Yusei Holdings Limited — Proxy Solicitation & Information Statement 2014

Apr 14, 2014

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

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

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

This circular appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for any securities.

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YUSEI HOLDINGS LIMITED 友成控股有限公司*

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 96)

(1) CONNECTED TRANSACTION RELATING TO THE SUBSCRIPTION FOR NEW SHARES; (2) APPLICATION FOR WHITEWASH WAIVER; AND (3) NOTICE OF EGM

Financial Adviser to the Company

First Shanghai Capital Limited

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

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REORIENT Financial Markets Limited

A letter from the Board is set out on pages 5 to 16 of this circular. A letter from the Independent Board Committee to the Independent Shareholders is set out on pages 17 to 18 of this circular. A letter from the Independent Financial Adviser, containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 19 to 50 of this circular.

A notice convening the EGM to be held at Lin Gang Industrial Zone, Henggengtou Village, Guali Town, Xiaoshan District, Hangzhou City, Zhejiang Province, the PRC on Wednesday, 7 May 2014 at 3:00 p.m. is set out on pages EGM-1 to EMG-2 of this circular. Whether or not you are able to attend and/or vote at the EGM in person, please complete the accompanying form of proxy in accordance with the instructions printed thereon and return the same to the Company’s Hong Kong branch share registrar, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong as soon as practicable but in any event not less than 48 hours before the time appointed for holding the EGM or any adjourned meeting thereof (as the case may be). Completion and return of the accompanying form of proxy will not preclude you from attending and voting in person at the EGM or any adjourned meeting thereof (as the case may be) should you so wish.

14 April 2014

• For identification purpose only

CONTENTS

	Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
LETTER FROM THE INDEPENDENT BOARD COMMITTEE . . . . . . . . . . . . . .	17
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER . . . . . . . . . . . . .	19
APPENDIX I – FINANCIAL INFORMATION OF THE GROUP . . . . . .	I-1
APPENDIX II – PROPERTY VALUATION . . . . . . . . . . . . . . . . . . . . . . . .	II-1
APPENDIX III – GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . .	III-1
NOTICE OF EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	EGM-1

– i –

DEFINITIONS

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

• “acting in concert”

• has the meaning ascribed to it under the Takeovers Code

• “Announcement”

• the announcement dated 27 January 2014 made by the Company in relation to, among others, the Subscription Agreement and the transactions contemplated thereunder and the Whitewash Waiver

• “associate(s)”

• has the meaning ascribed to it under the Listing Rules

• “Board”

• board of Directors

• “Business Day(s)”

• a day (excluding Saturday and Sunday) on which licensed banks are generally open for business in Hong Kong throughout their regular business hours

• “Company”

• YUSEI HOLDINGS LIMITED (友成控股有限公司*), a company incorporated in the Cayman Islands with limited liability whose issued Shares are listed on the Main Board of the Stock Exchange

• “Completion”

• completion of the Subscription

• “Completion Date”

• the date when Completion shall take place, being the fifth (5th) business day next following the day on which all the Conditions have been fulfilled, or such other date as may be agreed in writing between the Company and the Subscribers

• “Conditions”

• the conditions precedent to Completion, as more particularly set out under the section headed “Conditions of the Subscription” in the Letter from the Board contained in this circular

• “connected person(s)”

• has the meaning ascribed to it under the Listing Rules

• “Director(s)”

• the director(s) of the Company

• For identification purpose only

– 1 –

DEFINITIONS

“EGM”

• “Executive”

• “Group”

• “HK$”

• “Hong Kong”

• “Independent Board Committee”

the extraordinary general meeting of the Company to be convened and held at Lin Gang Industrial Zone, Henggengtou Village, Guali Town, Xiaoshan District, Hangzhou City, Zhejiang Province, the PRC on Wednesday, 7 May 2014 at 3:00 p.m. to approve the Subscription Agreement and the transactions contemplated thereunder and the Whitewash Waiver, respectively

the Executive Director of the Corporate Finance Division of the SFC from time to time and any delegate of such Executive Director

the Company and its subsidiaries

Hong Kong dollars, the lawful currency of Hong Kong

the Hong Kong Special Administrative Region of the PRC

(i) in relation to that established by the Company pursuant to the Listing Rules, the independent board committee comprising all independent non-executive Directors, namely Mr. Hisaki Takabayashi, Mr. Fan Xiaoping and Mr. Lo Ka Wai, to advise the Independent Shareholders on the terms of the Subscription Agreement and the transactions contemplated thereunder;

(ii) in relation to that established by the Company pursuant to the Takeovers Code, the independent board committee comprising all non-executive Directors other than Mr. Katsutoshi Masuda and Mr. Toshimitsu Masuda, namely Mr. Hisaki Takabayashi, Mr. Fan Xiaoping and Mr. Lo Ka Wai, to advise the Independent Shareholders on the Whitewash Waiver

• “Independent Financial Adviser”

REORIENT Financial Markets Limited, being the independent financial adviser to the Independent Board Committee and Independent Shareholders regarding the Subscription Agreement, the transactions contemplated thereunder and the Whitewash Waiver and a licensed corporation 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 for the purpose of the SFO

– 2 –

DEFINITIONS

• “Independent Shareholders”

• (i) for the purpose of the Subscription Agreement, Shareholders other than the Subscribers and their respective associates, parties acting or presumed to be acting in concert with Mr. Xu Yong (including Mr. Xu Yue and Yusei Japan) and any other Shareholders who are involved in or interested in the Subscription Agreement and the transactions contemplated thereunder and/or the Whitewash Waiver

• (ii) for the purpose of the Whitewash Waiver, Shareholders other than Mr. Xu Yong, parties acting or presumed to be acting in concert with him (including Mr. Xu Yue and Yusei Japan) and any other Shareholders who are involved in or interested in the Subscription Agreement and the transactions contemplated thereunder and/or the Whitewash Waiver

• “Last Trading Day”

• “Latest Practicable Date”

• “Listing Committee”

• “Listing Rules”

• “Masuda Family”

• “PRC”

• “SFC”

• “SFO”

• “Share(s)”

• “Shareholder(s)”

• 22 January 2014, being the last trading day of the Shares on the Stock Exchange before the signing of the Subscription Agreement

• 11 April 2014, being the latest practicable date prior to the publication of this circular for the purpose of ascertaining certain information contained in this circular

• the listing sub-committee of the Stock Exchange

• the Rules Governing the Listing of Securities on the Stock Exchange

• Mr. Katsutoshi Masuda, Mr. Toshimitsu Masuda and Mrs. Echiko Masuda

• the People’s Republic of China, which, solely for the purpose of this circular, excludes Hong Kong, Macau Special Administrative Region of the People’s Republic of China and Taiwan

• Securities and Futures Commission of Hong Kong

• Securities and Futures Ordinance, Chapter 571 of the Laws of Hong Kong

• share(s) of HK$0.01 each in the share capital of the Company

• holder(s) of the Share(s)

– 3 –

DEFINITIONS

• “Stock Exchange”

The Stock Exchange of Hong Kong Limited

• “Subscribers”

• Mr. Xu Yong, Mr. Manabu Shimabayashi, Mr. Wang Dehong, Mr. Li Yuquan, Mr. Shen Jinjiang, Mr. Yu Mingqi, Mr. Li Qunjin, Mr. Liu Haishu and Mr. Chen Gang

• “Subscription”

• the subscription by the Subscribers for the Subscription Shares pursuant to the Subscription Agreement

• “Subscription Agreement” the conditional subscription agreement dated 22 January 2014 (as amended and supplemented by the Supplemental Agreement) between the Subscribers and the Company relating to the Subscription

• “Subscription Price”

• means the subscription price of HK$0.80 per Subscription Share

• “Subscription Share(s)” new Share(s) to be subscribed by the Subscribers pursuant to the Subscription Agreement

• “Superview”

• Superview International Investment Limited, a company wholly-owned by Mr. Xu Yue and being a substantial Shareholder

• “Supplemental Agreement” the supplemental agreement to the Subscription Agreement dated 21 March 2014 between the Subscribers and the Company

• “Takeovers Code”

• The Code on Takeovers and Mergers

• “Whitewash Waiver”

• the waiver by the Executive under Note 1 of the Notes on dispensations from Rule 26 of the Takeovers Code waiving the obligation of the Xu Brothers to make a general offer for the securities of the Company, which would otherwise arise as a result of the subscription of 20,720,000 Shares of the Company by Mr. Xu Yong contemplated under the Subscription Agreement

• “Xu Brothers”

• Mr. Xu Yong, an executive Director, and Mr. Xu Yue, a substantial Shareholder and an elder brother of Mr. Xu Yong, being parties acting in concert

• “Yusei Japan” Yusei Machinery Corporation, a controlling Shareholder

• “%”

• per cent.

– 4 –

LETTER FROM THE BOARD

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YUSEI HOLDINGS LIMITED 友成控股有限公司*

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 96)

Executive Directors: Xu Yong Manabu Shimabayashi

Non-executive Directors: Katsutoshi Masuda Toshimitsu Masuda

Independent non-executive Directors: Lo Ka Wai Fan Xiaoping Hisaki Takabayashi

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

Head office and Principal Place of Business in the PRC: Lin Gang Industrial Zone, Henggengtou Village, Guali Town, Xiaoshan District, Hangzhou City, Zhejiang Province, the PRC

Business Address in Hong Kong: Unit 1, 9/F, Fortune Commercial Building, 362 Sha Tsui Road, Tsuen Wan, N.T., Hong Kong 14 April 2014

To the Shareholders

Dear Sir or Madam,

(1) CONNECTED TRANSACTION RELATING TO THE SUBSCRIPTION FOR NEW SHARES; (2) APPLICATION FOR WHITEWASH WAIVER; AND (3) NOTICE OF EGM

1. INTRODUCTION

Reference is made to the Announcement. On 22 January 2014 (after trading hours), the Company entered into the Subscription Agreement with the Subscribers, pursuant to

• For identification purpose only

– 5 –

LETTER FROM THE BOARD

which the Company has conditionally agreed to allot and issue, and the Subscribers have conditionally agreed to subscribe for, the Subscription Shares at an issue price of HK$0.80 per Subscription Share.

2. THE SUBSCRIPTION AGREEMENT

Date:

22 January 2014

Parties:

• (i) The Subscribers (Mr. Xu Yong, one of the Subscribers, is an executive Director and currently holds 10,560,000 Shares representing 6% of the existing issued share capital of the Company as at the Latest Practicable Date; Mr. Manabu Shimabayashi, one of the Subscribers, is also an executive Director and, for the purpose of the SFO, is deemed to be interested in 110,200 Shares held by his spouse representing approximately 0.06% of the existing issued share capital of the Company as at the Latest Practicable Date. The other Subscribers, namely Mr. Wang Dehong, Mr. Li Yuquan, Mr. Shen Jinjiang, Mr. Yu Mingqi, Mr. Li Qunjin, Mr. Liu Haishu and Mr. Chen Gang, are key employees of the Company and/or its subsidiaries and among these other Subscribers, Mr. Wang Dehong, Mr. Li Yuquan, Mr. Yu Mingqi, Mr. Li Qunjin, Mr. Liu Haishu and Mr. Chen Gang, are also Shareholders respectively holding 237,600, 397,000, 158,000, 264,000, 206,800 and 894,600 Shares, representing approximately 0.14%, 0.23%, 0.09%, 0.15%, 0.12% and 0.51% of the existing issued share capital of the Company as at the Latest Practicable Date, respectively. These other Subscribers are, save for being key employees of the Company and/or its subsidiaries and holding Shares (by some of them), third parties independent of the Company and its connected persons); and

• (ii) the Company.

– 6 –

LETTER FROM THE BOARD

The Subscription Shares:

Pursuant to the Subscription Agreement, the Subscribers have conditionally agreed to subscribe for and the Company has conditionally agreed to allot and issue a total of 26,400,000 Subscription Shares at the Subscription Price to the Subscribers respectively. The total consideration shall be a sum of HK$21,120,000 and to be apportioned among the Subscribers based on the number of Subscription Shares subscribed by each of them. The table below shows the details of the allotment and issue of Subscription Shares as contemplated under the Subscription Agreement:

Name of Subscribers Mr. Xu Yong Mr. Manabu Shimabayashi Mr. Wang Dehong Mr. Li Yuquan Mr. Shen Jinjiang Mr. Yu Mingqi Mr. Li Qunjin Mr. Liu Haishu Mr. Chen Gang Total	Number of Subscription Shares 20,720,000 660,000 660,000 660,000 1,060,000 660,000 660,000 660,000 660,000 26,400,000	Apportioned Consideration (HK$) 16,576,000 528,000 528,000 528,000 848,000 528,000 528,000 528,000 528,000
		21,120,000

As at the Latest Practicable Date, there were 176,000,000 Shares in issue and the Subscription Shares represent 15% of the issued share capital of the Company as at Latest Practicable Date and, assuming that there is no change in the issued share capital of the Company other than the issue of the Subscription Shares since the Latest Practicable Date up to Completion, approximately 13.04% of the issued share capital of the Company as enlarged by the issue of the Subscription Shares. Taking into account the Shares already owned by Mr. Xu Yong and indirectly owned by Mr. Xu Yue, immediately after the completion of the Subscription, Mr. Xu Yong will hold approximately 15.45% and the Xu Brothers will hold an aggregate of approximately 34.59% of the issued share capital of the Company as enlarged by the issue of the Subscription Shares (assuming that no additional Shares other than the Subscription Shares will be issued since the Latest Practicable Date up to Completion).

The Subscription Shares will be issued under a specific mandate to be sought for approval by the Independent Shareholders at the EGM. An application will be made by the Company for the listing of, and permission to deal in, the Subscription Shares.

– 7 –

LETTER FROM THE BOARD

Subscription Price:

The Subscription Price for the Subscription Shares is HK$0.80 per Subscription Share. The Subscription Price represents:

• (i) a discount of approximately 23.81% to the closing price of HK$1.05 per Share as quoted on the Stock Exchange on the Latest Practicable Date;

• (ii) a discount of approximately 5.88% to the closing price of HK$0.85 per Share as quoted on the Stock Exchange on the Last Trading Day;

• (iii) a discount of approximately 4.76% to the average closing price of HK$0.84 per Share for the last five trading days immediately prior to and including the Last Trading Day;

• (iv) a discount of approximately 6.98% to the average closing price of HK$0.86 per Share for the last ten trading days immediately prior to and including the Last Trading Day;

• (v) a discount of approximately 55.56% to the net asset value of approximately RMB1.44 per Share (equivalent to approximately HK$1.80 per Share), calculated based on the audited consolidated net assets attributable to owners of the Company of approximately RMB253.4 million (equivalent to approximately HK$316.8 million) as at 31 December 2012 and the total number of issued Shares of 176,000,000 as at the Latest Practicable Date; and

• (vi) a discount of approximately 56.76% to the net asset value of approximately RMB1.48 per Share (equivalent to approximately HK$1.85 per Share), calculated based on the audited consolidated net assets attributable to owners of the Company of approximately RMB260.7 million (equivalent to approximately HK$325.9 million) as at 31 December 2013 and the total number of issued Shares of 176,000,000 as at the Latest Practicable Date.

The Subscription Price was arrived at after arm’s length negotiations between the Company and the Subscribers with reference to the prevailing market price of the Shares and the current market conditions. The total consideration for the Subscription Shares in the sum of HK$21,120,000 shall be payable by the Subscribers to the Company in immediately available funds upon completion of the Subscription.

Ranking:

The Subscription Shares shall be issued free from all liens, charges, encumbrances and third party interest and shall rank pari passu in all respects with the Shares in issue.

– 8 –

LETTER FROM THE BOARD

Conditions of the Subscription:

Completion of the Subscription is conditional upon:

• (i) the Listing Committee having granted approval for the listing of, and permission to deal in, the Subscription Shares and such approval and permission not subsequently being revoked prior to the delivery of definitive share certificate(s) representing the Subscription Shares;

• (ii) the Executive having granted the Whitewash Waiver in accordance with the Takeovers Code and all conditions attached to the Whitewash Waiver having been satisfied;

• (iii) the passing by the Independent Shareholders by way of poll at the EGM of resolution(s) approving the Subscription Agreement and the transactions contemplated under or incidental to the Subscription Agreement (including but not limited to the subscription, allotment and issue of the Subscription Shares);

• (iv) the passing of a resolution by the Independent Shareholders by way of poll at the EGM approving the Whitewash Waiver; and

• (v) the Subscription Agreement not having been terminated as a result of any material breach of the warranties as set out in the Subscription Agreement prior to Completion.

None of the Conditions can be waived by either party. If the Conditions shall not have been fulfilled on or before the date falling sixty (60) days after the date of the Supplemental Agreement, being 20 May 2014 (or such other later date as may be agreed between the Subscribers and the Company), the Subscription Agreement shall lapse and become null and void and the parties thereto shall be released from all obligations thereunder, save for any liability arising out of antecedent breaches of the terms thereof. In the case that the Subscribers and the Company agree to postpone the long stop date as aforementioned, the Company would comply with all applicable requirements of the Listing Rules accordingly.

Completion:

Subject to fulfillment of all the Conditions, Completion shall take place on the Completion Date (or at such other time and date and at such place as may be agreed in writing between the Subscribers and the Company).

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LETTER FROM THE BOARD

3. EFFECTS OF THE SUBSCRIPTION

The shareholdings in the Company as at the Latest Practicable Date and immediately after Completion (assuming that there is no change in the issued share capital of the Company since the Latest Practicable Date up to Completion other than the issue of the Subscription Shares) are summarised as follows:

The Xu Brothers Mr. Xu Yong Superview Sub-total Yusei Japan (Note 1) Directors (other than Mr. Xu Yong) Mr. Manabu Shimabayashi and his spouse Mr. Fan Xiaoping Sub-total Public Shareholders The Subscribers Mr. Wang Dehong Mr. Li Yuquan Mr. Shen Jinjiang Mr. Yu Mingqi Mr. Li Qunjin Mr. Liu Haishu Mr. Chen Gang Other public Shareholders Sub-total Total	As at the Latest Practicable Date Shares Per cent. (Approx.) 10,560,000 6.00 38,722,000 22.00 49,282,000 28.00 80,960,000 46.00 110,200 0.06 19,800 0.01 130,000 0.07 237,600 0.14 397,000 0.23 – – 158,000 0.09 264,000 0.15 206,800 0.12 894,600 0.51 43,470,000 24.70 45,628,000 25.93 176,000,000 100.00	Immediately after completion of the Subscription Shares Per cent. (Approx.) 31,280,000 15.45 38,722,000 19.13 70,002,000 34.59 80,960,000 40.00 770,200 0.38 19,800 0.01 790,000 0.39 897,600 0.44 1,057,000 0.52 1,060,000 0.52 818,000 0.40 924,000 0.46 866,800 0.43 1,554,600 0.77 43,470,000 21.48 50,648,000 25.02 202,400,000 100.00	Immediately after completion of the Subscription Shares Per cent. (Approx.) 31,280,000 15.45 38,722,000 19.13 70,002,000 34.59 80,960,000 40.00 770,200 0.38 19,800 0.01 790,000 0.39 897,600 0.44 1,057,000 0.52 1,060,000 0.52 818,000 0.40 924,000 0.46 866,800 0.43 1,554,600 0.77 43,470,000 21.48 50,648,000 25.02 202,400,000 100.00
			34.59
			40.00 0.38 0.01
			0.39
			0.44 0.52 0.52 0.40 0.46 0.43 0.77 21.48
			25.02
			100.00

– 10 –

LETTER FROM THE BOARD

Notes:

1. Yusei Japan is held by Conpri Co. Ltd. (“ Conpri ”), Mr. Katsutoshi Masuda, Mr. Akio Suzuki, Mrs. Echiko Masuda, Mr. Toshimitsu Masuda, and Tokyo Small and Medium Business Investment & Consultation Co., Ltd. as to 25.8%, 21.9%, 12.1%, 2.1%, 1.7% and 30% respectively. In addition, Yusei Japan holds its own 6.4% equity interest as a result of share repurchase which, according to the confirmation of a practicing Japanese law firm, need not be extinguished from its issued share capital under Japanese laws. Conpri is a company incorporated in Japan with limited liability and is owned as to 50% by Mr. Toshimitsu Masuda, as to 30% by Mr. Katsutoshi Masuda and as to 20% by Mrs. Echiko Masuda. Mrs. Echiko Masuda and Mr. Toshimitsu Masuda are the spouse and son of Mr. Katsutoshi Masuda, respectively. Mr. Katsutoshi Masuda and Mr. Toshimitsu Masuda are non-executive Directors. Mr. Akio Suzuki was a non-executive Director. Yusei Japan is presumed to be acting in concert with the Xu Brothers in accordance with the Takeovers Code. Mr. Xu Yong and parties acting or presumed to be acting in concert with him (including Mr. Xu Yue and Yusei Japan) collectively holds approximately 74.00% of the issued share capital of the Company as at the Latest Practicable Date and would collectively hold approximately 74.59% of the issued share capital of the Company immediately after completion of the Subscription.

4. INTENTION OF THE COMPANY AND THE SUBSCRIBERS

It is the intention of the Company and the Subscribers that the Group will continue its current business, and the Subscribers have no intention to make any major changes to the business (including redeployment of fixed assets of the Group) or continued employment of the employees of the Group.

Given that the Subscribers have no intention to change any businesses and employments of the Group, the Directors are of the view that there will be no distortion or interruption to the Group’s operations which will continue to be operated upon completion of the Subscription as before.

5. REASONS FOR THE SUBSCRIPTION AND USE OF PROCEEDS

The Group is principally engaged in the design, development and fabrication of precision plastic injection moulds, and the manufacture of plastic components in the PRC. The Group also provides services for certain assembling and further processing of plastic components for its customers for maintenance and enhancement its position as a one-stop total solution provider in the plastic injection moulding industry.

The gross proceeds from the Subscription will be HK$21,120,000 and the net proceeds from the Subscription, after deduction of related expenses of approximately HK$1,450,000, is estimated to be approximately HK$19,670,000. It is the intention of the Company to apply the net proceeds from the Subscription (i) for the construction of a new plant at a piece of undeveloped land owned by the Group located in Lingang Industrial Park, Xiaoshan, Hanzhou City, Zhejiang Province, the PRC (the “ Plant No. 3 ”); and (ii) as general working capital. The construction of the Plant No. 3, which is estimated to cost approximately HK$19 million, is expected to commence in June 2014 and complete by May 2015. The Group will arrange the procurement of the equipment and machinery for the Plant No. 3, which is estimated to cost approximately HK$10 million, during the first half of 2015. Such equipment and machinery is expected to be procured via finance leases or with internal resources of the Group. The Plant No. 3 shall be able to produce products generally produced by the Group for its principal business, namely plastic injection moulds and plastic components. The Plant No. 3 is expected to commence commercial

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LETTER FROM THE BOARD

operation in the second half of 2015 and, as mentioned in the annual results announcement of the Company for the year ended 31 December 2013, is estimated to increase the production capacity of the Group by around 30%. The Directors consider that the Subscription could provide immediate funding to the Group to support its operation and investments and enhance the working capital status of the Group.

In addition, the Subscription signifies the confidence of Mr. Xu Yong and Mr. Manabu Shimabayashi, as executive Directors, and other key employees of the Company in the future development and prospects of the Group, which the Directors consider crucial and beneficial to the long-term development of the Group.

The Directors consider that the terms of the Subscription Agreement, which were negotiated on an arm’s length basis and agreed on normal commercial terms between the parties involved, are fair and reasonable, and the Subscription is in the interest of the Company and the Shareholders as a whole.

The Company did not conduct any fund raising activities through any issue of equity securities within the 12 months immediately prior to the Latest Practicable Date.

6. LISTING RULES IMPLICATIONS

Mr. Xu Yong, one of the Subscribers, is an executive Director and currently holds 10,560,000 Shares representing 6% of the existing issued share capital of the Company as at the Latest Practicable Date. Mr. Manabu Shimabayashi, one of the Subscribers, is also an executive Director and, for the purpose of the SFO, is deemed to be interested in 110,200 Shares held by his spouse representing approximately 0.06% of the existing issued share capital of the Company as at the Latest Practicable Date. As Mr. Xu Yong and Mr. Manabu Shimabayashi are Directors, each of them is a connected person of the Company under the Listing Rules. The Subscription by the Subscribers (including but not limited to Mr. Xu Yong and Mr. Manabu Shimabayashi) is therefore a connected transaction for the Company and subject to the reporting, announcement and Independent Shareholders’ approval at general meeting requirements under the Listing Rules.

Apart from Mr. Xu Yong and Mr. Manabu Shimabayashi who are interested in the Shares, Mr. Wang Dehong, Mr. Li Yuquan, Mr. Yu Mingqi, Mr. Li Qunjin, Mr. Liu Haishu and Mr. Chen Gang who are among the Subscribers, are also Shareholders respectively holding 237,600, 397,000, 158,000, 264,000, 206,800 and 894,600 Shares, representing approximately 0.14%, 0.23%, 0.09%, 0.15%, 0.12% and 0.51% of the existing issued share capital of the Company as at the Latest Practicable Date, respectively. In addition, Ms. Tang Henan and Ms. Ye Qing, spouses of Mr. Liu Haishu and Mr. Chen Gang respectively, are respectively holding 55,000 and 220,400 Shares representing approximately 0.03% and 0.13% of the existing issued share capital of the Company as at the Latest Practicable Date respectively.

Mr. Xu Yue, being an elder brother of Mr. Xu Yong and therefore an associate of Mr. Xu Yong, indirectly holds 38,722,000 Shares through Mr. Xu Yue’s wholly-owned company, Superview, representing approximately 22% of the issued share capital of the Company as at the Latest Practicable Date.

– 12 –

LETTER FROM THE BOARD

For the purpose of the Listing Rules, Mr. Xu Yong and Mr. Manabu Shimabayashi, being Subscribers, have abstained from voting on the relevant Board resolutions approving the Subscription Agreement and the transactions contemplated thereunder.

For the purpose of the Listing Rules, the Subscribers and their respective associates, which hold an aggregate of 51,825,600 Shares, representing approximately 29.45% of the existing issued share capital of the Company as at the Latest Practicable Date, shall abstain from voting at the EGM in respect of the resolutions approving the Subscription Agreement and the transactions contemplated thereunder.

The Directors have confirmed that so far as they are aware, save for the persons and/or their respective associates named above, no other Shareholder is interested in the Subscription.

7. TAKEOVERS CODE IMPLICATIONS

As at the Latest Practicable Date, Mr. Xu Yue, being an elder brother of Mr. Xu Yong and therefore presumed to be a party acting in concert with Mr. Xu Yong, indirectly holds 38,722,000 Shares, representing approximately 22% of the voting rights of the Company. As at the Latest Practicable Date, Yusei Japan is interested in 80,960,000 Shares, representing 46% of the existing issued share capital of the Company. As the Xu Brothers and Yusei Japan both own more than 20% of the voting rights of the Company, Yusei Japan is presumed to be acting in concert with the Xu Brothers in accordance with the Takeovers Code. Save for the aforesaid, as at the Latest Practicable Date, Mr. Xu Yong and parties acting or presumed to be acting in concert with him do not hold any other Shares, warrants, options or other convertible or exchangeable securities of the Company. Upon Completion, 26,400,000 Subscription Shares will be issued to the Subscribers, of which 20,720,000 Subscription Shares will be issued to Mr. Xu Yong. Thus, the interest of the Xu Brothers in the voting rights of the Company will be increased from approximately 28% to approximately 34.59% (assuming that no additional Shares other than the Subscription Shares will be issued since the Latest Practicable Date up to Completion). Accordingly, the Xu Brothers would be obliged to make a mandatory general offer under Rule 26 of the Takeovers Code for all the securities of the Company not already owned or agreed to be acquired by them, unless the Whitewash Waiver is granted.

An application to the Executive for the Whitewash Waiver has been made by the Subscribers and the Executive has indicated that it will grant the Whitewash Waiver subject to, among other things, the approval of Independent Shareholders at the EGM by way of poll. Mr. Xu Yong, Mr. Manabu Shimabayashi, Mr. Katsutoshi Masuda and Mr. Toshimitsu Masuda have abstained from voting on the relevant Board resolutions approving the Subscription Agreement, the transactions contemplated thereunder and the Whitewash Waiver. In addition, Mr. Xu Yong and parties acting or presumed to be acting in concert with him, together with their respective associates and Shareholders who are involved in or interested in the Subscription and/or the Whitewash Waiver shall abstain from voting at the EGM in respect of the resolutions approving the Subscription Agreement, the transactions contemplated thereunder and the Whitewash Waiver.

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LETTER FROM THE BOARD

As at the Latest Practicable Date, neither the Subscribers (including Mr. Xu Yong) nor any party acting or presumed to be acting in concert with any of them has received any irrevocable commitment from any Independent Shareholder as to whether they will vote for or against the resolutions approving the Subscription and/or the Whitewash Waiver at the EGM.

Mr. Xu Yong has undertaken to the Company that apart from the Subscription Agreement, neither he nor parties acting or presumed to be acting in concert with him will from the date of the Subscription Agreement until the Completion Date acquire or dispose of or enter into any agreement or arrangement to acquire or dispose of any voting rights in the Company.

8. INFORMATION REQUIRED UNDER THE TAKEOVERS CODE

As at the Latest Practicable Date, the Company does not have any options, warrants or convertible securities in issue.

Mr. Xu Yong has confirmed that neither he nor any parties acting or presumed to be acting in concert with him (including Mr. Xu Yue and Yusei Japan):

• (i) apart from 20,720,000 new Shares under the Subscription Agreement, have acquired or disposed of or entered into any agreement or arrangement to acquire or dispose of any voting rights in the Company within the six months prior to the date of the Subscription Agreement and up to the Latest Practicable Date;

• (ii) apart from 10,560,000 Shares owned by Mr. Xu Yong, 38,722,000 Shares indirectly owned by Mr. Xu Yue and 80,960,000 Shares owned by Yusei Japan, own, control or has direction over any shares, outstanding options, warrants, or any securities that are convertible into Shares or any derivatives in respect of Shares nor has entered into any outstanding derivative in respect of securities in the Company;

• (iii) has any arrangement referred to in Note 8 to Rule 22 of the Takeovers Code (whether by way of option, indemnity or otherwise) in relation to the Shares and which might be material to the transactions contemplated under the Subscription Agreement or the Whitewash Waiver;

• (iv) has any agreements or arrangements to which the Subscribers or any parties acting or presumed to be acting in concert with any of them is/are a party which relate to the circumstances in which the Subscribers or any parties acting or presumed to be acting in concert with any of them may or may not invoke or seek to invoke a pre-condition or a condition to the transactions contemplated under the Subscription Agreement or the Whitewash Waiver, nor any such agreements or arrangements the consequences of the Subscribers or any parties acting or presumed to be acting in concert with any of them so invoking or seeking to invoke a precondition or a condition to such transactions would result in any break fees being payable.

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LETTER FROM THE BOARD

As at the Latest Practicable Date, there are not any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in the Company which the Subscribers or any parties acting or presumed to be acting in concert with any of them have borrowed or lent.

9. GENERAL

Pursuant to the Listing Rules, an Independent Board Committee comprising all the independent non-executive Directors has been established by the Company to advise the Independent Shareholders on the terms of the Subscription Agreement and the transactions contemplated thereunder. In compliance with Note 1 of the Notes on dispensations from Rule 26 of the Takeovers Code, an Independent Board Committee comprising all the non-executive Directors should be established to, inter alia, make a recommendation to the Independent Shareholders as to whether the Whitewash Waiver is fair and reasonable and on how to vote. However, given that Yusei Japan is controlled by the Masuda Family under the definition of the Takeovers Code, Mr. Katsutoshi Masuda and Mr. Toshimitsu Masuda, being the non-executive Directors, are not suitable to be included as members of the Independent Board Committee established under the Takeovers Code. The Independent Board Committee which has been established under the Takeovers Code therefore only comprises all the independent non-executive Directors.

Pursuant to Rule 13.39(6) of the Listing Rules and Rule 2.1 of the Takeovers Code, the Board has appointed REORIENT Financial Markets Limited as the Independent Financial Adviser to advise the Independent Board Committee and Independent Shareholders as to, inter alia, the fairness and reasonableness of the terms of the Subscription Agreement, the transactions contemplated thereunder and the Whitewash Waiver and give its recommendation on how to vote. The appointment of the Independent Financial Adviser has been approved by the Independent Board Committee.

None of the members of the Independent Board Committee has any interest or involvement in the transactions contemplated under the Subscription Agreement or the Whitewash Waiver.

10. EGM

A notice convening the EGM to be held at Lin Gang Industrial Zone, Henggengtou Village, Guali Town, Xiaoshan District, Hangzhou City, Zhejiang Province, the PRC on Wednesday, 7 May 2014 at 3:00 p.m. is set out on pages EGM-1 to EGM-2 of this circular. Ordinary resolutions will be proposed at the EGM to consider, and if thought fit, to approve the Subscription Agreement and the transactions contemplated thereunder and the Whitewash Waiver.

A form of proxy for use at the EGM is enclosed with this circular. Whether or not you are able to attend the EGM in person, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon to the Company’s branch share registrar and transfer office in Hong Kong, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong as soon as possible but in any event not later than forty-eight (48) hours before the time of the meeting or any adjourned meeting. Completion and return of the form of proxy will not preclude Shareholders from attending and voting at the meeting of any adjourned meeting should they wish to do so.

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LETTER FROM THE BOARD

11. RECOMMENDATION

The Board considers that the terms of the Subscription Agreement are fair and reasonable and on normal commercial terms, the Whitewash Waiver is fair and reasonable and the Subscription Agreement and the transactions contemplated thereunder and the Whitewash Waiver are in the interests of the Company and the Shareholders as a whole and are fair and reasonable.

12. ADDITIONAL INFORMATION

Your attention is drawn to (i) this letter from the Board; (ii) a letter from the Independent Board Committee as set out on pages 17 to 18 of this circular; and (iii) a letter from the Independent Financial Adviser, containing its advice to the Independent Board Committee and the Independent Shareholders, as set out on pages 19 to 50 of this circular.

Your attention is also drawn to the additional information set out in the appendices of this circular.

Shareholders and potential investors should note that the Subscription, which is subject to a number of Conditions, may or may not proceed to completion. Shareholders and potential investors are reminded to exercise caution when dealing in the Shares.

By Order of the Board YUSEI HOLDINGS LIMITED Katsutoshi Masuda Chairman

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

The following is the text of a letter from the Independent Board Committee setting out its recommendation to the Independent Shareholders in relation to the Subscription Agreement and the transactions contemplated thereunder and the Whitewash Waiver:

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YUSEI HOLDINGS LIMITED 友成控股有限公司*

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 96)

14 April 2014

To the Independent Shareholders

Dear Sir or Madam,

(1) CONNECTED TRANSACTION RELATING TO THE SUBSCRIPTION FOR NEW SHARES; AND (2) APPLICATION FOR WHITEWASH WAIVER

We refer to the circular dated 14 April 2014 issued by the Company (the “ Circular ”) of which this letter forms part. Unless otherwise specified, terms defined in the Circular shall have the same meanings in this letter.

We have been appointed as the members of the Independent Board Committee to consider the Subscription Agreement and the transactions contemplated thereunder and the Whitewash Waiver and to advise the Independent Shareholders as to the fairness and reasonableness of the same. The Independent Financial Adviser, REORIENT Financial Markets Limited, has been appointed to advise the Independent Board Committee and the Independent Shareholders in this regard.

RECOMMENDATIONS

We wish to draw your attention to the letter from the Board, as set out from pages 5 to 16 of the Circular, and the letter from the Independent Financial Adviser which contains its advice to the Independent Board Committee in respect of the Subscription Agreement and the transactions contemplated thereunder and the Whitewash Waiver as set out from pages 19 to 50 of the Circular.

• For identification purpose only

– 17 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

After taking into consideration the advice from the Independent Financial Adviser and the terms of the Subscription Agreement and the transactions contemplated thereunder and the Whitewash Waiver, we consider that the terms of the Subscription Agreement and the transactions contemplated thereunder and the Whitewash Waiver are in the interests of the Company and the Shareholders as a whole, on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned. Accordingly, we recommend the Independent Shareholders to vote in favour of the resolutions to be proposed in the EGM to approve the Subscription Agreement and the transactions contemplated thereunder and the Whitewash Waiver.

Lo Ka Wai

Yours faithfully, For and on behalf of Independent Board Committee Fan Xiaoping Independent non-executive Directors

Hisaki Takabayashi

– 18 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the text of the letter of advice from REORIENT Financial Markets Limited, the independent financial adviser to the Independent Board Committee and the Independent Shareholders for the purpose of incorporation into this circular.

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==> picture [46 x 13] intentionally omitted <==

Suites 1102-03 Far East Finance Centre 16 Harcourt Road, Admiralty Hong Kong 14 April 2014

The Independent Board Committee and the Independent Shareholders of Yusei Holdings Limited

Dear Sirs,

CONNECTED TRANSACTION RELATING TO THE SUBSCRIPTION FOR NEW SHARES AND APPLICATION FOR WHITEWASH WAIVER

INTRODUCTION

We refer to our appointment as the independent financial adviser to the Independent Board Committee and the Independent Shareholders in connection with the Subscription and the Whitewash Waiver, details of which are set out in the circular of the Company dated 14 April 2014 (the “ Circular ”) of which this letter forms part. Capitalised terms used in this letter have the same meanings as defined in the Circular, unless the context requires otherwise.

On 22 January 2014, the Company entered into the Subscription Agreement with the Subscribers, whereby the Subscribers agreed to subscribe for 26,400,000 new Shares. Mr. Xu Yong and Mr Manabu Shimabayashi, two of the Subscribers, are executive Directors and thus connected persons of the Company under the Listing Rules. The Subscription constitutes a connected transaction for the Company under Chapter 14A of the Listing Rules and is subject to the reporting, announcement and independent shareholders’ approval requirements.

Following the allotment and issue of the Subscription Shares, the aggregate interest of Xu Brothers in the voting rights of the Company will increase from approximately 28% to approximately 34.59%. As such, Xu Brothers will be obliged to make a mandatory general offer under Rule 26 of the Takeovers Code for all the securities of the Company not already owned or agreed to be acquired by them unless the Whitewash Wavier is obtained from the Executive. Xu Brothers have made an application to the Executive for the Whitewash Waiver from an obligation to make such a general offer under Rule 26 of the Takeovers Code. The Executive has indicated that it will grant to Xu Brothers the Whitewash Waiver subject to the approval of the Independent Shareholders at the EGM.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

For the purpose of the Listing Rules, the Subscribers and their respective associates, and Shareholders who are involved in or interested in the Subscription shall abstain from voting at the EGM in respect of the resolutions approving the Subscription Agreement and the transactions contemplated thereunder. For the purpose of the Whitewash Waiver, Mr Xu Yong and parties acting or presumed to be acting in concert with him, together with their respective associates and Shareholders who are involved in or interested in the Subscription and/or the Whitewash Wavier shall abstain from voting at the EGM in respect of the resolutions approving the Subscription Agreement, the transactions contemplated thereunder and the Whitewash Waiver.

The Independent Board Committee comprising all the independent non-executive Directors, namely Mr Hisaki Takabayashi, Mr Fan Xiaoping and Mr Lo Ka Wai, has been formed to give advice and make recommendation to the Independent Shareholders in respect of the Subscription and the Whitewash Waiver.

REORIENT Financial Markets Limited has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders as to whether the terms of the Subscription are fair and reasonable and the Subscription is on normal commercial terms, in the ordinary and usual course of business and in the interests of the Company and the Shareholders as a whole, and whether the Whitewash Waiver is fair and reasonable and in the interests of the Company and the Shareholders as a whole.

In formulating our opinion, we have relied upon the information, facts and representations contained in the Announcement, the Circular and those supplied or made available by the management of the Company to us. We have assumed that all such information, facts and representations were true and accurate in all respects at the time they were supplied or made and continue to be true and accurate as at the Latest Practicable Date and can be relied upon. We have no reason to doubt the truth, accuracy and completeness of such information and representations and have confirmed with the management of the Company that no material facts have been withheld or omitted from such information and representations.

We have taken all reasonable and necessary steps to comply with the requirements set out in Rule 13.80 of the Listing Rules. We consider that we have been provided with sufficient information to enable us to reach an informed view. We have not, however, conducted any independent verification of such information or any independent in-depth investigation into the business, affairs, financial position or prospects of the Group nor have we carried out any in-depth research on the Group, the Subscribers, Mr Xu Yue and their respective associates.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

PRINCIPAL FACTORS CONSIDERED

In formulating our opinion on the Subscription and the Whitewash Waiver, we have taken into consideration the following principal factors:

Information on the Group

Business of the Group

The Group is principally engaged in the design, development and fabrication of precision plastic injection moulds, and the manufacture of plastic components in the PRC. The Group also provides services for certain assembling and further processing of plastic components for its customers for maintenance and enhancement of its position as a one-stop total solution provider in the plastic injection moulding industry. The Group’s customers are mainly manufacturers of home electrical appliances, office equipment and plastic components with production facilities located in the PRC.

Yusei Japan, the founder of the Group and the controlling Shareholder, and principally engages in the design, production, and sale of plastic molds and products in Japan, and offers various machines, including machinery designs, computer aided design, computer aided manufacturing, three dimensional measuring machines, and grade machines in Japan, founded the Group in 1992.

Mr Xu Yong joined a subsidiary of the Group as its deputy general manager in June 1995 and was appointed as executive Director in April 2005 when the Company prepared for listing of the Shares on the GEM. Mr Xu Yong was allotted 9,600,000 Shares (representing 6% of the issued share capital of the Company immediately upon the listing of the Shares on the GEM) under a pre-listing allotment exercise in recognition of his long term service and contributions to the business development of the Group. Mr Xu Yong’s shareholding in the Company increased to 10,560,000 Shares (representing 6% of the issued share capital of the Company as at the Latest Practicable Date) as a result of a bonus issue of Shares in May 2010.

Mr Xu Yue, the elder brother of Mr Xu Yong, was a business partner of Yusei Japan in Hangzhou Yusei Industrial Co., Ltd. (“ Yusei Industrial ”), a 30%-owned associate of the Company. As at the Latest Practicable Date, Mr Xu Yue owned a 70% interest in Yusei Industrial. Mr Xu Yue, through Superview International Investment Limited (“ Superview* ”), indirectly held 3,200,000 Shares (representing 2% of the issued share capital of the Company immediately upon the listing of the Shares on the GEM) at the time of listing of the Company. In November 2011, Mr Xu Yue, through Superview, acquired 35,200,000 Shares (representing 20% of the then issued share capital of the Company) from Yusei Japan and thereof his interest in the Company, through Superview, increased to 38,722,000 Shares (representing approximately 22% of the issued share capital of the Company as at the Latest Practicable Date). Mr Xu Yue was appointed as a non-executive Director in February 2013 and resigned in March 2013. Mr Xu Yue has not participated in the day-to-day operations of the Group.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

At the time of listing of the Company, the day-to-day operations of the Group were managed by Mr Keisuke Murakoshi, a former executive Director, together with Mr Xu Yong. After the resignation of Mr Keisuke Murakoshi as an executive Director in January 2010, the day-to-day operations of the Group have been managed by Mr Xu Yong with the assistance of the Group’s senior management team.

Financial performance of the Group

As set out in the Company’s annual results announcement for the year ended 31 December 2013 (the “ 2013 Annual Results Announcement ”), the Group operated in a single operating segment in respect of moulding fabrication, manufacturing and trading of moulds and plastic components.

Selected information of the Group’s consolidated financial results for the years ended 31 December 2013, 2012 and 2011 (as extracted from the Company’s annual reports and annual results announcement) is set out below.

	**Year **	ended 31 December
	2013	2012	2011
	RMB’000	RMB’000	RMB’000
	(Audited)	(Audited)	(Audited)
Revenue	892,968	984,776	831,994
Gross profit	116,975	102,921	116,024
Gross profit margin	13.10%	10.45%	13.95%
Loss caused by fire accident	(21,650)	–	–
Gain on disposal of
property, plant and
equipment and land use
rights	11	35,239	–
Profit attributable to equity
holders of the Company	5,604	41,445	15,340
Net profit margin
(excluding non-recurring
loss caused by fire
accident/gain on
disposal)	3.05%	0.63%	1.84%
Dividend	–	–	12,320

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Group’s revenue decreased by approximately 9.3% from approximately RMB984.8 million for the year ended 31 December 2012 to approximately RMB893.0 million for the year ended 31 December 2013. As set out in the 2013 Annual Results Announcement, such decrease was mainly due to the decrease in production capacity as a result of a fire on 1 January 2013 in the production plant of Hangzhou Yusei Machinery Co., Ltd. (“ Hangzhou Yusei ”), one of the Company’s subsidiaries, located in Lingang Industrial Park, Xiaoshan, Hangzhou City, Zhejiang Province, the PRC. The Group recorded a loss caused by the fire accident of approximately RMB21.7 million (after netting off a compensation income received from insurance claims of approximately RMB78.1 million). According to the Company, the damaged production facilities have reduced the Group’s total production capacity by approximately 15%. The profit attributable to equity holders of the Company decreased by approximately 86.5% from approximately RMB41.4 million for the year ended 31 December 2012 to approximately RMB5.6 million for the year ended 31 December 2013. The substantial decrease was mainly attributable to the combined effect of (i) the loss caused by the fire accident and the decrease in the Group’s total production capacity; (ii) a decrease in administrative expenses mainly due to reduction in salaries of Hangzhou Yusei after the fire accident and technical service fee paid to Yusei Japan; (iii) a gain on disposal of the Group’s factory building located at No. 8 Youcheng Road, Xiaoshan Economic and Technology Development Zone, Zhejiang Province, the PRC and the related land use right of approximately RMB35.2 million during the year ended 31 December 2012 in connection with some redevelopment plan of the area by the local government; and (iv) a decrease in finance costs as a result of the reduction in the Group’s average bank borrowings due to repayments by the proceeds from the disposal of the Group’s factory building and the compensation received from insurance claims.

If the one-off gain on disposal in 2012 and the loss caused by the fire accident in 2013 were excluded, the Company would have recorded a profit attributable to shareholders of RMB6.2 million in 2012 and RMB27.3 million in 2013, representing a significant improvement.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Group’s revenue increased by approximately 18.4% from approximately RMB832.0 million for the year ended 31 December 2011 to approximately RMB984.8 million for the year ended 31 December 2012. We understand from the Company that such increase was mainly due to an increase in the sale of plastic injection mould products which have relatively higher selling prices than plastic component products’. The profit attributable to equity holders of the Company increased by approximately 170.2% from approximately RMB15.3 million for the year ended 31 December 2011 to approximately RMB41.4 million for the year ended 31 December 2012. The substantial increase was mainly due to the gain on disposal of the Group’s factory building of approximately RMB35.2 million during the year ended 31 December 2012. We understand from the Company that such gain on disposal was free from income tax. If the gain on disposal of approximately RMB35.2 million is excluded, the profit attributable to equity holders of the Company decreased by approximately 59.5% from approximately RMB15.3 million for the year ended 31 December 2011 to approximately RMB6.2 million for the year ended 31 December 2012. Such decrease is mainly due to the combined effect of (i) a higher portion of the sales of plastic components for office equipment (which bore comparatively lower gross profit margin); (ii) an increase in distribution costs as a result of an increase in unit costs of packing materials and transportation costs; and (iii) an increase in finance costs as a result of an increase in borrowing interest rates as a result of the increasing trend of the market interest rate and the Group’s average bank borrowings for its expanding operations.

Based on the Group’s published results for the two years ended 31 December 2012 and 2011, the Group’s gross profit margin and net profit margin have been decreasing as a result of, among other factors, keen competition, increasing financing costs due to the increasing market interest rate and increasing distribution and transportation costs. Excluding the non-recurring gain on disposal of a factory building in 2012, the gross profit margin and net profit margin of the Group decreased from 13.95% and 1.84% in 2011 to 10.45% and 0.63% in 2012. Excluding the non-recurring loss caused by fire accident in 2013, the gross profit margin and net profit margin of the Group increased to 13.10% and 3.05% in 2013. The increase in profit margins was mainly due to an increase in the sales proportion of plastic products with comparatively higher margin in 2013. The fire in Hangzhou Yusei’s factory in January 2013 has affected the Group’s production capacity which resulted in a decrease in revenue for the year ended 31 December 2013. The Group is in the process of rebuilding damaged part of the production plant and has also decided to commence construction of a new production plant with a view to enhancing its competitiveness and production capability.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Financial position of the Group

We set out below information in respect of the Group’s consolidated statements of financial position as at 31 December 2013, 2012 and 2011 with reference to the Company’s annual reports and annual results announcement.

Non-current assets Property, plant and equipment Intangible asset Land use rights Interests in associates Deposits paid to acquire non-current assets Current assets Inventories Debtors, deposits and prepayments Amount due from an associate Pledged bank balance Bank balances, deposits and cash	As at 31 December 2013 2012 2011 RMB'000 RMB'000 RMB'000 (Audited) (Audited) (Audited) 321,317 373,455 402,609 864 417 530 18,797 19,420 20,098 23,612 23,469 20,031 – – 57 364,590 416,761 443,325 138,810 140,390 163,417 288,359 330,515 310,547 4,266 3,058 9,530 2,479 31,265 46,972 74,671 63,346 36,575 508,585 568,574 567,041

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Current liabilities Creditors and accrued charges Amount due to ultimate holding company Amount due to associates Income tax liabilities Obligations under finance leases Bank and other loans Net current liabilities Total assets less current liabilities Non-current liabilities Obligations under finance leases Bank and other loans Deferred income Net assets Equity Share capital Reserves

As at 31 December 2013 2012 2011 RMB'000 RMB'000 RMB'000 240,319 309,647 357,324 25,429 24,441 129 10,972 5,991 – 8,206 5,526 5,946 5,163 13,451 15,131 302,188 330,567 359,657 592,277 689,623 738,187 (83,692) (121,049) (171,146) 280,898 295,712 272,179 8,353 13,516 8,961 10,741 27,422 50,241 1,126 1,374 943 20,220 42,312 60,145 260,678 253,400 212,034 1,810 1,810 1,810 258,868 251,590 210,224 260,678 253,400 212,034

The Group’s total assets amounted to approximately RMB873.2 million, approximately RMB985.3 million and approximately RMB1,010.4 million as at 31 December 2013, 2012 and 2011 respectively. As at 31 December 2013, the Group’s total assets comprised mainly property, plant and equipment, inventories and debtors, deposits and prepayments.

– 26 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In connection with the Subscription, the Company has engaged Avista Valuation Advisory Limited (“ Avista ”), an independent professional valuer, to value the Group’s property interests as at 28 February 2014. A copy of the property valuation report issued by Avista (the “ Valuation Report ”) is set out in Appendix II to the Circular. We have read the Valuation Report and have discussed the major bases and assumptions of the valuation with Avista.

We understand that Avista is an appraisal company which carries out business and property valuations in the PRC. Its team members are experienced in PRC business and property valuations. We have reviewed the qualification, experience and independence of Avista and consider that Avista possesses the relevant qualification and experience and is independence to conduct the valuation of the Group’s property interests. We have also discussed with the relevant personnel of Avista in respect of the valuation.

The Group’s total liabilities amounted to approximately RMB612.5 million, approximately RMB731.9 million and approximately RMB798.3 million as at 31 December 2013, 2012 and 2011 respectively. As at 31 December 2013, the Group’s total liabilities comprised mainly creditors and accrued charges and bank and other borrowings.

The Group has been financing its business operation and development mainly via short-term bank financing. This is the reason for the Group consistently records a net current liability position. The Group seeks refinancing of its bank borrowings when they come due. As at 31 December 2013, the Group’s bank borrowings are secured by land use rights, and property, plant and equipment with an aggregate net carrying value of approximately RMB8.6 million and RMB43.3 million respectively. In this regard, we note that the independent auditor had drawn attention to the Group’s net current liabilities as at the balance sheet date as set out in its reports in respect of the Group’s consolidated financial statements for each of the year ended 31 December 2013, 2012 and 2011. The independent auditor had considered that such financial conditions indicated the existence of a material uncertainty which might cast significant doubt about the Group’s ability to continue as a going concern without qualifying its true and fair opinion on the Group’s consolidated financial statements. The Group was able to generate positive cash flow from its operating activities for the three years ended 31 December 2013. We understand from the Company that (i) the auditors have not issued any qualified opinion in respect of the Group’s financial statements and the Group’s financial statements have been prepared on a going concern basis despite the net current liability position of the Group; and (ii) the Group has managed to maintain a reasonable gross profit margin and generate positive cash flow from its operating activities to meet its refinancing requirements, including any finance costs. Accordingly, we agree with the Directors that this should not affect the Group as a going concern based on the condition that there are no material changes to the Group trading position and prospects.

As at 31 December 2013, the gearing ratio of the Group amounted to 37.4% (31 December 2012: 39.1%), which is calculated by adding up finance leases and borrowings and dividing the sum by total assets. Whilst the Company has

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

confirmed that it does not anticipate any major issue in refinancing the Group’s borrowings, it is important for the Group to maintain a sufficient cash buffer with a view to keeping the Group’s short-term financial liquidity.

Current ratio is a commonly used tool to measure a company’s short-term liquidity and ability to meet its short-term obligations, and is calculated by dividing current assets by current liabilities. Quick ratio is another commonly used tool to measure a company’s ability to meet its short-term obligations with its most liquid assets, and is calculated by dividing current assets (excluding inventories) by current liabilities. In general, a higher ratio indicates a better liquidity position of a company in meeting its short-term obligations. The Group maintained a current ratio of 0.86 as at 31 December 2013 which is better than the Group’s current ratio of 0.82 as at 31 December 2012 and 0.77 as at 31 December 2011. The Group had quick ratios of 0.62 as at 31 December 2013 and 2012 which are better than the quick ratio of 0.55 as at 31 December 2011 when the business of the Group was relatively difficult (during the year the Group’s net profit decreased by 28% year-on-year). We understand from the Company that the improvement in the Group’s short-term liquidity position in 2012 and 2013 was partly because the Group had non-recurring cash inflows in both 2012 and 2013 in respect of proceeds from the disposal of the Group’s factory building of approximately RMB47.3 million and the insurance claim compensation received of approximately RMB78.1 million, respectively and as a result which led to a decrease of bank and other loans from RMB409.9 million as at 31 December 2011 to RMB358.0 million as at 31 December 2012 and RMB312.9 million as at 31 December 2013. During the recent years, short-term liquidity is additionally important to the Group as a result of (i) the decrease in the Group’s sales during the year ended 31 December 2013; (ii) the short-term reduction in the Group’s production capacity as a result of the damage to Hangzhou Yusei’s production facilities; and (iii) the proposed construction of a new production plant as further described in the paragraph headed “Industry overview and prospects” below.

As set out in the 2013 Annual Results Announcement, the Group has commenced re-building the factory of Hangzhou Yusei (the “ New Plant No. 2 ”) at the same location since 22 May 2013. Upon completion, the Group’s production capacity will be restored to the level prior to the fire accident. The estimated re-building construction cost is approximately RMB30 million. We understand from the Company that the Group has been using different sources of funding, including bank loans, sales proceeds and the compensation received from the insurance company in respect of the fire accident to support, among other things, the re-building of the New Plant No. 2. In addition, as at 31 December 2013, the Group had capital expenditure contracted for but not provided in the financial statements of approximately RMB3.4 million in respect of acquisition of property, plant and equipment mainly for the New Plant No. 2. Apart from the above, the Company has confirmed that the Group has no material capital commitments as at 31 December 2013.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Cash flow position of the Group

We set out below information in respect of the Group’s consolidated statements of cash flow for the years ended 31 December 2012 and 2011 with reference to the Company’s annual reports.

Net cash from operating activities Net cash from/(used in) investing activities Net cash used in financing activities Net increase/(decrease) in cash and cash equivalents	Year ended 31 December 2012 2011 RMB'000 RMB'000 (Audited) (Audited) 51,710 68,653 32,335 (113,416) (57,208) (11,740) 26,837 (56,503)

We understand from the Company that, for the year ended 31 December 2013, the Group generated substantial net cash from operating activities higher than the net cash from operating activities of approximately RMB51.7 million for the year ended 31 December 2012. The increase in net cash flow from operating activities was primarily due to the insurance claim compensation received of approximately RMB78.1 million in 2013. If the insurance claim compensation received of approximately RMB78.1 million were excluded, the Group would have recorded net decrease in cash and cash equivalents for the year ended 31 December 2013.

Industry overview and prospects

Plastic injection moulding is a manufacturing technique for making parts from plastic material and is the most common method of part manufacturing. According to the website of the National Bureau of Statistics of China (www.stats.gov.cn), the production quantities of China’s plastic products are 44.3 million tons, 49.9 million tons, 53.3 million tons and 58.4 million tons for the year ended 31 December 2010, 2011, 2012 and 2013 respectively, representing a compound annual growth rate of approximately 9.6%. According to the website of the China Customs statistics (www.chinacustomsstat.com), the total export value of plastic products in China were US$18.7 billion, US$23.5 billion, US$31.6 billion and US$35.3 billion for the year ended 31 December 2010, 2011, 2012 and 2013 respectively, representing a compound annual growth rate of approximately 23.6%.

Plastic injection moulds and plastic components manufactured by plastic injection moulding are intermediate products that depend heavily on demand from downstream industries, such as automobiles, household electrical appliances and office equipment industries. Manufacturers are aggressively introducing new models and changing their product design to cope with keen market competition.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Plastic injection moulds become industrial consumables carrying a short life cycle. Thus, increasing demand for plastic moulds is expected to continue.

The plastic injection moulding industry is highly fragmented. Players in the industry are located in various industries around the world. As such, the Company competes with industry players both domestically and globally. The Group’s major competitors are companies located in the PRC that provide one-stop total plastics solutions as well as companies located in the PRC that engage in the manufacturing of plastic components utilising the plastic injection molding process.

We understand from the Company that the Group has accumulated over 20 years of technical and management expertise in the high-end mould and relevant parts industry. The Group’s existing customers include certain market leaders in the industry and the Group has cooperated with some of these customers for more than 10 years. The Group believes that its customers consider the Group is a reliable one-stop service provider from mould research and development to parts manufacturing. On the other hand, the Group had established production plants in Hangzhou, Guangzhou and Suzhou, the PRC. The Group aims at shortening the lead time and thus providing more timely services to its customers. In addition, the Group has also been keeping its distribution costs down in order to be more competitive.

In view of the Group’s competitive edges as mentioned above, the management of the Company is of the view that the Group will be continued to be able to benefit from the growth in the China’s plastic products market.

The Company will continue to leverage on the experience of its management team in the plastic component manufacturing industry and its expertise in mould development to enhance the quality of its products, expand its customer base and strengthen the market position in the high-end mould industry and its overall core competitiveness in relation to the one-stop services ranging from products development, plastic injection, aluminium-plating and assembling. For keeping abreast of the current development in the market and the customers’ needs, the Group has strengthened communications with its customers overseas. Apart from seconding technicians to Japan for training, the Group has also employed experienced salespersons and technicians from United Kingdom and Japan in order to improve the capability of marketing and technical ability. As regards the quality of the products, the Group has adopted an enterprise resource planning system to facilitate the production flow and monitor the product quality. To response the changing technology in the industry, the Company will continue to acquire and install advanced machinery and equipment and to increase the ability to design and develop precision plastic injection moulds. The Company plan to provide a one-stop solution to its customers from precision mould, plastic injection, aluminium plating to assembling in order to improve the sales network to capture opportunities in order to increase market share and to enlarge the customer bases. Whilst, the Group is cautious in accepting the new customers, it will continue to promote its business internationally. For the year ended 31 December 2013, the Group has built up business relationships with several new internationally reputable customers in Europe and America, including, among other places, Germany, France and Brazil.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Based on an article dated 9 July 2013 published in the website of China Die & Mould Industry Association (www.cdmia.com.cn), during the period of China’s 12th Five-Year Plan (2011–2015), the development of plastic mould industry shall continue to move toward large scale, sophisticated, high-efficient, complicated, high-performance and green manufacturing. In addition, research and development shall continue to materialise high-efficient production, environmental friendly manufacturing and high-quality moulds. As set out in its website (www.cdmia.com.cn), China Die & Mould Industry Association (“ CDMIA ”) was found in October 1984, approved and registered by the Ministry of Civil Affairs of the PRC and is guided by the State-Owned Assets Supervision and Administration Commission of the State Council. CDMIA is the sole nationwide organisation in die and mould industry in China with 1,200 voluntary group members, mainly comprising die and mould manufacturing companies, relevant industry enterprises, research institutes, etc. in China. We understand from the Company that given the promoting policy of the government and the Group continuing development in injection mould products requiring better quality and higher standard of precision, it considers the prospect of the high-end mould industry in the PRC is promising.

The Group has commenced re-building the New Plant No. 2 with planned construction area of approximately 17,000 sq.m. since 22 May 2013. We understand from the Company that the New Plant No. 2 is expected to be completed in June 2014. The current sales of the Group are significantly affected by the bottlenecking production capacity. To further enhance the Group’s prospect, the Company has decided to build a new plant (the “ Plant No. 3 ”) at a piece of undeveloped land owned by the Group adjacent to the New Plant No. 2 in Lingang Industrial Park, Xiaoshan, Hangzhou City, Zhejiang Province, the PRC. We understand from the Company that construction of the Plant No. 3 is expected to be commenced in June 2014 and completed by May 2015. Upon completion of the Plant No. 3, the Group’s production capacity will be increased by 30%.

Based on the above, we consider that the Group’s strategy in enhance competitiveness in terms of technology and marketing effects and the favourable industry environments including supporting government policies and the increasing trend in the export sales of China’s plastic products during 2010 to 2013 and the development of the plastic mould industry as set out in China’s 12th Five-Year Plan, if materialised, would have a positive impact to the Group’s volume of business and prospects.

Background of the Subscribers

The Subscribers comprise Mr Xu Yong, Mr Manabu Shimabayashi, Mr Wang Dehong, Mr Li Yuquan, Mr Shen Jinjiang, Mr Yu Mingqi, Mr Li Qunjin, Mr Liu Haishu and Mr Chen Gang.

Mr Xu Yong and Mr Manabu Shimabayashi, joined the Group in June 1995 and June 2007 respectively, are executive Directors. Mr Wang Dehong, joined the Group in July 1995, is the Group’s production supervisor. Mr Li Yuquan, joined the Group in January 2010, is the Group’s managing supervisor. Mr Shen Jinjiang, joined the

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Group in May 2013, is the Group’s financial controller. Mr Yu Mingqi, joined the Group in July 1994, is the deputy general manager of Guangzhou Yusei Machinery Co., Ltd. (“ Guangzhou Yusei ”), one of the Company’s subsidiaries. Mr Li Qunjin, joined the Group in August 1996, is a co-head of the Group’s operation technology department. Mr Liu Haishu, joined the Group in August 1998, is a co-head of the Group’s operation technology department. Mr Chen Gang, joined the Group in September 1992, is the deputy general manager of Hangzhou Yusei.

The table below sets out the number of Subscription Shares proposed to be subscribed for by each Subscriber:

Name of Subscriber Mr Xu Yong, executive Director Mr Manabu Shimabayashi, executive Director Mr Wang Dehong, production supervisor Mr Li Yuquan, managing supervisor Mr Shen Jinjiang, financial controller Mr Yu Mingqi, deputy general manager of Guangzhou Yusei Mr Li Qunjin, co-head of operation technology department Mr Liu Haishu, co-head of operation technology department Mr Chen Gang, deputy general manager of Hangzhou Yusei Total

Number of Subscription Shares 20,720,000 660,000 660,000 660,000 1,060,000 660,000 660,000 660,000 660,000

26,400,000

All the Subscribers are Directors and other key employees of the Group. The Company believes that the Subscription reflects their long-term commitment, confidence and support to the Company.

Reasons for and benefits of the Subscription

As set out in the letter from the Board to the Circular (the “ Letter from the Board ”), the Company intends to apply the net proceeds of approximately HK$19.7 million from the Subscription (i) for the construction of the Plant No. 3; and (ii) as general working capital. The Board also believes that the Subscription signifies the confidence of Mr Xu Yong and Mr Manabu Shimabayashi, as executive Directors, and other key employees of the Company in the future development and prospects of the Group, which the Company considers crucial and beneficial to the long-term development of the Group.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We were informed by the management of the Company that the estimated total construction cost of the Plant No. 3 is approximately HK$19 million and is to be financed by the net proceeds from the Subscription. The Group also plans to purchase new equipment for the Plant No. 3 with a budget aggregate purchase price of approximately HK$10 million which is expected to be financed via finance leases or the Group’s working capital (including short-term loans). As discussed above in this letter, short-term bank and other borrowings have been a financing means for the Group’s operations and developments. However, the Group’s trading and liquidity position was adversely affected by the fire in Hangzhou Yusei’s factory in 2013.

Based on the Company’s annual reports and annual results announcement, we set out below the Group’s interest coverage ratios (calculated by dividing profit before interest and taxation by finance costs) for the years ended 31 December 2013, 2012 and 2011.

	**Year **	ended 31 December
	2013	2012	2011
	RMB’000	RMB’000	RMB’000
Profit before interest and
taxation (excluding
non-recurring loss caused
by fire accident/gain on
disposal)	54,058	38,886	46,997
Finance costs	23,217	30,203	22,975
Interest coverage ratio
(times)	2.33@	1.29#	2.05

@ if the loss caused by fire accident is included, the interest coverage ratio for the year ended 31 December 2013 would be 1.40.

• if the gain on disposal is included, the interest coverage ratio for the year ended 31 December 2012 would be 2.45.

The Group’s interest coverage ratios decreased from 2.05 times for the year ended 31 December 2011 to 1.29 for the year ended 31 December 2012. The ratio increased to 2.33 times for the year ended 31 December 2013. The improvement in the Group’s interest coverage ratio was mainly attributable to the decrease in finance costs as a result of loan repayments by the non-recurring cash inflows from the disposal of the Group’s factory building and the compensation received from insurance claims in 2012 and 2013, respectively.

We have reviewed and discussed with the Company the cash flow requirements and projections of the Group for the year ending 31 December 2014 and the estimated construction costs of the Plant No. 3 and the other cash inflow and outflow requirements of the Group, including the capital expenditure in respect of the New Plant No. 2 and other loan repayment obligations. As set out in the Letter from the Board, the Company intends to apply the net proceeds from the

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Subscription principally to finance the construction of the Plant No. 3. We understand from the Company that the Group is of the view that the net proceeds from the Subscription, will provide further flexibility in planning and managing its short-term liability position and avoid additional finance costs and hence maintain the Group’s prospect. Despite an improvement in the current ratio, quick ratio and gearing ratio as at 31 December 2013 when comparing to those as at 31 December 2012 and 2011, the total bank balances and cash decreased to RMB77.2 million from RMB94.6 million as at 31 December 2012 and RMB83.5 million as at 31 December 2011. Without the Subscription, the Group may have to raise further funding through bank borrowings (likely short terms) which would again increase its finance cost. When the Group’s production capacity improves, it will require a higher level of working capital and may also be supported by short term bank borrowings as the Group has mostly always been doing. The Subscription will allow the Group to match capital expenditure by long-term financing and better control short-term liquidity risk.

The Subscribers are directors of the Company and key employees of the Group. One of the Subscribers, Mr Xu Yong, joined the Group in June 1995, is the executive Director and the manager (a key management position) of Zhejiang Yusei Plastics & Mould Co., Ltd. (“ Zhejiang Yusei* ”), one of the Company’s major operating subsidiaries. Mr Xu is currently responsible for the general management of the Group and the supervision of the overall production operation. Among the two executive Directors, Mr Xu is the only local Director in the PRC. The Company is of the view that Mr Xu is most instrumental to the business and operation of the Group. Mr Xu is currently a 6% Shareholder. Upon completion of the Subscription, Mr Xu will become a substantial shareholder of the Company. The Company is of the view that Mr Xu’s further investment under the Subscription and that he becoming a substantial shareholder of the Company after completion of the Subscription demonstrate his strong commitment to and confidence in the Group’s continuing development. Mr Xu plays a significant role in leading and managing the Group. We concur with the Company that the Subscription will further align Mr Xu’s interests as a key management member and a Shareholder, and would further motivate him to devote his efforts to the Group’s development, which the Directors consider crucial and beneficial to the long-term development of the Group.

The other Subscribers include another executive Director, Mr Manabu Shimabayashi and seven key employees of the Group. Mr Shimabayashi, joined the Group in June 2007, is the director and deputy manager of Zhejiang Yusei. Mr Wang Dehong, joined the Group in July 1995, is the Group’s production supervisor and is responsible for enhancement of the Group’s overall production management, quality and efficiency. Mr Li Yuquan, joined the Group in January 2010, is the Group’s managing supervisor and is responsible for the internal management of the Group, upgrading the management and optimising business operations. Mr Shen Jinjiang, joined the Group in May 2013, is the Group’s financial controller. Mr Yu Mingqi, joined the Group in July 1994, is the deputy general manager of Guangzhou Yusei. Mr Li Qunjin, joined the Group in August 1996, is a co-head of the operation technology department. Mr Liu Haishu, joined the Group in August 1998, is a co-head of the operation technology department. Mr Chen Gang, joined the Group

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

in September 1992, is the deputy general manager of Hangzhou Yusei and is responsible for the overall operation and technology enhancement for mould fabrication. We are of the view that the Subscription can help align their interests as management staff members and Shareholders, and can also serve as an incentive to retain and maintain on-going relationships with the Subscribers which will be beneficial to the long-term growth of the Group.

Having considered the information from the Company and our review and analysis mentioned above, we agree with the Directors’ view that the Subscription helps the Group raise funds for the construction of the Plant No. 3 and signifies the confidence of the Subscribers in the future development and prospects of the Group and we consider that the Subscription is in the interests of the Company and its Shareholders. The Group’s business is the design, development and fabrication of precision plastic injection moulds, and the manufacture of plastic components in the PRC. It is not in the Group’s ordinary and usual course of business to issue new Shares and thus to carry out the Subscription but the Subscription is incidental to the Group’s development of its ordinary and usual course of business.

Principal terms of the Subscription

Under the Subscription Agreement, the Subscribers agreed to subscribe for 26,400,000 new Shares, representing approximately 15% of the existing issued share capital of the Company and approximately 13.04% of the issued share capital of the Company as enlarged by the issue of the Subscription Shares as at the Latest Practicable Date, at HK$0.80 per Subscription Share.

The Subscription Shares, when issued and fully paid, will rank pari passu in all respects among themselves and with all the Shares in issue at the date of allotment and issue of the Subscription Shares, including the right to any dividends or distributions made or declared on or after the date of allotment and issue of the Subscription Shares.

Subscription Price

We note that the Subscription Price was arrived at after arm’s length negotiation between the Company and the Subscribers with reference to, among others, the prevailing market prices of the Shares on the Stock Exchange and the current market conditions. The Subscription Price of HK$0.80 per Subscription Share represents:

• (i) a discount of approximately 5.88% to the closing price of HK$0.85 per Share as quoted on the Stock Exchange on the Last Trading Day;

• (ii) a discount of approximately 4.76% to the average closing price of approximately HK$0.84 per Share for the last five trading days up to and including the Last Trading Day;

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

• (iii) a discount of approximately 6.98% to the average closing price of approximately HK$0.86 per Share for the last ten trading days up to and including the Last Trading Day; and

• (iv) a discount of approximately 23.81% to the closing price of HK$1.05 per Share as quoted on the Stock Exchange on the Latest Practicable Date.

Historical performance of Share price

The chart below illustrates the daily closing prices of the Shares during the 12-month period up to and including the date of the Subscription Agreement (the “ Past 12-Month Period ”) and up to the Latest Practicable Date:

==> picture [416 x 172] intentionally omitted <==

Source: Bloomberg

During the Past 12-Month Period, the closing price of the Shares ranged from HK$0.75 per Share to HK$1.00 per Share with an average closing price of approximately HK$0.855 per Share (the “ 12-Month Average Closing Price ”). The Subscription Price represents a discount of approximately 6.43% to the 12-Month Average Closing Price.

– 36 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Trading liquidity of the Shares

We set out below the monthly trading volume, the average daily number of Shares traded per month expressed in (i) number of Shares; (ii) a percentage to the total number of Shares in issue; and (iii) a percentage to the total number of Shares held by the other public Shareholders during the Past 12-Month Period and up to the Latest Practicable Date:

						Percentage	Percentage
						of average
			Percentage				daily
			of average				trading
					daily		volume
				trading			to total
				volume		number
	Total	Average		to total		of Shares
	monthly	daily	number			held by
	trading	trading	of Shares				public
Month	volume	volume	in issue			Shareholders
	(Number of	(Number of
	Shares)	Shares)			(%)		(%)
		(Note 1)		(Note 2)			(Note 3)
2013
January	2,178,000	99,000			0.06%		0.23%
February	4,796,400	282,141			0.16%		0.65%
March	422,400	21,120			0.01%		0.05%
April	380,000	19,000			0.01%		0.04%
May	42,000	2,000			0.00%		0.00%
June	100,000	5,263			0.00%		0.01%
July	170,000	7,727			0.00%		0.02%
August	602,000	28,667			0.02%		0.07%
September	78,000	3,900			0.00%		0.01%
October	1,234,000	58,762			0.03%		0.14%
November	546,000	26,000			0.01%		0.06%
December	1,044,000	52,200			0.03%		0.12%
2014
January (up to the
Last Trading
Day)	178,000	12,714			0.01%		0.03%
January	349,000	17,450			0.01%		0.04%
February	1,004,000	52,842			0.03%		0.12%
March	1,520,000	76,000			0.04%		0.17%
April (up to the
Latest Practicable
Date)	5,316,000	590,667			0.34%		1.36%

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Source: the Stock Exchange website (www.hkex.com.hk)

Notes:

1. Average daily trading volume is calculated by dividing the total trading volume of the Shares for the month/period by the number of trading days during the month/period.

2. Based on 176,000,000 Shares in issue as at the Latest Practicable Date.

3. Based on 43,470,000 Shares held by the other public Shareholders as at the Latest Practicable Date as set out in the shareholding structure of the Company in the paragraph headed “Effect of the Subscription” in the Letter from the Board.

During the Past 12-Month Period and up to the Latest Practicable Date, the average daily trading volume of the Shares as a percentage of the total number of issued Shares ranged from approximately 0% to 0.34% while the average daily trading volume of the Shares as a percentage of the total number of Shares held by the other public Shareholders ranged from approximately 0% to 1.36%. Based on the above, we consider the trading of the Shares was very thin and inactive during the Past 12-Month Period and up to the Latest Practicable Date.

Comparison of the Subscription Price

We have conducted a comparable analysis through identifying companies listed on the Main Board or GEM of the Stock Exchange which announced subscription or placement of new shares (excluding companies under debt restructuring) during the 3-month period up to and including the date of the Subscription Agreement (the “ Past 3-Month Period ”) and up to the Latest Practicable Date. Based on the above, we have, to the best of our effort, knowledge and endeavour by searching through published information on the Stock Exchange’s website, identified an exhaustive list of 145 placings and/or subscriptions (“ Comparable Transactions ”) which selected information is set out in the table below. We consider such review period to be reasonable and meaningful for identifying the Comparable Transactions because it represents a time span for identifying sufficient samples for comparable analysis purpose in view of the number (cover 145 transactions) of the Comparable Transactions.

When a listed company issues new shares, we consider it reasonable to compare the issue price with the recent trading prices of the listed company to form a basis of the fairness and reasonableness of the issue price of the new shares. We consider that premiums over/discounts to the market price which an issue price represents are affected by many different factors, including but not limited to the financial and trading position of a company, historical performance of share price as well as political events, market sentiment and economic news. Our analysis above does not limit to companies that are engaged in the same principal activities as the Group or without making reference to, among other things, market capitalisation and other financial conditions of the listed company, to be useful and meaningful for the Independent Shareholders as this analysis is aimed at comparing the discounts of the Subscription Price to the prevailing market prices against the premiums/discounts of the Comparable Transactions but not the underlying asset

– 38 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

values. Whilst it might be reasonable to negotiate and determine the issue price for subscription or placement of new shares with, we do not consider it necessary to only focus on these factors as it would preclude us from seeing the overall comparison on the issue price of listed companies’ shares in subscription or placement of new shares generally. Although the circumstances under each of the Comparable Transactions may be different, which may or may not have impacts on the terms of the Comparable Transactions, we consider that our analysis on the Comparable Transactions is meaningful to the Independent Shareholders for their information given the selected review period has covered a reasonable size of samples to provide an overview on the terms of the recent placings and/or subscriptions for comparison purposes.

				Premium over/
				(discount to)	Premium over/	Premium over/
				closing price	(discount to)	(discount to)
Announcement				on last trading	5-day average	10-day average
date	Stock code	Company	Issue price	day	closing price	closing price
			HK$
24-Oct-13	8039	Pegasus Entertainment Holdings Limited	0.9	4.65%	3.93%	4.41%
25-Oct-13	149	China Agri-Products Exchange Limited	0.112	(15.79%)	(0.88%)	4.48%
28-Oct-13	628	Sino Credit Holdings Limited (formerly known as	0.65	(8.50%)	(9.20%)	(13.33%)
		Dore Holdings Limited)(Note 1)#
30-Oct-13	451	Same Time Holdings Limited	4	(55.60%)	(47.60%)	(43.90%)
4-Nov-13	8078	China 3D Digital Entertainment Limited	0.0249	(19.68%)	(19.68%)	(18.36%)
4-Nov-13	1180	Paradise Entertainment Limited	2.3	(14.50%)	3.88%	9.94%
5-Nov-13	476	Sinocop Resources (Holdings) Limited	0.6	(11.76%)	(11.76%)	(12.02%)
5-Nov-13	8250	China Natural Investment Company Limited	0.198	(16.10%)	(18.25%)	(18.75%)
5-Nov-13	479	CIL Holdings Limited	0.149	(19.50%)	(9.00%)	3.69%
8-Nov-13	577	Louis XIII Holdings Limited	8.23	(15.15%)	(12.91%)	(9.14%)
8-Nov-13	735	China Power New Energy Development Company	0.75	85.00%	88.00%	90.00%
		Limited
8-Nov-13	8088	Crosby Capital Limited	0.68	(15.00%)	(18.66%)	(16.05%)
8-Nov-13	136	Mascotte Holdings Limited	0.085	(14.14%)	(15.84%)	(17.23%)
11-Nov-13	1195	Kingwell Group Limited	0.48	(17.24%)	(18.64%)	(14.29%)
12-Nov-13	8081	Computech Holdings Limited	0.128	(15.79%)	0.16%	(12.51%)
12-Nov-13	750	China Singyes Solar Technologies Holdings Limited	8.1	(8.16%)	(9.09%)	(7.64%)
14-Nov-13	397	Jun Yang Solar Power Investments Limited	0.07	(6.67%)	(5.91%)	(10.26%)
18-Nov-13	908	Zhuhai Holdings Investment Group Limited	1.52	5.56%	6.44%	4.76%
18-Nov-13	986	China Environmental Energy Investment Limited	2.01	(19.60%)	(19.15%)	(14.25%)
20-Nov-13	2700	Green International Holdings Limited	0.24	(18.64%)	(18.09%)	(17.81%)
20-Nov-13	279	Freeman Financial Corporation Limited	0.7	(12.50%)	(0.57%)	2.49%
20-Nov-13	221	PNG Resources Holdings Limited	0.1	(14.53%)	(0.99%)	(3.38%)
20-Nov-13	108	Buildmore International Limited	1	(55.00%)	(54.10%)	(55.20%)
21-Nov-13	7	Hoifu Energy Group Limited	1.42	(8.97%)	(9.44%)	(7.43%)
23-Nov-13	376	REORIENT Group Limited#	2.4	–	–	(1.64%)
23-Nov-13	500	DVN (Holdings) Limited#	0.75	–	3.88%	4.75%

– 39 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

				Premium over/
				(discount to)	Premium over/	Premium over/
				closing price	(discount to)	(discount to)
Announcement				on last trading	5-day average	10-day average
date	Stock code	Company	Issue price	day	closing price	closing price
			HK$
24-Nov-13	821	Value Convergence Holdings Limited	1	(26.50%)	(22.10%)	(21.63%)
26-Nov-13	476	Sino Resources (Holdings) Limited	0.6	(9.09%)	(7.69%)	(8.81%)
27-Nov-13	618	Peking University Resources (Holdings) Company	0.8	(19.19%)	(18.20%)	(17.78%)
		Limited (formerly known as EC-Founder
		(Holdings) Company Limited)
27-Nov-13	8298	AKM Industrial Company Limited	0.513	2.60%	0.98%	(0.97%)
28-Nov-13	223	Sino Resources Group Limited	0.115	13.86%	17.35%	2.22%
28-Nov-13	702	Sino Oil and Gas Holdings Limited	0.2	(8.26%)	(8.76%)	(6.59%)
29-Nov-13	207	The Hong Kong Parkview Group Limited	2	(42.90%)	(39.20%)	(38.30%)
3-Dec-13	2012	Sunshine Oilsands Ltd.(Note 2)	n/a	n/a	n/a	n/a
3-Dec-13	8202	Inno-Tech Holdings Limited	0.18	(18.18%)	(13.46%)	(13.79%)
3-Dec-13	862	Vision Values Holdings Limited	0.25	(13.80%)	(16.70%)	(19.40%)
4-Dec-13	1886	China Huiyuan Juice Group Limited	5.1	(6.40%)	(8.10%)	(5.71%)
6-Dec-13	471	CMMB Vision Holdings Limited	0.4	11.10%	9.00%	7.24%
6-Dec-13	658	China High Speed Transmission Equipment Group	3.98	(1.73%)	0.45%	1.32%
		Co., Ltd.
6-Dec-13	8163	Merdeka Resources Holdings Limited	0.156	(19.50%)	(19.17%)	(20.69%)
9-Dec-13	1169	Haier Electronics Group Co., Ltd.	18.413	(1.11%)	(0.79%)	(0.96%)
9-Dec-13	928	Tack Fiori International Group Limited	2.16	(16.92%)	(18.67%)	(13.70%)
9-Dec-13	1166	Solartech International Holdings Limited	0.32	(18.99%)	(18.58%)	(20.30%)
11-Dec-13	257	China Everbright International Limited	8.52	(4.38%)	(1.87%)	(0.02%)
13-Dec-13	182	China WIndPower Group Limited	0.44	(15.38%)	(11.47%)	(4.03%)
13-Dec-13	2123	Golden Shield Holdings (Industrial) Limited	0.29	(18.30%)	(19.90%)	(26.11%)
13-Dec-13	8166	China Eco-Farming Limited	0.188	3.30%	(0.21%)	1.18%
16-Dec-13	419	China Jiuhao Health Industry Corporation Limited	0.35	(19.54%)	(19.35%)	(21.26%)
17-Dec-13	8037	Longlife Group Holdings Limited	0.204	(15.00%)	(13.71%)	(18.37%)
18-Dec-13	182	China WIndPower Group Limited	0.43	(12.24%)	(15.35%)	(11.07%)
22-Dec-13	8270	China Leason CBM & Shale Gas Group Company	0.092	(17.12%)	(19.58%)	(8.00%)
		Limited
23-Dec-13	1777	Fantasia Holdings Group Co., Limited	1.4129	6.23%	6.23%	4.66%
24-Dec-13	2039	China International Marine Containers (Group)	13.48	(5.87%)	(6.78%)	(9.12%)
		Co., Ltd.#
2-Jan-14	159	Brockman Mining Limited#	0.4	(13.98%)	(16.49%)	(5.66%)
2-Jan-14	204	China Investment Development Limited	1.42	(11.80%)	(19.77%)	(9.55%)
6-Jan-14	875	Cypress Jade Agricultural Holdings Limited	0.145	(18.08%)	(17.61%)	(17.19%)
6-Jan-14	810	Opes Asia Development Limited	0.165	(13.16%)	(13.61%)	(15.82%)
6-Jan-14	8071	China Netcom Technology Holdings Limited	0.32	(16.88%)	(11.85%)	30.67%
7-Jan-14	2883	China Oilfield Services Limited	21.3	(6.99%)	(8.90%)	(9.57%)
10-Jan-14	566	Hanergy Solar Group Limited	0.82	3.80%	(19.60%)	(26.79%)
10-Jan-14	1020	Sinoref Holdings Limited	0.38	(18.27%)	(18.45%)	(20.00%)

– 40 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

				Premium over/
				(discount to)	Premium over/	Premium over/
				closing price	(discount to)	(discount to)
Announcement				on last trading	5-day average	10-day average
date	Stock code	Company	Issue price	day	closing price	closing price
			HK$
10-Jan-14	460	Sihuan Pharmaceutical Holdings Group Ltd.#	7.55	(0.50%)	(1.60%)	1.62%
10-Jan-14	8075	Media Asia Group Holdings Limited	0.607	(13.29%)	(9.94%)	(8.72%)
12-Jan-14	8021	WLS Holdings Limited	0.108	(17.56%)	8.00%	12.15%
13-Jan-14	702	Sino Oil and Gas Holdings Limited	0.22	(7.17%)	(7.56%)	(9.91%)
13-Jan-14	479	CIL Holdings Limited	0.11	(15.38%)	(17.54%)	(19.30%)
13-Jan-14	364	Ping Shan Tea Group Limited	0.18	(5.76%)	(6.44%)	(8.16%)
15-Jan-14	1668	China South City Holdings Limited_(Note 3)_	n/a	n/a	n/a	n/a
15-Jan-14	8212	Celebrate International Holdings Limited	0.25	(15.25%)	2.12%	(45.34%)
15-Jan-14	8116	China Fortune Investments (Holding) limited	0.103	(11.21%)	(14.17%)	(18.19%)
16-Jan-14	2012	Sunshine Oilsands Ltd.(Note 2)	n/a	n/a	n/a	n/a
16-Jan-14	653	Bonjour Holdings Limited	1.56	–	(4.06%)	(4.82%)
16-Jan-14	1680	Macau Legend Development Limited	7.25	(7.76%)	(7.05%)	(8.20%)
17-Jan-14	198	SMI Corporation Limited	0.21	(8.70%)	(5.80%)	(5.23%)
17-Jan-14	2389	Genvon Group Limited	0.325	–	28.97%	28.21%
19-Jan-14	8269	Wealth Glory Holdings Limited	0.17	(9.09%)	(6.18%)	2.04%
19-Jan-14	881	Zhongsheng Group Holdings Limted	10.79916	(6.30%)	(7.00%)	(3.20%)
20-Jan-14	8269	Wealth Glory Holdings Limited	0.19	(7.32%)	0.74%	10.66%
21-Jan-14	1187	Pearl River Tyre (Holdings) Limited	2.5	(11.66%)	(11.66%)	(11.66%)
21-Jan-14	39	Sino Distillery Group Limited	0.405	(19.00%)	(17.68%)	(14.83%)
22-Jan-14	8106	Zheda Lande Scitech Limited_(Note 4)_	n/a	n/a	n/a	n/a
22-Jan-14	956	China Suntien Green Energy Corporation Limited	3.35	(6.16%)	(7.15%)	(4.80%)
23-Jan-14	241	CITIC 21CN Company Limited	0.3	(63.86%)	(61.83%)	(61.24%)
24-Jan-14	686	United Photovoltaics Group Limited	1.72	(8.51%)	(1.83%)	(1.24%)
24-Jan-14	8192	Global Energy Resources International Group	0.39	(13.33%)	(18.92%)	(5.20%)
		Limited
26-Jan-14	816	Huadian Fuxin Energy Corporation Limited	3.3	(6.52%)	(8.84%)	(8.61%)
27-Jan-14	326	China Star Entertainment Limited	0.125	(6.72%)	(11.35%)	(6.02%)
27-Jan-14	1428	Bright Smart Securities & Commodities Group	1.3	(18.24%)	(18.95%)	(19.10%)
		Limited
27-Jan-14	776	JF Household Furnishings Limited	3.14	(19.90%)	(19.90%)	(19.28%)
28-Jan-14	509	Century Sunshine Group Holdings Limited	0.75	(9.64%)	(11.76%)	(10.71%)
29-Jan-14	476	Sinocop Resources (Holdings) Limited	0.6	(14.29%)	(1.64%)	(4.17%)
30-Jan-14	8063	Well Way Group Limited	1	3.09%	(16.39%)	(19.61%)
8-Feb-14	176	United Pacific Industries Limited	0.887	4.35%	5.85%	(5.22%)
9-Feb-14	582	Landing International Development Limited	0.3	(52.38%)	(48.54%)	(45.85%)
12-Feb-14	2319	China Mengniu Dairy Company Limited	42.5	15.30%	17.60%	18.90%
12-Feb-14	8083	China Innovationpay Group Limited	0.64	(18.99%)	(15.79%)	(3.54%)
13-Feb-14	451	Same Time Holdings Limited	4	(70.40%)	(68.10%)	(65.40%)
14-Feb-14	8207	Credit China Holdings Limited	0.8	(15.79%)	(11.89%)	(7.73%)
19-Feb-14	8150	Seamless Green China (Holdings) Limited	1	(6.54%)	(11.50%)	(11.27%)

– 41 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

				Premium over/
				(discount to)	Premium over/	Premium over/
				closing price	(discount to)	(discount to)
Announcement				on last trading	5-day average	10-day average
date	Stock code	Company	Issue price	day	closing price	closing price
			HK$
20-Feb-14	764	Eternity Investment Limited	0.78	(17.02%)	(19.09%)	(16.04%)
21-Feb-14	2312	China Financial Leasing Group Limited	0.26	(10.34%)	(19.25%)	(11.44%)
21-Feb-14	8163	Merdeka Resources Holdings Limited	0.171	(16.99%)	(19.72%)	(19.76%)
21-Feb-14	8156	China Vanguard Group Limited	5.14	(9.51%)	(7.79%)	(6.58%)
24-Feb-14	756	China Tianyi Holdings Limited	1.12	(8.20%)	(6.67%)	(6.28%)
24-Feb-14	9	Cheung Wo International Holdings Limited	n/a	n/a	n/a	n/a
		(Note 5)
24-Feb-14	1319	Oi Wah Pawnshop Credit Holdings Limited	1.45	(8.20%)	(4.60%)	(4.60%)
25-Feb-14	8108	FAVA International Holdings Limited	0.078	(12.36%)	(19.42%)	(19.92%)
26-Feb-14	8116	China Fortune Investments (Holding) Limited	0.103	–	(3.74%)	(3.56%)
28-Feb-14	8269	Wealth Glory Holdings Limited_(Note 6)_	n/a	n/a	n/a	n/a
3-Mar-14	471	CMMB Vision Holdings Limited	0.26	–	(1.52%)	(4.41%)
4-Mar-14	476	Sinocop Resources (Holdings) Limited	0.83	(1.19%)	(1.43%)	0.73%
4-Mar-14	8116	China Fortune Investments (Holding) Limited	0.103	(1.90%)	(1.34%)	(2.65%)
4-Mar-14	703	Future Bright Holdings Limited	4.3	(6.52%)	(6.32%)	(5.91%)
5-Mar-14	37	Far East Hotels & Entertainment Limited	0.19	(15.93%)	(19.56%)	(19.39%)
6-Mar-14	1191	Yueshou Environmental Holdings Limited	0.2	(4.76%)	(4.76%)	(5.66%)
6-Mar-14	651	China Ocean Shipbuilding Industry Group Limited	0.107	(17.69%)	(18.32%)	(15.75%)
7-Mar-14	720	Auto Italia Holdings Limited	0.125	(13.79%)	(16.89%)	(18.83%)
11-Mar-14	1060	ChinaVision Media Group Limited	0.5	(21.88%)	(8.76%)	9.41%
11-Mar-14	689	EPI (Holdings) Limited	0.22	(13.70%)	(11.30%)	(10.20%)
14-Mar-14	8098	CL Group (Holdings) Limited	0.305	(18.67%)	(7.29%)	(2.87%)
14-Mar-14	904	China Green (Holdings) Limited	0.6	(7.69%)	(13.79%)	(15.37%)
14-Mar-14	8200	Sau San Tong Holdings Limited	0.45	(10.00%)	(8.35%)	(6.44%)
14-Mar-14	904	China Green (Holdings) Limited	0.6	(7.69%)	(13.79%)	(15.37%)
17-Mar-14	572	China Packaging Group Company Limited	0.105	(15.32%)	(17.97%)	(17.06%)
18-Mar-14	381	Kiu Hung Energy Holdings Limited	0.175	(16.67%)	(19.95%)	(7.31%)
20-Mar-14	729	Sinopoly Battery Limited	0.5	(10.71%)	(13.19%)	(19.22%)
24-Mar-14	630	AMCO United Holding Limited	0.239	(9.81%)	(3.32%)	(4.21%)
24-Mar-14	698	Tongda Group Holdings Limited	1.12	(11.81%)	(14.50%)	(10.90%)
25-Mar-14	1868	Neo-Neon Holdings Limited	0.9	(50.00%)	(50.00%)	(50.50%)
26-Mar-14	1130	China Environmental Resources Group Limited	0.375	(18.48%)	(4.34%)	1.76%
26-Mar-14	718	Bestway International Holdings Limited	0.56	(8.20%)	(15.15%)	(12.50%)
26-Mar-14	2196	Shanghai Fosun Pharmaceutical (Group) Co., Ltd.	26.51	(4.98%)	(7.15%)	(8.27%)
27-Mar-14	943	eForce Holdings Limited	0.235	(16.07%)	(19.24%)	(25.04%)
28-Mar-14	8325	China Smartpay Group Holdings Limited	1.46	(11.00%)	(12.60%)	(10.10%)
28-Mar-14	8135	ZMFY Automobile Glass Services Limited#	0.55	(34.50%)	(32.10%)	(31.85%)
31-Mar-14	1833	Intime Retail (Group) Company Limited	7.5335	(13.71%)	(15.35%)	(15.05%)
31-Mar-14	905	Mastermind Capital Limited	0.1	(16.67%)	(16.39%)	(3.01%)
1-Apr-14	8108	FAVA International Holdings Limited	0.067	(14.10%)	(19.08%)	(20.52%)

– 42 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

				Premium over/
				(discount to)	Premium over/	Premium over/
				closing price	(discount to)	(discount to)
Announcement				on last trading	5-day average	10-day average
date	Stock code	Company	Issue price	day	closing price	closing price
			HK$
3-Apr-14	8172	China Media and Films Holdings Limited	0.23	(14.80%)	(19.60%)	(17.86%)
4-Apr-14	1522	China City Railway Transportation Technology	1.25	(26.04%)	(25.77%)	(25.90%)
		Hldgs Company Limited#
4-Apr-14	8116	China Fortune Investments (Holding) Limited	0.096	–	0.42%	0.31%
4-Apr-14	8078	China 3D Digital Entertainment Limited	0.128	(19.50%)	(19.70%)	(20.40%)
4-Apr-14	712	Comtec Solar Systems Group Limited	1.31	(7.50%)	(6.43%)	(5.76%)
9-Apr-14	8116	China Fortune Investments (Holding) Limited	0.1	(9.09%)	5.26%	3.41%
10-Apr-14	605	China Financial Services Holdings Limited	0.55	(12.70%)	(12.97%)	(13.39%)
		Maximum		85.00%	88.00%	90.00%
		Minimum		(70.40%)	(68.10%)	(65.40%)
		Average		(12.78%)	(11.20%)	(10.14%)
		Average (excludng the maximum premium		(13.09%)	(11.51%)	(10.47%)
		and the minimum discount)
		The Subscription	0.8	(5.88%)	(4.76%)	(6.98%)

Source: the Stock Exchange website (www.hkex.com.hk)

• These Comparable Transactions involved share placements to and/or subscriptions by connected persons under the Listing Rules.

Notes:

1. The subscription of new shares conducted by Sino Credit Holdings Limited comprised three tranches. The first tranche shall be completed within two weeks from the date of the special general meeting while the other two tranches shall be completed by 30 June 2014 and 31 December 2014. For the purpose of our analysis, only the relevant information relating to the first tranche is considered.

2. The issue price under these placings conducted by Sunshine Oilsands Ltd. involved both shares and warrants. No information is available in respect of the price for the shares only. Accordingly, these placings have not been considered for the purpose of our analysis.

3. The issue price under this placing conducted by China South City Holdings Limited involved both shares and options. No information is available in respect of the price for the shares only. Accordingly, this placing has not been considered for the purpose of our analysis.

4. The issue price under this placing conducted by Zheda Lande Scitech Limited has yet to be determined. Accordingly, this placing has not been considered for the purpose of our analysis.

5. The issue price under this placing conducted by Cheung Wo International Holdings Limited involved both shares and warrants. No information is available in respect of the price for the shares only. Accordingly, this placing has not been considered for the purpose of our analysis.

– 43 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

1. The issue price under this subscription conducted by Wealth Glory Holdings Limited involved both shares and warrants. No information is available in respect of the price for the shares only. Accordingly, this subscription has not been considered for the purpose of our analysis.

The Comparable Transactions (excluding the maximum and minimum cases) show (i) a discount of 13.09% to the relevant closing prices; (ii) a discount of 11.51% to the 5-day average closing price; and (iii) a discount of 10.47% to the 10-day average closing price immediately prior to related announcements. The discounts of the Subscription Price to the benchmark closing prices of the Shares are comparable to or smaller than the average discounts to the recent benchmark prices of the Comparable Transactions.

The Subscription Price is agreed between the Company and the Subscribers with reference to the Share market price. We consider it a common market practice and is fair and reasonable. With a view to further analysing the Share market price (valuation of the Company) and thus the Subscription Price, we have also compared the price earnings ratio (“ PER ”) of the Company with those of other companies listed in Hong Kong which are principally engaged in, among other things, the manufacture and sale of plastic injection moulds and plastic components (accounted for more than 50% of the their total revenue or is the single largest segment in their respective latest completed financial year) which is the principal activities as the Group. Whilst the exact circumstances faced by each company differ, trading PERs of companies in the same industry is a commonly used tool of valuation. We consider that our analysis on the PER of the companies selected is useful and meaningful to the Independent Shareholders. In addition, as at the Latest Practicable Date, the market capitalisation of the Company was approximately HK$185 million. We consider appropriate to exclude those companies with market capitalisation over HK$1,000 million. To the best of our knowledge and findings, we have identified an exhaustive list of 2 companies (“ Comparable Companies ”) as set out in the table below.

				Market
			capitalisation as			PER as at
				at the Latest		the Latest
Stock code	Company	Principal business	Practicable Date		Practicable Date
				HK$ million		(Note 1)
						times
675	K & P	Manufacture and sale of		198		7.61
	International	precision parts and
	Holdings	components and parts
	Limited	comprising keypards, synthetic
		rubber and plastic parts and
		components, and liquid crystal
		displays

– 44 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

			Market
			capitalisation as	PER as at
			at the Latest	the Latest
Stock code	Company	Principal business	Practicable Date	Practicable Date
			HK$ million	(Note 1)
				times
1002	VS International	Manufacture and sale of plastic	503	N/A
	Group Limited	moulded products and parts,
		assembling of electronic
		products, and mould design
		and fabrication

Note:

1. Data regarding PERs of the Comparable Companies are sourced from Bloomberg as at the Latest Practicable Date, and are on the basis of a rolling twelve months basis. For the Comparable Company marked with “N/A”, it recorded loss for the relevant period.

Based on the above, we consider that K & P International Holdings Limited and VS International Group Limited are appropriate Comparable Companies for the purposes of reviewing the PERs of the Company and the Subscription. However, no PER was available for VS International Group Limited as it recorded loss for the relevant period. Given that we could only identify one Comparable Company with PER based on our research, we could not compile a list of fair and representative samples for a meaningful comparison with the PERs of the Company and the Subscription.

We have not made any reference to the information in respect of K & P International Holdings Limited and VS International Group Limited in forming our view and we include the above table for information only.

Notwithstanding the Subscription Price represents discounts to the recent benchmark prices of the Shares, having considered (i) the benefits of the Subscription as discussed in the section headed “Reasons for and benefits of the Subscription”; (ii) the low liquidity in the trading of the Shares in the Past 12-Month Period and up to the Latest Practicable Date which may imply a higher level of risk involved in trading in the Shares; and (iii) discounts of the Subscription Price to the benchmark closing prices of the Shares fall within the range of the Comparable Transactions and are smaller than the average discounts to the recent benchmark prices of the Comparable Transactions during the Past 3-Month Period and up to the Latest Practicable Date, we consider that the Subscription Price is fair and reasonable so far as the Company and the Independent Shareholders are concerned.

Other financing alternatives

The Subscribers are all key employees of the Group. One of the reasons for the Subscription is to better tie the interests of those Directors and key employees of the Group with the long-term success of the Group. Other financing methods such as debts and a rights issue or open offer of equity or debt securities will not be able to achieve the same objective.

– 45 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We understand from the Company that it had considered various financing alternatives for raising additional fund, including new bank and other loans, a rights issue or an open offer, etc., for the construction of the Plant No. 3. We understand from the Company that the effective interest rates per annum of the Group’s loans were 2.35%–7.20% for fixed rate loans and 1.73%–7.69% for floating rate loans. Effective interest rates have been escalating in the past three years. As set out in the section “Information on the Group” above, the Group’s gearing ratio decreased from 39.1% as at 31 December 2012 to 37.4% as at 31 December 2013 and the Group’s interest coverage ratio increased from 1.29 times for the year ended 31 December 2012 to 2.33 times for the year ended 31 December 2013 mainly as a result of the insurance claim compensation received of approximately RMB78.1 million. As set out in the 2013 Annual Results Announcement, the Group had total borrowings of approximately RMB351.9 million and a cash and bank balance of approximately RMB74.7 million as at 31 December 2013. As set out in Appendix I – Financial Information of the Group to the Circular, the Group had unutilised bank facilities of approximately RMB73.6 million as at 28 February 2014. Whilst the Group’s total borrowings have reduced from approximately RMB409.4 million as at 31 December 2012 to approximately RMB351.9 million as at 31 December 2013, given the planned construction of the Plant No. 3 and the short-term adverse impact of the damage to and re-construction of the Plant No. 2, the Company considers it more prudent and appropriate to reduce its reliance on borrowings which will increase interest expenses.

Apart from debt financing, common means of equity financing include rights issues and open offers. However, rights issues and open offers involve more procedures and are more complicated and expensive. Rights issues or open offers, even if proceeded, generally incur higher costs as the issuer would have to pay underwriting commission as rights issues and open offers have to be fully underwritten in accordance with the Listing Rules. In addition, the trading volume of the Shares has been low. It is difficult for the Group to procure an underwriter without offering a substantial discount to the market price.

Having considered the reasons for and size of the Subscription, expenses and other cost to the Company in respect of the other financing alternatives and other factors as mentioned above, we concur with the Company’s view that the Subscription is a reasonable means to the Group to raise money to finance the construction of the Plant No. 3 and the Group’s general working capital and at the same time help further promote the Subscribers’ endeavours in enhancing the Company’s value.

Financial effects of the Subscription

Cash flow

According to the 2013 Annual Results Announcement, the Group had bank balances, deposits and cash and net current liabilities of RMB74.7 million and RMB83.7 million respectively. Upon completion of the Subscription, the liquidity and cash position will be improved as the Subscription will raise net proceeds of

– 46 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

HK$19.7 million. The Group’s bank balances, deposits and cash would increase and net current liabilities would decrease subject to all other things remaining unchanged. Accordingly, we are of the view that the Group’s cash position and net current liabilities are expected to be improved upon completion of the Subscription.

Earnings

Save for the expenses relating to the Subscription, the completion of the Subscription will not have any immediate material impact on the Group’s earnings. According to the 2013 Annual Results Announcement, the Group’s earnings per Share was RMB0.032 for the year ended 31 December 2013. Upon completion of the Subscription, the total number of the Shares would increase. Based on the total of 26,400,000 Subscription Shares, the Group’s earnings per Share would have decreased to approximately RMB0.028. As set out in the Letter from the Board, the net proceeds from the Subscription will be used to finance the construction of the Plant No. 3 which would increase the Group’s production capacity and thus enhance the Group’s business prospect.

Net asset value

According to the 2013 Annual Results Announcement, as at 31 December 2013, the Group’s net asset value was approximately RMB260.7 million and the Group’s net asset value per Share was approximately RMB1.481. Upon completion of the Subscription, the total assets and the share capital of the Company would increase. Based on the estimated net proceeds of approximately HK$19.7 million (equivalent to approximately RMB15.3 million) and the Group’s net asset value as at 31 December 2013, the Group’s net asset value would increase to approximately RMB276.0 million whereas the Group’s net asset value per Share would decrease to approximately RMB1.364 subject to all other things remaining unchanged. We consider the decrease in net asset value per Share acceptable as the Subscription Price is reasonably determined with reference to the Share market price and that the Subscription will help replenish the Group’s working capital and enhance the Group’s competitiveness and prospect by using the net proceeds to finance the construction of the Plant No. 3.

Gearing

As mentioned in the section “Financial position of the Group” to this letter, the gearing ratio as at 31 December 2013 was 37.4%. Upon completion of the Subscription, the Group’s net asset value would increase as a result of the Subscription whilst the total liabilities would remain the same, resulting in a drop of the Group’s gearing ratio to 36.7% subject to all other things remaining unchanged. Thus, we are of the view that the Group’s gearing level will be improved upon completion of the Subscription.

Based on the above, the Subscription would have an overall positive effect on the Group’s financial position upon completion of the Subscription. On such basis, we are of the view that the Subscription is in the interests of the Company and the Shareholders as a whole.

– 47 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Effect on the shareholding structure of the Company

Reference is made to the shareholding structure of the Company as set out in the section headed “Effect of the Subscription” in the Letter from the Board. Upon completion of the Subscription, the shareholding of the existing other public Shareholders will be diluted from approximately 24.70% to approximately 21.48%.

Having considered (i) the fairness and reasonableness of the Subscription Price of HK$0.80 in the section headed “Principal terms of the Subscription” above; (ii) that the issuance of the Subscription Shares will strengthen the Company’s cash and working capital position; (iii) the proposed use of proceeds to finance the Group’s expansion strategies as described above; and (iv) the benefit of the Subscription in motivating the Subscribers (being key management) to promote and enhance the Company’s prospect and value, we consider that the dilution shareholding effects upon completion of the Subscription is acceptable, and fair and reasonable.

Whitewash Waiver

The interest of Xu Brothers in the voting rights of the Company will increase from approximately 28% to approximately 34.59% immediately following completion of the Subscription. Under Rule 26.1 of the Takeovers Code, Xu Brothers are required to make a mandatory general offer for all the issued Shares and other relevant securities (as defined in note 4 to Rule 22 of the Takeovers Code) of the Company not already owned or agreed to be acquired by them immediately following completion of the Subscription unless the Whitewash Waiver is obtained. In this regard, Xu Brothers have made an application to the Executive for the Whitewash Waiver which is subject to the approval of the Independent Shareholders on a vote by poll.

The Subscription is conditional on, among other things, the approval of the Whitewash Waiver by the Independent Shareholders at the EGM. If the Whitewash Waiver is not approved, the Subscription will not proceed and no general offer obligation will be triggered. In the event that the Subscription does not proceed, the Group and the Shareholders will not be able to enjoy the benefits that would arise from the Subscription, as discussed earlier in this letter and the progress of the construction of the Plant No. 3 may be adversely affected.

Having considered the benefits of the Subscription as mentioned in the previous sections in this letter, in particular, (i) the Subscription is a reasonable financing alternative available to the Group; (ii) the Subscription would strengthen the Group’s cash balance and working capital position and enable the Group to construct the Plant No. 3; (iii) the Subscription helps closer align the Subscribers’ interests as management with the Shareholders’ interests and motivate them to further the Group’s business development and value; (iv) the dilution effect to the Shareholders, other than the Subscribers and parties acting in concert with them, as a result of the Subscription is acceptable; and (v) the Subscription would have an overall positive effect on the financial position of the Group in terms of the net asset

– 48 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

value, cashflows and gearing upon completion of the Subscription, we are of the view that the granting of the Whitewash Waiver is fair and reasonable and in the interests of the Company and the Shareholders as a whole.

RECOMMENDATION

Having considered the above principal factors and reasons, in particular,

• (i) the background and reasons for the Subscription as set out in the section headed “Reasons for and benefits of the Subscription”, in particular, (a) the benefit of building the Plant No. 3; (b) the incentive to the Subscribers to promote the Group’s prospect and value given the difficult market environment; and (c) that the Subscription will enhance the Group’s financial position and facilitate the Group’s overall expansion strategies;

• (ii) the trading in the Shares during the Past 12-Month Period and up to the Latest Practicable Date was very thin and inactive which make placing to independent investors and procuring underwriters for a rights issue/open offer difficult;

• (iii) our view that the Subscription Price is fair and reasonable so far as the Company and the Independent Shareholders are concerned, having considered (1) the benefits of the Subscription; (2) the low liquidity in the trading of the Shares; and (3) discounts of the Subscription Price to the benchmark closing prices of the Shares fall within the range of the Comparable Transactions and are smaller than the average discounts to the recent benchmark prices of the Comparable Transactions;

• (iv) carrying out the Subscription is a reasonable financing alternative, having considered the reasons for and size of the Subscription, expenses and other cost to the Company in respect of the other financing alternatives and other factors as discussed in the section headed “Other financing alternatives”;

• (v) the overall financial effects of the issuance of the Subscription Shares are favourable to the Company and the Independent Shareholders as a whole, having considered (1) the Group’s cash position and net current liabilities are expected to be improved upon completion of the Subscription; (2) the Plant No. 3 would increase the Group’s production capacity and thus enhance the Group’s business prospect; (3) the Subscription will help replenish the Group’s working capital and enhance the Group’s competitiveness and prospect; and (4) the Group’s gearing level will be improved upon completion of the Subscription; and

• (vi) the dilution effects on shareholdings of the Company upon completion of the Subscription is acceptable, having considered (1) the fairness and reasonableness of the Subscription Price; (2) that the issuance of the Subscription Shares will strengthen the Company’s cash and working capital position; (3) the proposed use of proceeds to finance the Group’s expansion

– 49 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

strategies; and (4) the benefit of the Subscription in motivating the Subscribers (being key management) to promote and enhance the Company’s prospect and value,

we consider that the terms of the Subscription are fair and reasonable and the Subscription is on normal commercial terms and in the interests of the Company and the Shareholders as a whole. On the basis that the grant of the Whitewash Waiver is an unwaivable condition of the Subscription Agreement, we also consider that the grant of the Whitewash Waiver is fair and reasonable and in the interests of the Company and the Shareholders as a whole. Accordingly, we advise the Independent Board Committee to recommend the Independent Shareholders, and the Independent Shareholders, to vote in favour of the ordinary resolutions to be proposed at the EGM to approve the Subscription and the transactions contemplated thereunder and the Whitewash Waiver.

Yours faithfully, For and on behalf of REORIENT Financial Markets Limited Allen Tze

Managing Director

– 50 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

1. SUMMARY OF FINANCIAL INFORMATION

The following is a summary of the consolidated results and financial information of the Group for each of the years ended 31 December 2011, 2012 and 2013, extracted from the 2011 and 2012 annual reports of the Company and the 2013 annual results announcement of the Company respectively.

Revenue Cost of sales Gross profit Other income Distribution costs Net foreign exchange gain (loss) Administrative expenses Loss caused by fire accident Finance costs Share of results of associates Profit before taxation Taxation Profit for the year attributable to: Owners of the Company Non-controlling interests Earnings per Share – Basic and diluted (in RMB per Share) ASSETS AND LIABILITIES Total assets Total liabilities Total equity Dividend paid Dividend per Share (in RMB per Share)	For the year ended 31 December 2013 RMB’000 (audited) 892,968 (775,993) 116,975 6,911 (27,594) 8,388 (50,754) (21,650) (23,217) 143 9,202 (3,598) 5,604 – 5,604 0.032 873,175 (612,497) 260,678 – –	For the year ended 31 December 2012 RMB’000 (audited) 984,776 (881,855) 102,921 42,342 (27,147) 6,512 (53,941) – (30,203) 3,438 43,922 (2,477) 41,445 – 41,445 0.235 985,335 (731,935) 253,400 – –	For the year ended 31 December 2011 RMB’000 (audited) 831,994 (715,970) 116,024 8,669 (20,933) (5,094) (52,617) – (22,975) 948 24,022 (8,682) 15,340 – 15,340 0.087 1,010,366 (798,332) 212,034 12,320 0.07

– I-1 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

On 24 March 2011, the Company declared a special dividend of RMB0.07 (or equivalent to HK$0.0832) per Share. Such dividend was fully settled in April 2011. Save for the aforementioned, no dividend was paid or proposed by the Company for each of the years ended 31 December 2011, 2012 and 2013.

SHINEWING (HK) CPA Limited, the auditors of the Company did not issue any qualified opinion on the financial statements of the Group for each of the years ended 31 December 2011, 2012 and 2013. Nonetheless, as detailed in the annual reports of the Company for the years ended 31 December 2011 and 2012 and the annual results announcement of the Company for the year ended 31 December 2013, without qualifying their opinion, the auditors drew attention to the net current liabilities position of the Group as at 31 December 2011, 2012 and 2013 and indicated the existence of a material uncertainty which may cast significant doubt about the Group’s ability to continue as a going concern. Save as disclosed in this circular, the Company had no items which are exceptional or extraordinary because of size, nature or incidence for each of the years ended 31 December 2011, 2012 and 2013.

– I-2 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

2. LATEST PUBLISHED FINANCIAL INFORMATION

Set out below are the latest published audited consolidated financial information of the Group for the two years ended 31 December 2013 and 2012 respectively together with the accompanying notes relating thereto as extracted from the annual results announcement of the Company for the year ended 31 December 2013 and the annual report of the Company for the year ended 31 December 2012 respectively.

(A) AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

CONSOLIDATED STATEMENT OF PROFIT AND LOSS

For the year ended 31 December 2013

NOTES Revenue 3 Cost of sales Gross profit Other income 4 Net foreign exchange gain Distribution costs Administrative expenses Loss caused by fire accident 5 Finance costs 6 Share of results of associates Profit before taxation Income tax expense 7 Profit for the year 8 Earnings per share Basic and diluted 9	2013 RMB’000 892,968 (775,993) 116,975 6,911 8,388 (27,594) (50,754) (21,650) (23,217) 143 9,202 (3,598) 5,604 RMB0.032	2012 RMB’000 984,776 (881,855) 102,921 42,342 6,512 (27,147) (53,941) – (30,203) 3,438 43,922 (2,477) 41,445 RMB0.235

– I-3 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the year ended 31 December 2013

Profit for the year Other comprehensive income (expense): Items that may be reclassified subsequently to profit or loss: Exchange differences arising on translating Total comprehensive income for the year attributable to owners of the Company	2013 RMB’000 5,604 1,674 7,278	2012 RMB’000 41,445 (79) 41,366

– I-4 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 December 2013

NOTES Non-current assets Property, plant and equipment Intangible assets Land use rights Interests in associates Current assets Inventories Trade receivables, deposits and prepayments 10 Amounts due from associates Pledged bank deposits Bank balances, deposits and cash Current liabilities Trade and other payables 11 Amount due to ultimate holding company Amounts due to an associates Income tax liabilities Obligations under finance leases – due within one year Bank and other loans – due within one year Net current liabilities Total assets less current liabilities	2013 RMB’000 321,317 864 18,797 23,612 364,590 138,810 288,359 4,266 2,479 74,671 508,585 240,319 25,429 10,972 8,206 5,163 302,188 592,277 (83,692) 280,898	2012 RMB’000 373,455 417 19,420 23,469 416,761 140,390 330,515 3,058 31,265 63,346 568,574 309,647 24,441 5,991 5,526 13,451 330,567 689,623 (121,049) 295,712

– I-5 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

NOTES Non-current liabilities Obligations under finance leases – due after one year Bank and other loans – due after one year Deferred income Capital and reserves Share capital Reserves	2013 RMB’000 8,353 10,741 1,126 20,220 260,678 1,810 258,868 260,678	2012 RMB’000 13,516 27,422 1,374
		42,312
		253,400
		1,810 251,590
		253,400

– I-6 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2013

1 January 2012 Profit for the year Other comprehensive expense for the year Total comprehensive (expense) income for the year Transfer At 31 December 2012 and 1 January 2013 Profit for the year Other comprehensive income for the year Total comprehensive income for the year Transfer At 31 December 2013	Share capital RMB’000 1,810 – – – – 1,810 – – – – 1,810	Share premium RMB’000 39,867 – – – – 39,867 – – – – 39,867	Special reserve RMB’000 49,663 – – – – 49,663 – – – – 49,663	Reserve for shares issued with vesting conditions RMB’000 18,065 – – – – 18,065 – – – – 18,065	Translation Reserve RMB’000 5,458 – (79) (79) – 5,379 – 1,674 1,674 – 7,053	Capital reserve RMB’000 71 – – – – 71 – – – – 71	Statutory surplus reserve RMB’000 14,274 – – – 1,191 15,465 – – – 1,028 16,493	Retained profits RMB’000 82,826 41,445 – 41,445 (1,191) 123,080 5,604 – 5,604 (1,028) 127,656	Total RMB’000 212,034 41,445 (79)
									41,366
									–
									253,400 5,604 1,674
									7,278
									–
									260,678

– I-7 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:

1. CORPORATE INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES

The Company is a public limited company incorporated in Cayman Islands as an exempted company with limited liability on 4 April 2005. Its ultimate holding company is Yusei Machinery Corporation (“ Yusei Japan ”) (incorporated in Japan).

The consolidated financial statements are presented in Renminbi (“ RMB ”). Other than those subsidiaries established in the People’s Republic of China (the “ PRC ”) whose functional currency is RMB, the functional currency of the Company is Hong Kong dollars (“ HK$ ”).

The principal activities of the Company and its subsidiaries are moulding fabrication, manufacturing and trading of moulds and plastic components.

Application of new and revised Hong Kong Financial Reporting Standards (“HKFRSs”)

In the current year, the Group has applied the following new and revised HKFRSs, which include HKFRSs, Hong Kong Accounting Standards (“ HKAS(s) ”) and Interpretations (“ Int(s) ”), issued by the Hong Kong Institute of Certified Public Accountants (the “ HKICPA ”).

Amendments to HKFRSs Annual Improvements to HKFRSs 2009-2011 Cycle issued Amendments to HKFRS 1 Presentation of Items of Other Comprehensive Income Amendments to HKFRS 7 Disclosures – Offsetting Financial Assets and Financial Liabilities Amendments to HKFRS 10, Consolidated Financial Statements, Joint Arrangements and HKFRS 11 and HKFRS 12 Disclosure of Interests in Other Entities: Transition Guidance HKFRS 10 Consolidated Financial Statements HKFRS 11 Joint Arrangements HKFRS 12 Disclosure of Interests in Other Entities HKFRS 13 Fair Value Measurement HKAS 19 (as revised in 2011) Employee Benefits HKAS 27 (as revised in 2011) Separate Financial Statements HKAS 28 (as revised in 2011) Investments in Associates and Joint Ventures HK(IFRIC*) – Int 20 Stripping Costs in the Production Phase of a Surface Mine

• IFRIC represents the International Financial Reporting Interpretations Committee.

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

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

In the current year, the Group has applied for the first time the package of five standards on consolidation, joint arrangements, associates and disclosures comprising HKFRS 10 Consolidated Financial Statements, HKFRS 11 Joint Arrangements, HKFRS 12 Disclosure of Interests in Other Entities, HKAS 27 (as revised in 2011) Separate Financial Statements and HKAS 28 (as revised in 2011) Investments in Associates and Joint Ventures, together with the amendments to HKFRS 10, HKFRS 11 and HKFRS 12 regarding transitional guidance.

HKAS 27 (as revised in 2011) is not applicable to the Group as it deals only with separate financial statements.

HKAS 28 (revised 2011) ‘Associates and joint ventures’ includes the requirements for joint ventures as well as associates, to be equity accounted following the issue of HKFRS 11. The directors of the Company considered the application of HKAS 28 (revised 2011) has not had significant impact on the Group’s financial statements.

The impact of the application of these standards is set out below.

– I-8 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Impact of the application of HKFRS 10

HKFRS 10 replaces the parts of HKAS 27 Consolidated and Separate Financial Statements that deal with consolidated financial statements and HK(SIC) Int-12 Consolidation – Special Purpose Entities. HKFRS 10 changes the definition of control such that an investor has control over an investee when a) it has power over the investee, b) it is exposed, or has rights, to variable returns from its involvement with the investee and c) has the ability to use its power to affect its returns. All three of these criteria must be met for an investor to have control over an investee. Previously, control was defined as the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Additional guidance has been included in HKFRS 10 to explain when an investor has control over an investee.

The directors of the Company concluded that the application of these standards has not had any material impact on the amounts recognised in the consolidated financial statements as all the subsidiaries of the Company are wholly-owned subsidiaries for the reporting periods.

Impact of application of HKFRS 11

HKFRS 11 replaces HKAS 31 Interests in Joint Ventures and the guidance contained in a related interpretation. HK(SIC) – Int 13 Jointly Controlled Entities – Non-Monetary Contributions by Venturers has been incorporated in HKAS 28 (as revised in 2011). HKFRS 11 deals with how a joint arrangement of which two or more parties have joint control should be classified and accounted for. Under HKFRS 11, there are only two types of joint arrangements – joint operations or joint ventures. The classification of joint arrangement under HKFRS 11 is determined based on the rights and obligations of the parties to the arrangements by considering the structure, the legal form of the arrangements, the contractual terms agreed by the parties to the arrangement, and when relevant, other facts and circumstances. A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement (i.e. joint operators) have rights to the assets, and obligations for the liabilities, relating to the arrangement. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement (i.e. joint venturers) have rights to the net assets of the arrangement. Previously, HKAS 31 contemplated three types of joint arrangements – jointly controlled entities, jointly controlled operations and jointly controlled assets. The classification of joint arrangements under HKAS 31 was primarily determined based on the legal form of the arrangement (e.g. a joint arrangement that was established through a separate entity was accounted for as a jointly controlled entity).

The initial and subsequent accounting of joint ventures and joint operations is different. Investment in joint ventures is accounted for using the equity method (proportionate consolidation is no longer allowed). Investment in joint operations are accounted for such that each joint operator recognises its assets (including its share of any assets jointly held, its liabilities (including its share of any liabilities incurred jointly), its revenue (including its share of revenue from the sale of the output by the joint operation) and its expenses (including its share of any expenses incurred jointly). Each joint operator accounts for the assets and liabilities, as well as revenues and expenses, relating to its interest in the joint operation in accordance with the applicable standards.

The directors of the Company concluded that the application of HKFRS 11 has not had any material impact on amounts reported in the consolidated financial statements. The directors have determined that the Group’s current investments which were previously classified as associates under HKAS 28 are not classified as joint arrangements under HKFRS 11 and continue to accounted for an associates using the equity method. The directors of the Company do not anticipate that there is material impact on the amounts currently reported in the consolidated financial statements.

Impact of the application of HKFRS 12

HKFRS 12 is a disclosure standard and is applicable to entities that have interests in subsidiaries, joint arrangements, associates and/or unconsolidated structured entities. In general, the application of HKFRS 12 has resulted in more extensive disclosures in the consolidated financial statements.

– I-9 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

HKFRS 13 Fair value Measurement

The Group has applied HKFRS 13 for the first time in the current year. HKFRS 13 establishes a single source of guidance for, and disclosures about, fair value measurements. The scope of HKFRS 13 is broad: the fair value measurement requirements of HKFRS 13 apply to both financial instrument items and non financial instrument items for which other HKFRSs require or permit fair value measurements and disclosures about fair value measurements, except for share-based payment transactions that are within the scope of HKFRS 2 Share-based Payment, leasing transactions that are within the scope of HKAS 17 Leases, and measurements that have some similarities to fair value but are not fair value.

HKFRS 13 defines the fair value of an asset as the price that would be received to sell an asset (or paid to transfer a liability, in the case of determining the fair value of a liability) in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions. Fair value under HKFRS 13 is an exit price regardless of whether that price is directly observable or estimated using another valuation technique. Also, HKFRS 13 includes extensive disclosure requirements.

HKFRS 13 requires prospective application. In accordance with the transitional provisions of HKFRS 13, the Group has not made any new disclosures required by HKFRS 13 for the 2012 comparative period. In addition, the application of HKFRS 13 has not had any material impact on the amounts recognised in the consolidated financial statements.

Amendments to HKAS 1 Presentation of Items of Other Comprehensive Income

The Group has applied the amendments to HKAS 1 Presentation of Items of Other Comprehensive Income. Upon the adoption of the amendments to HKAS 1, the Group’s ‘statement of comprehensive income’ is renamed as the ‘statement of profit or loss and other comprehensive income’. Furthermore, the amendments to HKAS 1 require additional disclosures to be made in the other comprehensive income section such that items of other comprehensive income are grouped into two categories: (a) items that will not be reclassified subsequently to profit or loss and (b) items that may be reclassified subsequently to profit or loss when specific conditions are met. Income tax on items of other comprehensive income is required to be allocated on the same basis – the amendments do not change the option to present items of other comprehensive income either before tax or net of tax. The amendments have been applied retrospectively, and hence the presentation of items of other comprehensive income has been modified to reflect the changes. Other than the above mentioned presentation changes, the application of the amendments to HKAS 1 does not result in any impact on profit or loss, other comprehensive income and total comprehensive income.

New and revised HKFRSs issued but not yet effective

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

Amendments to HKFRSs Amendments to HKFRSs Amendments to HKFRS 9 and HKFRS 7 HKFRS 9 HKFRS 14 Amendments to HKFRS 10, HKFRS 12 and HKAS 27 Amendments to HKAS 19 Amendments to HKAS 32 Amendments to HKAS 36 Amendments to HKAS 39

HK(IFRIC) – Int 21

Annual Improvements to HKFRSs 2010-2012 Cycle[2] Annual Improvements to HKFRSs 2011-2013 Cycle[2] Mandatory Effective Date of HKFRS 9 and Transition Disclosures[3] Financial Instruments[3] Regulatory Deferral Accounts[4] Investment Entities[1]

Defined Benefit Plans: Employee Contributions[2] Offsetting Financial Assets and Financial Liabilities[1] Recoverable Amount Disclosures for Non-Financial Assets[1] Novation of Derivatives and Continuation of Hedge Accounting[1] Levies[1]

– I-10 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

• 1 Effective for annual periods beginning on or after 1 January 2014, with earlier application permitted.

• 2 Effective for annual periods beginning on or after 1 July 2014, except as disclosed below. Early application is permitted.

• 3 Available for application the mandatory effective date will be determined when the outstanding phases of HKFRS 9 are finalised.

• 4 Effective for annual periods beginning on or after 1 January 2016, with earlier application permitted.

The directors of the Company anticipated that, except as described below, the application of other new and revised HKFRSs will have no material impact on the results and the financial position of the Group.

Annual Improvements to HKFRSs 2010-2012 Cycle

The Annual Improvements to HKFRSs 2010-2012 Cycle include a number of amendments to various HKFRSs, which are summarised below.

The amendments to HKFRS 2 (i) change the definitions of ‘vesting condition’ and ‘market condition’; and (ii) add definitions for ‘performance condition’ and ‘service condition’ which were previously included within the definition of ‘vesting condition’. The amendments to HKFRS 2 are effective for share-based payment transactions for which the grant date is on or after 1 July 2014.

The amendments to HKFRS 3 clarify that contingent consideration that is classified as an asset or a liability should be measured at fair value at each reporting date, irrespective of whether the contingent consideration is a financial instrument within the scope of HKFRS 9 or HKAS 39 or a non-financial asset or liability.

Changes in fair value (other than measurement period adjustments) should be recognised in profit and loss. The amendments to HKFRS 3 are effective for business combinations for which the acquisition date is on or after 1 July 2014.

The amendments to HKFRS 8 (i) require an entity to disclose the judgements made by management in applying the aggregation criteria to operating segments, including a description of the operating segments aggregated and the economic indicators assessed in determining whether the operating segments have ‘similar economic characteristics’; and (ii) clarify that a reconciliation of the total of the reportable segments’ assets to the entity’s assets should only be provided if the segment assets are regularly provided to the chief operating decision-maker.

The amendments to the basis for conclusions of HKFRS 13 clarify that the issue of HKFRS 13 and consequential amendments to HKAS 39 and HKFRS 9 did not remove the ability to measure short-term receivables and payables with no stated interest rate at their invoice amounts without discounting, if the effect of discounting is immaterial.

The amendments to HKAS 16 and HKAS 38 remove perceived inconsistencies in the accounting for accumulated depreciation/amortisation when an item of property, plant and equipment or an intangible asset is revalued. The amended standards clarify that the gross carrying amount is adjusted in a manner consistent with the revaluation of the carrying amount of the asset and that accumulated depreciation/amortisation is the difference between the gross carrying amount and the carrying amount after taking into account accumulated impairment losses.

The amendments to HKAS 24 clarify that a management entity providing key management personnel services to a reporting entity is a related party of the reporting entity. Consequently, the reporting entity should disclose as related party transactions the amounts incurred for the service paid or payable to the management entity for the provision of key management personnel services. However, disclosure of the components of such compensation is not required.

– I-11 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The directors do not anticipate that the application of the amendments included in the Annual Improvements to HKFRSs 2010-2012 Cycle will have a significant impact on the Group’s consolidated financial statements.

Amendments to HKAS 32 Offsetting Financial Assets and Financial Liabilities

The amendments to HKAS 32 clarify existing application issues relating to the offsetting requirements. Specifically, the amendments clarify the meaning of “currently has a legally enforceable right of set-off” and “simultaneous realisation and settlement”.

The amendments to HKAS 32 are effective for annual periods beginning on or after 1 January 2014 with early application permitted and require retrospective application.

The directors of the Company do not anticipate that the application of these amendments to HKAS 32 will have a significant impact on the Group’s consolidated financial statements as the Group does not have any financial assets and financial liabilities that qualify for offset for the reporting periods.

Amendments to HKAS 36 Recoverable Amount Disclosures for Non-Financial Assets

The amendments to HKAS 36 require disclosures on additional information about the fair value measurement when the recoverable amount of impaired assets is based on fair value less costs of disposal. If the recoverable amount is fair value less costs of disposal, an entity shall disclose the level of the fair value hierarchy within which the fair value measurement of the asset or cash generating unit is categorised in its entirety. The Group is required to make additional disclosures for Level 2 and Level 3 of the fair value hierarchy:

• a description of the valuation techniques used to measure the fair value less costs of disposals. If there is any change in valuation techniques, the fact and the reason should also be disclosed;

• each key assumption on which management has based its determination of fair value less costs of disposal;

• the discount rates used in the current and previous measurement if fair value less costs of disposal is measured using a present value technique.

The amendments to HKAS 36 are effective for annual periods beginning on or after 1 January 2014 with earlier application permitted, provided HKFRS 13 is also applied, and require retrospectively application.

The directors of the Company anticipate that the application of the amendments to HKAS 36 might result in additional disclosures being made with regard to the impairment assessment on non-financial assets.

HKFRS 9 – Financial Instruments

HKFRS 9 issued in 2009 introduces new requirements for the classification and measurement of financial assets. HKFRS 9 amended in 2010 includes the requirements for the classification and measurement of financial liabilities and for derecognition, and further amended in 2013 to include the new requirements for hedge accounting.

– I-12 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Key requirements of HKFRS 9 are described as follows:

• All recognised financial assets that are within the scope of HKAS 39 Financial Instruments: Recognition and Measurement are subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent accounting periods. All other debt investments and equity investments are measured at their fair values at the end of subsequent reporting periods. In addition, under HKFRS 9, entities may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognised in profit or loss.

• With regard to the measurement of financial liabilities designated as at fair value through profit or loss, HKFRS 9 requires that the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value of financial liabilities attributable to changes in the financial liabilities’ credit risk are not subsequently reclassified to profit or loss. Under HKAS 39, the entire amount of the change in the fair value of the financial liability designated as fair value through profit or loss was presented in profit or loss.

• The new general hedge accounting requirements retain the three types of hedge accounting. However, greater flexibility has been introduced to the types of transactions eligible for hedge accounting, specifically broadening the types of instruments that qualify for hedging instruments and the types of risk components of non-financial items that are eligible for hedge accounting. In addition, the effectiveness test has been overhauled and replaced with the principle of an ‘economic relationship’. Retrospective assessment of hedge effectiveness is also no longer required. Enhanced disclosure requirements about an entity’s risk management activities have also been introduced.

The directors of the Company anticipate that the adoption of HKFRS 9 in the future may result in significant impact in the Group’s consolidated financial statements.

Amendments to HKFRS 10, HKFRS 12 and HKAS 27 Investment Entities

The amendments to HKFRS 10 define an investment entity and require a reporting entity that meets the definition of an investment entity not to consolidate its subsidiaries but instead to measure its subsidiaries at fair value through profit or loss in its financial statements.

To qualify as an investment entity, certain criteria have to be met. Specifically, an entity is required to:

• obtain funds from one or more investors for the purpose of providing them with professional investment management services;

• commit to its investor(s) that its business purpose is to invest funds solely for returns from capital appreciation, investment income, or both; and

• measure and evaluate performance of substantially all of its investments on a fair value basis.

Consequential amendments to HKFRS 12 and HKAS 27 have been made to introduce new disclosure requirements for investment entities.

The directors of the Company anticipate that the application of the amendments will have no effect on the Group as the Company is not an investment entity.

– I-13 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Amendments to HKAS 19 Defined Benefit Plans: Employee Contributions

The amendments to HKAS 19 clarify how an entity should account for contributions made by employees or third parties to defined benefit plans, based on whether those contributions are dependent on the number of years of service provided by the employee.

For contributions that are independent of the number of years of service, the entity may either recognise the contributions as a reduction in the service cost in the period in which the related service is rendered, or to attribute them to the employees’ periods of service using the projected unit credit method; whereas for contributions that are dependent on the number of years of service, the entity is required to attribute them to the employees’ periods of service.

The directors of the Company do not anticipate that the application of these amendments to HKAS 19 will have a significant impact on the Group’s consolidated financial statements as the Group does not have any defined benefit plans.

2. BASIS OF PREPARATION

The consolidated financial statements have been prepared on a going concern basis notwithstanding the net current liabilities of approximately RMB83,692,000 as at 31 December 2013. In the opinion of the directors, the Group should be able to maintain itself as a going concern in the coming year as the Group anticipated to generate positive cash flows from its business.

On the basis that the continuing availability of the banking facilities provided by its banks and the implementation of other measures with a view to improve its working capital position and net financial position, the directors of the Company consider that the Group will have sufficient working capital to meet its financial obligations as and when they fall due for the next twelve months from 31 December 2013. Accordingly, the directors of the Company are satisfied that it is appropriate to prepare these consolidated financial statements on a going concern basis. The consolidated financial statements do not include any adjustments relating to the carrying amount and reclassification of assets and liabilities that might be necessary should the Group be unable to continue as a going concern.

3. REVENUE AND SEGMENT INFORMATION

Revenue represents the net amounts received and receivable for goods sold, less discount and value-added tax during the year.

For the two years ended 31 December 2013 and 2012, the sole principal activity of the Group is moulding fabrication, manufacturing and trading of moulds and plastic components. All the operations of the Group are located and carried out in the PRC. In the opinion of the directors of the Company, being the chief operating decision maker, the Group operated in a single operating segment. Accordingly, no segmental analysis has been presented.

Information about major customers

Revenue from customers of the corresponding years contributing over 10% of the total sales of the Group is as follows:

		2013	2012
		RMB’000	RMB’000
Customer	A	167,263	282,945
Customer	B	156,573	184,124

All revenue generated from the major customers shown above relate to the sale of moulds and plastic components.

– I-14 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

4. OTHER INCOME

Gain on sales of materials Bank interest income Rental income received Utilities expenses claimed Government subsidies (Note) Release of government grants for land use rights Reversal of impairment loss on trade receivables Gain on disposal of property, plant and equipment and land use rights Release of deferred gain from sale and leaseback of property, plant and equipment Others	2013 RMB’000 3,420 999 126 603 204 85 167 11 163 1,133 6,911	2012 RMB’000 3,494 1,582 193 463 173 85 – 35,239 136 977
		42,342

Note: Government subsidies of approximately RMB204,000 (2012: RMB173,000) have been recognised during the year ended 31 December 2013 which were designated for the encouragement of business development and high technology development incentive. All conditions in respect of these grants had been fulfilled and such government grants were recognised in other income for the year.

5. LOSS CAUSED BY FIRE ACCIDENT

On 1 January 2013, a fire broke out in the production plant No. 2 of Hangzhou Yusei, which was located in Lingang Industrial Park, Xiaoshan, Hangzhou City, Zhejiang Province, the PRC. As a result of the fire accident, certain property, plant and equipment and inventories were seriously damaged of which their carrying amounts as at 1 January 2013 were approximately RMB42,891,000 and RMB47,571,000 respectively. In addition, some delay in goods delivery to customers was resulted, leading to customer claims of approximately RMB4,570,000 being provided for and RMB2,229,000 being paid by the Group. Restoration costs incurred due to the fire accident was approximately RMB4,296,000.

As of the date of these consolidated financial statements, the Group was entitled to receive compensation from the insurance companies of approximately RMB78,098,000. The Directors of the Company are of the opinion that the Group had no significant contingent liabilities and capital commitment arising from the fire accident at the end of the reporting period.

Loss caused by fire accident was presented in the consolidation statement of profit or loss for the year ended 31 December 2013. The loss caused by fire accident was calculated as (i) impairment loss on property, plant and equipment and inventories in respect of fire accident, and (ii) the provision for customer claims less (iii) the compensation from the insurance companies.

– I-15 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Compensation received and receivable from insurance claim Sale of scrap material to independent third parties Less: Property, plant and equipment derecognised Inventories derecognized Compensation recognised and paid to customers Provision for compensation to customers Restoration costs	RMB’000 78,098 1,809 (42,891) (47,571) (2,229) (4,570) (4,296)
	(21,650)

6 FINANCE COSTS

Interest on: bank and other loans wholly repayable within five years finance leases amount due to ultimate holding company	2013 RMB’000 20,231 1,752 1,234 23,217	2012 RMB’000 26,483 2,424 1,296
		30,203

Note: No borrowing costs capitalised for the year ended 31 December 2013 and 2012.

7. INCOME TAX EXPENSE

PRC Enterprise Income Tax (the “EIT”) Current year Over provision in prior years	2013 RMB’000 3,598 – 3,598	2012 RMB’000 2,507 (30)
		2,477

(i) Overseas income tax

The Company is incorporated in the Cayman Islands and is exempted from taxation in the Cayman Islands.

(ii) Hong Kong Profits Tax

No provision for Hong Kong Profits Tax had been made as the Group did not generate any assessable profits in Hong Kong during both years.

(iii) PRC EIT

Under the Law of the PRC on EIT (the “ EIT Law ”) and Implementation Regulation of the EIT Law, the tax rate of the PRC subsidiaries is 25% from 1 January 2008 onwards.

The applicable tax rate of the Company’s subsidiaries, 杭州友成机工有限公司 Hangzhou Yusei Machinery Co., Ltd. (“ Hangzhou Yusei ”) and 蘇州友成機工有限公司 Suzhou Yusei Machinery Co., Ltd. (“ Suzhou Yusei ”) for the year ended 31 December 2013 and 2012 was 15%. On 27 December 2012, Hangzhou Yusei was approved by Science and Technology

– I-16 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Department of Zhejiang Province as high technology enterprise and therefore is subject to EIT at the rate of 15% for three years, with effective from 1 January 2012. On 8 November 2011, Suzhou Yusei was approved by Science and Technology Department of Suzhou Province as high technology enterprise and therefore is subject to EIT at the rate of 15% for three years, with effective from 1 January 2011.

In addition, the Company’s another subsidiary, 浙江友成塑料模具有限公司 Zhejiang Yusei Plastics & Mould Co., Ltd. (“ Zhejiang Yusei* ”), is operating and registered in the State Level New and High Technology Development Zone. Zhejiang Yusei is subjected to PRC EIT rate of 25% commencing from 1 January 2012.

Pursuant to the approvals obtained from the relevant PRC tax authorities, 友成(中國)模具 有限公司 Yusei (China) Mould Co., Ltd. (“ Yusei China* ”) is entitled to a tax concession period in which it is fully exempted from PRC EIT for two years commencing from 1 January 2008, followed by a reduced income tax rate of 11%, 12% and 12.5% for the sequential three years commencing from 1 January 2010. Yusei China is subjected to PRC EIT rate of 25% commencing from 1 January 2013.

The applicable PRC EIT rate of 廣州友成機工有限公司 Guangzhou Yusei Machinery Co., Ltd. (“ Guangzhou Yusei ”) and 杭州友成模具技術研究有限公司 Hangzhou Yusei Mould Technology Research Co., Ltd. (“ Hangzhou Yusei Moulding ”) is 25% for the two years ended 31 December 2013 and 2012.

As at 31 December 2013, the Group has estimated unused tax losses of approximately RMB32,629,000 (31 December 2012: RMB29,157,000). No deferred tax asset has been recognised in the consolidated financial statements due to the unpredictability of future profit streams. Such tax losses can be carried forward for five years from the year in which the respective loss arose.

Under the EIT Law of PRC, withholding tax is imposed on dividends declared in respect of profits earned by PRC subsidiaries from 1 January 2008 onwards. Deferred taxation has not been provided for in the consolidated financial statements in respect of temporary differences attributable to accumulated profits of the PRC subsidiaries amounting to approximately RMB177,280,000 (31 December 2012: RMB157,121,000) as the Group is able to control the timing of the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future.

• The English names are for identification purposes only.

– I-17 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

8. PROFIT FOR THE YEAR

Profit for the year has been arrived at after charging (crediting): Directors’ and the chief executive’s remuneration Salaries, wages and other benefits Retirement benefits scheme contributions Other staff costs Total staff costs Depreciation of property, plant and equipment Amortisation of intangible asset (included in administrative expenses) Amortisation of land use rights (included in administrative expenses) Total depreciation and amortisation expenses Operating lease charges on leased premises Impairment loss on trade receivables (included in administrative expense) Impairment loss on inventories (included in cost of sales) Reversal of impairment loss on inventories (included in cost of sales) Auditors’ remuneration	2013 RMB’000 4,105 128,213 3,399 131,612 135,717 42,344 68 623 43,035 6,351 1,475 45 (1,881) 916	2012 RMB’000 2,681
		126,208 2,823
		129,031
		131,712
		50,295 128 665
		51,088
		6,513 1,365 1,807 (1,719) 900

9. EARNINGS PER SHARE

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

Earnings Earnings for the purpose of basic earnings per share Number of shares Weighted average number of ordinary shares for the purposes of basic earnings per share	2013 RMB’000 5,604 176,000,000	2012 RMB’000 41,445
		176,000,000

Diluted earnings per share is same as basic earnings per share for the year ended 31 December 2013 and 2012 as there is no potential ordinary shares outstanding.

– I-18 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

10. TRADE RECEIVABLES, DEPOSITS AND PREPAYMENTS

Trade receivables and bills receivables Less: impairment loss recognised Advance to suppliers Other receivables, deposits and prepayments	2013 RMB’000 277,251 (4,904) 272,347 7,640 8,372 288,359	2012 RMB’000 294,404 (3,596)
		290,808 25,146 14,561
		330,515

The Group allows a general credit period of 30 to 90 days to its customers. For customers who purchased moulds from the Group and have established good relationships with the Group, the credit period may extend to the range from 90 days to 270 days.

The aging analysis of trade receivables and bills receivables based on the invoice date, which is approximate to revenue recognition date, net of impairment loss recognised is as follows:

1 – 30 days 31 – 60 days 61 – 90 days 91 – 180 days 181 – 365 days Over 365 days Trade receivables and bills receivables	2013 RMB’000 160,943 58,850 34,427 16,771 1,346 10 272,347	2012 RMB’000 203,969 44,670 25,014 15,275 1,818 62
		290,808

– I-19 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

11. TRADE AND OTHER PAYABLES

The aging analysis of trade payables based on the invoice date and summary of other payables at the end of the reporting period is as follows:

1 – 30 days 31 – 60 days 61 – 90 days 91 – 180 days 181 – 365 days Over 365 days Trade payables and bills payables VAT payables Deposits received Other payables and accrued charges	2013 RMB’000 104,692 43,963 22,499 5,090 1,388 1,529 179,161 10,966 673 49,519 240,319	2012 RMB’000 87,623 68,930 50,307 26,344 13,030 1,217
		247,451 12,128 4,192 45,876
		309,647

The average credit period on purchase of goods is 30 to 120 days. The Group has financial risk management policies in place to ensure that all payables are settled within the credit time frame.

The Group’s bank deposits of approximately RMB2,479,000 (2012: RMB29,465,000) were pledged to the banks to secure bills payables.

– I-20 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(B) AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012

The following is the full text of the audited financial statements of the Group for the year ended 31 December 2012:

CONSOLIDATED INCOME STATEMENT

For the year ended 31 December

NOTES Revenue 8 Cost of sales Gross profit Other income 9 Distribution costs Net foreign exchange gain (loss) Administrative expenses Finance costs 10 Share of results of associates 19 Profit before taxation Income tax expense 11 Profit for the year 12 Earnings per share Basic and diluted 15	2012 RMB’000 984,776 (881,855) 102,921 42,342 (27,147) 6,512 (53,941) (30,203) 3,438 43,922 (2,477) 41,445 RMB0.235	2011 RMB’000 831,994 (715,970)
		116,024 8,669 (20,933) (5,094) (52,617) (22,975) 948
		24,022 (8,682)
		15,340
		RMB0.087

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December

Profit for the year Exchange differences arising on translating Total comprehensive income for the year	2012 RMB’000 41,445 (79) 41,366	2011 RMB’000 15,340
		4,044
		19,384

– I-21 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 December

NOTES Non-current assets Property, plant and equipment 16 Intangible assets 17 Land use rights 18 Interests in associates 19 Deposits paid to acquire non-current assets 20 Current assets Inventories 21 Debtors, deposits and prepayments 22 Amounts due from associates 23(a) Pledged bank deposits 24 Bank balances, deposits and cash 25 Current liabilities Creditors and accrued charges 26 Amount due to ultimate holding company 27 Amount due to an associate 23(b) Income tax liabilities Obligations under finance leases – due within one year 28 Bank and other loans – due within one year 29 Net current liabilities Total assets less current liabilities	2012 RMB’000 373,455 417 19,420 23,469 – 416,761 140,390 330,515 3,058 31,265 63,346 568,574 309,647 24,441 5,991 5,526 13,451 330,567 689,623 (121,049) 295,712	2011 RMB’000 402,609 530 20,098 20,031 57 443,325 163,417 310,547 9,530 46,972 36,575 567,041 357,324 129 – 5,946 15,131 359,657 738,187 (171,146) 272,179

– I-22 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

NOTES Non-current liabilities Obligations under finance leases – due after one year 28 Bank and other loans – due after one year 29 Deferred income 30 Capital and reserves Share capital 31 Reserves	2012 RMB’000 13,516 27,422 1,374 42,312 253,400 1,810 251,590 253,400	2011 RMB’000 8,961 50,241 943
		60,145
		212,034
		1,810 210,224
		212,034

– I-23 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

1 January 2011 Profit for the year Other comprehensive income for the year Total comprehensive income for the year Dividend paid Transfer At 31 December 2011 and 1 January 2012 Profit for the year Other comprehensive income for the year Total comprehensive income for the year Transfer At 31 December 2012	Share capital RMB’000 (Note 31) 1,810 – – – – – 1,810 – – – – 1,810	Share premium RMB’000 39,867 – – – – – 39,867 – – – – 39,867	Special reserve RMB’000 (Note 33(v)) 49,663 – – – – – 49,663 – – – – 49,663	Reserve for shares issued with vesting conditions RMB’000 (Note 33(iv)) 18,065 – – – – – 18,065 – – – – 18,065	Translation reserve RMB’000 1,414 – 4,044 4,044 – – 5,458 – (79) (79) – 5,379	Capital reserve RMB’000 (Note 33(ii)) 71 – – – – – 71 – – – – 71	Statutory surplus reserve RMB’000 (Note 33(iii)) 11,942 – – – – 2,332 14,274 – – – 1,191 15,465	Retained profits RMB’000 82,138 15,340 – 15,340 (12,320) (2,332) 82,826 41,445 – 41,445 (1,191) 123,080	Total RMB’000 204,970
									15,340 4,044
									19,384
									(12,320) –
									212,034 41,445 (79)
									41,366
									–
									253,400

– I-24 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 December

OPERATING ACTIVITIES Profit before taxation Adjustments for: Bank interest income Depreciation and amortisation Finance costs Government subsidies Impairment loss on trade debtors Impairment loss on inventories (Gain) loss on disposal of property, plant and equipment and land use rights Release of deferred gain on sale and leaseback of property, plant and equipment Release of government grants Reversal of impairment loss on trade debtors Reversal of impairment loss on inventories Share of results of associates Operating cash flows before movements in working capital Decrease (increase) in inventories (Increase) decrease in debtors, deposits and prepayments Decrease (increase) in amounts due from associates Increase in amounts due to an associate (Decrease) increase in creditors and accrued charges Increase (decrease) in amount due to ultimate holding company Cash generated from operations Income taxes paid NET CASH FROM OPERATING ACTIVITIES	2012 RMB’000 43,922 (1,582) 51,088 30,203 (173) 1,365 1,807 (35,239) (136) (85) – (1,719) (3,438) 86,013 22,939 (21,411) 6,472 5,991 (47,841) 2,444 54,607 (2,897) 51,710	2011 RMB’000 24,022 (738) 45,499 22,975 (507) – 519 443 – (85) (188) (364) (948) 90,628 (49,134) 3,170 (2,029) – 35,033 (889) 76,779 (8,126) 68,653

– I-25 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

INVESTING ACTIVITIES Purchase of property, plant and equipment Decrease (increase) in pledged bank deposits Purchase of intangible assets Deposit paid for acquisition of machinery Proceeds from disposal of property, plant and equipment and land use rights Interest received NET CASH GENERATE FROM (USED IN) INVESTING ACTIVITIES FINANCING ACTIVITIES Repayment of bank and other loans Interest paid Repayment of obligations under finance leases Dividend paid Repayment to a director New bank and other loans raised Government subsidies received Increase in amount due to ultimate holding company Proceed of sale and leaseback transactions NET CASH USED IN FINANCING ACTIVITIES NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT 1 JANUARY Effect of foreign exchange rate changes CASH AND CASH EQUIVALENTS AT 31 DECEMBER, Representing bank balances, deposits and cash	2012 RMB’000 (32,655) 15,707 (15) – 47,716 1,582 32,335 (769,856) (28,907) (18,636) – – 717,935 173 20,572 21,511 (57,208) 26,837 36,575 (66) 63,346	2011 RMB’000 (93,794) (22,041) (215) (57) 1,953 738 (113,416) (287,152) (25,608) (14,388) (12,320) (106) 327,327 507 – – (11,740) (56,503) 92,962 116 36,575

– I-26 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. CORPORATE INFORMATION

Yusei Holdings Limited (the “ Company ”) is a public limited company incorporated in Cayman Islands as an exempted company with limited liability on 4 April 2005. Its ultimate holding company is Yusei Machinery Corporation (“ Yusei Japan ”) (incorporated in Japan). The addresses of the registered office and principal place of business of the Company are disclosed in the corporate information to the annual report.

The consolidated financial statements are presented in Renminbi (“ RMB ”). Other than those subsidiaries established in the People’s Republic of China (the “ PRC ”) whose functional currency is RMB, the functional currency of the Company is Hong Kong dollars (“ HK$ ”).

The principal activities of the Company and its subsidiaries (hereinafter collectively referred to as the “ Group ”) are moulding fabrication, manufacturing and trading of moulds and plastic components.

2. BASIS OF PREPARATION

The consolidated financial statements have been prepared on a going concern basis notwithstanding the net current liabilities of approximately RMB121,049,000 as at 31 December 2012. In the opinion of the directors, the Group should be able to maintain itself as a going concern in the coming year by taking into consideration the proposed arrangements which include, but are not limited to, the following:

1. subsequent to the year end date, the Group has successfully negotiated with its major banks to extend the existing bank loans of approximately RMB14,000,000, of which has been included in current liabilities as short-term bank loans as at 31 December 2012; and

2. the directors of the Company anticipate that the Group will generate positive cash flows from its businesses.

On the basis that the continuing availability of the banking facilities provided by its banks and the implementation of other measures with a view to improve its working capital position and net financial position, the directors of the Company consider that the Group will have sufficient working capital to meet its financial obligations as and when they fall due for the next twelve months from 31 December 2012. Accordingly, the directors of the Company are satisfied that it is appropriate to prepare these consolidated financial statements on a going concern basis. The consolidated financial statements do not include any adjustments relating to the carrying amount and reclassification of assets and liabilities that might be necessary should the Group be unable to continue as a going concern.

3. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS (“HKFRSS”)

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

Amendments to HKFRS 1 Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters Amendments to Hong Kong Deferred Tax: Recovery of Underlying Assets Accounting Standards (“ HKAS ”) 12 Amendments to HKFRS 7 Financial Instruments: Disclosures – Transfers of Financial Assets

The application of new and revised HKFRSs had no material effect on the consolidated financial statements of the Group for the current or prior accounting periods.

– I-27 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

New and revised HKFRSs issued but not yet effective

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

Amendments to HKFRSs Annual Improvements to HKFRSs 2009-2011 Cycle[1] Amendments to HKFRS 1 Government Loans[1] Amendments to HKFRS 7 Disclosures – Offsetting Financial Assets and Financial Liabilities[1] Amendments to HKFRS 7 Mandatory Effective Date of HKFRS 9 and Transition and HKFRS 9 Disclosures[3] HKFRS 9 Financial Instruments[3] Amendments to HKFRS 10, Consolidated Financial Statements, Joint Arrangements and HKFRS 11 and HKFRS 12 Disclosure of Interests in Other Entities: Transition Guidance[1] Amendments to HKFRS 10, Investment Entities[2] HKFRS 12 and HKAS 27 HKFRS 10 Consolidated Financial Statements[1] HKFRS 11 Joint Arrangements[1] HKFRS 12 Disclosure of Interests in Other Entities[1] HKFRS 13 Fair Value Measurement[1] HKAS 19 (as revised in 2011) Employee Benefits[1] HKAS 27 (as revised in 2011) Separate Financial Statements[1] HKAS 28 (as revised in 2011) Investments in Associates and Joint Ventures[1] Amendments to HKAS 1 Presentation of Items of Other Comprehensive Income[4] Amendments to HKAS 32 Offsetting Financial Assets and Financial Liabilities[2] 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.

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

Annual Improvements to HKFRSs 2009 – 2011 Cycle issued in June 2012

The Annual Improvements to HKFRSs 2009 – 2011 Cycle include a number of amendments to various HKFRSs. The amendments are effective for annual periods beginning on or after 1 January 2013. Amendments to HKFRSs include the amendments to HKAS 1 Presentation of Financial Statements, the amendments to HKAS 16 Property, Plant and Equipment and the amendments to HKAS 32 Financial Instruments: Presentation.

HKAS 1 requires an entity that changes accounting policies retrospectively, or makes a retrospective restatement or reclassification to present a statement of financial position as at the beginning of the preceding period (third statement of financial position). The amendments to HKAS 1 clarify that an entity is required to present a third statement of financial position only when the retrospective application, restatement or reclassification has a material effect on the information in the third statement of financial position and that related notes are not required to accompany the third statement of financial position. The directors do not anticipate that the application of the amendments will have a material effect on the Group’s consolidated financial statements.

The amendments to HKAS 16 clarify that spare parts, stand-by equipment and servicing equipment should be classified as property, plant and equipment when they meet the definition of property, plant and equipment in HKAS 16 and as inventory otherwise. The directors do not anticipate that the application of the amendments will have a material effect on the Group’s consolidated financial statements.

The amendments to HKAS 32 clarify that income tax on distributions to holders of an equity instrument and transaction costs of an equity transaction should be accounted for in accordance with HKAS 12 Income Taxes. The directors anticipate that the amendments to HKAS 32 will have no effect on the Group’s consolidated financial statements as the amendments to HKAS 32 is consistent with the Group’s existing accounting policy.

– I-28 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Amendments to HKAS 32 Offsetting Financial Assets and Financial Liabilities and amendments to HKFRS 7 Disclosures – Offsetting Financial Assets and Financial Liabilities

The amendments to HKAS 32 clarify existing application issues relating to the offsetting requirements. Specifically, the amendments clarify the meaning of “currently has a legally enforceable right of set-off” and “simultaneous realisation and settlement”.

The amendments to HKFRS 7 require entities to disclose information about rights of offset and related arrangements (such as collateral posting requirements) for financial instruments under an enforceable master netting agreement or similar arrangement.

The amended offsetting disclosures are required for annual periods beginning on or after 1 January 2013 and interim periods within those annual periods. The disclosures should also be provided retrospectively for all comparative periods. However, the amendments to HKAS 32 are not effective until annual periods beginning on or after 1 January 2014, with retrospective application required.

The directors anticipate that the application of these amendments to HKAS 32 and HKFRS 7 may result in more disclosures being made with regard to offsetting financial assets and financial liabilities in the future.

HKFRS 9 – Financial Instruments

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

Key requirements of HKFRS 9 are described as follows:

• All recognised financial assets that are within the scope of HKAS 39 Financial Instruments: Recognition and Measurement are subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent accounting periods. All other debt investments and equity investments are measured at their fair values at the end of subsequent reporting periods. In addition, under HKFRS 9, entities may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognised in profit or loss.

• With regard to the measurement of financial liabilities designated as at fair value through profit or loss, HKFRS 9 requires that the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value of financial liabilities attributable to changes in the financial liabilities’ credit risk are not subsequently reclassified to profit or loss. Under HKAS 39, the entire amount of the change in the fair value of the financial liability designated as fair value through profit or loss was presented in profit or loss.

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

The directors of the Company anticipate that the adoption of HKFRS 9 in the future may have significant impact on amounts reported in respect of the Group’s financial assets and financial liabilities. However, it is not practicable to provide a reasonable estimate of that effect until a detailed review has been completed.

– I-29 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

New and revised Standards on consolidation, associates and disclosures

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

Key requirements of these five standards are described below:

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

HKFRS 11 replaces HKAS 31 Interests in Joint Ventures. HKFRS 11 deals with how a joint arrangement of which two or more parties have joint control should be classified. HK (SIC) – Int 13 Jointly Controlled Entities – Non-monetary Contributions by Venturers will be withdrawn upon the effective date of HKFRS 11. Under HKFRS 11, joint arrangements are classified as joint operations or joint ventures, depending on the rights and obligations of the parties to the arrangements. In contrast, under HKAS 31, there are three types of joint arrangements: jointly controlled entities, jointly controlled assets and jointly controlled operations. In addition, joint ventures under HKFRS 11 are required to be accounted for using the equity method of accounting, whereas jointly controlled entities under HKAS 31 can be accounted for using the equity method of accounting or proportionate consolidation.

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

In July 2012, the amendments to HKFRS 10, HKFRS 11 and HKFRS 12 were issued to clarify certain transitional guidance on the application of these five HKFRSs for the first time.

These five standards, together with the amendments relating to the transitional guidance, are effective for annual periods beginning on or after 1 January 2013 with earlier application permitted provided that all of these standards are applied at the same time.

The application of HKFRS 12 may have significant impact on amounts reported in the consolidated financial statements. The application of HKFRS 10 might not have significant impact on the consolidated financial statements as all the subsidiaries are wholly owned by the Company.

Amendments to HKFRS 10, HKFRS 12 and HKAS 27 Investment Entities

The amendments to HKFRS 10 introduce an exception to consolidating subsidiaries for an investment entity, except where the subsidiaries provide services that relate to the investment entity’s investment activities.

Under the amendments to HKFRS 10, an investment entity is required to measure its interests in subsidiaries at fair value through profit or loss.

To qualify as an investment entity, certain criteria have to be met. Specifically, an entity is required to:

• obtain funds from one or more investors for the purpose of providing them with professional investment management services;

• commit to its investor(s) that its business purpose is to invest funds solely for returns from capital appreciation, investment income, or both; and

• measure and evaluate performance of substantially all of its investments on a fair value basis.

– I-30 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Consequential amendments to HKFRS 12 and HKAS 27 have been made to introduce new disclosure requirements for investment entities.

The amendments to HKFRS 10, HKFRS 12 and HKAS 27 are effective for annual periods beginning on or after 1 January 2014, with early application permitted. The directors anticipate that the application of the amendments will have no effect on the Group as the Company is not an investment entity.

HKFRS 13 Fair Value Measurement

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

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

The directors anticipate that HKFRS 13 will be adopted in the Group’s consolidated financial statements for the annual period beginning 1 January 2013 and that the application of the new Standard may affect the amounts reported in the consolidated financial statements and result in more extensive disclosures in the consolidated financial statements.

Amendments to HKAS 1 Presentation of Items of Other Comprehensive Income

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

The amendments to HKAS 1 are effective for annual periods beginning on or after 1 July 2012. The presentation of items of other comprehensive income will be modified accordingly when the amendments are applied in the future accounting periods.

The directors of the Company anticipate that the application of other new or revised HKFRSs will have no material impact on the results and the financial position of the Group.

4. SIGNIFICANT ACCOUNTING POLICIES

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

The consolidated financial statements have been prepared on the historical cost basis. Historical cost is generally based on the fair value of the consideration given in exchange for goods.

The principal accounting policies are set out below:

Basis of consolidation

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

– I-31 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

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

Investments in subsidiaries

Investment in a subsidiary is stated at cost less any identified impairment loss on the statement of financial position of the Company.

Investments in associates

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

The results and assets and liabilities of associates are incorporated in these consolidated financial statements using the equity method of accounting. The financial statements of associates used for equity accounting purposes are prepared using uniform accounting policies as those of the Group for like transactions and events in similar circumstances. Under the equity method, investments in associates are initially recognised in the consolidated statement of financial position at cost and adjusted thereafter to recognise the Group’s share of the profit or loss and other comprehensive income of associates. When the Group’s share of losses of an associate equals or exceeds its interest in that associate (which includes any long-term interests that, in substance, form part of the Group’s net investment in the associate), the Group discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of that associate.

Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of an associate recognised at the date of acquisition is recognised as goodwill, which is included within the carrying amount of the investment.

The requirements of HKAS 39 are applied to determine whether it is necessary to recognise any impairment loss with respect to the Group’s investment in an associate. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with HKAS 36 Impairment of Assets as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount. Any impairment loss recognised forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognised in accordance with HKAS 36 to the extent that the recoverable amount of the investment subsequently increases.

Where a group entity transacts with its associate, profits and losses resulting from the transactions with the associate are recognised in the Group’s consolidated financial statements only to the extent of interests in the associate that are not related to the Group.

Revenue recognition

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

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

• the Group has transferred to the buyer the significant risks and rewards of ownership of the goods;

• the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

– I-32 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

• the amount of revenue can be measured reliably;

• it is probable that the economic benefits associated with the transaction will flow to the Group; and

• the costs incurred or to be incurred in respect of the transaction can be measured reliably.

Service income is recognised when services are provided.

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

Rental income from operating leases is recognised in profit or loss on a straight-line basis over the term of the relevant leases.

Property, plant and equipment

Property, plant and equipment including buildings held for use in the production or supply of goods or services, or for administrative purposes (other than construction in progress) are stated in the consolidated statement of financial position at cost less subsequent accumulated depreciation and accumulated impairment losses, if any.

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

Properties in the course of construction for production, supply or administrative purposes are carried at cost, less any recognised impairment loss. Cost includes professional fees and, for qualifying assets, borrowing costs capitalised in accordance with the Group’s accounting policy. Such properties are classified to the appropriate categories of property, plant and equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.

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

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

Leasing

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

The Group as lessor

Rental income from operating leases is recognised in profit or loss on a straight-line basis over the term of the relevant lease.

– I-33 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The Group as lessee

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

Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognised immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Group’s policy on borrowing costs (see the accounting policy below). Contingent rentals are recognised as expenses in the periods, in which they are incurred.

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

Leasehold land and building

When a lease includes both land and building elements, the Group assesses the classification of each element as a finance or an operating lease separately based on the assessment as to whether substantially all the risks and rewards incidental to ownership of each element have been transferred to the Group, unless it is clear that both elements are operating leases in which case the entire lease is classified as an operating lease.

To the extent the allocation of the lease payments can be made reliably, interest in leasehold land that is accounted for as an operating lease is presented as “land use rights” in the consolidated statement of financial position and is amortised over the lease term on a straight-line basis. When the lease payments cannot be allocated reliably between the land and building elements, the entire lease is generally classified as a finance lease and accounted for as property, plant and equipment.

Foreign currencies

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

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

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

– I-34 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Borrowing costs

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

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

Government grants

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

Government grants are recognised in profit or loss on a systematic basis over the periods in which the Group recognises as expenses the related costs for which the grants are intended to compensate. Specifically, government grants whose primary condition is that the Group should purchase, construct or otherwise acquire non-current assets are recognised as deferred income in the consolidated statement of financial position and transferred to profit or loss over the useful lives of the related assets.

Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognised in profit or loss in the period in which they become receivable.

Retirement benefits scheme contribution

Payments to state-managed retirement benefit schemes and the Mandatory Provident Fund Scheme are recognised as an expense when employees have rendered service entitling them to the contributions.

Taxation

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

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

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

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

– I-35 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

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

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

Intangible asset

Intangible assets acquired separately

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

Inventories

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

Cash and cash equivalents

Bank balances and cash in the consolidated statement of financial position comprise cash at banks and on hand and short-term deposits with a maturity of three months or less. For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash and shortterm deposits as defined above.

Financial instruments

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

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.

Financial assets

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

– I-36 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Effective interest method

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

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

Loans and receivables

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

Impairment of financial assets

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

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

• significant financial difficulty of the issuer or counterparty; or

• breach of contract, such as default or delinquency in interest and principal payments; or

• it becoming probable that the borrower will enter bankruptcy or financial re-organisation; or

• disappearance of an active market for that financial asset because of financial difficulties.

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

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

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

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

– I-37 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Financial liabilities and equity instruments

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

Equity Instruments

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

The Group’s financial liabilities are generally classified into other financial liabilities.

Effective interest method

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

Interest expense is recognised on an effective interest basis.

Other financial liabilities

Other financial liabilities including creditors and accrued charges, amount due to an associate and ultimate holding company, obligations under finance leases and bank and other loans are subsequently measured at amortised cost, using the effective interest method.

Equity instruments

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

Derecognition

The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group continues to recognise the asset to the extent of its continuing involvement and recognises an associated liability. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recongise the financial asset and also recognises a collateralised borrowing for the proceeds received.

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

The Group derecongises financial liability when, and only when, the Group’s obligations are discharged, cancelled or expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

– I-38 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Impairment losses on tangible and intangible assets

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

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

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

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

5. CRITICAL ACCOUNTING JUDGEMENT AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Group’s accounting policies, which are described in Note 4, the directors of the Company are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

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

Critical judgements in applying the entity’s accounting policies

The following are the critical judgements, apart from those involving estimations (see below), that the directors of the Company have made in the process of applying the entity’s accounting policies and that have the most significant effect on the amounts recognised in consolidated financial statements.

Going concern consideration

The assessment of the going concern assumptions involves making judgement by the directors of the Company, at a particular point of time, about the future outcome of events or conditions which are inherently uncertain. The directors of the Company considers that the Group has ability to continue as a going concern and the major events or conditions, which may give rise to business risks, that individually or collectively may cast significant doubt about the going concern assumptions are set out in Note 2.

– I-39 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Building

Despite the Group has paid the full purchase consideration as detailed in Note 16, certain of the Group’s right to use of the building was not granted formal titles from the relevant government authorities. The directors of the Company are of the opinions that the risks and rewards of using the asset have been transferred to the Group and the absence of formal titles to the building do not impair the value of the relevant building to the Group.

Key sources of estimation uncertainty

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

Estimated useful lives of property, plant and equipment

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

Estimated impairment of property, plant and equipment and land use rights

The Group tests annually whether property, plant and equipment and land use rights have suffered any impairment in accordance with the accounting policy stated in Note 4. The recoverable amounts have been determined based on value-in-use calculations. These calculations require the use of estimates such as the future revenue and discount rates.

Estimated impairment of interests in associates

Determining whether the interests in associates are impaired requires an estimation of the future cash flows expected to arise and the expected dividend yield from the associates in order to calculate the present value. Where the actual future cash flows are less than expected, a material impairment loss may arise.

Estimated Impairment loss on inventories

The directors of the Company review an aging analysis at the end of each reporting period, and makes impairment for obsolete and slow-moving inventory items identified that are no longer suitable for use in production. The directors of the Company estimate the net realisable value for such raw materials, work-in-progress and finished goods based primarily on the latest invoice prices and current market conditions. The directors of the Company also carry out an inventory review on a product-by-product basis at the end of each reporting period and makes impairment for obsolete items. During the year ended 31 December 2012, the Group reversed an impairment loss on inventories of approximately RMB1,719,000 (2011: RMB364,000) and written down of inventory of approximately RMB1,807,000 (2011: RMB519,000). At 31 December 2012, the carrying amount of inventories is approximately RMB140,390,000 (2011: RMB163,417,000).

Estimated impairment loss on debtors

The policy for making impairment loss on debtors of the Group is based on the evaluation of collectability of debtors and on judgement of the directors of the Company. A considerable amount of judgement is required in assessing the ultimate realisation of these debtors, including the current creditworthiness and the past collection history of each debtor. If the financial conditions of debtors of the Group were to deteriorate, resulting in an impairment of their ability to make payments, additional impairment loss may be required. At 31 December 2012, the carrying amount of debtors was approximately RMB290,808,000, net of accumulated impairment loss on debtors of approximately RMB3,596,000 (2011: carrying amount of debtors was approximately RMB264,342,000, net of accumulated impairment loss on debtors of approximately RMB2,231,000).

– I-40 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

6. CAPITAL RISK MANAGEMENT

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

The capital structure of the Group consists of debt, which includes obligation under finance leases and bank and other loans as disclosed in Notes 28 and 29 respectively and amount due to ultimate holding company as disclosed in Note 27, net of cash and cash equivalents and equity attributable to owners of the Company, comprising issued share capital and reserves. The management of the Group reviews the capital structure by considering the cost of capital and the risks associated with each class of capital. In view of this, the Group will balance its overall capital structure through the payment of dividends, new share issues as well as raise of new loans or repayment of existing loans.

7. FINANCIAL INSTRUMENTS

A. Categories of financial instruments

Financial assets Loan and receivables – debtors, deposits and other debtors – amounts due from associates – pledged bank deposits – bank balances, deposits and cash Financial liabilities Other financial liabilities measured at amortised cost – creditors and accrued charges – amount due to ultimate holding company – amount due to an associate – obligations under finance leases – bank and other loans	2012 RMB’000 295,088 3,058 31,265 63,346 392,757 292,981 24,441 5,991 26,967 357,989 708,369	2011 RMB’000 268,379 9,530 46,972 36,575
		361,456
		338,343 129 – 24,092 409,898
		772,462

B. Financial risk, management objectives and policies

The Group’s major financial instruments include debtors, deposits and other receivables; creditors and accrued charges; obligations under finance leases; bank and other loans; balances with ultimate holding company and associates; pledged bank deposits and bank balances, deposits and cash. Details of these financial instruments are disclosed in respective notes. The risks associated with these financial instruments include market risk (currency risk and interest rate risk), credit risk and liquidity risk. The policies on how to mitigate these risks are set out below. The management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

– I-41 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Market risk

(i) Currency risk

The Group’s exposure to currency risk is attributable to the debtors, deposits and other receivables; bank balances, deposits and cash; creditors and accrued charges; obligations under finance leases, bank and other loans of the Group which are denominated in foreign currencies of United State dollars (“ US$ ”) and Japanese Yen (“ JPY ”). The functional currencies of the relevant group entities are RMB and HK$. The Group currently does not have a foreign currency hedging policy in respect of foreign currency exposure. However, the directors of the Company monitor the related foreign currency exposure and will consider hedging significant foreign currency exposure should the need arise.

The carrying amounts of the Group’s major monetary assets and monetary liabilities denominated in currencies other than the functional currencies of the relevant group entities at the reporting date are as follows:

Monetary assets US$ Debtors, deposits and other receivables Bank balances, deposits and cash JPY Debtors, deposits and other receivables Bank balances, deposits and cash	As at 31 December 2012 2011 RMB’000 RMB’000 61,723 37,690 18,005 17,436 79,728 55,126 1,049 26 607 181 1,656 207 81,384 55,333	As at 31 December 2012 2011 RMB’000 RMB’000 61,723 37,690 18,005 17,436 79,728 55,126 1,049 26 607 181 1,656 207 81,384 55,333
		55,126
		26 181
		207
		55,333

– I-42 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Monetary liabilities US$ Creditors and accrued charges Bank loans JPY Creditors and accrued charges Obligations under finance leases Bank loans	As at 31 December 2012 2011 RMB’000 RMB’000 40,983 54,776 53,428 18,903 94,411 73,679 986 936 4,332 13,539 43,874 79,947 49,192 94,422 143,603 168,101	As at 31 December 2012 2011 RMB’000 RMB’000 40,983 54,776 53,428 18,903 94,411 73,679 986 936 4,332 13,539 43,874 79,947 49,192 94,422 143,603 168,101
		73,679
		936 13,539 79,947
		94,422
		168,101

Sensitivity analysis

The Group is mainly exposed to currency risk in JPY and US$. The following table details the Group’s sensitivity to a 10% (2011: 10%) increase and decrease in RMB against JPY and 5% (2011: 5%) increase and decrease in RMB against US$ with all other variables held constant. 10% and 5% (2011: 10% and 5%) are the sensitivity rate used when the reporting foreign currency risk internally to key management personnel and represents directors’ assessment of the reasonably possible change in foreign exchange rates of JPY and US$. The sensitivity analysis includes US$ and JPY denominated monetary assets and liabilities and adjusts their translation based on their carrying amounts at the end of each reporting period. A positive number below indicates a decrease in the post-tax profit where RMB strengthen 5% (2011: 5%) against US$ and strengthen 10% (2011: 10%) against JPY. For a 5% and 10% (2011: 5% and 10%) weakening of RMB against US$ and JPY respectively, there would be an equal and opposite impact on the post-tax profit.

	2012	2011
	Decrease	Decrease
	(increase)	(increase)
	in profit	in profit
	RMB’000	RMB’000
US$	(73)	(684)
JPY	(4,467)	(8,522)

– I-43 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(ii) Interest rate risk

The Group is exposed to fair value interest rate risk in relation to fixed-rate pledged bank deposits, bank balances, deposits and cash, amount due to ultimate holding company, obligations under finance leases and bank and other loans (see Notes 24, 25, 27, 28 and 29 respectively for details). The Group historically has not used any financial instruments to hedge potential fluctuations in interest rates.

The Group is also exposed to cash flow interest-rate risk in relation to floating-rate bank and other loans (see Note 29 for details). It is the Group’s policy to keep its loans at floating-rate of interests so as to minimise the fair value interest rate risk. The Group’s cash flow interest rate risk is mainly concentrated on the fluctuation of Toyko Interbank Offer Rate (“ TIBOR ”) arising from the Group’s JPY denominated bank loans and RMB Benchmark Interest Rate arising from the Group’s RMB denominated bank loans.

Sensitivity analysis

At 31 December 2012, it is estimated that a general increase or decrease of five percentage point (2011: five percentage point) in interest rates, with all other variables held constant, would decrease or increase the Group’s post-tax profit for the year ended 31 December 2012 by approximately RMB102,000 (2011: RMB654,000).

The above sensitivity analysis has been determined assuming that a change in interest rates had occurred at the end of the reporting period and had been applied to the exposure to interest rate risk for bank and other loans in existence at that date. The five percentage point (2011: five percentage point) increase or decrease is used when reporting interest rate risk internally to key management personnel and represents directors’ assessment of the reasonably possible change in interest rates.

Credit risk

Credit risk refers to the risk that debtors will default on their obligations to repay the amounts owing to the Group, resulting in a loss to the Group. The maximum exposure to credit risk in the event that the counterparties fail to perform their obligations as the end of the reporting period in relation to each class of recognised financial assets is the carrying amount of those assets as stated in the consolidated statement of financial position.

The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults.

In order to minimise the credit risk, the directors of the Company have delegated a team responsible for determination of credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. The Group’s exposure and the credit ratings of its counterparties are continuously monitored and controlled by credit limits. The Group’s current credit practices include assessment and valuation of customer’s credit reliability and periodic review of their financial status to determine credit limits to be granted.

As at 31 December 2012, the Group has certain concentration of credit risk as 56% (2011: 46%) of the Group’s total balance of debtors was due from the Group’s five largest customers.

The Group’s concentration of credit risk by geographical locations is mainly in the PRC, which accounted for 99.9% (31 December 2011: 99.9%) of the total debtors as at 31 December 2012.

– I-44 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

Liquidity risk

As at 31 December 2012, the Group has net current liabilities of approximately RMB121,049,000 (2011: RMB171,146,000).

The liquidity of the Group is primarily dependent on its ability to maintain adequate cash inflow from operations to meet its debt obligations and to obtain continuing financial supports from its bankers. At 31 December 2012, banking facilities (including bank and other loans and bills payables) in an aggregate amount of approximately RMB173,400,000 (2011: approximately RMB392,279,000) were available from the Group’s principal bankers, of which approximately RMB113,550,000 (2011: RMB339,152,000) has been utilised. The Group ensures to the compliance of those covenants of the existing banking facilities.

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

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

As at 31 December 2012

Creditors and accrued charges Amount due to ultimate holding company Amount due to an associate Obligations under finance leases Bank and other loans	Carrying amount Total contractual undiscounted cash flow RMB’000 RMB’000 292,981 292,981 24,441 24,647 5,991 5,991 26,967 30,218 357,989 377,649 708,369 731,486	Within one year or on demand RMB’000 292,981 24,647 5,991 15,079 348,721 687,419	More than one year less than two years RMB’000 – – – 6,154 18,022 24,176	More than two years less than five years RMB’000 – – – 8,985 10,906
				19,891

– I-45 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

As at 31 December 2011

Creditors and accrued charges Amount due to ultimate holding company Obligations under finance leases Bank and other loans Creditors and accrued charges	Carrying amount Total contractual undiscounted cash flow RMB’000 RMB’000 338,343 338,343 129 129 24,092 25,281 409,898 433,440 772,462 797,193	Within one year or on demand RMB’000 338,343 129 16,121 380,313 734,906	More than one year less than two years RMB’000 – – 9,160 28,315 37,475	More than two years less than five years RMB’000 – – – 24,812
				24,812

Bank loans with a repayment on demand clause are included in the “within one year or on demand” time band in the above maturity analysis. As at 31 December 2012 and 31 December 2011, the aggregate undiscounted principal amounts of these bank loans amounted to RMB6,282,000 and RMB10,446,000 respectively. Taking into account the Group had no history of default or delay in principal nor interests payments, the directors do not believe that it is probable that the banks will exercise their discretionary rights to demand immediate repayment. The directors of the Company believe that such bank loans will be repaid two years after the reporting date in accordance with the scheduled repayment dates set out in the loan agreements. At that time, the aggregate principal and interest cash outflows will amount to RMB6,627,000.

C. Fair value

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

• the fair value of all financial assets and financial liabilities is determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices from observable current market transactions and dealer quotes for similar instruments;

• the directors of the Company consider that the fair value of all financial assets and financial liabilities recorded at amortised cost in the consolidated statement of financial position approximate to the corresponding carrying amounts due to their short-term maturities; and

• the fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.

The directors of the Company consider the fair values of other non-current liabilities approximate their carrying amounts as the impact of discounting is not significant.

– I-46 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

8. REVENUE AND SEGMENT INFORMATION

Revenue represents the net amounts received and receivable for goods sold, less discount, and net of value-added tax during the year.

For the two years ended 31 December 2012 and 2011, the sole principal activity of the Group is moulding fabrication, manufacturing and trading of moulds and plastic components. All the operation of the Group are located and carried out in the PRC. In the opinion of the directors of the Company, being the chief operating decision maker, the Group operated in a single operating segment. Accordingly, no segmental analysis has been presented.

Information about major customers

Revenue from customers of the corresponding years contributing over 10% of the total sales of the Group are as follows:

		2012	2011
		RMB’000	RMB’000
Customer	A	282,945	265,451
Customer	B	184,124	175,816
Customer	C	N/A1	86,888

1 The corresponding revenue did not contribute over 10% of the total sales of the Group in the respective year

All revenue generated from the major customers relate to the sale of moulds and plastic components.

9. OTHER INCOME

Gain on sales of materials Bank interest income Rental income received Utilities expenses claimed Government subsidies (Note) Release of government grants for land use rights (Note 30) Reversal of impairment loss on trade debtors Gain on disposal of property, plant and equipment and land use rights Release of deferred gain from sale and leaseback of property, plant and equipment (Note 30) Others	2012 RMB’000 3,494 1,582 193 463 173 85 – 35,239 136 977 42,342	2011 RMB’000 4,812 738 743 573 507 85 188 – – 1,023
		8,669

Note: Government subsidies of approximately RMB173,000 (2011: RMB507,000) have been recognised during the year ended 31 December 2012 which were designated for the encouragement of business development and high technology development incentive. All conditions in respect of these grants had been fulfilled and such government grants were recognised in other income for the year.

– I-47 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

10. FINANCE COSTS

Interest on: bank and other loans wholly repayable within five years finance leases amount due to ultimate holding company Less: Interest expenses capitalised into construction in progress and property, plant and equipment (Note) Total interest	2012 RMB’000 26,483 2,424 1,296 – 30,203	2011 RMB’000 23,859 1,749 – (2,633)
		22,975

Note: Borrowing costs capitalised during the year ended 31 December 2011 arose on the general borrowing pool and are calculated by applying a capitalisation rate of 6.06% per annum to expenditure on qualifying assets. No borrowing costs capitalised for the year ended 31 December 2012.

11. INCOME TAX EXPENSE

PRC Enterprise Income Tax (the “EIT”) Current year (Over) under provision in prior years	2012 RMB’000 2,507 (30) 2,477	2011 RMB’000 8,287 395
		8,682

(i) Overseas income tax

The Company is incorporated in the Cayman Islands and is exempted from taxation in the Cayman Islands.

(ii) Hong Kong Profits Tax

No provision for Hong Kong Profits Tax had been made as the Group did not generate any assessable profits in Hong Kong during both years.

(iii) PRC EIT

Under the Law of the PRC on EIT (the “ EIT Law ”) and Implementation Regulation of the EIT Law, the tax rate of the PRC subsidiaries is 25% from 1 January 2008 onwards.

The applicable tax rate of the Company’s subsidiaries, 杭州友成機工有限公司 Hangzhou Yusei Machinery Co., Ltd. (“ Hangzhou Yusei ”) and 蘇州友成機工有限公司 Suzhou Yusei Machinery Co., Ltd. (“ Suzhou Yusei ”) for 2012 was 15%. On 27 December 2012, Hangzhou Yusei was approved by Science and Technology Department of Zhejiang Province as high technology enterprise and therefore is subject to EIT at the rate of 15% for three years, with effective from 1 January 2012. On 8 November 2011, Suzhou Yusei was approved by Science and Technology Department of Jiangsu Province as high technology enterprise and therefore is subject to EIT at the rate of 15% for three years, with effective from 1 January 2011.

– I-48 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

In addition, the Company’s another subsidiary, 浙江友成塑料模具有限公司 Zhejiang Yusei Plastics & Mould Co., Ltd. (“ Zhejiang Yusei* ”), is operating and registered in the State Level New and High Technology Development Zone. Pursuant to the notice dated 20 March 2008 issued by the PRC tax authorities, the applicable tax rate of Zhejiang Yusei for 2008, 2009, 2010 and 2011 is 18%, 20%, 22% and 24% respectively. Zhejiang Yusei is subjected to PRC EIT rate of 25% commencing from 1 January 2012.

Pursuant to the approvals obtained from the relevant PRC tax authorities, 友成(中國)模具 有限公司 Yusei (China) Mould Co., Ltd. (“ Yusei China* ”) is entitled to a tax concession period in which it is fully exempted from PRC EIT for two years commencing from 1 January 2008, followed by a reduced income tax rate of 11%, 12% and 12.5% for the sequential three years commencing from 1 January 2010.

The applicable PRC EIT rate of 廣州友成機工有限公司 Guangzhou Yusei Machinery Co., Ltd. (“ Guangzhou Yusei ”) and 杭州友成模具技術研究有限公司 Hangzhou Yusei Mould Technology Research Co., Ltd. (“ Hangzhou Yusei Moulding ”) is 25% for the two years ended 31 December 2012 and 2011.

• The English names are for identification purposes only.

The charge for the year can be reconciled to the profit before taxation per consolidated income statement, based on the income tax rate of most of the Group’s profit under assessment, as follows:

Profit before taxation Tax at the income tax rate at 25% (2011: 25%) Tax effect of share of results of associates Tax effect of expenses not deductible for tax purpose Tax effect of income not taxable for tax purpose Tax effect of tax losses not recognised Utilisation of tax losses previously not recognised Tax effect of tax concession period Effect of different tax rates (Over) under provision in prior years Income tax expenses for the year	2012 RMB’000 43,922 10,980 (860) 5,979 (12,652) 1,428 (889) (1,447) (32) (30) 2,477	2011 RMB’000 24,022
		6,005 (237) 996 – 2,603 – (1,834) 754 395
		8,682

At 31 December 2012, the Group has estimated unused tax losses of approximately RMB29,157,000 (31 December 2011: RMB27,001,000). No deferred tax asset has been recognised in the consolidated financial statements due to the unpredictability of future profit streams.

Under the EIT Law of PRC, withholding tax is imposed on dividends declared in respect of profits earned by PRC subsidiaries from 1 January 2008 onwards. Deferred taxation has not been provided for in the consolidated financial statements in respect of temporary differences attributable to accumulated profits of the PRC subsidiaries amounting to approximately RMB157,121,000 (31 December 2011: RMB107,386,000) as the Group is able to control the timing of the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future.

– I-49 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

12. PROFIT FOR THE YEAR

Profit for the year has been arrived at after charging: Directors’ remuneration (Note 13) Salaries, wages and other benefits Retirement benefits scheme contributions Other staff costs Total staff costs Depreciation of property, plant and equipment Amortisation of intangible asset (included in administrative expenses) Amortisation of land use rights (included in administrative expenses) Total depreciation and amortisation expenses Operating lease charges on leased premises Impairment loss on trade debtors (included in administrative expense) Impairment loss on inventories (included in cost of sales) Reversal of impairment loss on inventories (included in cost of sales) Loss on disposals of property, plant and equipment Auditors’ remuneration	2012 RMB’000 2,681 126,208 2,823 129,031 131,712 50,295 128 665 51,088 6,513 1,365 1,807 (1,719) – 900	2011 RMB’000 2,693
		110,070 2,176
		112,246
		114,939
		44,617 187 695
		45,499
		1,940 – 519 (364) 443 860

– I-50 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

13. REMUNERATION OF DIRECTORS AND FIVE HIGHEST PAID INDIVIDUALS

The emoluments of directors and the chief executive are analysed as follows:

2012

Name of director Executive directors Xu Yong Shimabayashi Manabu Non-executive directors Katsutoshi Masuda Toshimitsu Masuda Toshinobu Ito (resigned on 23 November 2012) Shinichi Koizumi Independent non-executive directors Lo Ka Wai Fan Xiaoping Hisaki Takabayashi	Fees RMB’000 630 630 811 41 14 41 97 24 24 2,312	Basic salaries and allowances Retirement benefits scheme contributions RMB’000 RMB’000 120 13 236 – – – – – – – – – – – – – – – 356 13	Total RMB’000 763 866 811 41 14 41 97 24 24
			2,681

2011

Name of director Executive directors Xu Yong Shimabayashi Manabu Non-executive directors Katsutoshi Masuda Toshimitsu Masuda Toshinobu Ito Shinichi Koizumi Independent non-executive directors Lo Ka Wai Fan Xiaoping Hisaki Takabayashi	Fees RMB’000 630 630 831 42 42 42 100 25 25 2,367	Basic salaries and allowances Retirement benefits scheme contributions RMB’000 RMB’000 126 13 187 – – – – – – – – – – – – – – – 313 13	Total RMB’000 769 817 831 42 42 42 100 25 25
			2,693

Mr. Xu Yong is also the Chief Executive of the Company and his emoluments disclosed above include those for services rendered by him as the Chief Executive.

– I-51 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Of the five highest paid individuals in the Group during the year ended 31 December 2012, three (2011: three) were directors and the chief executive of the Company and details of their remunerations are set out above. The remunerations of the remaining two (2011: two) individuals were as follows:

Basic salaries and allowances Retirement benefits scheme contributions	2012 RMB’000 729 29 758	2011 RMB’000 629 10
		639

The remunerations of these individuals were within the following bands:

	Number of employees
	2012	2011
Nil to HK$1,000,000 (equivalent to approximately
RMB810,775 (2011: RMB830,815))	2	2

During the two years ended 31 December 2012 and 2011, no remuneration were paid by the Group to the five highest paid individuals and directors as an inducement to join or upon joining the Group or as compensation for loss of office. None of the directors and the chief executive has waived any remuneration during the two years ended 31 December 2012 and 2011.

14. DIVIDEND

					2012	2011
					RMB’000	RMB’000
Dividend	paid	during	the	year	–	12,320

Pursuant to board resolutions passed on 24 March 2011, the Company declared special dividends of approximately RMB12,320,000 to the then shareholders. Such dividends were fully settled in April 2011. No dividend has been proposed since the end of the reporting period.

No dividend was paid or proposed for the year ended 31 December 2012.

15. EARNINGS PER SHARE

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

Earnings Earnings for the purpose of basic earnings per share Number of shares Weighted average number of ordinary shares for the purposes of basic earnings per share	2012 RMB’000 41,445 176,000,000	2011 RMB’000 15,340
		176,000,000

Diluted earnings per share is same as basic earnings per share for the year ended 31 December 2012 and 2011 as no potential ordinary shares outstanding.

– I-52 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

16. PROPERTY, PLANT AND EQUIPMENT

COST At 1 January 2011 Additions Transfer Disposal At 31 December 2011 and 1 January 2012 Additions Disposal At 31 December 2012 DEPRECIATION At 1 January 2011 Provided for the year Eliminated on disposals At 31 December 2011 and 1 January 2012 Provided for the year Eliminated on disposals At 31 December 2012 CARRYING VALUES At 31 December 2012 At 31 December 2011	Buildings RMB’000 112,311 528 57,547 (911) 169,475 4,799 (16,540) 157,734 27,016 6,132 (490) 32,658 7,616 (9,972) 30,302 127,432 136,817	Machinery and equipment RMB’000 358,553 59,334 8,483 (2,435) 423,935 40,446 (51,482) 412,899 147,210 33,523 (349) 180,384 34,791 (25,353) 189,822 223,077 243,551	Motor vehicles RMB’000 5,462 414 – (165) 5,711 – (94) 5,617 3,892 646 (149) 4,389 379 (84) 4,684 933 1,322	Office equipment RMB’000 10,158 876 – (86) 10,948 566 (2,531) 8,983 6,970 1,444 (42) 8,372 622 (2,156) 6,838 2,145 2,576	Moulds Construction in progress RMB’000 RMB’000 24,600 31,779 2,402 34,251 – (66,030) – – 27,002 – 6,264 2,148 – – 33,266 2,148 5,787 – 2,872 – – – 8,659 – 6,887 – – – 15,546 – 17,720 2,148 18,343 –	Total RMB’000 542,863 97,805 – (3,597)
						637,071 54,223 (70,647)
						620,647
						190,875 44,617 (1,030)
						234,462 50,295 (37,565)
						247,192
						373,455
						402,609

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

Buildings	20 years
Machinery and equipment	5 to 20 years
Motor vehicles	5 years
Office equipment	5 years
Moulds	5 years

As at 31 December 2012, the property usage permits of certain building which transferred from construction in progress in prior year has not been granted by relevant government authorities with the aggregate carrying values of approximately RMB53,880,000 (2011: RMB56,579,000). In the opinion of the directors of the Company, the absence of property usage permits to the building does not impair the value of the relevant building to the Group. The directors of the Company also believe that property usage permits to the building will be granted to the Group in due course.

– I-53 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

As at 31 December 2012, certain of the property, plant and equipment were pledged to obtain bank and other loans granted to the Group, details of which are set out in Note 29.

Analysis of carrying values of machinery and equipment held under finance leases is:

			2012	2011
			RMB’000	RMB’000
Machinery	and	equipment	50,076	36,156

17. INTANGIBLE ASSETS

COST At 1 January 2011 Additions At 31 December 2011 and 1 January 2012 Additions At 31 December 2012 AMORTISATION At 1 January 2011 Provided for the year At 31 December 2011 and 1 January 2012 Provided for the year At 31 December 2012 CARRYING VALUES At 31 December 2012 At 31 December 2011	Software RMB’000 4,481 215
	4,696 15
	4,711
	3,979 187
	4,166 128
	4,294
	417
	530

The amount represents software which is amortised on a straight-line basis over two to five years.

– I-54 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

18. LAND USE RIGHTS

COST At beginning of the year Disposal At end of the year AMORTISATION At beginning of the year Charge for the year Eliminated on disposal At end of the year CARRYING VALUES At end of the year Analysed for reporting purposes as: Current assets (included in debtors, deposits and prepayments) Non-current assets	2012 RMB’000 25,025 (1,277) 23,748 4,232 665 (1,186) 3,711 20,037 617 19,420 20,037	2011 RMB’000 25,025 –
		25,025
		3,537 695 –
		4,232
		20,793
		695 20,098
		20,793

Land use rights represent medium-term leasehold land in the PRC and are amortised over the respective lease terms.

As at 31 December 2012, certain of the land use rights were pledged to obtain bank loans granted to the Group, details of which are set out in Note 29.

19. INTERESTS IN ASSOCIATES

Cost of investment in associates – unlisted Share of post-acquisition losses and reserves Interests in associates	2012 RMB’000 27,671 (4,202) 23,469	2011 RMB’000 27,671 (7,640)
		20,031

Included in the cost of investment in associates is goodwill of approximately RMB2,111,000 (2011: RMB2,111,000) arising on acquisition of associates.

– I-55 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

As at 31 December 2012 and 2011, the Group had interests in the following associates:

		Place of		Proportion of	Proportion of
		incorporation/		nominal value of
		Principal place	Class of	issued capital held		Proportion	of	Principal
Name of entity	Form of entity	of operation	shares held	by the Group		voting power	held	activities
				2012	2011	2012	2011
杭州友成實業有限公司	Incorporated	PRC	Registered	30%	30%	30%	30%	Moulding
Hangzhou Yusei			capital					fabrication
Industrial Company
Limited (“Yusei*
Industrial”)(Note a)
吉林東光友成機工有限公司	Incorporated	PRC	Registered	40%	40%	40%	40%	Manufacturing
Jilin Dong Guang Yusei			capital					and trading of
Manufacturing Co., Ltd.*								plastic
(“Jilin Yusei”)(Note b)								components

Notes:

• (a) On 15 December 2008, the Company entered into an agreement with Yusei Japan pursuant to which the Company agreed to acquire from Yusei Japan 30% equity interests in Yusei Industrial for a consideration of US$3,000,000 (equivalent to approximately RMB20,471,000). The acquisition was approved by the Company’s shareholders at an extraordinary general meeting held on 19 January 2009 and completed on 13 July 2009.

• (b) On 15 November 2008, Zhejiang Yusei entered into an agreement with independent third parties to establish Jilin Yusei in Jilin in the PRC with total registered capital of RMB18,000,000, of which Zhejiang Yusei was required to contribute RMB7,200,000, representing 40% equity interests in Jilin Yusei, to the registered capital of Jilin Yusei. Jilin Yusei was established on 6 January 2009.

• The English names are for identification purposes only.

The following table illustrates the summarised financial information of the Group’s associates extracted from their management accounts:

Total assets Total liabilities Net assets Group’s share of net assets of associates Revenue Profit (loss) for the year Group’s share of profits and reserve of associates for the year	2012 RMB’000 207,090 149,157 57,933 23,469 208,715 7,115 3,438	2011 RMB’000 209,245 158,377
		50,868
		20,031
		169,488 (2,688) 948

– I-56 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The Group has discontinued recognition of its share of loss of Jilin Yusei commencing from the year ended 31 December 2010. The amount of unrecognised share of loss of those associate, extracted from the relevant management accounts, both for the year and cumulatively, is as follow:

Unrecognised share of losses of an associate for the year Accumulated unrecognised share of losses of an associate 20. DEPOSITS PAID TO ACQUIRE NON-CURRENT ASSETS Deposits paid for: Acquisition of machinery 21. INVENTORIES Raw materials Work-in-progress Finished goods	2012 RMB’000 1,738 4,612 2012 RMB’000 – 2012 RMB’000 34,467 74,526 31,397 140,390	2011 RMB’000 2,340
		2,874
		2011 RMB’000 57
		2011 RMB’000 31,528 89,525 42,364
		163,417

During the year, there was a significant increase in the net realisable value of finished goods due to change in market condition. As a result, a reversal of impairment loss on inventories of RMB1,719,000 (2011: RMB364,000) has been recognised and included in cost of sales in the current year.

22. DEBTORS, DEPOSITS AND PREPAYMENTS

Trade debtors and bills receivables Less: impairment loss recognised Advance to suppliers Other debtors, deposits and prepayments	2012 RMB’000 294,404 (3,596) 290,808 25,146 14,561 330,515	2011 RMB’000 266,573 (2,231)
		264,342 21,551 24,654
		310,547

The Group allows a general credit period of 30 to 90 days to its customers. For customers who purchased moulds from the Group and have established good relationships with the Group, the credit period may extend to the range from 90 days to 270 days.

– I-57 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The aging analysis of trade debtors and bills receivables based on the invoice date, which is approximate to revenue recognition date, net of impairment loss recognised is as follows:

1 – 30 days 31 – 60 days 61 – 90 days 91 – 180 days Over 180 days Trade debtors and bills receivables	2012 RMB’000 203,969 44,670 25,014 17,093 62 290,808	2011 RMB’000 172,480 56,819 21,661 12,468 914
		264,342

Impairment losses in respect of trade debtors 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 balance directly. The movement in the provision for impairment loss on trade debtors is as follows:

Balance at beginning of the year Reversal of impairment loss Recognised during the year Balance at end of the year	2012 RMB’000 2,231 – 1,365 3,596	2011 RMB’000 2,419 (188) –
		2,231

At the end of each reporting period, the Group’s trade debtors were individually determined to be impaired. The individually impaired receivables are recognised based on the credit history of its customers, such as financial difficulties or default in payments, and current market conditions. Consequently, specific impairment provision was recognised. The Group does not hold any collateral over these balances.

Receivables of approximately RMB273,653,000 (2011: RMB250,960,000) were neither past due nor impaired and related to a wide range of customers for whom there was no history of default. The Group does not hold any collateral over these balances.

Receivables of approximately RMB17,155,000 (2011: RMB13,382,000) that were past due but not impaired were all aged within one year and related to a number of customers that have a good track record with the Group. Based on past experience, the management believes that no impairment allowance is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are still considered fully recoverable. The Group does not hold any collateral over these balances.

At 31 December 2012, certain of the bills receivables were pledged to obtain bank and other loans granted to the Group, details of which are set out in Note 29.

– I-58 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Debtors, deposits and other receivables the Group that are denominated in currencies other than the functional currency of the relevant group entities are set out below:

	2012	2011
	RMB’000	RMB’000
US$	61,723	37,690
JPY	1,049	26

23. AMOUNTS DUE FROM ASSOCIATES/TO AN ASSOCIATE

(a) Amounts due from associates:

Name of company Yusei Industrial 杭州友成進出口有限公司 Hangzhou Yusei Import and Export Limited Company (“Yusei Import and Export*”) Jilin Yusei	2012 Maximum amount outstanding during 2012 RMB’000 RMB’000 – 2,638 1,286 2,978 1,772 5,248 3,058	2011 Maximum amount outstanding during 2011 RMB’000 RMB’000 2,638 6,785 1,644 3,775 5,248 5,248 9,530	2011 Maximum amount outstanding during 2011 RMB’000 RMB’000 2,638 6,785 1,644 3,775 5,248 5,248 9,530

• Yusei Import and Export was a wholly-owned subsidiary of Yusei Industrial. The English name are for identification purpose only.

The amounts are unsecured, interest-free and repayable under credit term of 90 days.

(b) Amount due to an associate:

**Name **	of company	2012	2011
		RMB’000	RMB’000
Yusei	Industrial	5,991	–

The amount is unsecured, interest-free and repayable under credit term of 90 days.

24. PLEDGED BANK DEPOSITS

At 31 December 2012, bank deposits amounting to approximately RMB29,465,000 (2011: RMB45,172,000) have been pledged for short-term bills payables and short-term bank loans. The pledged deposits were classified as current assets as the deposits will be released upon the settlement of relevant bills payables. In additions, an amount of RMB1,800,000 bank deposit has been pledged to the PRC customs authorities (2011: RMB1,800,000).

The pledged bank deposits carry fixed interest rates ranging from 0.35% to 2.80% per annum (2011: 0.36% to 1.98% per annum).

– I-59 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

25. BANK BALANCES, DEPOSITS AND CASH

At 31 December 2012, bank balances, deposits and cash of approximately RMB44,332,000 (2011: RMB18,731,000) were denominated in RMB, which is not freely convertible currency in the international market and its exchange rate is determined by the Government of the PRC. The bank balances and deposits held by the Group are with maturity of three months or less and carry interest at prevailing market rate for both years.

Bank balances, deposits and cash of the Group that are denominated in currencies other than the functional currency of the relevant group entities are set out below:

	2012	2011
	RMB’000	RMB’000
US$	18,005	17,436
JPY	607	181
HK$	394	220
EURO	8	7

26. CREDITORS AND ACCRUED CHARGES

The aging analysis of trade creditors based on the invoice date at the end of the reporting period is as follows:

1 – 30 days 31 – 60 days 61 – 90 days 91 – 180 days Over 180 days Trade creditors and bills payables VAT payables Deposits received Other creditors and accrued charges	2012 RMB’000 87,623 68,930 50,307 39,374 1,217 247,451 12,128 4,192 45,876 309,647	2011 RMB’000 130,865 55,103 42,763 49,819 1,387
		279,937 11,961 6,962 58,464
		357,324

The average credit period on purchase of goods is 30 to 120 days. The Group has financial risk management policies in place to ensure that all payables are settled within the credit time frame.

The Group’s bank deposits of approximately RMB29,465,000 (2011: RMB35,000,000) were pledged to the banks to secure the bills payables.

Creditors and accrued charges of the Group that are denominated in currencies other than the functional currency of the relevant group entities are set out below:

	2012	2011
	RMB’000	RMB’000
US$	40,983	54,776
JPY	986	936

– I-60 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

27. AMOUNT DUE TO ULTIMATE HOLDING COMPANY

Included in the amount of approximately RMB20,572,000 (2011: nil) is unsecured, carrying interest rate of 7.3% per annum and repayable within 12 months, the remaining balance is unsecured, interest-free and repayable on demand.

28. OBLIGATIONS UNDER FINANCE LEASES

Amounts payable under finance leases: Within one year More than one year, but not exceeding two years More than two years, but not exceeding five years Less: Future finance charges Present value of lease obligations Less: Amounts due within one year shown under current liabilities Amounts due after one year	Minimum lease payments 2012 2011 RMB’000 RMB’000 15,079 16,121 6,154 9,160 8,985 – 30,218 25,281 (3,251) (1,189) 26,967 24,092	Present value of minimum lease payment 2012 2011 RMB’000 RMB’000 13,451 15,131 5,163 8,961 8,353 – 26,967 24,092 N/A N/A 26,967 24,092 (13,451) (15,131) 13,516 8,961	Present value of minimum lease payment 2012 2011 RMB’000 RMB’000 13,451 15,131 5,163 8,961 8,353 – 26,967 24,092 N/A N/A 26,967 24,092 (13,451) (15,131) 13,516 8,961
			24,092 N/A
			24,092 (15,131)
			8,961

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

It is the Group’s policy to lease certain of its machinery and equipment under finance leases. The average lease term is 5 years. For the year ended 31 December 2012, the average effective borrowing rate was 5.67% per annum (2011: 4.86% per annum). Interest rates are fixed at the contract date. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.

Certain finance leases obligations are denominated in Japanese Yen, amounted to approximately RMB4,332,000 (2011: RMB13,539,000).

– I-61 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

29. BANK AND OTHER LOANS

Bank loans Other loans Analysed as: Secured bank loans Secured other loans Unsecured bank loans Unsecured other loans The maturity profile of the above loans is as follows: Carrying amount repayable (Note): On demand or within one year More than one year but not exceeding two years More than two years but not more than five years Carrying amount of bank loans that are not repayable within one year from the end of the reporting period but contain a repayment on demand clause Less: Amounts due within one year shown under current liabilities Amounts shown under non-current liabilities	2012 RMB’000 322,889 35,100 357,989 128,857 5,100 194,032 30,000 357,989 327,699 17,084 10,338 355,121 2,868 357,989 (330,567) 27,422	2011 RMB’000 378,898 31,000
		409,898
		108,803 – 270,095 31,000
		409,898
		352,682 26,777 23,464
		402,923 6,975
		409,898 (359,657)
		50,241

Note: The amounts due are based on scheduled repayment dates set out in the loan agreements.

The exposure of the Group’s interest-bearing bank and other loans are as follows:

Fixed-rate loans Floating-rate loans	2012 RMB’000 294,657 63,332 357,989	2011 RMB’000 110,302 299,596
		409,898

– I-62 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The ranges of effective interest rates per annum of the Group’s loans are as follows:

	2012	2011
Fixed-rate loans	2.35% to 7.98%	4.02% to 10%
Floating-rate loans	1.73% to 8.31%	1.73% to 7.36%

The secured bank and other loans were secured by the Group’s land use rights, property, plant and equipment, pledged bank deposits and bills receivables with an aggregate net carrying amount of approximately RMB19,593,000 (2011: RMB20,440,000), RMB60,782,000 (2011: RMB69,960,000), RMB5,000,000 (2011: RMB10,000,000) and RMB5,100,000 (2011: nil) respectively.

The Group’s bank and other loans that are denominated in currencies other than the functional currency of the relevant group entities are set out below:

US$ JPY 30. DEFERRED INCOME Current liabilities (included in creditors and accrued charges) Deferred income – government grants (Note a) Deferred income – sales and leaseback transactions (Note b) Non-current liabilities Deferred income – government grants (Note a) Deferred income – sales and leaseback transactions (Note b)	2012 RMB’000 53,428 43,874 2012 RMB’000 85 163 248 858 516 1,374 1,622	2011 RMB’000 18,903 79,947
		2011 RMB’000 85 –
		85
		943 –
		943
		1,028

• Note a: During the year ended 31 December 2007, the Group received government grants of approximately RMB1,297,000, which were designated for the purchase of land use rights. Such government grants are presented as deferred income and are released to income over the useful lives of the related land use rights. During the current year, government grants released to consolidated income statement as other income amounted to approximately RMB85,000 (2011: RMB85,000).

• Note b: During the year ended 31 December 2012, the Group sold property, plant and equipment and leased back with a lease term of 5 years under sale and finance leaseback arrangement. A gain of approximately RMB815,000 on the sale and finance leaseback transaction which were amortised over its lease term. During the current year, gain on sale and leaseback of property, plant and equipment released to consolidated income statement as other income amounted to approximately RMB136,000 (2011: nil).

– I-63 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

31. SHARE CAPITAL OF THE COMPANY

Ordinary shares of HK$0.01 each Authorised At 1 January 2011, 31 December 2011 and 31 December 2012 Issued and fully paid At 1 January 2011, 31 December 2011 and 31 December 2012	Number of shares ’000 1,500,000 176,000	Amount HK$’000 15,000 1,760	Shown in the consolidated financial statements as RMB’000 N/A
			1,810

32. SHARE OPTIONS

The Company’s share option scheme (the “ Scheme ”), was adopted pursuant to a resolution passed on 19 September 2005 for the primary purpose of providing incentives or rewards to and recognising the contribution of the full-time employees of the Company and/or its subsidiaries, directors (whether executive, non-executive or independent non-executive) of the Company and/or its subsidiaries, and any consultants or advisers (whether professional or otherwise and whether on an employment or contractual or honorary basis or otherwise and whether paid or unpaid) to the Group (collectively the “ Eligible Persons ”) and providing more flexibility to the Group, and will expire on 18 September 2015. Under the Scheme, the directors of the Company may grant options to Eligible Persons. No options had been granted since the adoption of the Scheme.

The scheme was terminated upon the shares of the Company were withdrawn from the GEM and listed on the Main Board of The Stock Exchange of Hong Kong Limited (the “ Stock Exchange ”) on 15 October 2010. No further options may be affected or granted under the scheme.

33. RESERVES

(i) Basis of appropriations to reserves

The transfers to statutory surplus reserve are based on the profit after tax in the financial statements prepared under the PRC accounting standards.

(ii) Capital reserve

The amount represents the excess capital contribution by the ultimate holding company to the subsidiary in prior years.

– I-64 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(iii)

Statutory surplus reserve

The Articles of Association of the subsidiaries requires the appropriation of 10% of its profit after taxation determined under the PRC accounting standards each year to the statutory surplus reserve until the balance reaches 50% of the registered share capital. According to the provision of the Company’s Articles of Association, under normal circumstances, the statutory surplus reserve shall only be used for making up losses, capitalisation into share capital and expansion of the Company’s production and operation. For the capitalisation of statutory surplus reserve into share capital, the remaining amount of such reserve shall not be less than 25% of the registered share capital.

(iv) Reserve for shares issued with vesting conditions

The reserve for shares issued with vesting conditions represents the accumulated fair value at the date of allotment of the relevant shares (allotted on 12 October 2005) subsequently vested.

(v) Special reserve

The special reserve of the Group represents the difference between the nominal value of the registered capital of the acquired subsidiaries and the nominal value of the shares of the Company issued for the acquisition at the time of the group reorganisation on 6 June 2005.

34. COMMITMENT

Operating leases

(a) As lessor

At the end of the reporting period, the Group had future minimum lease receivables under non-cancellable operating leases contracted with tenants as follows:

			2012	2011
			RMB’000	RMB’000
Within	one	year	13	–

(b) As lessee

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

Within one year In the second to fifth years inclusive	2012 RMB’000 526 417 943	2011 RMB’000 217 –
		217

Operating lease payments represent rentals payable by the Group for its leased factory and office premises. Leases are negotiated with terms ranging from two to five years and rentals are fixed for an average of two to five years.

– I-65 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Capital commitments

	2012	2011
	RMB’000	RMB’000
Capital expenditure contracted for but not provided in the
consolidated financial statements in respect of:
– acquisition of property, plant and equipment	1,209	5,700

35. RETIREMENT BENEFITS SCHEMES

The Group operates a Mandatory Provident Fund Scheme for all qualifying employees in Hong Kong. The assets of the scheme are held separately from those of the Group, in funds under the control of trustees. The Group contributes 5% of relevant payroll costs to the scheme, which contribution is matched by employees.

As stipulated by the rules and regulations in the PRC, the Group contributes to the retirement funds scheme managed by local social security bureau in the PRC. The Company contributes a certain percentage of the basic salaries of its employees to the retirement plan to fund the benefits.

The only obligation of the Group with respect to the retirement benefit plan is to make the specified contributions. During the year ended 31 December 2012, the total retirement benefits scheme contributions charged to the consolidated income statement amounted to approximately RMB2,836,000 (2011: RMB2,189,000).

36. EVENT AFTER THE REPORTING PERIOD

On 1 January 2013, a fire broke out in the production plant No. 2 of Hangzhou Yusei, which was located in Lingang Industrial Park, Xiaoshan, Hangzhou City, Zhejiang Province, the PRC. As a result of the fire accident, certain property, plant and equipment and inventories were seriously damaged of which their carrying amounts as at 31 December 2012 are not less than RMB60,000,000. No impairment loss on property, plant and equipment and inventories in respect of fire accident is provided for in these consolidated financial statements for the year ended 31 December 2012.

While the Group is currently liaising with its insurer for settlement of compensation, as at the date of this report it is uncertain the amount of compensation on the relevant losses of the Group that would be recovered from the insurance. The directors consider that the realisation of the compensation is probable but not virtually certain; and the Group had no significant contingent liabilities and capital commitment arising from the fire accident at the end of the year.

– I-66 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

37. RELATED PARTY TRANSACTIONS

• (a) Details of the balances with related parties are set out in the consolidated statement of financial position and Notes 23 and 27 respectively.

• (b) During the year ended 31 December 2012, the Group had the following material transactions with its related parties:

Name of related
party	Nature of transactions	2012	2011
		RMB’000	RMB’000
Yusei Japan	Purchase of raw materials	129	289
	Sales of finished goods	799	475
	Interest payable	1,296	–
	Technical service fee expense	1,200	–
Yusei Industrial	Rental fee paid	2,332	1,661
	Sales of moulds	10,344	19,724
	Mould designing fee paid	62	–
	Purchase of raw materials	1,280	–
	Purchase of plant, property
	and equipment	–	1,749
Jilin Yusei	Purchase of finished goods	8,418	–
Yusei Import and
Export	Sales of moulds	11,225	8,738

The above transactions were made on terms mutually agreed between both parties.

• (c) In additions to above, the remuneration of directors and other members of key management during the year was as follows:

		2012	2011
		RMB’000	RMB’000
Short-term	benefits	3,786	3,445

The remuneration of directors and key executives disclosed above are based on the service contracts entered into between the Group and the respective individuals. The remuneration of directors and key executives for subsequent renewal of these service contracts will be determined by the remuneration committee having regard to the performance of individuals and market trends.

– I-67 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

38. SUBSIDIARIES

Particulars of the subsidiaries of the Company as at 31 December 2012 established and operating in the PRC are as follows:

				Attributable	Attributable	Attributable	Attributable	Attributable
				interests directly			interests indirectly
Name of	Fully paid		Class of	held by the			held by the
subsidiary	registered capital		share	Company			Company		Principal activities
	2012	2011		2012		2011	2012	2011
	US$’000	US$’000
Zhejiang Yusei	3,000	3,000	Registered	100%	100%		–	–	Moulding fabrication,
			capital						manufacturing and
									trading of plastic
									components
Hangzhou Yusei	8,000	8,000	Registered	100%	100%		–	–	Moulding
			capital						manufacturing and
									trading of plastic
									components
Hangzhou Yusei	500	500	Registered	100%	100%		–	–	Moulding fabrication
Moulding			capital
Yusei China	15,300	15,300	Registered	35%		35%	65%	65%	Moulding fabrication
			capital
Suzhou Yusei	10,000	10,000	Registered	35%		35%	65%	65%	Moulding fabrication,
			capital						manufacturing and
									trading of plastic
									components
Guangzhou Yusei	1,622	1,622	Registered	25%		25%	75%	75%	Moulding fabrication,
(Note a)			capital						manufacturing and
									trading of plastic
									components.

Note:

• (a) Guangzhou Yusei was established as a wholly-owned foreign-enterprise liability on 4 May 2008 with an operating period of 30 years. The registered capital of Guangzhou Yusei was USD1,000,000 (equivalent to RMB6,859,000) and wholly owned by the Company. Pursuant to a verification report dated 15 July 2008, the initial registered capital of US$1,000,000 (equivalent to RMB6,859,000), representing 100% of the total registered capital, has been fully paid up by the Company as of 15 July 2008.

On 24 January 2011, the registered capital of Guangzhou Yusei was increased to US$4,000,000 (equivalent to RMB19,766,000) by Zhejiang Yusei. Pursuant to the verification report dated 24 January 2011, the newly increased register capital of US$622,000 (equivalent to RMB4,100,000), representing 15.56% of the total registered capital, has been fully paid up by Zhejiang Yusei as of 24 January 2011.

None of the subsidiaries had any debt securities outstanding as at the end of the year or at any time during the year.

– I-68 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

39. MAJOR NON-CASH TRANSACTIONS

During the year ended 31 December 2011, there was a penalty of approximately RMB279,000 was paid by the Group due to the early cancellation of a rental agreement of a factory premise. The penalty of RMB279,000 was partly settled by transfer of a building of RMB171,000 and the remaining penalty of RMB108,000 was settled by the rental deposit paid in relation to the lease of the factory premise.

40. STATEMENT OF FINANCIAL POSITION OF THE COMPANY

NOTES Non-current assets Investments in subsidiaries Interest in an associate Current assets Deposits, prepayments and other receivables Amount due from ultimate holding company (a) Amounts due from subsidiaries (a) Bank balances and cash Current liabilities Other payables and accruals Amounts due to subsidiaries (a) Bank and other loans – due within one year Net current liabilities Non-current liabilities Bank and other loans – due after one year Net assets Capital and Reserves Share capital Reserves (b) Total equity	2012 RMB’000 208,795 20,471 229,266 1,013 629 34,475 4,232 40,349 2,412 14,823 49,295 66,530 (26,181) 203,085 22,869 180,216 1,810 178,406 180,216	2011 RMB’000 227,717 20,471
		248,188
		1,786 629 2,066 1,276
		5,757
		3,775 11,691 16,482
		31,948
		(26,191)
		221,997
		42,082
		179,915
		1,810 178,105
		179,915

– I-69 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

• (a) The amounts due from ultimate holding company, due from (to) subsidiaries are unsecured, interest-free and repayable on demand.

(b) Reserves of the Company

At 1 January 2011 Total comprehensive income for the year Dividend paid At 31 December 2011 and 1 January 2012 Total comprehensive income for the year At 31 December 2012	Share premium RMB’000 39,867 – – 39,867 – 39,867	Reserve for shares issued with vesting conditions RMB’000 18,065 – – 18,065 – 18,065	Capital reserve RMB’000 73,854 – – 73,854 – 73,854	Translation reserve RMB’000 2,012 4,044 – 6,056 (79) 5,977	Retained profits RMB’000 46,749 5,834 (12,320) 40,263 380 40,643	Total RMB’000 180,547 9,878 (12,320)
						178,105 301
						178,406

– I-70 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

3. STATEMENT OF INDEBTEDNESS

Borrowings

At the close of business on 28 February 2014, being the latest practicable date for the purpose of this statement of indebtedness prior to the printing of this circular, the Group had outstanding (i) secured bank loans of approximately RMB103,291,000, (ii) unsecured bank loans of approximately RMB197,301,000, (iii) other unsecured and interest-bearing loans of approximately RMB24,500,000, (iv) obligations under finance leases of approximately RMB12,687,000 and (v) amount due to ultimate holding company (i.e. Yusei Japan) of approximately RMB26,331,000.

Securities and guarantees

At the close of business on 28 February 2014, the Group had pledged the following assets to banks as security for the Group’s secured banking facilities:

• (i) the Group’s land use rights and property, plant and equipment in the aggregate sum of approximately RMB58,722,000.

• (ii) the Group’s pledged bank deposits in the aggregate sum of approximately RMB2,399,000.

Contingent liabilities

At the close of business on 28 February 2014, the Group did not have any material contingent liabilities.

Save as the aforesaid, as at the close of business on 28 February 2014, the Group did not have any other outstanding mortgages, charges, debentures or other loan capital, bank overdrafts or loans, other similar indebtedness, finance lease or hire purchase commitments, liabilities under acceptance or acceptance credits, guarantees or other material contingent liabilities.

The Directors confirm that they are not aware of any material change in indebtedness and contingent liabilities of the Group since 28 February 2014 up to the Latest Practicable Date.

Available banking facilities

At the close of business on 28 February 2014, being the latest practicable date for the purpose of this statement of indebtedness prior to the printing of this circular, the aggregated amount of unutilised bank facilities of the Group was RMB73,610,000.

– I-71 –

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

4. MATERIAL ADVERSE CHANGE

The Directors confirm that there has been no material change in the financial or trading position or outlook of the Group since 31 December 2013, being the date to which the latest published audited financial statements of the Group were made up, up to and including the Latest Practicable Date.

– I-72 –

APPENDIX II

PROPERTY VALUATION

The following is the text of a letter, summary of values and valuation certificates, prepared for the purpose of incorporation in this circular received from Avista Valuation Advisory Limited, an independent valuer, in connection with its valuation as at 28 February 2014 of the property interests of the Group.

==> picture [84 x 33] intentionally omitted <==

Suite 807, 8th Floor, AXA Centre, 151 Gloucester Road, Wan Chai, Hong Kong

TEL : (852) 3907 0680 FAX : (852) 3914 6388 info@avaval.com www.avaval.com

14 April 2014

The Board of Directors

Yusei Holdings Limited

Unit 1, 9/F Fortune Commercial Building 362 Sha Tsui Road Tsuen Wan New Territories, Hong Kong

Dear Sirs/Madams,

We were instructed by Yusei Holdings Limited (the “ Company ”) to value various properties held by the Company and its subsidiaries (hereinafter together referred to as the “ Group ”) in the People’s Republic of China (the “ PRC ”) (details of the properties are more particularly listed in the Summary of Values of this report), we confirm that we have carried out inspections, made relevant enquiries and searches 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 28 February 2014 (the “ Date of Valuation ”).

The valuation is our opinion of market value which is defined by the Hong Kong Institute of Surveyors as “the estimated amount for which an asset or liability should exchange on the date of 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, prudently, and without compulsion”.

In valuing the property interests, we have complied with all the requirements set out in Chapter 5 and Practice Note 12 of the Rules Governing the Listing of Securities issued by The Stock Exchange of Hong Kong Limited (the “ Listing Rules ”), the HKIS Valuation Standards (2012 Edition) published by the Hong Kong Institute of Surveyors and the International Valuation Standards published from time to time by the International Valuation Standards Council and Rule 11 of the Codes on Takeovers and Mergers and Share Buy-backs issued by the Securities and Futures Commission.

– II-1 –

APPENDIX II

PROPERTY VALUATION

For the subject properties, as confirmed by the Group as of the date of valuation, the Group has no intention to sell the property interests and therefore there is no likelihood of any tax liability crystallising.

Potential taxes which may be incurred on the sale of the subject property(s), include PRC, business tax (5% of surplus portion), deed tax (3%), stamp duty (0.5%) and any surtax imposed by the local government from time to time. All of the percentages are in approximate and subject to the local government’s tax policy.

Our valuations 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 or costs of sale and purchase or offset for any associated taxes.

Our valuation has been made on the assumption that the owner sells the property interests in the open market without the benefit of a deferred term contract, leaseback, joint venture, management agreement or any similar arrangement which would serve to increase the value of the property interests. In addition, no account has been taken of any option or right of pre-emption concerning or affecting the sale of the property interests and no forced sale situation in any manner is assumed in our valuation.

Where, due to the nature of the buildings and structures of the properties, there are no market sales comparables readily available, we have valued a property on the basis of its depreciated replacement cost.

Depreciated replacement cost is defined as “the current cost of replacement (reproduction) of a property less deductions for physical deterioration and all relevant forms of obsolescence and optimization”. It is based on an estimate of the market value for the existing use of the land, plus the current cost of replacement (reproduction) of the improvements, less deductions for physical deterioration and all relevant forms of obsolescence and optimization. The depreciated replacement cost of the property interest is subject to adequate potential profitability of the concerned business.

We have been shown copies of various title documents, sales and purchase agreements and other document relating to the property interests and have made relevant enquiries. Where possible, we have examined the original documents to verify the existing title to the property interests in the PRC and any material encumbrance that might be attached to the property interests or any tenancy amendment. We have relied considerably on the advice given by the Company’s PRC legal advisers – 浙江京衡律師事 務所, concerning the validity of the property interests in the PRC.

We have relied to a very considerable extent on the information given to us by the Company in the course of valuation. We have no reason to doubt the truth and accuracy of the information provided to us by the Company which is material to the valuation. We have accepted advice given to us on such matters as title, planning approvals, statutory notices, easements, tenure, leases, particulars of occupancy, identification of property, site and floor areas and all other relevant matters.

– II-2 –

APPENDIX II

PROPERTY VALUATION

Dimensions, measurements and areas included in the valuation certificates are based on information contained in the documents provided to us and are therefore only approximations. No on-site measurements have been made to verify their correctness. We have been advised by the Company that no material factors have been omitted from the information supplied to reach an informed view, and have no reason to suspect that any material information has been withheld.

We have not carried out detailed site measurements to verify the correctness of the land or building areas in respect of the property but have assumed that the areas provided to us are correct. Based on our experience of valuation of similar properties in the PRC, we consider the assumptions so made to be reasonable. All documents and contracts have been used as reference only and all dimensions, measurements and areas are approximations. We have also assumed that there was not any material change of the property in between date of our inspection and the valuation date.

We have inspected the exterior and, where possible, the interior of the appraised property. However, we must point out that we have not carried out a structural survey nor have we inspected woodwork or other parts of the structures which are covered, unexposed or inaccessible, we are therefore unable to report and any such part of the property are free from rot, infestation or any other defects. No tests were carried out on any of the services. We have assumed that utility services, such as electricity, telephone, water, etc., are available and free from defect.

Moreover, we have not carried out any site investigation to determine the suitability of the ground conditions or the services for any property development erected or to be erected thereon. Nor did we undertake archaeological, ecological or environmental surveys for the property interests. Our valuation is prepared on the assumption that these aspects are satisfactory and that no extraordinary expenses or delays will be incurred during the construction period. Should it be discovered that contamination, subsidence or other latent defects exists in the property or on adjoining or neighbouring land or that the property had been or are being put to contaminated use, we reserve right to revise our opinion of value.

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

We have further assumed that the properties were not transferred or involved in any contentious or non-contentious dispute as at the date of valuation. We have also assumed that there was not any material change of the properties in between dates of our inspection and the valuation date.

The site inspection was carried out during the period from 24 March 2014 to 25 March 2014 by our Jason Wang (CFA, Director) and Raymond Chan (Valuer).

– II-3 –

APPENDIX II

PROPERTY VALUATION

In accordance with our standard practice, this valuation report is for the exclusive use of the party to whom it is addressed and no responsibility is accepted to the third party for the whole or any part of its contents.

Unless otherwise stated, all monetary figures stated in this report are in Renminbi (RMB).

Our valuation is summarized below and the valuation certificates are attached.

Yours faithfully, For and on behalf of Avista Valuation Advisory Limited Sr Oswald W Y Au

MHKIS(GP) AAPI MSc(RE) Registered Professional Surveyor (GP) Director

Note: Mr. Oswald W Y Au holds a Master‘s Degree of Science in Real Estate from the University of Hong Kong. He is also a member of Hong Kong Institute of Surveyors (General Practice) and Associate Member of Australian Property Institute. In addition, he is a Registered Professional Surveyor (General Practice) registered with Surveyors Registration Board. He has about 7 years’ experience in the valuation of properties in the PRC and 10 years of property valuation experience in Hong Kong, the U.S., Canada, South Africa, East and Southeast Asia including Singapore, Japan, Korea and Mongolia.

– II-4 –

APPENDIX II

PROPERTY VALUATION

SUMMARY OF VALUES

Property interests held and occupied by the Group in the PRC

			Market value
			in existing state
			as at
No.	Property		28 February 2014
			RMB
1.	No. 3 Weisi Road		76,698,000
	Zengjiang Street
	Zengcheng District
	Guangzhou City
	Guangdong Province
	The PRC
2.	Linjiang Industrial Park		40,896,000
	Guali Town
	Xiaoshan District
	Hangzhou City
	Zhejiang Province
	The PRC
3.	Henggengtou Village		14,265,000
	Guali Town
	Xiaoshan District
	Hangzhou City
	Zhejiang Province
	The PRC
4.	No. 9 Anmin Road		53,586,000
	Dongqiao
	Huangdai Town
	Xiangcheng District
	Suzhou City
	Jiangsu Province
	The PRC
		Total:	185,445,000

– II-5 –

APPENDIX II

PROPERTY VALUATION

VALUATION CERTIFICATE

Property interests held and occupied by the Group in the PRC

				Market value
				in existing state
				as at
No.	Property	Description and tenure	Particulars of occupancy	28 February 2014
				RMB
1.	No. 3 Weisi Road	The property comprises a	The property is currently	76,698,000
	Zengjiang Street	parcel of land with a total	occupied by the Group
	Zengcheng District	site area of	for industrial purpose.
	Guangzhou City	approximately 38,738.89
	Guangdong Province	sq.m. and 2 buildings
	The PRC	erected thereon which
		were completed in about
		2011.
		The buildings have a
		total gross floor area of
		approximately 30,678.28
		sq.m. and mainly include
		an industrial building
		and a dormitory
		building.
		The land use rights of the
		property has been
		granted for a term
		commencing from 5th
		November 2009 and
		expiring on 12th
		November 2058 for
		industrial use.

Notes:

1. Pursuant to the State-owned Land Use Rights Certificate – Zeng Guo Yong (2009) Di No. B0200104 issued by Zengzheng Municipal People’s Government dated 5th November 2009 with a total site area of approximately 38,738.89 sq.m. has been granted to Guangzhou Yusei Machinery Co., Ltd. (廣州友成機工 有限公司), a wholly-owned subsidiary of the Company, for a term commencing from 5th November 2009 and expiring on 12th November 2058 for industrial use.

2. Pursuant to the 2 Buildings Ownership Certificates – Yue Fang Di Quan Zheng Zi Zi Di No. 10026539 and 10026531, dated at 26th February 2014, the 2 blocks of buildings constructed thereon have a total gross floor area of approximately 30,678.28 sq.m..

3. We have been provided with a legal opinion regarding the property interest by the Company’s PRC legal advisers, which contains, inter alia, the following:

4. a. Guangzhou Yusei Machinery Co., Ltd. has legally obtained both the State-owned Land Use Rights Certificate and the Buildings Ownership Certificates of the property, and has the rights to use and occupy the property; and

5. b. Guangzhou Yusei Machinery Co., Ltd. has the right to transfer, lease, mortgage or otherwise dispose of the property.

– II-6 –

APPENDIX II

PROPERTY VALUATION

VALUATION CERTIFICATE

• Market value

• in existing state as at

• No. Property Description and tenure Particulars of occupancy 28 February 2014 RMB

• 1. Linjiang Industrial The property comprises a The property is currently 40,896,000 Park parcel of land with a total occupied by the Group Guali Town site area of for industrial purpose. Xiaoshan District approximately 55,000.00 Hangzhou City sq.m. and 2 buildings Zhejiang Province erected thereon which The PRC were completed in about 2003. The buildings have a total gross floor area of approximately 12,368.72 sq.m. and mainly include 2 industrial buildings. There is 1 other building are under construction in progress (CIP) and schedule to be completed in June 2014. The land use rights of the property has been granted for a term commencing from 18th March 2002 and expiring on 13th December 2031 for industrial use.

Notes:

1. Pursuant to the State-owned Land Use Rights Certificate – Hang Xiao Guo Yong (2002) Zi Di No. 0200002 issued by Bureau of Land and Resource of Hangzhou dated 18th March 2002 with a total site area of approximately 55,000.00 sq.m. has been granted to Hangzhou Yusei Machinery Co. Ltd. (杭州友成機工有限公司), a wholly-owned subsidiary of the Company, for a term commencing from 18th March 2002 and expiring on 13th December 2031 for industrial use.

2. Pursuant to the Buildings Ownership Certificate – Hang Fang Quan Zheng Xiao Zi Di No. 087202, dated at 1st April 2003, the 2 blocks of buildings constructed thereon have a total gross floor area of approximately 12,368.72 sq.m..

3. The CIP is scheduled to be completed in June 2014. Upon completion, the building of the property will have a total gross floor area of approximately 17,143.00 sq.m. including 1 industrial building. The total construction cost is estimated to be approximately RMB 14,559,074 of which RMB 13,629,869.80 had been paid as at the date of valuation. The reference value of the property, as if completed as at the date of valuation under the development proposals as described above and assuming it can be freely transferred in the market, would be RMB17,000,000.

4. We have been provided with a legal opinion regarding the property interest by the Company’s PRC legal advisers, which contains, inter alia, the following:

5. a. Hangzhou Yusei Machinery Co., Ltd. has legally obtained both the State-owned Land Use Rights Certificate and the Buildings Ownership Certificate of the property, and has the rights to use and occupy the property;

6. b. Hangzhou Yusei Machinery Co., Ltd. has the right to transfer, lease, mortgage or otherwise dispose of the property;

7. c. The local government has been well informed by the Company of the commencement of the construction works of the property mentioned in note 3; and

8. d. There is no legal impediment to obtain the Construction Works Planning Permit and Construction Works Commencement Permit.

– II-7 –

APPENDIX II

PROPERTY VALUATION

VALUATION CERTIFICATE

				Market value
				in existing state
				as at
No.	Property	Description and tenure	Particulars of occupancy	28 February 2014
				RMB
3.	Henggengtou Village	The property comprises a	The property is currently	14,265,000
	Guali Town	parcel of land with a total	occupied by the Group
	Xiaoshan District	site area of	for industrial purpose.
	Hangzhou City	approximately 8,015.47
	Zhejiang Province	sq.m. and 2 buildings
	The PRC	erected thereon which
		were completed in about
		2005.
		The buildings have a
		total gross floor area of
		approximately 8,137.66
		sq.m. and mainly include
		an office building and an
		ancillary building.
		The land use rights of the
		property has been
		granted for a term
		commencing from 7th
		April 2006 and expiring
		on 26th October 2033 for
		industrial use.

Notes:

1. Pursuant to the State-owned Land Use Rights Certificate – Hang Xiao Guo Yong (2006) Zi Di No. 0200010 issued by Hangzhou Municipal People’s Government dated 7th April 2006 with a total site area of approximately 8,015.47 sq.m. has been granted to Hangzhou Yusei Mould Technology Research Co. Ltd. (杭州友成模具技術研究有限公司), a wholly-owned subsidiary of the Company, for a term commencing from 7th April 2006 and expiring on 26th October 2033 for industrial use.

2. Pursuant to the 2 Buildings Ownership Certificates – Hang Fang Quan Zheng Xiao Zi Di No. 088483 and No. 00105694, dated at 13th September 2010, the 2 blocks of buildings constructed thereon have a total gross floor area of approximately 8,137.66 sq.m..

3. We have been provided with a legal opinion regarding the property interest by the Company’s PRC legal advisers, which contains, inter alia, the following:

4. a. Hangzhou Yusei Mould Technology Research Co. Ltd. has legally obtained both the State-owned Land Use Rights Certificate and the Buildings Ownership Certificates of the property, and has the rights to use and occupy the property; and

5. b. Hangzhou Yusei Mould Technology Research Co. Ltd. has the right to transfer, lease, mortgage or otherwise dispose of the property.

– II-8 –

APPENDIX II

PROPERTY VALUATION

VALUATION CERTIFICATE

• Market value

• in existing state as at

• No. Property Description and tenure Particulars of occupancy 28 February 2014 RMB

• 1. No. 9 Anmin Road The property comprises a The property is currently 53,586,000 Dongqiao parcel of land with a total occupied by the Group Huangdai Town site area of for industrial purpose. Xiangcheng District approximately 26,728.00 Suzhou City sq.m. and 3 buildings Jiangsu Province erected thereon which The PRC were completed in about 2008 – 2009. The buildings have a total gross floor area of approximately 28,622.55 sq.m. and mainly include 2 industrial buildings and an dormitory building. The land use rights of the property has been granted for a term commencing from 11th September 2007 and expiring on 9th March 2057 for industrial use.

Notes:

1. Pursuant to the State-owned Land Use Rights Certificate – Xiang Guo Yong (2007) Di No. 00467 issued by Suzhou Municipal People’s Government dated 11th September 2007 with a total site area of approximately 26,728.00 sq.m. has been granted to Suzhou Yusei Machinery Co., Ltd. (蘇州友成機工有限 公司), a wholly-owned subsidiary of the Company, for a term commencing from 11th September 2007 and expiring on 9th March 2057 for industrial use.

2. Pursuant to the 3 Buildings Ownership Certificates – Su Fang Quan Zheng Xiang Cheng Zi Di No. 30045985 – No. 30045987, dated at 18th December 2009, the 3 blocks of buildings constructed thereon have a total gross floor area of approximately 28,622.55 sq.m..

3. We have been provided with a legal opinion regarding the property interest by the Company’s PRC legal advisers, which contains, inter alia, the following:

4. a. Suzhou Yusei Machinery Co., Ltd. has legally obtained both the State-owned Land Use Rights Certificate and the Buildings Ownership Certificates of the property, and has the rights to use and occupy the property; and

5. b. Suzhou Yusei Machinery Co., Ltd. has the right to transfer, lease, mortgage or otherwise dispose of the property.

– II-9 –

APPENDIX III

GENERAL INFORMATION

1. RESPONSIBILITY STATEMENT

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

This circular includes particulars given in compliance with the Takeovers Code for the purpose of giving information with regard to the Group. The Directors jointly and severally accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable inquiries, that to the best of their knowledge, opinions expressed (other than those expressed by the Subscribers) in this circular have been arrived at after due and careful consideration and there are no other facts not contained in this circular, the omission of which would make any statement in this circular misleading.

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

2. MARKET PRICE

The table below sets out the closing prices of the Shares on the Stock Exchange on (i) the last trading day of each of the six months immediately preceding the date of the Announcement; (ii) the Last Trading Day; and (iii) the Latest Practicable Date.

Date	Closing price per Share
	HK$
31 July 2013	0.83
30 August 2013	0.86
30 September 2013	0.88
31 October 2013	0.88
29 November 2013	0.98
31 December 2013	0.89
22 January 2014 (being the Last Trading Day)	0.85
30 January 2014	0.87
28 February 2014	0.92
31 March 2014	0.89
11 April 2014 (being the Latest Practicable Date)	1.05

– III-1 –

APPENDIX III

GENERAL INFORMATION

The lowest and highest closing market prices of the Shares recorded on the Stock Exchange during the period commencing on 27 July 2013 (being the six months immediately prior to the date of the Announcement) and ending on the Latest Practicable Date were HK$0.80 per Share (recorded from 10 September 2013 to 23 September 2013, 26 September 2013, 27 September 2013 and 18 October 2013) and HK$1.24 per Share (recorded on 3 April 2014) respectively.

3. SHARE CAPITAL, SHARE OPTIONS AND CONVERTIBLE SECURITIES

(i) Share capital

The following are the authorized and issued share capital of the Company as (i) at the Latest Practicable Date; and (ii) immediately after the issue of the Subscription Shares.

(a) (b)	As at the Latest Practicable Date: Authorised 1,500,000,000 Issued and fully paid or credited as fully paid 176,000,000 Immediately after the issue of the Subscription Shares: Authorised 1,500,000,000 Issued and fully paid or credited as fully paid 176,000,000 Shares in issue as at the Latest Practicable Date 26,400,000 Allotment and issue of the Subscription Shares 202,400,000	HK$ 15,000,000 1,760,000 HK$ 15,000,000 1,760,000 264,000
		2,024,000

All the issued Shares will rank pari passu with each other in all respects including, in particular, the rights in respect of capital, dividend and voting.

Since 31 December 2013 (being the date to which the latest published audited accounts of the Group were prepared) and up to the Latest Practicable Date, no new Shares have been issued by the Company.

– III-2 –

APPENDIX III

GENERAL INFORMATION

(ii) Share options and convertible securities

As at the Latest Practicable Date, the Company had no outstanding share options, warrants and convertible securities or rights convertible into Shares in issue.

4. DISCLOSURE OF INTERESTS

(a) Directors’ interest

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

– III-3 –

APPENDIX III

GENERAL INFORMATION

Long positions in the shares and underlying shares of the Company

		Capacity				Number of shares
						Approximate
						Percentage of
						Total Issued Share
						Capital of the
	Personal	Family	Corporate	Long	Short	Company as at the
Name of Director	Interests	Interests	Interests	Position	Position	Latest Practicable Date
Katsutoshi Masuda			80,960,000	80,960,000
(Note 1)	–	–	Shares	Shares	–	46%
Toshimitsu Masuda			80,960,000	80,960,000
(Note 2)	–	–	Shares	Shares	–	46%
	10,560,000			10,560,000
Xu Yong	Shares	–	–	Shares	–	6%
Manabu Shimabayashi		110,200		110,200
(Note 3)	–	Shares	–	Shares	–	0.06%
	19,800			19,800
Fan Xiaoping	Shares	–	–	Shares	–	0.01%

– III-4 –

APPENDIX III

GENERAL INFORMATION

Notes:

1. Mr. Katsutoshi Masuda is deemed to be interested in 49.8% of the issued share capital in Yusei Japan pursuant to the SFO. Yusei Japan is interested in 46% of the issued share capital of the Company and that Yusei Japan or its directors are accustomed or obliged to act in accordance with the directions or instructions of Mr. Katsutoshi Masuda. By virtue of the SFO, Mr. Katsutoshi Masuda is deemed to be interested in 80,960,000 Shares held by Yusei Japan.

2. Mr. Toshimitsu Masuda, (son of Mr. Katsutoshi Masuda) holds 50% of the issued share capital of Conpri. Conpri is interested in 25.8% in the issued share capital of Yusei Japan which in turn is interested in 46% of the issued share capital of the Company. By virtue of the SFO, Mr. Toshimitsu Masuda is deemed to be interested in 80,960,000 Shares through his shareholding in Conpri.

3. Mrs. Hidemi Shimabayashi, the spouse of Mr. Manabu Shimabayashi, is the beneficial owner of 110,200 Shares. By virtue of the SFO, Mr. Manabu Shimabayashi is deemed to be interested in the same parcel of Shares.

Save as disclosed above, none of the Directors nor chief executive of the Company had any interests or short positions in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required (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 and short positions which the Director or chief executive of the Company was taken or deemed to have under such provisions of the SFO); (ii) pursuant to section 352 of the SFO, to be entered in the register of the Company referred to therein; (iii) pursuant to the Model Code, to be notified to the Company and the Stock Exchange; or (iv) to be disclosed in this circular pursuant to the requirements of the Takeovers Code.

(b) Directors’ service contracts

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contract with the Company or any of its subsidiaries or associated companies:

• (a) which (including both continuous and fixed term contracts) have been entered into or amended within six months before the date of the Announcement;

• (b) which are continuous contracts with a notice period of 12 months or more;

• (c) which are fixed term contracts with more than 12 months to run irrespective of the notice period; or

• (d) which are not expiring or determinable by the employer within one year without payment of compensation (other than statutory compensation).

– III-5 –

APPENDIX III

GENERAL INFORMATION

(c) Interests in the Group’s assets, contract or arrangement significant to the Group

As at the Latest Practicable Date, none of the Directors had any direct or indirect interest in any assets which have been, since 31 December 2013, being the date to which the latest published audited accounts of the Group were made up, acquired or disposed of by, or leased to the Company or any of its subsidiaries, or are proposed to be acquired or disposed of by, or leased to, the Company or any of its subsidiaries.

As at the Latest Practicable Date, none of the Directors was materially interested in any contract or arrangement entered into by the Company or any of its subsidiaries which contract or arrangement is subsisting at the date of this circular and which is significant in relation to the business of the Group.

(d) Directors’ interests in competing businesses

Yusei Japan beneficially owns 46% of the equity interest of the Company. With its production and business operations based in Japan, Yusei Japan is principally engaged in the design, fabrication and sales of plastic injection moulds, and, to a lesser extent, the manufacture and sales of plastic component products. The plastic injection moulds fabricated by Yusei Japan are mainly applicable for the manufacture of headlight components including glass lens and reflector, automobile gauge board and other interior components for automobiles. Furthermore, Yusei Japan also fabricates plastic injection moulds for the manufacturing of peripheral plastic components for air conditioners and component parts for fishing tools.

Yusei Japan is owned as to approximately 25.8% by Conpri, as to approximately 21.9% by Mr. Katsutoshi Masuda, as to approximately 12.1% by Mr. Akio Suzuki, as to approximately 2.1% by Mrs. Echiko Masuda and as to approximately 1.7% by Mr. Toshimitsu Masuda, as to 30% by Tokyo Small and Medium Business Investment & Consultation Co., Ltd., respectively and as to approximately 6.4% held by Yusei Japan itself as a result of share repurchase, which according to the confirmation of a practicing Japanese law firm, need not be extinguished from the issued share capital of Yusei Japan under Japanese laws. Conpri is a company incorporated in Japan with limited liability and is owned as to 50% by Mr. Toshimitsu Masuda, as to 30% by Mr. Katsutoshi Masuda, and as to 20% by Mrs. Echiko Masuda. Mrs. Echiko Masuda and Mr. Toshimitsu Masuda are the spouse and son of Mr. Katsutoshi Masuda, respectively. Mr. Katsutoshi Masuda and Mr. Toshimitsu Masuda are the Company’s non-executive directors.

– III-6 –

APPENDIX III

GENERAL INFORMATION

Notwithstanding that the Group and Yusei Japan are engaged in similar business activities to certain extent, there is a clear delineation and independence of the Group’s business from that of Yusei Japan. In particular, the Group’s target markets (being the PRC, Taiwan, Hong Kong and the Macau Special Administrative Region of the PRC) (the “ Group’s Exclusive Markets ”) are territorially different from that of Yusei Japan. The locations of the production facilities are different and separate between the Group and Yusei Japan. The management responsible for the day-to-day operations of the Group and Yusei Japan is also different. The Directors believe that Yusei Japan does not compete with the Group.

Notwithstanding that the Directors believe that Yusei Japan does not compete with the Group, to clearly delineate the business operation of the Group from that of Yusei Japan and to avoid any possible future competition with the Group, Yusei Japan and its shareholders (collectively the “ Covenantors ”) have entered into a deed of non-competition dated 19 September 2005 and a supplemental deed of non-competition on 3 December 2010, pursuant to which each of the Convenantors irrevocably and unconditionally undertakes and covenants with the Company that each of the Convenantors shall:

• (1) not either on his/her/its own account or for any other person, firm or company, and (if applicable) shall procure that its subsidiaries (other than the Company and any member of the Group) or companies controlled by each of the Covenantors shall not either on its own behalf or as agent for any person, firm or company and either directly or indirectly (whether as a shareholder, partner, consultant or otherwise and whether for profit, reward or otherwise) at any time solicit, interfere with or endeavour to entice away from any member of the Group any person, firm, company or organisation who to its knowledge is from time to time or has at any time been a customer or supplier or a business partner of any member of the Group;

• (2) not either alone or jointly with any other person, firm or company, carry on (including but not limited to making investments, setting up distribution channels and/or liaison offices and creating business alliances), participate, be engaged, concerned or interested in or in any way assist in or provide support (whether financial, technical or otherwise) to any business similar to or which competes (either directly or indirectly) or is likely to compete with the business of the design, development and fabrication of precision plastic injection moulds or the manufacturing of plastic components in the Group’s Exclusive Markets or the provision of certain assembling and further processing of plastic components for customers from time to time carried out by any member of the Group (provision of assistance and support to the Group excepted) including the entering into of any contracts, agreements or other arrangements in relation to any of the above;

– III-7 –

APPENDIX III

GENERAL INFORMATION

• (3) not directly or indirectly sell, distribute, supply or otherwise provide products that are produced or proposed to be produced by the Group in the course of its business (the “ Group’s Product Portfolio ”) to any purchaser or potential purchaser of any products within the Group’s Product Portfolio in the Group’s Exclusive Markets (the “ Customers ”) and upon receipt of any enquiry from Customers for products which are within the Group’s Product Portfolio, to refer to the Company or any member of the Group all such business opportunities received by the Covenantors and provide sufficient information to enable the Company or any member of the Group to reach an informed view and assessment on such business opportunities;

• (4) not directly or indirectly sell, distribute, supply or otherwise provide any products that are within the Group’s Product Portfolio where the relevant Covenantor(s) know(s), or is reasonably regarded as should have known, that such products are destined to be re-sold, re-distributed or re-supplied for the purpose of commercial exploitation in the Group’s Exclusive Markets;

• (5) upon receipt of any order or enquiry from customers outside the Group’s Exclusive Markets for products which are within the Group’s Product Portfolio and where the relevant Covenantor(s) know(s), or is reasonably regarded as should have known, that such products are destined to be re-sold, re-distributed or re-supplied for the purpose of commercial exploitation in the Group’s Exclusive Markets, the relevant Covenantor(s) shall inform the Group in writing of such order of the relevant product;

• (6) not do or say anything which may be harmful to the reputation of any member of the Group or which may lead any person to reduce their level of business with any member of the Group or seek to improve their terms of trade with any member of the Group; and

• (7) not solicit or entice or endeavour to solicit or entice any of the employees of or consultants to the Group to terminate their employment or appointment with any member of the Group.

Save as disclosed above, none of the Directors of the Company and their respective associates (as if each of them were treated as a controlling shareholder under Rule 8.10 of the Listing Rules) had an interest in a business which competes or may compete with the business of the Group.

– III-8 –

APPENDIX III

GENERAL INFORMATION

(e) Other interests

As at the Latest Practicable Date, the following Directors were also director or employee of the following companies, each of which had an interest in the Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO:-

	Name of substantial	Position in the
	shareholder of the	substantial shareholder
Name of Director	Company	of the Company
Katsutoshi Masuda	Yusei Japan	Director
	Conpri	Director
Toshimitsu Masuda	Yusei Japan	Director
	Conpri	Director

5. SUBSTANTIAL SHAREHOLDERS’ INTERESTS

As at the Latest Practicable Date, the following persons and entities, other than a Director or chief executive of the Company, had an interest or short position in the Shares and underlying shares in the Company as recorded in the register required to be kept under section 366 of the SFO.

			Approximate
	Number of		percentage of
Name of Shareholder	Shares	Capacity	shareholding
Yusei Japan	80,960,000	Beneficial owner	46%
Conpri (Note 1)	80,960,000	Interest of controlled	46%
		corporation
Mrs. Echiko	80,960,000	Family interest	46%
Masuda (Note 2)
Superview	38,722,000	Beneficial Owner	22%

Notes:

1. Conpri is interested in 25.8% of the issued share capital of Yusei Japan. By virtue of the SFO, Conpri is deemed to be interested in 80,960,000 Shares held by Yusei Japan.

2. Mrs. Echiko Masuda is the spouse of Mr. Katsutoshi Masuda and is deemed to be interested in 80,960,000 Shares pursuant to the SFO.

– III-9 –

APPENDIX III

GENERAL INFORMATION

Save as disclosed above, as at the Latest Practicable Date, no person or entity other than a Director or chief executive of the Company, had an interest or a short position in the Shares and underlying Shares in the Company (i) as recorded in the register required to be kept under section 366 of the SFO; or (ii) required to be disclosed in this circular pursuant to the Takeovers Code.

6. SHAREHOLDINGS AND DEALINGS

As at the Latest Practicable Date:

• (a) there was no agreement, arrangement or understanding (including compensation arrangement) between Mr. Xu Yong or any parties acting or presumed to be acting in concert with him (including Mr. Xu Yue and Yusei Japan) and any other persons in relation to the transfer, charge or pledge of the Shares that may be issued and allotted to Mr. Xu Yong under the Subscription Agreement or as a result of any obligation under the Subscription Agreement;

• (b) Mr. Xu Yue, being the sole director of Superview, is interested in 38,722,000 Shares, representing approximately 22% of the existing issued share capital of the Company through his 100% interest in Superview;

• (c) save as disclosed in the section headed “Effects of the Subscription” in the letter from the Board of this circular, none of Mr. Xu Yong and parties acting or presumed to be acting in concert with him (including Mr. Xu Yue and Yusei Japan) held, owned, controlled any other Shares, convertible securities, warrants, options or derivatives of the Company and none of them had dealt for value in any such securities of the Company during the period beginning six months prior to the date of the Announcement and ending on the Latest Practicable Date;

• (d) no person had irrevocably committed themselves to vote for or against the resolutions to be proposed at the EGM to approve the Subscription Agreement and/or the transactions contemplated thereunder and the Whitewash Waiver;

• (e) save for the Subscription Agreement and the transactions contemplated thereunder, Mr. Xu Yong or parties acting or presumed to be acting in concert with him (including Mr. Xu Yue and Yusei Japan) did not have any arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code with any other persons;

• (f) none of Mr. Xu Yong or parties acting or presumed to be acting in concert with him (including Mr. Xu Yue and Yusei Japan) has borrowed or lent any Shares, convertible securities, warrants, options or derivatives in the Company or similar right which are convertible or exchangeable into Shares to any person;

• (g) the Company did not hold, control or have any direction over any shares and any options, warrants, derivatives or convertible securities in respect of the

– III-10 –

APPENDIX III

GENERAL INFORMATION

securities in Superview or Yusei Japan, being parties acting or presumed to be acting in concert with Mr. Xu Yong and it had not dealt for value in any such securities of Superview or Yusei Japan during the period beginning six months prior to the date of the Announcement and ending on the Latest Practicable Date;

• (h) save as disclosed in the paragraph headed “Directors’ Interest” in this appendix, none of the Directors of the Company held, controlled or had direction over any options, warrants, derivatives or convertible securities in respect of the securities in Superview or Yusei Japan, being parties acting or presumed to be acting in concert with Mr. Xu Yong, and none of them had dealt for value in any such securities of Superview or Yusei Japan during the period beginning six months prior to the date of the Announcement and ending on the Latest Practicable Date;

• (i) save as disclosed in the paragraph headed “Directors’ interest” in this appendix, none of the Directors was interested in any Shares, convertible securities, warrants, options or derivatives of the Company or similar rights which are convertible or exchangeable into any Shares. In addition, none of the Directors had dealt for value in any Shares, convertible securities, warrants, options or derivatives of the Company during the period beginning six months prior to the date of the Announcement and ending on the Latest Practicable Date;

• (j) none of the subsidiaries of the Company and none of the pension funds of the Company and/or its subsidiaries, nor any fund managed on a discretionary basis by any fund manager connected with the Company, nor any adviser to the Company as specified in class (2) of the definition of “associate” under the Takeovers Code, owned or controlled any Shares, convertible securities, warrants, options or derivatives of the Company or had dealt for value in any Shares, convertible securities, warrants, options or derivatives of the Company;

• (k) no person had any arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code with the Company or any person who is an associate of the Company by virtue of classes (1), (2), (3) and (4) of the definition of associate in the Takeovers Code;

• (l) As at the Latest Practicable Date, Mr. Fan Xiaoping intended to vote in favour of the resolutions approving the Subscription Agreement and the transactions contemplated thereunder and the Whitewash Waiver at the EGM in respect of his shareholdings in the Company. Mr. Xu Yong, Mr. Manabu Shimabayashi and their respective associates shall abstain from voting on the resolutions approving the Subscription and the Whitewash Waiver at the EGM pursuant to the Listing Rules and/or the Takeovers Code. Yusei Japan, which is controlled by the Masuda Family (including Mr. Katsutoshi Masuda and Mr. Toshimitsu Masuda), shall also abstain from voting on the resolutions approving the Subscription and the Whitewash Waiver at the EGM pursuant to the Takeovers Code. Save for the aforementioned, no other Directors beneficially owned or are otherwise interested in any Shares as at the Latest Practicable Date;

– III-11 –

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GENERAL INFORMATION

• (m) neither the Company nor any Directors had borrowed or lent any Shares, convertible securities, warrants, options or derivatives in the Company or similar rights which are convertible or exchangeable into Shares;

• (n) there was no benefit to be given to any Directors as compensation for loss of office in any member of the Group or otherwise in connection with the Subscription Agreement and the transactions contemplated thereunder and the Whitewash Waiver;

• (o) there was no agreement, arrangement or understanding (including compensation arrangement) (i) between Mr. Xu Yong or parties acting or presumed to be acting in concert with him (including Mr. Xu Yue and Yusei Japan) and any Directors, recent Directors, Shareholders or recent Shareholders having any connection with or dependence upon the Subscription Agreement and the transactions contemplated thereunder and the Whitewash Waiver; and (ii) between any Directors and any other persons which is conditional on or dependent upon the outcome of the Subscription Agreement and the transactions contemplated thereunder and the Whitewash Waiver; and

• (p) apart from the Subscription Agreement, there is no material contract entered into by any of the Xu Brothers in which any Director has a material personal interest.

7. MATERIAL CONTRACTS

During the two years immediately preceding the date of the Announcement and up to the Latest Practicable Date, the following contracts, not being contracts entered into in the ordinary course of business carried on or intended to be carried on by the Group, have been entered into by the Group and/or are material:

• (i) The sale and purchase agreement dated 14 September 2012 entered into between 浙江友成塑料模具有限公司, a limited liability company registered in the PRC and a subsidiary of the Company, and the administrative committee of 蕭山經濟技術開發區管理委員會 in relation to the disposal of the land located at No.8 Youcheng Road, Xiaoshan Economic and Technological Development Zone, Zhejiang, the PRC with area of approximately 13,141 square meters from 浙江友成塑料模具有限公司 to the administrative committee of 蕭山經濟技 術開發區管理委員會 at the consideration of RMB47,276,900.

8. MATERIAL LITIGATION

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

– III-12 –

APPENDIX III

GENERAL INFORMATION

9. QUALIFICATION AND CONSENT OF EXPERT

The following is the qualification of the expert who has given its opinion or advice which are contained in this circular:

Name Qualification REORIENT Financial A licensed corporation to carry out Type 1 (Dealing in Markets Limited Securities), Type 4 (Advising on Securities), Type 6 (Advising on Corporate Finance) and Type 9 (Asset Management) regulated activities under the SFO

Avista Valuation Advisory Professional valuer Limited

As at the Latest Practicable Date, each of the Independent Financial Adviser and Avista Valuation Advisory Limited:

• (a) did not have any shareholding, directly or indirectly, in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group;

• (b) did not have any direct or indirect interest in any assets which have been acquired or disposed of by or leased to, or which were proposed to be acquired or disposed of by or leased to, any member of the Group since 31 December 2013, being the date up to which the latest published audited consolidated financial statements of the Group were made; and

• (c) has given and has not withdrawn its written consent to the issue of this circular with the inclusion of and references to its name and letter or report (as the case may be) in the form and context in which they respectively appear.

The letter of advice given by the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders was made on 14 April 2014 for incorporation in this circular.

10. GENERAL

• (i) The registered office of the Company is at Century Yard, Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands.

• (ii) The principle place of business of the Company in the PRC is at Lin Gang Industrial Zone, Henggengtou Village, Guali Town, Xiaoshan District, Hangzhou City, Zhejiang Province, the PRC and the business address of the Company in Hong Kong is at Unit 1, 9/F, Fortune Commercial Building, 362 Sha Tsui Road, Tsuen Wan, N.T., Hong Kong.

– III-13 –

APPENDIX III

GENERAL INFORMATION

(iii) The company secretary of the Company is Mr. Shum Shing Kei.

• (iv) The Hong Kong branch share registrar and transfer office of the Company is Computershare Hong Kong Investor Services Limited at shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong.

• (v) The financial adviser of the Company is First Shanghai Capital Limited and its registered office is situated at 19/F., Wing On House, 71 Des Voeux Road Central, Hong Kong.

• (vi) The Independent Financial Adviser is REORIENT Financial Markets Limited and its registered office is situated at Suites 1102-03, Far East Finance Centre, 16 Harcourt Road, Admiralty, Hong Kong.

• (vii) The valuer is Avista Valuation Advisory Limited and its registered office is situated at Suite 807, 8th Floor, AXA Centre, 151 Gloucester Road, Wan Chai, Hong Kong.

• (viii) The address of Mr. Xu Yong is 81, Kwai Hua Yuan, Shang Cheng Hua Yuan, Xiaoshan, Hangzhou, Zhejiang, the PRC.

The address of Mr. Xu Yue is Room 101 East, No. 158 Dao Yuan Road, Xiaoshan District, Hangzhou, Zhejiang, the PRC.

The registered address of Superview is 11/F Kwan Chart Tower, 6 Tonnochy Road, Wan Chai, Hong Kong.

The registered address of Yusei Japan is 28-203 Cho-me Furusho Aoi-ku Shizouka City, Shizouka Pref., Japan.

• (ix) The director and ultimate controlling shareholder of Superview is Mr. Xu Yue. The directors and ultimate controlling shareholders of Yusei Japan are Mr. Katsutoshi Masuda, Mr. Toshimitsu Masuda and Mr. Shinichi Koizumi, and the Masuda Family respectively.

• (x) The English text of this circular shall prevail over the Chinese text in the case of inconsistency.

• (xi) As at the Latest Practicable Date, the board of the Company comprises seven Directors with Xu Yong and Manabu Shimabayashi as executive directors; Katsutoshi Masuda and Toshimitsu Masuda as non-executive directors; and Lo Ka Wai, Fan Xiaoping and Hisaki Takabayashi as independent non-executive directors.

– III-14 –

APPENDIX III

GENERAL INFORMATION

11. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection at Unit 1, 9/F, Fortune Commercial Building, 362 Sha Tsui Road, Tsuen Wan, N.T., Hong Kong during normal business hours on any business day from the date of this circular up to and including the date of EGM. Copy of the following documents will also be available for inspection on the website of the SFC at http://www.sfc.hk and the website of the Company at http://www.yusei.cn/english/ from the date of this circular up to and including the date of the EGM.

• (1) the memorandum and articles of association of the Company;

• (2) the annual reports of the Company for the last two financial years ended 31 December 2011 and 31 December 2012 respectively;

• (3) the annual results announcement of the Company for the year ended 31 December 2013 dated 28 March 2014;

• (4) the Subscription Agreement and the Supplemental Agreement;

• (5) this circular;

• (6) the letter from the Board to the Shareholders, the text of which is set out on pages 5 to 16 of this circular;

• (7) the letter from the Independent Board Committee to the Independent Shareholders, the text of which is set out on pages 17 to 18 of this circular;

• (8) the letter from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders, the text of which is set out on pages 19 to 50 of this circular;

• (9) the valuation report in respect of the property interests of the Group from Avista Valuation Advisory Limited, the text of which is set out in Appendix II to this circular;

• (10) the written consents from the Independent Financial Adviser and Avista Valuation Advisory Limited as referred to in the paragraph headed “Qualification and Consent of Expert” in this appendix; and

• (11) the material contracts referred to in the paragraph headed “Material contracts” in this appendix.

– III-15 –

NOTICE OF EGM

==> picture [61 x 61] intentionally omitted <==

YUSEI HOLDINGS LIMITED 友成控股有限公司*

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 96)

NOTICE IS HEREBY GIVEN that an extraordinary general meeting of YUSEI HOLDINGS LIMITED (the “ Company ”) will be held at Lin Gang Industrial Zone, Henggengtou Village, Guali Town, Xiaoshan District, Hangzhou City, Zhejiang Province, the PRC on Wednesday, 7 May 2014 at 3:00 p.m. or at any adjournment thereof for the following purposes which will be proposed as ordinary resolutions of the Company:

ORDINARY RESOLUTIONS

1. “ THAT , conditional upon the fulfillment of the conditions precedent of the Subscription Agreement as amended and supplemented by the Supplemental Agreement (each as defined in the circular of the Company dated 14 April 2014 in relation to, amongst others, the Subscription Agreement and the transactions contemplated thereunder and the Whitewash Waiver (as defined therein)), marked “A” and initialed by the chairman of the meeting for identification purpose:

2. (a) the Subscription Agreement and the Supplemental Agreement be and is hereby approved, confirmed and ratified;

3. (b) the specific mandate granted to the directors of the Company to exercise the powers of the Company to allot, issue and deal with the Subscription Shares pursuant to the Subscription Agreement and the Supplemental Agreement be and is hereby approved; and

4. (c) any one director of the Company be and is hereby authorised to do all such acts and things and execute such documents and take all steps which, in his opinion deemed necessary, desirable or expedient to implement and/or effect the transactions contemplated under the Subscription Agreement and the Supplemental Agreement for and on behalf of the Company.”

5. For identification purpose only

– EGM-1 –

NOTICE OF EGM

1. “ THAT , subject to the passing of the resolution set out as Resolution No. 1 in the notice convening the meeting, the Whitewash Waiver granted or to be granted by the Executive (as defined in the Circular) to the Subscribers (as defined in the Circular) be and is hereby approved and any one director of the Company be and is hereby authorised to do all such things and take all such actions as he/she may consider to be necessary or desirable to implement any of the matters relating to or incidental to the Whitewash Waiver.”

By Order of the Board Yusei Holdings Limited Katsutoshi Masuda Chairman

PRC, 14 April 2014

Notes:

• i. A member of the Company entitled to attend and vote at the meeting convened by the above notice is entitled to appoint one or more than one proxy to attend and, subject to the provisions of the articles and association of the Company, vote in his stead. A proxy need not be a member of the Company.

• ii. To be valid, the form of proxy together with a power of attorney or other authority, if any, under which it is signed or a certified copy of such power or authority must be deposited at the Company’s branch share registrar and transfer office in Hong Kong, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong not later than 48 hours before the time of the meeting or any adjourned meeting.

• iii. Delivery of an instrument appointing a proxy should not preclude member from attending and voting in person at the above meeting or any adjournment thereof and in such event, the instrument appointing a proxy shall be deemed to be revoked.

• iv. In the case of joint holders of a share, any one of such joint holders may vote, either in person or by proxy, in respect of such share as if he/she/it were solely entitled thereto. If more than one of such joint holders are present at the above meeting, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders. For this purpose, seniority shall be determined by the order in which the names stand in the register of members of the Company in respect of the joint holding.

• v. The translation into Chinese language of this notice is for reference only. In case of any inconsistency, the English version shall prevail.

• vi. Attendants should bear their own travelling, accommodation and other expenses.

• vii. As at the date of this notice, the board of the Company comprises seven Directors with Xu Yong and Manabu Shimabayashi as executive directors; Katsutoshi Masuda and Toshimitsu Masuda as non-executive directors; and Lo Ka Wai, Fan Xiaoping and Hisaki Takabayashi as independent non-executive directors.

– EGM-2 –