,000 were pledged to banks as security in connection with certain of the Group’s banking facilities.

– II-85 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

An aging analysis on the Group’s trade and bills receivable by period of overdue repayment is as below:

Current Less than 1 month past due 1 to 3 months past due More than 3 months but less than 12 months past due Amounts past due	At 31 January 2013 HK$’000 263,260 26,756 8,330 5,374 40,460 303,720	At 31 July 2012 HK$’000 269,840
		26,185 9,682 1,402
		37,269
		307,109

Credit terms granted by the Group to customers generally range from 30 to 120 days. The Group does not hold any collaterals in respect of its trade receivables.

The movement in provision for impairment on trade and bills receivables is as follows:

At 1 August Provision for impairment At 31 January/31 July Bank deposits Bank deposits with original maturities of over 3 months Pledged fixed deposits with banks	At 31 January 2013 HK$’000 7,771 99 7,870 At 31 January 2013 HK$’000 5,174 30,051 35,225	At 31 July 2012 HK$’000 7,729 42
		7,771

		At 31 July 2012 HK$’000 6,489 32,729
		39,218

11 Bank deposits

– II-86 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

12 Cash and cash equivalents

Cash at banks and in hand Cash and cash equivalents in the statement of financial position Bank overdrafts_(note 14(a))_ Cash and cash equivalents in the condensed consolidated cash flow statement Trade and other payables Trade payables Bills payable Trade and bills payables Payables for the purchase of machinery and equipment Accrued expenses and other payables Less: non-current portion of payables for the purchase of machinery and equipment Trade and other payables – current	At 31 January 2013 HK$’000 77,638 77,638 (20,318) 57,320 At 31 January 2013 HK$’000 211,575 15,694 227,269 11,685 91,396 330,350 – 330,350	At 31 July 2012 HK$’000 90,848
		90,848 (23,258)
		67,590

		At 31 July 2012 HK$’000 225,680 15,261
		240,941 22,551 108,563
		372,055 (11,081)
		360,974

13 Trade and other payables

The following is an aging analysis of the Group’s trade and bills payables at the reporting date:

Due within 1 month or on demand Due after 1 month but within 3 months Due after 3 months but within 6 months	At 31 January 2013 HK$’000 145,460 60,486 21,323 227,269	At 31 July 2012 HK$’000 160,937 59,940 20,064
		240,941

– II-87 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

14 Borrowings

At 31 January 2013 HK$’000 Current: Bank borrowings repayable within 1 year or on demand 258,371 Non-current: Bank borrowings repayable after 1 year but within 2 years 31,032 Bank borrowings repayable after 2 years but within 5 years 210,727 241,759 Total 500,130 (a) An analysis of current and non-current borrowings is as follows: At 31 January 2013 HK$’000 Current: Overdrafts – secured 20,318 Bank loans – secured 167,273 – unsecured 70,780 238,053 258,371 Non-current: Bank loans – secured 241,759 500,130	At 31 July 2012 HK$’000 316,180
	31,014 226,111
	257,125
	573,305

	At 31 July 2012 HK$’000 23,258
	184,905 108,017
	292,922
	316,180
	257,125
	573,305

– II-88 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(b) Certain banking facilities, including trade finance, overdrafts and bank loans, are secured by the following assets of the Group:

Bills receivable Fixed bank deposits Land use rights Plant and machinery with aggregate carrying value Buildings held for own use with aggregate carrying value	At 31 January 2013 HK$’000 – 30,051 25,363 62,210 285,129 402,753	At 31 July 2012 HK$’000 5,942 32,729 25,107 69,143 281,946
		414,867

The Group’s secured banking facilities, including trade finance, overdrafts and bank loans, totalling HK$528,180,000 (31 July 2012: HK$557,612,000), were utilised to the extent of HK$429,350,000 (31 July 2012: HK$465,288,000) at 31 January 2013. The Group’s unsecured banking facilities totalled HK$203,243,000 (31 July 2012: HK$226,691,000) and were utilised to the extent of HK$70,780,000 (31 July 2012: HK$108,017,000) at 31 January 2013.

15 Share option scheme

Pursuant to the resolution duly passed at the annual general meeting (“AGM”) held on 16 December 2011, the general scheme limit (“General Scheme Limit”) of the Share Option Scheme was refreshed. The total number of ordinary shares which could be allotted and issued upon exercise of all options granted or to be granted under the Share Option Scheme must not in aggregate exceed 20 percent of the shares in issue as at the date of the AGM. As at the date of the AGM, there were 1,155,968,000 shares of the Company in issue. Accordingly, the refreshed General Scheme Limit was 231,193,600 shares of the Company.

Pursuant to a resolution passed by directors in a meeting of the Board on 3 February 2010, the Board approved the grant of 86,680,000 share options (“Options”) under the rules of the Share Option Scheme. The number of share options granted was adjusted to 92,322,000 as a result of the rights issue completed on 16 March 2011.

The main purpose of the Share Option Scheme is to enable the Group to grant Options to the eligible participants as incentives or rewards for their contribution to past and future performances of the Group. In appreciation of their efforts and support and/or as incentives for their continual support for the Group, it was recommended that Options be granted to the grantees under the Share Option Scheme, to subscribe for ordinary shares at an exercise price of HK$0.18 (“Exercise Price”) per share. The Exercise Price per share was adjusted to HK$0.169 as a result of the rights issue completed on 16 March 2011. The share options have a term of three years commencing from 1 August 2010 and shall vest (if applicable) and become exercisable in three tranches in the proportion of approximately 30%, 30% and 40% on 1 August 2010, 1 August 2011 and 1 August 2012 respectively.

For acceptance of Options granted by the Company, an eligible participant is required to remit HK$1 to the Company at the principal place of business of the Company in Hong Kong within 21 days from the date of receiving the offer of the Options. As at 24 February 2010, 66 eligible participants accepted the offer of Options granted by the Company. No further Options have been granted since that date.

– II-89 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

The Options’ fair value of HK$6,736,000 was measured at grant date using the binomial option pricing model. The total estimated fair value of the Options is spread over the vesting period, taking into account the probability that the Options will vest. For the period ended 31 January 2013, no share option expenses were recognised as all these options were vested in the last financial year.

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

Exercisable Date granted Vesting period period 3 February 2010 3 February 2010 to 1 August 2010 to 31 July 2010 31 July 2013 3 February 2010 to 1 August 2011 to 31 July 2011 31 July 2013 3 February 2010 to 1 August 2012 to 31 July 2012 31 July 2013	Options granted to directors ’000 9,970 9,970 13,294 33,234	Total ’000 9,970 9,970 13,294
		33,234

Pursuant to the rules of the Share Option Scheme, Options will lapse when the grantee ceases to be an employee of the Group for reasons other than death, ill-health or retirement.

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

At 1 August Exercised during the period Lapsed during the period At 31 January Exercisable at the end of the period	2013 Weighted average Outstanding exercise number of price options HK$ ’000 0.169 65,063 0.169 (30,657) 0.169 (1,172) 0.169 33,234 0.169 33,234	2012 Weighted average Outstanding exercise number of price options HK$ ’000 0.169 85,707 – – 0.169 (10,439) 0.169 75,268 0.169 45,224	2012 Weighted average Outstanding exercise number of price options HK$ ’000 0.169 85,707 – – 0.169 (10,439) 0.169 75,268 0.169 45,224
			75,268

			45,224

The Options outstanding at 31 January 2013 had an exercise price of HK$0.169 (2012: HK$0.169) and a weighted average remaining contracted life of half years (2012: one and a half years).

The fair value of the options was determined using the binomial valuation method at the date of grant; no subsequent revaluation at the period end is required. The significant inputs into the model were expected dividend yield of 0%, weighted average option life of 3.5 years, expected volatility of 85.48% and the risk-free rate of 1.2195% based on Hong Kong Exchange Fund Notes.

There was no profit and loss impact relating to the Share Option Scheme in the current period.

– II-90 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

16 Share capital

(i) Authorised and issued share capital

Authorised: Ordinary shares of HK$0.05 each Issued and fully paid: At 1 August Exercise of share option Conversion of bonus warrants (note (ii)) Issuance of new shares At 31 January/31 July	At 31 January 2013 Number of shares Amount ’000 HK$’000 4,000,000 200,000 1,156,035 57,801 30,657 1,533 2,070 104 115,000 5,750 1,303,762 65,188	At 31 July 2012 Number of shares Amount ’000 HK$’000 4,000,000 200,000 1,155,968 57,798 – – 67 3 – – 1,156,035 57,801	At 31 July 2012 Number of shares Amount ’000 HK$’000 4,000,000 200,000 1,155,968 57,798 – – 67 3 – – 1,156,035 57,801

			57,798 – 3 –
			57,801

(ii) Rights issue with bonus warrants

On 16 March 2011, 288,992,000 ordinary shares of the Company were issued at the subscription price of HK$0.12 each by way of rights issue (“Rights Issue”). The gross proceeds received by the Company from the rights issue were approximately HK$34,679,000, among which HK$14,449,000 was credited to the share capital account and the balance of HK$18,199,000 (net of professional fees of HK$2,031,000) was credited to the share premium account.

Upon completion of and in connection with the Rights Issue, an aggregate of 144,496,000 bonus warrants (“Bonus Warrants”) were issued to the subscribers on the basis of one Bonus Warrant for every two rights shares taken up, whereby options were issued to the subscribers to subscribe for ordinary shares at an exercise price of HK$0.12 per share for the period from 16 March 2011 to 15 March 2014.

(iii) Terms of unexpired and unexercised share options at the end of the reporting period

	At 31 January 2013	At 31 January 2013	At 31	July 2012
	Exercise	Number of	Exercise	Number of
Exercisable period	price	options	price	options
	HK$	’000	HK$	’000
1 August 2010 to 31 July 2013	0.169	9,970	0.169	19,544
1 August 2011 to 31 July 2013	0.169	9,970	0.169	19,544
1 August 2012 to 31 July 2013	0.169	13,294	0.169	25,975
		33,234		65,063

Each share option entitles the holder to subscribe for one ordinary share in the Company.

– II-91 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

17 Capital commitments

Capital commitments outstanding at 31 January 2013 and 31 July 2012 are as follows:

	At	At
	31 January	31 July
	2013	2012
	HK$’000	HK$’000
Authorised but not contracted for	–	–
Contracted but not provided for	249	–

18 Related party transactions

(a) In addition to the transactions and balances disclosed elsewhere in this condensed consolidated interim financial information, the Group entered into the following material related party transactions:

Sales to a substantial shareholder Sales to an associate Sales of property, plant and equipment to a subsidiary of a substantial shareholder Sales of property, plant and equipment to a company controlled by a family member of a director Interest paid and payable to a substantial shareholder Operating lease charges paid and payable to a company controlled by a director Purchase of fabricated moulds and certain moulded products and parts from a company controlled by a family member of a director Management fee paid and payable to a company controlled by a director Sub-contracting fee paid and payable to a company controlled by a family member of a director Repair and maintenance services paid and payable to a company controlled by a family member of a director	Unaudited Six months ended 31 January 2013 2012 HK$’000 HK$’000 1,156 – 466 9,862 1,622 9,862 – 9,920 – 409 – 10,329 – 62 4,574 4,835 36 658 330 349 483 1,840 298 –	Unaudited Six months ended 31 January 2013 2012 HK$’000 HK$’000 1,156 – 466 9,862 1,622 9,862 – 9,920 – 409 – 10,329 – 62 4,574 4,835 36 658 330 349 483 1,840 298 –
		9,862

		9,920 409
		10,329

		62

		4,835

		658

		349

		1,840

		–

– II-92 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(b) Amounts due from related parties included as part of trade and other receivables were as follows:

Amount due from a company controlled by a director Amount due from an associate Amount due from a substantial shareholder Amount due from a company controlled by a family member of a director	At 31 January 2013 HK$’000 2,896 363 740 27 4,026	At 31 July 2012 HK$’000 2,816 1,429 1,729 –
		5,974

Amounts due from related parties are interest-free, unsecured and are repayable on demand.

Amounts due to directors Amount due to a company controlled by a director Amounts due to companies controlled by a family member of a director Amount due to a substantial shareholder	At 31 January 2013 HK$’000 205 – 250 92 547	At 31 July 2012 HK$’000 300 941 751 –
		1,992

– II-93 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

3. INDEBTEDNESS

The statement of indebtedness of the Group as of 31 March 2013, being the latest practicable date for the purpose of this statement prior to the publication of this composite offer documents, is set out as follows:

HK$’000

Borrowings Bank loans – Secured_(note) – Unsecured Secured bank overdrafts(note)_	398,682 55,938
	454,620 22,521
	477,141

Note:

The amounts are secured by the following assets of the Group:

Fixed deposits Buildings held for own use with an aggregate carrying value Plant and machinery with an aggregate carrying value Interests in leasehold land held for own use under operating leases with an aggregate carrying value	HK$’000 23,875 283,637 58,901 25,357
	391,770

Contingent liabilities

As at the close of business on 31 March 2013, the Group did not have any material contingent liabilities.

– II-94 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Save as aforesaid, and apart from normal trade payables in the normal course of business, as at the close of business on 31 March 2013, the Group did not have any loan capital issued and outstanding or agreed to be issued, bank overdrafts, loans or other similar indebtedness, liabilities under acceptances (other than normal trade bills) or acceptance credits, debentures, mortgages, charges, hire purchase commitments, guarantees or other material contingent liabilities.

4. MATERIAL CHANGE

Save as disclosed in (i) the interim report of Company for the six months ended 31 January 2013 and indebtedness statement as set out in the paragraph headed “3. Indebtedness” in appendix II to this Composite Offer Document in respect of the Group’s total borrowings having decreased from HK$573.3 million as at 31 July 2012 to HK$500.1 million as at 31 January 2013 and further reduced to HK$477.1 million as at 31 March 2013; and (ii) the announcement of the Company dated 31 December 2012 in respect of the possible disposal of the Land, there has been no material change in the Group’s financial or trading position or outlook since 31 July 2012, the date to which the latest published audited financial statements of the Group were made up to the Latest Practicable Date.

5. PROPERTY INTERESTS

Details relating to the Group’s property interests are set out in Appendix III to this Composite Offer Document. DTZ Debenham Tie Leung Limited, an independent property valuer, has valued the properties owned by the Group as at 31 March 2013. The text of their letters, summary of valuation and valuation certificates are set out in Appendix III to this Composite Offer Document.

A reconciliation of the net book value of the relevant property interests as at 31 July 2012 to their fair value as stated in Appendix III to this Composite Offer Document is as follows:

Net book value of the Group’s property interests as at 31 July 2012 Additions Depreciation/amortisation Disposals Exchange adjustments Net book value of the Group’s property interests as at 31 March 2013 Valuation surplus Valuation amount as at 31 March 2013	HK$’000 312,761 – (5,869) – 7,584
	314,476 259,899
	574,375

– II-95 –

APPENDIX III PROPERTY VALUATION REPORT OF THE GROUP

The following is the text of a letter, summary of valuations and valuation certificates prepared for the purpose of incorporation in this document received from DTZ Debenham Tie Leung Limited, an independent property valuer, in connection with its opinion of market values of the Properties in the PRC as at 31 March 2013.

==> picture [44 x 42] intentionally omitted <==

==> picture [88 x 41] intentionally omitted <==

16th Floor Jardine House 1 Connaught Place Central Hong Kong

7 June 2013

The Board of Directors V. S. International Group Limited 40th Floor, Jardine House 1 Connaught Place Central Hong Kong

Dear Sirs,

Re: Portfolio Valuation

INSTRUCTIONS, PURPOSE & DATE OF VALUATION

In accordance with your instruction for us to carry out market valuation of the properties (the “Properties”) held by V. S. International Group Limited (the “Company”) and its subsidiaries (hereinafter together as the “Group”) in the People’s Republic of China (the “PRC”), we confirm that we have carried out site inspections, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the market values of the Properties as at 31 March 2013 (the “date of valuation”).

DEFINITION OF MARKET VALUE

Our valuation of each of the Properties represents its market value which in accordance with the HKIS Valuation Standards 2012 Edition published by the Hong Kong Institute of Surveyors is defined as “the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing where the parties had each acted knowledgeably, prudently and without compulsion”.

– III-1 –

APPENDIX III PROPERTY VALUATION REPORT OF THE GROUP

VALUATION BASIS AND ASSUMPTION

Our valuations of the Properties exclude an estimated price inflated or deflated by special terms or circumstances such as atypical financing, sale and leaseback arrangement, special considerations or concessions granted by anyone associated with the sale, or any element of special value.

In the course of our valuations of the Properties situated in the PRC, we have assumed that transferable land use rights in respect of the Properties for its specific term at nominal annual land use fee have been granted and that any premium payable has already been fully paid. We have relied on the information and advice given by the Group and the PRC legal opinion of the legal adviser, Shanghai Jingcheng Shenheng Law Office（上海精誠申衡律師事務所）dated 16 April 2013, regarding the titles to the Properties and the interests in the Properties. In valuing the Properties, we have assumed that the owners have enforceable titles to the Properties and have free and uninterrupted rights to use, occupy or assign the Properties for the whole of the unexpired terms as granted.

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

According to financial information of the Group, for indicate purpose and based on prevailing rules and information available as at the Latest Practicable Date, the potential tax liability which would arise on the disposal of the Properties in the PRC are PRC business tax (approximately 5%) and PRC land appreciation tax (approximately 30%-60% of the appreciation amount), if any. According to our established practice, in the course of our valuation, we have neither verified nor taken into account such tax liability.

The precise tax implication will be subject to prevailing rules and regulation at the time of disposal. The Properties are held by the Group for owner-occupation purposes, the likelihood of the relevant tax liabilities being crystallized is remote in near future.

METHODS OF VALUATION

In valuing the Properties in Group I, which are held by the Group for owner-occupation in the PRC, in the absence of relevant market data to arrive at the market values of the Properties by means of market-based evidence, we have valued the Properties by Depreciated Replacement Cost Approach which requires a valuation of the market value of the land in its existing use and an estimate of the new replacement cost of the buildings and structures, from which deductions are made to allow for the age, condition and functional obsolescence. The reported market values by Depreciated Replacement Cost Approach only apply to the whole of the Properties as a unique interest respectively, and no piecemeal transaction of the Properties is assumed. The market values are subject to adequate potential profitability of the business from the use of the Properties as a whole.

– III-2 –

APPENDIX III PROPERTY VALUATION REPORT OF THE GROUP

The Property in Group II, which is rented by the Group in the PRC, is considered to have no commercial value due to the prohibitions against assignment of the Property or otherwise due to the lack of substantial profit rent.

In valuing the Properties, we have complied with the requirements set out in Chapter 5 and Practice Note 12 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, the Rule 11 of the Codes on Takeovers and Mergers and Share Repurchases issued by Securities and Futures Commission and the HKIS Valuation Standards 2012 Edition published by the Hong Kong Institutes of Surveyors.

SOURCE OF INFORMATION

We have relied to a very considerable extent on the information given by the Group and the opinion of the PRC legal adviser as to the PRC laws. We have accepted advice given to us on such matters as planning approvals or statutory notices, easements, tenure, identification of Properties, particulars of occupancy, development scheme, construction costs, site and floor areas and all other relevant matters.

Dimension, measurements and areas included in this valuation report are based on the information provided to us and are therefore only approximation. We have had no reason to doubt the truth and accuracy of the information provided to us by the Group which is material to the valuations. We were also advised that no material facts have been omitted from the information supplied.

We would point out that the copies of documents provided to us are mainly compiled in Chinese characters and the transliteration into English represents our understanding of the contents. We would therefore advise the Company to make reference to the original Chinese edition of the documents and consult your legal adviser regarding the legality and interpretation of these documents.

TITLE INVESTIGATION

We have been provided by the Group with copies or extracts of documents. However, we have not searched the original documents to verify ownership or to ascertain any amendments to any documents. We have not been able to cause title search for the Property in the PRC but we have made reference to the copies of the title documents which have been made available to us by the Group. All documents have been used for reference only and all dimensions, measurements and areas are approximate.

SITE INSPECTION

Our valuers, Alfred Chan, Tao Wen and Hanson Han (a Surveyor or China Real Estate Appraiser), have inspected the exterior and, wherever possible, the interior of the Properties in April 2013 respectively. However, no structural survey has been made, but in the course of our inspection, we did not note any serious defects. We are not able to report whether the Properties are free of rot, infestation and any other structural defects; no tests were carried out to any of the services.

– III-3 –

APPENDIX III PROPERTY VALUATION REPORT OF THE GROUP

Unless otherwise stated, we have not been able to carry out detailed on-site measurements to verify the site and floor areas of the Properties and we have assumed that the areas shown on the documents handed to us are correct.

CURRENCY

Unless otherwise stated, all sums stated in our valuations are in Renminbi, the official currency of the PRC.

We attach herewith the summary of valuations and valuation certificates.

Yours faithfully,

For and on behalf of

DTZ Debenham Tie Leung Limited Philip C Y Tsang Registered Professional Surveyor (General Practice) Registered China Real Estate Appraiser MSc, MRICS, MHKIS

Director

Note: Mr. Philip C Y Tsang is a Registered Professional Surveyor (General Practice) who has over 20 years property valuation experience in the PRC.

– III-4 –

APPENDIX III PROPERTY VALUATION REPORT OF THE GROUP

SUMMARY OF VALUATIONS

Property
Market value
in existing
state as at
31 March 2013
The Group’s
attributable
interest
RMB
%
Group I – Properties held by the Group for owner-occupation in the PRC
1.
An Industrial Complex and Two
Warehouses on a nearby site situated at
Beisha Village,
Jinding Town,
Xiangzhou District,
Zhuhai,
Guangdong Province,
the PRC
364,100,000
100
2.
A 3-storey Industrial Complex situated at
No. 236 Qianwangang Road,
Haier Industrial Park, Qingdao Economic
and Technological Development Zone,
Huangdao District,
Qingdao,
Shandong Province,
the PRC
61,800,000
100
3.
An Industrial Complex situated at North
of No. 2 Line and East of No. 6 Line in
Export Processing Zone, Qingdao,
Shandong Province,
the PRC
33,600,000
100
Grand Total:
459,500,000

Market value
in existing
state as at
31 March 2013
attributable to
the Group
RMB
364,100,000
61,800,000
33,600,000

459,500,000

– III-5 –

APPENDIX III PROPERTY VALUATION REPORT OF THE GROUP

Property

Market value in existing state as at 31 March 2013 RMB

Group II – Property rented by the Group in the PRC

20 blocks of staff quarters buildings situated at west of Jinsha Road, Beisha Village, Jinding Town, Xiangzhou District, Zhuhai, Guangdong Province, the PRC

No commercial value

– III-6 –

APPENDIX III PROPERTY VALUATION REPORT OF THE GROUP

VALUATION CERTIFICATE

Group I – Properties held by the Group for owner-occupation in the PRC

Property

Description and tenure

Particulars of occupancy

Market Value in existing state as at 31 March 2013

An Industrial The Property comprises two nearby Complex and Two parcels of land (the “Land”) with an Warehouses on a industrial complex (designated as nearby site situated Phases I – IV on 272,886.01 sq.m. at Beisha Village, land) and two warehouses Jinding Town, (designated as Phase VI on Xiangzhou District, 43,612.28 sq.m. land). The Property Zhuhai, has a total site area of 316,498.29 Guangdong sq.m.. Province, the PRC The industrial complex (Phases I – IV) comprises 7 blocks of 2-storey workshop, 3 blocks of extension workshop, 2 blocks of single-storey warehouse, a single-storey canteen and other ancillary facilities. These buildings were completed between 2001 and December 2004.

There are also 2 blocks of single-storey warehouse (Phase VI) erected on the nearby site. The workshops were completed in September 2007.

Most portion of RMB364,100,000 Phases I – IV is (100% interest owner-occupied as attributable to workshop, warehouse, the Group: ancillary offices and RMB364,100,000) other ancillary uses.

The remaining portion of Phases I – IV is vacant.

As advised by the Group, Warehouse No. 2 of Phase VI is temporarily leased to a tenant on month to month basis at a monthly rent of RMB40,000, exlcusive of management fee.

Warehouse No. 1 of Phase VI is vacant.

The Property has a total gross floor area of approximately 139,333.22 sq.m. (exclusive of areas of those ancillary facilities). The breakdown is summarized

Industrial Complex

Phase	No.	Building	Gross	Floor Area
				sq.m.
I	V1	Workshop/Office		8,653.52
I	V1	Extension	Workshop	7,234.20
I	V2	Workshop/Office		8,653.51
I	V2	Extension	Workshop	7,236.00
II	V4	Warehouse		10,435.37
II	V5	Workshop		15,820.31
II	–	Canteen		3,161.39
II	V6	Workshop		4,710.06
II	V6	Extension	Workshop	2,393.56
III	V7	Workshop		4,710.06
III	V8	Warehouse		10,435.37
III	V9	Workshop	& Extension	20,632.67
IV	V10	Workshop		21,338.28
			Sub-total:	125,414.30

– III-7 –

APPENDIX III PROPERTY VALUATION REPORT OF THE GROUP

Property

Description and tenure

Market Value in Particulars of existing state as at occupancy 31 March 2013

Two Warehouses on a Nearby Site

Phase	No.	Building	Gross	Floor Area
				sq.m.
VI	1	Warehouse		6,959.46
VI	2	Warehouse		6,959.46
			Sub-total:	13,918.92
		Grand Total:		139,333.22

The Property is located at Beisha Village, Jinding Town in Xiangzhou District, which is in urban area of Zhuhai. Developments nearby are mainly industrial and residential development. According to the Group, the Property is planned for industrial use; there is no environmental issues and litigation dispute; there is no plan for renovation or to dispose of the Property in near future. However, on 31 December 2012, the Company announced that V.S. Technology Industry Park (Zhuhai) Co., Ltd. （威士茂科技工業園（珠海）有限公司） intended to apply for inclusion of the Land under an urban redevelopment scheme of the government of Zhuhai (the “Zhuhai Government”) in relation to aged factories, towns and villages (the “Application”). The success of the Application and resumption of the Land are subject to various factors including the approval of the Application, the negotiations with the Zhuhai Government, and the terms of resumption of the Land. The resumption of the Land may or may not proceed.

The land use rights of the Property have been granted for a term due to expire on 20 February 2051 for industrial use.

– III-8 –

APPENDIX III PROPERTY VALUATION REPORT OF THE GROUP

Notes:

(1) According to Real Estate Title Certificate No. C4713923 issued by the People’s Government of Guangdong Province, the land use rights of a site located at Beisha Village, Jinding Town, Zhuhai having a site area of 272,886.01 sq.m. is vested in V.S. Technology Industry Park (Zhuhai) Co., Ltd.
（威士茂科技工業園（珠海）有限公司）, a wholly owned subsidiary of the Company, for a land use term due to expire on 20 February 2051 for industrial use.
(2) According to Real Estate Title Certificate No. C0294561 issued by the People’s Government of Guangdong Province, the land use rights of a site located at Beisha Village, Jinding Town, Zhuhai having a site area of 43,612.28 sq.m. is vested in V.S. Technology Industry Park (Zhuhai) Co., Ltd.
（威士茂科技工業園（珠海）有限公司）for a land use term due to expire on 20 February 2051 for industrial use.
(3) According to 18 Real Estate Title Certificates all issued by the People’s Government of Guangdong Province, the land use rights and building ownership of the industrial complex are vested in V.S. Technology Industry Park (Zhuhai) Co., Ltd.（威士茂科技工業園（珠海）有限公司）for a land use term due to expire on 20 February 2051 for industrial use. The salient conditions as stipulated in the Real Estate Title Certificates are summarized below:

Certificate No. (Building Portion) C0572318 C0572320 C2692136 C2692137 C2692172 C2692173 C2692174 C2692376 C2692377 C2692380 C2692381 C2692382 C2863355 C2931268 C2931900 C4713920 C4713921 C4713922 Total:	Gross Floor Area sq.m. 8,653.52 8,653.51 12,955.89 2,864.42 13,504.29 7,833.99 10,435.37 12,766.33 7,866.34 3,797.91 912.15 10,435.37 3,782.33 927.73 3,161.39 7,236.00 7,234.20 2,393.56
	125,414.30

– III-9 –

APPENDIX III PROPERTY VALUATION REPORT OF THE GROUP

(4) According to 2 Real Estate Title Certificates all issued by the People’s Government of Guangdong Province, the land use rights of a site located at No. 100 Beisha Road, Jinding Town, Zhuhai having a site area of 43,612.28 sq.m. and the building ownership of two warehouses are vested in V.S. Technology Industry Park (Zhuhai) Co., Ltd.（威士茂科技工業園（珠海）有限公司）for a land use term due to expire on 20 February 2051 for industrial use. The salient conditions as stipulated in the Real Estate Title Certificates are summarized below:

Certificate No. Gross Floor (Building Portion) Area sq.m. C6091250 6,959.46 C6091251 6,959.46 Total: 13,918.92

(5) According to Business Licence No. 440400400007257, V.S. Technology Industry Park (Zhuhai) Co., Ltd.（威士茂科技工業園（珠海）有限公司）was established with a registered capital of USD36,820,000 for a valid operation period from 27 July 2000 to 27 July 2050.
(6) According to the PRC legal opinion:
(i) V.S. Technology Industry Park (Zhuhai) Co., Ltd（威士茂科技工業園（珠海）有限公司）has obtained the business licence and is legally established; and
(ii) V.S. Technology Industry Park (Zhuhai) Co., Ltd（威士茂科技工業園（珠海）有限公司）has obtained 22 Real Estate Title Certificates and has the rights to use, handle and lease out the Property.
(7) The status of the title and grant of major approvals and licenses in accordance with the information provided by the Group and the legal opinion are as follows:

Real Estate Title Certificate Yes Business Licence Yes

– III-10 –

APPENDIX III PROPERTY VALUATION REPORT OF THE GROUP

Property

Description and tenure

Particulars of occupancy

Market Value in existing state as at 31 March 2013

A 3-storey Industrial Complex situated at No. 236 Qianwangang Road, Haier Industrial Park, Qingdao Economic and Technological Development Zone, Huangdao District, Qingdao, Shandong Province, the PRC

The Property comprises a 3-storey industrial complex completed in 2003.

The Property has a site area of 30,642 sq.m. and a total gross floor area of 20,638.22 sq.m..

The Property is located at Haier Industrial Park, Qingdao Economic and Technological Development Zone in Huangdao District, which is in urban area of Qingdao. Developments nearby are mainly industrial and residential development. According to the Group, the Property is planned for industrial use; there is no environmental issues and litigation dispute; there is no plan for renovation, to dispose of or change the use of the Property.

The Property is RMB61,800,000 owner-occupied as (100% interest workshop, warehouse, attributable to ancillary offices and the Group: other ancillary uses. RMB61,800,000)

The land use rights of the Property have been granted for a term due to expire on 9 January 2052 for industrial use.

– III-11 –

APPENDIX III PROPERTY VALUATION REPORT OF THE GROUP

Notes:

(1) According to Real Estate Title Certificate No. 201165908 issued by People’s Government of Qingdao, the land use rights and building ownership of the Property are vested in Qingdao GS Electronic Plastics Co., Ltd.（青島偉勝電子塑膠有限公司）, a wholly owned subsidiary of the Company, with a site area of 30,642 sq.m. and a total gross floor area of 20,638.22 sq.m.. The land use rights have been granted for a term due to expire on 9 January 2052 for industrial use.
(2) According to Business Licence No. 370200400085234, Qingdao GS Electronic Plastics Co., Ltd.（青島偉勝電子塑膠有限公司） was established with a registered capital of RMB73,980,000 for a valid operation period from 2 August 2001 to 2 August 2051.
(3) According to the PRC legal opinion:
(i) Qingdao GS Electronic Plastics Co., Ltd.（青島偉勝電子塑膠有限公司）has obtained the business licence and is legally established; and
(ii) Qingdao GS Electronic Plastics Co., Ltd. （青島偉勝電子塑膠有限公司） has obtained the Real Estate Title Certificate and has the rights to use, handle and lease out the Property.
(4) The status of the title and grant of major approvals and licenses in accordance with the information provided by the Group and the legal opinion are as follows:

Real Estate Title Certificate Yes Business Licence Yes

– III-12 –

APPENDIX III PROPERTY VALUATION REPORT OF THE GROUP

Property

Description and tenure

Market Value in Particulars of existing state as at occupancy 31 March 2013

An Industrial Complex situated at North of No. 2 Line and East of No. 6 Line in Export Processing Zone, Qingdao, Shandong Province, the PRC

The Property comprises a 3-storey workshop, a single storey warehouse and various single storey ancillary buildings completed in 2006.

The Property has a site area of 24,270 sq.m. and a total gross floor area of 18,039.79 sq.m..

The Property is RMB33,600,000 owner-occupied as (100% interest workshop, warehouse, attributable to ancillary offices and the Group: other ancillary uses. RMB33,600,000)

The Property is located at Export Processing Zone, which is in rural area of Qingdao. Developments nearby are mainly industrial development. According to the Group, the Property is planned for industrial use; there is no environmental issues and litigation dispute; there is no plan for renovation, to dispose of or change the use of the Property.

The land use rights of the Property have been granted for a term due to expire on 30 December 2056 for industrial use.

– III-13 –

APPENDIX III PROPERTY VALUATION REPORT OF THE GROUP

Notes:

(1) According to Real Estate Title Certificate No. 024 issued by People’s Government of Qingdao on 23 July 2008, the land use rights and building ownership of the Property are vested in Qingdao GP Electronic Plastics Co., Ltd.（青島偉立精工塑膠有限公司）, a wholly owned subsidiary of the Company, with a site area of 24,270 sq.m. and a total gross floor area of 18,039.79 sq.m.. The land use rights have been granted for a term due to expire on 30 December 2056 for industrial use.
(2) According to Business Licence No. 370214400003341, Qingdao GP Electronic Plastics Co., Ltd.（青島偉立精工塑膠有限公司） was established with a registered capital of US$11,000,000 for a valid operation period from 20 March 2006 to 20 March 2056.
(3) According to the PRC legal opinion:
(i) Qingdao GP Electronic Plastics Co., Ltd.（青島偉立精工塑膠有限公司）has obtained the business licence and is legally established; and
(ii) Qingdao GP Electronic Plastics Co., Ltd. （青島偉立精工塑膠有限公司） has obtained the Real Estate Title Certificate and has the rights to use, handle and lease out the Property.
(4) The status of the title and grant of major approvals and licenses in accordance with the information provided by the Group and the legal opinion are as follows:

Real Estate Title Certificate Yes Business Licence Yes

– III-14 –

APPENDIX III PROPERTY VALUATION REPORT OF THE GROUP

Group II – Property rented by the Group in the PRC

Property

Description and tenure

Market Value in existing state as at 31 March 2013

20 blocks of staff quarters buildings situated at west of Jinsha Road, Beisha Village, Jinding Town, Xiangzhou District, Zhuhai, Guangdong Province, the PRC

The Property comprises 20 blocks of 6-storey staff No commercial value quarters buildings completed in mid 2000’s respectively.

The Property has a total gross floor area of 34,241.32 sq.m. and is occupied by the Group as staff quarters.

The Property is currently rented by the Group for a term of 2 years from 1 August 2012 to 20 July 2014 at an annual rent of RMB7,930,290, inclusive of management fee.

According to the PRC legal opinion, the lessor is entitled to lease the Property to the Group and the tenancy agreement is legal, valid and binding.

– III-15 –

GENERAL INFORMATION

APPENDIX IV

1. RESPONSIBILITY STATEMENT

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

The directors of the Offeror jointly and severally accept full responsibility for the accuracy of the information contained in this Composite Offer Document (other than those relating to the Company, its associates and parties acting in concert with it) and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in this Composite Offer Document (other than those expressed by the Company, its associates and 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 Offer Document, the omission of which would make any statements in this Composite Offer Document misleading.

The Directors jointly and severally accept full responsibility for the accuracy of the information contained in this Composite Offer Document (other than those relating to the Offeror, its associates (except for the Group) and parties acting in concert with it) and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in this Composite Offer Document (other than those expressed by the Offeror, its associates (except for the Group) and 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 Offer Document, the omission of which would make any statements in this Composite Offer Document misleading.

– IV-1 –

GENERAL INFORMATION

APPENDIX IV

2. SHARE CAPITAL OF THE COMPANY

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

	Number of
	Shares	Amount
		HK$
Ordinary shares of HK$0.05 each
Authorised:
Balance as at the Latest Practicable Date	4,000,000,000	200,000,000
Issued and fully paid:
Balance as at 31 July 2012	1,156,034,666	57,801,733
Shares issued pursuant to exercise of Share
Options	30,656,925	1,532,846
Shares issued pursuant to exercise of Bonus
Warrants	6,037,338	301,867
Shares issued pursuant to the subscription
agreements dated 27 November 2012 entered
into by the Company	115,000,000	5,750,000
Balance as at the Latest Practicable Date	1,307,728,929	65,386,446

All of the Shares currently in issue rank pari passu in all respects with each other, including the rights in respect of dividend, voting and capital. The Shares are listed and traded on the Main Board of the Stock Exchange.

The Company has issued (i) 30,656,925 Shares pursuant to the exercise of Share Options by the Optionholders in accordance with the Share Option Scheme and 6,037,338 pursuant to the exercise of Bonus Warrants by the Warrantholders; and (ii) 115,000,000 Shares pursuant to the subscription agreements dated 27 November 2012 entered into by the Company and three subscribers, since 31 July 2012, being the end of its last financial year, up to the Latest Practicable Date.

– IV-2 –

GENERAL INFORMATION

APPENDIX IV

The Company has granted Share Options to the Directors and eligible employees of the Group pursuant to the Share Option Scheme from time to time. As at the Latest Practicable Date, the Company had outstanding Share Options to subscribe for a total of 33,234,772 Shares, details of which are set out below:

Date of grant Subscription price per Share Option Period during which Share Options outstanding are exercisable HK$ 3 February 2010 0.169 1 August 2010 to 31 July 2013 3 February 2010 0.169 1 August 2011 to 31 July 2013 3 February 2010 0.169 1 August 2012 to 31 July 2013	Number of Shares subject to the Share Options outstanding 9,970,431 9,970,431 13,293,910
	33,234,772

Note: These Share Options shall vest and become exercisable in three tranches in the proportion of approximately 30%, 30% and 40% on 1 August 2010, 1 August 2011 and 1 August 2012 respectively.

Upon completion of and in connection with the rights issue of the Company completed on 16 March 2011, an aggregate of 144,496,000 bonus warrants were issued to the subscribers on the basis of one bonus warrant for every two rights shares taken up. As at the Latest Practicable Date, the Company had outstanding Bonus Warrants to subscribe for a total of 138,391,996 Shares, details of which are set out below:

Date of grant Exercise price per Bonus Warrant Period during which Bonus Warrants outstanding are exercisable HK$ 14 March 2011 0.12 16 March 2011 to 15 March 2014	Number of Shares subject to the Bonus Warrants outstanding 138,391,996
	138,391,996

Save as disclosed above, as at the Latest Practicable Date, there were no outstanding options, warrants or conversion rights affecting or convertible into Shares.

– IV-3 –

GENERAL INFORMATION

APPENDIX IV

3. DISCLOSURE OF INTERESTS

(a) Interest of the Offeror and parties acting in concert with it in the Company

As at the Latest Practicable Date, details of the Shares held by the Offeror and parties acting in concert with it were as follows:

	As at the	As at the
	Latest Practicable		Date
	Number of	Approximate
	Shares		%
Offeror
V.S. Industry Berhad (Note 10)	497,716,400		38.06
Parties acting in concert with the Offeror
Gan Sem Yam (Notes 1, 9 and 10)	23,530,000		1.80
Beh Kim Ling (Notes 2, 9 and 10)	52,267,699		4.00
Gan Chu Cheng (Notes 3, 9 and 10)	69,227,706		5.29
Gan Tiong Sia (Notes 4, 9 and 10)	29,637,700		2.27
Beh Hwee Sze (Notes 5 and 10)	19,654,000		1.50
Beh Chern Wei (Notes 6 and 10)	–		–
Gan Pee Yong (Note 7)	40,767,275		3.12
Tang Sim Cheow (Notes 8 and 9)	–		–

Notes:

Mr. Gan Sem Yam, an executive Director, is also an executive director of the Offeror.
Mr. Beh Kim Ling, an executive Director, is also an executive director of the Offeror.
Madam Gan Chu Cheng, an executive Director, is also an executive director of the Offeror.
Mr. Gan Tiong Sia, a non-executive Director, is also an executive director of the Offeror.
Miss Beh Hwee Sze is the daughter of Mr. Beh Kim Ling and Madam Gan Chu Cheng.
Mr. Beh Chern Wei is the son of Mr. Beh Kim Ling and Madam Gan Chu Cheng.
Mr. Gan Pee Yong is the son of Mr. Gan Sem Yam.
Mr. Tang Sim Cheow, an independent non-executive Director, is also an independent non-executive director of the Offeror.

– IV-4 –

APPENDIX IV

GENERAL INFORMATION

Each of Mr. Gan Sem Yam, Mr. Beh Kim Ling, Madam Gan Chu Cheng, Mr. Gan Tiong Sia and Mr. Tang Sim Cheow holds interests in the Share Options granted by the Company under the share option scheme adopted by the Company on 20 January 2002:

					Number of
					Shares that
					would be
					allotted and
					issued upon
					exercise of
Name of	Date of	Exercise			the Share
Director	grant	price	Exercise period		Option
Beh Kim Ling	3 February	HK$0.169	1 August 2010 to	(i)	2,748,260
	2010		31July 2013
			1 August 2011 to	(ii)	2,748,260
			31 July 2013
			1 August 2012 to	(iii)	3,664,347
			31 July 2013
Gan Sem Yam	3 February	HK$0.169	1 August 2010 to	(i)	2,748,260
	2010		31July 2013
			1 August 2011 to	(ii)	2,748,260
			31 July 2013
			1 August 2012 to	(iii)	3,664,347
			31 July 2013
Gan Chu Cheng	3 February	HK$0.169	1 August 2010 to	(i)	2,748,260
	2010		31July 2013
			1 August 2011 to	(ii)	2,748,260
			31 July 2013
			1 August 2012 to	(iii)	3,664,347
			31 July 2013
Gan Tiong Sia	3 February	HK$0.169	1 August 2010 to	(i)	1,342,173
	2010		31July 2013
			1 August 2011 to	(ii)	1,342,173
			31 July 2013
			1 August 2012 to	(iii)	1,789,565
			31 July 2013
Tang Sim Cheow	3 February	HK$0.169	1 August 2010 to	(i)	191,739
	2010		31July 2013
			1 August 2011 to	(ii)	191,739
			31 July 2013
			1 August 2012 to	(iii)	255,652
			31 July 2013

– IV-5 –

APPENDIX IV

GENERAL INFORMATION

Each of V.S. Industry Berhad, Mr. Gan Sem Yam, Mr. Beh Kim Ling, Madam Gan Chu Cheng, Mr. Gan Tiong Sia, Miss Beh Hwee Sze and Mr. Beh Chern Wei holds interests in the Bonus Warrants granted by the Company pursuant to rights issue completed on 16 March 2011:

				Number of
				Shares that
				would be
Name of				allotted and
Offeror, its				issued upon
director and				exercise of
party acting in				the Bonus
concert with it	Date of grant	Exercise price	Exercise period	Warrants
V.S. Industry	14 March 2011	HK$0.12	16 March 2011 to	62,859,750
Berhad			15 March 2014
Beh Kim Ling	14 March 2011	HK$0.12	16 March 2011 to	6,533,461
			15 March 2014
Gan Sem Yam	14 March 2011	HK$0.12	16 March 2011 to	3,046,250
			15 March 2014
Gan Chu Cheng	14 March 2011	HK$0.12	16 March 2011 to	19,113,465
			15 March 2014
Gan Tiong Sia	14 March 2011	HK$0.12	16 March 2011 to	2,103,463
			15 March 2014
Beh Hwee Sze	14 March 2011	HK$0.12	16 March 2011 to	1,120,000
			15 March 2014
Beh Chern Wei	14 March 2011	HK$0.12	16 March 2011 to	100,000
			15 March 2014

Save as disclosed above, as at the Latest Practicable Date, none of the Offeror and parties acting in concert with it owned or controlled or had any interest in the relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company.

– IV-6 –

GENERAL INFORMATION

APPENDIX IV

(b) Interests of Directors in the Company

As at the Latest Practicable Date, the interests and short positions of the Directors in the Shares, underlying Shares or debentures of the Company or any of its associated corporation (within the meaning of Part XV of the SFO) which were required (i) 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) pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers contained in the Listing Rules, to be notified to the Company and the Stock Exchange, were as follows:

			Approximate	Approximate
	The Company/name			percentage
	of associated		Number and class	of
Name of Director	corporation	Capacity	of securities	interest
			(Note 2)
Beh Kim Ling	The Company	Beneficial	67,962,027 Shares(L)	4.59%
(Note 1)		owner	(Note 3)
	V.S. Corporation	Beneficial	3,750,000 non-voting	5.00%
	(Hong Kong) Co.,	owner	deferred shares of
	Limited		HK$1 each (L)
	(“VSHK”)
	V.S. Investment	Beneficial	5 ordinary shares of	Nominal
	Holdings Limited	owner	HK$1 each (L)
	(“VS Investment”)
Gan Sem Yam	The Company	Beneficial	35,737,117 Shares(L)	2.42%
(Note 1)		owner	(Note 4)
	VSHK	Beneficial	3,750,000 non-voting	5.00%
		owner	deferred shares of
			HK$1 each (L)
	VS Investment	Beneficial	5 ordinary shares of	Nominal
		owner	HK$1 each (L)
Gan Chu Cheng	The Company	Beneficial	97,502,038 Shares(L)	6.59%
(Note 1)		owner	(Note 5)
	VSHK	Beneficial	3,750,000 non-voting	5.00%
		owner	deferred shares of
			HK$1 each (L)
	VS Investment	Beneficial	5 ordinary shares of	Nominal
		owner	HK$1 each (L)
Zhang Pei Yu	The Company	Beneficial	2,000 Shares(L)	0.00%
		owner	(Note 6)
Gan Tiong Sia	The Company	Beneficial	36,215,074 Shares(L)	2.45%
(Note 1)		owner	(Note 7)
	VSHK	Beneficial	3,750,000 non-voting	5.00%
		owner	deferred shares of
			HK$1 each (L)
Diong Tai Pew	The Company	Beneficial	1,413,129 Shares(L)	0.10%
		owner	(Note 8)
Tang Sim Cheow	The Company	Beneficial	639,130 Shares(L)	0.04%
		owner	(Note 9)

– IV-7 –

GENERAL INFORMATION

APPENDIX IV

Notes:

Mr. Beh Kim Ling is the husband of Madam Gan Chu Cheng, and the brother-in-law of Messrs. Gan Sem Yam and Gan Tiong Sia. Madam Gan Chu Cheng is the sister of Mr. Gan Sem Yam and Mr. Gan Tiong Sia.
The letter “L” represents the Director’s long position interest in the Shares and underlying Shares of the Company or its associated corporations.
These Shares include (i) 52,267,699 Shares held by Mr. Beh Kim Ling; and (ii) the Shares which would be allotted and issued upon exercise in full of the outstanding Share Options and Bonus Warrants granted to Mr. Beh Kim Ling, details of which are set out notes 9 and 10 to paragraph 3(a) of this Appendix.
These Shares include (i) 23,530,000 Shares held by Mr. Gan Sem Yam; and (ii) the Shares which would be allotted and issued upon exercise in full of the outstanding Share Options and Bonus Warrants granted to Mr. Gan Sem Yam, details of which are set out in notes 9 and 10 to paragraph 3(a) of this Appendix.
These Shares include (i) 69,227,706 Shares held by Madam Gan Chu Cheng; and (ii) the Shares which would be allotted and issued upon exercise in full of the outstanding Share Options and Bonus Warrants granted to Madam Gan Chu Cheng, details of which are set out in notes 9 and 10 to paragraph 3(a) of this Appendix.
These Shares include 2,000 Shares held by Mr. Zhang Pei Yu.
These Shares include (i) 29,637,700 Shares held by Mr. Gan Tiong Sia; and (ii) the Shares which would be allotted and issued upon exercise in full of the outstanding Share Options and Bonus Warrants granted to Mr. Gan Tiong Sia, details of which are set out in notes 9 and 10 to paragraph 3(a) of this Appendix.
These Shares include (i) 682,666 Shares held by Mr. Diong Tai Pew; and (ii) the Shares which would be allotted and issued upon exercise in full of the outstanding Share Options and Bonus Warrants granted to Mr. Diong Tai Pew, details of which are set out below.

Share Options
3 February 2010	HK$0.169	1 August 2010 to 31 July 2013	(i)	191,739
		1 August 2011 to 31 July 2013	(ii)	191,739
		1 August 2012 to 31 July 2013	(iii)	255,652
Bonus Warrants
14 March 2011	HK$0.12	16 March 2011 to 15 March 2014		91,333

These Shares include the Shares which would be allotted and issued upon exercise in full of the outstanding Share Options granted to Mr. Tang Sim Cheow, details of which are set out in note 9 to paragraph 3(a) of this Appendix.

Save as disclosed above, none of the Directors or chief executive of the Company had, as at the Latest Practicable Date, any interests or short positions in the Shares, underlying Shares and debentures of the Company 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 and short positions which were taken or deemed to have been taken under such provisions of the SFO) or the Model Code for Securities Transactions by Directors of Listed Issuers or which were required to be entered in the register required to be kept under section 352 of the SFO.

– IV-8 –

GENERAL INFORMATION

APPENDIX IV

Save as disclosed above, none of the Directors had any interests in the relevant securities (as defined under Note 4 to Rule 22 of the Takeovers Code) of the Company.

(c) Interests of Substantial Shareholders

As at the Latest Practicable Date, so far as was known to any Directors or chief executive of the Company, the following persons (not being a Director or chief executive of the Company) had, or were deemed or taken to have interests or short positions in the Shares or underlying Shares of the Company which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO:

			Approximate
Name of Substantial	Number of		percentage
Shareholder	Shares	Capacity	of interest
	(Note 1)
V.S. Industry Berhad	560,576,150 (L)	Beneficial	37.89%
	(Note 2)	owner

Notes:

The letter “L” represents the shareholder’s long position interest in the Shares.
These Shares include (i) 497,716,400 Shares held by V.S. Industry Berhad; and (ii) 62,859,750 Shares which would be allotted and issued upon exercise in full of the outstanding Bonus Warrants granted to V.S. Industry Berhad, details of which are set out in note 10 to paragraph 3(a) of this Appendix respectively.

(d) Other disclosures

On 31 October 2012, Mr. Zhang Pei Yu exercised 9,160,867 Share Options at the exercise price of HK$0.169 per Share and on 11 April 2013, he disposed of his interests in 9,160,867 Shares at the price of HK$0.305 per Share.

In November 2012, Miss Beh Hwee Sze disposed of 1,010,000 Bonus Warrants at the average price of approximately HK$0.08 per Bonus Warrant.

From October 2012 to January 2013, Mr. Beh Chern Wei disposed of 1,000,000 Shares and 200,000 Bonus Warrants at the average price of approximately HK$0.175 per Share and approximately HK$0.144 per Bonus Warrant, respectively.

As at the Latest Practicable Date:

(i) no person had any arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code with the Offeror or any parties acting in concert with it. The directors of the Offeror and its financial advisor were not aware of any such arrangements between any other associate of the Offeror and any other person;

– IV-9 –

GENERAL INFORMATION

APPENDIX IV

(ii) none of the Offeror or any parties acting in concert with it had borrowed or lent in the relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company;
(iii) none of the subsidiaries of the Company, any pension funds of the Group, nor any advisor to the Company as specified in class (2) of the definition of “associate” under the Takeovers Code (but excluding exempt principal traders) owned or controlled any of the relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company;
(iv) 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;
(v) no relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company were managed on a discretionary basis by fund managers (other than exempt fund managers) connected with the Company;
(vi) Mr. Diong Tai Pew and Mr. Zhang Pei Yu, being the Directors who are eligible to participate in the Partial Offer, the Option Offer and/or the Warrant Offer have indicated that they will not accept the Partial Offer, the Option Offer and/or the Warrant Offer in respect of their own beneficial ownership in the relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company;
(vii) neither the Company nor any of the Directors had borrowed or lent any of the relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company; and
(viii) no person who owned or controlled any Shares or other securities of the Company carrying voting rights or convertible securities, warrants, options or derivatives of the Company has irrevocably committed themselves to accept or not to accept the Partial Offer, the Option Offer and the Warrant Offer.

– IV-10 –

GENERAL INFORMATION

APPENDIX IV

(e) Interests of the Company and the Directors in the Offeror

As at the Latest Practicable Date, the following Directors had interest in the relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Offeror:

	Number of	Approximate
	shares in	percentage
Name of Director	the Offeror	of interest
Beh Kim Ling	32,166,159	17.8%
	(Note 1)
Gan Sem Yam	14,187,061	7.8%
	(Note 2)
Gan Chu Cheng	24,940,140	13.8%
	(Note 3)
Gan Tiong Sia	5,449,686	3.0%
	(Note 4)

Notes:

These shares include (i) 31,606,159 shares held by Mr. Beh Kim Ling; and (ii) the shares which would be allotted and issued upon exercise in full of the outstanding share options granted by the Offeror to Mr. Beh Kim Ling, details of which are set out in note 5 below.
These shares include (i) 13,627,061 shares held by Mr. Gan Sem Yam; and (ii) the shares which would be allotted and issued upon exercise in full of the outstanding share options granted by the Offeror to Mr. Gan Sem Yam, details of which are set out in note 5 below.
These shares include (i) 24,380,140 shares held by Madam Gan Chu Cheng; and (ii) the shares which would be allotted and issued upon exercise in full of the outstanding share options granted by the Offeror to Madam Gan Chu Cheng, details of which are set out in note 5 below.
These shares include (i) 4,889,686 shares held by Mr. Gan Tiong Sia; and (ii) the shares which would be allotted and issued upon exercise in full of the outstanding share options granted by the Offeror to Mr. Gan Tiong Sia, details of which are set out in note 5 below.

– IV-11 –

APPENDIX IV

GENERAL INFORMATION

Each of Mr. Beh Kim Ling, Mr. Gan Sem Yam, Madam Gan Chu Cheng and Mr. Gan Tiong Sia holds interests in the share options granted by the Offeror:

					Number of
					Shares that
					would be
Name of	Date of	Exercise			allotted and
Director	grant	price	Exercise period		issued
Beh Kim Ling	19 Nov 2010	RM1.54	19 Nov 2011 to	(i)	140,000
			18 Nov 2015
			19 Nov 2012 to	(ii)	140,000
			18 Nov 2015
			19 Nov 2013 to	(iii)	140,000
			18 Nov 2015
			19 Nov 2014 to	(iv)	140,000
			18 Nov 2015
Gan Chu Cheng	19 Nov 2010	RM1.54	19 Nov 2011 to	(i)	140,000
			18 Nov 2015
			19 Nov 2012 to	(ii)	140,000
			18 Nov 2015
			19 Nov 2013 to	(iii)	140,000
			18 Nov 2015
			19 Nov 2014 to	(iv)	140,000
			18 Nov 2015
Gan Sem Yam	19 Nov 2010	RM1.54	19 Nov 2011 to	(i)	140,000
			18 Nov 2015
			19 Nov 2012 to	(ii)	140,000
			18 Nov 2015
			19 Nov 2013 to	(iii)	140,000
			18 Nov 2015
			19 Nov 2014 to	(iv)	140,000
			18 Nov 2015
Gan Tiong Sia	19 Nov 2010	RM1.54	19 Nov 2011 to	(i)	140,000
			18 Nov 2015
			19 Nov 2012 to	(ii)	140,000
			18 Nov 2015
			19 Nov 2013 to	(iii)	140,000
			18 Nov 2015
			19 Nov 2014 to	(iv)	140,000
			18 Nov 2015

Save as disclosed above, as at the Latest Practicable Date, neither the Company nor the Directors have any interest in the relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Offeror.

4. DEALING IN SECURITIES

The Offeror and parties acting in concert with it further undertake that they will not acquire any voting rights in the Company from the date of the first joint announcement issued by the Company and the Offeror on 3 April 2013 to the end of the Offer Period.

(a) During the Relevant Period, save as disclosed in paragraph 3(d) above:

(i) none of the Offeror, its directors or parties acting in concert with the Offeror had dealt for value in the relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company;

– IV-12 –

GENERAL INFORMATION

APPENDIX IV

(ii) none of the Offeror or any parties acting in concert with the Offeror had borrowed or lent the relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company;
(iii) none of the Directors had dealt for value in the relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company; and
(iv) neither the Company nor any of its Directors had dealt for value in the relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Offeror.

(b) During the Offer Period and up to the Latest Practicable Date:

(i) none of the subsidiaries of the Company or, any pension funds of the Group nor any advisor to the Company as specified in class (2) of the definition of “associate” under the Takeovers Code had dealt for value in the relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company; and
(ii) no fund managers (other than exempt fund managers) connected with the Company who managed funds on a discretionary basis had dealt for value in the relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company.

5. ARRANGEMENTS AFFECTING AND RELATING TO DIRECTORS

As at the Latest Practicable Date:

(a) there was no arrangement whereby any Director would or will be given any benefit as compensation for loss of office or otherwise in connection with the Partial Offer, the Option Offer and the Warrant Offer;
(b) no agreement or arrangement existed between any Director and any other person which was conditional or dependent upon the outcome of the Partial Offer, the Option Offer and the Warrant Offer or otherwise connected with the Partial Offer, the Option Offer and the Warrant Offer;
(c) no material contract had been entered into by the Offeror in which any Director had a material personal interest; and
(d) there was no agreement, arrangement or understanding (including any compensation arrangement) between the Offeror and any parties acting in concert with it on the one hand and any Director, recent Director, Shareholder or recent Shareholder on the other hand, having any connection with or dependence upon the Partial Offer, the Option Offer and the Warrant Offer.

– IV-13 –

GENERAL INFORMATION

APPENDIX IV

6. DIRECTORS’ SERVICE AGREEMENTS

Each of Mr. Beh Kim Ling, Mr. Gan Sem Yam, Mr. Zhang Pei Yu and Madam Gan Chu Cheng, being all the executive Directors, has entered into a service contract with the Company for an initial term of three years commencing from 20 January 2002, and is automatically renewable for successive terms of one year upon expiry of the then current term, until terminated by not less than three months’ notice in writing served by either party to the other.

As at the Latest Practicable Date, Mr. Gan Tiong Sia is the non-executive Director and Mr. Diong Tai Pew, Mr. Lee Soo Gee and Mr. Tang Sim Cheow are the independent non-executive Directors. The appointments of Mr. Gan Tiong Sia (appointed on 1 August 2006), Mr. Diong Tai Pew (appointed on 31 August 2002), Mr. Lee Soo Gee (appointed on 28 January 2011) and Mr. Tang Sim Cheow (appointed on 30 September 2004) are for a term of one year renewable automatically for successive terms of one year until terminated by not less than two months’ notice in writing served by either party to the other.

As at the Latest Practicable Date, there were no service contracts with the Company or any of its subsidiaries or associated companies in force for the Directors:

(a) which (including both continuous and fixed term contracts) had been entered into or amended within six months before the commencement of the Offer Period;
(b) which were continuous contracts with a notice period of 12 months or more; or
(c) which were fixed term contracts with more than 12 months to run irrespective of the notice period.

– IV-14 –

GENERAL INFORMATION

APPENDIX IV

7. MARKET PRICES

The table below shows the closing price per Share as quoted on the Stock Exchange on (i) the Latest Practicable Date; (ii) 26 March 2013, being the Last Trading Day and the last trading day immediately preceding the date of the Initial Announcement; and (iii) the last trading day of each of the calendar months during the Relevant Period.

	Closing
	price per
Date	Share
	(HK$)
31 October 2012	0.175
30 November 2012	0.170
31 December 2012	0.249
31 January 2013	0.270
28 February 2013	0.270
26 March 2013 (Last Trading Day)	0.330
30 April 2013	0.325
31 May 2013	0.300
Latest Practicable Date	0.310

8. HIGHEST AND LOWEST SHARE PRICE

The highest and lowest closing prices of the Shares as quoted on the Stock Exchange during the Relevant Period were HK$0.335 per Share on 24 April 2013 and HK$0.155 per Share on 3 October 2012.

9. LITIGATION

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

10. MATERIAL CONTRACTS

The following contracts (not being contracts entered into in the ordinary course of business of the Group) had been entered into 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 were, or might be, material:

(i) the sale and purchase agreement dated 18 January 2012 and entered into between VSA Electronics Technology (Zhuhai) Co., Ltd. (“ VSAZH ”), a wholly-owned subsidiary of the Company, and PT. V.S. Technology Indonesia (“ PT Indonesia ”), pursuant to which VSAZH has agreed to sell, and PT Indonesia has agreed to

– IV-15 –

GENERAL INFORMATION

APPENDIX IV

purchase certain machineries used for the manufacturing of electronic products, parts and components at the consideration of US$1,270,000 (equivalent to approximately HK$9,920,000);

(ii) the sale and purchase agreement dated 16 February 2012 and entered into between V.S. International Industry Limited (“ VSIIL ”), a wholly-owned subsidiary of the Company, and Andes Electric Co., Ltd. (“ AEC ”), pursuant to which AEC has agreed to sell, and VSIIL has agreed to purchase 19% of the total issued share capital of VSA Holding Hong Kong Co. Limited at the consideration of HK$2,460,173; and
(iii) the subscription agreements dated 27 November 2012 and entered into between the Company, as issuer, and three individuals (“ Subscribers ”) as subscribers respectively, pursuant to which the Subscribers agreed to subscribe for and the Company agreed to allot and issue an aggregate of 115,000,000 Shares at the subscription price of HK$0.168 per Share.

11. EXPERTS AND CONSENTS

The following are the names and qualification of each of the professional advisors who are named in this Composite Offer Document or who has given opinions or advice which are contained in or referred to in this Composite Offer Document:

Name Qualification Kim Eng 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 as defined under the SFO Somerley a corporation licensed to carry out Type 1 (dealing in securities), Type 4 (advising on securities), Type 6 (advising on corporate finance) and Type 9 (asset management) regulated activities as defined under the SFO

DTZ Debenham Tie Leung professional property valuer Limited (“ DTZ ”)

Each of Kim Eng, Somerley and DTZ has given and has not withdrawn its written consent to the issuance of this Composite Offer Document with the inclusion herein of the opinion or letter (as the case may be) and references to its name, in the form and context in which it is included.

As at the Latest Practicable Date, each of Kim Eng, Somerley and DTZ did not have any shareholding in any member of the Group or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

– IV-16 –

GENERAL INFORMATION

APPENDIX IV

12. MISCELLANEOUS

(a) As at the Latest Practicable Date, the Offeror and parties acting in concert with it had no agreement or understanding to transfer, charge or pledge any of the Shares acquired pursuant to the Partial Offer, the Option Offer and the Warrant Offer to any other persons.
(b) The registered office of the Company is located at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman, KY1-1111, Cayman Islands and the principal place of business of the Company in Hong Kong is located at 40th Floor, Jardine House, 1 Connaught Place, Central, Hong Kong;
(c) The registered office of the Offeror is at Suite 7E, Level 7, Menara Ansar, 65, Jalan Trus, 80000 Johor Bahru, Johor Darul Takzim, Malaysia. The correspondence address of the Offeror is at PTD 86556, Jalan Murni 12, Taman Perindustrian Murni, 81400 Senai, Johor Darul Takzim, Malaysia.
(d) The parties acting in concert with the Offeror are Mr. Beh Kim Ling, Mr. Gan Sem Yam, Madam Gan Chu Cheng, Mr. Gan Tiong Sia, Mr. Tang Sim Cheow, Miss Beh Hwee Sze, Mr. Beh Chern Wei and Mr. Gan Pee Yong.
(e) The correspondence address of Mr. Beh Kim Ling is at No. 15, Cedarwood Grove, Singapore 738399.
(f) The correspondence address of Mr. Gan Sem Yam is 30 Pavillion Rise, Singapore 658665.
(g) The correspondence address of Madam Gan Chu Cheng is No. 15, Cedarwood Grove, Singapore 738399.
(h) The correspondence address of Miss Beh Hwee Sze is No. 15, Cedarwood Grove, Singapore 738399.
(i) The correspondence address of Mr. Beh Chern Wei is No. 15, Cedarwood Grove, Singapore 738399.
(j) The correspondence address of Mr. Gan Pee Yong is 30 Pavillion Rise, Singapore 658665.
(k) The correspondence address of Mr. Gan Tiong Sia is 9, Rosewood Drive, #13-17, Singapore 737938.
(l) The correspondence address of Mr. Tang Sim Cheow is 25A, Jalan Meranti Merah, Melodies Garden, 80250 Johor Bahru, Johor, Malaysia.
(m) Kim Eng is the financial advisor to the Offeror in respect of the Partial Offer, the Option Offer and the Warrant Offer in Hong Kong perspective. The address of Kim Eng is at Level 30, Three Pacific Place, 1 Queen’s Road East, Hong Kong.

– IV-17 –

GENERAL INFORMATION

APPENDIX IV

(n) In respect of the Partial Offer, the Option Offer and the Warrant Offer, Kim Eng and Maybank Investment Bank Berhad advise the Offeror from Hong Kong perspective and Malaysia perspective, respectively. The registered address of Maybank Investment Bank Berhad is 32nd Floor, Menara Maybank, 100 Jalan Tun Perak, 50050 Kuala Lumpur, Malaysia. The Offeror would settle the payment of consideration pursuant to the Partial Offer, Option Offer and Warrant Offer by loans from Malayan Banking Berhad and internal funding of the Offeror. Kim Eng is a wholly-owned subsidiary of Maybank IB Holdings Sdn Bhd which, together with Maybank Investment Bank Berhad are wholly-owned subsidiaries of Malayan Banking Berhad. Malayan Banking Berhad was incorporated in the Federation of Malaysia and is listed on the Bursa Malaysia Securities Berhad. The registered address of Malayan Banking Berhad is 14th Floor, Menara Maybank, 100 Jalan Tun Perak, 50050 Kuala Lumpur, Malaysia.
(o) The independent financial advisor to the Independent Board Committee is Somerley whose address is at 20th Floor, Aon China Building, 29 Queen’s Road Central, Hong Kong.
(p) The Company’s Hong Kong branch share registrar and transfer office is Computershare Hong Kong Investor Services Limited, Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.
(q) The company secretary of the Company is Ms. Ng Ting On, Polly, a practising solicitor in Hong Kong.
(r) There are no agreements or arrangements to which the Offeror is a party which relate to circumstances in which it may or may not invoke or seek to invoke a condition to the Partial Offer, the Option Offer and/or the Warrant Offer.
(s) None of the Partial Offer, the Option Offer or the Warrant Offer is a securities exchange offer.
(t) None of the Partial Offer, the Option Offer or the Warrant Offer involves the issue of unlisted securities.
(u) All time references contained in this Composite Offer Document refer to Hong Kong time.
(v) In case of inconsistency, the English text of this Composite Offer Document, the Form of Acceptance, the Form of Option Offer Acceptance and the Form of Warrant Offer Acceptance shall prevail over the Chinese texts.

– IV-18 –

GENERAL INFORMATION

APPENDIX IV

13. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection (i) during normal business hours from 9:00 a.m. to 5.30 p.m. (public holidays excepted) at the office of the Company at 40th Floor, Jardine House, 1 Connaught Place, Central, Hong Kong; (ii) on the website of the SFC at http://www.sfc.hk; and (iii) on the website of the Company at www.vs-ig.com, from the date of this Composite Offer Document until the end of the Offer Period:

(a) the memorandum and articles of association of the Company;
(b) the annual reports of the Company for the two years ended 31 July 2012;
(c) the annual reports of the Offeror for the two years ended 31 July 2012;
(d) the interim report of the Company for the six months ended 31 January 2013;
(e) the interim report of the Offeror for the six months ended 31 January 2013;
(f) the Letter from the Board, the text of which is set out on pages 7 to 22 of this Composite Offer Document;
(g) the Letter from Kim Eng, the text of which is set out on pages 23 to 35 of this Composite Offer Document;
(h) the Letter from the Independent Board Committee, the text of which is set out on pages 36 to 37 of this Composite Offer Document;
(i) the Letter from Somerley, the text of which is set out on pages 38 to 71 of this Composite Offer Document;
(j) the valuation report on property interests of the Group prepared by DTZ, which is set out in Appendix III to this Composite Offer Document;
(k) the letters of consent from each of Kim Eng, Somerley and DTZ referred to in the paragraph headed “Experts and consents” in this Appendix; and
(l) each of the material contracts mentioned in the section headed “Material Contracts” in this Appendix.

– IV-19 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

1. SUMMARY OF FINANCIAL INFORMATION OF THE OFFEROR

Set out below is the summary of the financial information of the Offeror for three financial years ended 31 July 2012, as extracted from the audited consolidated financial statements of the Offeror and its subsidiaries (collectively the “Offeror Group”) for the three financial years ended 31 July 2012, and for the six months ended 31 January 2012 and 2013, as extracted from the interim financial reports of the Offeror Group for the six months ended 31 January 2012 and 2013. The auditors of the Offeror Group has expressed an unqualified opinion on the annual reports dated 19 November 2010, 15 November 2011 and 23 November 2012.

(i) Condensed consolidated statement of comprehensive income

Continuing operations Revenue Goods sold Cost of goods sold Gross profit Operating expenses Net other income/(expenses) Results from operating activities Interest income Finance costs Net finance costs Operating profit Share of profit/(loss) of equity accounted associate, net of tax Profit before tax Income tax expense	Audited For the year ended 31 July 2012 2011 2010 RM’000 RM’000 RM’000 1,201,992 1,026,818 800,170 (1,055,020) (879,318) (678,894) 146,972 147,500 121,276 (80,224) (78,046) (62,334) 40 (2,117) (11,100) (3,572) (8,165) (8,165) 66,788 67,337 47,842	Audited For the year ended 31 July 2012 2011 2010 RM’000 RM’000 RM’000 1,201,992 1,026,818 800,170 (1,055,020) (879,318) (678,894) 146,972 147,500 121,276 (80,224) (78,046) (62,334) 40 (2,117) (11,100) (3,572) (8,165) (8,165) 66,788 67,337 47,842	Audited For the year ended 31 July 2012 2011 2010 RM’000 RM’000 RM’000 1,201,992 1,026,818 800,170 (1,055,020) (879,318) (678,894) 146,972 147,500 121,276 (80,224) (78,046) (62,334) 40 (2,117) (11,100) (3,572) (8,165) (8,165) 66,788 67,337 47,842	Audited For the year ended 31 July 2012 2011 2010 RM’000 RM’000 RM’000 1,201,992 1,026,818 800,170 (1,055,020) (879,318) (678,894) 146,972 147,500 121,276 (80,224) (78,046) (62,334) 40 (2,117) (11,100) (3,572) (8,165) (8,165) 66,788 67,337 47,842	Unaudited For the six months ended 31 January 2013 2012 RM’000 RM’000 561,782 548,207 (508,214) (479,399) 53,568 68,808 (36,397) (41,139) (4,281) (717) (2,622) (18,115) 12,890 26,952	Unaudited For the six months ended 31 January 2013 2012 RM’000 RM’000 561,782 548,207 (508,214) (479,399) 53,568 68,808 (36,397) (41,139) (4,281) (717) (2,622) (18,115) 12,890 26,952
		942 (5,859)	756 (6,239)	599 (6,016)	507 (2,718)	537 (3,215)
		(4,917) 61,871 (13,080) 48,791 (15,253)	(5,483) 61,854 (10,491) 51,363 (15,875)	(5,417) 42,425 (3,648) 38,777 (13,427)	(2,211) 10,679 80 10,759 (3,375)	(2,678) 24,274 (2,317) 21,957 (6,857)

– V-1 –

APPENDIX V

FINANCIAL INFORMATION OF THE OFFEROR

Profit from continuing operations Discontinued operation Profit/(Loss) from discontinued operation, net of tax Profit for the year/period Other comprehensive income, net of tax Foreign currency translation differences for foreign operations Total comprehensive income for the year/period Profit attributable to: Owners of the Offeror Non-controlling interests Profit for the year/period Total comprehensive income attributable to: Owners of the Offeror Non-controlling interests Total comprehensive income for the year/period	Audited For the year ended 31 July 2012 2011 2010 RM’000 RM’000 RM’000 33,538 35,488 25,350 3,335 (14,052) (1,819) 36,873 21,436 23,531 (809) (1,120) (2,358) 36,064 20,316 21,173 38,615 27,721 24,290 (1,742) (6,285) (759) 36,873 21,436 23,531 37,782 27,136 21,328 (1,718) (6,820) (155) 36,064 20,316 21,173	Unaudited For the six months ended 31 January 2013 2012 RM’000 RM’000 7,384 15,100 – 1,980 7,384 17,080 3,141 (946) 10,525 16,134 7,703 18,232 (319) (1,152) 7,384 17,080 10,836 17,238 (311) (1,104) 10,525 16,134

– V-2 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

Basic earnings/(loss) per ordinary share (sen) – from continuing operations – from discontinued operation Diluted earnings per ordinary share (sen) – from continuing operations – from discontinued operation	Audited For the year ended 31 July 2012 2011 2010 RM’000 RM’000 RM’000 19.46 19.53 14.08 1.84 (4.19) (0.54) 21.30 15.34 13.54 – 19.19 – – (4.11) – – 15.08 –	Unaudited For the six months ended 31 January 2013 2012 RM’000 RM’000 4.25 8.96 – 1.09 4.25 10.05 – – – – – –	Unaudited For the six months ended 31 January 2013 2012 RM’000 RM’000 4.25 8.96 – 1.09 4.25 10.05 – – – – – –
			10.05

			– –
			–

There were no extraordinary items for the three financial years ended 31 July 2012 and for the six months ended 31 January 2012 and 31 January 2013.

– V-3 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

(ii) Condensed consolidated statements of financial position

Assets Property, plant and equipment Biological Assets Investment properties Investments in associates Loans to associate Deferred tax assets Total non-current assets Inventories Trade and other receivables Tax recoverable Assets classified as held for sale Cash and cash equivalents Total current assets Total assets Equity Share capital Reserves Amount recognised directly in equity relating to asset held for sale Total equity attributable to owners of the Offeror Non-controlling interests Total equity	Audited For the year ended 31 July 2012 2011 2010 RM’000 RM’000 RM’000 274,520 264,552 268,960 – – 37,344 9,300 9,300 9,300 86,337 91,977 95,661 – – 1,928 – – 421 370,157 365,829 413,614 104,577 87,227 77,380 317,572 203,250 195,821 – – – – 42,831 – 58,680 71,853 67,364 480,829 405,161 340,565 850,986 770,990 754,179 182,327 182,327 179,702 225,164 222,582 194,885 – (15,525) – 407,491 389,384 374,587 430 13,612 19,242 407,921 402,996 393,829	Unaudited For the six months ended 31 January 2013 2012 RM’000 RM’000 275,572 266,517 – – 9,300 9,300 81,430 95,300 – – – – 366,302 371,117 94,394 102,062 210,483 217,866 1,046 – – – 39,714 60,196 345,637 380,124 711,939 751,241 182,327 182,327 221,921 210,448 – – 404,248 392,775 378 1,001 404,626 393,776	Unaudited For the six months ended 31 January 2013 2012 RM’000 RM’000 275,572 266,517 – – 9,300 9,300 81,430 95,300 – – – – 366,302 371,117 94,394 102,062 210,483 217,866 1,046 – – – 39,714 60,196 345,637 380,124 711,939 751,241 182,327 182,327 221,921 210,448 – – 404,248 392,775 378 1,001 404,626 393,776
			371,117
			102,062 217,866 – – 60,196
			380,124
			751,241

			182,327 210,448 –
			392,775 1,001
			393,776

– V-4 –

APPENDIX V

FINANCIAL INFORMATION OF THE OFFEROR

Liabilities Long term payables Loans and borrowings Deferred tax liabilities Total non-current liabilities Trade and other payables Loans and borrowings Taxation Liabilities classified as held for sale Total current liabilities Total liabilities Total equity and liabilities	Audited For the year ended 31 July 2012 2011 2010 RM’000 RM’000 RM’000 4,322 4,322 4,322 34,592 29,509 35,825 27,046 26,038 25,575 65,960 59,869 65,722 272,544 181,780 156,677 103,416 105,320 134,219 1,145 3,769 3,732 – 17,256 – 377,105 308,125 294,628 443,065 367,994 360,350 850,986 770,990 754,179	Unaudited For the six months ended 31 January 2013 2012 RM’000 RM’000 4,322 4,322 35,506 24,599 26,205 27,043 66,033 55,964 175,721 189,160 65,559 111,000 – 1,341 – – 241,280 301,501 307,313 357,465 711,939 751,241	Unaudited For the six months ended 31 January 2013 2012 RM’000 RM’000 4,322 4,322 35,506 24,599 26,205 27,043 66,033 55,964 175,721 189,160 65,559 111,000 – 1,341 – – 241,280 301,501 307,313 357,465 711,939 751,241
			55,964
			189,160 111,000 1,341 –
			301,501
			357,465
			751,241

– V-5 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

2. FINANCIAL STATEMENTS

A. AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE OFFEROR GROUP FOR THE YEAR ENDED 31 JULY 2012

The following are the latest published audited consolidated financial statements of the Offeror Group for the year ended 31 July 2012 with the notes therein, as extracted from the 2012 annual report of the Offeror.

STATEMENTS OF FINANCIAL POSITION

As at 31 July 2012

Note Assets Property, plant and equipment 3 Investment properties 4 Investments in subsidiaries 5 Investments in associates 6 Total non-current assets Inventories 7 Trade and other receivables 8 Assets classified as held for sale 9 Cash and cash equivalents 10 Total current assets Total assets Equity Share capital 11 Reserves 11 Amount recognised directly in equity relating to asset held for sale 9 Total equity attributable to owners of the Offeror Non-controlling interests Total equity	2012 RM’000 274,520 9,300 – 86,337 370,157 104,577 317,572 – 58,680 480,829 850,986 182,327 225,164 – 407,491 430 407,921	2011 RM’000 264,552 9,300 – 91,977 365,829 87,227 203,250 42,831 71,853 405,161 770,990 182,327 222,582 (15,525) 389,384 13,612 402,996

– V-6 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

Note Liabilities Long term payables 12 Loans and borrowings 13 Deferred tax liabilities 14 Total non-current liabilities Trade and other payables 15 Loans and borrowings 13 Taxation Liabilities classified as held for sale 9 Total current liabilities Total liabilities Total equity and liabilities	2012 RM’000 4,322 34,592 27,046 65,960 272,544 103,416 1,145 – 377,105 443,065 850,986	2011 RM’000 4,322 29,509 26,038
		59,869
		181,780 105,320 3,769 17,256
		308,125
		367,994
		770,990

– V-7 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

STATEMENTS OF COMPREHENSIVE INCOME

For the year ended 31 July 2012 Note Continuing operations Revenue Goods sold Cost of goods sold Gross profit Other income Distribution expenses Administrative expenses Other expenses Results from operating activities Interest income Finance costs 16 Net finance costs Operating profit 17 Share of loss of equity accounted associate, net of tax Profit before tax Income tax expense 18 Profit from continuing operations Discontinued operation Profit/(Loss) from discontinued operation, net of tax 9 Profit for the year Other comprehensive income, net of tax Foreign currency translation differences for foreign operations Total comprehensive income for the year		2012 RM’000 1,201,992 (1,055,020) 146,972 3,612 (24,607) (55,617) (3,572) (3,572) 66,788	2011 RM’000 1,026,818 (879,318) 147,500 6,048 (25,548) (52,498) (8,165) (8,165) 67,337
		942 (5,859)	756 (6,239)
		(4,917) 61,871 (13,080) 48,791 (15,253) 33,538 3,335 36,873 (809) 36,064	(5,483) 61,854 (10,491) 51,363 (15,875) 35,488 (14,052) 21,436 (1,120) 20,316

– V-8 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

Note Profit attributable to: Owners of the Offeror Non-controlling interests Profit for the year Total comprehensive income attributable to: Owners of the Offeror Non-controlling interests Total comprehensive income for the year Basic earnings/(loss) per ordinary share (sen) 19 – from continuing operations – from discontinued operation Diluted earnings per ordinary share (sen) 19 – from continuing operations – from discontinued operation	2012 RM’000 38,615 (1,742) 36,873 37,782 (1,718) 36,064 19.46 1.84 21.30 – – –	2011 RM’000 27,721 (6,285) 21,436 27,136 (6,820) 20,316 19.53 (4.19) 15.34 19.19 (4.11) 15.08

– V-9 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

STATEMENT OF CHANGES IN EQUITY

For the year ended 31 July 2012

Note *At 1 August 2010* Profit for the year Reclassification to assets held for sale Realisation of revaluation reserve Foreign currency translation differences for foreign operations Total comprehensive (expense)/ income for the year Shares buy back Equity settled share based transaction 11 – Share option granted – Share option granted in an associate – Share option exercised – Shares issued Increase in share capital of a subsidiary Dividends to owners of the Offeror 20 At 31 July 2011		Attributable to owners of the Offeror	Attributable to owners of the Offeror
		– – – – – – – 35,280 (7,559) 27,721 (6,285) 21,436 – – – 2,812 – – – 4,594 (7,406) – – – – – (835) – – – – 835 – – – – – – – (25) – – – – (560) (585) (535) (1,120)
		– – (835) 2,787 – – – 40,709 (15,525) 27,136 (6,820) 20,316 – – – – – – (469) – – (469) – (469) – – – – – 3,730 – – – 3,730 147 3,877 – – – – – 308 – – – 308 – 308 – 963 – – – (963) – – – – – – 2,625 1,418 – – – – – – – 4,043 – 4,043 – – – – – – – – – – 1,043 1,043 – – – – – – – (19,951) – (19,951) – (19,951) 182,327 2,381 47,518 10,973 9,121 3,588 (985) 149,986 (15,525) 389,384 13,612 402,996

– V-10 –

APPENDIX V

FINANCIAL INFORMATION OF THE OFFEROR

Attributable to owners of the Offeror

Note *At 1 August 2011* Profit for the year Disposal of assets held for sale Realisation of revaluation reserve Transferred from retained earnings Foreign currency translation differences for foreign operations Total comprehensive (expense)/ income for the year Shares buy back Equity settled share based transaction 11 – Share option granted – Share option granted in an associate – Share option lapsed in an associate Dividends to owners of the Offeror 20 *At 31 July 2012*		Non-distributable Distributable Employee Exchange share- Assets Non- Share Share Revaluation fluctuation Capital based Treasury Retained held for controlling Total capital premium reserve reserve reserve reserve shares earnings sale Total interests equity RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 182,327 2,381 47,518 10,973 9,121 3,588 (985) 149,986 (15,525) 389,384 13,612 402,996	Non-distributable Distributable Employee Exchange share- Assets Non- Share Share Revaluation fluctuation Capital based Treasury Retained held for controlling Total capital premium reserve reserve reserve reserve shares earnings sale Total interests equity RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 182,327 2,381 47,518 10,973 9,121 3,588 (985) 149,986 (15,525) 389,384 13,612 402,996
		– – – – – – – 38,615 – 38,615 (1,742) 36,873 – – – – – – – (15,525) 15,525 – (11,547) (11,547) – – (890) – – – – 890 – – – – – – – – 275 – – (275) – – – – – – – (833) – – – – – (833) 24 (809)
		– (890) (833) 275 – – 23,705 15,525 37,782 (13,265) 24,517 – – – – – – (514) – – (514) – (514) – – – – – 2,243 – – – 2,243 83 2,326 – – – – – 351 – – – 351 – 351 – – – – – (279) – 279 – – – – – – – – – (21,755) – (21,755) – (21,755) 182,327 2,381 46,628 10,140 9,396 5,903 (1,499) 152,215 – 407,491 430 407,921

– V-11 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

STATEMENTS OF CASH FLOWS

For the year ended 31 July 2012

Note Cash flows from operating activities Profit before tax: – continuing operations – discontinued operation 9 Adjustments for:– Depreciation 3 Interest expense 16 Share of loss in associates Impairment loss on: – investments in associates – biological assets Equity settled share-based transactions (Reversal of)/Impairment loss on receivables: – continuing operations – discontinued operation Interest income Property, plant and equipment: – Written off – Gain on disposal Reversal of impairment loss on investments in subsidiaries Unrealised (gain)/loss on foreign exchange Operating profit before changes in working capital Change in inventories Change in trade and other receivables Change in trade and other payables Cash generated from operations	2012 RM’000 48,791 (612) 48,179 28,487 5,557 13,080 – – 2,340 (172) – (942) 92 (351) – (696) 95,574 (17,360) (115,882) 87,731 50,063	2011 RM’000 51,363 (14,204) 37,159 28,375 5,977 10,491 798 10,603 3,877 319 4,216 (756) 95 (379) – 1,616 102,391 (10,234) (12,432) 29,283 109,008

– V-12 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

Note Interest received Tax paid Net cash from operating activities Cash flows from investing activities Acquisition of: – biological assets – property, plant and equipment 21 Investments in subsidiaries Investments in associates Proceeds from disposal of: – property, plant and equipment – a subsidiary 9 Interest received Loans to subsidiaries Repayment of loan to associates Net cash (used in)/from investing activities Cash flows from financing activities Proceeds from long term borrowings Repayment of long term borrowings Payments of finance lease liabilities Net drawdown from short term borrowings Interest paid Repurchase of treasury shares Funds from non-controlling interests Dividend paid to owners of the Offeror Proceeds from issue of share capital Net cash used in financing activities Exchange differences on translation of the financial statements of foreign operations	2012 RM’000 917 (16,869) 34,111 – (40,360) – – 3,103 12,551 25 – 1,899 (22,782) 11,138 (10,213) (1,927) 4,089 (5,557) (514) – (21,755) – (24,739) (833)	2011 RM’000 634 (15,365) 94,277 (3,627) (39,641) – (8,871) 2,462 – 122 – 2,691 (46,864) 14,565 (19,957) (2,586) (11,954) (5,977) (469) 1,043 (19,951) 4,043 (41,243) (585)

– V-13 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

2012
Note
RM’000
Net (decrease)/increase in cash and cash equivalents
(14,243)
Cash and cash equivalents at 1 August
71,287
Foreign exchange differences on opening balance
(66)
Cash and cash equivalents at 31 July
56,978
Cash and cash equivalents included in the statements of cash flows comprise
statements of financial position amounts:
Cash and bank balances
38,142
Deposits with licensed banks
20,538
Bank overdrafts
(1,702)
56,978

2011
RM’000
5,585
65,723
(21)
71,287
the following
52,864
18,989
(566)
71,287

– V-14 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

NOTES TO THE FINANCIAL STATEMENTS

V. S. Industry Berhad is a public limited liability company, incorporated and domiciled in Malaysia and listed on the Main Market of Bursa Malaysia Securities Berhad. The addresses of the principal place of business and registered office of the Offeror are as follows:

Principal place of business PTD 86556, Jalan Mumi 12 Taman Perindustrian Mumi 81400 Senai Johor Malaysia

Registered office Suite 7E, Level 7 Menara Ansar 65, Jalan Trus 80000 Johor Bahru Johor Malaysia

The consolidated financial statements of the Offeror as at and for the year ended 31 July 2012 comprise the Offeror and its subsidiaries (together referred to as the “Offeror Group”) and the Offeror Group’s interest in associates. The financial statements of the Offeror as at and for the year ended 31 July 2012 do not include other entities.

The principal activities of the Offeror consist of those relating to the investment holding and manufacturing, assembling and sale of electronic and electrical products and plastic moulded components and parts. The principal activities of its subsidiaries are disclosed in Note 5.

These financial statements were authorised for issue by the Board of Directors of the Offeror on 23 November 2012.

1. Basis of preparation

(a) Statement of compliance

The financial statements of the Offeror Group have been prepared in accordance with Financial Reporting Standards (FRSs), generally accepted accounting principles and the Companies Act, 1965 in Malaysia.

The following are accounting standards, amendments and interpretations of the FRS framework that have been issued by the Malaysian Accounting Standards Board (MASB) but have not been adopted by the Offeror Group:

FRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2012

FRS 124, Related Party Disclosures (revised)
Amendments to FRS 1, First-time Adoption of Financial Reporting Standards – Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters
Amendments to FRS 7, Financial Instruments: Disclosures – Transfers of Financial Assets
Amendments to FRS 112, Income Taxes – Deferred Tax: Recovery of Underlying Assets

FRSs, Interpretations and amendments effective for annual periods beginning on or after 1 July 2012

Amendments to FRS 101, Presentation of Financial Statements – Presentation of Items of Other Comprehensive Income

– V-15 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

FRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2013

FRS 10, Consolidated Financial Statements
FRS 11, Joint Arrangements
FRS 12, Disclosure of Interests in Other Entities
FRS 13, Fair Value Measurement
FRS 119, Employee Benefits (2011)
FRS 127, Separate Financial Statements (2011)
FRS 128, Investments in Associates and Joint Ventures (2011)
IC Interpretation 20, Stripping Costs in the Production Phase of a Surface Mine
Amendments to FRS 7, Financial Instruments: Disclosures – Offsetting Financial Assets and Financial Liabilities
Amendments to FRS 1, First-time Adoption of Financial Reporting Standards – Government Loans

FRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2014

Amendments to FRS 132, Financial Instruments: Presentation – Offsetting Financial Assets and Financial Liabilities

FRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2015

FRS 9, Financial Instruments (2009)
FRS 9, Financial Instruments (2010)
Amendments to FRS 7, Financial Instruments: Disclosures – Mandatory Date of FRS 9 and Transition Disclosures

The Offeror Group’s financial statements for annual period beginning on 1 August 2012 will be prepared in accordance with the Malaysian Financial Reporting Standards (MFRSs) issued by the MASB and International Financial Reporting Standards (IFRSs). As a result, the Offeror Group and the Offeror will not be adopting the above FRSs, Interpretations and amendments.

The initial application of a standard which will be applied prospectively or which requires extended disclosures, is not expected to have any financial impacts to the current and prior periods financial statements upon their first adoption other than:

FRS 10, Consolidated financial statements

FRS 10, Consolidated financial statements’ builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of the parent company. The standard provides additional guidance to assist in the determination of control where this is difficult to assess. The Offeror Group has yet to assess FRS 10’s full impact and will be adopting FRS 10 no later than the accounting period beginning on or after 1 August 2013.

– V-16 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

(b) Basis of measurement

The financial statements have been prepared on the historical cost basis other than as disclosed in Note 2.

(c) Functional and presentation currency

These financial statements are presented in Ringgit Malaysia (RM), which is the Offeror’s functional currency. All financial information is presented in RM and has been rounded to the nearest thousand, unless otherwise stated.

(d) Use of estimates and judgements

The preparation of the financial statements in conformity with FRSs requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

There are no significant areas of estimation uncertainty and critical judgements in applying accounting policies that have significant effect on the amounts recognised in the financial statements other than those disclosed in the following notes:

Note 2(g)(iii) – valuation of investment properties

2. Significant Accounting Policies

The accounting policies set out below have been applied consistently to the periods presented in these financial statements, and have been applied consistently by the Offeror Group entities, unless otherwise stated.

(a) Basis of consolidation

(i) Subsidiaries

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

Investments in subsidiaries are measured in the Offeror’s statement of financial position at cost less any impairment losses, unless the investment is held for sale or distribution. The cost of investments includes transaction costs.

The accounting policies of subsidiaries are changed when necessary to align them with the policies adopted by the Offeror Group.

– V-17 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

(ii) Accounting for business combinations

Business combinations are accounted for using the acquisition method from the acquisition date, which is the date on which control is transferred to the Offeror Group.

Acquisition on or after 1 August 2010

For acquisitions on or after 1 August 2010, the Offeror Group measures goodwill at the acquisition date as:

the fair value of the consideration transferred; plus
the recognised amount of any non-controlling interests in the acquiree; plus
if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree; less
the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.

When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss.

Costs related to the acquisition, other than those associated with the issue of debt or equity securities, that the Offeror Group incurs in connection with a business combination are expensed as incurred.

Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration is classified as equity, it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent consideration are recognised in profit or loss.

When share-based payment awards (replacement awards) are required to be exchanged for awards held by the acquiree’s employees (acquiree’s awards) and relate to past services, then all or a portion of the amount of the acquirer’s replacement awards is included in measuring the consideration transferred in the business combination. This determination is based on the market-based value of the replacement awards compared with the market-based value of the acquiree’s awards and the extent to which the replacement awards relate to past and/or future services.

Acquisitions prior to 1 August 2010

For acquisitions prior to 1 August 2010, goodwill represents the excess of the cost of the acquisition over the Offeror Group’s interest in the fair values of the net identifiable assets and liabilities.

Transaction costs, other than those associated with the issue of debt or equity securities, that the Offeror Group incurs in connection with a business combination are expensed as incurred.

– V-18 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

(iii) Accounting for acquisitions of non-controlling interests

The Offeror Group treats all changes in its ownership interest in a subsidiary that do not result in a loss of control as equity transactions between the Offeror Group and its non-controlling interest holders.

Any difference between the Offeror Group’s share of net assets before and after the change, and any consideration received or paid, is adjusted to or against Offeror Group reserves.

(iv) Loss on control

Upon the loss of control of a subsidiary, the Offeror Group derecognises the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Offeror Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently it is accounted for as an equity accounted investee or as an available-for-sale financial asset depending on the level of influence retained.

(v) Associates

Associates are entities, including unincorporated entities, in which the Offeror Group has significant influence, but not control, over the financial and operating policies.

Investments in associates are accounted for in the consolidated financial statements using the equity method less any impairment losses, unless it is classified as held for sale or distribution. The cost of the investment includes transaction costs. The consolidated financial statements include the Offeror Group’s share of the profit or loss and other comprehensive income of the equity accounted associates, after adjustments, if any, to align the accounting policies with those of the Offeror Group, from the date that significant influence commences until the date that significant influence ceases.

When the Offeror Group’s share of losses exceeds its interest in an associate, the carrying amount of that interest including any long-term investments is reduced to zero, and the recognition of further losses is discontinued except to the extent that the Offeror Group has an obligation or has made payments on behalf of the investee.

Investments in associates are measured in the Offeror’s statement of financial position at cost less any impairment losses, unless the investment is classified as held for sale or distribution. The cost of the investment includes transaction costs.

(vi) Non-controlling interests

Non-controlling interests at the end of the reporting period, being the equity in a subsidiary not attributable directly or indirectly to the equity holders of the Offeror, are presented in the consolidated statement of financial position and statement of changes in equity within equity, separately from equity attributable to the owners of the Offeror. Non-controlling interests in the results of the Offeror Group is presented in the consolidated statement of comprehensive income as an allocation of the profit or loss and the comprehensive income for the year between noncontrolling interests and the owners of the Offeror.

– V-19 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

Losses applicable to the non-controlling interest in a subsidiary are allocated to the noncontrolling interests even if doing so causes the non-controlling interests to have a deficit balance.

(vii) Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements.

Unrealised gains arising from transactions with equity accounted associates are eliminated against the investment to the extent of the Offeror Group’s interest in the associates. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

(b) Foreign currency

(i) Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of Offeror Group entities at exchange rates at the dates of the transactions.

Monetary assets and liabilities denominated in foreign currencies at the reporting period are retranslated to the functional currency at the exchange rate at that date.

Non-monetary assets and liabilities denominated in foreign currencies are not retranslated at the end of the reporting date except for those that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined.

Foreign currency differences arising on retranslation are recognised in profit or loss, except for differences arising on the retranslation of available-for-sale equity instruments or a financial instrument designated as a cash flow hedge of currency risk, which are recognised in other comprehensive income.

(ii) Operations denominated in functional currencies other than Ringgit Malaysia

The assets and liabilities of operations denominated in functional currencies other than RM, including goodwill and fair value adjustments arising on acquisition, are translated to RM at exchange rates at the end of the reporting period, except for goodwill and fair value adjustments arising from business combinations before 1 August 2006 which are reported using the exchange rates at the dates of the acquisitions. The income and expenses of foreign operations, are translated to RM at exchange rates at the dates of the transactions.

Foreign currency differences are recognised in other comprehensive income and accumulated in the foreign currency translation reserve (FCTR) in equity. However, if the operation is a non-wholly-owned subsidiary, then the relevant proportionate share of the translation difference is allocated to the non-controlling interests. When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the FCTR related to that foreign operation is reclassified to profit or loss as part of the profit or loss on disposal.

– V-20 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

When the Offeror Group disposes of only part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to non-controlling interests. When the Offeror Group disposes of only part of its investment in an associate or joint venture that includes a foreign operation while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

In the consolidated financial statements, when settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, foreign exchange gains and losses arising from such a monetary item are considered to form part of a net investment in a foreign operation and are recognised in other comprehensive income, and are presented in the FCTR in equity.

(c) Financial instruments

(i) Initial recognition and measurement

A financial asset or a financial liability is recognised in the statement of financial position when, and only when, the Offeror Group becomes a party to the contractual provisions of the instrument.

A financial instrument is recognised initially, at its fair value plus, in the case of a financial instrument not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial instrument.

An embedded derivative is recognised separately from the host contract and accounted for as a derivative if, and only if, it is not closely related to the economic characteristics and risks of the host contract and the host contract is not categorised at fair value through profit or loss. The host contract, in the event an embedded derivative is recognised separately, is accounted for in accordance with policy applicable to the nature of the host contract.

(ii) Financial instrument categories and subsequent measurement

The Offeror Group categorise financial instruments as follows:

Financial assets

(a) Financial assets at fair value through profit or loss

Fair value through profit or loss category comprises financial assets that are held for trading, including derivatives (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument) or financial assets that are specifically designated into this category upon initial recognition.

Derivatives that are linked to and must be settled by delivery of unquoted equity instruments whose fair values cannot be reliably measured are measured at cost.

Financial assets categorised as fair value through profit or loss are subsequently measured at their fair values with the gain or loss recognised in profit or loss.

– V-21 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

(b) Held-to-maturity investments

Held-to-maturity investments category comprises debt instruments that are quoted in an active market and the Offeror Group has the positive intention and ability to hold them to maturity.

Financial assets categorised as held-to-maturity investments are subsequently measured at amortised cost using the effective interest method.

(c) Loans and receivables

Loans and receivables category comprises debt instruments that are not quoted in an active market.

Financial assets categorised as loans and receivables are subsequently measured at amortised cost using the effective interest method.

(d) Available-for-sale financial assets

Available-for-sale category comprises investment in equity and debt securities instruments that are not held for trading.

Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are measured at cost. Other financial assets categorised as available-for-sale are subsequently measured at their fair values with the gain or loss recognised in other comprehensive income, except for impairment losses, foreign exchange gains and losses arising from monetary items and gains and losses of hedged items attributable to hedge risks of fair value hedges which are recognised in profit or loss. On derecognition, the cumulative gain or loss recognised in other comprehensive income is reclassified from equity into profit or loss. Interest calculated for a debt instrument using the effective interest method is recognised in profit or loss.

All financial assets, except for those measured at fair value through profit or loss, are subject to review for impairment (see Note 2(k)(i)).

Financial liabilities

All financial liabilities are subsequently measured at amortised cost other than those categorised as fair value through profit or loss.

Fair value through profit or loss category comprises financial liabilities that are held for trading, derivatives (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument) or financial liabilities that are specifically designated into this category upon initial recognition.

Derivatives that are linked to and must be settled by delivery of unquoted equity instruments whose fair values cannot be reliably measured are measured at cost.

Financial liabilities categorised as fair value through profit or loss are subsequently measured at their fair values with the gain or loss recognised in profit or loss.

– V-22 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

(iii) Financial guarantee contracts

A financial guarantee contract is a contract that requires the issuer 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 original or modified terms of a debt instrument.

Financial guarantee contracts are classified as deferred income and are amortised to profit or loss using a straight-line method over the contractual period or, when there is no specified contractual period, recognised in profit or loss upon discharge of the guarantee. When settlement of a financial guarantee contract becomes probable, an estimate of the obligation is made. If the carrying value of the financial guarantee contract is lower than the obligation, the carrying value is adjusted to the obligation amount and accounted for as a provision.

(iv) Regular way purchase or sale of financial assets

A regular way purchase or sale is a purchase or sale of a financial asset under a contract whose terms require delivery of the asset within the time frame established generally by regulation or convention in the marketplace concerned.

A regular way purchase or sale of financial assets is recognised and derecognised, as applicable, using trade date accounting. Trade date accounting refers to:

(a) the recognition of an asset to be received and the liability to pay for it on the trade date, and
(b) derecognition of an asset that is sold, recognition of any gain or loss on disposal and the recognition of a receivable from the buyer for payment on the trade date.

(v) Derecognition

A financial asset or part of it is derecognised when, and only when the contractual rights to the cash flows from the financial asset expire or the financial asset is transferred to another party without retaining control or substantially all risks and rewards of the asset. On derecognition of a financial asset, the difference between the carrying amount and the sum of the consideration received (including any new asset obtained less any new liability assumed) and any cumulative gain or loss that had been recognised in equity is recognised in the profit or loss.

A financial liability or a part of it is derecognised when, and only when, the obligation specified in the contract is discharged or cancelled or expires. On derecognition of a financial liability, the difference between the carrying amount of the financial liability extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in the profit or loss.

– V-23 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

(d) Property, plant and equipment

(i) Recognition and measurement

Items of property, plant and equipment are measured at cost/valuation less any accumulated depreciation and any accumulated impairment losses.

Property, plant and equipment under the revaluation model

The Offeror Group revalues its property comprising land and buildings every 5 years and at shorter intervals whenever the fair value of the revalued property is expected to differ materially from their carrying value.

Surpluses arising from revaluation are dealt with in the property revaluation reserve account. Any deficit arising is offset against the revaluation reserve to the extent of a previous increase for the same property. In all other cases, a decrease in carrying amount is recognised in profit or loss.

Cost includes expenditures that are directly attributable to the acquisition of the asset and any other costs directly attributable to bringing the asset to working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. The cost of self-constructed assets also includes the cost of materials and direct labour. For qualifying assets, borrowing costs are capitalised in accordance with the accounting policy on borrowing costs. Cost also may include transfers from equity of any gain or loss on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment.

Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.

The cost of property, plant and equipment recognised as a result of a business combination is based on fair value at acquisition date. The fair value of property is the estimated amount for which a property could be exchanged between knowledgeable willing parties in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. The fair value of other items of plant and equipment is based on the quoted market prices for similar items when available and replacement cost when appropriate.

When significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

The gain or loss on disposal of an item of property, plant and equipment is determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and is recognised net within “other income” or “other expenses” respectively in profit or loss. When revalued assets are sold, the amounts included in the revaluation surplus reserve are transferred to retained earnings.

– V-24 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

(ii) Subsequent costs

The cost of replacing a part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Offeror Group, and its cost can be measured reliably. The carrying amount of the replaced part is derecognised to profit or loss. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred.

(iii) Depreciation

Depreciation is calculated over the depreciable amount, which is the cost of an asset, or other amount substituted for cost, less its residual value.

Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonable certain that the Offeror Group will obtain ownership by the end of the lease term. Freehold land is not depreciated. Property, plant and equipment under construction are not depreciated until the assets are ready for their intended use.

The estimated useful lives for the current and comparative periods are as follows:

Leasehold land	30 - 55 years
Buildings	50 years
Plant and machinery	5 - 10 years
Furniture, fittings and renovation	3 - 10 years
Motor vehicles	5 years
Building improvements	5 years

Depreciation methods, useful lives and residual values are reviewed, and adjusted as appropriate at the end of the reporting period.

(e) Leased assets

(i) Finance lease

Leases in terms of which the Offeror Group assumes substantially all the risks and rewards of ownership are Offeror as finance leases. Upon initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.

Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed.

Leasehold land which in substance is a finance lease is classified as property, plant and equipment.

– V-25 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

(ii) Operating lease

Leases, where the Offeror Group does not assume substantially all the risks and rewards of ownership are classified as operating leases and, except for property interest held under operating lease, the leased assets are not recognised on the statement of financial position. Property interest held under an operating lease, which is held to earn rental income or for capital appreciation or both, is classified as investment property and measured using fair value model.

Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Lease incentives received are recognised in profit or loss as an integral part of the total lease expense, over the term of the lease. Contingent rentals are charged to profit or loss in the reporting period in which they are incurred.

(f) Intangible assets

(i) Goodwill

Goodwill arises on business combinations is measured at cost less any accumulated impairment losses. In respect of equity accounted investees, the carrying amount of goodwill is included in the carrying amount of the investment and an impairment loss on such an investment is not allocated to any asset, including goodwill, that forms part of the carrying amount of the equity accounted investees.

(ii) Amortisation

Goodwill with indefinite useful lives are not amortised but are tested for impairment annually and whenever there is an indication that they may be impaired.

(g) Investment properties

(i) Investment properties carried at fair value

Investment properties are properties which are owned or held under a leasehold interest to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes.

Investment properties are measured initially at cost and subsequently at fair value with any change therein recognised in profit or loss for the period in which they arise. Where the fair value of the investment property under construction is not reliably determinable, the investment property under construction is measured at cost until either its fair value becomes reliably determinable or construction is complete, whichever is earlier.

Cost includes expenditure that is directly attributable to the acquisition of the investment property. The cost of self-constructed investment property includes the cost of materials and direct labour, any other costs directly attributable to bringing the investment property to a working condition for their intended use and capitalised borrowing costs.

– V-26 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

An investment property is derecognised on its disposal, or when it is permanently withdrawn from use and no future economic benefits are expected from its disposal. The difference between the net disposal proceeds and the carrying amount is recognised in profit or loss in the period in which the item is derecognised.

(ii) Reclassification to/from investment property

When an item of property, plant and equipment is transferred to investment property following a change in its use, any difference arising at the date of transfer between the carrying amount of the item immediately prior to transfer and its fair value is recognised in other comprehensive income and accumulated in equity as revaluation reserve. However, if a fair value gain reverses a previous impairment loss, the gain is recognised in profit or loss. Upon disposal of an investment property, any surplus previously recorded in equity is transferred to retained earnings; the transfer is not made through profit or loss.

When the use of a property changes such that it is reclassified as property, plant and equipment or inventories, its fair value at the date of reclassification becomes its deemed cost for subsequent accounting.

(iii) Determination of fair value

An external, independent valuation firm, having appropriate recognised professional qualifications and recent experience in the location and category of property being valued, values the Offeror Group’s investment property portfolio annually.

The fair values are based on market values, being the estimated amount for which a property could be exchanged on the date of the valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably.

Investment property under construction is valued by estimating the fair value of the completed investment property and then deducting from that amount the estimated costs to complete construction, financing costs and a reasonable profit margin.

(h) Inventories

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

The cost of inventories is measured based on the first-in-first-out, and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. In the case of work-in-progress and finished goods, cost includes an appropriate share of production overheads based on normal operating capacity.

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

– V-27 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

The fair value of inventories acquired in a business combination is determined based on the estimated selling price in the ordinary course of business less the estimated costs of completion and sale, and a reasonable profit margin based on the effort required to complete and sell the inventories.

(i) Non-current assets held for sale or distribution

Non-current assets, or disposal group comprising assets and liabilities that are expected to be recovered primarily through sale rather than through continuing use, are classified as held for sale.

Immediately before classification as held for sale, the assets, or components of a disposal group, are remeasured in accordance with the Offeror Group’s accounting policies. Thereafter generally the assets (or disposal group) are measured at the lower of their carrying amount and fair value less costs to sell.

Any impairment loss on a disposal group is first allocated to goodwill, and then to remaining assets and liabilities on pro rata basis, except that no loss is allocated to inventories, financial assets, deferred tax assets, employee benefit assets and investment property, which continue to be measured in accordance with the Offeror Group’s accounting policies. Impairment losses on initial classification as held for sale and subsequent gains or losses on remeasurement are recognised in profit or loss. Gains are not recognised in excess of any cumulative impairment loss.

Intangible assets and property, plant and equipment once classified as held for sale or distribution are not amortised or depreciated. In addition, equity accounting of equity-accounted investees ceases once classified as held for sale or distribution.

(j) Cash and cash equivalents

Cash and cash equivalents consist of cash in hand, balances and deposits with banks and highly liquid investments which have an insignificant risk of changes in value. For the purpose of the statement of cash flows, cash and cash equivalents are presented net of bank overdrafts and pledged deposits.

(k) Impairment

(i) Financial assets

All financial assets (except for financial assets categorised as fair value through profit or loss, investments in subsidiaries and associates) are assessed at each reporting date whether there is any objective evidence of impairment as a result of one or more events having an impact on the estimated future cash flows of the asset. Losses expected as a result of future events, no matter how likely, are not recognised. For an equity instrument, a significant or prolonged decline in the fair value below its cost is an objective evidence of impairment.

An impairment loss in respect of loans and receivables and held-to-maturity investments is recognised in profit or loss and is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account.

– V-28 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

An impairment loss in respect of available-for-sale financial assets is recognised in profit or loss and is measured as the difference between the asset’s acquisition cost (net of any principal repayment and amortisation) and the asset’s current fair value, less any impairment loss previously recognised. Where a decline in the fair value of an available-for-sale financial asset has been recognised in the other comprehensive income, the cumulative loss in other comprehensive income is reclassified from equity and recognised to profit or loss.

An impairment loss in respect of unquoted equity instrument that is carried at cost is recognised in profit or loss and is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset.

Impairment losses recognised in profit or loss for an investment in an equity instrument is not reversed through profit or loss.

If, in a subsequent period, the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed, to the extent that the asset’s carrying amount does not exceed what the carrying amount would have been had the impairment not been recognised at the date the impairment is reversed. The amount of the reversal is recognised in profit or loss.

(ii) Other assets

The carrying amounts of other assets (except for inventories and investment property that is measured at fair value and non-current assets (or disposal groups) classified as held for sale) are reviewed at the end of each reporting period to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For goodwill that have indefinite useful lives or that are not yet available for use, the recoverable amount is estimated each period at the same time.

For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets (known as cash-generating unit). The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to a cash-generating unit or a group of cash-generating units that are expected to benefit from the synergies of the combination.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or cash-generating unit.

An impairment loss is recognised if the carrying amount of an asset or its related cashgenerating unit exceeds its estimated recoverable amount.

Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit or the group of cash-generating units and then to reduce the carrying amount of the other assets in the cash-generating unit (or a group of cash-generating units) on a pro rata basis.

– V-29 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at the end of each reporting period for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount since the last impairment loss was recognised. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Reversals of impairment losses are credited to profit or loss in the financial year in which the reversals are recognised.

(l) Equity instruments

Instruments classified as equity are measured at cost on initial recognition and are not remeasured subsequently.

(i) Issue expenses

Costs directly attributable to issue of instruments classified as equity are recognised as a deduction from equity.

(ii) Repurchase of share capital

When share capital recognised as equity is repurchased, the amount of the consideration paid, including directly attributable costs, is recognised as a deduction from equity. Repurchased shares that are not subsequently cancelled are classified as treasury shares in statement of changes in equity.

Where treasury shares are distributed as share dividends, the cost of the treasury shares is applied in the reduction of the share premium account or distributable reserves, or both.

Where treasury shares are sold or reissued subsequently, the difference between the sales consideration net of directly attributable costs and the carrying amount of the treasury shares is recognised in equity, and the resulting surplus or deficit on the transaction is presented in share premium.

(m) Income tax

Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognised in profit or loss except to the extent that it relates to a business combination or items recognised directly in equity or other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted by the end of the reporting period, and any adjustment to tax payable in respect of previous financial years.

Deferred tax is recognised using the liability method, providing for temporary differences between the carrying amounts of assets and liabilities in the statement of financial position and their tax bases. Deferred tax is not recognised for the following temporary differences: the initial recognition of goodwill, the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the end of the reporting period.

– V-30 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax assets are reviewed at the end of each reporting period and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Unutilised reinvestment allowance is treated as tax base of assets and is recognised as a reduction of tax expense as and when they are utilised.

(n) Revenue and other income

(i) Goods sold

Revenue from the sale of goods in the course of ordinary activities is measured at fair value of the consideration received or receivable, net of returns and allowances, trade discount and volume rebates. Revenue is recognised when persuasive evidence exists, usually in the form of an executed sales agreement, that the significant risks and rewards of ownership have been transferred to the customer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, and there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. If it is probable that discounts will be granted and the amount can be measured reliably, then the discount is recognised as a reduction of revenue as the sales are recognised.

(ii) Interest income

Interest income is recognised in profit or loss as it accrues using the effective interest rate except for interest income arising from temporary investment of borrowings taken specifically for the purpose of obtaining a qualifying asset which is accounted for in accordance with the accounting policy on borrowing costs.

(iii) Dividend income

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

(iv) Rental income

Rental income from investment property is recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income, over the term of the lease. Rental income from sub-leased property is recognised as other income.

– V-31 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

(o) Borrowing costs

Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method.

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the cost of those assets.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

(p) Employee benefits

(i) Short term employee benefits

Short term employee benefit obligations in respect of salaries, annual bonuses, paid annual leave and sick leave are measured on an undiscounted basis and are expensed as the related service is provided.

A liability is recognized for the amount expected to be paid under short term cash bonus or profit-sharing plans if the Offeror Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

(ii) State plans

The Offeror Group’s contribution to statutory pension funds are charged to profit or loss in the financial year to which they relate. Once the contributions have been paid, the Offeror Group has no further payment obligations.

(iii) Share-based payment transactions

The grant date fair value of share-based payment awards to employees is recognised as an employee expense, with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the awards. The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market vesting conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that meet the related service and non-market performance conditions at the vesting date.

For share-based payment awards with non-vesting conditions, the grant date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.

– V-32 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

The fair value of employee share options is measured using a binomial lattice model. Measurement inputs include share price on measurement date, exercise price of the instrument, expected volatility (based on weighted average historic volatility adjusted for changes expected due to publicly available information), weighted average expected life of the instruments (based on historical experience and general option holder behaviour), expected dividends, and the riskfree interest rate (based on government bonds). Service and non-market performance conditions attached to the transactions are not taken into account in determining fair value.

(q) Provisions

A provision is recognised if, as a result of a past event, the Offeror Group has present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding or the discount is recognised as finance cost.

Contingent liabilities

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

(r) Earnings per ordinary share

The Offeror Group presents basic and diluted earnings per share data for its ordinary shares (EPS).

Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Offeror by the weighted average number of ordinary shares outstanding during the period, adjusted for own shares held.

Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding adjusted for own shares held for the effects of all dilutive potential ordinary shares, which comprise share options granted to employees.

(s) Operating segments

An operating segment is a component of the Offeror Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Offeror Group’s other components. An operating segment’s operating results are reviewed regularly by the chief operating decision maker, which in this case is the Managing Director of the Offeror Group, to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.

– V-33 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

3. Property, plant and equipment

At cost/valuation At 1 August 2010 Additions Disposals Written off Reclassified to assets held for sale Exchange differences At 31 July 2011/ 1 August 2011 Additions Disposals Written off Transfer Exchange differences At 31 July 2012 Representing items at: Cost Directors’ valuation Accumulated depreciation At 1 August 2010 Depreciation charge Disposals Written off Exchange differences Reclassified to assets held for sale At 31 July 2011/ 1 August 2011 Depreciation charge Disposals Written off Exchange differences Reclassification At 31 July 2012 Carrying amounts At 31 July 2012 At 31 July 2011	Land and buildings RM’000 143,666 13,583 – – (1,783) (153) 155,313 7,566 – – 7,442 (179) 170,142 29,036 141,106 170,142 8,512 3,638 – – (24) (30) 12,096 3,871 – – (47) – 15,920 154,222 143,217	Plant and machinery RM’000 273,908 13,690 (14,058) (505) (15,130) (1,064) 256,841 22,342 (13,683) (4,566) 970 (1,356) 260,548 260,548 – 260,548 145,255 23,628 (11,985) (412) (359) (6,566) 149,561 21,889 (10,933) (4,478) (557) (77) 155,405 105,143 107,280	Furniture, fittings and renovation RM’000 15,292 2,021 (100) (102) (54) (71) 16,986 3,710 (63) (280) 88 7 20,448 20,448 – 20,448 12,001 1,424 (93) (100) (53) (36) 13,143 1,792 (61) (276) 9 77 14,684 5,764 3,843	Motor vehicles RM’000 7,293 2,536 (937) (76) (735) (81) 8,000 1,327 (866) – – (13) 8,448 8,448 – 8,448 5,664 1,027 (934) (76) (32) (332) 5,317 935 (866) – (6) – 5,380 3,068 2,683	Capital work- in-progress RM’000 233 7,529 – – (227) (6) 7,529 7,452 – – (8,500) (158) 6,323 6,323 – 6,323 – – – – – – – – – – – – – 6,323 7,529	Total RM’000 440,392 39,359 (15,095) (683) (17,929) (1,375)
						444,669 42,397 (14,612) (4,846) – (1,699)
						465,909

						324,803 141,106
						465,909

						171,432 29,717 (13,012) (588) (468) (6,964)
						180,117 28,487 (11,860) (4,754) (601) –
						191,389

						274,520

						264,552

– V-34 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

Carrying amounts of land and buildings At valuation Freehold land Long term leasehold land Short term leasehold land Buildings At cost Freehold land Buildings	2012 RM’000 18,829 535 7,866 98,878 3,514 24,600 154,222	2011 RM’000 18,829 547 8,077 102,092 3,514 10,158
		143,217

Revaluation

Land and buildings were revalued in the financial year ended 31 July 2008 by Directors based on independent professional valuation on the open market value basis carried out on 1 August 2008. Had the land and building been carried at cost, their carrying amounts would have been as follows:

Long term leasehold land Short term leasehold land Freehold land Buildings	2012 RM’000 531 4,277 18,220 61,297 84,325	2011 RM’000 544 4,391 18,220 63,594
		86,749

Leased plant and machinery

At 31 July 2012, the net carrying amount of leased plant and equipment of the Offeror Group was RM4,095,000 (2011: RM9,369,000).

Security

The leased plant and equipment secured the lease obligations (see Note 13).

– V-35 –

APPENDIX V

FINANCIAL INFORMATION OF THE OFFEROR

Depreciation charge for property, plant and equipment is allocated as follows:

Profit or loss – continuing operations – discontinued operation Biological assets 4. Investment properties At 1 August/31 July	2012 RM’000 28,487 – 28,487 28,487 – 28,487 28,487 2012 RM’000 9,300	2011 RM’000 28,074 301
		*29,717* 28,375 1,342
		*29,717* 29,717

		2011 RM’000 9,300

Investment properties comprise a vacant freehold land and a factory building.

The fair value is determined by the Directors by reference to the valuation conducted in July 2012 by independent professional valuers.

The following are recognised in profit or loss in respect of investment properties:

	2012	2011
	RM’000	RM’000
Rental income	269	268
Direct operating expenses
– income generating investment properties	24	25
– non-income generating investment properties	12	9

– V-36 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

5. Investments in subsidiaries

The principal activities of the subsidiaries, their places of incorporation and the interest of the Offeror are shown below:

			Effective ownership	Effective ownership
		Country of	interest
Name of company	Principal activities	incorporation	2012	2011
			%	%
V.S. Plus Sdn. Bhd.	Manufacturing, assembly	Malaysia	99.25	99.25
	and sale of plastic moulded
	components and parts, and
	electrical products
V.S. Ashin Technology	Property letting	Malaysia	54.40	54.40
Sdn. Bhd.
V.S. Electronics Sdn. Bhd.	Manufacturing, assembling	Malaysia	100	100
	and sale of electronic
	and electrical products,
	components and parts
V.S. Technology Sdn. Bhd.	Design and fabrication of	Malaysia	100	100
	tools and moulds
V.S. Logistics Sdn. Bhd.	Dormant	Malaysia	100	100
V.S. Holdings (M) Ltd#	Investment holding	Mauritius	100	100
VVS Co., Ltd.	Dormant	British Virgin	87.27	87.27
		Islands
PT. V.S. Technology	Assembling and sale of	Indonesia	100	100
Indonesia@	electronic products
PT.GY Plantation	Operation of an oil palm	Indonesia	–	53
Indonesia@	plantation
VS Marketing &	Trading of electronic	Singapore	51	51
Engineering Pte. Ltd.@	components

Audited by member firm of KPMG International
@ Audited by other firms of accountants

– V-37 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

6. Investments in associates

At cost Quoted shares outside Malaysia Unquoted shares outside Malaysia Share of post-acquisition reserves Less: Impairment loss Represented by: Offeror Group’s share of net assets other than goodwill Offeror Group’s share of goodwill in associate’s consolidated financial statements less amortisation, at carrying amount At market value Quoted shares outside Malaysia	2012 RM’000 25,265 16,623 56,100 (11,651) (11,651) 86,337 (11,651) 86,005 332 (11,651) 86,337 (11,651) 30,296	2011 RM’000 25,265 16,623 61,740 (11,651) (11,651) 91,977 (11,651) 91,667 310 (11,651) 91,977 (11,651) 16,205

Summary financial information on the associates:

Country Effective of ownership Name of company incorporation interest (%) 2012 V.S. International Group Limited – listed on Hong Cayman Kong Stock Exchange# Islands 43.06 PT. VS Mining Resources@ Indonesia 45.00 2011 V.S. International Group Limited – listed on Hong Cayman Kong Stock Exchange# Islands 43.06 PT. VS Mining Resources@** Indonesia 45.00	Revenue (100%) RM’000 604,029 — 604,029 639,755 — 639,755	Loss (100%) RM’000 (30,377) (1,762) (32,139) (24,928) (1,050) (25,978)	Total assets (100%) RM’000 598,869 9,042 607,911 697,158 9,497 706,655	Total liabilities (100%) RM’000 (398,115) (8,055) (406,170) (482,429) (6,675) (489,104)

– V-38 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

The associate has interest in subsidiaries that are principally involved in the business of manufacturing, assembly and sale of plastic moulded products and parts, electronic products and mould design and fabrication.
** The associate has interest in a controlled entity that is principally involved in the exploration and mining of coal for which impairment losses has been provided in full.
Audited by member firm of KPMG International.
@ Audited by other firms of accountants.

7. Inventories

Raw materials Work-in-progress Finished goods Packing materials	2012 RM’000 55,985 24,276 23,922 394 104,577	2011 RM’000 44,082 22,062 20,648 435
		87,227

At the end of the reporting period, the Offeror Group has written off obsolete inventories of RM294,000 (2011: NIL).

8. Trade and other receivables

Trade receivables Other receivables, deposits and prepayments Due from subsidiaries – non-trade – loan – trade Due from associates – non-trade – loan	2012 RM’000 299,322 18,249 – – – 1 – 317,572	2011 RM’000 186,629 14,569 – – – 153 1,899
		203,250

Loan to an associate was denominated in US Dollar, unsecured and interest was chargeable at 5% (2011: 5%) per annum and has been fully repaid during the year.

Loan to subsidiaries were denominated in US Dollar, unsecured and interest free. Impairment loss of RM12,155,000 was recognised in prior year in respect of loan to a subsidiary and has been written off during the year. (see Note 24)

– V-39 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

9. Assets/liabilities classified as held for sale

On 13 July 2011, the Offeror Group entered into a Conditional Sale and Purchase of Shares Agreement with a third party to dispose its entire shareholding in a subsidiary, PT. GY Plantation Indonesia for a consideration of USD4,073,445 (equivalent to RM12,020,736). The sale was completed in October 2011.

Profit/(Loss) attributable to the discontinued operation were as follows:

Results of discontinued operation Revenue Expenses Impairment loss on biological assets Loss before tax Tax income Loss for the year Gain on sale of discontinued operation Profit/(Loss) for the year	2012 RM’000 278 (890) – (612) – (612) 3,947 3,335	2011 RM’000 2,175 (5,776) (10,603) (14,204) 152 (14,052) – (14,052)

The cash flows from/(used in) the discontinued operation are not significant to the Offeror Group.

Effect of disposal on the financial position of the Offeror Group:

Property, plant and equipment Biological assets Deferred tax assets Inventories Trade and other receivables Cash and cash equivalents Trade and other payables Loan and borrowings Net assets and liabilities Less: Non-controlling interests portion Gain on sale of discontinued operation Consideration received, satisfied in cash Cash and cash equivalents disposed of Net cash inflow	2012 RM’000 10,965 30,463 563 397 181 84 (6,884) (15,534) 20,235 (11,547) 8,688 3,947 12,635 (84) 12,551

– V-40 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

As at 31 July 2011, the assets and liabilities held for sale were as follows:

Assets classified as held for sale
Property, plant and equipment
Biological assets
Deferred tax assets
Inventories
Trade and other receivables
Cash and cash equivalents
Assets classified as held for sale
Reserves
Amount recognised directly in equity relating to assets held for sale
Liabilities classified as held for sale
Loans and borrowings
– non-current
– current
Trade and other payables
Liabilities classified as held for sale
Cash and cash equivalents
2012
RM’000
Deposits with licensed banks
20,538
Cash and bank balances
38,142
58,680

2011
RM’000
10,965
30,463
563
387
403
50
42,831
(15,525)
104
14,387
2,765
17,256
2011
RM’000
18,989
52,864
71,853

10. Cash and cash equivalents

– V-41 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

11. Capital and reserves

Share capital

Ordinary shares of RM1.00 each: Authorised Issued and fully paid: At 1 August Share options exercised At 31 July	2012 RM’000 500,000 182,327 – 182,327	2011 RM’000 500,000 179,702 2,625 182,327	Number of ordinary share 2012 2011 ’000 ’000 500,000 500,000 182,327 179,702 – 2,625 182,327 182,327	Number of ordinary share 2012 2011 ’000 ’000 500,000 500,000 182,327 179,702 – 2,625 182,327 182,327

				179,702 2,625
				182,327

Reserves

Non-distributable Share premium Revaluation reserve Exchange fluctuation reserve Capital reserve Employee share-based reserve Treasury shares Distributable Retained earnings	2012 RM’000 2,381 46,628 10,140 9,396 5,903 (1,499) 72,949 152,215 225,164	2011 RM’000 2,381 47,518 10,973 9,121 3,588 (985)
		72,596 149,986
		222,582

Treasury shares

At the Annual General Meeting held on 3 January 2012, the shareholders of the Offeror renewed their approval for the Offeror to repurchase its own shares.

During the financial year, the Offeror repurchased in the open market a total of 351,300 (2011: 341,800) of its issued ordinary shares. The average repurchase price was RM1.46 (2011: RM1.37) per ordinary share. The total consideration paid was RM513,783 including transaction costs of RM3,409.

– V-42 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

The repurchase transactions were financed by internally generated funds and the repurchased shares are being held as treasury shares and carried at cost.

At 31 July 2012, a total of 1,104,336 (2011: 753,036) repurchased shares are being held as treasury shares. The number of outstanding shares of RM1.00 each in issue after the setoff is 181,222,370 (2011: 181,573,670).

Treasury shares have no rights to voting, dividends and participation in any other distribution. Treasury shares shall not be taken into account in calculating the number or percentage of shares or of a class of shares in the Offeror for any purposes including substantial shareholding, take-overs, notices, the requisition of meeting, the quorum for a meeting and the result of a vote on a resolution at a meeting.

Revaluation reserve

Revaluation reserve represents surplus on revaluation of certain land and buildings of the Offeror Group and its associate, net of deferred tax.

Exchange fluctuation reserve

Exchange fluctuation reserve represents all foreign currency differences arising from the translation of the financial statements of the Offeror Group entities with functional currencies other than RM.

Capital reserve

Capital reserve represents appropriation of net profit of associates in accordance with its local regulation.

Retained earnings

The Offeror has adopted the single tier company income tax system pursuant to Finance Act, 2007.

Employee share-based reserve

Employee share-based reserve represent cumulative value of employee services received for the issue of share options of the Offeror and its associate.

When the option is exercised, the amount from the Employee share-based reserve is transferred to share premium. When the share options expire, the amount from the Employee share-based reserve is transferred to retained earnings.

Equity settled share-based transaction

On 19 November 2010, the Offeror Group established a share option programme that entitles key management personnel and employees to purchase shares in the Offeror.

– V-43 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

The terms and conditions relating to the grants of the share option programme are as follows; all options are to be settled by physical delivery of shares:

Grant date/	Number of	Vesting	Contractual	Contractual
employees entitled	options	conditions	life	of options
	’000
Option granted to all	26,178	20% of the options issued		5 years
employees on 19		for each calendar year
November 2010

The number and exercise price of share options are as follows:

			Number of options over ordinary shares	Number of options over ordinary shares	Number of options over ordinary shares
			of RM1.00 each		(‘000)
		At				At
	Exercise	1 August				31 July
Date of offer	price	2011	Granted	Exercised	Forfeited	2012
	RM
19 November 2010	1.54	20,863	–	–	(1,232)	19,631
Fair value of share options and assumptions

The fair value of services received in return for share options granted is based on the fair value of share options granted, measured based on a binomial lattice model to reflect the impact of vesting period, exit rate and exercise pattern on the option value.

Fair value at grant date	RM0.367
Share price at grant date	RM1.74
Exercise price	RM1.54
Expected volatility (weighted average volatility)	30%
Option life (expected weighted average life)	5 years
Expected dividends	5%
Risk-free interest rate (based on Malaysian Government Securities)	3.287%

Value of employee services received for issue of share options

	2012	2011
	RM’000	RM’000
Total expense recognised as equity settled
share-based transaction	2,340	3,877

– V-44 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

12. Long term payables

	2012	2011
	RM’000	RM’000
Due to Directors	4,322	4,322

The amounts due to Directors are unsecured, interest free and not repayable within the next twelve months.

13. Loans and borrowings

Non-current *Secured* Term loans Finance lease liabilities *Unsecured* Term loans Current *Secured* Term loans Finance lease liabilities *Unsecured* Revolving credit Term loans Bankers’ acceptances Bank overdrafts Foreign currency trust receipts Short term loan		2012 RM’000	2011 RM’000
		– 667	579 1,894
		667 33,925 34,592	2,473 27,036 29,509
		– 1,136	824 1,823
		1,136	2,647
		5,000 14,328 80,337 1,702 – 913	10,000 18,889 59,685 566 9,258 4,275
		102,280 103,416 138,008	102,673 105,320 134,829

Certain of the Offeror Group’s banking facilities are subject to the fulfilment of covenants relating to certain of the Offeror Group’s balance sheet ratios, as are commonly found in lending arrangements with financial institutions. If the Offeror Group were to breach the covenants, the drawn down facilities would become payable on demand. The Offeror Group regularly monitors its compliance with these covenants. Further details of the Offeror Group’s management of liquidity risk are set out in Note 24. As at 31 July 2012 and 31 July 2011, none of the covenants relating to drawn down facilities had been breached.

– V-45 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

Finance lease liabilities

Finance lease liabilities are payable as follows:

Less than one year Between one and five years	Future minimum lease payments RM’000 1,218 698 1,916	2012 Interest RM’000 82 31 113	Present value of minimum lease payments RM’000 1,136 667 1,803	Future minimum lease payments RM’000 1,996 2,004 4,000	2011 Interest RM’000 173 110 283	Present value of minimum lease payments RM’000 1,823 1,894
						3,717

14. Deferred tax liabilities

Recognised deferred tax liabilities

Deferred tax assets and liabilities are attributable to the following:

Property, plant and equipment – capital allowances – revaluation Deductible temporary differences Unabsorbed capital allowances Unutilised tax losses	2012 RM’000 20,932 8,214 (1,280) (820) – 27,046	2011 RM’000 20,678 8,380 (1,105) (1,801) (114)
		26,038

Movement in temporary differences during the year:

Property, plant and equipment – capital allowance – revaluation Deductible temporary differences Unabsorbed capital allowances Unutilised tax losses	At 1.8.2011 RM’000 20,678 8,380 (1,105) (1,801) (114) 26,038	Recognised in profit or loss (Note 18) RM’000 305 (166) (185) 981 114 1,049	Exchange differences RM’000 (51) – 10 – – (41)	At 31.7.2012 RM’000 20,932 8,214 (1,280) (820) –
				27,046

– V-46 –

APPENDIX V

FINANCIAL INFORMATION OF THE OFFEROR

Property, plant and equipment – capital allowance – revaluation Deductible temporary differences Unabsorbed capital allowances Unutilised tax losses	At 1.8.2010 RM’000 21,214 8,542 (1,295) (2,963) (344) 25,154	Recognised in profit or loss (Note 18) RM’000 (510) (162) (386) 1,162 230 334	Reclassified to assets held for Exchange sale differences (Note 9) RM’000 RM’000 (26) – – – 13 563 – – – – (13) 563	At 31.7.2011 RM’000 20,678 8,380 (1,105) (1,801) (114) 26,038

Unrecognised deferred tax assets

Deferred tax assets have not been recognised in respect of the following items:

Unutilised tax losses Deductible temporary differences Taxable temporary differences	2012 RM’000 12,920 668 (686) 12,902	2011 RM’000 12,920 668 (615) 12,973

The unutilised tax losses and deductible temporary differences do not expire under current tax legislation. Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profit will be available against which a subsidiary can utilise the benefits there from.

Subject to agreement by the Inland Revenue Board, the Offeror Group has unutilised reinvestment allowance and investment tax allowance of RM19,804,000 (2011: RM20,791,000) and RM8,174,000 (2011: RM8,174,000) respectively to set off against future taxable profit.

– V-47 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

15. Trade and other payables

Trade payables Other payables and accrued expenses Due to subsidiaries – trade Due to associates – trade Included in other payables and accrued expenses are: Property, plant and equipment’s creditors Sundry creditors Accrued expenses Progress billings to customers 16. Finance costs Interest expense of financial liabilities that are not at fair value through profit or loss: Interest expense Other financing cost	2012 RM’000 222,988 49,166 – 390 272,544 2012 RM’000 4,004 11,382 22,340 11,440 49,166 2012 RM’000 5,557 302 5,859	2011 RM’000 137,655 44,036 – 89
		181,780

		2011 RM’000 1,967 9,949 19,960 12,160
		44,036

		2011 RM’000 5,977 262
		6,239

– V-48 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

17. Operating profit

	2012	2011
	RM’000	RM’000
Operating profit is arrived at after charging/(crediting)
Audit fees
– KPMG Malaysia	209	189
– Overseas affiliate of KPMG Malaysia	11	11
– Other auditors	48	63
– Under provided in prior year	20	–
Non-audit fees
– KPMG Malaysia	9	26
Amortisation of biological asset	–	329
Depreciation	28,487	28,375
Derivative loss	941	681
Inventories written down	294	–
Impairment loss on:
– Investments in associates	–	798
– Biological assets	–	10,603
(Reversal of)/Impairment losses
on receivables:
– continuing operations	(172)	319
– discontinued operation	–	4,216
Personnel expenses (including
key management personnel):
– Contributions to state plans	7,362	6,389
– Wages, salaries and others	137,268	131,244
– Equity settled share-based
transactions	2,340	3,877
Rental of premises	4,228	2,509
Reversal of impairment loss on
investments in subsidiaries	–	–
Foreign exchange:
– Unrealised (gain)/loss	(696)	1,616
– Realised loss/(gain)	1,582	(1,322)
Property, plant and equipment:
– Written off	92	95
– Gain on disposal	(351)	(379)
Bad debts recovered	(60)	(1)
Interest income
– Deposits	(917)	(634)
– Associate	(25)	(122)
Rental income	(454)	(446)

– V-49 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

Key management personnel compensation

The key management personnel compensation are as follows:

Directors – Fees – Remuneration – Contributions to state plans – Equity settled share-based transaction Total short term employee benefits Other key management personnel: – Wages, salaries and others – Contributions to state plans – Other short term employee benefits – Equity settled share-based transaction	2012 RM’000 412 13,778 1,499 432 16,121 3,380 177 29 209 3,795 19,916	2011 RM’000 412 13,635 1,494 717
		16,258

		3,008 165 31 407
		3,611
		19,869

The estimated monetary value of Directors’ benefit-in-kind of the Offeror Group is RM123,000 (2011: RM135,000).

Other key management personnel comprises persons other than the Directors of Offeror Group entities, having authority and responsibility for planning, directing and controlling the activities of the Offeror Group either directly or indirectly.

18. Income tax expense

Recognised in profit or loss

Major components of income tax expense include:

Current tax expense – Malaysian tax – Current year – Prior year – Overseas tax – Current year – Prior year Deferred tax expense/(income) – Malaysian tax – Origination and reversal of temporary differences – Prior year – Overseas tax – Origination of temporary differences	2012 2011 RM’000 RM’000
	11,326 13,635 93 (310) 2,774 2,128 11 (64)
	14,204 15,389
	1,021 907 108 (511) (80) 90
	1,049 486

– V-50 –

APPENDIX V

FINANCIAL INFORMATION OF THE OFFEROR

Total tax expense recognised in profit or loss Tax expense on share of profit of an associate Discontinued operation – Reversal of temporary differences Total income tax expense Reconciliation of effective tax expense Profit for the year Total income tax expense Profit before tax Income tax calculated using Malaysian tax rate of 25% Effect of different tax rates in foreign jurisdictions Deferred tax assets not recognised: – associate – subsidiaries Non-deductible expenses Tax exempt/Non-taxable income Tax incentives Others Under/(Over) provided in prior years Total income tax expense	2012 RM’000 15,253 2,386 – 17,639 2012 RM’000 36,873 17,639 54,512 13,628 (900) 4,578 (32) 2,085 (9) (1,953) 30 17,427 212 17,639	2011 RM’000 15,875 3,679 (152)
		19,402

		2011 RM’000 21,436 19,402
		40,838

		10,210 (29) 4,843 (478) 7,934 (126) (1,329) (738)
		20,287 (885)
		19,402

19. Earnings per ordinary share

Basic earnings per ordinary share

The calculation of basic earnings per ordinary share is based on the profit attributable to ordinary shareholders and a weighted average number of ordinary shares outstanding calculated as follows:

Profit attributable to ordinary shareholders:

		2012			2011
	Continuing	Discontinued		Continuing	Discontinued
	operations	operation	Total	operations	operation	Total
	RM’000	RM’000	RM’000	RM’000	RM’000	RM’000
Profit/(Loss) for the year
attributable to owners	35,280	3,335	38,615	35,280	(7,559)	27,721

– V-51 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

Weighted average number of ordinary shares:

Issued ordinary shares after deducting treasury shares at 1 August Effect of shares repurchased Effect of ordinary shares issued Weighted average number of ordinary shares at 31 July Basic earnings/(loss) per ordinary share (sen) – From continuing operations – From discontinued operation	2012 ’000 181,574 (262) – 181,312 19.46 1.84 21.30	2011 ’000 179,291 (293) 1,663 180,661 19.53 (4.19) 15.34

Diluted earnings per ordinary share

The calculation of diluted earnings per ordinary share is based on profit attributable to ordinary shareholders and a weighted average number of ordinary shares outstanding after adjustment for the effects of all dilutive potential ordinary shares, calculated as follows:

Profit attributable to ordinary shareholders (diluted):

2012 Continuing Discontinued operations operation Total RM’000 RM’000 RM’000 Profit/(Loss) attributable to ordinary shareholders (diluted) 35,280 3,335 38,615 Weighted average number of ordinary shares (diluted): Weighted average number of ordinary shares (basic) Effect of share options in issue Weighted average number of ordinary shares (diluted) at 31 July Diluted earnings per ordinary share (sen) – From continuing operations – From discontinued operation	2011 Continuing Discontinued operations operation RM’000 RM’000 35,280 (7,559) 2012 ’000 181,312 (390) 180,922 -- -- --*	2011 Continuing Discontinued operations operation RM’000 RM’000 35,280 (7,559) 2012 ’000 181,312 (390) 180,922 -- -- --*	Total RM’000 27,721 2011 ’000 180,661 3,188 183,849 19.19 (4.11) 15.08

No disclosure is made for diluted earnings per ordinary share for the year as it is antidilutive.

– V-52 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

20. Dividends

Dividends recognised by the Offeror are:

Sen per share 2012 2011 – Fourth, single tier 3.0 2012 – First interim, single tier 5.0 2012 – Second interim, single tier 2.0 2012 – Third interim, single tier 2.0 2011 2010 – Final, single tier 5.0 2011 – First interim, single tier 2.0 2011 – Second interim, single tier 2.5 2011 – Third interim, single tier 1.5	Date of Total amount payment RM’000 5,443 28 October 2011 9,064 31 January 2012 3,624 3 May 2012 3,624 31 July 2012 21,755 9,061 24 January 2011 3,629 28 February 2011 4,537 5 May 2011 2,724 29 July 2011 19,951

After the reporting period, the following dividend was declared by the Directors. This dividend will be recognised in subsequent financial period.

Sen per share 2012 – Fourth interim, single tier 6.0 Acquisition of assets Acquisition of property, plant and equipment represents:– Current year additions (Note 3) Less: Amount financed by: – Finance lease liabilities – Amount under credit term (Note 15) Add: Payment in respect of previous year’s purchase of property, plant and equipment		Total Date of amount payment RM’000 10,873 25 October 2012 2012 2011 RM’000 RM’000 42,397 39,359 – (282) (4,004) (1,967) 1,967 2,531 40,360 39,641

21. Acquisition of assets

– V-53 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

22. Operating segments

Offeror Group

The Offeror Group’s main business activities comprise the investment holding and manufacturing, assembling and sale of electronic and electrical products and plastic moulded components and parts, are principally located in Malaysia, Indonesia and two other locations. Inter-segment pricing is determined based on negotiated terms.

Performance is measured based on segment profit before tax, interest, depreciation and amortisation, as included in the internal management reports that are reviewed by the Offeror Group’s Managing Director, who is the Offeror Group’s chief operating decision maker. Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries.

Segment assets

The total of segment asset is measured based on all assets (including goodwill) of a segment, as included in the internal management reports that are reviewed by the Offeror Group’s Managing Director. Segment total asset is used to measure the return of assets of each segment.

Segment liabilities

Segment liabilities information is also included in the internal management reports provided to the Offeror Group’s Managing Director.

Segment profit Included in the measure of segment profit are: Revenue from external customers Inter-segment revenue Not included in the measure of segment profit but provided to Managing Director Depreciation and amortisation Finance costs Interest income Income tax expense Segment assets	Malaysia 2012 2011 RM’000 RM’000 82,799 70,913 1,074,901 916,034 2,110 3,516 (24,580) (24,674) (5,323) (5,638) 864 745 (12,548) (13,720) 753,571 630,059	Indonesia 2012 2011 RM’000 RM’000 14,210 11,326 113,811 92,933 –– –– (3,729) (3,216) (427) (510) 78 11 (2,694) (2,155) 76,923 56,721	Total 2012 2011 RM’000 RM’000 97,009 82,239 1,188,712 1,008,967 2,110 3,516 (28,309) (27,890) (5,750) (6,148) 942 756 (15,242) (15,875) 830,494 686,780	Total 2012 2011 RM’000 RM’000 97,009 82,239 1,188,712 1,008,967 2,110 3,516 (28,309) (27,890) (5,750) (6,148) 942 756 (15,242) (15,875) 830,494 686,780

				1,008,967 3,516

				(27,890) (6,148) 756 (15,875)

				686,780

– V-54 –

APPENDIX V

FINANCIAL INFORMATION OF THE OFFEROR

Included in the measure of segment assets are: Additions to non-current assets other than financial instruments and deferred tax assets Segment liabilities	Malaysia 2012 2011 RM’000 RM’000 27,892 36,016 401,993 322,600	Indonesia 2012 2011 RM’000 RM’000 14,333 2,987 37,710 29,869	Total 2012 2011 RM’000 RM’000 42,225 39,003 439,703 352,469	Total 2012 2011 RM’000 RM’000 42,225 39,003 439,703 352,469

				352,469

Reconciliations of reportable segment revenues, profit or loss, assets and liabilities and other material items.

Profit Total profit for reportable segments Other non-reportable segments Elimination of inter-segment profits Depreciation and amortisation Finance costs Interest income Share of loss of associates not included in reportable segments Consolidated profit before tax and discontinued operation	2012 RM’000 97,009 (2,702) 968 (28,487) (5,859) 942 (13,080) 48,791	2011 RM’000 82,239 694 12,478 (28,074) (6,239) 756 (10,491)
		51,363

2012 Total reportable segments Other non-reportable segments Components not monitored by managing director Elimination of inter-segment transaction or balances Consolidated total	External revenue Depreciation RM’000 RM’000 1,188,712 (28,309) 13,280 (178) – – – – 1,201,992 (28,487)	Finance costs RM’000 (5,750) (109) – – (5,859)	Interest income RM’000 942 – – – 942	Investment Segment in assets associates RM’000 RM’000 830,494 – 8,165 – 61,072 86,337 (48,745) – 850,986 86,337	Additions to non- current assets RM’000 42,225 172 – – 42,397	Segment liabilities RM’000 439,703 20,887 – (17,525)
						443,065

– V-55 –

APPENDIX V

FINANCIAL INFORMATION OF THE OFFEROR

2011 Total reportable segments Other non-reportable segments Components not monitored by managing director Elimination of inter-segment transaction or balances Discontinued operation Consolidated total	External revenue Depreciation RM’000 RM’000 1,008,967 (27,890) 17,851 (184) – – – – – (301) 1,026,818 (28,375)	Finance costs RM’000 (6,148) (91) – – – (6,239)	Interest income RM’000 756 – – – – 756	Investment Segment in assets associates RM’000 RM’000 686,780 – 31,993 – 66,712 91,977 (57,326) – 42,831 – 770,990 91,977	Additions to non- current assets RM’000 39,003 153 – – 5,172 44,328	Segment liabilities RM’000 352,469 29,838 – (31,569) 17,256
						367,994

Revenue by geographical location of customers:

Malaysia Indonesia United Kingdom Others Total revenue	2012 RM’000 958,754 112,967 24,616 105,655 1,201,992	2011 RM’000 830,219 89,554 30,901 76,144
		1,026,818

Major customers

There is a major customer with revenue equal to or more than 10 percent of the Offeror Group revenue with details as follows:

		Revenue	Segment
	2012	2011
	RM’000	RM’000
A customer	770,962	659,566	Malaysia

– V-56 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

23. Contingencies (unsecured)

		2012	2011
		RM’000	RM’000
(i)	Corporate guarantees given to financial institutions in
	respect of outstanding term loans and banking facilities of
	subsidiaries	–	–
(ii)	Claim by a third party on land used by a disposed
	subsidiary for planting of biological assets^	–	32,108

^ In prior year, PT. GY Plantation Indonesia (“PTGY”) was granted the site license to operate its palm oil plantation in 2004 in Indonesia. The site license was issued pending the issuance of the land utilization right and rezoning of land area by the relevant government authorities.

However, a third party previously having beneficial rights to the said land has succeeded in a legal claim in Indonesia for reinstatement of its right to the land.

PTGY has appealed to the relevant government authorities to resolve the above matter and the Directors were of the opinion that the Offeror would be able to obtain a favourable outcome to the appeal.

During the year, the Offeror Group’s entire shareholding in PTGY was disposed (see Note 9).

24. Financial instruments

24.1 Categories of financial instruments

The table below provides an analysis of financial instruments categorised as follows:

(a) Loans and receivables (L&R);
(b) Fair value through profit or loss (FVTPL):
Held for trading (HFT); and
(c) Other financial liabilities measured at amortised cost (OL).

2012 Trade and other receivables Cash and cash equivalents Loans and borrowings Trade and other payables Long term payables	Carrying amount RM’000 317,572 58,680 (138,008) (261,104) (4,322) (27,182)	L&R RM’000 317,572 58,680 – – – 376,252	OL RM’000 – – (138,008) (261,104) (4,322)
			(403,434)

– V-57 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

2011 Trade and other receivables Cash and cash equivalents Loans and borrowings Trade and other payables Long term payables	Carrying amount RM’000 203,250 71,853 (134,829) (169,620) (4,322) (33,668)	L&R RM’000 203,250 71,853 – – – 275,103	OL RM’000 – – (134,829) (169,620) (4,322) (308,771)

At the end of reporting period, the fair value through profit or loss in respect of forward contract is insignificant to the Offeror Group.

24.2 Net gains and losses arising from financial instruments

Net losses arising on: Fair value through profit or loss: – Held for trading Loans and receivables Financial liabilities measured at amortised cost	2012 RM’000 (941) 288 (5,859) (6,512)	2011 RM’000 (681) (4,073) (6,239) (10,993)

24.3 Financial risk management

The Offeror Group has exposure to the following risks from its use of financial instruments:

Credit risk
Liquidity risk
Market risk

Credit risk

Credit risk is the risk of a financial loss to the Offeror Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Offeror Group’s exposure to credit risk arises principally from its receivables from customers and fixed deposits placements with licensed banks. The Offeror’s exposure to credit risk arises principally from loans and advances to subsidiaries, associates and financial guarantees given to banks for credit facilities granted to subsidiaries.

Receivables

Risk management objectives, policies and processes for managing the risk

Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Normally credit evaluations are required to be performed on customers requiring credit over a certain amount.

– V-58 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

Exposure to credit risk, credit quality and collateral

As at the end of the reporting period, the Offeror Group have significant concentration of credit risk arising from amounts due from two major customers, representing 74% and 92% (2011: 62% and 90%) of the Offeror Group’s trade receivable respectively.

As at the end of the reporting period, the maximum exposure to credit risk arising from receivables is represented by the carrying amounts in the statement of financial position.

Management has taken reasonable steps to ensure that receivables that are neither past due nor impaired are measured at their realisable values. A significant portion of these receivables are regular customers that have been transacting with the Offeror Group. The Offeror Group uses ageing analysis to monitor the credit quality of the receivables individually.

The exposure of credit risk for trade receivables as at the end of the reporting period by geographic region was:

Domestic Indonesia United States Singapore United Kingdom Others	2012 RM’000 250,599 19,899 12,500 4,125 1,575 11,435 300,133	2011 RM’000 138,739 24,699 – 6,632 5,268 12,376
		187,714

Impairment losses

The ageing of trade receivables as at the end of the reporting period was:

2012 Not past due Past due 1 – 30 days Past due 31 – 60 days Past due 61 – 90 days Past due more than 90 days 2011 Not past due Past due 1 – 30 days Past due 31 – 60 days Past due 61 – 90 days Past due more than 90 days	Gross RM’000 244,909 52,772 1,122 158 1,172 300,133 Gross RM’000 164,534 17,662 1,993 3,021 504 187,714	Individual impairment RM’000 – – – – (811) (811) Individual impairment RM’000 – – – (592) (493) (1,085)	Net RM’000 244,909 52,772 1,122 158 361
			299,322

			Net RM’000 164,534 17,662 1,993 2,429 11
			186,629

– V-59 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

The movements of impairment losses of trade receivables during the financial year were:

At 1 August Impairment loss recognised Impairment loss reversed Impairment loss written off Exchange differences At 31 July	2012 RM’000 1,085 – (172) (123) 21 811	2011 RM’000 797 319 – (31) – 1,085

The allowance account in respect of receivables is used to record impairment losses. Unless the Offeror Group is satisfied that recovery of the amount is possible, the amount considered irrecoverable is written off against the receivable directly.

In determining whether impairment allowance is required to be made, the Offeror Group considers financial background of the customers, past transactions and other specific reasons causing these balances to be past due more than 60 days.

The trade receivables that are past due but not impaired as at end of the statement of financial position are regular customers that have been transacting with the Offeror Group. The Offeror Group does not consider it necessary to impair the receivable amount.

Financial guarantees

Risk management objectives, policies and processes for managing the risk

The Offeror provides unsecured financial guarantees to banks in respect of banking facilities granted to certain subsidiaries. The Offeror monitors on an ongoing basis the results of the subsidiaries and repayments made by the subsidiaries.

Exposure to credit risk, credit quality and collateral

The maximum exposure to credit risk amounts to RM88.2 million (2011: RM70.8 million) representing the outstanding banking facilities of the subsidiaries as at the end of the reporting period.

As at the end of the reporting period, there was no indication that any subsidiary would default on repayment.

Inter company balances

Risk management objectives, policies and processes for managing the risk

The Offeror provides unsecured loans and advances to subsidiaries. The Offeror monitors the results of the subsidiaries regularly.

Exposure to credit risk, credit quality and collateral

As at the end of the reporting period, the maximum exposure to credit risk is represented by their carrying amounts in the statement of financial position.

– V-60 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

Impairment losses

The movements of impairment losses of loans to subsidiaries during the financial year were:

At 1 August Impairment loss recognised Impairment loss written off At 31 July	2012 RM’000 12,155 – (12,155) –	2011 RM’000 – 12,155 –
		12,155

Liquidity risk

Liquidity risk is the risk that the Offeror Group will not be able to meet its financial obligations as they fall due. The Offeror Group’s exposure to liquidity risk arises principally from its various payables, loans and borrowings.

The Offeror Group maintains a level of cash and cash equivalents and bank facilities deemed adequate by the management to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they fall due.

Maturity analysis

The table below summarises the maturity profile of the Offeror Group’s financial liabilities as at the end of the reporting period based on undiscounted contractual payments:

2012 Non-derivative financial liabilities Secured finance lease liabilities Unsecured short term loan Unsecured term loans Unsecured revolving credit Unsecured banker’s acceptances Unsecured bank overdrafts Due to Directors Trade and other payables 2011 Non-derivative financial liabilities Secured finance lease liabilities Secured term loans Unsecured term loan Unsecured trust receipts Unsecured revolving credit Unsecured banker’s acceptances Unsecured bank overdrafts Due to Directors Trade and other payables	Contractual Carrying interest Contractual amount rate/ cash flows RM’000 coupon RM’000 % 1,803 2.17 – 5.70 1,916 913 6.50 943 48,253 3.17 – 6.50 53,489 5,000 4.61 5,000 80,337 1.21 – 4.21 80,337 1,702 7.30 – 7.60 1,702 4,322 – 4,322 261,104 – 261,104 403,434 408,813 3,717 2.50 – 5.70 3,966 1,403 6.50 – 7.50 1,485 50,200 4.05 – 4.71 53,810 9,258 1.08 9,258 10,000 4.56 10,000 59,685 1.21 – 4.21 59,685 566 7.45 566 4,322 – 4,322 169,620 – 169,620 169,620 308,771 312,712	Under 1 year RM’000 1,218 943 15,064 5,000 80,337 1,702 – 261,104 365,368 1,981 891 24,778 9,258 10,000 59,685 566 – 169,620 276,779	1 – 2 years RM’000 423 – 12,313 – – – – – 12,736 1,467 594 14,005 – – – – – – 16,066	2 – 5 years RM’000 258 – 19,868 – – – – – 20,126 452 – 12,583 – – – – – – 13,035	Over 5 years RM’000 17 – 6,244 – – – 4,322 –
					10,583

					66 -- 2,444 – – – – 4,322 –
					6,832

– V-61 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and other prices that will affect the Offeror Group’s financial position or cash flows.

Currency risk

The Offeror Group is exposed to foreign currency risk on sales, purchases and borrowings that are denominated in a currency other than the respective functional currencies of Offeror Group entities. The currencies giving rise to this risk are primarily US Dollar (USD).

The other currencies such as Euro, Singapore Dollar and Japanese Yen are also used by the Offeror Group for sales and purchase purposes. However, the exposure to these currencies are not considered significant to the Offeror Group as their usage are not extensive.

Risk management objectives, policies and processes for managing the risk

The Offeror Group uses forward exchange contracts to hedge its foreign currency risk. Most of the forward exchange contracts have maturities of less than one month after the end of the reporting period. However, the usage of forward exchange contracts are not extensive.

Exposure to foreign currency risk

The Offeror Group’s exposure to foreign currency (a currency which is other than the currency of the Offeror Group entities) risk, based on carrying amounts as at the end of the reporting period was:

2012 Trade and other receivables Cash and cash equivalents Trade and other payables Unsecured term loans Unsecured short term loan Secured finance lease liabilities 2011 Trade and other receivables Cash and cash equivalents Trade and other payables Unsecured trust receipts Secured term loans Secured finance lease liabilities	Denominated in USD RM’000 43,894 20,466 (94,900) (11,758) (913) (209) (43,420) Denominated in USD RM’000 77,175 9,813 (53,357) (9,258) (5,678) (667) 18,028

– V-62 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

Currency risk sensitivity analysis

Foreign currency risk arises from Offeror Group entities which have a Ringgit Malaysia (“RM”) functional currency. The exposure to currency risk of Offeror Group entities which do not have a Malaysian Ringgit functional currency is not material and hence, sensitivity analysis is not presented.

A 10% (2011: 10%) strengthening of the RM against the following currency at the end of the reporting period would have increased (decreased) post-tax profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remained constant and ignores any impact of forecasted sales and purchases.

2012 Profit or loss 2011 Profit or loss	Denominated in USD RM’000 3,257 (1,352)

A 10% (2011: 10%) weakening of RM against the above currency at the end of the reporting period would have had equal but opposite effect on the above currency to the amounts shown above, on the basis that all other variables remained constant.

Interest rate risk

The Offeror Group’s fixed rate borrowings are exposed to a risk of change in their fair value due to changes in interest rates. The Offeror Group’s variable rate borrowings are exposed to a risk of change in cash flows due to changes in interest rates.

Risk management objectives, policies and processes for managing the risk

Exposure to interest rate risk is monitored on an ongoing basis and the Offeror Group endeavours to keep the exposure at an acceptable level.

Exposure to interest rate risk

The interest rate profile of the Offeror Group’s significant interest-bearing financial instruments, based on carrying amounts as at the end of the reporting period was:

Fixed rate instruments Financial assets Financial liabilities Floating rate instruments Financial liabilities	2012 RM’000 20,538 (87,140) (66,602) (50,868)	2011 RM’000 20,888 (85,126) (64,238) (49,703)

– V-63 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

Interest rate risk sensitivity analysis

(a) Fair value sensitivity analysis for fixed rate instruments

The Offeror Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss, and the Offeror Group does not designate derivatives as hedging instruments under a fair value hedged accounting model. Therefore, a change in interest rates at the end of the reporting period would not affect profit or loss.

(b) Cash flow sensitivity analysis for variable rate instruments

A change of 100 basis points in interest rates at the end of the reporting period would have increased (decreased) the Offeror Group’s post-tax profit or loss by RM382,000 (2011: RM373,000). This analysis assumes that all other variables, in particular foreign currency rates, remained constant.

Fair value of financial instruments

The carrying amounts of cash and cash equivalents, short term receivables and payables and short term borrowings approximate fair values due to the relatively short term nature of these financial instruments.

The carrying amount of floating rates term loans approximate its fair value as its effective interest rate changes accordingly to movements in the market interest rate.

The carrying amount of the forward foreign exchange contract approximates its fair value due to the relatively short term nature of the financial instrument, with terms less than 1 month.

The fair values of other financial assets and liabilities, together with the carrying amounts shown in the statement of financial position, are as follows:

*Financial assets* Loan to an associate *Financial liabilities* Unsecured term loans Secured finance lease liabilities	Carrying amount RM’000 – – 1,803	2012 Fair value RM’000 – – 1,689	Carrying amount RM’000 1,899 3,975 3,717	2011 Fair value RM’000 1,899

				3,906 3,664

The following summarises the methods used in determining the fair value of financial instruments reflected in the above table.

Derivatives

The fair value of forward exchange contracts is based on their quoted price, if available. If a quoted market price is not available, then fair value is estimated by discounting the difference between the contractual forward price and the current forward price for the residual maturity of the contract using a risk-free interest rate (based on government bonds).

– V-64 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

Non-derivative financial liabilities

Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the end of the reporting period. For finance leases the market rate of interest is determined by reference to similar lease agreements.

Interest rates used to determine fair value

The interest rates used to discount estimated cash flows, when applicable, are as follows:

	2012	2011
	RM’000	RM’000
	%	%
Unsecured term loans	7.30	7.30
Secured finance lease liabilities	2.60 - 7.50	2.60 - 7.20

25. Capital management

The Offeror Group’s objectives when managing capital is to maintain a strong capital base and safeguard the Offeror Group’s ability to support the underlying risks in its business activities and to enable future business growth. The Directors monitor and determine to maintain an optimal debt-to-equity ratio that complies with debt covenants.

The debt-to-equity ratios at 31 July 2012 and 31 July 2011 were as follows:

Total loans and borrowings_(Note 13) Less: Cash and cash equivalent(Note 10)_ Net debt Total equity Debt-to-equity ratio 26. Capital commitments	2012 RM’000 138,008 (58,680) 79,328 407,491 0.19	2011 RM’000 134,829 (71,853)
		62,976

		389,384

		0.16

	2012	2011
	RM’000	RM’000
*Property, plant and equipment*
Contracted but not provided for	14,693	6,266

27. Related parties

Identity of related parties

For the purposes of these financial statements, parties are considered to be related to the Offeror Group or the Offeror if the Offeror Group has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Offeror Group and the party are subject to common control or common significant influence. Related parties may be individuals or other entities.

– V-65 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

Key management personnel are defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Offeror Group either directly or indirectly. Key management personnel include all the Directors of the Offeror Group, and certain members of senior management of the Offeror Group.

The significant related party transactions of the Offeror Group, other than key management personnel compensation (see Note 17), are as follows:

*Subsidiaries* Sales of goods Sales of plant and equipment Purchases of goods Purchases of plant and equipment Loan to subsidiaries Rental expense *Associates* Sales of plant and equipment Purchases of goods Purchases of plant and equipment Interest income Sales commission income *A company in which is wholly-owned by close family member* *of certain Directors* Purchases of tooling Sales commission income *A company in which certain Directors have substantial* *financial interest* Rental expense *Companies in which a major shareholder has financial* *interest* Purchases Outstanding balances *Remuneration paid to staff who are close family member of* *certain Directors*	2012 RM’000 – – – – – – – 1,607 3,685 25 25 2,537 1,151 233 4,580 708 699	2011 RM’000 – – – – – –

		42 1,011 – 122 671

		2,007 –

		233

		6,649 1,217

		615

– V-66 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

28. Supplementary information on the breakdown of realised and unrealised profits or losses

The breakdown of the retained earnings of the Offeror Group as at 31 July, into realised and unrealised profits, pursuant to Paragraphs 2.06 and 2.23 of Bursa Malaysia Main Market Listing Requirements, are as follows:

Total retained earnings of the Offeror and its subsidiaries: – realised – unrealised Total retained earnings from associates – realised – unrealised Add: Consolidation adjustments Total retained earnings	2012 RM’000 119,263 (18,152) 101,111 17,247 (1,510) 15,737 116,848 35,367 152,215	2011 RM’000 101,869 (20,035) 81,834 31,522 (2,847) 28,675 110,509 39,477 149,986

The determination of realised and unrealised profits is based on the Guidance of Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosures Pursuant to Bursa Malaysia Securities Berhad Listing Requirements , issued by the Malaysian Institute of Accountants on 20 December 2010.

– V-67 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

B. UNAUDITED INTERIM FINANCIAL INFORMATION OF THE OFFEROR GROUP FOR THE SIX MONTHS ENDED 31 JANUARY 2013

The following are the unaudited condensed consolidated results of the Offeror Group for the six months ended 31 January 2013 with notes therein, as extracted from the 2013 interim report of the Offeror.

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 January 2013 – unaudited

Assets Property, plant and equipment Investment properties Investment in associates Total non-current assets Inventories Trade and other receivables Tax recoverable Cash and cash equivalents Total current assets Total assets Equity Share capital Reserves Total equity attributable to owners of the Offeror Non-controlling interests Total equity Liabilities Long term payables Loans and borrowings Deferred tax liabilities Total non-current liabilities	31.01.2013 RM’000 275,572 9,300 81,430 366,302 94,394 210,483 1,046 39,714 345,637 711,939 182,327 221,921 404,248 378 404,626 4,322 35,506 26,205 66,033	31.07.2012 RM’000 274,520 9,300 86,337
		370,157
		104,577 317,572 – 58,680
		480,829
		850,986

		182,327 225,164
		407,491 430
		407,921
		4,322 34,592 27,046
		65,960

– V-68 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

Trade and other payables Loans and borrowings Taxation Total current liabilities Total liabilities Total equity and liabilities Net assets per share of RM1.00 each	31.01.2013 RM’000 175,721 65,559 – 241,280 307,313 711,939 2.23	31.07.2012 RM’000 272,544 103,416 1,145
		377,105
		443,065
		850,986

		2.25

– V-69 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the period ended 31 January 2013 – unaudited

Continuing operations Revenue Cost of sales Gross profit Operating expenses Net other income/(expenses) Results from operating activities Finance costs Interest income Share of profit/(loss) of associates, net of tax Profit before tax Tax expense Profit/(Loss) from continuing operations Discontinued operation Profit from discontinued operation, net of tax Profit/(Loss) for the period Other comprehensive income, net of tax Foreign currency translation differences for foreign operations Total comprehensive income for the period Profit/(Loss) attributable to: Owners of the Offeror Non-controlling interests Profit/(Loss) for the period Total comprehensive income attributable to: Owners of the Offeror Non-controlling interests Total comprehensive income for the period Earnings per ordinary share Basic (sen) – from continuing operations – from discontinued operation Diluted (sen)	Individual 3 months ended 31 January 2013 2012 RM’000 RM’000 233,943 265,769 (214,317) (233,044) 19,626 32,725 (16,680) (20,489) (4,726) (1,711) (1,780) 10,525 (1,124) (1,587) 226 272 2,972 (183) 294 9,027 (697) (2,507) (403) 6,520 – – (403) 6,520 5,104 (652) 4,701 5,868 40 6,642 (443) (122) (403) 6,520 5,152 5,984 (451) (116) 4,701 5,868 0.02 3.66 – – 0.02 3.66 anti-dilutive anti-dilutive	Cumulative 6 months ended 31 January 2013 2012 RM’000 RM’000 561,782 548,207 (508,214) (479,399) 53,568 68,808 (36,397) (41,139) (4,281) (717) 12,890 26,952 (2,718) (3,215) 507 537 80 (2,317) 10,759 21,957 (3,375) (6,857) 7,384 15,100 – 1,980 7,384 17,080 3,141 (946) 10,525 16,134 7,703 18,232 (319) (1,152) 7,384 17,080 10,836 17,238 (311) (1,104) 10,525 16,134 4.25 8.96 – 1.09 4.25 10.05 anti-dilutive anti-dilutive

– V-70 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the period ended 31 January 2013 – unaudited

Share Non- distributable capital Reserve RM’000 RM’000 182,327 72,949 – (16)	Share Non- distributable capital Reserve RM’000 RM’000 182,327 72,949 – (16)	Distributable Retained Assets held profits for sale RM’000 RM’000 152,215 – – –	Distributable Retained Assets held profits for sale RM’000 RM’000 152,215 – – –	Total RM’000 407,491 (16)	Non- controlling interest RM’000 430 –	Total equity RM’000 407,921 (16)
– – –	– (437) 3,133	7,703 437 –	– – –	7,703 – 3,133	(319) – 8	7,384 – 3,141
– 2,696 – – – – – 422 – (12) 182,327 76,039 Share Non- distributable capital Reserve RM’000 RM’000 182,327 72,596 – (419)		8,140 – (14,497) – – – – – 12 – 145,870 – Distributable Retained Assets held profits for sale RM’000 RM’000 149,986 (15,525) – –		10,836 (14,497) – 422 – 404,236 Total RM’000 389,384 (419)	(311) – 246 13 – 378 Non- controlling interest RM’000 13,612 –	10,525 (14,497) 246 435 – 404,614 Total equity RM’000 402,996 (419)
– – – –	– (444) (4,366) –	16,252 444 3,372 (13,545)	1,980 – – 13,545	18,232 – (994) –	(1,152) – 48 (11,547)	17,080 – (946) (11,547)
– – – 182,327	(4,810) – 1,079 68,446	6,523 (14,507) – 142,002	15,525 – – –	17,238 (14,507) 1,079 392,775	(12,651) – 40 1,001	4,587 (14,507) 1,119 393,776

– V-71 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the period ended 31 January 2013 - unaudited

Cash flows from operating activities
Profit before tax:
– Continuing operations
– Discontinued operation
Adjustments for:
Depreciation
Other non-cash items
Non-operating items
Operating profit before changes in working capital
Changes in working capital:
Change in inventories
Change in trade and other receivables
Change in trade and other payables
Interest received
Tax paid
Net cash from operating activities
Cash flows from investing activities
Proceeds from disposal of discontinued operation
Acquisition of property, plant and equipment
Proceeds from disposal of property, plant and equipment
Interest received
Net cash (used in)/from investing activities
Cash flows from financing activities
Bank borrowings
Dividend paid to owners of the Offeror
Funds from non-controlling interests
Repurchase of treasury shares

6 months ended
31 January
2013
2012
RM’000
RM’000
10,759
21,957
–
1,980
10,759
23,937
14,537
14,110
3
(1,360)
7,782
5,244
33,081
41,931
10,183
(14,845)
107,036
(14,449)
(100,439)
8,588
507
509
(6,407)
(8,300)
43,961
13,434
–
11,688
(14,106)
(17,996)
1,549
1,784
–
25
(12,557)
(4,499)
(39,250)
(2,581)
(14,497)
(14,507)
246
–
(16)
(419)

– V-72 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

Net cash used in financing activities
Exchange differences on translation of the financial statements
of foreign operations
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of period
Foreign exchange differences on opening balances
Cash and cash equivalents at end of period
Cash and cash equivalent comprise:
Cash and bank balances
Deposit with licensed banks
Bank overdrafts

6 months ended
31 January
2013
2012
RM’000
RM’000
(53,517)
(17,507)
3,133
(4,366)
(18,980)
(12,938)
56,978
71,287
198
(54)
38,196
58,295
28,445
41,874
11,269
18,322
(1,518)
(1,901)
38,196
58,295

– V-73 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

V.S. Industry Berhad (the “Offeror”, together with its subsidiaries, the “Offeror Group”) is a public limited liability company, incorporated and domiciled in Malaysia and is listed on the Main Market of the Bursa Malaysia Securities Berhad.

The condensed consolidated interim financial statements of the Offeror Group as at and for the six months period ended 31 January 2013 comprise the Offeror and its subsidiaries and the Offeror Group’s interests in associates.

The consolidated financial statements of the Offeror Group as at and for the year ended 31 July 2012 are available upon request from the Offeror’s registered office at:

Registered office Suite 7E, Level 7 Menara Ansar 65, Jalan Trus 80000 Johor Bahru Johor Malaysia

These condensed consolidated interim financial statements were approved by the board of directors of the Offeror on 26 March 2013.

1. Basis of preparation

(a) Statement of compliance

These condensed consolidated interim financial statements have been prepared in accordance with the applicable disclosure provisions of the Listing Requirements of the Bursa Malaysia Securities Berhad and MFRS 134, Interim Financial Reporting in Malaysia and with IAS 34, Interim Financial Reporting . They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Offeror Group as at and for the year ended 31 July 2012.

These are the Offeror Group’s condensed consolidated interim financial statements for the period covered by the Offeror Group’s first MFRS framework annual financial statements and MFRS 1, Firsttime Adoption of Malaysian Financial Reporting Standards has been applied. The adoption of MFRS 1 has no significant impact on the financial statements.

2. Significant accounting policies

The accounting policies applied by the Offeror Group in these condensed consolidated interim financial statements are the same as those applied by the Offeror Group in its consolidated financial statements as at and for the year ended 31 July 2012.

3. Seasonal or cyclical factors

The Offeror Group’s operations are not significantly affected by any seasonal or cyclical factors.

4. Unusual items affecting the assets, liabilities, equity, net income or cash flows

There are no unusual items affecting the assets, liabilities, equity, net income or cash flows of the Offeror Group for the current quarter and financial year-to-date.

– V-74 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

5. Material changes in estimates

There are no material changes in estimates for the current quarter and financial year-to-date.

6. Issuances, cancellations, repurchases, resale and repayments of debts and equity securities

There are no issuance, cancellations, repurchases, resale and repayments of debts and equity securities for the current financial year-to-date.

As at the date of this interim report, a total of 1,119,336 of the repurchased shares are being held as treasury shares and carried at cost.

7. Dividends paid

Since the end of the previous financial year, the Offeror paid:-

(a) a fourth interim single tier dividend of 6 sen per ordinary share of RM1.00 each totalling RM10,872,742 in respect of the financial year ended 31 July 2012 on 25 October 2012; and
(b) a first interim single tier dividend of 2 sen per ordinary share of RM1.00 each totalling RM3,624,247 in respect of the financial year ending 31 July 2013 on 31 January 2013.

8. Segment information

(a) Information about reportable segments

External revenue Inter-segment revenue Segment profit/(loss) before tax External revenue Inter-segment revenue Segment profit/(loss) before tax	6 months ended 31 January 2013 Malaysia Indonesia Total RM’000 RM’000 RM’000 504,980 53,335 558,315 354 – 354 13,337 3,768 17,105 6 months ended 31 January 2012 Malaysia Indonesia Total RM’000 RM’000 RM’000 475,014 65,852 540,866 1,287 – 1,287 17,852 8,105 25,957

(b) Reconciliation of reportable segment profit or loss

Total profit for reportable segments Other non-reportable segments Elimination of inter-segment profits Loss on dilution of interest in an associate Share of profit of associate not included in reportable segments Consolidated profit before tax	6 months ended 31 January 2013 2012 RM’000 RM’000 17,105 25,957 (601) (1,760) 53 77 (5,878) – 80 (2,317) 10,759 21,957	6 months ended 31 January 2013 2012 RM’000 RM’000 17,105 25,957 (601) (1,760) 53 77 (5,878) – 80 (2,317) 10,759 21,957
		21,957

– V-75 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

9. Material events subsequent to period end

There are no material events subsequent to the end of the period reported that have not been reflected in this quarterly report.

10. Changes in composition of the Offeror Group

There are no material changes in the composition of the Offeror Group for the current quarter and financial year-to-date except for the dilution of interest in an associate in China, from 43.06% to 38.18% pursuant to its 9.69% private placement exercise and employees’ share option scheme .

11. Contingent liabilities and contingent assets

The Offeror Group does not have any contingent liabilities and contingent assets as at 31 January 2013.

12. Capital Commitments

	31.01.2013
	RM’000
Property, plant and equipment
Contracted but not provided for	13,848

13. Related party transactions

Significant related party transactions of the Offeror Group are as follows:-

Associates – Sales commission income/sales – Purchases – Purchase of plant and equipment – Interest receivable A company in which certain Directors have substantial financial interest – Rental payable A company which is wholly owned by close family member of certain Directors – Sales commission income/sales – Purchases Companies in which a major shareholder has financial interest – Purchases Remuneration paid to staff who are close family member of certain Directors	6 months ended 31 January 2013 2012 RM’000 RM’000 – 55 793 660 – 3,811 – 25 116 116 852 – 1,154 1,085 2,185 2,404 462 413	6 months ended 31 January 2013 2012 RM’000 RM’000 – 55 793 660 – 3,811 – 25 116 116 852 – 1,154 1,085 2,185 2,404 462 413

		116

		– 1,085

		2,404

		413

These transactions have been entered into in the normal course of business and have been established under negotiated terms.

– V-76 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

ADDITIONAL INFORMATION ON INTERIM FINANCIAL REPORT REQUIRED ON THE BURSA MALAYSIA LISTING REQUIREMENTS

14. Review of performance

For the current quarter under review, the Offeror Group recorded a lower revenue of RM233.9 million as compared to RM265.8 million in the preceding year’s corresponding quarter, whilst profit before tax was RM0.3 million versus RM9.0 million previously.

The lower profit before tax was mainly due to lower sales generated by the Malaysian operation coupled with lower gross margin caused by increased competition in the electronic manufacturing services sector and loss of RM5.9 million arising from dilution of interest from 43.06% to 38.18% in associate in China due to its 9.69% private placement exercise and employees’ share option scheme.

For the six months period ended 31 January 2013, the Offeror Group recorded a revenue of RM561.8 million as compared to RM548.2 million of the corresponding period of the preceding year, whilst profit before tax was RM10.8 million versus RM22.0 million previously.

The lower profit before tax despite increase in revenue for the financial period was mainly due to lower gross margin caused by increased competition in the electronic manufacturing sevices sector coupled with loss of RM5.9 million arising from dilution of interest from 43.06% to 38.18% in associate in China due to its 9.69% private placement exercise and employees’ share option scheme.

The comparison of the results of the segment are tabulated below:-

	Individual	Individual	Individual	Cummulative	Cummulative	Cummulative
		Quarter			Quarter
	31		January	31		January
	2013		2012	2013		2012
	RM’000		RM’000	RM’000		RM’000
Revenue
Malaysia	205,547		232,230	504,980		475,014
Indonesia	28,056		27,242	53,335		65,852
Profit before tax
Malaysia	2,852		5,092	13,337		17,852
Indonesia	1,213		4,356	3,768		8,105

Malaysia segment

The lower profit before tax in the current quarter was mainly due to lower sales orders from key customers and lower gross margin caused by increased competition in the electronic manufacturing services sector.

The lower profit before tax in the cumulative quarter despite increase in revenue was mainly due to lower gross margin caused by increased competition in the electronic manufacturing services sector.

Indonesia segment

The lower profit before tax in the current quarter was mainly due to change in business model mix.

The lower profit before tax in the cumulative quarter was mainly attributable to lower sales orders from key customers.

– V-77 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

15. Variation of results against preceding quarter

For the current quarter under review, the Offeror Group recorded a lower profit before tax of RM0.3 million as compared to profit before tax of RM10.5 million in the preceding quarter. This was mainly due to lower sales generated by the Malaysian operation coupled with lower gross margin caused by increased competition in the electronic manufacturing services sector and loss arising from dilution of interest in associate in China amounting to RM5.9 million.

16. Current year prospects

The Board is mindful of the continuing challenges faced by the global economy, thus expects the prospects for the remaining quarters of the current financial year to be challenging. This is coupled with the implementation of the minimum wage for workers effective from 1 January 2013.

17. Profit forecast

Not applicable.

18. Tax expense

Tax expense Malaysian – Current period Overseas – Current period Deferred tax expense Malaysian – Current period Overseas – Current period	Individual 3 months ended 31 January 2013 2012 RM’000 RM’000 545 925 364 1,159 909 2,084 (212) 363 – 60 (212) 423 697 2,507	Cumulative 6 months ended 31 January 2013 2012 RM’000 RM’000 3,150 3,552 1,080 2,156 4,230 5,708 (855) 1,036 – 113 (855) 1,149 3,375 6,857	Cumulative 6 months ended 31 January 2013 2012 RM’000 RM’000 3,150 3,552 1,080 2,156 4,230 5,708 (855) 1,036 – 113 (855) 1,149 3,375 6,857
			5,708
			1,036 113
			1,149
			6,857

The effective tax rate for the financial year-to-date is higher than the statutory tax rate due to nondeductible expenses.

19. Status of uncompleted corporate proposals

There are no outstanding uncompleted corporate proposals as at the date of this quarterly report.

– V-78 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

20. Borrowing and debt securities

Non-current *Secured* Finance lease liabilities *Unsecured* Term loans Current *Secured* Finance lease liabilities *Unsecured* Term loans Bank overdraft Revolving credit Bankers’ acceptance Short term loan	31.01.2013 RM’000 326 35,180 35,506 863 11,994 1,518 – 50,256 928 65,559 101,065	31.07.2012 RM’000 667 33,925
		34,592 1,136 14,328 1,702 5,000 80,337 913
		103,416
		138,008

Borrowings denominated in US Dollar amounted to RM4.3 million (31.7.2012: RM17.3 million).

21. Changes in material litigation

There are no material litigation which would materially and adversely affect the financial position of the Offeror Group as at the date of this quarterly report.

22. Profit for the period

	3 months ended	3 months ended	6 months ended	6 months ended
	31 January		31 January
	2013	2012	2013	2012
	RM’000	RM’000	RM’000	RM’000
Profit for the period is arrived at after
charging/(crediting)
Depreciation of property, plant and equipment	7,387	7,090	14,537	14,110
Net foreign exchange (gain)/loss	(499)	1,639	(1,469)	1,377
(Gain)/Loss on disposal of property, plant
and equipment	(237)	(77)	(450)	(308)
Derivative (gain)/loss	(119)	399	850	376
Loss on dilution of interest in an associate	5,878	–	5,878	–

– V-79 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

23. Dividends

(a) No dividend is proposed for the current quarter.
(b) The total dividend per share for the current financial year is 2.0 sen (previous year corresponding period : 7.0 sen).

24. Earnings per share

(a) Basic earnings per share

Profit attributable to owners of the Offeror

Profit for the period Profit for the period	Continuing operations 3 months ended 31 January 2013 Discontinued operation RM’000 RM’000 40 – Continuing operations 3 months ended 31 January 2012 Discontinued operation RM’000 RM’000 6,642 –	Total RM’000 40 Total RM’000 6,642	Continuing operations 6 months ended 31 January 2013 Discontinued operation RM’000 RM’000 7,703 – Continuing operations 6 months ended 31 January 2012 Discontinued operation RM’000 RM’000 16,252 1,980	Total RM’000 7,703

				Total RM’000 18,232

Weighted average number of ordinary shares

Issued ordinary shares at 1 August Effect of shares repurchased Weighted average number of ordinary shares at 31 January Basic earnings per ordinary share (sen) – from continuing operations – from discontinued operation	3 months ended 31 January 2013 31 January 2012 RM’000 RM’000 181,223 181,574 (10) (248) 181,213 181,326 0.02 3.66 – – 0.02 3.66	6 months ended 31 January 2013 31 January 2012 RM’000 RM’000 181,223 181,574 (8) (177) 181,215 181,397 4.25 8.96 – 1.09 4.25 10.05	6 months ended 31 January 2013 31 January 2012 RM’000 RM’000 181,223 181,574 (8) (177) 181,215 181,397 4.25 8.96 – 1.09 4.25 10.05
			181,397

			8.96 1.09
			10.05

(b) Diluted earnings per share

No disclosure is made for the diluted earnings per share for the current quarter and financial yearto-date as it is anti-dilutive.

– V-80 –

FINANCIAL INFORMATION OF THE OFFEROR

APPENDIX V

25. Disclosure of realised and unrealised profits/losses

Total retained profits of the Offeror and its subsidiaries – Realised – Unrealised Total share of retained profit from associates – Realised – Unrealised Consolidation adjustments Total group retained profit as per consolidated accounts	Current Quarter 31.01.2013 117,410 (17,471) 99,939 18,046 (2,026) 115,959 29,911 145,870	Preceding Quarter 31.10.2012 118,729 (17,792) 100,937 17,110 (4,166) 113,881 35,346 149,227

3. SUBSEQUENT EVENT

The directors of the Offeror have confirmed that, save as disclosed in Note 14 – Review of performance, Note 15 – Variation of results against preceding quarter and Note 16 – Current year prospect to the interim report of the Offeror for the six months ended 31 January 2013 in terms of the reduced profitability resulting from increased competition in the electronic manufacturing services sector and the implementation of the minimum wage for workers in Malaysia and Indonesia, there are no material changes in the financial or trading position or outlook of the Offeror after the financial year ended 31 July 2012.

– V-81 –

Offer	Price	for	each	Offer	Share	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	HK$0.355	in	cash
Offer	price	for	each	Share	Option		.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	HK$0.186	in	cash
Offer	price	for	each	Bonus	Warrant				.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	.	HK$0.235	in	cash

AI assistant

Weichai Power Co., Ltd. — M&A Activity 2013

50534_rns_2013-06-06_919a2cbe-063f-42fb-a82b-5855456bf786.pdf

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

V.S. INDUSTRY BERHAD

V.S. INTERNATIONAL GROUP LIMITED 威鋮國際集團有限公司

Financial adviser to the Offeror

Independent financial adviser to the Independent Board Committee

CONTENTS

EXPECTED TIMETABLE

EXPECTED TIMETABLE

Partial Offer, Option Offer and Warrant Offer open

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

V.S. INTERNATIONAL GROUP LIMITED 威鋮國際集團有限公司

VOLUNTARY UNCONDITIONAL PARTIAL CASH OFFER

BY KIM ENG SECURITIES (HONG KONG) LIMITED

INTRODUCTION

LETTER FROM THE BOARD

TERMS OF THE PARTIAL OFFER, THE OPTION OFFER AND THE WARRANT OFFER

(a) Offer Price

(b) Other terms

Partial Offer

LETTER FROM THE BOARD

Option Offer and Warrant Offer

EFFECT OF ACCEPTING THE PARTIAL OFFER, THE OPTION OFFER AND THE WARRANT OFFER

VALUE OF THE PARTIAL OFFER

HIGHEST AND LOWEST CLOSING PRICES OF THE SHARES

STAMP DUTY

ODD LOTS

PAYMENT

TOTAL CONSIDERATION FOR THE PARTIAL OFFER, THE OPTION OFFER AND THE WARRANT OFFER AND FINANCIAL RESOURCES OF THE OFFEROR

OVERSEAS SHAREHOLDERS, OVERSEAS OPTIONHOLDERS AND OVERSEAS WARRANTHOLDERS

LETTER FROM THE BOARD

DEALINGS IN SECURITIES

CHANGES IN SHAREHOLDING STRUCTURE

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

INFORMATION ON THE GROUP

INFORMATION ON THE OFFEROR

REASONS FOR THE PARTIAL OFFER

INTENTIONS OF THE OFFEROR

LETTER FROM THE BOARD

INTERESTED PARTIES

RECOMMENDATION OF THE BOARD

LETTER FROM KIM ENG

VOLUNTARY UNCONDITIONAL PARTIAL CASH OFFER BY KIM ENG SECURITIES (HONG KONG) LIMITED ON BEHALF OF V.S. INDUSTRY BERHAD

INTRODUCTION

LETTER FROM KIM ENG

TERMS OF THE PARTIAL OFFER, THE OPTION OFFER AND THE WARRANT OFFER

(a) Offer Price

LETTER FROM KIM ENG

(b) Other Terms

Partial Offer

LETTER FROM KIM ENG

Option Offer and Warrant Offer

LETTER FROM KIM ENG

VALUE OF THE PARTIAL OFFER

HIGHEST AND LOWEST CLOSING PRICES OF THE SHARES

EFFECT OF ACCEPTING THE PARTIAL OFFER, THE OPTION OFFER AND THE WARRANT OFFER

LETTER FROM KIM ENG

TOTAL CONSIDERATION FOR THE PARTIAL OFFER, THE OPTION OFFER AND THE WARRANT OFFER AND FINANCIAL RESOURCES OF THE OFFEROR

PROCEDURES FOR ACCEPTANCE

NOMINEE REGISTRATION OF SHARES

INFORMATION ON THE OFFEROR

LETTER FROM KIM ENG

REASONS FOR THE PARTIAL OFFER

INTENTIONS OF THE OFFEROR AND MAINTAINING THE LISTING STATUS OF THE COMPANY

LETTER FROM KIM ENG

OVERSEAS SHAREHOLDERS, OVERSEAS OPTIONHOLDERS AND OVERSEAS WARRANTHOLDERS

LETTER FROM KIM ENG

STAMP DUTY IMPLICATIONS

ODD LOTS

LETTER FROM KIM ENG

PAYMENT

Weichai Power Co., Ltd. M&A Activity 2013