Z-Obee Holdings Limited - HKEXnews

Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited (the “HKEx”) and the Securities and Futures Commission (the “SFC”) take no responsibility for the contents of this Web Proof Information Pack, 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 Web Proof Information Pack.

Web Proof Information Pack of

Z-Obee Holdings Limited(incorporated in Bermuda with limited liability)

WARNING

This Web Proof Information Pack is being published as required by the HKEx/the SFC solely for the purpose of providing information to the public in Hong Kong.

This Web Proof Information Pack is in draft form. The information contained in it is incomplete and is subject to change which could be material. By viewing this document, you acknowledge, accept and agree with Z-Obee Holdings Limited (the “Company”), its affiliates, sponsors, advisers and members of the underwriting syndicate that:

(a) this Web Proof Information Pack is solely for the purpose of facilitating equal dissemination of information to investors in Hong Kong and not for any other purposes. No investment decision should be based on the information contained in this Web Proof Information Pack;

(b) the posting of the Web Proof Information Pack or any supplemental, revised or replacement pages thereof on the HKEx’s website does not give rise to any obligation of the Company, its affiliates, sponsors, advisers or members of the underwriting syndicate to proceed with an offering in Hong Kong or any other jurisdiction. There is no assurance that the Company will proceed with any offering;

(c) the contents of the Web Proof Information Pack or any supplemental, revised or replacement pages thereof may or may not be replicated in full or in part in the actual prospectus;

(d) the Web Proof Information Pack is in draft form and may be changed, updated or revised by the Company from time to time and the changes, updates and/or revisions could be material, but each of the Company and its affiliates, sponsors, advisers and members of the underwriting syndicate is under no obligation, legal or otherwise, to update any information contained in this Web Proof Information Pack;

(e) this Web Proof Information Pack does not constitute a prospectus as defined in section 2(1) of the Companies Ordinance (Chapter 32 of the Laws of Hong Kong) (the “Companies Ordinance”) or a prospectus, notice, circular, brochure, advertisement or document offering to sell any securities to the public in any jurisdiction, nor is it an invitation or solicitation to the public to make offers to acquire, subscribe for or purchase any securities, nor is it calculated to invite offers by the public to acquire, subscribe for or purchase any securities;

(f) this Web Proof Information Pack must not be regarded as an inducement to acquire, subscribe for or purchase any securities, and no such inducement is intended;

(g) neither the Company nor any of its affiliates, sponsors, advisers or members of the underwriting syndicate is offering, or is soliciting offers to subscribe for or buy, any securities in any jurisdiction through the publication of this Web Proof Information Pack;

(h) neither this Web Proof Information Pack nor anything contained herein shall form the basis of or be relied on in connection with any contract or commitment whatsoever;

(i) neither the Company nor any of its affiliates, sponsors, advisers or members of the underwriting syndicate makes any express or implied representation or warranty as to the accuracy or completeness of the information contained in this Web Proof Information Pack;

(j) each of the Company and its affiliates, sponsors, advisers and members of the underwriting syndicate expressly disclaims any and all liabilities on the basis of any information contained in, or omitted from, or any inaccuracies or errors in, this Web Proof Information Pack;

(k) the Company has not and will not register the securities referred to in this Web Proof Information Pack under the United States Securities Act of 1933 (the “Securities Act”), as amended, or any state securities laws of the United States; and

(l) as there may be legal restrictions on the distribution of this Web Proof Information Pack or dissemination of any information contained in this Web Proof Information Pack, you agree to inform yourself about and observe any such restrictions applicable to you.

THIS WEB PROOF INFORMATION PACK IS NOT FOR PUBLICATION OR DISTRIBUTION TO PERSONS IN THE UNITED STATES. ANY SECURITIES REFERRED TO HEREIN HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT, AS AMENDED AND MAY NOT BE OFFERED OR SOLD WITHOUT REGISTRATION THEREUNDER OR PURSUANT TO AN AVAILABLE EXEMPTION THEREFROM.

NEITHER THIS WEB PROOF INFORMATION PACK NOR THE INFORMATION CONTAINED HEREIN CONSTITUTES AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES IN THE UNITED STATES. THIS WEB PROOF INFORMATION PACK IS NOT BEING MADE AND MAY NOT BE DISTRIBUTED OR SENT INTO CANADA OR JAPAN.

Any offer or invitation to make an offer for any securities in the Company will only be made to the public in Hong Kong after the Company has registered its prospectus in accordance with the Companies Ordinance. If an offer or an invitation is made to the public in Hong Kong in due course, prospective investors are reminded to make their investment decisions solely based on a prospectus of the Company registered with the Registrar of Companies in Hong Kong, copies of which will be distributed to the public during the offer period.

Contents

THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained herein is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed “Warning” on the cover of this Web Proof Information Pack.

The Web Proof Information Pack contains the following information in relation to Z-Obee Holdings Limited extracted from the draft document:

• Summary

• Definitions

• Glossary of technical terms

• Risk factors

• Waivers from strict compliance with the Listing Rules

• Directors and parties involved in the Share Offer

• Corporate information

• Industry overview

• Regulatory overview

• Business

• Directors, senior management and staff

• Corporate governance

• Controlling Shareholder and substantial Shareholders

• Share capital

• Financial information

• Future plans

Appendices

• I – Accountants’ report of the Group

• III – Property valuation

• IV – Summary of the constitution of the Company and Bermuda Company Law

• V – Statutory and general information

• VI – Summary of salient provisions of the laws of Singapore

• VII – Further information relating to dual primary listing

YoU sHoULD ReAD tHe seCtIon HeADeD “WARnInG” on tHe CoVeR oF tHIs WeB PRooF InFoRMAtIon PACK.

- � -

SUMMARY


OVERVIEW

The Group is a mobile handset application and solution provider and a mobile handset manufacturer

in the PRC. The Group provides full-set of design and production solution services spanning the entire

handset design cycle, which involves industrial design, mechanical design, application design, PCB

design, procurement of hardware, prototype testing, pilot production and SMT for mobile handset

and PCB. The Group’s business can be divided into the following four major areas:

�. Provision of mobile handset application design;

2. Provision of design and production solution services for mobile handset;

3. Assembly of mobile handset and SMT of PCB; and

4. Distribution and marketing of mobile handset and mobile handset components.

During the Track Record Period, the revenue breakdown by activities was illustrated as

below:

Forthesixmonths Forthefinancialyearended31March ended30September 2007 2008 2009 2008 2009 (Unaudited)

US$ % US$ % US$ % US$ % US$ %

Provision of mobile handset

solutions and applications 9,235,556 �9.96 �2,�09,�8� �0.�3 7,289,224 7.03 4,04�,752 5.55 �,886,536 3.44

Assembly of mobile handset

and SMT of PCB – – 9,603,39� 8.03 20,437,043 �9.72 �2,933,464 �7.75 �5,520,980 28.33

Distribution and marketing of

mobile handset and

mobile handset components 37,025,775 80.04 97,88�,544 8�.84 75,897,585 73.25 55,873,7�4 76.70 37,372,727 68.23

Total 46,26�,33� �00 ��9,594,��6 �00 �03,623,852 �00 72,848,930 �00 54,780,243 �00

The revenue from provision of mobile handset solutions and applications (the “Solution Segment”)

is primarily derived from the provision of design and production solution services for mobile handset.

The revenue from assembly of mobile handset and SMT of PCB (the “Assembly Segment”) is derived

from the sale of mobile handset and PCBA which are both manufactured and assembled respectively

by the Group. The revenue from distribution and marketing of mobile handset and mobile handset

- 2 -

SUMMARY


components (the “Distribution and Marketing Segment”) is derived from the sale of mobile handset

and mobile handset components produced by third parties and the sale of mobile handset under the

Group’s owned brand “VIM” or in Chinese “偉恩”.

The Company

R&D department develops different mobile handset applications for installation into the Group’s mobile handset or customers’ products

Product design team designs products for mobile handset manufacturers based on customers’ specification and project management for the assembly of mobile handset

Provides the assembly ofmobile handset and SMT ofPCB according to the customers’ specification or the Group’s design team

Distribution and marketing of mobile handset or mobile handset components produced by third parties or produced by the Group

Mobilehandset

applicationdesign

Design andproduction

solution servicesfor mobile handset

Assembly ofmobile handset

and SMTof PCB

Distribution andmarketing of

mobile handset andmobile handsetcomponents

The Group provides the total solution of mobile handset production from product design to

production support and assembly of mobile handset. Depends on the requirements of different customers,

the Group will provide either single segment of solution services of the Group or complete mobile

handset solution. For example, the mobile handset manufacturer customers may require the Group to

provide them services from industrial design to product being manufacturable without the Group’s

provision of manufacturing services by the Group. However, the mobile handset distributors who do

not have the production capability may on the other hand require the Group to provide them with the

total solution services from product definition to mobile handset assembly.

COMPETITIVESTRENGTHS

• Possess of application development and design capability

• One stop service centre with the flexibility to provide customised services

• Technical expertise coupled with innovative and fashionable product ideas

• Established product niche

• Service and product quality recognised by customers

• Professional and dedicated management

- 3 -

SUMMARY


BUSINESSSTRATEGY

The Group aspires to become a leading mobile handset solution provider and to establish its

own brand name “VIM” or in Chinese “偉恩” in the PRC and overseas, offering services which range

from product definition, solution design to assembly of mobile handset. To realise such mission, the

Group intends to adopt the business strategies as set out below:–

Launchingofnewflagshipbrand,“VIM”or inChinese“偉恩”

The launch of mobile handset under the new flagship brand name of the Group “VIM”

or in Chinese “偉恩” in December 2008 is a strategic move of the Group to introduce and

characterise the Group’s trendy design of mobile handset. It aims to differentiate the Group

from its competitors for its competitiveness in mobile handset designs and to build up the

Group’s image in fashionable design capability. The Directors believe that the launching of

mobile handset under the Group’s own brand name provides a good platform for the Group to

capitalise on the strong market demand for mobile handsets in the PRC by demonstrating the

Group’s mobile handset application development capability.

ToenhancetheGroup’sproductdevelopmentcapabilities

The Group believes that the ability to provide product designs incorporating the latest

technology development and trends is crucial for the Group to maintain its competitiveness

as a solution provider. As such, the Group will continue to enhance its product development

capabilities in the areas of industrial design, mechanical design, software design and PCB

design. For instance, the Group will strive to integrate the latest trends in mobile technology

into its designs and will continue to build up its software application libraries and hardware in

order to enable the Group to develop products of multiple tiering and flexibilities.

The Group plans to increase the size of its R&D team from the existing 60 engineers

to 73 engineers in the year 20�0. The Group’s R&D team is headed by Mr. Wang. The Group

believes that having more skilled manpower would enable the Group to better meet the anticipated

increase in its business volume. The Group also intends to continually improve its training

programmes for its engineers to ensure the constant upgrading of their technical skills.

Toenlarge itsproductmix

The Group intends to enlarge its product mix at two levels:- (a) developing mobile handset

with multi-functions, and (b) tapping into new consumer markets.

(a) Developingmobilehandsetwithmulti-functions

The Directors believe that the demand for mobile handset with varied functions will

continue to grow. In line with such expectation, whilst the Group has already developed mobile

handset with multi-functions, the Group intends to further focus its research and development of

multimedia mobile handset with emphasis on the entertainment aspect. Apart from entertainment

aspect, the Group is also exploring and looking into developing solutions which could further

- 4 -

SUMMARY


improve other functions of mobile handset, for example by developing mobile handset with

television functions and tourist friendly functions such as the ability to download maps of the

present location.

In order to capture the opportunities arising from the 3G mobile handset in the PRC,

the Group will further strengthen its software application libraries and purchase any necessary

hardware and software for the design of solutions for use in 3G mobile handset and obtaining

the necessary licences for the relevant technology from third party vendors for use in 3G mobile

handset.

(b) Tapping intonewconsumermarkets

The enlargement and diversification of the product mix will allow the Group to diversify

its customer base and tap into new markets. In particular, the Directors have noted that a larger

number of young people are acquiring mobile handset for their own use at a younger age in the

PRC. The Group believes that the ability to design and produce technologically up-to-date and

trendy mobile handset at a lower cost than foreign mobile handset design houses or manufacturers

would allow the Group to tap into the rapidly growing market of younger consumers. Apart

from tapping into the market for younger consumers, the Group also aims to increase its market

share in the rural area of the PRC, and the Directors are of the view that the pricing of the

mobile handset is one of the major buying criteria for consumers in the rural areas of the PRC.

During the Track Record Period, the Group has developed two sets of solution which aim at

the lower price range mobile handsets for consumers in the rural areas of the PRC, which is

in line with the growing affluence of these groups of consumers.

Exploringthepossibilityofenteringtheoverseasmarket

The Group plans to expand into overseas markets which have similar demographic and

economic conditions to those of the PRC, for example, countries in Southeast Asia, South

America and India. The Group may also consider entering into joint ventures or strategic

alliances with network operators and mobile handset manufacturers in the overseas market

should any opportunities arise.

The Group has already registered or pending to register its trademarks “VIM” or in

Chinese “偉恩” as its new flagship brand in various overseas markets in an effort to prepare

entering into these overseas markets.

FUTUREPLANS

StrengtheningofR&Dteam

The Directors consider that it is important to further strengthen the Group’s R&D team, especially

in the application development and industrial design and mechanical design teams. The Group plans

to recruit additional professionals to join its R&D team and provides training to improve the R&D

team’s technical know-how. It is the Group’s strategy to focus on a few core areas of mobile handset

application development.

- 5 -

SUMMARY


Developmentof3Gtechnologiesandapplications

The Directors believe that the official launch of the 3G mobile handset may increase the demand

for the 3G mobile handset and module in the PRC. The Group intends to invest in research on the

application of 3G technologies and solutions in order to capture the potential opportunities of the

rising demand for 3G mobile handset and module especially in multi-functional mobile handset.

The Directors believe that the following strategies will lead to the success of the Group for

developing 3G technologies and applications:

(i) The Group is conducting a market research on the adoption of 3G standards in order to

better facilitate its future business plans on 3G development;

(ii) Before finalising the details as to the adoption of 3G standards, the Group has been

cooperating with Zhenhua Group in developing the 3G (EVDO) phone. Such cooperation

has facilitated the Group in building its know-how on 3G business and will shorten

the development cycle once the Group has confirmed which 3G standards are to be

adopted;

(iii) As at the Latest Practicable Date, two newly developed 3G software of Zeus have passed

software product registration tests under China Software Testing Center. The Directors

considered that the qualified software will ensure the Group’s success in the future

development of 3G mobile handset;

(iv) The Group will spend approximately US$�.6 million to purchase the necessary hardware

and software for research and development of 3G mobile handset and module; and

(v) The first EVDO phone is planned to be launched in 20�0.

Strengtheningof thebrandawarenessof“VIM” or inChinese “偉恩”

It is the intention of the Group to strengthen the brand awareness of “VIM” or in Chinese

“偉恩” in the mobile handset market in the PRC in order to position the Group’s strong industrial

design of mobile handset with fashionable and trendy styles. Therefore, the Group intends to expand

its distribution network in the PRC by entering into distribution agreements with major retail chain

stores in the PRC in major cities of the PRC.

- 6 -

SUMMARY


SUMMARYFINANCIALINFORMATION

The following table summarises the Group’s results for the years ended 3� March 2007, 2008, 2009 and six months ended 30 September 2008 and 2009 which is extracted from and has been prepared in accordance with the basis set forth in the accountants’ report, the text of which is set forth in Appendix I to this prospectus:–

ConsolidatedIncomeStatements

Forthesixmonths Fortheyearended31March ended30September 2007 2008 2009 2008 2009 (unaudited) US$ US$ US$ US$ US$

Revenue 46,26�,33� ��9,594,��6 �03,623,852 72,848,930 54,780,243

Cost of goods sold (35,836,026 ) (�03,4�9,592 ) (95,��6,448 ) (66,726,032 ) (49,873,560 )

Grossprofit �0,425,305 �6,�74,524 8,507,404 6,�22,898 4,906,683

Other income 38,578 576,463 �,256,790 580,060 244,639Selling and distribution costs (6,9�3 ) (�,309 ) (47,29� ) (�5,428 ) (�2,239 )Administrative expenses (�,993,8�3 ) (5,773,36� ) (5,�03,964 ) (2,709,373 ) (2,606,322 )

Profit fromoperations 8,463,�57 �0,976,3�7 4,6�2,939 3,978,�57 2,532,76�

Finance costs (�39,236 ) (792,�27 ) (543,70� ) (2��,��8 ) (�83,899 )Share of profit of a jointly controlled entity 999,800 743,595 434,886 446,�46 –

Profitbeforetax 9,323,72� �0,927,785 4,504,�24 4,2�3,�85 2,348,862

Income tax expense (446,076 ) (8�0,000 ) (593,608 ) (308,008 ) (347,500 )

Profit fortheyear/period 8,877,645 �0,��7,785 3,9�0,5�6 3,905,�77 2,00�,362

Profit fortheyear/periodattributableto: Owners of the Company 8,948,047 �0,�80,7�0 3,959,40� 3,936,993 2,00�,362 Minority interests (70,402 ) (62,925 ) (48,885 ) (3�,8�6 ) –

8,877,645 �0,��7,785 3,9�0,5�6 3,905,�77 2,00�,362

Dividends

Interim 257,069 – – – –

Final 2,200,000 2,040,052 – – –

EarningspershareBasic (US cents) (Note) 2.�8 2.3� 0.80 0.79 0.40

Note:

1. TheearningsperSharehasnottakenintoaccountofthe20,000,000newSharesissuedon8October2009pursuanttothesubscriptionagreementsdated24September2009.

- 7 -

SUMMARY


For each of the three financial years ended 3� March 2009 and the six months ended 30

September 2009, the net profit margin of the Group were approximately �9.�9%, 8.46%, 3.77% and

3.65% respectively. Such decrease in net profit margin was due to: (i) the decrease in contribution

of revenue from the Solution Segment which has the highest profit margin among the three business

segments of the Group; and (ii) the decrease in contribution of revenue from the Distribution and

Marketing Segment which was resulted from the constant decrease of the average selling price in the

global mobile handset industry.

As at the Latest Practicable Date, the Directors confirm that there has been no material adverse

change in the financial or trading positions or prospects of the Group since 30 September 2009, the

date on which the latest audited consolidated financial statements of the Group were made up.

EARNINGSPERSHARE

TheearningsperShareintheprospectushavenottakeninaccountofthe20,000,000newShares issuedon8October2009pursuant to the subscriptionagreementsdated24September2009assuchtransactionoccurredafter thebalancesheetdatewhichdidnotaffect thecapitalusedtoproducetheprofitand loss forthecorrespondingperiod.

On 24 September 2009, the Company entered into the eight subscription agreements with

eight existing Shareholders respectively, being Independent Third Parties, for the allotment and issue

by the Company to such subscribers of 20,000,000 new Shares the (“Subscription Shares”), at a

subscription price of S$0.�3 (equivalent to approximately HK$0.72) per Share. The subscription price

was determined with reference to the trading market price of the Shares preceding the execution of

the subscription agreements and was agreed upon arms’ length negotiation between the Company and

the subscribers. The subscription price of S$0.�3 per Share amounted to a discount of approximately

�3.33% to the volume weighted average price of S$0.�5 of the Shares traded on the SGX-ST for the

full market day on 24 September 2009, being the full market day immediately preceding the execution

of the subscription agreements.

On 8 October 2009, the issued and paid-up share capital of the Company was increased to

US$4,�40,589 comprising 5�7,573,662 Shares after the completion of allotment and issue of the

Subscription Shares.

No share consolidation, share split, bonus issue or other share capital reorganisationhavingsimilareffecthasbeentakenplace inrespectofthesharecapitaloftheCompanysincetheCompany’slistingonSGX-STuptotheLatestPracticableDate.Further,theCompanyhasnointentiontoconductanysharecapitalreorganisationfromthedateofthisprospectustotheListingDate(which isexpectedtobeon1March2010).

- 8 -

SUMMARY


REASONSFORTHEDUALLISTINGANDSHAREOFFER

The Shares have been listed on the SGX-ST since 2� November 2007. Whilst the Directors consider that it is important to maintain the Singapore listing, they consider that it would be desirable and beneficial for the Company to have a dual primary listing of the Shares in both Hong Kong and Singapore as the Directors believe that the stock markets in Hong Kong and Singapore attract different investors. The dual listing will also enable the Company to have ready access to two different equity markets when any opportunity arises. It will thereby widen the investor base of the Company and increase the liquidity of the Shares. Also, listing on the Stock Exchange will enhance the Company’s profile in Hong Kong and the PRC, facilitate investment by Hong Kong investors, enable the Company to gain access to Hong Kong’s capital markets and benefit from its exposure to a wide range of private and institutional investors. The Directors consider that this is important for the Group’s growth and long term development, in particular, the Group’s operations are principally located in the PRC.

The net proceeds from the issue of New Shares will strengthen the Group’s capital base and will provide fundings to better execute the Group’s business strategy and to implement its future plans.

DIVIDENDPOLICY

The payment and the amount of any dividends to be declared by the Group in the future will be determined at the sole discretion of the Directors and will depend on, among other things, the results of operations, working capital requirements, the amount of distributable profits based on the applicable laws and regulations.

The Group has declared an interim dividend of US$257,069, nil and nil for the three financial years ended 3� March 2007, 2008 and 2009, respectively.

The Group has declared a final dividend of US$2,200,000, US$2,040,052 and nil for the three financial years ended 3� March 2007, 2008 and 2009, respectively.

The Group has not declared any interim dividend for the six months ended 30 September 2009.

The Group currently does not have a fixed dividend policy. The form, frequency and amount of future dividends on the Shares will depend on the level of cash and retained earnings, the results of operations, the capital expenditure requirements, the expansion and/or investment plans and other factors that the Directors may deem appropriate. There is no assurance that dividends will be paid in the future. Neither will there be any assurance regarding the amount or timing of any dividends that will be paid in the future. Cash dividends on the Shares, if any, will be paid in Hong Kong dollars converted from US dollars.

SHAREOPTIONSCHEME

The Group has adopted the Share Option Scheme to motivate the employees to optimise their performance and contributions to the future success of the Group and/or to reward them for their past contribution, to attract and retain or otherwise maintain on-going relationships with such participants who are significant to and or whose contribution are or will be beneficial to the performance, growth or success of the Group. The principal terms of the Share Option Scheme are summarised in the paragraph headed “Share Option Scheme” in Appendix V to this prospectus.

- 9 -

SUMMARY


RISKFACTORS

Riskrelatingtothebusinessof theGroup

• Seasonal fluctuations in revenue

• Sustainability of profit margin

• The Group has not entered into any long-term purchase contracts with suppliers and may

be adversely affected if there is a shortage or delay in delivery of components

• The Group is dependent on the relationship with major customers

• The Group faces intense competition from existing competitors in the industry and new

entrants to the industry and its existing customers may reduce their reliance on the

Group

• Subject to rapid technological developments and rapidly changing market preferences,

which can adversely affect the demand for the Group’s products if it is unable to keep

up with these technological developments and market preferences

• The Group is reliant on the research and development personnel to develop innovative

and up-to-date solutions

• Reliance on certain key executives

• Net cash outflow from operating activities

• The Group may be liable for defects or errors in its developed products

• There is no assurance that the Group will be able to execute its future plans successfully,

or that its future plans will result in commercial success

• Exposure to risk of foreign exchange fluctuations

• Exposure to foreign exchange forward contract risk

• The Group may not have adequate insurance coverage

• The Group may not be able to adequately protect its intellectual property rights (including

but not limited to trademarks and patents) which could adversely and materially affect

the Group’s business

• The Group may be subject to third party claims for infringement of intellectual property

rights

- �0 -

SUMMARY


• The Group may require additional funding for future growth

• The Group’s operations may be materially and adversely affected by a shortage or

disruption to the power supply

• Leasing of premise occupied by Tongqing in the PRC

• Any recurrence of severe acute respiratory syndrome (SARS), pandemic avian influenza

or an increase in the severity of H�N� flu (swine flu) or another widespread public

health problem could materially and adversely affect the Group’s business and results

of operations

Riskrelatingtothedual listingof theCompany

• Different characteristics between the Singapore stock market and Hong Kong stock

market

• The Company, being listed on the SGX-ST, is concurrently subject to the Listing Manual

and the Singapore Code

RiskrelatingtothePRC

• The Group’s business and operations are subject to certain laws and regulations of the

PRC

• The Group’s business and operations may be materially and adversely affected by any

changes in the political, economic and social conditions of the PRC

Riskrelatingto investment inShares

• Liquidity and market price of the Shares

• There was no prior public market for the Shares in Hong Kong so that the liquidity is

not guaranteed and the performance of the share price may not prevail in the trading

market

• There may be dilution of shareholding as a result of issuance of new Shares, or equity

linked securities or exercise of share options

Riskrelatingtostatementmade inthisprospectus

• Government official facts and statistics included in this prospectus may not be accurate and precise

• Forward-looking statements

Please refer to the section headed “Risk Factors” of this prospectus for details.

- �� -

SUMMARY


SHAREPRICE

As at the Latest Practicable Date, the trading price of the Shares as quoted on the SGX-ST was S$[•••] (approximately HK$[•••]). Based on [•••] Shares in issue, the market capitalisation of the Company was approximately S$[•••] million (approximately HK$[•••] million).

The high, low, monthly closing, and monthly average of the daily closing trading prices at which the Shares have traded on SGX-ST in each of the twelve calendar months preceding the Latest Practicable Date were as follows:

Monthly averageof Monthly dailyMonth High Low closing closing S$ S$ S$ S$2008October 0.07 0.03 0.04 0.05November 0.09 0.03 0.03 0.05December 0.04 0.02 0.03 0.03

2009January 0.05 0.04 0.04 0.04February 0.05 0.03 0.03 0.04March 0.04 0.03 0.03 0.03April 0.04 0.03 0.04 0.03May 0.06 0.04 0.06 0.05June 0.�0 0.06 0.07 0.08July 0.�0 0.06 0.09 0.07August 0.�4 0.08 0.�2 0.�0September 0.�6 0.�2 0.�4 0.�4October (Note1) 0.�4 0.�2 0.�2 0.�3November (Note1) 0.�2 0.�2 0.�2 0.�2December (Note1) 0.28 0.�2 0.24 0.�7Latest Practicable Date (Note1) [•••] [•••] [•••] [•••]

Note:

�. The subscription of 20,000,000 new Shares pursuant to the subscription agreements dated 24 September 2009 was completed on 8 October 2009.

2. For information, the conversion rate of S$ into HK$ was approximately S$�.00 = HK$5.56.

- �2 -

SUMMARY


REMOVALOFSHARESFROMTHEBERMUDASHAREREGISTRARTOTHEHONGKONGSHAREREGISTRARANDTRADINGOFSHARESONTHESTOCKEXCHANGE

The Company currently has a primary listing of Shares on the SGX-ST, which it intends to

maintain alongside its proposed dual primary listing of Shares on the Stock Exchange. Application

has been made to the Listing Committee for the listing of, and permission to deal in, the Shares. The

principal register of members is maintained in Bermuda by Coden Services Limited (“Bermuda Share

Registrar”). The Shares are currently registered on the Bermuda Share Registrar for the purpose of

trading on the SGX-ST.

The Company has established a branch register of members in Hong Kong which is maintained

by Tricor Investor Services Limited (“Hong Kong Share Registrar”) whose address is 26th Floor,

Tesbury Centre, 28 Queen’s Road East, Hong Kong. The Shares must be transferred to the Hong Kong

Share Registrar before they can be traded on the Stock Exchange upon Listing, and only certificates

for Shares issued by the Hong Kong Share Registrar will be valid for delivery in respect of dealings

effected on the Stock Exchange. The transfer agent for members of the Company in Singapore is

Tricor Barbinder Share Registration Services (a division of Tricor Singapore Pte. Ltd.) (“Singapore

Transfer Agent”) whose address is #��-00 PWC Building 8 Cross Street Singapore 048424.

The principal procedures for removal of Shares from the Bermuda Share Registrar to the Hong

Kong Share Registrar are as follows:

�. Shareholders whose Shares are deposited with the CDP, a wholly-owned subsidiary of

the Singapore Exchange Limited, being incorporated under the laws of Singapore and

acts as a depository and clearing organization, and who wish to transfer their Shares to

the Hong Kong Share Registrar are required to take the following actions:

(a) make an application for the withdrawal of the certificate(s) in respect of their Shares

by completing and submitting the Deed of Transfer with stamp duty duly paid and

CDP Form 3.� (Request for Withdrawal of Securities) to CDP at 4 Shenton Way

#02-0�, SGX Centre 2, Singapore 068807; such form of request for withdrawal of

securities and deed of transfer can be obtained from CDP; and

(b) concurrently, make an application for the transfer of their Shares to the Hong Kong

Share Registrar by completing and submitting the share removal form (in triplicate)

to the office of Singapore Transfer Agent at #��-00 PWC Building, 8 Cross Street,

Singapore 048424.

2. Shareholders who do not have any Shares deposited with the CDP and who wish to transfer

their Shares to the Hong Kong Share Registrar are required to make an application for the

transfer of their Shares to the Hong Kong Share Registrar by completing and submitting

the share removal form (together with the certificate(s) for their Shares) to the office of

Singapore Transfer Agent at #��-00 PWC Building, 8 Cross Street, Singapore 048424.

Such share removal form can be obtained from the Singapore Transfer Agent.

- �3 -

SUMMARY


Under normal circumstances, the above procedures generally requires about �2 business days

to complete.

Upon completing and submitting the share removal form to the Singapore Transfer Agent,

the Singapore Transfer Agent will inform the Bermuda Share Registrar to remove the name of such

Shareholders from register of members of the Company in the Bermuda Share Registrar and transfer

to register of members of the Company in the Hong Kong Share Registrar.

Investors in Hong Kong must settle their trades executed on the Stock Exchange through

their brokers directly or through custodians. For an investor in Hong Kong who has deposited his

Shares in his stock account or in his designated CCASS Participant’s stock account maintained with

CCASS, settlement will be effected in CCASS in accordance with the CCASS Rules in effect from

time to time. For an investor who holds the physical certificates, settlement certificates and the duly

executed transfer forms must be delivered to his broker before the settlement date. For details of the

settlement date and time required for such settlement, please refer to the paragraph headed “Settlement

of dealings in Hong Kong” in section headed “Listings, Registration, Dealings and Settlement” of

this prospectus.

As at the Latest Practicable Date, there is an aggregate of [•••] Shares held by the existing

Shareholders who have made arrangements to remove their respective Shares from the Bermuda Share

Registrar to the Hong Kong Share Registrar for the purpose of trading on the Stock Exchange. It is

expected that these [•••] Shares will be transferred from the Bermuda Share Registrar and registered

with the Hong Kong Share Registrar by [•••] for the purposes of trading on the Stock Exchange.

Shareholders and investors are advised to refer to the sections headed “Risks Factor – Risks

Relating to the Dual Primary Listing of the Company” and “Listings, Registration, Dealings and

Settlement” of this prospectus for details.

- 14 -

DEFINITIONS


In this prospectus, the following expressions have the following meanings unless the context

otherwise requires.

“Application Form(s)” WHITE application form(s), YELLOW application form(s),

PINK application form(s) and GREEN Form, or where

the context so requires, any of them, relating to the Share

Offer

“Associate(s)” has the meaning ascribed thereto under the Listing

Rules

“Board” the board of Directors

“business day” any day (other than a Saturday, Sunday or public holiday)

on which banks are generally open for business throughout

their normal business hours in Hong Kong

“BVI” the British Virgin Islands

“CAGR” compound annual growth rate

“CCASS” the Central Clearing and Settlement System established

and operated by HKSCC

“CCASS Clearing Participant” a person admitted to participate in CCASS as a direct

clearing participant or general clearing participant

“CCASS Custodian Participant” a person admitted to participate in CCASS as a custodian

participant

“CCASS Investor Participant” a person or persons admitted to participate in CCASS as

an investor participant who may be in individual or joint

individuals or a corporation

“CCASS Participant” a CCASS Clearing Participant, a CCASS Custodian

Participant or a CCASS Investor Participant

“CCDH” CCDH Technology (Shenzhen) Limited (久宜通信技術（深圳）有限公司), a company incorporated in the PRC

with limited liability, a wholly foreign-owned enterprise

“CCDH Tech” CCDH Technology Limited, a company incorporated

in BVI with limited liability, an indirect wholly owned

subsidiary of the Company

- 15 -

DEFINITIONS


“CDP” The Central Depositary (Pte) Limited

“CEO” chief executive officer

“chief executive” the chief executive (as defined in the SFO) of the

Company

“Companies Act” the Companies Act 1981 of Bermuda, as amended from

time to time

“Companies Ordinance” the Companies Ordinance (Chapter 32 of the Laws of Hong

Kong), as amended, supplemented or otherwise modified

from time to time

“Company” Z-Obee Holdings Limited, an exempted company incorporated

in Bermuda with limited liability on 30 January 2007,

which was formerly known as EGG Technology (Holdings)

Limited and subsequently changed its name as Z-Obee

Holdings Limited on 17 May 2007

“connected person(s)” has the meaning ascribed thereto under the Listing

Rules

“Controlling Shareholder(s)” has the meaning ascribed to it under the Listing Rules

and in context of this prospectus, means Mr. Wang and

Ms. Wang Tao

“Director(s)” the director(s) of the Company, including independent

non-executive directors of the Company

“Eight Treasures” Eight Treasures Investment Limited, a company incorporated

in BVI, an Independent Third Party

“Elastic Glory” Elastic Glory Investment Limited, a company incorporated

in BVI with limited liability, a direct wholly owned

subsidiary of the Company

“Elite Link” Elite Link Technology Limited, a company incorporated

in Hong Kong with limited liability, an indirect wholly

owned subsidiary of the Company

“Finet Enterprises” Finet Enterprises Limited, a company incorporated in BVI

with limited liability, an indirect wholly owned subsidiary

of the Company

- 16 -

DEFINITIONS


“Finet Technology” Finet Technology Limited which was dissolved on 23 June

2007 by way of a members’ voluntary winding up

“Group” the Company and its subsidiaries, or any of them or, where

the context so requires, in respect of the period before

the Company became the holding company of its present

subsidiaries, the present subsidiaries of the Company or,

where the context otherwise specifies or so requires in

respect of financial or accounting information, the Company

and its subsidiaries

“HKSCC” Hong Kong Securities Clearing Company Limited

“HKSCC Nominees” HKSCC Nominees Limited

“Hong Kong” or “HK” the Hong Kong Special Administrative Region of the

PRC

“Hong Kong dollars”, “HK dollars” Hong Kong dollars, the lawful currency of Hong Kong

or “HK$”

“Independent Third Party” party(ies), who is/are not connected with any members

of the Group, the Directors, the chief executive or a

substantial shareholder of the Company

“India” The Republic of India

“Indonesia” The Republic of Indonesia

“ISO” The International Organisation for Standardisation

“Listing” the listing and the commencement of dealings of the Shares

on the Main Board of the Stock Exchange

“Listing Committee” the Listing Committee of the Stock Exchange

“Listing Date” the date on which dealings in the Shares on the Main

Board first commence

“Listing Manual” listing rules of the SGX-ST which set out the requirements applicable to issuers relating to, inter alia: (i) the manner in which securities are to be offered and (ii) the continuing obligations of issuers

“Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange, as amended from time to time

- 17 -

DEFINITIONS


“Main Board” the Stock Market operated by the Stock Exchange (excluding the options market) which is independent from and operated in parallel with the Growth Enterprise Market of the Stock Exchange

“Max Sunny” Max Sunny Limited, a company incorporated in Hong Kong with limited liability, an indirect wholly owned subsidiary of the Company

“Memorandum of Association” the memorandum of association of the Company as amended from time to time, a summary of which is set out in Appendix IV to this prospectus

“MII” 中華人民共和國信息產業部 (The Ministry of Information Industry of the PRC)

“Mr. Wang” Mr. Wang Shih Zen, one of the Controlling Shareholders, the chairman and the chief executive officer of the Company

“Ms. Wang Tao” Ms. Wang Tao, an executive Director of the Company, being one of the Controlling Shareholders

“NDRC” 中華人民共和國發展和改革委員會 (National Development

and Reform Commission of the PRC)

“New Bye-laws” the new bye-laws of the Company adopted on [•••] 2010,

a summary of which is set out in Appendix IV to this

prospectus

“Old Share(s)” ordinary Share(s) with a par value of US$1.00 each in the

share capital of the Company before the sub-division of

the Share(s) of the Company becoming effective on 24

September 2007

“Philippines” The Republic of the Philippines

“PhoneLink” Shanghai PhoneLink Communications Technology Co., Ltd.

(上海風淩通訊技術有限公司), a company incorporated in

the PRC with limited liability, an indirect wholly domestic

owned enterprise of the Company

“Placing” the conditional placing by the Placing Underwriters of

the Placing Shares at the Offer Price with institutional,

professional and private investors, details of which are

described in the section headed “Structure of the Share

Offer” in this prospectus

- 18 -

DEFINITIONS


“PRC”, “China” or “Mainland China” the People’s Republic of China excluding, for the purposes

of this prospectus only, Hong Kong, Macau and Taiwan

“PRC Government” the central government of the PRC including all government

departments (including provincial, municipal and other

regional or local government entities) and organs thereof

or, as the context requires, any of them

“PRC Laws” all laws, rules, regulations, notices, orders and decrees in

force in the PRC as at the date of this prospectus

“PRC Legal Adviser” Haihua Yongtai Law Firm

“R&D” research and development

“RMB” Renminbi, the lawful currency of the PRC

“SAFE” State Administration of Foreign Exchange (國家外匯管理局)

“SAIC” State Administration of Industry and Commerce (國家工商行政管理總局)

“SFA” The Securities and Futures Act, Chapter 289 of Laws of

Singapore, as amended or modified from time to time

“SFC” the Securities and Futures Commission of Hong Kong

“SFO” the Securities and Futures Ordinance (Chapter 571 of

the Laws of Hong Kong), as amended, supplemented or

otherwise modified from time to time

“SGX-ST” Singapore Exchange Securities Trading Limited

“Share(s)” ordinary share(s) with a par value of US$0.008 each in

the share capital of the Company

“Share Option Scheme” the share option scheme conditionally adopted by the

Company on [•••] February 2010, the principal terms of

which are summarised under the paragraph headed “Share

Option Scheme” in Appendix V to this prospectus

“Shareholder(s)” the holder(s) of the Shares

“Singapore” The Republic of Singapore

- 19 -

DEFINITIONS


“Singapore Code” Singapore Code on Takeovers and Mergers

“Singapore Companies Act” The Companies Act, Chapter 50 of Laws of Singapore,

as amended or modified from time to time

“Singapore dollars” or “S$” Singapore dollars, the lawful currency of Singapore

“SinoPac” or “Sponsor” S inoPac Secur i t i e s (As ia ) L imi ted , a l i censed

or “Bookrunner” corporation to conduct type 1 (dealing in securities), type

4 (advising on securities), type 6 (advising on corporate

finance) and type 9 (asset management) regulated activities

under the SFO and the sponsor for the Share Offer

“South Africa” The Republic of South Africa

“State Tech” State Tech International Limited, a company incorporated

in BVI with limited liability

“Stock Exchange” The Stock Exchange of Hong Kong Limited

“subsidiary” has the meaning ascribed thereto in section 2 of the

Companies Ordinance

“Substantial Shareholder(s)” has the meaning ascribed to it under the Listing Rules

“Taiwan” The Republic of China, Taiwan

“Takeovers Code” the Hong Kong Code on Takeovers and Mergers, as amended

from time to time

“Tongqing” Tongqing Communication Equipment (Shenzhen) Co., Ltd.

(統慶通信設備(深圳)有限公司), a company incorporated

in the PRC with limited liability, an indirect wholly

foreign-owned enterprise of the Company

“Track Record Period” the three financial years of the Company ended 31 March

2009 and the six months ended 30 September 2009

“US” or “USA” The United States of America

“US$”, “US dollars” or “USD” United States dollars, the lawful currency of US

“Vietnam” The Socialist Republic of Vietnam

“WFOE” a wholly foreign owned enterprise incorporated in the

PRC

- 20 -

DEFINITIONS


“Zeus” Zeus Telecommunication Technology Holdings Ltd. (深圳市杰特電信控股有限公司), a company incorporated

in the PRC with limited liability, an indirect a wholly

foreign-owned enterprise of the Company

“Zhenhua Group” Zhenhua Technology and its subsidiaries

“Zhenhua Obee” GuiZhou Zhenhua OBEE Communication Co., Ltd

“Zhenhua Technology” China Zhenhua (Group) Science & Technology Co., Ltd, a

company incorporated in the PRC and the shares of which

are listed on the Shenzhen Stock Exchange, a company

independent from the Group

“sq.ft.” square feet

“sq.m.” square metres

“%” per cent.

Unless otherwise specified, for illustration purpose only, the following exchange rates are used

in this prospectus:

US$1.0 = HK$7.78

S$1.0 = HK$5.56

US$1.0 = S$1.39

No representation is made that any amounts in US$, S$ or HK$ were or could have been

converted at the above rate or at any other rates or at all.

- 21 -

GLOSSARY OF TECHNICAL TERMS


This glossary of technical terms contains explanations of certain terms used in this prospectus in connection with the Group and its business. The terminologies and their meanings may not correspond to standard industry meanings or usage of those terms.

“3G” or “third-generation” a wireless communications technology recognised by ITU as being capable of data transmission speeds of 144 Kbps or higher and included in the ITU’s IMT-2000 standard

“CDMA” Code division multiple access. A system designed for mobile telephony that specifically uses a form of multiplexing, also called spread spectrum, in which analogue signals are converted into digital form for transmission. For each communication channel, the signals are encoded in a sequence known to the transmitter and the receiver

“EVDO” Evolu t ion Data Only, a 3G mobi le boardband technology

“full-set solutions” the entire production process as described in the section headed “Business – Overview” of this prospectus

“GPRS” general packet radio service. A service designed to speed up the delivery of information for second generation digital cellular networks. GPRS utilises a packet radio principle sending bursts of information at speeds of up to 114 Kbps (as opposed to GSM speeds of 9.6 Kbps). GPRS is an intermediate step before 3G allowing the faster transmission of data

“GPS” Global Positioning System provides positioning and navigation service on a continuous basis

“GSM” global system for mobile communications. GSM is the pan- European digital communications standard

“IC” integrated circuit

“ID/MD” industrial design and mechanical design, which mainly includes design of the mobile handset outlook, product finishing and the moulds

“ITU” International Telecommunications Union. An international organisation founded in 1865 and headquartered in Geneva, Switzerland that sets communications standards

“JAVA” a programming language designed to generate applications that can run on all hardware platforms, small, medium and large, without modification

- 22 -



“Kbps” kilo bits per second

“LCD” liquid crystal display. A display technology that uses rod-

shaped molecules (liquid crystals) that flow like liquid and

bend light. Unenergised, the crystals direct light through

two polarising filters, allowing a natural background

colour to show. When energised, they redirect the light

to be absorbed in one of the polarisers, causing the dark

appearance of crossed polarisers to show

“MP3” MPEG audio layer 3. An audio compression technology

that uses perceptual audio coding to compress compact disc

quality sound. MP3 music files are played via software

or a physical player

“MP4” MPEG-4 Part 14 is a multimedia container format standard

specified as a part of MPEG-4. It is most commonly used

to store digital audio and digital video streams, especially

those defined by MPEG, but can also be used to store other

data such as subtitles and still images. Like most modern

container formats, MPEG-4 Part 14 allows streaming over

the internet. Devices that play MP4 files are referred to

as MP4 players

“MPEG” Moving Picture Experts Group. A working group of the

International Organisation for Standardisation or the

International Electrotechnical Commission charged with

the development of video and audio encoding standards

“MPEG-1” an audio and video compression format developed by

the MPEG in 1993. A coding of moving pictures and

associated audio for digital storage media at up to about

1.5 megabyte per second. MPEG-1 is the video format

that has had some extremely popular spin-offs and side

products, most notably MP3 and video compact discs

“MPEG-4” a standard used primarily to compress audio and visual

digital data. Introduced in late 1998, it is the designation

for a group of audio and video coding standards and related

technology agreed upon by the International Organisation

for Standardisation or the International Electrotechnical

Commission. The uses for the MPEG-4 standard are

web (streaming media) and compact disc distribution,

conversation (videophone) and broadcast television, all

of which benefit from compressing the audio and visual

stream

- 23 -



“PCB” printed circuit board. A board of insulating material on

which electronic circuits are printed by application of

photographic, chemical and electroplating processes

“PCBA” the assembly of components onto a PCB or a PCB that is

assembled, as the case may be

“SD card” secure digital card. A flash memory card that provides

secure storage for handheld devices such as mobile

handset

“SIM card” subscriber identity module card. A removable smartcard for

mobile handset that securely store the service subscriber

key used to identify a GSM subscriber

“SMT” Surface Mounting Technology. A method for constructing

electronic circuits in which the components are mounted

directly onto the surface of PCBs

- 24 -

RISK FACTORS


RISK RELATING TO THE BUSINESS OF THE GROUP

Seasonal fluctuations in revenue

The Group’s revenue may be affected by seasonality and a number of other factors. The Group’s

results of operations have fluctuated from season to season in the past and are likely to continue to

fluctuate due to seasonality. During the Track Record Period, the Group generally recorded higher

sales in the second half than in the first half of a year. Such seasonality is primarily attributable to

the seasonal nature of the seasonal fluctuation of mobile handset production in the PRC, and the fact

that the Group’s products in autumn and winter generally have higher sales volume than that in spring

and summer. Accordingly, any comparison of the Group’s results of operations between interim and

annual results in a financial year is not necessarily meaningful. As a result, the Group interim results

should not be referred to as an indicator of the Group’s performance for that financial year.

Sustainability of profit margin

For each of the three financial years ended 31 March 2009 and the six months ended 30 September

2009, the gross profit margin of the Group were approximately 22.54%, 13.52%, 8.21% and 8.96%

respectively; and the net profit margin of the Group were approximately 19.19%, 8.46%, 3.77% and

3.65% respectively. Such decrease in gross profit margin and net profit margin was due to: (i) the

decrease in contribution of revenue from the Solution Segment which has the highest profit margin

among the three business segments of the Group; and (ii) the decrease in contribution of revenue

from the Distribution and Marketing Segment which was resulted from the constant decrease of the

average selling price in the global mobile handset industry. The Directors consider if there is any

increase in competition from other mobile handset solution providers and/or an increase in the costs

of production materials which cannot be passed on to the customers, the gross profit margin and net

profit margin of the Group may be adversely affected.

The Group has not entered into any long-term purchase contracts with suppliers and may be adversely affected if there is a shortage or delay in delivery of components

The Group has not entered into any long-term purchase contracts with its suppliers. Suppliers

are therefore not bound to supply components to the Group. For the three financial years ended 31

March 2007, 2008 and 2009 and six months ended 30 September 2009, approximately 93%, 77%,

47% and 66% respectively of the Group’s total purchases was contributed by top five suppliers of

the Group and approximately 55%, 43%, 24% and 23% of the Group’s procurement was contributed

by the largest supplier of the Group, each of them was an Independent Third Party. If such suppliers

cease to supply components or there is a shortage of supply or delay in delivery of components by

suppliers, the Group may be unable to fulfill its obligations to customers in an efficient and timely

manner and may consequently affect its reputation, business and financial performance.

- 25 -

RISK FACTORS


The Group is dependent on the relationship with major customers

The Group does not generally have any long-term contracts with customers and therefore the

customers are not bound to purchase solutions and products from the Group and the maintenance of

close and satisfactory relationships with customers is important to the business of the Group. There

can be no assurance that the Group will continue to retain these customers or that these customers will

maintain or increase their current level of business activities with the Group. For the three financial

years ended 31 March 2007, 2008 and 2009 and six months ended 30 September 2009, approximately

66%, 72%, 53% and 56% respectively of the Group’s revenue was contributed by the top five customers

of the Group and approximately 26%, 19%, 15% and 14% of the Group’s revenue was contributed

by the largest customer of the Group, each of them was an Independent Third Party. If there is any

material delay, reduction or cancellation of orders or a termination of relationship with any of these

top five customers, the Group’s revenue and profitability will be materially and adversely affected.

The Group faces intense competition from existing competitors in the industry and new entrants to the industry and its existing customers may reduce their reliance on the Group

There are different design solutions houses in the PRC which could offer customers one stop

service similar to that provided by the Group. The Group nonetheless faces intense competition at

each relevant stage from product development to production, in particular the provision of design

solutions.

The mobile handset design and solution houses in the PRC are not required to satisfy additional

licensing requirements, except for the normal business licensing requirements applicable to all

corporations in the PRC. As such, the entry barrier for a mobile handset design solution house is

relatively low. The Group faces competition from existing and future design solution houses in the

PRC and also from foreign design solution houses. There is no assurance that the Group will be able

to compete effectively against these competitors. If such competitors are able to provide comparable

services at more competitive prices than the Group, the Group’s business and financial results may

be adversely affected.

On the other hand, the Group’s existing mobile handset manufacturer customers may have

choice to focus on developing its in-house research and design capabilities which would reduce their

reliance on third party design solution houses, such as the Group. Thus the business and financial

results of the Group may be adversely affected.

Subject to rapid technological developments and rapidly changing market preferences, which can adversely affect the demand for the Group’s products if it is unable to keep up with these technological developments and market preferences

The mobile handset industry is characterised by rapid technological developments and changing

market preferences. These factors result in the frequent introduction of new products, short product

life cycles, continually evolving mobile handset specifications and significant price competition. If the

Group is unable to design new mobile handset models in a timely and cost-efficient manner to keep

- 26 -

RISK FACTORS


abreast with these technological developments and rapidly changing market preferences, its business

and financial results may be adversely affected.

The Group is reliant on the research and development personnel to develop innovative and up-to-date solutions

One of the main success factors of the Group’s business lies in the ability to develop innovative

design solutions which are up-to-date with the latest technological developments and the latest market

trends through its research and development team. As at the Latest Practicable Date, the Group has

60 research and development engineers for different tasks in solutions development. If the Group is

unable to retain the research and development personnel and unable to find suitable replacements

within a short period of time, the ability of the Group to produce competitive design solutions and

in turn, its business and financial performance would be adversely affected.

Reliance on certain key executives

The Group’s success to date has been largely due to the contribution from Mr. Wang Shih

Zen who is responsible and in charge of the Group’s business strategies and R&D, and other senior

management as disclosed in the section headed “Directors, senior management and staff” of this

prospectus. The continued success is dependent on its ability to retain the services of the key

management and operational personnel. The Group has not obtained any insurance to cover losses

arising from any loss of key management staff. The loss of the Directors and senior management

without suitable replacements, or the inability to attract and retain qualified personnel or the inability

of such personnel to perform their responsibilities and duties for any reason, may adversely affect

the Group’s operations, revenue and profits.

Net cash used in operations

During the Track Record Period, the Group recorded net cash used in operations of approximately

US$606,000, US$9,477,000 and US$5,053,000 for the financial year ended 31 March 2008 and the

six months ended 30 September 2008 and 2009 respectively. The net cash used in operations as above

was mainly due to the increase in trade receivables and prepayments, deposits and other receivables

during the above respective periods. Such occurrence of net cash outflow from operating activities

indicates the working capital requirement may exceed cash generated from the Group’s operating

activities. There is no assurance that the Group will not experience net cash used in operations in the

future, which could adversely affect the working capital and financial position of the Group.

The Group may be liable for defects or errors in its developed products

Any defects or errors caused by the application of solutions or content could result in delay or

loss of revenues, additional expenditure to correct the problems, adversely affect customer relationships

and liability claims against the Group. The Group generally provides customers with a warranty period

of one year for their solutions and its own brand “VIM” or in Chinese “偉恩” mobile handset. The

Group does not maintain any product liability insurance. In the event that there are material defects

or errors in the Group’s solutions and its own brand “VIM” or in Chinese “偉恩” mobile handset and

experience a significant claim against the Group in the future, the Group’s results and prospects may


- 27 -

RISK FACTORS


There is no assurance that the Group will be able to execute its future plans successfully, or that its future plans will result in commercial success

The Group has identified several growth plans as set out in the sections headed “Business”

and “[•••]” of this prospectus. These plans include, inter alia, the enhancement of the product

development capabilities and the enlargement of the product mix. The implementation of these

plans may incur additional costs. There is no assurance that the implementation of the future plans

will be commercially successful. Failure to do so will result in the Group incurring expenses and

resources without a corresponding increase in revenue and its financial performance and results may


Exposure to risk of foreign exchange fluctuations

The Group’s reporting currency is US dollars. During the Track Record Period, the sales and

purchases transactions were substantially conducted in US dollars and to a lesser extent in RMB and

HK dollars. The Group will be subject to foreign exchange transaction risk arising from sales and

purchases and recurring operating expenses incurred in the operations located in the PRC which are

mainly denominated in RMB, repayment of bank loans that are denominated in currencies other than

US dollars and the distribution of any dividends which are denominated in HK dollars and Singapore

dollars. Although the fluctuation of the exchange rates between RMB or HK dollars, and US dollars

was not material during the Track Record Period, there is no assurance that the exchange rates will

remain stable and the Group still subject to foreign exchange transaction risks.

Exposure to foreign exchange forward contract risk

After the listing of Shares in SGX-ST in November 2007, the scale of the businesses of the

Group increased significantly. In order to minimise any risks associated with the foreign exchange,

the Group has started to enter into foreign exchange forward contracts with its principal bankers in

Hong Kong or major banks in the PRC since January 2008. All the foreign exchange forward contracts

related to either the currency pair of US dollars/RMB or US dollars/HK dollars. These are the major

currencies the Group used for its daily operations, such as sales and cash receipts cycle and purchases

and cash disbursements cycle. In addition, the entering of the foreign exchange forward contracts

was based on the forecast transactions on the probable receipts of sales proceeds and payments for

the procurement.

In view of the challenging year 2008 caused by the financial crisis, the Directors considered that

any changes on the pegged system and significant fluctuation on the exchange rate of US dollars/HK

dollars would result into unknown impact on the Group. Moreover, the absolute aggregate amount

of the total procurement and the operational expenses is a material one. Any changes in basis points

of the spot rate will have an unknown impact on the Group’s net profit for the year. As such, the

Group still entered into certain foreign exchange forward contracts related to US dollars/HK dollars

for contingency purposes given that HK dollars is pegged to US dollars.

- 28 -

RISK FACTORS


Categories of the financial instruments

The foreign exchange forward contracts entered by the Group during the Track Record Period

are mainly divided into three categories, namely, foreign exchange forward contract, range foreign

exchange forward contract and target redemption forward contract.

i) Foreignexchange forwardcontract

Foreign exchange forward contract is an agreement for the Group to purchase or sell the

currency at a future date for a price agreed upon at the time of the contract. The derivative

financial instruments entered into by the Group under this type of foreign exchange forward

contract are US dollars/HK dollars and US dollars/RMB. For the six months ended 30 September

2009, the annualised notional amount for the US dollars/HK dollars and US dollars/RMB under

this type of foreign exchange forward contract was approximately US$6 million and US$24

million respectively.

ii) Range foreignexchange forwardcontract

A range foreign exchange forward contract provides protection against unfavourable

exchange rate movements by allowing the Group to exchange one currency for another at a

pre-agreed ceiling rate or a floor rate on an agreed maturity date. At the same time, the range

foreign exchange forward contract provides the Group with an ability to participate in any

favourable exchange rate movements to a pre-determined level. The contract period of the range

foreign exchange forward contract the Group entered into is normally two years on average.

The relative derivative financial instruments entered into by the Group under this type of

foreign exchange forward contract are US dollars/RMB. For the six months ended 30 September

2009, the annualised notional amount for the US dollars/RMB under this type of range foreign

exchange forward contract was US$36 million respectively.

iii) Targetredemption forwardcontract

Target redemption forward contract refers to a transaction that combines a currency

barrier (knock-out) call option and a currency barrier (knock-out) put option with several partial

settlement dates. This relates to a zero cost option strategy in which the Group purchases a

right to buy or to sell a given currency and at the same time sells a right to buy or to sell that

same currency. If on any partial settlement date the relevant currency option is exercised, then

the Group cumulates the profit to that date. If the Group’s accumulated profit will at some

point reach an amount agreed in advance, then both currency barrier options are cancelled. The

notional amounts of the two options can be the same or differ depending on the arrangement

agreed with. The contract period of the target redemption forward contract the Group entered

into is normally two years on average. For the six months ended 30 September 2009, the

annualised notional amount for the US dollars/HK dollars under this type of target redemption

forward contract was approximately US$46 million.

- 29 -

RISK FACTORS


The unrealised fair value losses on the outstanding foreign exchange forward contracts amounted

to approximately US$153,831 for the six months ended 30 September 2009. As at 30 September

2009, the deemed annualised notional amount was approximately US$111,600,000. Despite the

foreign exchange forward contracts entered by the Group during the Track Record Period does not

fulfill the stringent requirements under the hedge accounting of International Accounting Standard

39, the performance of the foreign exchange forward contracts entered into by the Group satisfies

the principle of hedging and provides hedging purpose for the Group so as to minimise its foreign

exchange exposure. According to the internal valuation performed at each quarter end based on the

existing available market data on hand to estimate the fair value of the open position of the foreign

exchange forward contracts at each quarter end, the Directors are of the view that the hedging is

effective as the aggregate amount of the net exchange differences and the net fair value changes on

the derivative financial instruments only amounted to a minimal percentage of the total purchases

and operating expenses for the corresponding financial year/period.

The Group has no formal and written foreign currency hedging policy and it has not sought any

advice from qualified investment advisers for entering into such foreign exchange forward contracts

during the Track Record Period. However, internal valuation is performed at each quarter end based

on the existing available market data on hand and the open position of the foreign exchange forward

contracts at quarter end is reviewed by the audit committee. The entering of the foreign exchange

forward contacts must be approved by the chairman of the Company. The management will consider

to enter into any suitable foreign exchange forward contracts according to the expectation by the

management to the trend of the value of US dollars/RMB and US dollars/HK dollars.

There is no assurance the changes in fair values on the existing foreign exchange forward

contracts can fully and effectively mitigate the fluctuation of US dollars/RMB and US dollars/HK

dollars and results of operations of the Group may be adversely affected.

The Group may not have adequate insurance coverage

The Group has maintained insurance coverage for most of the fixed assets (including motor

vehicles and machinery located in the Tongqing production plant).

However, the Group currently does not maintain any insurance policies against product liability

claims, third party liability claims or disruptions to business operations. As at the Latest Practicable

Date, there has been no past occurrence of product claims, third party liability claims or disruptions

to its business operations. If such events were to occur, the Group’s business, financial performance

and position would be materially and adversely affected.

The Group may not be able to adequately protect its intellectual property rights (including but not limited to trademarks and patents) which could adversely and materially affect the Group’s business

During the Track Record Period, the Group had been carrying out its principal business in the

PRC and Hong Kong under the titles and brand names of “Z-Obee”, “OBEE” and “VIM” or in

- 30 -

RISK FACTORS


Chinese “偉恩”. “Z-Obee” is the Company’s name and the original intention of the Company was to

use this name as its brand. “OBEE” is the mobile handset brand used by Zhenhua Obee in the PRC.

“VIM” or in Chinese “偉恩” is the latest brand for proprietary developed mobile handset used by the

Group. As the name and the appearance of Z-Obee is similar to that of OBEE, the Group intended to

develop “VIM” or in Chinese “偉恩” as a new brand for differentiation and brand recognition

purposes.

The application for registration of “VIM” text mark had been refused by the Hong Kong Trade

Marks Registry as the mark was considered to be indistinctive and descriptive. Such application was

refused also on the ground that the “VIM” text mark was identical to certain previously registered

trademarks, one of which was registered under the class of goods which the “VIM” text mark was also

intended to be covered and the applied-for goods and services of the “VIM” text mark were similar

to those of such registered marks.

The Directors considered that the impact on the refusal of the application for registration of

“VIM” text mark by the Hong Kong Trade Marks Registry is insignificant and would not have material

impact to the business of the Group as the Group’s mobile handsets in the brand name of “VIM” are

sold under the “VIM Logo” which, in view of the form of presentation, is substantially different

from the “VIM” text mark. The refusal of the application for registration of “VIM” text mark by the

Hong Kong Trade Marks Registry was due to an identical prior registration of the trade mark “VIM”,

which covered class 9 of computer hardware and computer software, computer hardware and software

for voice message applications, excluding goods relating to vendor independent messaging, registered

by another company. The products covered by such “VIM” text mark are not the same products the

Group sold and therefore the legal adviser of the Company as to intellectual property laws advised

that third party claims for infringement of intellectual property right against the Group for selling

the mobile handsets under “VIM Logo” are unlikely to be successful.

The Directors assessed the risks of using the “VIM” text mark after the refusal and therefore

the Directors considered that it is much more appropriate for the Group to apply for the “VIM Logo”

in series of two marks and for the Group’s brand immediately after the refusal. All

the mobile handsets of the Group are sold under brand logo “VIM Logo” and in either

version of the series of two marks being applied for.

The legal adviser of the Company as to intellectual property laws in Hong Kong advised that

based on the outcome of the applications in various countries, it appears that no other players in the

various markets concerned have either registered or having used or have been using any mark identical

to the “VIM Logo” before the Company’s registration in Hong Kong. Therefore, the legal adviser as

to intellectual property laws in Hong Kong considered that anyone claiming trade mark infringement

and passing off would have a serious and difficult task of proving confusion. The application of the

“VIM Logo” and in Hong Kong has been registered since December 2009.

- 31 -

RISK FACTORS


As at the Latest Practicable Date, the Group had applied for registration of the brand names of

“Z-Obee”, “OBEE”, “VIM” and or in Chinese “偉恩” and “OBFON” in Hong Kong, the

PRC, the US, Philippines, Indonesia, India, Vietnam, Malaysia, South Africa, Australia, Singapore

and European Union. As at the Latest Practicable Date, certain trademark registration applications in

the above countries or regions were still pending for approval by the relevant government authorities.

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries,

the unregistered trademarks and trademarks used and pending for registration would be protected

by other civil actions in the relevant jurisdiction. Through the sales of products which carry the

Group’s names and marks and the promotion activities to be conducted by the Group as disclosed in

the section headed “Future Plans and Use of Proceeds” in this prospectus, the Directors believe that

the Group will be able to prove the goodwill and reputation in the names and marks of its products

in Hong Kong, the PRC, Singapore, USA, Philippines, India, Indonesia, Vietnam, Malaysia, South

Africa, European Union and Australia. If any person trades mobile handsets in Hong Kong, the PRC,

Singapore, USA, Philippines, India, Indonesia, Vietnam, Malaysia, South Africa, European Union and

Australia using a mark or trade name which leads or is likely to lead the public to believe that those

mobile handsets are the products of the Group or such person’s business is connected with those of the

Group, the Group is entitled to commence civil actions against such person. Based on the protection

offered to the Group as mentioned above, even though the trademark applications in Hong Kong,

the PRC, Singapore, USA, Philippines, India, Indonesia, Vietnam, Malaysia, South Africa, European

Union and Australia have not been approved by the respective trademark registration authorities,

the Directors believe that the non-registration of such trademarks will not have any material adverse

impact on the Group’s business.

Details of the Group’s intellectual property rights are set out in the paragraph headed “Intellectual

property rights of the Group” in the section headed “Further Information about the Company and its

subsidiaries” in Appendix V to this prospectus.

The Group had also applied for patent registrations for certain inventions and utility models

of the Group in the PRC. As at the Latest Practicable Date, certain patent registration applications

were still pending for approval by the relevant government authorities. For details, please refer to

the paragraphs headed “Patent” and “Utility model” in the paragraph headed “Intellectual property

rights of the Group” under the section headed “Further information about the business of the Group”

in Appendix V to this prospectus.

As the approvals of the above registrations had not been obtained, there is no assurance that

such registrations will be approved or in case of such trademarks, inventions and utility models had

already been registered by other third parties and, consequently, the Group may not be able to acquire

rights to such trademarks, inventions and utility models. As the title, brand names, inventions and

utility models are important to the Group’s continuous development, any significant infringement of

such intellectual property rights of the Group could have an adverse effect on the Group’s business.

In the event that the Group undertakes litigation to enforce its intellectual property rights,

such litigation may be costly and time consuming. If the Group is unable to adequately protect the

trademarks and/or patents, the Group’s business may be adversely affected.

- 32 -

RISK FACTORS


The Group may be subject to third party claims for infringement of intellectual property rights

The Group may be unaware of third party intellectual property rights that may cover some

of the technology, designs and services originally belonged to other third parties who may assert

intellectual property infringement claims against the Group. Any litigation regarding intellectual

property could be costly and time consuming. It could also divert the management and key personnel

from the business operations.

In the event of a successful claim by such third parties, the Group may be subject to payment

of significant damages. The Group may further be subject to injunctions against the development

and sale of certain of its design solutions and services. These consequences may adversely affect the

Group’s business and financial results.

The Group may require additional funding for future growth

The Group may find opportunities to grow through acquisitions that cannot be predicted at this

juncture. Under such circumstances, secondary issue(s) of securities after the Share Offer may be

necessary to raise the required capital to capitalise these growth opportunities. If new Shares placed

to new and/or existing Shareholders are issued after the Share Offer, they may be priced at a discount

to the then prevailing market price of its Shares trading on the SGX-ST and/or Stock Exchange, in

which case, existing Shareholders’ equity interest may be diluted. If we fail to utilise the new equity

to generate a commensurate increase in earnings, the Group’s earnings per Share will be diluted which

could lead to a decline in its share price from the dilution. Any additional debt financing may, apart

from increasing interest expense and gearing, contain restrictive covenants with respect to dividends,

future fund raising exercises and other financial and operational matters.

The Group’s operations may be materially and adversely affected by a shortage or disruption to the power supply

The Group’s production plant relies on public power supply for its machinery to function. In

the event that there is a shortage or disruption to the power supply and its private power generator

fails to function, its operations will be disrupted and its ability to delivery products and services to

its customers on a timely basis will be affected.

Leasing of the premises occupied by Tongqing in the PRC

The production plant and office premises of Tongqing are located on leased premises at Baoan

District, Shenzhen, the PRC. Pursuant to the tenancy agreements for such leased premises entered

into between the Group and the landlord, being an Independent Third Party, such premises are leased

to the Group for approximately five years from 16 April 2007 to 1 March 2012. Since the premises

occupied by Tongqing are the center of the Group for assembly of mobile handset and SMT of PCB,

the failure to renew such lease agreements, or if there is any dispute as to the legal title of any such

leased premises and/or if the right of the Group to occupy such leased premises comes into question,

where either of which may cause the relocation of the production plant of the Group to an alternative

- 33 -

RISK FACTORS


premises that may not be located in areas which could offer similar business environment and condition.

In addition, relocation cost will be incurred and the Assembly Segment of the Group will be adversely

affected, which in turn may adversely affect the revenue and financial performance of the Group.

Any recurrence of severe acute respiratory syndrome (SARS), pandemic avian influenza or an increase in the severity of H1N1 flu (swine flu) or another widespread public health problem could materially and adversely affect the Group’s business and results of operations

From November 2002 to June 2003, the PRC and certain other countries and regions experienced

an outbreak of a new and highly contagious form of atypical pneumonia known as SARS. On 5 July

2003, the World Health Organization declared that the SARS outbreak had been contained. However,

a number of isolated cases of SARS were reported in the PRC in April 2004. A renewed outbreak of

SARS, pandemic avian influenza or an increase in the severity of H1N1 flu (swine flu) or another

widespread public health problem in the PRC, particularly at the locations of the Group’s operations

and headquarters, could have a negative effect on the Group’s operations. The Group’s operations

may be affected by a number of health-related factors, including quarantines or closures of some of

the Group’s offices and production plant, which would severely disrupt the Group’s operations, travel

restrictions, the sickness or death of its key officers and employees, import and export restrictions

and a general slowdown in the PRC’s economy. Additionally, the World Health Organization or the

PRC government may recommend or impose other measures that could cause significant interruption

to the Group’s business operations. Any of the foregoing events or other unforeseen consequences of

pubic health problems could materially and adversely affect the Group’s business, financial condition

and results of operations.

RISKS RELATING TO THE DUAL PRIMARY LISTING OF THE COMPANY

Different characteristics between the Singapore stock market and Hong Kong stock market

The Shares have been listed and have commenced dealing on the SGX-ST since 21 November

2007 (“Singapore Shares”). Following the Listing, it is the Company’s current intention that the

Singapore Shares will continue to be traded on the SGX-ST, and the Shares subject to the Listing to

be registered by the share registrar in Hong Kong (“Hong Kong Shares”) will be traded on the Stock

Exchange. As there is no direct trading or settlement between the stock markets of Singapore and

Hong Kong, the required time to transfer Shares between the CDP and branch share registrar in Hong

Kong may vary and there is no certainty of when transferred Shares will be available for trading or

settlement. Details for transferring the Shares from principal register of members in Bermuda to the

branch register of members in Hong Kong are set out in the section headed “Listing, registration,

dealings and settlement”.

The SGX-ST and the Stock Exchange have different trading hours, trading characteristics

(including trading volume and liquidity), trading and listing rules and investor bases (including different

levels of retail and institutional participation). As a result of these differences, the trading price of

the Singapore Shares and the Hong Kong Shares may not be the same. Furthermore, fluctuations in

the Singapore Share price could materially and adversely affect the Hong Kong Share price and vice

versa. Moreover, fluctuations in the exchange rate between Singapore dollars and Hong Kong dollars

- 34 -

RISK FACTORS


could materially and adversely affect the prices of Singapore Shares and Hong Kong Shares. Due to

the different characteristics of the stock markets of Singapore and Hong Kong, the historical prices

of Singapore Shares may not be indicative of the performance of Hong Kong Shares after the Listing.

Investors should therefore not place undue reliance on the prior trading history of the Singapore Shares

when evaluating an investment in the Share Offer.

The Company, being listed on the SGX-ST, is concurrently subject to the Listing Manual and the Singapore Code

Being a listed company on the SGX-ST, the Company is required to comply with the Listing

Manual in addition to the Listing Rules. In the event of any conflict between the Listing Manual

and the Listing Rules, the Company shall comply with the more stringent rules. Accordingly, the

Company may incur additional costs and resources to comply with both sets of rules. In addition to

the Takeovers Code, being a listed company on the SGX-ST, the Company is subject to the Singapore

Code which contains certain provisions, under which any person who would like to conduct a future

takeover or change in control of the Company will have to observe for so long as the Shares are listed

on the SGX-ST. The Company shall observe the provisions of the Singapore Code and the Takeovers

Code concurrently.

RISK RELATING TO THE PRC

The Group’s business and operations are subject to certain laws and regulations of the PRC

The Group’s business and operations are subject to certain laws and regulations of the PRC. Any

breach or non-compliance with these laws and regulations of the PRC may result in the imposition

of penalties by the relevant authorities, including the suspension, withdrawal or termination of its

Group’s business licences. In addition, should there be any increase in the licensing requirements,

such as a requirement to obtain more licences or more stringent criteria having to be satisfied before

certain licences are granted, its cost to ensure that the Group comply with these licensing requirements

may increase. The withdrawal, suspension or termination of the Group’s licences or permits, or the

imposition of any penalties, as a result of any infringement of any regulatory requirements will have

an adverse impact on its business and results of operations.

The Group’s business and operations may be materially and adversely affected by any changes in the political, economic and social conditions of the PRC

As the Group’s business and operations are carried out in the PRC, any changes in the

political, economic and social conditions of the PRC may adversely affect its business and viability.

The PRC government has undergone various reforms of its economic systems. Such reforms have

resulted in economic growth for the PRC in the last two decades. However, many of the reforms are

unprecedented or experimental, and are expected to be refined and modified from time to time. In

addition, the scope, application and interpretation of laws relating to such reforms may be uncertain.

Other political, economic and social factors may also lead to further refinement or adjustment of the

reform measures. This refinement and adjustment process may consequently have a material adverse

- 35 -

RISK FACTORS


impact on the operations of the Group in the PRC or on its financial performance. Its results and

financial condition may be adversely affected by any changes in the PRC’s political, economic and

social conditions and by changes in policies of the PRC government or changes in laws, regulations

or the interpretation or implementation thereof.

Introduction of new laws or changes to existing laws by the PRC government may adversely

affect business and operations of the Group. The business and operations of the Group in the PRC

are governed by the legal system of the PRC.

Some of the PRC laws and regulations, and the interpretation, implementation and enforcement

thereof, are still being developed and refined and are, therefore, subject to policy changes. Accordingly,

the outcome of dispute resolutions may not be consistent or predictable with certainty other legal

jurisdiction, and it may be difficult to obtain swift and equitable enforcement of the laws in the PRC,

or to obtain enforcement of judgment by a court of another jurisdiction.

There is however no assurance that the PRC authorities will not issue further directives,

regulations, clarifications or implementation rules requiring the Company to obtain further approvals

in relation to its proposed Listing on the Stock Exchange.

RISK RELATING TO INvESTMENT IN SHARES

Liquidity and market price of the Shares

The market price and trading volume of the Shares may be highly volatile. Factors such as

variations in the Group’s revenues, earnings or cash flows, and/or announcements of new investments,

strategic alliances and/or acquisitions and fluctuations in prices for the major components could cause

the market price of the Shares to change substantially. Any such developments may result in large

and sudden changes in the volume and market price at which the Shares will be traded. There is no

assurance that these developments will not occur in the future. In addition, shares of other companies

listed on the Stock Exchange and SGX-ST related to the mobile handset industry have experienced

price volatility in the past, and it is possible that the Shares will be subject to changes in market price

that may not be directly related to the Group’s financial or business performance.

There was no prior public market for the Shares in Hong Kong so that the liquidity is not guaranteed and the performance of the share price may not prevail in the trading market

There was no public market for the Shares in Hong Kong prior to the Share Offer. The Offer Price

for the Offer Shares was based on the trading price of the Shares in SGX-ST. There is no indication

from the Offer Price that the Shares prices will prevail in the trading market. The Offer Price may

differ significantly from the market price for the Shares in Hong Kong following the Share Offer and

the market price for the Shares in Hong Kong may be different from the trading price in SGX-ST.

The listing on the Stock Exchange does not guarantee that an active and liquid trading market for

the Shares will develop or be sustained immediately after the Share Offer or thereafter, or that the

market price of the Shares in Hong Kong will not decline after the Share Offer.

- 36 -

RISK FACTORS


There may be dilution of shareholding as a result of issuance of new Shares, or equity linked securities or exercise of share options

The Group may need to raise additional funds to finance its development and expansion relating

to the Group’s existing operations or new acquisitions. Any issuance of new Shares or equity linked

securities or exercise of the share options in respect of the Shares other than on a pro-rata basis to

existing Shareholders would result in the reduction in the percentage of ownership of the Shareholders

and may result in a dilution in the earnings per Share and net asset value per Share and/or such

securities may have rights, preferences and privileges senior to the Shares.

RISK RELATING TO STATEMENTS MADE IN THIS PROSPECTUS

Government official facts and statistics included in this prospectus may not be accurate and precise

Certain information and statistics contained in this prospectus under the section headed “Industry

overview” of this prospectus are derived from various official governmental publications and research

report. While reasonable care has been exercised in the reproduction of such information, it has not been

independently verified by the Group, the Sponsor, the Underwriters or any of their respective affiliates

or advisers and may not be accurate, complete or up-to-date. The Group makes no representation as

to the correctness or accuracy of such information and, accordingly, such information should not be

unduly relied upon.

Forward-looking statements

This prospectus contains certain statements and information that are forward-looking and uses

forward-looking terminology such as “anticipate”, “believe”, “could”, “expect”, “estimate”, “may”,

“ought to”, “should” or “will”. Those statements include, among other things, the discussion of the

Group’s growth and business strategies and expectations concerning its future operations, liquidity and

capital resources. Potential investors are cautioned that reliance on any forward-looking statements

involves risks and uncertainties and that, although the Company believes the assumptions on which the

forward-looking statements are based are fair and reasonable, any or all of those assumptions could

prove to be incorrect and as a result, the forward-looking statements based on those assumptions could

also be incorrect. The uncertainties in this regard include but not limited to those identified in this

“Risk factors” section, many of which are not within the Group’s control. In light of these and other

uncertainties, the inclusion of forward-looking statements in this prospectus should not be regarded

as representations by the Group that its plans or objectives will be achieved and investors should not

place undue reliance on such forward-looking statements.

- 37 -

WAIVER FROM STRICT COMPLIANCE WITH THE LISTING RULES


For the purpose of the dual primary listing, the Company has applied for, and the Stock Exchange

has granted, the following waiver in relation to strict compliance with certain requirements under the Listing

Rules, details of which are described below:

DEALINGS IN THE SHARES PRIOR TO LISTING

According to Rule 9.09 of the Listing Rules, there must be no dealing in the securities for which listing

is sought by any connected person of the issuer from four clear business days before the expected hearing

date until listing is granted (the “Relevant Period”). In the context of a dual primary listing of a widely held,

publicly traded company currently has its issued Shares listed on the SGX-ST, the Company has no control

over the investment decisions of its shareholders (other than the Controlling Shareholders, Mr. Lu Shangmin

and their respective associates) and the investing public in Singapore. The Company has applied for, and

the Stock Exchange has granted, a waiver from strict compliance with Rule 9.09 of the Listing Rules which

restricts such dealings in the Shares prior to Listing.

In support of its waiver application, the Directors confirm that:

1. potential substantial shareholders have not been and will not be involved in the management and

operation of the Group and flotation exercise prior to the Company’s Listing;

2. other than the Controlling Shareholders, Mr. Lu Shangmin and their respective associates, the

Company does not have control over the investment decisions of any shareholder and the investing

public in Singapore. As such any person who is permissible to deal with the Shares on SGX-ST

may become a substantial Shareholder, and may continue to deal with the Shares during the

relevant period;

3. the Controlling Shareholders, the Directors and chief executive officer, together with their

respective associates, have not dealt in and will not deal in the Shares before the listing of the

Shares in Hong Kong; and

4. the Company shall and use its best endeavous to procure the Sponsor to notify the Stock Exchange

of any dealing or suspected dealing in the Shares by any connected persons of the Company

during the Relevant Period of which it becomes aware.

The Company has not provided any non-public information to Shareholders or potential substantial

shareholder. In addition, the Company and the Sponsor have undertaken that no non-public information will

be disclosed to any Shareholders or any potential substantial shareholder. As at the Latest Practicable Date,

the Company is not aware of any potential connected person which may not be able to comply with Rule 9.09

of the Listing Rules.

- 38 -

DIRECTORS AND PARTIES INVOLVED IN THE SHARE OffER


DIRECTORS

Name Address Nationality

Executive Directors

Wang Shih Zen (王世仁) Flat B, 3/F, Win Shun Mansion Chinese

Chairman and CEO 9 Kin Wah Street

North Point

Hong Kong

Wang Tao (王濤) Unit 29G, Block 2, Fu Tian Chinese

Yuan Dong Hua Yuan

Shenzhen

PRC

Lu Shangmin (呂尚民) Flat G, 43/F Chinese

Twr 7 Le Point

8 King Ling Road

Tseung Kwan O

Kowloon

Non-executive Director

Lim Teck Leong David (林德隆) House 1C Margate Road Singaporean

Singapore 438074

Independent Non-executive Directors

Chan Kam Loon 25 Duchess Road Singaporean

Singapore 268995

Guo Yanjun (郭燕軍) Room 901, 218 Apartment Chinese

218 Hennessy Road

Wanchai

Hong Kong

Lo Hang Fong (勞恒晃) Flat 01, 20/F, Block A Chinese

Fortress Metro Tower

238-240 King’s Road

Hong Kong

- 39 -



PARTIES INVOLVED IN THE SHARE OffER

Legal advisers to the Company As to Hong Kong law

Michael Li & Co 14th Floor, Printing House

6 Duddell Street

Central

Hong Kong

As to Singapore law

David Lim & Partners 50 Raffles Place #17-01

Singapore Land Tower

Singapore 048623

As to PRC law

Haihua Yongtai Law firm 701 Eton Place

69 Dongfang Road

Shanghai 200120

PRC

As to Bermuda law

Conyers Dill & Pearman Clarendon House

2 Church Street

Hamilton HM 11

Bermuda

Legal advisers to the Sponsor As to Hong Kong law

and the Underwriters Winnie Mak, Chan & Yeung 8/F, Two Chinachem Plaza

68 Connaught Road Central

Hong Kong

As to PRC Law

Hills & Co. 11th Floor, Central Tower

No. 88 Fu Hua 1st Road

Fu Tian District

Shenzhen, PRC

Auditors and reporting accountants RSM Nelson Wheeler 29th Floor, Caroline Centre, Lee Garden Two

28 Yun Ping Road

Hong Kong

- 40 -



Property valuer BMI Appraisals Limited Suite 11-18, 31/F., Shui On Centre

6-8 Harbour Road

Wanchai

Hong Kong

Receiving banker Standard Chartered Bank (Hong Kong) Limited 15th Floor, Standard Chartered Tower

388 Kwun Tong Road

Kowloon

Hong Kong

- 41 -

CORPORATE INFORMATION


Registered office Clarendon House, 2 Church Street

Hamilton HM 11, Bermuda

Website of the Company www.z-obee.com

Headquarters and principal place Room 401, Building 14

of business in the PRC West Park of Software Park Hi-Tech Park

Second Road Nanshan

Shenzhen

PRC

Place of business in Hong Kong Unit 605, 6/F, Yen Sheng Centre

under Part XI of 64 Hoi Yuen Road

the Companies Ordinance Kwun Tong

Kowloon

Hong Kong

Company secretary in Hong Kong Shum Hoi Luen

Joint company secretaries in Singapore Busarakham Kohsikaporn

Shirley Lim Keng San

Authorised representatives Wang Shih Zen

Flat B, 3/F, Win Shun Mansion

9 Kin Wah Street

North Point

Hong Kong

Shum Hoi Luen

Room 311, Block K

Kornhill, Quarry Bay

Hong Kong

Audit committee Chan Kam Loon

Guo Yanjun

Lo Hang Fong

Lim Teck Leong David

Remuneration committee Guo Yanjun

Chan Kam Loon

Wang Shih Zen

Lo Hang Fong


- 42 -



Nomination committee Guo Yanjun

Chan Kam Loon

Lo Hang Fong

Wang Shih Zen


Principal share registrar Bermuda Share Registrar Coden Services Limited

Clarendon House

2 Church Street

Hamilton HM 11

Bermuda

Principal share transfer Tricor Barbinder Share Registration Services

agent in Singapore (a division of Tricor Singapore Pte. Ltd.)

8 Cross Street

#11-00, PWC Building

Singapore 048424

Branch share registrar and Tricor Investor Services Limited

transfer office in Hong Kong 26th Floor, Tesbury Centre

28 Queen’s Road East

Hong Kong

Principal bankers Oversea-Chinese Banking Corporation Limited

65 Chulia Street, #29-02/04

OCBC Centre

Singapore 049513

Oversea-Chinese Banking Corporation Limited

Hong Kong Branch

9th Floor

Nine Queen’s Road Central

Hong Kong

DBS Bank (Hong Kong) Limited

6th Floor, The Center

99 Queen’s Road Central

Hong Kong

Standard Chartered Bank (Hong Kong) Limited

13th Floor, Standard Chartered Bank Building

4-4A Des Voeux Road Central

Hong Kong

- 43 -



Dah Sing Bank Limited Dah Sing Financial Centre 108 Gloucester Road Hong Kong

Nanyang Commercial Bank Limited 151 Des Voeux Road Central Hong Kong

- 44 -

INDUSTRY OVERVIEW


The information in the section below has been directly or indirectly derived, in part, from various

governmental, official or other sources. The relevant information has not been independently verified

by the Company, the Sponsor or any of their respective affiliates or advisers, and therefore may

not be accurate, complete or updated. The Group makes no representation as to its accuracy, and

accordingly the information contained herein should not be unduly relied upon.

OVERVIEW Of ThE glObal mObIlE haNDSET maRkET

The global mobile handset market has expanded rapidly, in terms of total sales volume, in recent

years. According to “2009-2012年中國手機行業調研及戰略諮詢報告” (the “Related Report”), the global

sales of mobile handset increased from approximately 400 million units in 2000 to approximately 1.1

billion units in 2007, and the estimated sales of mobile handsets may reach approximately 1.23 billion

units in year 2008, representing the compound annual growth rate of approximately 15.07% from

2000 to 2008. The Related Report is published by 深圳市盛世華研管理諮詢公司 (formerly known

as Oriental Intelligence Co. Ltd), which is a market researcher in the PRC and an Independent Third

Party. It was neither commissioned by the Company nor its connected persons nor the Sponsor.

The following chart illustrates the growth in the number of global sales of mobile handsets

from 2000 to 2008(E):

14

47.3%

4.0 4.0 4.3

5.1

6.78.1

9.7

11.5

12.3

0%7.5%

18.6%

31.4%20.9%

18.6%19.8%

7.0%

80%

60%

40%

20%

0%

-20%2000 2001 2002 2003 2004 2005 2006 2007 2008

12

10

8

6

4

2

0

Total sales and growth of the global moblie handset industry from 2000 to 2008

Total Size (100 Million Sets) Growth Rate

Source: CCID Consulting

- 45 -

INDUSTRY OVERVIEW


According to the information included in the Related Report, the annual output value of mobile

handset have been increasing steadily from approximately US$122.17 billion in 2006 to an estimated

value of approximately US$176.34 billion in year 2009, representing the compound annual growth rate

of approximately 13.01%. However, annual growth rate of the global output value of mobile handsets

decreased from approximately 18.91% in 2007 to approximately 15.29% in 2008, and is estimated to

be further decreased to approximately 5.29% in 2009. The estimation for the substantial decrease in

annual growth rate in 2009 is reached after taking into account the effect of global financial crisis

in late 2008.

The following chart illustrates the global output values of mobile handsets and their respective

annual growth rate from 2006 to 2009(E):

200,000 20%

16%

12%

8%

4%

0%2006

Global output value from 2006 to 2009

2007 2008E 2009F

160,000

120,000

80,000

40,000

0

Source: Topology Research Institute

Output Value (US$ million) YOY

122,171

145,268

167,481

18.9%

15.3%

5.3%

176,335

- 46 -

INDUSTRY OVERVIEW


According to the Related Report, the global average selling price (“ASP”) of mobile handset was approximately the same between 2006 and 2007. However, the ASP is estimated to drop by about 1.5% and 2% during the 2008 and 2009 respectively. Such drop was attributable to the financial crisis spreading around the globe during 2008.

The following chart illustrates the estimated global average selling price (ASP) of mobile handsets and their respective growth rate from 2006 to 2009(E):

0.0%

-0.5%

-1.0%

-1.5%

-2.0%

-2.5%2006 2007 2008E 2009F

127

126

125

124

123

122

121

120

119


Average selling price of global mobile handset in 2009

Average Selling Price (Unit: US$) YOY

126.34126.21

124.06

121.61

-0.1%

-1.7%

-2.0%

According to the Related Report, the global penetration rate of mobile handset has been tremendously increasing for the past 10 years. The mobile handset is estimated to be fully penetrated into the developed nations in 2008. In relation to the penetration rate in the emerging nations, it was estimated to reach approximately 53% and 59% in 2008 and 2009 respectively. It represents that the development potential for the mobile handset industry in the emerging nations, like China, is larger than that of developed nations.

The following chart illustrates the estimated penetration rate of mobile handsets in the developed and emerging nations from 1994 to 2009(E):

100%

80%

60%

40%

20%

94 95 96 97 98 99 00 01 02 03 04 05 06 07 09F08E

Developed Global Emerging

5 813

18

25

35

50

5865

7077

8690

97 9998

1 2 3 4 58

1216 19

2328

3441

49

6257

0 0 1 1 2

35 8 11

1419

2634

45

5953


Global penetration rate of mobile handset from 1994 to 2009 (E)

- 47 -

INDUSTRY OVERVIEW


OVERVIEW Of ThE ChINa mObIlE haNDSET maRkET

The growth of China’s mobile handset market is one of the key factors affecting the growth of

the Group’s business as the Group engages in mobile handset industry, particularly in (i) application

design; (ii) solution design and services; (iii) mobile handset production; and (iv) distribution and

marketing of mobile handset and components in the PRC. In 2008, China’s mobile handset market

has experienced significant growth. According to “2008-2009 Annual Report on China’s Mobile

Phone Market” published by CCID Consulting Co., Ltd. (“CCID Consulting”), the PRC has become

the largest market of mobile handset subscribers in the world to date. Between 2000 and 2008, the

number of mobile handset subscribers in China increased rapidly from approximately 85.3 million to

approximately 625.1 million, representing a compound annual growth rate of approximately 28.7%.

CCID Consulting is a consulting company in the PRC, an Independent Third Party, which was neither

commissioned by the Company nor its connected persons nor the Sponsor.

The following chart illustrates the growth in the number of mobile handset subscribers in China

from 2000 to 2011(F):

0

200

400

600

800

1,000 100%

80%

60%

40%

20%

0%2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

(F)2010(F)

2010(F)

85.3144.8

206.0

334.8268.7393.3

461.0

547.1

625.1700.0

776.0

860.0


97.2%

69.8%

42.3%

30.4%

24.6%17.5% 17.2% 18.7%

14.3% 11.9% 10.9% 10.8%

Number of Mobile Phone Subscribers (Million) Growth Rate

Number and growth of mobile handset subscribers in the PRC from 2000 to 2011(F)

- 48 -

INDUSTRY OVERVIEW


The main driver of such growth has been the increasing overall mobile handset penetration rate in the PRC. According to National Bureau of Statistics of China, the rate changed from approximately 21.0% during 2003 to approximately 41.6% during 2007, representing the compound annual growth rate of approximately 18.64%.

The following chart illustrates the penetration rate for mobile handset subscribers in the PRC from 2003 to 2007:

41.6

35.3

30.3

21.0

26.0

Penetration rate of mobile handset in the PRC from 2003 to 2007

Penetration Rate (%)

Source: National Bureau of Statistics of China

According to the Related Report, the mobile handset subscriber proportion between urban and rural areas was approximately 79% and 21% respectively during 2008. In 2005, there was approximately 42.99% people residing in urban areas, with the rest of approximately 57.01% residing in rural areas. With the much lower penetration rate and larger number of population, the development potential is tremendous in the rural areas. Accordingly to CCID Consulting, agricultural population is the main part of fourth and fifth tier mobile handset markets. Rural market’s rapid growth brings a large number of new mobile handset subscribers, which results in mobile handset subscribers scales’ rapid expansion in fourth and fifth tier mobile handset markets.

The following chart illustrates the penetration rate of mobile handsets in the urban areas and rural areas of the PRC during 2008:

數據來源：互聯網消費調研中心(ZDC)

Penetration rate of mobile handsets in urban areas andrural areas in the PRC in 2008

Urban Area Rural Area0%

20%

40%

60%

80%

100%

79.0%

21.0%

Penetration Rate

- 49 -

INDUSTRY OVERVIEW


According to CCID Consulting, during the period from 2001 to 2008, annual mobile handset sales

in the PRC increased at a compound annual growth rate of approximately 19.52% from approximately

46.01 million units in 2001 to approximately 160.36 million units in 2008. This growth was mainly

attributable to the existing subscribers upgrading and replacing their current handset. The upgrade

and replacement trend partly results from the introduction of handset with advanced features, such

as digital cameras, MP3 music players and other consumer-oriented multimedia features, as hardware

and software technologies continually evolve. According to CCID Consulting’s forecast, the annual

mobile handset sales will increase to approximately 180 million in 2011.

The following table illustrates the annual mobile handset sales in the PRC during the period 2001 to 2011(F):

Sales Sales growth growthYear Sales rate Sales rate (’000 Units) (RMB billion)

2001 46,016 51.9% 90.19 33.2%2002 62,474 35.8% 107.71 19.4%2003 73,786 18.1% 118.93 10.4%2004 78,696 6.7% 129.47 1.3%2005 88,061 11.9% 131.58 9.2%2006 119,336 35.5% 168.08 27.7%2007 148,132 24.1% 167.98 -0.1%2008 160,363 8.3% 181.21 7.9%2009(F) 151,582 -5.5% 186.29 2.8%2010(F) 161,617 6.6% 216.24 16.1%2011(F) 179,168 10.9% 240.09 11.0%


According to CCID Consulting, the market share for the Chinese manufactured mobile handset escalated substantially from 2.8% during 1999 and was peaked at approximately 52.9% during 2003. The market share for the Chinese manufactured mobile handset then decreased steadily to approximately 33.2% during 2008. Such falling market share was mainly attributable to the fierce competition from the reputable international brand names, which started to compete at the low to middle priced mobile handset in China. Although the market share for Chinese manufactured mobile handset was increasing year on year before 2003, there was no mobile handset player in the PRC successfully established a well-known international brand name during the period. Therefore, when facing the keen competition from foreign players in terms of price, quality and appearance, the Chinese mobile handset players started to lose popularity.

- 50 -

INDUSTRY OVERVIEW


The following chart illustrates the market share of domestic mobile handset in the PRC during the period 1999 to 2008:

1999 2000 2001 2002 2003 2004 2005 2006 2007

2.8%

8.3%

15.3%

36.5%

52.9%

44.3%

36.7%

31.3% 32.5% 33.2%

0%

10%

20%

30%

40%

50%

60%

2008

Market share of domestic mobile handset in the PRC from 1999 to 2008


Market Share (%)

ThE PROSPECTS Of ThE gRaNT Of 3g lICENSES IN 2009

The Ministry of Industry and Information Technology of the PRC has granted 3G licenses to

the major telecommunication operators in the PRC in January 2009. The grant of such licenses shows

that the mobile handset industry of China has entered into a new 3G era.

According to the Related Report, it is estimated that the 3G-related expenditures will amount

to approximately RMB280 billion during the subsequent two years of 2009 and 2010. Apart from the

direct investment in 3G infrastructure, the grant of 3G licenses is expected to encourage other social

expenditures which are estimated to be approximately RMB2,000 billion and will in turn stimulate

further the Chinese economy.

In the 3G era, 3G mobile handset users can enjoy speedier transmission of data and enhanced

valued-added functions, including sophisticated data downloading, internet browsing, email communication

and ecommerce. According to the Related Report, it is estimated that the consumer demand for 3G

mobile handset will prosper and there will be much development potential for new 3G application,

its related services and mobile users replacing their 2G mobile handset with 3G mobile handset.

- 51 -

INDUSTRY OVERVIEW


The following chart illustrates the estimated sales volume of 3G mobile handsets in the PRC

from 2009(F) to 2011(F):

2009(F) 2010(F) 2011(F)

329

10,000 Sets

1,223

1,258

3,828

1,949

2,588

5,725

3,283

7450

2,000

4,000

6,000

8,000

10,000

12,000

WCDMA TD-SCDMA CDMA2000 EV-DO

Sales volume of 3G mobile handsets in the PRC from 2009(F) to 2011(F)

With the arrival of 3G era, mobile handsets with varied application functions, such as voice

communication, multimedia, computer function, entertainment, internet browsing and so forth, will

enter rapid growth period.

The following chart illustrates the estimated sales volume of smart phones and television phones

in the PRC from 2009(F) to 2011(F):

Sales volume of smart phones and TV phones in the PRC from 2009(F) to 2011(F)

2009(F)0

2,000

6,000

4,000

8,000

10,000

12,000

10,000 Sets

6,285

2,182

Sales Volume of Smart Phones Sales Volume of TV Phones

2010(F)

8,496

2,830

2011(F)

10,816

3,541


- 52 -

INDUSTRY OVERVIEW


ThE CURRENT laNDSCaPE Of mObIlE haNDSET SOlUTION PROVIDERS IN ThE PRC

In the past, the China mobile handset manufacturers did not possess the fundamentals for

research and development of mobile handset. They mainly engage as OEM/ODM basis to produce

mobile handset. With the accumulation of technical experience, the designs developed by the Chinese

mobile handset solution providers have started to be adopted in recent years. Therefore, the China

mobile handset manufacturers’ in the PRC reliance on the OEM/ODM models has reduced and they

showed strong demands for the designs developed by the Chinese solution houses. According to the

Related Report, during 2005, the major revenues for the solution houses in the PRC were mainly

attributed to China mobile handset manufacturers.

Currently, there are around 60 active mobile handset solution providers in mobile handset

industry in the PRC. These companies can offer complete design solutions and some may even

provide wireless module, handset software systems, platform and software applications. Most of the

Chinese solutions houses are strong at software design. However, they are relatively weak at hardware

structure design.

The major clients for solution houses in the PRC are mainly the mobile handset manufacturers

in the PRC. Half of the solution houses may only relied on one or two China mobile handset

manufacturers in the PRC.

According to the Related Report, it is expected that the 3G communication market in the PRC

would create business opportunities for mobile handset manufacturers. The consumer demand for

replacement of traditional 2G mobile handset will also create business opportunities for solution

houses in the PRC. With their established expertise and experience, it is believed that the mobile

handset solution houses in the PRC have better positioned to capitalise on the future growth of 3G

mobile handset in the PRC.

- 53 -

REGULATORY OVERVIEW


LAWS AND REGULATIONS RELATING TO THE GROUP’S BUSINESS

The laws regulating the development, assembly and sale of software and solution for mobile

appliances and mobile handset hardware in the PRC include, but not limited to, Catalogue for

the Guidance of Foreign Investment Industries (《外商投資產業指導目錄》), Administration of

Telecommunication Equipment Entering into the Public Telecommunication Networks (《電信設備進網管理辦法》), Regulations concerning Management of Compulsive Product Certification (《強制性產品認證管理規定》), Radio Administration Rules (《無線電管理條例》). Certain important provisions

of the above laws and regulations relating to the mobile handset industry are set out below.

Business

According to the Catalogue for the Guidance of Foreign Investment Industries (《外商投資產業指導目錄》) issued by the Ministry of Commerce (“MOFCOM”) and the NDRC on 30 November

2004, the foreign investment in the field of mobile phone manufacture is encouraged by the PRC

government. Pursuant to item 21 of the Catalogue for the Guidance of Foreign Investment Industries

(《外商投資產業指導目錄》) regarding foreign investments in communication equipments issued by

the MOFCOM and the NDRC on 31 October 2007 and took effect on 1 December 2007, foreign

investment in the field of 3G and the subsequent mobile phone manufacture is encouraged by the PRC

government, and foreign investment in other mobile phone manufacture is permitted.

On 25 September 2000, the State Council enacted the PRC Telecommunication Regulations

(《中華人民共和國電信條例》) (the “Regulations”) and on 10 May 2001, MII issued the Measures

for the Administration of Telecommunication Equipment Entering into the Public Telecommunication

Networks (《電信設備進網管理辦法》) (the “Measures”). According to the Regulations and the Measures,

telecommunication terminal equipment, wireless communication equipment and network interconnection

involved equipment are subject to the approval certificate system for entering into networks, under

which an approval certificate must be obtained from MII. Without the approval certificate issued by

MII, the relevant equipment is forbidden to be connected onto the public telecommunication network,

used or sold within the PRC.

According to the Regulations concerning Management of Compulsive Product Certification

(《強制性產品認證管理規定》) issued by the State General Administration of Quality Supervision,

Inspection and Quarantine (“AQSIQ”) which took effect on 1 May 2002 and amended on 26 May

2009, mobile phone, as the product listed in the Catalogue of the First Batch of Products subject to

Compulsory Product Certification (《第一批實施強制性產品認證的產品目錄》), must be certified by

the designated certification organization of the State. The mobile phone can be sold, imported or

used for business only after obtaining the relevant certificate, which is known as China Compulsory

Certification.

According to Radio Administration Rules of the PRC (《中華人民共和國無線電管理條例》)

issued by the State Council on 11 September 1993, and the Radio Administration Rules of Shenzhen

Special Economic Region (《深圳經濟特區無線電管理條例》) issued by the Standing Committee of

the Congress, Shenzhen Municipal, Guangdong Province, on 17 February 2009, the manufacturer

of radio emission equipment shall obtain approval from state radio administration authority for the

working frequency, band and technical index of the equipments to be produced.

- 54 -

REGULATORY OVERVIEW


On 19 February 2005, NDRC issued the Several Provisions on Approval of Telecommunications

System and Mobile Terminals Investment Project (《移動通信系統及終端投資項目核准的若干規定》)

(the ‘‘Provisions’’). According to the Provisions, projects involving telecommunication systems and

mobile terminals, i.e. mobile phone, are required to apply for the approval of NDRC and NDRC shall

seek MII’s opinions before deciding whether or not to approve the project.

The PRC legal advisers to the Company also advise that, pursuant to the Decision Regarding

Fourth Batch of the Cancellation and Adjustment of Administration Approval Project (關於第四批取消和調整行政審批項目的決定) issued by the State Council on 7 October 2007, the requirement for

obtaining the approval for the investment in mobile phone production as set out in the Provisions

has been cancelled.

According to the relevant PRC laws and regulations, the PRC legal advisers to the Company

consider that it is not required to obtain approval from relevant government authority to engage in

distribution and marketing of mobile phones.

The Product Quality Law of the PRC (《中華人民共和國產品質量法》), (the “Product Quality

Law”) was promulgated on 22 February 1993 and amended on 8 July 2000. The Product Quality

Law is applicable to all activities of production and sale of any product within the territory of the

PRC, and the producers and sellers shall be liable for product quality in accordance with the Product

Quality Law.

The Consumer Protection Law of the PRC (《中華人民共和國消費者權益保護法》) (the “Consumer

Protect Law”) was enacted on 31 October 1993 and took effect on 1 January 1994. According to the

Consumer Protection Law, the rights and interests of the consumers who buy or use commodities for

the purposes of daily consumption or those who receive services are protected and all manufacturers

and distributors involved must ensure that the products and services will not cause damage to persons

and properties.

The Provisions on the Liabilities of Repair, Replacement and Return of Mobile Telephone

Merchandise (《移動電話機商品修理更換退貨責任規定》) promulgated by AQSIQ, SAIC and MII

on 17 September 2001 and came into effect on 15 November 2001, emphasise that manufacturers,

distributors and repairers shall be liable for repair, replacement and return of the products if they

provide the unqualified ones. Within the liability period, consumers are entitled to have the unqualified

mobile phone repaired, replaced or returned according to the provisions.

REGULATIONS IN RELATION TO M&A RULES AND CSRC NOTIFICATION

On 8 August 2006, Ministry of Commence (“MOC”), China Security and Regulatory Commission

(“CSRC”) and four other PRC authorities at state level promulgated the “Rules on the Mergers and

Acquisitions of Domestic Enterprises by Foreign Investors” (“M&A Rules”), which came into effect

on 8 September 2006. It is applicable to, amongst other matters, a foreign investor’s purchase of

equity interests in a domestic PRC enterprise or subscription of a domestic company’s capital increase,

resulting in the conversion of a domestic PRC company into a newly established Foreign-Invested

Enterprise (“FIE”); or a foreign investor’s establishment of a FIE and purchase through such FIE, the

- 55 -

REGULATORY OVERVIEW


assets of domestic PRC enterprise and use of such assets to invest in and establish a FIE to operate

such assets. Pursuant to Article 39 and 40 of M&A Rules, the listing of offshore special purpose

vehicles, which are directly or indirectly established or controlled by PRC entities or individuals, are

subject to the prior approval from CSRC (“CSRC Approval”).

Based on the M&A Rules, on 21 September 2006, the CSRC published a notification (the

“Notification”) on its official website with provisions setting out the legislative basis for this requirement

and the conditions, procedures, and timeline for obtaining CSRC Approval of overseas share offering

or overseas listing conducted by domestic enterprises.

Since the acquisition of Zeus by Elite Link was completed on 29 May 2006, prior to the date

when the M&A Rules was promulgated, the PRC legal advisor of the Company is of the opinion that

M&A Rules do not apply to this acquisition.

Pursuant to the provisions of M&A Rules, where a foreign investor intends to merge or acquire a

domestic enterprise through a FIE established by it in the PRC, the deal shall be governed by relevant

existing rules of FIE regarding domestic investment, merger and/or split-up. Based on this, the PRC

legal advisor of the Company concludes that the acquisition of a domestic enterprise by FIE in the

PRC is not applicable to M&A Rules. Zeus has become a FIE since 29 May 2006. Therefore, the

PRC legal advisor of the Company opines that the acquisition of Phonelink, a domestic enterprise,

by Zeus does not apply to the M&A Rules.

The Notification was promulgated based on the M&A Rules, since M&A Rules do not apply

to the acquisitions, the PRC legal advisor of the Company is of the opinion that the Notification is

not required either.

Based on the above, the PRC legal advisor of the Company opines that no PRC governmental

or regulatory approval is required for the Listing of the Shares on the Main Board of the Stock

Exchange.

REGULATION IN RELATION TO FOREIGN EXCHANGE AND DIVIDEND DISTRIBUTION

Foreign currency exchange

The principal regulation governing foreign currency exchange in China is the Foreign Exchange

Administration Rules of the PRC (中華人民共和國外匯管理條例) (the “Foreign Exchange Administration

Rules”). It was promulgated by the State Council of the PRC (中華人民共和國國務院) on 29 January

1996, became effective on 1 April 1996 and was amended on 14 January 1997 and 1 August 2008.

Under these rules, Renminbi is generally freely convertible for payments of current account items,

such as trade and service-related foreign exchange transactions and dividend payments, but not

freely convertible for capital account items, such as capital transfer, direct investment, investment in

securities, derivative products or loan unless prior approval of the SAFE is obtained.

- 56 -

REGULATORY OVERVIEW


Under the Foreign Exchange Administration Rules, foreign-invested enterprises in the PRC may

purchase foreign exchange without the approval of SAFE for paying dividends by providing certain

evidencing documents (board resolutions, tax certificates, etc.), or for trade and services-related

foreign exchange transactions by providing commercial documents evidencing such transactions. They

are also allowed to retain foreign currency (subject to a cap approval by SAFE) to satisfy foreign

exchange liabilities. In addition, foreign exchange transactions involving overseas direct investment

or investment and exchange in securities, derivative products abroad are subject to registration with

SAFE and approval or file with the relevant governmental authorities (if necessary).

Dividend distribution

Before the promulgation of the New PRC Corporate Income Tax Law (the “New Tax Law”), the

principal regulations governing distribution of dividends paid by wholly foreign-owned enterprises

include the Wholly Foreign-owned Enterprise Law and the Implementation Regulation of the Wholly

Foreign-owned Enterprise Law.

Under these regulations, wholly foreign-owned enterprises in China may only pay dividends

from accumulated after-tax profit, if any, determined in accordance with PRC accounting standards

and regulations. Dividends paid to its foreign investors are exempt from withholding tax. However,

this provision has been revoked by the New Tax Law. The New Tax Law prescribes a standard

withholding tax rate of 20% on dividends and other China-sourced passive income of non-resident

enterprises. However, the Implementation Rules reduced the rate from 20% to 10%, effective from

1 January 2008.

The PRC and the government of Hong Kong signed Arrangement between the Mainland of the

PRC and Hong Kong for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion

with respect to Taxes on Income (內地和香港特別行政區關於對所得避免雙重徵稅和防止偷漏稅的安排) on 21 August 2006 (the “Arrangement”). According to the Arrangement, no more than the

5% withholding tax rate applies to dividends paid by a PRC company to a Hong Kong tax resident,

provided that the recipient is a company that holds at least 25% of the capital of the PRC company.

The 10% withholding tax rate applies to dividends paid by a PRC company to a Hong Kong resident

if the recipient is a company that holds less than 25% of the capital of the PRC company.

SAFE registration regarding return investment

Circular of the State Administration of Foreign Exchange (“SAFE”) on Relevant Issues concerning

Foreign Exchange Administration of Financing and Return Investment Undertaken by Domestic

Residents through Overseas Special-purpose Vehicles (“SPV”)(“Circular No. 75”) was promulgated

on 21 October 2005 and went into effect as of 1 November 2005.

The Circular No. 75 states that before a SPV is set up or controlled by the domestic resident,

he must apply for such vehicle to be registered with the local foreign exchange authority. It further

- 57 -

REGULATORY OVERVIEW


requires that PRC residents shall register with the local foreign exchange authority (if they have

not previously done so in accordance with previous applicable regulations), even if the special

purpose vehicle is set up prior to 1 November 2005. It is further provided in the Circular No. 75 that

registration is required for modification or record with the local foreign exchange authority within

30 days from the date of any increase/decrease of capital, share transfer, merger/splitting, long term

equity or debt finance, granting of foreign-related security or other material changes to the capital

structure of the SPV.

The SPV as mentioned in Circular No.75 refers to an overseas enterprise directly established

or indirectly controlled by a domestic resident legal person or domestic resident natural person for

the purposes of undertaking equity financing (including convertible bond financing) abroad with the

enterprise assets or rights and interests it/he holds inside China.

By examination of the incorporation date of foreign entities, including Elastic Glory, Elite

Link, Max Sunny, and the process of acquisition or formation of domestic interests, the PRC legal

advisor of the Company expresses an opinion that Elastic Glory, Elite Link and Max Sunny are not

SPVs as defined in Circular No. 75, and there is no return investment involved in the restructuring

as described in this prospectus.

The PRC legal advisor of the Company concludes that Circular No. 75 does not apply to the

Shareholders, and no requirement or legal obligation for them to submit SAFE registration.

REGULATION IN RELATION TO THE PRC CUSTOMS DUTIES

According to the Customs Law of the PRC, the consignee of the imports, the consignor of

exports and the owner of the imports and the exports are the persons obligated to pay customs duties

(generally speaking, exports are not subject to customs duties). The Customs is the authority in charge

of the collection of customs duties.

The customs duties in the PRC mainly fall under ad valorem duties, i.e. the price of import/

export commodities is the basis for the calculation of the duties. When calculating the customs duties,

import/export commodities shall be classified under appropriate dutiable items in accordance with

the category provisions of the Customs Import and Export Tariff and shall be subject to duty levies

pursuant to relevant duty rates.

Under the laws of the PRC, raw materials, supplementary materials, parts, components, accessories

and packing materials imported for processing and assembling finished products for foreign parties

or for manufacturing products for export shall be exempt from import duties pursuant to the actual

amount of goods processed for export; or import duties may be levied upfront on import materials

and parts and subsequently refunded pursuant to the actual amount of goods processed for export.

- 58 -

REGULATORY OVERVIEW


To encourage the introduction of foreign investment, as of 1992, the PRC exercised exemption

and reduction of customs duties on the import of machinery, equipment, parts and other materials

within the total investment of foreign investment companies. But after the adjustment of policies as

of 1 April 1996, such exemption and reduction has been terminated, while the foreign investment

companies incorporated before then can still continue to enjoy such preferential treatment within the

grace period.

As from 1 January 1998, according to the Notice of the State Council regarding the Adjustment

of Taxation Policy of Import Equipment, in respect of the foreign investment projects that fall under

the Encouraging Category and the Restricted B Category of the Industrial Guidance Catalogue of

Foreign Investment and also involve the transfer of technology, the equipment imported for its own use

within the total investment can be exempt from the customs duties, except for the commodities listed

in the Catalogue of the non-tax exemption Import Commodity of Foreign Investment Projects.

REGULATION IN RELATION TO THE PRC LABOUR LAW

The Group is subject to the Labour Law of the PRC, pursuant to which companies must enter

into employment contracts with their employees, based on the principles of equality, consent and

agreement through consultation. Companies must establish and effectively implement a system

of ensuring occupational safety and health, educate employees on occupational safety and health,

preventing work-related accidents and reducing occupational hazards. Companies must also pay for

their employees’ social insurance premium.

The principal regulations governing the employment contract is the PRC Labour Contract Law

(中華人民共和國勞動合同法), which was promulgated by the Standing Committee of the NPC on 29

June 2007 and came into effect on 1 January 2008. Pursuant to the Labour Contract Law, employers

shall establish employment relationship with employees on the date that they start employing the

employees. To establish such relationship, a written labour contract shall be concluded, otherwise

employers will be liable. Furthermore, the probation period and liquidated damages shall be restricted

by the law to safeguard employees’ rights and interests.

On 18 September 2008, the State Council promulgated the Implementation Regulations of

the PRC Labor Contract Law (“Implementation Regulations”) which came into effect on the same

day. Pursuant to the Implementation Regulations, the conclusion or dissolution of a non-fixed term

employment contract were formulated intensively and special provisions on the labor-dispatch also were

instituted. Furthermore, the Implementation Regulations may improve and implement the economic

compensation system.

REGULATION IN RELATION TO THE ENVIRONMENTAL PROTECTION OF THE PRC

The Administration Supervisory Department of Environmental Protection of the State Council

sets the national guidelines for the discharge of pollutants. The provincial and municipal governments

of provinces, autonomous regions and municipalities may also set their own guidelines for the

discharge of pollutants within their own provinces or districts in the event that the national guidelines

are inadequate.

- 59 -

REGULATORY OVERVIEW


Any company or enterprise which causes environmental pollution and discharges polluting

materials that endanger the public should implement environmental protection methods and procedures

into their business operations. This may be achieved by setting up a system of accountability within

the company’s business structure for environmental protection; adopting effective procedures to

prevent environmental hazards such as waste gases, water and residues, dust powder, radioactive

materials environment. The environmental protection system and procedures should be implemented

simultaneously with the commencement of and during the operation of construction, production and

other activities undertaken by the company. Any company or enterprise which discharges environmental

pollutants should report and register such discharge with the Administration Supervisory Department

of Environmental Protection and pay any fines imposed for the discharge. A fee may also be imposed

on the company for the cost of any work required to restore the environment to its original state.

Companies which cause severe pollution to the environment are required to restore the environment

or remedy the effects of the pollution within a prescribed time limit.

If a company or enterprise fails to report and/or register the environmental pollution caused

by it, it will receive a warning or be penalised. Companies or enterprises which fail to restore

the environment or remedy the effects of the pollution within the prescribed time will either be

penalised or have their business licences terminated. Companies or enterprises which have polluted

and endangered the environment must bear the responsibility for remedying the danger and effects

of the pollution, as well as to compensate for any losses or damages suffered as a result of such

environmental pollution.

REGULATION IN RELATION TO THE TAXATION OF THE PRC

Income tax

Prior to 1 January 2008, income tax payable by foreign-invested enterprises in the PRC was

governed by the Foreign-invested Enterprise and Foreign Enterprise Income Tax Law of the PRC (中華人民共和國外商投資企業和外國企業所得稅法) (“FIE Tax Law”) promulgated on 9 April 1991 and

effective on 1 July 1991 and the related implementation rules. Pursuant to the FIE Tax Law, a foreign-

invested enterprise was subject to a national income tax at the rate of 30% and a local tax at the rate

of 3% unless a lower rate was provided by laws or administrative regulations. The income tax on

foreign-invested enterprises established in Special Economic Zones, foreign enterprises which have

establishments or places in Special Economic Zones engaged in production or business operations, and

on foreign-invested enterprises of a production nature in Economic and Technological Development

Zones, was levied at the reduced rate of 15%. The income tax on foreign-invested enterprises of a

production nature established in coastal economic open zones or in the old urban districts of cities

where the Special Economic Zones or the Economic and Technological Development Zones are

located, was levied at the reduced rate of 24%. Any foreign-invested enterprise of a production nature

scheduled to operate for a period of not less than ten years was exempted from income tax for two

years commencing from the first profit-making year (after offsetting all tax losses carried forward from

previous years) and allowed a fifty per cent. reduction in the following three consecutive years.

- 60 -

REGULATORY OVERVIEW


According to the Enterprise Income Tax Law of the PRC (中華人民共和國企業所得稅法) (“New

Tax Law”), which was promulgated on 16 March 2007, the income tax for both domestic and foreign

invested enterprises is at the same rate of 25% effective from 1 January 2008. In order to clarify

some provisions in the New Tax Law, the Implementation Rules to the New Tax Law (中華人民共和國企業所得稅法實施條例) (“Implementation Rules”) was promulgated on 6 December 2007, effective

from 1 January 2008. The New Tax Law provides certain relief during the transition period that apply

to enterprises that were established prior to 16 March 2007 (i) if foreign-invested enterprises enjoy

reduced tax rates under the laws and regulations, the tax rate will be gradually increased to coincide

with the new tax rate within five years starting from 2008; and (ii) if foreign-invested enterprises

enjoy tax holidays for a fixed period under laws and regulations, such foreign-invested enterprises

can continue the holiday until its expiry. However, if an enterprise has not started to enjoy the tax

holiday due to a lack of profit, 2008 will be regarded as the first profit-making year and the enterprise

starts to enjoy the tax holiday.

Value-added tax

Pursuant to the Provisional Regulations on Value-added Tax of the PRC (中華人民共和國增值稅暫行條例) effective from 1 January 1994 (amended on 5 November 2008) and its implementation

rules, all entities or individuals in the PRC engaging in the sale of goods, provision of processing

services, repairs and replacement services, and importation of goods are required to pay value-added

tax (“VAT”). VAT payable is calculated as “output VAT” minus “input VAT”. The rate of VAT for

normal taxpayer is 17% or in certain limited circumstances, 13%, depending on the product type

whilst the rate of VAT for small-scale taxpayer is 3%.

Business tax

Pursuant to the Provisional Regulations on Business Tax of the PRC (中華人民共和國營業稅暫行條例) effective from 1 January 1994 (amended on 5 November 2008) and its implementation rules,

businesses that provide services (including entertainment business), assign intangible assets or sell

immovable property are liable to business tax at a rate ranging from 3%-20% (three to twenty per

cent), of the charges of the services provided, intangible assets assigned or immovable property sold,

as the case may be. The formula for calculation of the amount of tax payable is set forth below:

Amount of tax payable = amount of business × tax rate

The amount of tax payable shall be calculated in RMB. Taxpayers that settle their business income

in foreign exchange shall convert the amounts into RMB at the foreign exchange market rate.

- 61 -

REGULATORY OVERVIEW


COMPLIANCE

The laws and regulations governing the business and operation of the Group in the PRC

include, but not limited to, Catalogue for the Guidance of Foreign Investment Industries (《外商投資產業指導目錄》)，Administration of Telecommunication Equipment Entering into the Public

Telecommunication Networks (《電信設備進網管理辦法》)，Regulations concerning Management of

Compulsive Product Certification (《強制性產品認證管理規定》)，Radio Administration Rules of

the PRC (《中華人民共和國無線電管理條例》).

According to the opinion of the legal advisor of the Company as to the PRC Laws that:

1. All requisite permits, licenses and approvals required under the laws of the PRC to carry

out the business have been obtained by the Group;

2. Each company of the Group in the PRC has been conducting its business within its

business scope, the requisite permits, licenses and approval; and

3. The Group has complied with all relevant laws and regulations in the PRC for its operation

and business activities.

- 62 -

BUSINESS


HISTORY AND DEVELOPMENT

Establishment of the Group

The Company has been listing on the main board of SGX-ST since 21 November 2007. The

Group was established in 2002 with the incorporation of Elastic Glory and State Tech. Elastic Glory

was incorporated and owned as to 45% and 55% by Ms. Wang Tao and an Independent Third Party

in September 2002. State Tech, being a wholly-owned subsidiary of Elastic Glory, was established

for engaging in the procurement and trading of electronic components and mobile handset.

In 2005, Mr. Wang joined and became one of the controlling shareholders of the Group by

acquiring 55% shareholding interest in Elastic Glory from its then shareholder, an Independent Third

Party, on 8 June 2005. After Mr. Wang’s participation in the Group’s management and development,

the Group started to develop more mobile handset solution and application business and recorded an

increment in revenue from the provision of mobile handset solution and application for the financial

year ended 31 March 2006.

Co-operation with Zhenhua Technology

In 2006, the management of the Group identified that the mobile handset distributors were

playing an increasingly important role in the mobile handset industry, but both such distributors and

the Group were not licensed manufacturers of mobile handset at that time. Therefore, the Group

formed a strategic alliance and made a co-operation arrangement with Zhenhua Technology, which

is a licensed mobile handset manufacturer in the PRC. Under such strategic alliance, the Group was

responsible for procuring co-operation between its distributor customers and Zhenhua Technology.

The Group would study and modify the product definitions created by distributor customers before

presenting them to Zhenhua Technology, which might or might not agree to participate in the particular

project, or might further modify the parameters such that the resultant handsets match with their

product development and marketing plan. Once the co-operation was agreed by Zhenhua Technology

and distributor customers, the Group would then carry out product development and provide technical

support to Zhenhua Technology for the production of the mobile handset. The Group implemented

quality control measures during the course of product development and, if required, provided hardware

procurement services, to ensure that the Group’s solutions satisfy the quality standards set down by

relevant authorities in the PRC and Zhenhua Technology on one hand and comply with the product

definition as agreed by Zhenhua Technology and distributor customers on the other hand. The finished

mobile handset would be sold to customers through the sales network of distributor customers and

Zhenhua Technology. While the Group was responsible for the design of the mobile handset, Zhenhua

Technology was responsible for the manufacturing of the mobile handset. The distributor customers then

sold the products, which is registered under the brand name “OBEE” owned by Zhenhua Technology

through their sales network. During the whole process, the Group only rendered services in provision

of services of design of the mobile handset, in form of solutions. As such, the Group’s revenue was

generated in the Solution Segment from the co-operation with Zhenhua Technology.

- 63 -

BUSINESS


After the establishment of Tongqing by the Group, the Group is able to assemble the mobile

handset under its own production capacity. Such development of the Group reduces the co-operation

aforementioned with Zhenhua Technology, however Zhenhua Group remains as one of the major

suppliers of the Group in supply of mobile handset and mobile handset components during the Track

Record Period.

In March 2006, the Group, together with Zhenhua Technology and Full Wealth (Hong Kong)

Limited, jointly established Zhenhua Obee, which was owned as to approximately 43%, 42% and 15%

by Zhenhua Technology, Elite Link, an investment holding company and a wholly-owned subsidiary

of Elastic Glory, and Full Wealth (Hong Kong) Limited respectively. Zhenhua Obee had two SMT

production lines leased to and operated by Shenzhen Zhenhua Communication Equipment Co. Ltd.,

an Independent Third Party, to carry out the manufacturing of PCB designed by the Group. Shenzhen

Zhenhua Communication Equipment Co. Ltd. was one of the subsidiaries of Zhenhua Technology at

the time of the formation of Zhenhua Obee.

Zhenhua Technology, which issued shares are listed on the Shenzhen Stock Exchange, is

principally engaged in the design and production of terminal telecommunication products. The related

companies of Zhenhua Technology are customers and suppliers of the Group. The Group sells mobile

handset components and mobile handset applications to Zhenhua Group while the Group also purchases

PCBA and mobile handsets from Zhenhua Group. Zhenhua Group is one of the major and reliable

strategic alliances of the Group. As such, the Group and Zhenhua Group rely on each other’s strengths

to satisfy customers’ requirements and needs. Therefore, there are two-way transactions between the

Group and Zhenhua Group during the Track Record Period.

Full Wealth (Hong Kong) Limited, being one of the suppliers and overseas distributors for the

products of Zhenhua Group, is principally engaged in the procurement, trading and distribution of

electronic components and products. The original shareholders of Full Wealth (Hong Kong) Limited

at the time of formation of the joint venture company were the employees of Zhenhua Shenzhen

Electronic Co., Ltd, which was owned as to 49% by Zhenhua Technology and as to 51% by Zhenhua

Electronic Co. Ltd, which in turn holds 36% of Zhenhua Technology. Neither the Company, its Directors

nor their respective associates is connected with Zhenhua Technology and Full Wealth (Hong Kong)

Limited under the Listing Rules.

Zeus and PhoneLink

In May 2006, in order to capture the increasing demand of PCB mobile handset solutions design

and the potential growth of the mobile handset industry, the Group entered into a sale and purchase

agreement for the acquisition of the entire shareholding interest in Zeus. Zeus, in turn, owned 45%

shareholding interest in Phonelink, was incorporated in August 2004 with two shareholders in equal

shareholding proportion, namely Ms. Chen Ying, an Independent Third Party at the time of the

acquisition, and Mr. Wang Xu, Ms. Wang Tao’s brother. In October 2005, Ms. Chen Ying transferred

all of her shareholding interest in Zeus to Mr. Ma Jin Long, being an Independent Third Party, and

remained as an administration manager of Zeus. Subsequently, Ms. Chen Ying joined the Group with

her extensive experience in the operation of mobile handset solution and became the existing chief

operating officer of the Group when the Group acquired the entire equity interests in Zeus in May

2006. Zeus is principally engaged in the product definition process, provision of industrial design

- 64 -

BUSINESS


and mechanical design, PCB design, modelling and procurement. Its then associated company at the

time of the acquisition, PhoneLink, owned as to approximately 45% shareholding interest by Zeus,

is engaged in research and development of PCB designs in preparation for the anticipated launch

of the 3G network in the PRC. The remaining 55% shareholding interest in PhoneLink was owned

by Ms. Chen Ying and Zhenhua Technology amounted to approximately 6% and 49% respectively.

Pursuant to such sale and purchase agreement for acquiring the entire shareholding interest in Zeus,

the Group agreed to acquire and Mr. Wang Xu, together with Mr. Ma Jin Long, another independent

shareholder of Zeus, agreed to sell, the entire equity interest in Zeus at a consideration of RMB20

million (equivalent to approximately HK$19.8 million), which was based on arm’s length negotiation

with reference to the total registered capital contributed by each of the two shareholders of Zeus.

Upon completion of the aforementioned sale and purchase agreement on 29 May 2006, Zeus became

the principal R&D centre of the Group in the PRC.

On 9 June 2006, the registered capital of PhoneLink was increased from approximately

US$873,537 (equivalent to RMB7 million) to approximately US$1,247,910 (equivalent to RMB10

million), contributed entirely by Zeus. Equity interest in PhoneLink then held by Zeus increased

from 45% to 61.5% through this capital contribution, and PhoneLink has become a subsidiary of

Zeus thereafter.

On 1 August 2006 and 6 February 2007, Zeus further acquired 4.2% and 15.3% of the capital

of PhoneLink, from minority interests for cash consideration of approximately US$52,413 (equivalent

to RMB420,000) and approximately US$194,711 (equivalent to RMB1,530,000) respectively upon

arm’s length negotiation.

In August 2006, the Group further expanded its product development capacity by establishing

CCDH in August 2006 with engineers specialising in PCB design, industrial design and mechanical

design. Each of CCDH and Zeus focuses on GSM solutions utilising different IC platforms. Through

this arrangement, the Group optimises its usage of resources by allowing PhoneLink to focus on

establishing a special niche in developing 3G mobile handset solutions whereas CCDH and Zeus

focus on GSM solutions.

Tongqing

To further strengthen the capabilities as a one stop service centre and to enhance operating

efficiency and cost competitiveness of the Group, the Group established Tongqing, a WFOE in

Shenzhen which is a wholly-owned subsidiary of Max Sunny, an investment holding company at

that time and a wholly-owned subsidiary of Elite Link, in March 2007. The total initial investment

and registered capital of Tongqing was HK$120 million and HK$60 million respectively. The total

investment and registered capital of Tongqing was increased to HK$180 million and HK$90 million

respectively on 28 July 2009. Tongqing provides subcontracted manufacturing services for hardware

used in mobile handset (mainly PCBA) and the assembly of semi-finished handset developed by the

Group or its customers.

- 65 -

BUSINESS


Finet Technology

The Group had intention to set up a Macao company in 2006 with a view to benefit from the

Macau Offshore Institution Regime on certain tax exemptions. As such, the Group established Finet

Technology, a Macao company in May 2006. However, such plan had not been carried into effect as

after further assessment of the pros and cons of the plan, the Directors noted that the administrative

costs and other overhead for maintaining such Macao company might outweight the tax benefits. As

such, the Directors subsequently considered that it might not be justifiable for the Group to maintain

such Macao company in addition to other then existing Subsidiaries situated in Shenzhen, Hong Kong

and Shanghai, and hence the Group dissolved the Macao company on 23 June 2007 for minimising

the costs to be incurred by the Group. Finet Technology remained dormant during the financial year

ended 31 March 2007 and until before dissolved.

Loan Agreements

On 25 January 2007, an interim loan agreement (“Interim Loan Agreement”) with an interest

rate of 6% per annum was entered into amongst seven independent investors (collectively, the “First

Tranche Investors”), Elastic Glory as borrower, and Mr. Wang and Ms. Wang Tao as guarantors,

pursuant to which the First Tranche Investors was extended due to the incorperation of Z-Obee

Holdings Limited had not been taken as at 25 January 2007. On 29 March 2007, an interim loan of

S$6 million to Elastic Glory, was transferred to the Company after incorporation of the Company.

The First Tranche Convertible Loan Agreement (“First Tranche Convertible Loan Agreement”) was

entered into amongst the First Tranche Investors and the Company, where upon the Interim Loan

Agreement was terminated and the interim loan transferred to the Company became a convertible

loan, which would be automatically converted to Shares as soon as practicable after the issue of an

eligibility letter to the Company for its listing on SGX-ST.

On 19 April 2007, the Company and further nine independent investors, two of which are the

First Tranche Investors, (collectively, “Second Tranche Investors”) entered into the Second Tranche

Convertible Loan Agreement (“Second Tranche Convertible Loan Agreement”), whereupon the First

Tranche Convertible Loan Agreement lapsed and ceased to be of further effect. Pursuant to the Second

Tranche Convertible Loan Agreement, the Second Tranche Investors agreed to advance a convertible

loan amounting to S$4 million, which, together with the loans already advanced by the First Tranche

Investors amounting to S$10 million, would be automatically converted to Shares as soon as practicable

after the issue of an eligibility letter to the Company for its listing on SGX-ST.

On 4 June 2007, the First Tranche Investors, the Second Tranche Investors, the Company and

OCBC Capital Investment Private Limited (“Third Tranche Investor”) entered into the First, Second

and Third Tranche Convertible Loan Agreement (“Third Tranche Convertible Loan Agreement”),

whereupon the Second Tranche Convertible Loan Agreement lapsed and ceased to be of further effect.

OCBC Capital Investment Private Limited is incorporated in Singapore and is an indirect wholly

owned subsidiary of OCBC Bank which was the manager, underwriter and placement agent to the

Company at the time of primary listing on the SGX-ST. Save as being the Third Tranche Investor and

acting as the manager, underwriter and placement agent for the listing on SGX-ST, there are no other

relationships between the Company on the one hand and OCBC Capital Investment Private Limited

and Orient Holdings Private Limited on the other hand. Pursuant to the Third Tranche Convertible

- 66 -

BUSINESS


Loan Agreement, the Third Tranche Investor agreed to advance a convertible loan amounting to S$3

million, which, together with the convertible loans already advanced by the First Tranche Investors

and the Second Tranche Investors, amounting to S$13 million, would be automatically converted to

Shares as soon as practicable after the issue of an eligibility letter to the Company for its listing on

SGX-ST. Pursuant to the Third Tranche Convertible Loan Agreement, an interest of 5.0% or 5.5%

per annum on the outstanding amount of the convertible loan would be charged, depending on the

terms stipulated, if the listing of the Shares on SGX-ST does not take place due to any force majeure

factors. Otherwise an interest rate of 3% per annum would be charged upon the full redemption of the

convertible loan. The convertible loans were fully converted into 56,722,689 Shares on 24 September

2007.

Corporate restructuring

In January 2007, the Group underwent a corporate restructuring for the preparation of listing

on the SGX-ST as follows:

(a) the Company was incorporated in Bermuda on 30 January 2007 to serve as the ultimate

holding company of the Group;

(b) prior to the completion of the corporate restructuring, the Group’s business and assets

were held by Elastic Glory, a company incorporated in the British Virgin Islands on 16

September 2002, and its subsidiaries. The issued shares in the capital of Elastic Glory were

held by Mr. Wang and Ms. Wang Tao in the respective proportions of 55%, comprising

1,413,882 ordinary shares of US$1.00 each, (“WSZ EG Shares”) and 45%, comprising

1,156,812 ordinary shares of US$1.00 each (“WT EG Shares”);

(c) on 28 March 2007, the Company, Mr. Wang and Ms. Wang Tao entered into a restructuring

agreement (“Restructuring Agreement”). Pursuant to the Restructuring Agreement, a share

swap took place whereby:

(i) in consideration of the issuance of shares in the Company described in paragraph

(ii) below, Mr. Wang and Ms. Wang Tao transferred the WSZ EG Shares and WT

EG Shares respectively to the Company; and

(ii) in consideration of the transfers described in paragraph (i) above, the Company

issued 1,156,812 fully paid Old Share to Ms. Wang Tao and 1,413,881 fully paid

Old Share to Mr. Wang and credited as fully paid the one Old Share which had

been issued nil paid to Mr. Wang on 1 February 2007;

(d) on 4 June 2007, each of Mr. Wang and Ms. Wang Tao transferred 23,320 and 19,080

Old Shares respectively to Mr. Lu Shangmin at a consideration of US$9.80 per Old

Share. Mr. Lu Shangmin was the financial controller of the Group’s PRC operations in

May 2007 and was promoted to an executive Director in March 2009. The Old Shares

were transferred to him at a discount of approximately 4.7% to the valuation of the Old

Shares conducted by BMI Appraisals Limited as at 31 March 2007 of US$10.28 Old

Share (“Share Valuation”). Such removal of Shares to him was to incentivise him for his

continued service to the Group;

- 67 -

BUSINESS


(e) on 4 June 2007, 117,660 Shares was issued at a consideration equal to the Share Valuation

of US$10.28 per Old Share to Denix Limited, an investment holding company incorporated

in the British Virgin Islands. To the best of the Directors’ knowledge, information and belief

after having made all reasonable enquiries, Denix Limited was no longer a shareholder

of any of the members of the Group and it is an Independent Third Party;

(f) pursuant to the First Tranche Convertible Loan Agreement, Second Tranche Convertible

Loan Agreement and Third Tranche Convertible Loan Agreement, the aggregate

convertible loans amounting to S$13 million (the “Convertible Loan”), advanced by

the First Tranche Investors, Second Tranche Investors and Third Tranche Investor

(collectively the “Pre-IPO Investors”) was secured by personal guarantees of

Mr. Wang and Ms. Wang Tao (the “Personal Guarantees”) and a charge over up to 50%

of the issued Shares by Mr. Wang and Ms. Wang Tao (the “Charge”). The Convertible

Loan was fully converted into 56,722,689 Shares on 24 September 2007. Immediately

after the conversion, the Charge and the Personal Guarantees were released. Each of Mr.

Wang and Ms. Wang Tao had undertaken to the Pre-IPO Investors that if the Company

was not listed by 31 May 2008 and was unable to purchase from the Pre-IPO Investors

the converted Shares at stipulated price within the stipulated time frame, Mr. Wang and

Ms. Wang Tao should fulfill the obligations of the Company and pay to the Pre-IPO

Investors the stipulated price. The Pre-IPO Investors were regarded as public shareholder

upon the listing of the Company on SGX-ST; and

(g) on 24 September 2007, 16,806,723 Shares were issued to Eight Treasures Investment

Limited, together with its sole shareholder being an Independent Third Party, for the

consultancy services provided in relation to liaison and co-ordination support in connection

with the listing of the Company’s shares on SGX-ST. Eight Treasures Investment Limited,

an investment holding company, was regarded as public Shareholder and an Independent

Third Party upon listing of the Company on SGX-ST. The Directors confirm that there is

no special right attached to the Shares issued to the Pre-IPO Investors and Eight Treasures

Investment Limited.

The Shares was successfully listed on the SGX-ST on 21 November 2007.

Launch of “VIM” or in Chinese “偉恩”

The Group launched its mobile handset under “VIM” or in Chinese “偉恩”, the new brand name

of the Group for its proprietary mobile handset in the PRC in December 2008. These achievements

provided a good platform from which the Group could capitalise in the event of an economic recovery

and when opportunities arise.

Further to the Group’s successful launch of its first proprietary mobile handset E818 under its

own brand name “VIM” or in Chinese “偉恩” in December 2008, the Group launched additional new

models of mobile handset under brand name “VIM” or in Chinese “偉恩” as at the Latest Practicable

Date. The “VIM” or in Chinese “偉恩” brand of mobile handset has been marketed to retail chain

stores for electronic and electrical appliances in Hong Kong and the PRC in June 2009 and August

2009 respectively.

- 68 -

BUSINESS


Max Pixel

The Group had intention to set up a new WFOE in the PRC for the Group’s business expansion.

As such, the Group established Max Pixel, a company incorporated in Hong Kong for being the

intermediate holding company for the planned WFOE in February 2008. However, such plan had not

been carried into effect due to the global financial crisis, and hence the Group disposed of Max Pixel

on 10 February 2009. Max Pixel was dormant before disposal.

Acquisition of the remaining equity interest in PhoneLink

In February 2009, the Group entered into a sale and purchase agreement with the minority

shareholder of PhoneLink to acquire the remaining 19% of the shareholding interest in PhoneLink

for a cash consideration of US$305,014 (equivalent to RMB2,100,000) from Zhenhua Technology on

a willing-buyer and willing-seller basis so as to enable the Group to become the sole owner of the

know-how and any corresponding intellectual rights derived by PhoneLink in mobile handset development.

Subsequent to the acquisition, PhoneLink became a wholly owned subsidiary to the Company.

Disposal of State Tech Group

On 31 March 2009, the Group entered into a sale and purchase agreement with Manchester

International Group Limited, an Independent Third Party for the disposal of its entire shareholding

interest in State Tech and CCDH (collectively known as the “State Tech Group”) at a consideration of

US$457,721. The consideration was agreed between the Group and the purchaser upon arm’s length

negotiation after taking into account of the unaudited net asset value of the State Tech Group as at

31 December 2008 and would be settled in cash upon completion. Prior to the disposal, the mobile

handset solution business, R&D of mobile handset and distribution and marketing business of the State

Tech Group were taken up by Zeus and Max Sunny in the financial year ended 31 March 2009 and

the State Tech Group maintained the remaining business in GPS business. Manchester International

Group Limited intended to acquire the GPS business and a PRC WFOE company, CCDH, which is a

wholly owned subsidiary of State Tech and therefore entered into the sale and purchase agreement to

acquire the State Tech Group. In such regards, the Group mainly disposed of the GPS business carried

by State Tech and CCDH through the disposal of State Tech Group. The mobile handset solution

business, R&D of mobile handset and distribution and marketing business of the State Tech Group were

taken up and consolidated with other subsidiaries of the Company under internal restructuring for the

purpose of streamlining the operations. Since the revenue derived from the GPS business amounted

to approximately US$863,000 for the financial year end 31 March 2009, the Directors consider the

disposal of State Tech Group and its GPS business was immaterial in terms of its revenue, assets and

equity contribution to the Group. Accordingly, the disposal of the State Tech Group was not critical

to the future business development of the Group and will not have any significant impact on the core

business and operation of the Group in any aspect concerning research and development, manufacture

and sale of mobile handset solutions and its proprietary mobile handset. The Directors considered that

such disposal will be of beneficial to the Company by streamlining the operations, saving recurring

administrative costs on maintaining the inactive State Tech Group and reducing further loss from

possible write off of the underlying assets which were not used by the Group. The disposal of State

Tech Group was not required to be subject to Shareholders’ approval under the Listing Manual. The

disposal was completed on 30 June 2009.

- 69 -

BUSINESS


Disposal of Zhenhua Obee

On 22 May 2009, the Group entered into the sale and purchase agreements with Full Wealth

(Hong Kong) Limited and Zhenhua Technology (“Purchasers”) for the disposal of the 42% equity

interest in Zhenhua Obee at a consideration of RMB10,113,600, which was agreed upon arm’s length

negotiation between the Group and the Purchasers after taking into account the carry amount of the

Group’s investment in Zhenhua Obee as at 31 December 2008. As the Group established Tongqing, its

manufacturing arm, in March 2007 and has been launching the marketing plan for its mobile handset

under the new flagship brandname “VIM” or in Chinese “偉恩” since December 2008 with its owned

manufacturing skill and production capacity, any further investment in Zhenhua Obee may not make

the most efficient use of the Group’s resources. Accordingly, the Directors are of the view that (i) it

is appropriate to dispose of the investment in Zhenhua Obee; and (ii) the disposal will not have any

significant impact on the core business and operation of the Group in any aspect concerning research

and development, manufacture and sale of mobile handset solutions and its proprietary mobile handset.

The consideration will be applied for general working capital purposes of the Group. The disposal is

expected to be completed on or before May 2010.

Referring to the sale and purchase agreements for the disposal of 42% equity interest in Zhenhua

Obee, the Purchasers are obliged for the settlement of the consideration within 360 days after the date

of the sale and purchase agreements. As at the Latest Practicable Date, the said consideration has

not yet been settled by the Purchasers and the transaction has not been completed. The transaction is

expected to be completed on or before May 2010, which is within the 360 days period for the settlement

of the consideration. As such, there is no gain or loss on disposal as at the Latest Practicable Date.

The estimated gain on the disposal based on the terms of the disposal is approximately US$287,000

which is derived from the difference between the consideration of the disposal of approximately

US$1,469,000 together with the final dividend for the year ended 31 December 2007 of approximately

US$885,000, the related reserve associated with Zhenhua Obee amounted to approximately US$938,000

and the carrying amount of the 42% equity interest in Zhenhua Obee amounted to approximately

US$3,005,000. The Directors consider that such 360 days settlement period was agreed after taking

into account the sufficient working capital of the Group and the long-term business relationship with

Zhenhua Group.

Since Zhenhua Obee is the registered owner of the “OBEE” in the PRC, the Group will not

use “OBEE” for its products’ brand after the disposal and there is no revenue of the Group that

was derived from the sale of “OBEE” brand products in the PRC during the Track Record Period.

Upon the disposal of Zhenhua Obee, the Group will not have any right to use the name of “OBEE”

as its products’ brand in the PRC. However it would not affect the registered rights of the Group

and applications for registration of certain “OBEE” trademarks in the areas outside of the PRC. As

Zhenhua Obee only conducts its sales with “OBEE” trademark in the PRC, the trademarks of “ ”

and “OBEE” registered in countries other than the PRC were not requested by Zhenhua Obee hence

they were not included as a part of the disposal transaction. Therefore, trademarks of “ ” and

“OBEE” registered in countries other than the PRC are currently owned by the Company’s indirect

wholly owned subsidiary, Finet Enterprises.

- 70 -

BUSINESS


The Group intends to use its own brand name “VIM” or in Chinese “偉恩” in the launch of

its own products brand in the future, therefore the Group does not intend to enter into an agreement

with Zhenhua Obee for the use of “OBEE” in the PRC.

The disposal of the 42% equity interest in Zhenhua Obee was not subject to the Shareholders’

approval under the Listing Manual.

Share Placement

On 24 September 2009, the Company entered into the eight subscription agreements with eight

existing Shareholders respectively, being Independent Third Parties, for the issue and allotment by the

Company to such subscribers of the Subscription Shares, at a subscription price of S$0.13 (equivalent

to approximately HK$0.72) per Share. The subscription price was determined with reference to the

trading market price of the Shares preceding the execution of the subscription agreement and was

agreed upon arms’ length negotiation between the Company and the subscribers. The subscription

price of S$0.13 per Share amounted to a discount of approximately 13.33% to the volume weighted

average price of S$0.15 of the Shares of the Company traded on the SGX-ST for the full market

day on 24 September 2009, being the full market day immediately preceding the execution of the

subscription agreements.

The Shareholders granted the authority to the Directors to at any time, allot and issue Shares at

an issue price for each Share with the issue price not representing a discount more than 20% to the

weighted average price of a Share for trades done on the SGX-ST, at the annual general meeting held

on 30 July 2009. Such Subscription Shares represent approximately 4.02% of the issued share capital

of the Company as at 24 September 2009 and represent approximately 3.86% of the share capital of

the Company as enlarged by the allotment and issue of the Subscription Shares. The allotment and

issue of the Subscription Shares were completed on 8 October 2009.


US$4,140,589 comprising 517,573,662 Shares after the completion of the allotment and issue of the


- 71 -

BUSINESS


SHAREHOLDING AND GROUP STRUCTURE

The chart below illustrates the simplified corporate and shareholding structure of the Group immediately after the completion of the Share Offer:

Wang Shih Zen Wang Tao Lu Shangmin Public

100%

28.23%

16.32% 0.89% 54.56%

100%

The Company (Bermuda)

Investment holding

100%

Elastic Glory (BVI)

Investment holding

100% 100% 100%

CCDH Tech (BVI)

Dormant

Finet Enterprises(BVI)

Trademarks and patents registration holding

Elite Link (Hong Kong) Provision of

management services to the Group

42%

Zhenhua Obee (note 2)(PRC)

Manufacturing, sale andmarketing of mobile appliance

and providing technicalsupport services in respect of

manufacturing and sale ofmobile appliances

100% 100%

Max Sunny (Hong Kong)

Investment holding and sale of mobile

handset and mobile handset hardware

Zeus(PRC)

Development, sales and marketing ofsoftware and solution for mobileappliances and mobile handset

hardware

100% 100%

Tongqing (PRC)

Manufacture and assembly of mobile

handset and hardware

(PRC)

(note 1)

PhoneLink (PRC)

Development of software and solutionfor mobile appliances

WisePremiumLimited

Notes:

1. Including approximately [•••]% of Shares held by Pre-IPO Investors and approximately [•••]% of Shares held by Eight Treasures Investment Limited upon the Listing of the Company on SGX-ST on 21 November 2007 and approximately [•••]% of Subscription Shares held by eight existing Shareholders, issued on 8 October 2009 pursuant to the subscription agreements dated 24 September 2009.

2. The Group entered into the sale and purchase agreements for the disposal of its 42% shareholding interest in Zhenhua Obee on 22 May 2009. The disposal is expected to be completed on or before May 2010. The remaining 58% shareholding interest in Zhenhua Obee was held by Full Wealth (Hong Kong) Limited and Zhenhua Technology with 15% and 43% respectively.

- 72 -

BUSINESS


OVERVIEW

The Group is a mobile handset application and solution provider and a mobile handset manufacturer

in the PRC. The Group provides full-set design and production solution services spanning the entire

handset design cycle, which involves industrial design, mechanical design, application design, PCB

design, procurement of hardware, prototype testing, pilot production and SMT production for mobile

handset and PCB. The Group’s business can be divided in following four major areas:

1. Provision of mobile handset application design;

2. Provision of design and production solution services for mobile handset;

3. Assembly of mobile handset and SMT of PCB; and

4. Distribution and marketing of mobile handset and mobile handset components.

Provision of mobile handset application design

The Group engages in three types of design and development of mobile handset applications: i)

security application such as biometric verification system for personal mobile handset, ii) performance

enhancement program such as noise reduction which reduces the noises in surrounding environment

when the mobile handset is in use and iii) entertainment applications such as “Love Touch” and “Draw

Board”. The applications are installed in the mobile handset produced by the Group or provided

as package of software applications to the customers as one of the solution design services of the

Group.

Provision of design and production solution services for mobile handset

The Group has its own in-house mobile handset design team which enables the Group to offer

integrated product and/or service solutions to meet different customers’ requirements. The solutions

provided by the Group include product definition, industrial design, mechanical design, software

design, PCB design, procurement of hardware, prototype testing, pilot production and production

support. The Group can either provide the total solution service from mobile handset design to the

production of mobile handset or individual solution service such as industrial design, mechanical

design, OEM services in the assembly of mobile handset and SMT of PCB.

Assembly of mobile handset and SMT of PCB

The Group also engages in the production of mobile handset for its OEM customers. The Group

has its own production facilities, the Tongqing production plant, which provide the SMT lines for

assembly of PCB and production of mobile handset. The production services include provision of

PCBA services, surface mounting and processing of mobile terminal products and testing and assembly

of mobile communication products. The Group provides assembly of mobile handset (including the

SMT of PCB) for its own brand and third parties brands. However, there is no separate SMT of PCB

under the Group’s own brand.

- 73 -

BUSINESS


The Group’s production plant and R&D operations are currently based in Shenzhen and Shanghai

and the majority of the customers are based in the PRC.

The OEM manufacture of mobile handset and mobile handset components produced by the

Group were included in the revenue of business segment of assembly.

Apart from OEM manufacture of mobile handset and mobile handset components produced by

the Group in the PRC, the Group also launched its own brand name “VIM” or in Chinese “偉恩” for

its proprietary handset in the PRC in December 2008. The brand name of “VIM” or in Chinese “偉恩” targets the middle price range of mobile handset and aims at young and energetic mobile handset

users with trendy and multi-functions mobile handset. An immaterial amount of product sample and

promotional sales of mobile handset under the brand “VIM” or in Chinese “偉恩” since its first launch

in December 2008 to June 2009 were included in the Distribution and Marketing Segment.

VIM series mobile handset model E818 is designed and launched by the Group

The Group launched the special limited edition showcased design under its new VIM series

phone, E818 after the first launch of E818 in December 2008. The new, stylish E818 is positioned as

a statement in fashion, elegance and modern attitude towards life characterised by its sleek, mirror

cover design and patented technology standard.

Since the short period from the first launch of the mobile handset under the brand of “VIM” or

in Chinese “偉恩”, the contribution of revenue from the sales of “VIM” or in Chinese “偉恩” mobile

handset was not significant during the Track Record Period. Up to 30 September 2009, the Group has

sold approximately 15,000 units of mobile handsets with total revenue amounted to approximately

US$1,000,000 under the brand of “VIM” or in Chinese “偉恩” since the first launch of “VIM” or in

Chinese “偉恩” in December 2008.

- 74 -

BUSINESS


The Group started to sell mobile handset under its brand name “VIM” or in Chinese “偉恩”

through the distribution channels in Hong Kong and the PRC since June 2009 and August 2009,

respectively. There was no engagement of consignee for the products of “VIM” or in Chinese “偉恩”

by the Group in Hong Kong and the PRC as at 31 March 2009. As at 30 September 2009, there were

10 retail shops in Hong Kong through a retail distribution network that sold the products of “VIM”

or in Chinese “偉恩”. As at the Latest Practicable Date, there were 10 retail shops in Hong Kong

by a distribution agreement and 8 retail shops in the PRC by a consignment agreement that sell the

mobile handsets of “VIM” or in Chinese “偉恩”.

After the well establishment of the sales network of “VIM” or in Chinese “偉恩”, the Group

considered that it is much more appropriate to include such revenue in the Assembly Segment instead

of the Distribution and Marketing Segment due to the original nature and for better presentation

purposes.

Distribution and marketing of mobile handset and mobile handset components

In support of the Group’s solution service in mobile handset production, the Group sells the

mobile handsets and mobile handset components to mobile handset and mobile handset components

distributors. The Distribution and Marketing Segment of the Group mainly includes selling of mobile

handsets and mobile handset components produced by third parties.

The Group serves two major groups of customers, namely mobile handset manufacturers and

mobile handset distributors:–

(a) Mobile handset manufacturers

The Group provides solutions mainly in the form of industrial design and mechanical

design, software and hardware design and PCBA to these customers who procure the hardware

components, assemble the handset and sell them under their respective brand names. The normal

contract period between the Group and these respective customers was approximately two to

three months during the Track Record Period.

(b) Mobile handset and mobile handset components distributors

The Group provides mobile handset designs to distributor and if they require, we also

provide relevant procurement and production support services.

The revenue breakdown by the mobile handset manufacturers and mobile handset and

mobile handset components distributors during the Track Record Period was set out below in

the section “Major Customers”.

- 75 -

BUSINESS


During the Track Record Period, the revenue breakdown by activities was illustrated as

below: For the six months ended For the financial year ended 31 March 30 September 2007 2008 2009 2008 2009 (unaudited) US$ % US$ % US$ % US$ % US$ %

Solution Segment 9,235,556 19.96 12,109,181 10.13 7,289,224 7.03 4,041,752 5.55 1,886,536 3.44

Assembly Segment – – 9,603,391 8.03 20,437,043 19.72 12,933,464 17.75 15,520,980 28.33

Distribution and Marketing Segment 37,025,775 80.04 97,881,544 81.84 75,897,585 73.25 55,873,714 76.70 37,372,727 68.23

Total 46,261,331 100 119,594,116 100 103,623,852 100 72,848,930 100 54,780,243 100

During the Track Record Period, the breakdown of the Group’s gross profit and gross profit margin by business activities was illustrated as below:

For the six months ended For the financial year ended 31 March 30 September 2007 2008 2009 2008 2009 (unaudited) US$ % US$ % US$ % US$ % US$ %


Assembly Segment – – 1,097,032 11.42 1,660,178 8.12 886,458 6.85 2,006,872 12.93


Total 10,425,305 22.54 16,174,524 13.52 8,507,404 8.21 6,122,898 8.40 4,906,683 8.96

- 76 -

BUSINESS


During the Track Record Period, the revenue breakdown by geographic locations was

illustrated as below:

For the six months ended For the financial year ended 31 March 30 September 2007 2008 2009 2008 2009 (unaudited) US$ % US$ % US$ % US$ % US$ %

The PRC except Hong Kong 43,874,807 94.84 106,763,743 89.27 88,399,329 85.31 61,720,455 84.72 43,791,302 79.94Hong Kong 2,386,524 5.16 12,830,373 10.73 15,224,523 14.69 11,128,475 15.28 10,988,941 20.06

Total 46,261,331 100 119,594,116 100 103,623,852 100 72,848,930 100 54,780,243 100

The business activities of the Group are presented based on the result contribution to the

Group and the resources employed by the Group in each of its business activities. The Solution

Segment is regarded as the core business activity of the Group, since:

(i) the well established research and development department of the Group with 60

staffs representing more than 24% of the human resource of the Group and being

the largest department of the Group;

(ii) the total cost of salaries incurred for the research and development department

represented approximately 49.71%, 33.26% and 25.71% of the total staff costs of

the Group for each of the three years ended 31 March 2009 respectively;

(iii) the gross profit margin as an indicator to the profit contribution by the Solution

Segment to the Group’s profitability, which was illustrated in the breakdown of

the Group’s gross profit and gross profit margin as above;

(iv) one of the business objectives of the Group is to become a leading mobile handset

solution provider; and

(v) the Assembly Segment as well as the Distribution and Marketing Segment serve as

supporting segments to the one-stop services rendered by the Solution Segment.

Although the revenue from the Distribution and Marketing Segment contributed the largest

proportion of the revenue of the Group, it contributed the least proportion of gross profit to the

Group due to the business nature of this segment which usually has the lowest profit margin

and is employed with relatively fewer resources.

- 77 -

BUSINESS


BUSINESS MODEL

The Group is a mobile handset application and solution provider and it also possesses production

capacity for mobile handsets. The Group provides services at various stages of the development and

production of mobile handset from mobile handset application design, product design to mobile handset

manufacturing and distribution and marketing of mobile handset and mobile handset components.

The Company

R&D department develops different mobile handset applications for installation into the Group’s mobile handset or customers’ products

Product design team designs products for mobile handset manufacturers based on customers’ specification and project management for the production of mobile handset

Provides the assembly ofmobile handset and SMTof PCB according tothe customers’ specificationor the Group’s design team

Distribution and marketing of mobile handset or mobile handset components produced by third parties or produced by the Group

Mobilehandset

applicationdesign

Design and production

solution servicesfor mobilehandset

Assembly ofmobile handset

and SMTof PCB

Distribution andmarketing of

mobile handset andmobile handsetcomponents

The Group provides total solution of mobile handset production from product design to production

support and assembly of mobile handset. Depends on the requirements of different customers, the Group

will provide either single segment of services of the Group or complete mobile handset solution. For

example, the mobile handset manufacturer customers may require the Group to provide them services

from industrial design to product being manufacturable without the provision of manufacturing services

by the Group. However, the mobile handset and mobile handset components distributors who do not

have the production capability may on the other hand require the Group to provide them with the

total solution services from product definition to mobile handset production.

- 78 -

BUSINESS


Business flow of solution design services

Set out below is a flow chart of the solution design services engaged by the Group:

Product definition

Industrial designExterior outlook design

Mechanical designPCB design

Software design

Software and applicationimplementation

Tooling

PRODUCTION

Application design

Product testing

i) Product definition

The product definition stage is to understand the customers’ product specifications, functions

and features which they require in the mobile handset. The Group also provides consultation and

advisory services to its customers on the proposed design solutions based on its understanding of

the market preferences and demands, having taken into account of the development of technology in

the industry.

ii) Application design

The R&D department constantly develops new applications according to the market demand

for the new application technique and special features for the mobile handset. The newly developed

applications will be tested by computer programmes and then trial in the mobile handset to ensure the

compatibility of the applications in the mobile handset’s operating system. The successful applications

will be introduced to the customers of the Group and combined with the software design. The newly

developed applications will then be installed in the new models of mobile handset according to the

feature requirements under the product definition.

- 79 -

BUSINESS


iii) Software design

According to the product definition, the software engineers of the Group will design the

software interface for the operation of mobile handset and test the compatibility of the applications

to be installed in the mobile handset.

iv) Industrial design and Mechanical design

Based on the customers’ requirements and taking into account of the current market preferences,

the Group designs the exterior outlook of the mobile handset, as well as the mechanical design for the

PCB. The Group’s software engineers will also design the applicable software or specific application

to ensure the compatibility of the user-features of the handset. Further steps are also taken to ensure

the compatibility of the hardware and software and that the mechanical components conform to the

desired physical appearance of the mobile handset. After ascertaining customers’ desired functions

and features, the Group will design the PCB to meet the customers’ requirements.

v) Product testing

The specified applications, PCBs and features of the product samples will then be tested by

the Group’s R&D department.

vi) Tooling

The Group does not have its own mould and tooling department. As such, the Group will provide

the industrial design and mechanical design to the external mould tooling manufacturer to design the

mould and tooling for mass production of mobile handset.

- 80 -

BUSINESS


Business flow of mobile handset assembly and SMT of PCB

Set out below is a flow chart of the assembly of mobile handset of the Group:

SMT

Packaging

Raw materials and components

purchases

Incoming inspection

Mobile handset assembly and testing

PCBA testing

i) Raw materials and components purchases and incoming inspection

The Group acquires raw materials and components from external suppliers and the quality

assurance department of the Group will inspect the incoming raw materials and components before

delivery to the warehouse.

ii) SMT

The components will be fitted and assembled on the PCB based on the hardware design in the

production plant of the Group, namely Tongqing. The Group’s engineers will provide on-site technical

support to the subcontractors for the production of the PCBA designed by the Group.

iii) PCBA testing

After SMT processing, the PCBA is connected to display modules and the keypad of the mobile

handset to test the functioning of the PCBA board.

- 81 -

BUSINESS


iv) Mobile handset assembly and testing

The PCBA are assembled with the display modules, keypads, casing and components into

the mobile handset. The quality assurance department of the Group will ensure that the prescribed

procedures are properly complied with. Visual inspection and performance tests are carried out at each

checkpoint. The mobile handset will also be fully functional tested according to the requirements.

v) Packaging

After completion of the production of the mobile handset or the PCBA, the mobile handset or

the PCBA will be transferred to another capsulated area to minimise the dust when packaging. The

final products will be packed in accordance with the packaging specification of the customers.

Apart from OEM manufacture of mobile handset and mobile handset components produced by

the Group, the Group also sells its own brand name manufactured mobile handset “VIM” or in Chinese

“偉恩” to customers directly or through retail distributors in Hong Kong and the PRC.

The products of “VIM” or in Chinese “偉恩” were supplied to 10 retail shops of a retail

distribution company through the Group’s distributor and the Group has engaged a PRC retail

distribution company to sell the products of “VIM” or in Chinese “偉恩” in 8 retail shops in the PRC.

The retail distributor will place the requested number of the Group’s mobile handset constantly. When

the Group’s sales and marketing department receives orders from the retail distributors, the sales and

marketing department will arrange delivery of the mobile handsets from the warehouse of the Group

or arrange production to fulfill such demand orders.

The sales of “VIM” or in Chinese “偉恩” mobile handsets to the distributors in Hong Kong

and the PRC comprise the following steps:

(a) Distributors/consignees will acknowledge receipt upon delivery of goods;

(b) Distributors/consignees will issue a monthly sales report to the Group for reconciliation

and the Group will issue sales invoices to the distributors/consignees for the collection

of sales proceeds;

(c) Distributors/consignees will issue a monthly inventory report to the Group for reconciliation

with its record; and

(d) The Group will carry out monthly physical stocktake with the distributors/consignees to

ensure sufficient quantity of stock on hand.

The Group provides customers with after sales repair and maintenance services mainly in

rectifying the products’ problem.

- 82 -

BUSINESS


Revenue breakdown of assembly of mobile handset and SMT of PCB

The revenue breakdown of assembly of mobile handset and SMT of PCB during the Track

Record Period was illustrated below:

For the six months For the financial year ended 31 March ended 30 September 2007 2008 2009 2009 US$ % US$ % US$ % US$ %

Mobile handsets – OEM – – 7,068,713 73.61 16,237,196 79.45 7,000,305 45.10

Mobile handsets – “VIM”

or in Chinese“偉恩” – – – – – – 971,100 6.26

Mobile handsets

components – – 2,534,678 26.39 4,199,847 20.55 7,549,575 48.64

Total – – 9,603,391 100 20,437,043 100 15,520,980 100

Business flow of distribution and marketing of mobile handset and mobile handset components

Set out below is a flow chart of the distribution and marketing of mobile handset and mobile

handset components:

Customer orders

Delivery to customers

Procurement of mobile handset or components from

suppliers

Incoming qualityinspection

- 83 -

BUSINESS


The Group will assist its customers to source for and procure raw materials and components to

be used in the manufacture of the mobile handset, for example, capacitors, antenna and LCD. These

customers may either be customers who require such assistance as part of their purchase of PCBA

from the Group, or customers who require its services only for the purchase of parts and components.

Income derived from the provision of procurement services is classified as income from distribution

and marketing of mobile handset and mobile handset components. When the customers place the

purchase orders with the Group, the Group’s procurement and supply department will source such

raw materials or components from the Group’s suppliers. The quality assurance department will

inspect the incoming raw materials and components before delivering to the customers. Revenues

from procurement and delivery of third parties produced products are recognised on the transfer of

significant risks and rewards of ownership, which generally coincides with the time when the products

are delivered and the legal titles have been properly and legally passed to the customers.

The Group provides customers with after sales repair and maintenance services mainly in

rectifying the products’ problem.

Revenue breakdown of distribution and marketing of mobile handset and mobile handset components

The revenue of distribution and marketing of mobile handset and mobile handset components

was derived from the following business activities of the Group:–

(1) the sales of mobile handset produced by third parties; and

(2) the sales of mobile handset components produced by third parties.

The revenue breakdown of distribution and marketing of mobile handset and mobile handset

components during the Track Record Period was illustrated below:


Distribution and marketing of mobile handset produced by third parties – – 298,700 0.31 6,789,710 8.95 11,955,898 31.99

Distribution and marketing of mobile handset components produced by third parties 37,025,775 100.00 97,582,844 99.69 69,107,875 91.05 25,416,829 68.01

Total 37,025,775 100 97,881,544 100 75,897,585 100 37,372,727 100

- 84 -

BUSINESS


COMPETITIVE STRENGTHS

The Group’s competitive strengths as set out below have driven growth in revenue and net profits and distinguished the Group from its competitors in the mobile handset industry:

• Possess of application development and design capability

The Group’s R&D team is responsible for the development of new mobile handset applications. During the Track Record Period, the Group has developed 37 invention and utility model applications in various aspects which included security, performance enhancement and entertainment aspects. The capability of application development and design played a key role in enabling the Group to launch high quality products with advanced features and functionality. The strong industrial design, mechanical design, software design, hardware design and user-interface design capabilities enable the Group to respond to the customers’ requirements and capture the latest market trends of mobile handset. Please see the section headed “Intellectual property rights of the Group” in Appendix V of this prospectus for more details.

• One stop service centre with the flexibility to provide customised services

The Group is able to provide its customers with a complete range of services from product design to production support for mobile handset. This one stop service is particularly recognised by its mobile handset distributors as it saves their time and resources that would have otherwise been spent on liaising separately with different suppliers for hardware procurement, SMT factories for producing PCBAs and mobile handset manufacturers for assembling the finished mobile handset and selling under registered handset brand names. The Group’s one stop service thus improves the cost effectiveness and shortens time-to-market for the production and commercial launch of mobile handset. Given the short product cycle of the mobile handset market, cost effectiveness and short time-to-market are most crucial to the competitiveness of each product launched into the market.

Customers may also choose to engage the Group’s services for a specific design stage of a mobile handset, which is normally preferred by mobile handset manufacturers which have their own capacity for hardware procurement and handset production. The ability to offer varied services to customers according to their needs enhances the Group’s competitiveness, diversifies the Group’s customer base and in so doing, maximises the usage of its resources.

• Technical expertise coupled with innovative and fashionable product ideas

The Group has an experienced and innovative product development team comprising 60 staffs who are engineers as at the Latest Practicable Date who have over six years of relevant experience on average and approximately 48 of them are holders of university degrees. The Group’s research and development team has proven track record in developing popular and profitable mobile handset models. In an industry where consumer preferences change at a fast pace and technological developments evolve rapidly, the strong product development capabilities allow the Group to maintain its position at the forefront of mobile handset design solutions in the PRC. The Directors believes that the Group is one of the design solutions houses which brought mobile handset with dual GSM cards and full-flat-touch-screen to the PRC market.

- 85 -

BUSINESS


• Established product niche

The mobile handset market generates tremendous business opportunities with different

consumer groups from young generations to high net worth businessmen. The Directors are of

the view that the Group has to define and focus on its product niche in order to make the most

efficient use of its resources. During the Track Record Period, the Group focused on developing

solutions for mobile handset in the medium retail price with communication and multimedia

content processing functions such as 64-tone polyphony, camera and MP3 and MP4 music

playback and entertainment programs. The Directors are of the view that the product niche that

the Group has been focusing on will continue to provide tremendous business opportunities in

the foreseeable future, as the Directors believe these market segments may still experience a

larger growth cycle as compared with the other segments of the mobile handset market.

• Service and product quality recognised by customers

As referred to in the section headed “Business – Sales and marketing” in this prospectus,

the Group has not taken aggressive sales and marketing plans during the Track Record Period,

when the Group solicited and established close business relationships with a group of high quality

customers. This approach ensured the efficient use of the Group’s resources in providing superior

quality products and services to its customers and consequently established its reputation by

word-of-mouth. The Directors consider this strategy to be successful in promoting the Group

to prospective customers. The Group will also monitor the developments in the marketplace

and the availability of resources in order to adjust and pursue appropriate sales and marketing

strategies and to constantly develop and improve its product and service quality.

• Professional and dedicated management

The Group is managed by a group of young and professional executives with recognised

academic qualifications and relevant experience in the industry. The Group’s chief executive

officer, Mr. Wang, has extensive experience in development of telecommunication products. He

is responsible for leading the senior management of the Group in the sales and marketing and

also development of new products and solutions in mobile handset. The integrity, professionalism

and dedication to excellence of its management will contribute to the continuous enhancement

of the service and product quality of the Group and its operating performance.

- 86 -

BUSINESS


BUSINESS STRATEGY

The Group aspires to become a leading mobile handset solution provider and to establish its

own brand name “VIM” or in Chinese “偉恩” in the PRC and overseas offering services which range

from product definition solution design to assembly of mobile handset. To realise such mission, the

Group intends to adopt the business strategies as set out below:–

Launching of new flagship brand, “VIM” or in Chinese “偉恩”

The launch of mobile handset under the new flagship brand name of the Group “VIM”

or in Chinese “偉恩” in December 2008 is a strategic move of the Group to introduce and

characterise the Group’s trendy design of mobile handset. It aims to differentiate the Group

from its competitors for its competitiveness in mobile handset designs and to build up the

Group’s image in fashionable design capability. The Directors believe that the launching of

mobile handset under the Group’s own brand name provides a good platform for the Group to

capitalise on the strong market demand for the mobile handset in the PRC by demonstrating

the Group’s mobile handset application development capability.

To enhance the Group’s product development capabilities

The Group believes that the ability to provide product designs incorporating the latest

technology development and trends is crucial for the Group to maintain competitiveness as

a solution provider. As such, the Group will continue to enhance its product development

capabilities in the areas of industrial design, mechanical design, software design and PCB

design. For instance, the Group will strive to integrate the latest trends into its designs and

will continue to build up its software application libraries and hardware to allow the Group

offering products of multiple tiering and flexibilities.

The Group plans to increase the size of its R&D team from the existing 60 engineers

to 76 engineers by the year 2010. The Group’s R&D team is headed by Mr. Wang. The Group

believes that having more skilled manpower would enable the Group to better meet the anticipated

increase in its business volume. The Group also intends to continually improve its training

programmes for its engineers to ensure the constant upgrading of their technical skills.

To enlarge its product mix

The Group intends to enlarge its product mix at two levels:– (a) developing mobile handset

with multi-functions, and (b) tapping into new consumer markets.

(a) Developing mobile handset with multi-functions

The Directors believe that the demand for mobile handset with varied functions will

continue to grow. In line with such expectation, whilst the Group has already developed mobile

handset with multi-functions, the Group intends to further focus its research and development of

multimedia mobile handset with emphasis on the entertainment aspect. Apart from entertainment

- 87 -

BUSINESS


aspect, the Group is also exploring and looking into developing solutions which could further

improve other functions of mobile handset, for example by developing mobile handset with

television functions and tourist friendly functions such as the ability to download maps of the

present location.

(b) Tapping into new consumer markets

The enlargement and diversification of the product mix will allow the Group to diversify

its customer base and tap into new markets. In particular, the Directors have noted that a larger

number of young people are acquiring mobile handset for their own use at a younger age in

the PRC. The Group believes that the ability to design and produce technologically up-to-

date and trendy mobile handsets at a lower cost than foreign mobile handset design houses

or manufacturers would allow the Group to tap into the rapidly growing market of younger

consumers. Apart from tapping into the market for younger consumers, the Group also aims

to increase its market share in the rural area of the PRC and the Directors are of the view that

the pricing of the mobile handset is one of the major buying criteria for consumer in the rural

areas of the PRC.

Exploring the possibility of entering the overseas market

The Group plans to expand into overseas markets which have similar demographic and

economic conditions to those of the PRC, for example, countries in Southeast Asia, South

America and India. The Group may also consider entering into joint ventures or strategic

alliances with network operators and mobile handset manufacturers in the overseas market

should any opportunity arise.

The Group has already registered or pending to register its trademarks “VIM” or in

Chinese “偉恩” as its new flagship brand in various overseas markets in an effort to prepare

entering into these overseas markets. Details of the trademarks may refer to the paragraph

headed “Trademark” in the sub-section headed “Intellectual property rights of the Group”

under the section headed “Further information about the business of the Group” in Appendix

V to this prospectus.

RESEARCH AND DEVELOPMENT

The Group’s research and development capabilities cover various aspects of handset designs

including application development, product definition, PCB design, ID/MD, software development

and sample modeling. The Group provides its design samples in the form of blueprints, PCBA or

finished handset models, depending on the requirements of customers.

The Group’s research and development engineers work closely with its sales and marketing

team to collect market intelligence of the mobile handset and devise new product definitions. The

Group’s sales and marketing team then presents these new product ideas to customers and very often

will go through a process of assessment and modification before the customers decide whether to

develop and sell the product.

- 88 -

BUSINESS


Being a solutions house that serves mobile handset manufacturers and mobile handset distributors,

the Group has to understand and take into account of the business strategy and niche of its customers

when the Group defines its own business strategies. During the Track Record Period, the Group

adopted the following research and development strategies:

• solutions targeted at the lower to middle end consumers of the market;

• continual enhancement in processing multimedia contents;

• trendy outlook and unique features of mobile handsets that are attractive to young

consumers; and

• outlook design tailored for Chinese culture and consumer preferences.

The Group has also been developing PDA phones embedded with unique features that are targeted

at higher-end executive consumers. In preparation for the 3G mobile handset in the PRC, the Group

has been building up the software library with software required for 3G applications. The Group is

conducting a market research on the adoption of 3G standards in order to better design the future

business plans on 3G development. As at the Latest Practicable Date, two newly 3G software of Zeus

has passed software product registration tests under China Software Testing Centre. The approved

software will ensure the Group’s success in the future production of 3G mobile handsets.

Before the adoption of 3G standards, the Group entered into a cooperation agreement with Zhenhua

Group in September 2009 for the research and development on 3G (EVDO) mobile handset. Pursuant

to the cooperation agreement, the Group is responsible for the design and provision of respective

solutions and applications for the 3G (EVDO) mobile handsets as per requested by Zhenhua Group,

while Zhenhua Group will pay for the relevant fees on the solutions and applications provided by the

Group. The Group will implement quality control measures during the course of product development.

The Group reserves all the rights of the solutions and applications developed by its own. Such

participation has facilitated the Group to build its know-how and will shorten the development cycle

once the Group has confirmed which 3G standard is to be adopted. The first EVDO phone is planned

to be launched in 2010. The Group intends to spend approximately US$1.6 million to purchase the

necessary hardware and software for research and development of 3G mobile handset and 3G modules.

Apart from the number of solutions launched by us during the Track Record Period, its research and

development capabilities were also demonstrated in the breakthrough features of its solutions. For

instance, to the best knowledge of the Directors, the Group is one of the solutions houses that brought

mobile handset with dual GSM cards and introduced mobile handset with full-flat-touch screen to

the PRC mobile handset market.

As at the Latest Practicable Date, the Group has 60 research and development engineers responsible

for different tasks in solutions development and were led by Mr. Wang. The Group’s research and

development engineers have over six years of relevant experience on average and approximately 48

of them have university degrees.

- 89 -

BUSINESS


The Group incurred approximately nil, US$0.66 million and US$0.99 million research and

development expenditure for the year ended 31 March 2007, 31 March 2008 and 31 March 2009,

respectively. Other than those research and development expenditure, the Group also had incurred

expenses in relation to the salaries of its research and development engineers after the acquisition of

Zeus during the year ended 31 March 2007. The total cost of salaries incurred for the research and

development amounted to approximately US$0.91 million, US$0.85 million and US$0.85 million for

the year ended 31 March 2007, 31 March 2008 and 31 March 2009, respectively.

PRODUCTION FACILITIES

Tongqing

The Group established Tongqing, a wholly foreign owned enterprise in the PRC, on 20 March

2007. Its production plant locates in Shenzhen and possessed a mobile handset manufacturing licence

and engages in the manufacture of finished mobile handset and assembly of PCB. Assembly operation

of Tongqing commenced pilot run production in August 2007 and commenced mass production by the

early of 2008. As at the Latest Practicable Date, Tongqing had installed five SMT lines, of which four

of them are mass production and the remaining one is mainly for making samples and trial assembly,

with a total annual capacity of approximately 5,000,000 pieces of PCBA (on the basis of 20 hours

a day and 26 days a month) and 5,000,000 pieces of mobile handset (on the basis of 20 hours a day

and 26 days a month).

Set forth below is a table of the quarterly average utilisation rate of the assembly capacity by

production line functions for the periods indicated:

Average utilisation rate SMT Assembly

2008April – June 48.4% 48.0%

July – September 81.4% 73.5%

October – December 54.1% 54.1%

2009January – March 39.3% 39.3%

April – June 77.2% 58.4%

July – September 72.2% 61.1%

October – December 80.5% 73.0%

The quarterly average utilisation rate of the assembly capacity ranges from approximately 39%

to more than approximately 80%, depending on the sales order on hand. The low season of mobile

handset assembly of the Group is normally from January to March of each year and the peak season

of mobile handset assembly is normally from July to December of each year. Such seasonality is

attributible to the nature of the seasonal fluctuation of demand from the mobile handset market in

the PRC.

- 90 -

BUSINESS


The production plant and office premises of Tongqing are located on a leased premise in Baoan

District, Shenzhen, the PRC with a gross floor area of approximately 7,872 m2. The lease has a term

of approximately five years commencing on 16 April 2007 and ending on 1 March 2012. Under the

terms of the lease, the Group has a right of first refusal to extend the lease under the same terms

offered by other prospective tenants by giving one month’s prior notice.

Although the premises occupied by Tongqing is the only production plant of the Group, the

Directors consider that the expiration of the lease will not materially and adversely affect the operation

of the Group due to the reasons listed below:

i) The crucial production facilities of Tongqing are comprised of five SMT lines which are

removable and could be reinstalled in another premises should there is such a need;

ii) The management will rotate installation of each production line without complete cessation

of the production if removal of the production plant is required;

iii) Similar and comfortable premises are readily available in Shenzhen, the PRC that allow

the Group to move to another production plant when necessary;

iv) The SMT and assembly services could be outsourced to another parties; and

v) The Solution Segment is the major gross profit contributor to the Group and contribution

of gross profit from the Assembly Segment were approximately nil, 6.78% and 19.51%

for the three years ended 31 March 2007, 2008 and 2009 and approximately 40.90% for

the six months ended 30 September 2009.

Therefore the Directors consider that the operation of the Group will not be materially and

adversely affected if the Company fails to renew the lease agreement for the premises occupied by

Tongqing. Since the lease of the premises will expire until March 2012, the Directors consider that

there is no immediate need to consider any plan to relocate its production plant. As the relocation

does not require huge amount of capital investment and most of the current production machinery is

removable, the Directors consider that cost of relocation will not substantially affect the cashflow of

the Group and the time of relocation in affecting the operation of the Group is minimal.

To the best of the Directors’ knowledge, information and belief having made all reasonable

enquiries, the Directors were not aware of any dispute as to the legal title of any such leased premises

as at the Latest Practicable Date.

SALES AND MARKETING

The sales and marketing team is led by Mr. Wang and comprises 21 employees as at the Latest

Practicable Date. The sales and marketing strategies of the Group is to establish and strengthen the

business connections with certain selected customers in the PRC by providing products and services

of high quality and consequently to promote general awareness of its Group by customers to other

industry players in the PRC.

- 91 -

BUSINESS


Thus, the Group has been very selective in soliciting its customers who will have to possess a

high degree of management integrity, relevant and sufficient handset development and sales experience,

good development prospects, sound financial position, production support backup and extensive sales

network. This is to ensure that the products would be able to reach end-users on a timely basis with

a satisfactory degree of penetration which would in turn increase the revenue of the Group, build up

the reputation in the industry and maintain a sustainable business relationship with customers. The

Directors consider the above strategies appropriate and successful.

Apart from formulating and executing the sales and marketing strategies, the sales and marketing

team also carries out the following functions:–

• solicit orders from customers;

• collect feedback from customers on its products and to study improvement procedures

with the research and development department;

• manage customer relationships through regular visits to its customers’ offices;

• understand background of prospective customers; and

• collect industry information for the purposes of formulating business strategies and

product definitions.

Looking ahead, the Group intends to further strengthen and expand its sales and marketing

strategies by:

• increasing its efforts in actively soliciting new customers, including mobile handset

manufacturers and mobile handset distributors;

• exploring business opportunities in overseas countries; and

• maintaining the quality of clientele.

The Group will constantly monitor the changes in the industry and adjust its sales and marketing

strategies accordingly from time to time.

PRICING POLICY AND REVENUE RECOGNITION POLICY

The Group takes into consideration a number of factors in determining the pricing policies for

its different business segments. In relation to the pricing policy for the mobile handset application

and solution services, the Group shall take into account the cost for the research and development of

such application and solution, and the purchase cost if the application software itself is purchased

from other suppliers. For the mobile handsets under the brand of OEM customer and mobile handset

components, the production and material cost with mark up will be assessed for pricing determination.

The pricing policy for the Distribution and Marketing Segment of the Group is based on the reference

with the average gross profit margins ranged from approximately 2% to approximately 7% during

the Track Record Period.

- 92 -

BUSINESS


In view of the market position of the mobile handset under Group’s owned brand “VIM” or in

Chinese “偉恩”, factors including and production cost and market price of different tiers of mobile

handsets marketed in the PRC and Hong Kong will be considered for determining the price of “VIM”

or in Chinese “偉恩” mobile handset.

The revenue recognition of the Group depends on the terms stipulated in each of the sales

agreement. Details of the revenue recognition policy is detailed in the accounting policy in note 4(w)

as set out in Appendix I of this prospectus.

MAJOR CUSTOMERS

Since its commencement of operations in 2004, the Group has established good working

relationships with its customers in Hong Kong and the PRC. During the Track Record Period, the

Group’s customers mainly included mobile handset manufacturers and mobile handset and mobile

handset components distributors.

The revenue breakdown by types of customers of the Group during the Track Record Period

was illustrated below:


Mobile handset manufacturers 5,117,370 11.06 31,202,718 26.09 26,659,003 25.73 4,298,395 7.85

Mobile handset and mobile handset components distributors 41,143,961 88.94 88,391,398 73.91 76,964,140 74.27 50,479,361 92.15

Individual and Shareholders – – – – 709 0.00 2,487 0.00

Total 46,261,331 100 119,594,116 100 103,623,852 100 54,780,243 100

- 93 -

BUSINESS


The background information of the major customers contributed more than 10% of revenue of

the Group for respective years/period during the Track Record Period was illustrated below:

Major customers with revenue contribution over 10% of the Group for the year ended 31 March 2007

Business segment served by the Group Distribution and Percentage Solution Assembly MarketingCustomer of revenue Business nature of the customer Segment Segment Segment

A 25.73% Principally engaged in research and ∆ ∆ development, production, sale of mobile handsets, LCD modules and DVD

B 15.89% Principally engaged in the research and ∆ ∆ development and sale of computer communication and related software and hardware

C 10.42% Principally engaged in the development ∆ ∆ and sale of electronic communication products


Business segment served by the Group Distribution and Percentage Solution Assembly MarketingCustomer of revenue Business nature of the customer Segment Segment Segment

A 18.88% Principally engaged in research and ∆ ∆ ∆ development, production, sale of mobile handsets, LCD modules and DVD

B 18.82% Principally engaged in the research and ∆ ∆ development and sale of computer communication and related software and hardware

D 14.01% Principally engaged in the trading and ∆ ∆ distribution of raw materials of battery

E 10.99% Principally engaged in the manufacture ∆ ∆ and sale of POS board and components, and the research, manufacture and sale of mobile handset components

- 94 -

BUSINESS



Business segment served by the Group Distribution and Percentage Solution Assembly Marketing Customer of revenue Business nature of the customer Segment Segment Segment

E 15.31% Principally engaged in the manufacture and ∆ ∆ sale of POS board and components,

and the research, manufacture and

sale of mobile handset components

F 12.86% Principally engaged in sales of communication ∆ ∆ products and project management

Major customers with revenue contribution over 10% of the Group for the six month ended 30 September 2009

Business segment served by the Group Distribution and Percentage Solution Assembly Marketing Customer of revenue Business nature of the customer Segment Segment Segment

F 13.81% Principally engaged in sales of ∆ ∆ communication products and

project management

G 13.07% Principally engaged in sales of

light industrial products ∆

D 12.37% Principally engaged in the trading and ∆ ∆ distribution of raw materials of battery

Note: “Percentage of revenue” refers to the revenue from respective customer on a percentage of revenue of the Group

during the respective financial year/period.

With respect to the sale of mobile handset under the Group’s owned brand “VIM” or in Chinese

“偉恩”, the Group entered into a consignment agreement with a PRC consumer electronic retail

company, an Independent Third Party, for the sale of the “VIM” or in Chinese “偉恩” mobile handset

through its retail chain stores in the PRC. The consignment agreement shall be valid and effective till

31 December 2009. It was agreed under such consignment agreement that the parties shall commence

- 95 -

BUSINESS


negotiations for renewal for the agreement one month before the expiry date (i.e. 31 December 2009).

If no renewed agreement is executed on or before 31 December 2009, the original consignment

agreement will be automatically renewed up to the date of the execution of the renewed agreement,

subject to a maximum period of automatic extension of three months (i.e. up to 31 March 2010). If

no renewed agreement is executed on or before 31 March 2010, the original consignment agreement

will terminate. As at the Latest Practicable Date, the Group has/has not commenced negotiations

with the PRC consumer electronic retail company for renewal of such consignment agreement. For

any damaged goods reported by the retail company, the Group shall be responsible for collection or

recall of the damaged ones within 10 days.

The Group also entered into a distribution agreement with a distributing company, an Independent

Third Party for the sale through retail chain stores of a consumer electronic retail company in Hong

Kong. The Group provides one year warranties for its “VIM” or in Chinese “偉恩” mobile handsets

under the terms of the aforementioned consignment agreement and distribution agreement.

Pursuant to the distribution agreement, the Group would deliver to the distributing company the

quantity of “VIM” or in Chinese “偉恩” mobile handset that the distributing company requires for

sales from the retail chain stores of a consumer electronic retail company in Hong Kong. The Group

would be responsible to pay all freight and shipping charges for the delivery of the mobile handset.

However, the distributing company should be responsible for any loss of or damage to the “VIM” or

in Chinese “偉恩” mobile handset upon receipt of the mobile handset, as the mobile handset are under

its control. The distributing company should endeavor to the sales and distribution of the delivered

mobile handset, however, the Group has the discretion on adjusting the sales prices. The distributing

company should not sell the delivered mobile handset at below the prices defined by the Group. The

distributing company should have a sole control on the distribution of the “VIM” or in Chinese “偉恩” mobile handset. Although the distributing company has a sole discretion on the business regarding

the distribution, the delivered mobile handset should remain the property of the Group until sold in

the regular course of business. Settlement between the Group and the distributing company regarding

the distribution of the mobile handsets is on a monthly basis.

The Group has not recalled any of the products and components manufactured by the Group for

the customers’ brand during the Track Record Period. For the three financial years ended 31 March

2007, 2008 and 2009 and six months ended 30 September 2009, approximately 66%, 72%, 53% and

56% respectively of the Group’s revenue was contributed by the top five customers of the Group, and

approximately 26%, 19%, 15% and 14% respectively of the Group’s revenue was contributed by the

largest customer of the Group. Such top five customers of the Group are mainly manufacturers of

mobile handsets, mobile handset components and PCBA, and are Independent Third Parties.

Amongst the top five customers, one of the subsidiaries of Zhenhua Group contributed

approximately 9.83% of the revenue of the Group for the year ended 31 March 2009. The Directors

confirm that neither the subsidiaries of Zhenhua Group nor Zhenhua Group was connected party to

the Group as defined in the Listing Rules. The Directors also confirm that none of the Directors,

their respective associates or, so far as the Directors are aware, any person who owns more than 5%

of the issued share capital of the Company has any interest in any of the top five customers of the

Group during the Track Record Period.

- 96 -

BUSINESS


MAJOR SUPPLIERS

During the Track Record Period, the Group initially purchased finished mobile handset and

mobile handset components for trading and later purchased mobile handset hardware and mobile handset

components. Such later purchase of mobile handset, hardware and components was mainly at the

request from the customers for the integration services provided by the Group including the provision

of mobile handset solution, production of mobile handset and assembly of PCB, being a one-stop-

solution service provided to the Group’s customers from product development to production. For the

three financial years ended 31 March 2007, 2008 and 2009 and six months ended 30 September 2009,

approximately 93%, 77%, 47% and 66% respectively of the Group’s total purchase was contributed

by the top five suppliers of the Group, and approximately 55%, 43%, 24% and 23% respectively of

the Group’s procurement was contributed by the largest supplier of the Group. Such top five suppliers

of the Group are Independent Third Parties.

Amongst the top five suppliers, one of the subsidiaries of Zhenhua Group and Full Wealth (Hong

Kong) Limited accounted to approximately 54.80% and 30.80% of the purchase of the Group for the

year ended 31 March 2007, approximately 42.90% and 23.98% for the year ended 31 March 2008 and

approximately 24.03% and 8.26% for the year ended 31 March 2009. Amongst the top five suppliers,

one of the subsidiaries of Zhenhua Group contributed approximately 23.44% of the purchase of the

Group for the six months ended 30 September 2009. The Directors confirm that neither the subsidiaries

of Zhenhua Group, Zhenhua Group nor Full Wealth (Hong Kong) Limited was connected party to the

Group as defined in the Listing Rules. The Directors also confirm that none of the Directors, their

respective associates or, so far as the Directors are aware, any person who owns more than 5% of the

issued share capital of the Company has any interest in any of the top five suppliers of the Group

during the Track Record Period.

QUALITY CONTROL

The Directors believe that the quality of the Group’s products is essential and has implemented

strict quality control programmes and has adopted certain quality assurance guidelines. As at the Latest

Practicable Date, the Group had a total of 15 quality control staffs working with different departments

of the Group to ensure that the quality control are properly implemented.

• procurement – the Group has established a component supplier approval committee,

comprising representatives of the development, quality control, operations and planning

and procurement departments, led by senior management. The committee is responsible

for compiling a list of approved component suppliers based on factors such as product

quality, cost and service. The committee regularly reviews such approved supplier list.

It is the Group’s policy to only source components from approved reputable and reliable

suppliers;

• application development and solution design – the Group’s engineers work closely with the

Group’s quality control team and component procurement and supply team, to ensure that

new products meet the quality assurance standards of the Group and of its customers;

- 97 -

BUSINESS


• assembly and production – the Group’s quality control team conducts quality control

tests as to safety and reliability at different stages of the production process; and

• finished products – after the final assembly and production stage, all of the finished

products are subject to quality control tests which include inspection of their external

appearance, testing of functions of the mobile handset or the PCBA and testing under

different environmental conditions.

INVENTORY MANAGEMENT

The Group’s inventory comprises mainly (a) raw materials such as mobile handset hardware

for production of mobile handset and assembly of PCB, and (b) finished goods such as PCBA,

mobile handset and mobile handset hardware such as LCDs and digital cameras. In terms of the raw

materials, the Group only keeps it as minimal level as possible so as to avoid any risks of piling up

of the raw materials.

The following table sets forth the components of the Group’s inventory as at the respective dates of the statement of financial position:

30 31 March September 2007 2008 2009 2009 US$ US$ US$ US$

Finished goods 2,073,209 6,011,276 2,735,741 1,106,080Raw materials – 459,451 859,205 5,764,276

Total 2,073,209 6,470,727 3,594,946 6,870,356

As shown above, the inventory level of the Group increased to approximately US$6.47 million

as at 31 March 2008 from approximately US$2.07 million as at 31 March 2007. Such increase in the

Group’s inventory level was mainly attributable to the substantial growth in the business of distribution

and marketing of mobile handsets and mobile handset components of the Group which led to the

increase its inventory level to fulfill the growing demand for the Group’s products, mobile handset

hardware and components. Also, the commencement of production operation of Tongqing has started

since August 2007 increased the inventory level of the Group in the period. Since then, the Group

maintains the level of raw materials that production efficiency is properly maintained.

Owing to the financial crisis in late 2008 resulting the economic downturn, the market demand

of the Group’s products decreased, which led to the Group’s decrease in its inventory level as a result

of the more prudent inventory management policy. As at 31 March 2009, the Group recorded an

inventory level amounted to approximately US$3.59 million, representing a decrease of approximately

44.44% comparing to inventory level as at 31 March 2008.

- 98 -

BUSINESS


The inventory turnover days during the Track Record Period are as follows:

For the financial year ended For the six months ended 31 March 30 September 2007 2008 2009 2008 2009

Inventory turnover days (Note 1) 21 23 14 7 25

Note:

(1) The inventory turnover days is based on the closing inventory divided by cost of goods sold during such period

and then multiplied by the number of days during such period.

During the Track Record Period, the inventory turnover days has been gradually increased from

approximately 7 days to approximately 25 days. The exceptional low inventory turnover days noted

for the six months ended 30 September 2008 and the financial year ended 31 March 2009 was due to

the prudent inventory management resulted from the global financial crisis in 2008.

The Group sets up a computerised inventory management system to record and update the ins

and outs and balance of inventory. In order to minimise the inventory risk, regular meetings among

various departments including sales and marketing, research and development, procurement and supply

and production are held to review and decide the weekly and monthly sales and production plans.

Procurement and supply teams also coordinate with suppliers to ensure on-time delivery of materials

and components. Regular inventory counts are also conducted by the Group.

INTELLECTUAL PROPERTY

The Group sells its mobile handset under the brand name “VIM” or in Chinese “偉恩”.

The application for registration of “VIM” text mark had been refused by the Hong Kong Trade

Marks Registry as the mark was considered to be indistinctive and descriptive. Such application was

refused also on the ground that the “VIM” text mark was identical to certain previously registered

trademarks, one of which was registered under the class of goods which the “VIM” text mark was also

intended to be covered and the applied-for goods and services of the “VIM” text mark were similar

to those of such registered marks.

The Directors considered that the impact on the refusal of the application for registration of

“VIM” text mark by the Hong Kong Trade Marks Registry is insignificant and would not have material

impact to the business of the Group as the Group’s mobile handsets in the brand name of “VIM” are

sold under the “VIM Logo” which, in view of the form of presentation, is substantially different

from the “VIM” text mark. The refusal of the application for registration of “VIM” text mark by the

Hong Kong Trade Marks Registry was due to an identical prior registration of the trade mark “VIM”,

which covered class 9 of computer hardware and computer software, computer hardware and software

for voice message applications, excluding goods relating to vendor independent messaging, registered

by another company. The products covered by such “VIM” text mark are not the same products the

- 99 -

BUSINESS


Group sold and therefore the legal advisor of the Company as to intellectual property laws advised

that third party claims for infringement of intellectual property right against the Group for selling

the mobile handsets under “VIM Logo” are unlikely to be successful.

As at the Latest Practicable Date, the Group has registered a total of 34 trademarks in Hong

Kong, the PRC, Singapore, USA, Philippines, India, Indonesia, Vietnam, Malaysia, South Africa,

European Union and Australia and has applied to registered a total of 13 trademarks in the PRC. In

the opinion of the PRC Legal Adviser, to the Directors’ knowledge, the Trademark Office of the State

Administration for Industry and Commerce of the PRC would usually take about 3 months to approve

a trademark application if it receives no objection from the public after gazette of the application.

As at the Latest Practicable Date, the Group has obtained 6 utility models and has submitted

33 invention applications and 4 utility model applications to the State Intellectual Property Bureau.

The Group has also obtained 15 software product registrations, and 4 computer software copyright

registration from National Copyright Administration of the PRC.

Details of the Group’s intellectual property rights are set out in the paragraph headed “Intellectual

property rights of the Group” in the section headed “Further Information about the Company and its

subsidiaries” in Appendix V in this prospectus.

INSURANCE AND PRODUCT LIABILITY

The Group does not own any office or production premises. The landlords are responsible for the insurance of the properties leased by the Group to carry out its business and production operations. The Group has taken insurance against damages (inclusive of fire damage) for the motor vehicles and machinery in its Tongqing production plant. Also, the Group does not maintain insurance policies for other fixed assets.

The Group does not maintain product liability insurance in respect of their products since it is not a common industry practice. The Group also does not maintain insurance for third party liability claims and disruptions to business operations. To mitigate the risk of product liability claims, the Group adopts stringent quality control measures throughout the various stages from product development to production in order to ensure that the designs and finished goods comply with the relevant standards imposed by the respective government authorities.

The Group participates in the social security system as required under the relevant PRC laws and regulations for its employees in the PRC. For the employees in Hong Kong, the Group maintains employee compensation insurance that includes work injury under the regulatory requirements in Hong Kong and subsidize the individual medical insurance.

After the listing in SGX-ST in November 2007, the Group also has an insurance scheme for its Directors and officers under the corporate governance requirement.

During the Track Record Period and up to the Latest Practicable Date, there has been no past occurrence of product liability claims, third party liability claims or disruptions to business operations.

- 100 -

BUSINESS


The Group will continue to closely monitor its exposures to various risks and take corresponding actions to mitigate such risks, such as maintaining appropriate insurance policies. In the event that there is material claim or damage or loss of assets that is uninsured, the financial results and financial position of its Group may be adversely affected. Please refer to the section headed “Risk Factors” of this prospectus for more details.

PROPERTIES

As at the Latest Practicable Date, the Group does not own any properties. However, the Group has leased 4 offices and 1 production premises with ancillary office and other facilities, as follows:

Location Use Gross Floor Area Expiry of Lease Lessor

Unit No. 5 on 6th Floor of Sales and 1,740 ft2 15 May 2010 Unigrade

Yen Sheng Centre, administration International

64 Hoi Yuen Road, Limited

Kwun Tong, Kowloon,

Hong Kong

Room 401, Building 14, R&D centre 1,132.46 m2 21 April 2013 深圳高新開發建設公司 West Part of Software Park and office Hi-Tech Park in the Second Road, Nanshan District, Shenzhen, the PRC

Unit No. 1206, Block A of Office 39.8 m2 31 July 2010 韋素芬 Jiazhaoye Centre, Shangbu South Road, Futian District, Shenzhen, the PRC

Unit No. 911 & 912, No. 800 R&D centre 247 m2 17 February 2010 上海軒潤日用禮品 Shangcheng Road, and office 有限公司 Pudong New District, Shanghai, the PRC

Levels 2 & 3 of Staff quarter 12,293 m2 1 March 2012 永光實業（深圳） Block A, Block B 有限公司 and Block C of Jingangshan Industrial District, Jiuwei Society Road, Xixiang Street, Baoan District, Shenzhen, the PRC

- 101 -

BUSINESS


Location Use Gross Floor Area Expiry of Lease Lessor

Level 1 of Block A, Staff canteen 3,117.6 m2 1 March 2012 永光實業（深圳） Jingangshan Industrial 有限公司 District, Jiuwei Society Road, Xixiang Street, Baoan District, Shenzhen, the PRC

Level 1 of Block 4, Production plant 3,200 m2 1 March 2012 永光實業（深圳） Jingangshan Industrial 有限公司 District, Jiuwei Society Road, Xixiang Street, Baoan District, Shenzhen, the PRC

Level 1 of Blocks 1, 2 and 3, Production plant 7,872 m2 1 March 2012 永光實業（深圳） Jingangshan Industrial and office 有限公司 District, Jiuwei Society Road, Xixiang Street, Baoan District, Shenzhen, PRC

Further particulars of the Group’s property interests are set out in the valuation certificate of

its property interest prepared by BMI Appraisals Limited, the text of which is set out in Appendix

III to this prospectus.

AWARDS AND ACCREDITATIONS

The following has set out some of the significant awards and accreditations that were granted in relation to the Group’s brand names or products up to the Latest Practicable Date:

Awards/accreditation Endorsing organisation Date

High-New Technology Science and Technology Bureau 29 June 2006 Enterprise certificate of Shenzhen Government

Shenzhen City’s Key Science and Technology 29 December 2008 Software Enterprise Bureau of Shenzhen Government

Certificate for China China Quality 24 April 2009 compulsory product Certification Centre certification

- 102 -

BUSINESS


ENVIRONMENTAL PROTECTION

The Group is subject to relevant PRC national and local environmental laws and regulations,

including but not limited to the following:

• Environment Protection Law of the PRC (effective on 26 December 1989);

• Law of Prevention and Treatment of Water Pollution of the PRC (as amended and effective

on 1 June 2008); and

• Law of Prevention and Treatment of Atmospheric Pollution of the PRC (effective on 1

September 2000).

COMPETITION

The Group offers its customers one stop service from product design to production of mobile

handset. The Group faces competition in the provision of solutions design and the services at the

various stages of the production process.

(a) Solutions design

The design, production and sale of mobile handset is a fast growing industry with rapid

advancement in technology and fast changing consumer preferences for functions and physical

appearance. These factors cause intense competition among the branded mobile handset

manufacturers and the solutions houses that provide the mobile handset designs. Solutions

houses compete principally on quality of design, cost effectiveness, time-to-market and general

service quality. A solutions house has to be superior in all these aspects, in order to sustain

its competitiveness.

The Group faces competition from domestic and overseas solutions houses. These competitors

may have relative advantages in terms of a longer operating history and thus an established

presence in the industry, technical and development know-how, rich financial resources and

manpower, sufficiently large business volume to obtain better terms from hardware supplier and

clientele with renowned mobile handset brand names that facilitates new client solicitation.

Nevertheless, the Group faces more competition from its domestic competitors than

overseas design solutions houses as the former have relative advantages in costs and familiarity

with the Chinese market. Among around 60 active mobile handset solution providers in the

PRC, the Group regards its direct competitor if (i) its existing customers are primarily local

PRC mobile handset vendors, operating in the mid range of the mobile handset market and (ii)

it is a one stop service solutions house located in the major PRC cities of Beijing, Shanghai

and Shenzhen, based on these criteria, the Group’s key domestic competitors include:

• Longcheer Holdings Limited, engages in the development of mobile handset

hardware, software, system testing and exterior design with total revenue of

RMB2.85 billion and total assets of RMB1.07 billion for the year ended 30 June

- 103 -

BUSINESS


2009. Its WCDMA export business is ranked the top three in the PRC and total

shipments of the company amounted to 11.8 million units in 2009. It has R&D

facilities in Shanghai, Beijing, Xi’an, Shenzhen and Singapore with 1,500 staffs

and 55 companies of customer base.

• China Techfaith Wireless Communication, engages in the design and production

of mobile handsets with total revenue of US$208.85 million and total assets of

US$220.06 million for the year ended 31 December 2008. It has 1,300 staffs, of

whom 1,170 are engineers. In February 2009, it launched nine new mobile handsets

models specifically for the 3G network operators in China, including China Unicom

and China Telecom.

• SIM Technology Group Limited, engages in the development of mobile handset,

wireless communication and LCD modules with total revenue of HK$1.93 billion

and total assets of HK$2.99 billion for the year ended 31 December 2008. It has

2,194 staffs, and launched 200 models and 37 mobile handset platforms with total

shipments amounted to 25.24 million units in 2008.

(b) Supply chain management

The Group also faces competition from domestic and overseas companies which specialise

in supply chain management and offer integrated service to the mobile handset industry. These

competitors may have relative advantages in terms of a longer operating history and thus an

established presence in the industry and clientele, rich financial resources and manpower. If

an increasing number of companies that offer supply chain management services to the mobile

handset industry also begin to provide design solutions in the PRC, its uniqueness as a one

stop service centre would be reduced.

The Group regards a competitor in the mobile handset products manufacturing and assembly industry in the PRC, if (i) it is an integrated provider of mobile handset components, modules manufacturing and assembly services with major manufacturing facilities in the PRC and (ii) the annual production capacity of mobile handset and components is not less than 10 million pieces. Based on these criteria, the Group considers that the competition among the competitors is intensive, as some of the competitors have greater manufacturing, financial, R&D or marketing resources or geographical reach. Nonetheless, the Group is strike to maintain its competitiveness by providing strong product development capabilities and manufacturing services, maintaining high quality, providing competitive prices and offering reliable delivery.

To the best knowledge and belief of the Directors having made all reasonable enquires, as at the Latest Practicable Date, neither the Controlling Shareholders nor the Directors had any interest in a business, apart from the Group’s business, which competes or is likely to compete, either directly or indirectly, with the Group’s business.

- 104 -

BUSINESS


LITIGATION

As at the Latest Practicable Date, none of any members of the Group is currently involved in or has been involved in any legal or arbitration proceedings of material importance and no litigation or claim of material importance is known to the Directors to be pending or threatened by or against any member of the Group.

ADOPTION OF INTERNAL CONTROL POLICY

In order to strengthen its compliance merchanism for relevant regulations and to enhance the strength and effectiveness of the Group’s corporate governance, the Group has taken and will take the following steps to incorporate the following internal control policy to ensure compliance with various applicable rules and regulations:

(a) distribution to and review by the Directors of detailed memorandum prepared by the legal advisor to the Company setting out the requisite on-going regulatory requirements and obligations of the Directors after Listing;

(b) training sessions attended by the Directors and senior management of the Group conducted by legal advisor to the Company on the on-going obligations and duties of a director of a company whose shares are listed on the Stock Exchange;

(c) the appointment of three independent non-executive Directors with experience in financial, accounting and legal industries respectively. The Company will be able to draw on their experience with respect to the compliance with applicable legal, regulatory and financial reporting requirements;

(d) the company secretarial team will have access to external professional retained or to be retained by the Group from time to time if applicable, including the compliance advisor, external legal counsel, auditors and other advisors as necessary and will report directly to the Board;

(e) the establishment of an audit committee which comprises the independent non-executive Directors who would, among other things, review the internal control systems and procedures for compliance with the relevant accounting, financial and Listing Rules requirements. Such audit committee has adopted a term of reference setting out in details its duties and obligations for ensuring compliance of regulatory requirements; and

(f) the appointment of SinoPac as the Company’s compliance advisor to advise the Company on compliance matters in accordance with Rule 3A.19 of the Listing Rules.

The Sponsor considers that the above corporate governance measures will enable the Group to strengthen its control environment both at the working level and at the monitoring level. The Sponsor are of the view that these measures, in addition to the standard measures employed by other newly listed companies, will provide a stronger foundation for the Group to more effectively identify and deal with compliance related matters and will provide assistance to the Directors in monitoring compliance of the Group with regulatory and legal requirements as a whole.

- 105 -

BUSINESS


During the due diligence process, the Sponsor has not identified any material matter which will raise their concern as to the competence, integrity and characters of the Directors nor as to their suitability to act as directors of the Company.

CONTINUING CONNECTED TRANSACTION

Having made all reasonable enquires, to the best knowledge, information and belief of the Directors, there is no continuing connected transaction between the Group and connected person as at the Latest Practicable Date.

Upon Listing, the Group will observe the following practices to govern and monitor its future transactions with its connected persons:

i. the independent non-executive Directors shall review the terms of the transactions entered into or proposed to be entered into between the Group and the connected persons;

ii. for any transactions entered into between the Group and the connected persons, in the case where the independent non-executive Directors consider that the transactions are not fair and reasonable or are not in the interests of the Company and Shareholders as a whole, they will recommend the revision of terms of the transactions;

iii. the Company will provide all necessary information to assist the independent non-executive Directors in making up its opinion and recommendation;

iv. the connected transactions shall be reviewed by the auditors and the compliance adviser of the Company on an annual basis and necessary suggestions shall be made to the Group;

v. all connected transactions will be subject to compliance with the requirements of Chapter 14A of the Listing Rules; and

vi. the Company’s interim and annual reports will contain summaries of the measures mentioned above in place in the relevant financial year and appropriate disclosure on how these measures have operated during the same period.

- 106 -

DIRECTORS, SENIOR MANAGEMENT AND STAFF


EXECUTIVE DIRECTORS

Wang Shih Zen (“Mr. Wang”), aged 49, is one of the Group’s Controlling Shareholders,

Chairman and chief executive of the Company. He joined the Group in 2005 and was appointed to

the Board on 1 February 2007. Mr. Wang is responsible for the strategy planning of the Group and

also leads both of the research and development team and the sales and marketing team.

After Mr. Wang joined the Group in 2005, the Group started to focus on research and development

of mobile handset solution and application business and recorded an increment in revenue from the

provision of mobile handset solution and application since the financial year ended 31 March 2006,

which was attributable to the extensive experience in telecommunication industry contributed by Mr.

Wang. In view of Mr. Wang’s business strategy, which lead to the expansion of the Group by exploring

higher profit margin business and entering into the high-end market, and his extensive experience in

telecommunication industry and management, Mr. Wang plays a key person to the Group’s success

and to be responsible to the execution of the business strategies of the Group and the day-to-day

management of the business of the Group.

Mr. Wang has extensive experience in the telecommunications industry obtaining a Bachelor of

Engineering degree from the James Cook University in North Queensland in 1984 and subsequently

a Master of Engineering degree from the University of New South Wales in 1987.

In 1998, Mr. Wang joined Neolink Communications Technology Limited (“Neolink”) which is

engaged in the sale of trunking services, as its chief executive officer and assisted to restructure the

private company for purposes of listing. Mr. Wang also led its research and development team since

1998. Mr. Wang subsequently joined Pine Technology Holdings Ltd., a company listed on the Growth

Enterprise Market of the Stock Exchange, as its executive vice president responsible for planning,

developing and managing its internet appliance division from 2000 to 2002. Thereafter, Mr. Wang

moved on to establish his own company, Moosik Ltd, a company engaged in the production and sale

of electronic devices. Mr. Wang invested in the Group in 2005 and has been in charge of strategising

and charting the Group’s directions. In September 2009, Mr. Wang ceased to be the director and

shareholder of Moosik Ltd. Mr. Wang has over 15 years of experience in the field of information

technology. Prior to joining the Group, Mr. Wang has held various senior management positions in

telecommunication companies.

In the three years preceding the Latest Practicable Date, Mr. Wang did not hold any directorship

in listed public companies or any other major appointments.

Wang Tao, aged 37, is one of the Group’s Controlling Shareholders, and is responsible for the

sales and marketing of the Group in distribution of mobile handsets components. She joined the Group

in 2002 and was appointed to the Board on 19 June 2007 and was last re-elected on 30 July 2008.

Ms. Wang Tao obtained a Bachelor of Engineering degree from the China University of Petroleum

in 1993. In 1995, Ms. Wang Tao entered into a joint venture with a business partner and established

a company engaged in the trading of electronics components and mobile accessories. Ms. Wang Tao

founded the Group in September 2002.

- 107 -



In the three years preceding the Latest Practicable Date, Ms. Wang Tao did not hold any directorship in listed public companies or any other major appointments.

Lu Shangmin (“Mr. Lu”), aged 46, is the Group’s Executive Director and is responsible for the financial management, and client solicitation, assessment and monitoring. He was appointed to the Board on 3 March 2009. Mr. Lu graduated from Anhui University of Finance and Economic (formerly known as Auhui Institute of Finance and Trade) with a bachelor degree of Economics in 1981. He was the Financial Controller of Shenzhen Yue Tai Hua Investments Limited from September 1997 to March 2007. Mr. Lu joined the Group in May 2007 as the Financial Controller of the Company before his appointment as an Executive Director in March 2009.

In the three years preceding the Latest Practicable Date, Mr. Lu did not hold any directorship in listed public companies or any other major appointments.

NON-EXECUTIVE DIRECTOR

David Lim Teck Leong (“Mr. Lim”), aged 53, was appointed as the Group’s Independent Director on 28 October 2008 and was redesignated to be a non-executive Director of the Group on 3 February 2010. Mr. Lim has been working in David Lim & Partners and is now a managing partner. Mr. Lim is the Commissioner for Oaths and Notary Public and a fellow member of the Singapore Institute of Directors, member of the Board of National Voluntary & Philanthropy Centre appointed by the Ministry of Community Development, Youth & Sports in 2007. He currently serves as an independent and non-executive director of Liang Huat Aluminium Limited, and Samudera Shipping Line Ltd. The Board will consider Mr. Lim as independent according to the Listing Manual, but for the purposes of the dual listing and the Share Offer, Mr. Lim has agreed to this redesignation.

Save as disclosed above, in the three years preceding the Latest Practicable Date, Mr. Lim did not hold any other directorships in listed public companies or any other major appointments.

INDEPENDENT NON-EXECUTIVE DIRECTORS

Chan Kam Loon (“Mr. Chan”), aged 49, was appointed as the Group’s Independent Director on 24 September 2007 and was last re-elected on 30 July 2008. Mr. Chan holds a Bachelor of Science (Economics) in Accounting and Finance degree from the London School of Economics and Political Science and is a qualified Chartered Accountant with the Institute of Chartered Accountant in England and Wales (ICAEW).

He currently runs his own management and consulting firm, Philip Chan Consulting Pte Ltd and also serves as an independent director of HUPSteel Limited, Jiutian Chemical Group Limited, China Gaoxian Fibre Fabric Holdings Ltd, Sarin Technologies Ltd and Megachem Limited.

Save as disclosed above, in the three years preceding the Latest Practicable Date, Mr. Chan did not hold any other directorships in listed public companies or any other major appointments.

Guo Yanjun (“Mr. Guo”), aged 56, was appointed as the Group’s Independent Director on 24 September 2007 and was last re-elected on 30 July 2008. Mr. Guo graduated with a Diploma in Law from the China People’s University in 1984.

- 108 -



He is also the director of several investment companies which also provide investment consultancy

services. Mr. Guo set up Long Apex Limited in December 2001, and subsequently established CNHK

Energy Limited (SAMOA) (focusing on the energy sector) in May 2006.

In the three years preceding the Latest Practicable Date, Mr. Guo did not hold any other

directorships in listed public companies or any other major appointments.

Lo Hang Fong (“Mr. Lo”), aged 46, was appointed as an Independent Director of the Company

on 3 February 2010. Mr. Lo joined the Group in November 2009 as an independent non-executive

director of Max Sunny. He graduated from the University of Bristol with a bachelor of law degree

in 1986. He is currently a partner of a law firm, Stevenson, Wong & Co. Mr. Lo has been admitted

as a solicitor to the High Court of Hong Kong since 1989. He is also admitted as a solicitor to the

Supreme Court of Singapore in 1995 and the Supreme Court of England and Wales in 1996. Mr. Lo is

currently an independent non-executive director of Mainland Headwear Holdings Limited and Bonjour

Holdings Limited, which are both companies listed on the Main Board of the Stock Exchange.

Save as disclosed above, in the three years preceding the Latest Practicable Date, Mr. Lo did

not hold any directorship in listed public companies or any other major appointments.

There are no other matters or information relating to the above Directors that need to be brought to

the attention of the Shareholders or to be disclosed pursuant to Rule 13.51(2) of the Listing Rules.

SENIOR MANAGEMENT

Shum Hoi Luen (“Mr. Shum”) is the Group’s chief financial officer and company secretary in

Hong Kong. Mr. Shum is a fellow member of The Hong Kong Institute of Certified Public Accountants.

Prior to joining the Group, Mr. Shum worked in an international accounting firm and a GEM board

listed company in Hong Kong. Mr. Shum joined the Group in August 2008.

Chen Ying (“Ms. Chen”) is the Group’s Chief Operations Officer and is in charge of administration,

procurement and support operation. Ms. Chen joined Zeus as an administration manager in January

2005 and joined the Group in May 2006 when the Group acquired Zeus.

Wang Bing Bing is the Group’s R&D manager and is in charge of the ID/MD areas and directly

reports to the Group’s R&D Head. Prior to joining the Group, he was working as a manager of

mechanical department of a telecommunication company in the PRC since 2005 of which he earned

the working experience in the design area of the mobile handset and electronics industry. Mr. Wang

Bing Bing joined the Group in December 2007.

Zhou Jian (“Mr. Zhou”) is the Group’s PM manager and is in charge of the overall product and project management and directly reports to the Group’s R&D Head. Prior to joining the Group, Mr. Zhou was engaged as supervisor of R&D division in a mobile handset producer in the PRC since 2005 of which he earned the working experience in the R&D area and production and material, logistics control and overall project management in mobile handset and electronics industry. Mr. Zhou joined the Group in December 2007.

- 109 -



COMPANY SECRETARY IN HONG KONG AND IN SINGAPORE

Mr. Shum is the company secretary of the Company in Hong Kong. Particulars of Mr. Shum Hoi Luen are set out in the paragraph headed “Senior management” above in this section.

Busarakham Kohsikaporn (“Ms. Kohsikaporn”) and Shirley Lim Keng San (“Ms. Lim”) are the joint company secretaries of the Company in Singapore.

Ms. Kohsikaporn, is one of the joint company secretaries of the Company in Singapore. She is a Practising Chartered Secretary under the employment of KCS Corporate Services Pte Ltd, a professional services firm. Ms. Kohsikaporn is a Fellow of SAICSA and ICSA, UK.

Ms. Lim, is one of the joint company secretaries of the Company in Singapore. She is a Practising Chartered Secretary under the employment of KCS Corporate Services Pte Ltd, a professional services firm. Ms. Lim is a Fellow of SAICSA and ICSA, UK.

DIRECTORS AND SENIOR MANAGEMENT REMUNERATION

The remuneration committee will regularly review and determine from time to time the remuneration and compensation of the Directors and the senior management of the Group.

For the three years ended 31 March 2009 and the six months ended 30 September 2009, the aggregate remuneration paid to the Directors amounted to approximately US$27,000, US$76,000, US$127,000 and US$104,000, respectively.

STAFF

As at the Latest Practicable Date, the Group had a total of 524 full-time employees. The following table sets forth the breakdown of its employees by functions:

Total

Research and Development 60Management and Administration 41Sales and Marketing 21Finance and Accounting 16Procurement and Supply 26Production 15Quality Assurance 15

Total 194

The Directors are of the view that the Group has maintained a good relationship with its staff.

The Group has not, in the past, experienced any disruption of its operations due to labour disputes.

- 110 -



COMPLIANCE ADVISER

Pursuant to the Listing Rules, the Company has appointed SinoPac Securities (Asia) Limited

as its compliance adviser to assist and advise the Company in connection with the Listing Rules and

applicable laws, rules, codes and guidelines.

The compliance adviser will advise the Company on the following matters:

• the publication of any regulatory announcement, circular or financial report;

• where a transaction, which might be a notifiable or connected transaction (as defined

under the Listing Rules), is contemplated, including share issues and share repurchases;

and

• where the Stock Exchange makes an inquiry of the Company regarding unusual movements

in the price and/or trading volume of the Shares.

The appointment of SinoPac Securities (Asia) Limited as the Company’s compliance adviser

will commence on the Listing Date and end on the date on which the Company complies with Rules

13.46 of the Listing Rules with respect to the Company’s financial results for the first full year

commencing after the Listing Date or the date on which such agreement is terminated pursuant to

the terms thereof, whichever is the earlier.

- 111 -

CORPORATE GOVERNANCE



The Directors recognise the importance of incorporating elements of good corporate governance

in the management structures and internal control procedures of the Group so as to achieve effective

accountability.

In accordance with the requirements of the Listing Rules, the Company has established an audit

committee in compliance with the Code on Corporate Governance Practices as set forth in Appendix 14

to the Listing Rules and appointed a qualified accountant to oversee the financial reporting procedures

and internal controls of the Group so as to ensure compliance with the Listing Rules.

The Company has adopted a system of corporate governance.

The Company is committed to the view that the Board should include a balanced composition of

executive and non-executive Directors (including independent non-executive Directors) so that there is

a strong independent element on the Board, which can effectively exercise independent judgement.

The Company is also committed to the view that the independent non-executive Directors should

be of sufficient caliber and number for their views to carry weight. The independent non-executive

Directors, details of whom are set out in the section headed “Directors, senior management and staff”,

are free of any business or other relationship which could interfere in any material manner with the

exercise of their independent judgment.

Pursuant to the Code on Corporate Governance Practices as set out in Appendix 14 of the

Listing Rules, there should be a clear division of responsibilities of management of the Board on

the one hand and the day-to-day management of the Group’s business on the other hand to ensure a

balance of power and authority, so that power is not concentrated in any individual. The roles of the

chairman of the Company and the CEO should be separated and should not be performed by the same

individual. Mr. Wang Shih Zen serves as the chairman of the Company while he is also the CEO of

the Company since 2007. Since Mr. Wang has extensive experience in telecommunication industry

and strong contribution to the Group in research and development of mobile handset solution and

application business, Mr. Wang is appointed to be in charge of leading the management in the day-

to-day operations of the Group as the chief executive officer of the Group during the Track Record

Period.

On the other hand, Mr. Wang was appointed as the chairman of the Company since the listing

of the Shares on SGX-ST and is responsible for business strategic planning of the Group and regular

communication among the Directors. In such regards, Mr. Wang is the suitable person and he is

competent to act as both the chairman and chief executive officer of the Group. The Directors believe

that the existing management structure will provide the Group the effectiveness and efficiency in

management and implementation of the business plan, which may lead to the Group’s success. The

Board will continue to review the current management structure of the Group from time to time and

will make necessary changes when appropriate.

- 112 -



Pursuant to the Code on Corporate Governance Practices as set out in Appendix 14 of the

Listing Rules, the terms of the appointment for independent non-executive directors should have a

fixed term. The independent non-executive directors are appointed subject to retirement by rotation

and re-election at the annual general meeting of the Company in accordance with the provision of

the New Bye-laws.

The Directors are of the view that there are sufficient safeguards and checks to ensure that the

process of decision-making by the Board is independent and based on collective decision-making

without the Controlling Shareholders being able to exercise considerable concentration of power or

influence.

The New Bye-laws also provide that each Director shall retire from office at least once every

three years. A retiring Director shall be eligible for re-election.

Pursuant to the Rule 221 of the Listing Manual, a foreign issuer must have at least two

independent directors, resident in Singapore. After the re-designation of Mr. David Lim Teck Leong as

non-executive Director on 3 February 2010, the Company only has one independent Director resident

in Singapore. The Board will appoint another independent director who shall reside in Singapore in

due course to re-comply with the Listing Manual.

Audit committee

The Company established the audit committee on 24 September 2007 with written terms of

reference in compliance with the Code on Corporate Governance Practices as set forth in appendix 14

to the Listing Rules. The primary duties of the audit committee include the review and supervision

of the financial reporting processes and internal control systems of the Group. Currently, Mr. Chan

Kam Loon, Mr. Guo Yanjun and Mr. Lo Hang Fong, all being independent non-executive Directors,

and Mr. David Lim Teck Leong, being non-executive Director are members of the audit committee.

Remuneration committee

The Company established the remuneration committee on 24 September 2007 with written

terms of reference. The primary duties of the remuneration committee include reviewing the terms

of remuneration packages, determining the award of bonuses. The remuneration committee has five

members comprising Mr. Guo Yanjun, Mr. Chan Kam Loon, Mr. Lo Hang Fong, Mr. David Lim Teck

Leong and Mr. Wang Shih Zen, three of whom are independent non-executive Directors.

Nominating committee

A nominating committee was established by the Company on 24 September 2007 with written

terms of reference. The primary duties of the nominating committee are to make recommendations to

the Board on the appointment of Directors and the management of the Board succession. The members

of the nominating committee are Mr. Lo Hang Fong, Mr. Chan Kam Loon, Mr. Guo Yanjun, Mr. David

Lim Teck Leong and Mr. Wang Shih Zen.

- 113 -

CONTROLLING SHAREHOLDER AND SUBSTANTIAL SHAREHOLDERS


SUBSTANTIAL SHAREHOLDERS

So far as the Directors are aware, immediately after the completion of the Share Offer, the

following person who will have interests or short positions in the Shares or underlying Shares which

would fall to be disclosed under provision of Division 2 and 3 of Part XV of the SFO and would

represent 5% or more of the share capital of the Company.

Approximate Number of percentage Shares directly or of the Shares indirectly held in issue effectively immediately after held immediately after the completion of the the completion of theName Share Offer Share Offer

Wise Premium Limited* 168,110,250 28.23%

Wang Tao 97,206,500 16.32%

* Wise Premium Limited is 100% owned by Wang Shih Zen.

So far as the Directors are aware, immediately after the completion of the Share Offer, there are

no other persons directly or indirectly interested in five per cent, or more of the voting power at any

general meeting of the Company, apart from the Substantial Shareholder and Controlling Shareholder

referred to above.

- 114 -

SHARE CAPITAL


SHARE CAPITAL

The Company’s authorised share capital and issued share capital immediately after the completion

of the Share Offer will be as follows:

Authorised share capital:

US$

1,250,000,000 Shares 10,000,000

Issued share capital:

US$

[•••] [•••]

GENERAL MANDATE GIVEN TO THE DIRECTORS TO ISSUE SHARES

At the annual general meeting of the Company held on 30 July 2009, the Shareholders approved

the resolution pursuant to which authority was given to its Directors to issue Shares whether by

way of rights, bonus or otherwise, and/or make or grant offers, agreements or options (collectively,

“Instruments”) that might or would require Shares to be issued, including but not limited to the creation

and issue of (as well as adjustments to) warrants, debentures or other instruments convertible into

Shares at any time and upon such terms and conditions and to such persons as the Directors may, in

their absolute discretion, deem fit provided that the aggregate number of Shares (including Shares to

be issued in pursuance of Instruments made or granted pursuant to this resolution) does not exceed

50% of the total number of issued Shares (excluding treasury shares) at the time of the passing of

this resolution, of which the aggregate number of Shares and convertible securities to be issued other

than on a pro rata basis to all shareholders of the Company shall not exceed 20% of the total number

of issued Shares (excluding treasury shares). Unless revoked or varied by the Company in general

meeting, such authority shall continue in force (i) until the conclusion of the Company’s next annual

general meeting or the date by which the next annual general meeting of the Company is required by

law to be held, whichever is earlier or (ii) in the case of Shares to be issued in accordance with the

terms of convertible securities issued, made or granted pursuant to this resolution, until the issuance

of such Shares in accordance with the terms of such convertible securities share issue (“General

Mandate”).

For the purpose of determining the aggregate number of Shares that may be issued under the

authority granted above, the total number of issued Shares (excluding treasury shares) shall be based on

the total number of issued Shares (excluding treasury shares) as at the date of passing of the resolution,

after adjusting for: (i) new Shares arising from the conversion or exercise of convertible securities, (ii)

new Shares arising from exercising share options outstanding or subsisting at the time this resolution

is passed, and (iii) any subsequent bonus issue, consolidation or subdivision of Shares.

- 115 -

SHARE CAPITAL


Pursuant to the Listing Rules, the Listing Manual and the New Bye-laws, the maximum aggregate

number of Shares and convertible securities of the Company (other than on a pro rata basis to all

Shareholders) which may be issued other than on a pro rata basis under the general mandate before

the next annual general meeting of the Company is 99,514,732 Shares, representing 20% of the issued

share capital of the Company as at the date of grant of such general mandate.

On 24 September 2009, the Company entered into eight subscription agreements with eight

independent subscribers respectively for the issue and allotment by the Company to such subscribers

of the Subscription Shares. The Directors utilised part of the General Share Issue Mandate and the

Subscription Shares were alloted and issued to the eight subscribers on 8 October 2009. Please refer

to “share placement” in the section “Business” of this prospectus for further retails of the share

placement.

For further details of this general mandate, please refer to the paragraph headed “Resolutions

of the Shareholders passed at the Company’s annual general meeting held on 30 July 2009” in the

section headed “Further information about the Company and its subsidiaries” in Appendix V to this

prospectus.

GENERAL MANDATE GIVEN TO THE DIRECTORS TO REPURCHASE SHARES

At the special general meeting of the Company held on 11 August 2009, the Directors have

been granted a general unconditional mandate (the “Share Repurchase Mandate”) to exercise all the

powers of the Company to repurchase Shares in the amount of not more than 10% of the issued share

capital of the Company as at the date of the grant of Share Repurchase Mandate. For further details of

the Share Repurchase Mandate, please refer to the paragraph headed “Resolutions of the Shareholders

passed at the Company’s special general meeting held on 11 August 2009” in the section headed

“Further information about the Company and its subsidiaries” in Appendix V to this prospectus.

The Share Repurchase Mandate only relates to repurchases made on the SGX-ST and the Stock

Exchange, and which are in accordance with all applicable laws and the requirements of the Listing

Manual, the Listing Exchange and the terms of the Share Repurchase Mandate.

The Share Repurchase Mandate will remain in effect until whichever is the earliest of:

(i) the conclusion of the next annual general meeting of the Company;

(ii) the date by which the next annual general meeting is required to be held; and

(iii) the date on which the purchases or acquisitions of Shares pursuant to the Share Repurchase

Mandate are carried out to the full extent mandated.

However, as the Share Repurchase Mandate is not in compliance with the requirements under

the Listing Rules, the Share Repurchase Mandate will not be exercised by the Directors after the

Listing.

- 116 -

SHARE CAPITAL


DEALINGS IN THE SHARES PRIOR TO LISTING

According to Rule 9.09 of the Listing Rules, there must be no dealing in the securities for

which listing is sought by any connected person of the issuer from the time of submission of the

formal application for listing until the listing is granted. In the context of a dual primary listing of

a widely held, publicly traded company, the Company has no control over the investment decisions

of its Shareholders (other than the Controlling Shareholders and their respectively associates). The

Company has applied for, and the Stock Exchange has granted, a waiver from strict compliance with

Rule 9.09 of the Listing Rules which restricts such dealings in the Shares prior to Listing. Please

refer to the paragraph headed “Dealings in the Shares prior to Listing” in the section headed “Waivers

from strict compliance with the Listing Rules” in this prospectus for details of the waiver.

- 117 -

FINANCIAL INFORMATION


You should read the following discussion and analysis of the Company’s financial condition and

results of operations together with the combined financial statements as at and for each of the years

ended 31 March 2007, 2008 and 2009, and the accompanying notes included in the accountants’

report set out in Appendix I to this prospectus. The accountants’ report has been prepared in

accordance with International Accounting Standards. Potential investors should read the whole

of the accountants’ report set out in Appendix I to this prospectus and not rely merely on the

information contained in this section. The following discussion and analysis contains forward-

looking statements that involve risks and uncertainties. In evaluating the business of the Group,

please refer to the section headed “Risk Factors” in this prospectus.

TRADING RECORD OF THE GROUP DURING THE TRACK RECORD PERIOD

The following table is a summary of the Group’s audited consolidated results during the Track

Record Period, as extracted from the accountants’ report as set out in Appendix I to this prospectus.

Potential investors should read this section in conjunction with the Accountants’ Report as set out in

Appendix I to this prospectus and not rely merely on the information contained in the section. The

combined financial information as of and for the six months ended 30 September 2008 has not been

audited.

- 118 -



Consolidated Income Statements

For the financial year ended For the six months ended 31 March 30 September 2007 2008 2009 2008 2009 (unaudited) US$ US$ US$ US$ US$

Revenue 46,261,331 119,594,116 103,623,852 72,848,930 54,780,243Cost of goods sold (35,836,026 ) (103,419,592 ) (95,116,448 ) (66,726,032 ) (49,873,560 )

Gross profit 10,425,305 16,174,524 8,507,404 6,122,898 4,906,683

Other income 38,578 576,463 1,256,790 580,060 244,639Selling and distribution costs (6,913 ) (1,309 ) (47,291 ) (15,428 ) (12,239 )Administrative expenses (1,993,813 ) (5,773,361 ) (5,103,964 ) (2,709,373 ) (2,606,322 )

Profit from operations 8,463,157 10,976,317 4,612,939 3,978,157 2,532,761

Finance costs (139,236 ) (792,127 ) (543,701 ) (211,118 ) (183,899 )Share of profit of a jointly controlled entity 999,800 743,595 434,886 446,146 –

Profit before tax 9,323,721 10,927,785 4,504,124 4,213,185 2,348,862

Income tax expense (446,076 ) (810,000 ) (593,608 ) (308,008 ) (347,500 )

Profit for the year/period 8,877,645 10,117,785 3,910,516 3,905,177 2,001,362

Profit for the year/period attributable to: Owners of the Company 8,948,047 10,180,710 3,959,401 3,936,993 2,001,362 Minority interests (70,402 ) (62,925 ) (48,885 ) (31,816 ) –

8,877,645 10,117,785 3,910,516 3,905,177 2,001,362

Dividends

Interim 257,069 – – – –

Final 2,200,000 2,040,052 – – –

Earnings per share Basic (US cents) (Note) 2.18 2.31 0.80 0.79 0.40

Note:

1. The earnings per Share has not taken into account of the 20,000,000 new Shares issued on 8 October 2009 pursuant to the subscription agreements dated on 24 September 2009.

- 119 -



PRINCIPAL CONSOLIDATED INCOME STATEMENTS COMPONENTS

The following is an overview of the major revenue and expense components contributing to the

audited trading record of the Group during the Track Record Period:

Revenue

The revenue of the Group is mainly derived from the Solution Segment, the Assembly Segment

and the Distribution and Marketing Segment.

Referring to the revenue breakdown by business segment of the Group as set out in the table

below, the revenue contribution from the Solution Segment, in terms of product mix, decreased

from approximately 19.96% for the financial year ended 31 March 2007 to approximately 10.13%

for the financial year ended 31 March 2008 and then further decreased to approximately 7.03% for

the financial year ended 31 March 2009. The decrease in the revenue contribution from the Solution

Segment, in terms of product mix, is mainly due to the fact that the Group started its assembly

operations by Tongqing during the financial year ended 31 March 2008 and it further enhanced the

revenue contribution from the Assembly Segment, in terms of product mix, for the financial year

ended 31 March 2009, after its initial stage. As a result, the revenue contribution of the Assembly

Segment, in terms of product mix, increased significantly from approximately 8.03% for the financial

year ended 31 March 2008 to approximately 19.72% for the financial year ended 31 March 2009. Such

increase in the revenue contribution from the Assembly Segment, in terms of product mix, for both

of the financial years ended 31 March 2008 and 31 March 2009, further dragged down the revenue

contributions from both of the Solution Segment and the Distribution and Marketing Segment, in

terms of product mix. The revenue contribution from the Distribution and Marketing Segment, in

terms of product mix, which was mainly at the request from the customers for the integration services

for assembly purposes as a result of provision of a one-stop solution service to the customers from

product development to production support, increased from approximately 80.04% for the financial

year ended 31 March 2007 to approximately 81.84% for the financial year ended 31 March 2008 and

then decreased to approximately 73.25% for the financial year ended 31 March 2009. The increase

in the Distribution and Marketing Segment, in terms of product mix, for the financial year ended

31 March 2008 was mainly due to the growth of the mobile handset industry. The decrease in the

Distribution and Marketing Segment, in terms of product mix, for the financial year ended 31 March

2009 was mainly due to the weakened consumer market in the PRC after the outbreak of the global

financial crisis in late 2008.

The Group recorded a prominent increase in its revenue owing to the global booming economy

noted during the financial year ended 31 March 2008. Although the Group established Tongqing as the

Group’s production plant for assembly of mobile handset and SMT of PCB and the Group successfully

launched its first mobile handset under its brand during the financial year ended 31 March 2009, the

Group recorded a downturn in its business due to the economic turmoil resulting from the financial

crisis in late 2008. The revenue of the Group slightly dropped when comparing the results of the

financial year ended 31 March 2008 to the one of the financial year ended 31 March 2009.

- 120 -



The revenue contribution from the Solution Segment, in terms of product mix, decreased from

approximately 5.55% for the six months ended 30 September 2008 to approximately 3.44% for the

six months ended 30 September 2009. The slight decrease was due to the overall change of product

mix pattern noted in the current period when compared to the six months ended 30 September 2008.

The revenue contribution from the Assembly Segment, in terms of product mix, increased from


six months ended 30 September 2009. Such increase was explained in detail in the above paragraph.

As the general demand for the Group’s one-stop solution service from product development to

production was still weak for the six months ended 30 September 2009, the revenue contribution

from the Distribution and Marketing Segment, in terms of product mix, decreased from approximately

76.70% for the six months ended 30 September 2008 to approximately 68.23% for the six months

ended 30 September 2009.

The following table shows the breakdown of the revenue of the Group by business activities

during the Track Record Period:

For the financial year ended For the six months ended 31 March 30 September 2007 2008 2009 2008 2009 (unaudited)

US$ % US$ % US$ % US$ % US$ %


Assembly Segment – – 9,603,391 8.03 20,437,043 19.72 12,933,464 17.75 15,520,980 28.33


Total 46,261,331 100 119,594,116 100 103,623,852 100 72,848,930 100 54,780,243 100

The following table shows the breakdown of the Group’s revenue by geographical locations during the Track Record Period:

For the financial year ended For the six months ended 31 March 30 September 2007 2008 2009 2008 2009 (unaudited) US$ % US$ % US$ % US$ % US$ %

The PRC except Hong Kong 43,874,807 94.84 106,763,743 89.27 88,399,329 85.31 61,720,455 84.72 43,791,302 79.94

Hong Kong 2,386,524 5.16 12,830,373 10.73 15,224,523 14.69 11,128,475 15.28 10,988,941 20.06

46,261,331 100 119,594,116 100 103,623,852 100 72,848,930 100 54,780,243 100

- 121 -



The major business activities of the Group were conducted in the PRC during the Track Record Period, accounting for over 79% of the total revenue. Most of the revenue generated from Hong Kong was derived from the Distribution and Marketing Segment in Hong Kong. The revenue generated from Hong Kong has been rising over the Track Record Period and reached to approximately 20.06% for the six months ended 30 September 2009 from approximately 5.16% of the Group’s revenue for the year ended 31 March 2007 as a result of the increase in the spread of the geographical client base during the Track Record Period.

Cost of goods sold

The main components of the cost of goods sold include cost of services rendered and cost of inventories sold. The following table shows the breakdown of the cost of goods sold of the Group during the Track Record Period:

For the financial year ended For the six months ended 31 March 30 September 2007 2008 2009 2008 2009 (unaudited) US$ % US$ % US$ % US$ % US$ %

Cost of services rendered Depreciation of property, plant and equipment – – 359,816 0.35 873,091 0.92 331,721 0.50 377,106 0.76 Staff costs 914,373 2.55 1,304,652 1.26 2,264,251 2.38 1,249,618 1.87 1,056,272 2.12 Operating lease charges in respect of land and buildings – – 235,867 0.23 378,877 0.40 189,446 0.28 189,446 0.38 Amortisation of intangible assets – – – – – – – – 416,666 0.83 Other manufacturing overheads 422,434 1.18 1,153,782 1.11 2,025,516 2.13 670,692 1.01 520,401 1.04

1,336,807 3.73 3,054,117 2.95 5,541,735 5.83 2,441,477 3.66 2,559,891 5.13

Cost of inventories sold 34,499,219 96.27 100,365,475 97.05 89,574,713 94.17 64,284,555 96.34 47,313,669 94.87

Total 35,836,026 100 103,419,592 100 95,116,448 100 66,726,032 100 49,873,560 100

The largest component of the cost of goods sold is cost of inventories sold arising from (i) the cost of the mobile handset and mobile handset components incurred for the Distribution and Marketing Segment; and (ii) the cost of raw materials and components used for the Assembly Segment. The cost of inventories sold represented more than 94% of the total cost of goods sold during the Track Record Period.

The remaining component of the cost of goods sold is cost of services rendered mainly arising from the staff costs for the Solution Segment and other manufacturing overheads for the Solution Segment and the Assembly Segment.

- 122 -



Gross profit and gross profit margin

The following table shows the breakdown of the Group’s gross profit and gross profit margin by business activities during the Track Record Period:

Gross profit

For the financial year ended For the six months ended 31 March 30 September 2007 2008 2009 2008 2009 (unaudited) US$ US$ US$ US$ US$

Solution Segment 7,898,749 10,587,393 5,321,618 3,228,501 1,513,555

Assembly Segment – 1,097,032 1,660,178 886,458 2,006,872

Distribution and Marketing Segment 2,526,556 4,490,099 1,525,608 2,007,939 1,386,256

Total 10,425,305 16,174,524 8,507,404 6,122,898 4,906,683

Gross profit margin

For the financial year ended For the six months ended 31 March 30 September 2007 2008 2009 2008 2009 (unaudited) % % % % %

Solution Segment 85.53 87.43 73.01 79.88 80.23

Assembly Segment – 11.42 8.12 6.85 12.93

Distribution and Marketing Segment 6.82 4.59 2.01 3.59 3.71

Overall 22.54 13.52 8.21 8.40 8.96

It is obvious that the Solution Segment rendered the highest gross profit margin ranging

from approximately 73.01% to approximately 87.43% during the Track Record Period. The

gross profit margin of the Solution Segment remained stable during the Track Record Period,

except for the financial year ended 31 March 2009. The drop of the gross profit margin for

the Solution Segment for the financial year ended 31 March 2009 was due to the decrease in

demand of the mobile handset solution services of the Group caused by the economic turmoil

since 2008, in which the cost of services mainly comprised with staff costs which are relatively

independent from the sales level.

- 123 -



The gross profit margin of Assembly Segment ranged from approximately 6.85% to

approximately 12.93% during the Track Record Period. The decrease in gross profit margin of

the Assembly Segment from the financial year ended 31 March 2008 to the financial year ended

31 March 2009 was due to the increase in the unit production cost for the Assembly Segment.

The increase in gross profit margin of the Assembly Segment from the financial year ended 31

March 2009 to the six months ended 30 September 2009 was due to the increase in contribution

from new revenue contributors which generated a higher gross profit margin.

The gross profit margin of the Distribution and Marketing Segment generated the

lowest gross profit margin during the Track Record Period. As the Distribution and Marketing

Segment is one of the integrated services provided by the Group to customers for facilitating

the transactions with the Group’s customers, the selling price under this business segment has

been negotiated on an arm’s length basis with such background and the gross profit margin

derived from this business segment is therefore very minimal.

Other income

Other income mainly comprises interest income, net foreign exchange gains, net fair value

gains on derivative financial instruments and sundry income. Set forth below is the breakdown of the

Group’s other income:


US$ US$ US$ US$ US$

Interest income 21,904 106,134 178,480 96,448 168,672

Foreign exchange gains, net – 428,796 207,377 374,095 –

Fair value gains on derivative

financial instruments, net – – 870,933 109,517 75,967

Sundry income 16,674 41,533 – – –

Total 38,578 576,463 1,256,790 580,060 244,639

Interest income is derived from the bank balances and time deposits.

Net foreign exchange gains are derived from (a) the difference between the actual rate and the

book rate of the foreign monetary item when such foreign monetary item settled; and (b) translation

differences arising from monetary items in foreign currencies. Such net foreign exchange gains were

considered to be generated from the ordinary and usual course of the Group’s businesses.

- 124 -



Net fair value gains on derivative financial instruments are derived from the realised and

unrealised fair value gains on the foreign exchange forward contracts entered by the Group during

the Track Record Period. The foreign exchange forward contracts were entered into US dollars/RMB

and US dollars/HK dollars which are the major currencies of the Group used for its daily operations.

Since both sales and cash receipts cycle and purchases and cash disbursements cycle were the critical

business processes of the Group, the foreign exchange forward contracts were all used for hedging

purpose and therefore such net fair value gains on derivative financial instruments were all generated

from the ordinary and usual course of the Group’s businesses.

Selling and distribution costs

Selling and distribution costs represent mainly advertisement and promotion cost for the Group’s

products and were maintained at an immaterial level during the Track Record Period, which was due

to the Group’s strategy to focus on establishing business connection with selected customers in the

PRC by providing products and services of high quality instead of incurring unnecessary promotion

and advertising costs.

Administrative expenses

Administrative expenses mainly comprise salaries, bonuses, allowances and retirement benefit

scheme contributions of administrative and management personnel including remuneration of directors,

amortisation of intangible assets, depreciation, rental expenses and general administrative related

expenses. For the three financial years ended 31 March 2007, 2008 and 2009 and the six months

ended 30 September 2008 and 2009, administrative expenses were approximately US$1.99 million,

US$5.77 million, US$5.10 million, US$2.71 million and US$2.61 million respectively.

Finance costs

The Group’s finance costs mainly represent interest on bank loans and bank overdraft, finance

lease charges and interest on convertible loans. The increase in interest expenses on convertible

loans from approximately US$83,000 for the financial year ended 31 March 2007 to approximately

US$420,000 for the year ended 31 March 2008 was mainly due to the fact that the Company issued

additional convertible loans of S$7 million during the financial year ended 31 March 2008, which in

turn incurred additional interest expenses.

- 125 -



Under the International Accounting Standard, as at the date of issue of the convertible loan,

the fair value of the derivative component of the convertible loan is determined at using an option

pricing model; and this amount is carried as a derivative liability until extinguished on conversion or

redemption. The remainder of the proceeds is allocated to the liability component and is carried as

a liability at amortised cost using the effective interest method until extinguished on conversion or

redemption. The derivative component is measured at fair value with gains and losses recognised in the

income statement. As such, the recognition of the finance cost is in accordance with the International

Accounting Standard. The following table sets out the breakdown of the Group’s finance costs during

the Track Record Period:


US$ US$ US$ US$ US$

Interest on bank loans

and bank overdraft 56,485 158,075 341,672 122,831 125,940

Finance lease charges – 177,110 174,920 88,287 56,638

Interest on convertible loans 82,751 420,426 – – –

Others – 36,516 27,109 – 1,321

Total 139,236 792,127 543,701 211,118 183,899

Share of profit of a jointly controlled entity

Share of profit of a jointly controlled entity mainly comprised share of profit contributed by the

Group’s jointly controlled entity, Zhenhua Obee. On 22 May 2009, the Group entered into the sale and

purchase agreements for the disposal of the 42% shareholding interests in Zhenhua Obee. Completion

of the disposal is expected to be on or before May 2010. There has been no share of profit of it since

January 2009 under the terms and conditions of the aforementioned sale and purchase agreements.

- 126 -



Income tax expense

The income tax expense was calculated at the rates of tax prevailing in the countries or

jurisdictions in which the Group operated, based on existing legislation, interpretations and practices

in respect thereof. The following table sets forth the applicable income tax rates for the Group during

the Track Record Period:

For the financial year ended For the six months ended Notes 31 March 30 September 2007 2008 2009 2008 2009 (unaudited)

The Company (a) – – – – –

CCDH (b) 15% 15% or 18% 18% or 20% 18% 20%

CCDH Tech (c) – – – – –

Elite Link (d) 17.5% 17.5% 16.5% 16.5% 16.5%

Elastic Glory (c) – – – – –

Finet Enterprises (c) – – – – –

Finet Technology (e) – – – – –

Max Sunny (d) 17.5% 17.5% 16.5% 16.5% 16.5%

PhoneLink (f) 15% 15% or 18% 18% or 20% 18% 20%

State Tech (c) 17.5% 17.5% 16.5% 16.5% 16.5%

Zeus (g) exempted exempted or 9% 9% or 10% 9% 10%

Tongqing (h) exempted exempted exempted exempted exempted

Notes:

(a) The Company was incorporated in Bermuda and did not generate any assessable profits and was therefore not subject to profits tax in its jurisdiction. The Company is not subject to any tax in other jurisdiction.

(b) CCDH is a Foreign Investment Enterprises (“FIE”) established in one of the Special Economic Zones. Under the Income Tax Law of PRC for FIE and Foreign Enterprises, the income tax on enterprises with foreign investment established in Special Economic Zones shall be levied at the reduced rate of 15%. After the new PRC enterprise income tax law passed by the Tenth National People’s Congress on 16 March 2007, the new tax law had been effective from 1 January 2008. As such, the tax rate, under the grandfathering of incentives, changed to 18% and 20% for the year ended 31 December 2008 and year ended 31 December 2009, respectively. CCDH has not yet started to make profit since its incorporation and was disposed of on 30 June 2009.

(c) CCDH Tech, Elastic Glory, Finet Enterprises and State Tech

These companies were incorporated in BVI, which is a tax heaven country where no tax is levied on the profits generated by these companies in BVI.

During the Track Record Period, certain profitable operations of the Group were carried out by State Tech. The management had made provisions for the estimated assessable profits that might be subject to Hong Kong profits tax for prudence sake. In the event that such profits were subject to Hong Kong profits tax, the net profit of the Group would not be materially and adversely affected. Accordingly, Hong Kong profits tax was provided for based on the estimated assessable profits of State Tech during the Track Record Period. State Tech was disposed of on 30 June 2009.

- 127 -



(d) Elite Link and Max Sunny

These companies were incorporated in Hong Kong. Hong Kong profits tax was provided for based on any of the assessable profits arising in or derived from Hong Kong during each of the assessable year/period.

(e) Finet Technology

Finet Technology remained dormant during the financial year ended 31 March 2007 and therefore Finet Technology is not subject to any tax in Macau. Finet Technology has been dissolved on 23 June 2007 by way of members’ voluntary winding up.

(f) PhoneLink

Under the Provisional Statute on the Income Tax of the PRC on Enterprises and Implementing Rules of Provisional Statute on the Income Tax of the PRC on Enterprises, the income tax on enterprises in the PRC shall be levied at the rate of 33%. However, according to Notice on the Applicable Income on Domestic-investment Joint Venture in Pudong New Area of Shanghai Municipal, the applicable income tax rate for Domestic-investment Joint Ventures and wholly owned by the domestic enterprises which are newly established within Pudong New Area (excluding banks and insurance companies) should be 15%. As such, the applicable tax rate for PhoneLink is 15%. After the new PRC Enterprise Income Tax law passed by the Tenth National People’s Congress on 16 March 2007, the new tax law had been effective from 1 January 2008. As such, the tax rate, under the grandfathering of incentives, changed to 18% and 20% for the year ended 31 December 2008 and year ended 31 December 2009, respectively. PhoneLink did not have any assessable profits during the Track Record Period.

(g) Zeus

Zeus is entitled to an exemption from Foreign Enterprise Income Tax (“FEIT”) for the first two years and a 50% reduction in FEIT for the next three years thereafter, commencing from the first profit making calendar year, after offsetting all recognised tax losses carried forward (such carried forward losses shall be limited to tax losses carried forward from the previous five calendar years) (“Tax Holiday”). Zeus is an established software enterprise in PRC and is entitled to Tax Holiday. Its first profitable year is financial year ended 31 December 2006. Accordingly, no tax provision was provided for Zeus for the period from 1 January 2006 to 31 December 2007. After the new PRC enterprise income tax law passed by the Tenth National People’s Congress on 16 March 2007, the new tax law had been effective from 1 January 2008. As such, the tax rate, under the grandfathering of incentives, changed to 9% and 10% for the year ended 31 December 2008 and year ended 31 December 2009, respectively.

(h) Tongqing

Tongqing is entitled to a Tax Holiday during the Track Record Period. Its first profitable year is financial year ended 31 December 2008. Accordingly, no provision for tax would be needed for Tongqing for the next 2 coming years starting from 1 January 2008.

The Directors confirmed that the Group has made all the required tax filings and has paid all

outstanding tax liabilities with the relevant tax authorities, and the Group is not subject to any dispute

or potential dispute with the tax authorities.

Profit for the year/period and the net profit margin for the year/period

The Group’s profit for the year increased from approximately US$8.88 million for the financial

year ended 31 March 2007 to approximately US$10.12 million for the financial year ended 31 March

2008 but then decreased to approximately US$3.91 million for the financial year ended 31 March

2009. The fall in the net profit for the financial year ended 31 March 2009 was due to the continuous

drop in the net profit margin as a result of the slackening consumer market due to the global financial

crisis. The net profit margin decreased from approximately 19.19% for the financial year ended 31

March 2007 to approximately 8.46% for the financial year ended 31 March 2008 and dropped further

to approximately 3.77% for the financial year ended 31 March 2009.

- 128 -



For the financial year ended 31 March 2008, the increase in the profit for the year, despite a drop

in the net profit margin, were mainly attributable to the commencement of the newly established Tongqing

production plant under the Assembly Segment commenced to generate revenue and profit.

Notwithstanding the fact of expanding revenue and profit for the financial year ended 31 March

2008, the Group was unable to maintain the profit growth for the financial year ended 31 March 2009.

The Group experienced a decrease of approximately 61.35% in its net profit for the financial year

ended 31 March 2009 and a drop in net profit margin from approximately 8.46% for the financial

year ended 31 March 2008 to approximately 3.77% for the financial year ended 31 March 2009. The

Directors attributed the decline and reduction in the net profit margin for the financial year ended 31

March 2009 primarily due to (i) the Group’s reduction in its gross profit margin from approximately

13.52% for the financial year ended 31 March 2008 to approximately 8.21% for the financial year

ended 31 March 2009 as a result of slackening consumer market; (ii) special discounts amounted to

approximately US$0.98 million were granted to certain customers, which were among the top five

customers during the financial year ended 31 March 2009, on one-off basis mainly for establishment

of the long term business relationship between the Group and such customers; and (iii) decrease in

the share of profit of a jointly controlled entity.

The effect of the global financial crisis in late 2008 continued in the first quarter of the

financial year ending 31 March 2010 of the Group. The Group recorded a decrease in net profit of

approximately US$1.90 million for the six months ended 30 September 2009 when comparing to the

corresponding period in 2008.

FACTORS AFFECTING THE GROUP’S RESULTS OF OPERATIONS

The Group’s results of operations and financial condition have been and will continue to be affected

by a number of factors, including but not limited to the following factors as set forth below:

Ability to compete effectively against intense competition

Although the Group was one of the solutions houses in the PRC that could offer customers a one

stop service from product design to production support for mobile handset, the Group nonetheless faces

intense competition in the provision of design solutions. The mobile handset industry is characterised

by rapid technological developments and changing market preferences. These factors result in the

frequent introduction of new products, short product life cycles, continually evolving mobile handset

specifications and significant price competition. If the Group is unable to design new mobile handset

models in a timely and cost-efficient manner to keep abreast with these technological developments

and changing market preferences, its business and financial results may be adversely affected.

General economic condition

The Group generated approximately over 79% of its revenue from the PRC and the rest of

approximately 20% from Hong Kong during the Track Record Period. The general economic conditions,

the levels of disposable income and consumer spending in the PRC and in Hong Kong where the

Group’s customers are located, therefore, have a substantial impact on the Group’s results of operations

and financial condition. The PRC has experienced significant economic growth in recent years. The

- 129 -



Directors believe that the increase in the purchasing power of the PRC residents has continued to

drive sentiment towards the purchase of brand new mobile handset which has positively affected the

Group’s results of operations. However, the lingering impact from the financial turmoil and credit

crunch have created uncertainties on the global economy and caused economic downturn as well as

decrease in consumer spending in most countries. As a consequence, it is expected that consumers

in the PRC and Hong Kong may reduce their spending on purchasing new mobile handset. Should

the economic downturn and decrease in consumer spending continue, the Group’s business, financial

condition and results of operations may be adversely affected.

Research and development

The Group is engaged in mobile handset industry, which is characterised by high degree of

changing customers preference. Therefore, one of the main success factors of the Group’s sustainable

growth relies on the Group’s research and development ability to develop innovative design solutions

which are applied with the latest technological developments and the market trends. If the Group is

unable to retain the research and development personnel and unable to find suitable replacements

within a short period of time, the Group’s ability to produce competitive design solutions would

be questioned and accordingly, the Group’s business and financial performance would be adversely

affected.

Ability to execute the future plans

The Group has identified several growth plans. These plans include, inter alia, the enhancement

of the product development capabilities and the enlargement of the product mix. The implementation

of these plans may incur additional costs. There is no assurance that the implementation of the future

plans will be commercially successful. Failure to do so will result in the Group incurring expenses

and resources without a corresponding increase in revenue and the Group’s financial performance and

results may be adversely affected.

PERIOD TO PERIOD COMPARISON OF RESULTS OF OPERATIONS

Sixmonthsended30September2009comparing tosixmonthsended30September2008

Revenue

The revenue of the Group decreased by approximately US$18.07 million from approximately

US$72.85 million for the six months ended 30 September 2008 to approximately US$54.78 million

for the six months ended 30 September 2009. The overall decrease was mainly due to the general

decrease in revenue in the first quarter of the financial year ending 31 March 2010, compared to the

previous corresponding period which resulted from the financial crisis started in 2008. The decrease in

the first quarter of the financial year ending 31 March 2010 offset the increase in the revenue derived

from the Assembly Segment and the Distribution and Marketing Segment in the second quarter of the

financial year ending 31 March 2010, compared to the previous corresponding period.

- 130 -



Cost of goods sold

The cost of goods sold of the Group decreased by approximately US$16.86 million from

approximately US$66.73 million for the six months ended 30 September 2008 to approximately

US$49.87 million for the six months ended 30 September 2009. The decrease in the cost of goods

sold of the Group was in line with the decrease in revenue of the Group during the period.


The gross profit of the Group was decreased by approximately US$1.21 million from approximately

US$6.12 million for the six months ended 30 September 2008 to approximately US$4.91 million

for the six months ended 30 September 2009. In contrast, the gross profit margin increased from


six months ended 30 September 2009. The increase in the gross profit margin was mainly due to

the increase in contribution from certain new revenue contributors in the Assembly Segment, which

generated a higher gross profit margin.


The selling and distribution costs of the Group decreased by approximately US$3,000 from

approximately US$15,000 for the six months ended 30 September 2008 to approximately US$12,000

for the six months ended 30 September 2009. However, the amount was insignificant to the Group’s

operation.


The administrative expenses of the Group decreased by approximately US$0.10 million from

approximately US$2.71 million for the six months ended 30 September 2008 to approximately US$2.61

million for the six months ended 30 September 2009 as a result of the “net-off” effect from the one-off

expenses in relation to the primary dual listing project, which offset the decrease in the cost savings

effect in administrative expenses through the cost implementation started in the third quarter of the

financial year ended 31 March 2009.

Profit from the operations

The profit from operations of the Group decreased by US$1.45 million from approximately

US$3.98 million for the six months ended 30 September 2008 to approximately US$2.53 million for

the six months ended 30 September 2009. Such decrease was due to the decrease in the revenue of

the Group during the period despite of the slight increase of gross profit margin by 0.56% for the six

months ended 30 September 2009.

Finance costs

The finance costs decreased by approximately US$0.03 million from approximately US$0.21 million for the six months ended 30 September 2008 to approximately US$0.18 million for the six months ended 30 September 2009. The decrease was mainly due to the general decrease in the bank interest borrowing rate as a result of the global economic turmoil.

- 131 -



Share of profit of a jointly controlled entity

Share of profit of a jointly controlled entity decreased by 100% from approximately US$0.45 million for six months ended 30 September 2008 to nil balance for six months ended 30 September 2009. The decrease was mainly due to the proposed disposal of Zhenhua Obee.

Profit before tax

Profit before tax of the Group decreased by US$1.86 million from approximately US$4.21 million for the six months ended 30 September 2008 to approximately US$2.35 million for the six months ended 30 September 2009. Such decrease was a combination effect of the decrease in both of the revenue of the Group and the share of profit of a jointly controlled entity.

Income tax

Income tax of the Group increased by approximately US$0.04 million from approximately US$0.31 million for the six months ended 30 September 2008 to approximately US$0.35 million for the six months ended 30 September 2009. Such increase was a combination effect of the decrease in the share of profit of a jointly controlled entity which is not taxable and the increase in the applicable income tax rate of Zeus from 9% for the six months ended 30 September 2008 to 10% for the six months ended 30 September 2009.

Profit for the period

Net profit of the Group decreased by approximately US$1.91 million from approximately US$3.91 million for the six months ended 30 September 2008 to approximately US$2.00 million for the six months ended 30 September 2009, which was primarily due to the factors described above.

Financialyearended31March2009comparing to thefinancialyearended31March2008

Revenue

The revenue of the Group decreased by approximately US$15.97 million from approximately

US$119.59 million for the financial year ended 31 March 2008 to approximately US$103.62 million for

the financial year ended 31 March 2009. The decrease was partially offset by the Assembly Segment

that was accounted for on a 12 months basis during the financial year ended 31 March 2009 which

was only accounted for 7 months basis during the financial year ended 31 March 2008.

The overall decrease of revenue was mainly due to the continuous drop in demand resulting

from the weak consumer market in the PRC after the outbreak of the global financial crisis in late

2008 which had a prolonged and far-reaching effect on all industry sectors.

Cost of goods sold

The costs of goods sold of the Group decreased by approximately US$8.30 million from

approximately US$103.42 million for the financial year ended 31 March 2008 to approximately

US$95.12 million for the financial year ended 31 March 2009. Such decrease was generally in line

with the decrease in revenue of the Group.

- 132 -




The gross profit of the Group decreased by approximately US$7.66 million from approximately


the financial year ended 31 March 2009. Such decrease was due to the overall decrease in the gross

profit margin.

The gross profit margin of the Group decreased by approximately 5.31% from approximately

13.52% for the financial year ended 31 March 2008 to approximately 8.21% for the financial year ended

31 March 2009. The decrease in gross profit and gross profit margin was mainly due to (i) slackening

consumer market; (ii) special discounts amounted to approximately US$0.98 million were granted to

certain customers, which were among the top five customers during the financial year ended 31 March

2009, on one-off basis mainly for establishment of the long term business relationship between the

Group and such customers; and (iii) decrease in the share of profit of a jointly controlled entity.


The selling and distribution costs of the Group increased by approximately US$46,000 from

approximately US$1,300 for the financial year ended 31 March 2008 to approximately US$47,300

for the financial year ended 31 March 2009. Such increase was mainly due to the additional cost

spent for promoting the Group’s self-developed handset, “VIM” or in Chinese “偉恩”, which was

launched in late 2008.


The administrative expenses of the Group decreased by approximately US$0.67 million

from approximately US$5.77 million for the financial year ended 31 March 2008 to approximately

US$5.10 million for the financial year ended 31 March 2009. Such decrease was due to the effective

implementation of the cost saving measures resulting in more efficient control of certain running

costs such as salaries, welfare, travelling and communication.

Profit from operations

The profit from operations of the Group decreased by approximately US$6.37 million from

approximately US$10.98 million for the financial year ended 31 March 2008 to approximately US$4.61

million for the financial year ended 31 March 2009. Such decrease was due to the decrease in gross

profit margin.

Finance costs

Finance costs of the Group decreased by approximately US$0.25 million from approximately


the financial year ended 31 March 2009. Such decrease was mainly due to the decrease in interest

expenses in relation to the conversion of the convertible loans of the Company into the Shares in

September 2007 and no interest has been charged since then.

- 133 -



Share of profit of jointly controlled entity

Share of profit of jointly controlled entity decreased by approximately US$0.31 million from

approximately US$0.74 million for the financial year ended 31 March 2008 to approximately US$0.43

million for the financial year ended 31 March 2009. Such decrease was mainly due to the increase in

cost of production, which led to the decrease in gross profit margin of the jointly controlled entity.

Profit before tax

Profit before tax of the Group decreased by approximately US$6.43 million from approximately


the financial year ended 31 March 2009. Such decrease was in line with the decrease in gross profit

margin and the decrease in the share of profit of a jointly controlled entity.

Income tax

Income tax of the Group decreased by approximately US$0.22 million from approximately


the financial year ended 31 March 2009. Such decrease was in line with the decrease in profit before

tax. The increase in effective tax rate from approximately 7.41% for the financial year ended 31 March

2008 to approximately 13.18% for the financial year ended 31 March 2009 was mainly due to the

first taxable and profitable financial year of Zeus starting from its financial year ended 31 December

2008 and an increase in tax rate from 9% for the financial year ended 31 December 2008 to 10% for

the three months ended 31 March 2009.

Profit for the year

Net profit of the Group decreased by approximately US$6.21 million from approximately


the financial year ended 31 March 2009, which was primarily due to the factors described above.

Financialyearended31March2008comparing to thefinancialyearended31March2007

Revenue

The revenue of the Group increased by approximately US$73.33 million from approximately

US$46.26 million for the financial year ended 31 March 2007 to approximately US$119.59 million

for the financial year ended 31 March 2008.

The overall increase in revenue was mainly due to the growth of the mobile handset industry

and the increase in demand of the Group’s business of the Solution Segment and the Distribution and

Marketing Segment. In addition, the Group had commenced generating income from its Assembly

Segment during the financial year ended 31 March 2008.

- 134 -



Cost of goods sold

The costs of goods sold of the Group increased by approximately US$67.58 million from approximately US$35.84 million for the financial year ended 31 March 2007 to approximately US$103.42 million for the financial year ended 31 March 2008. Such increase was generally in line with the increase in revenue of the Group.


The gross profit of the Group increased by approximately US$5.74 million from approximately US$10.43 million for the financial year ended 31 March 2007 to approximately US$16.17 million for financial year ended 31 March 2008. Such increase was generally in line with the increase in revenue of the Group.

The gross profit margin of the Group decreased by approximately 9.02% from approximately 22.54% for the financial year ended 31 March 2007 to approximately 13.52% for the financial year ended 31 March 2008. Such decrease in gross profit and gross profit margin was mainly due to the increase in contribution from the Distribution and Marketing Segment which has the lowest gross profit margin amongst all business segments of the Group.


The selling and distribution costs of the Group decreased by approximately US$5,600 from approximately US$6,900 for the financial year ended 31 March 2007 to approximately US$1,300 for the financial year ended 31 March 2008 which was insignificant to the Group’s operation.


The administrative expenses of the Group increased by approximately US$3.78 million from approximately US$1.99 million for the financial year ended 31 March 2007 to approximately US$5.77 million for the financial year ended 31 March 2008. The increase was mainly due to the non-recurring expenses related to the initial public offering of the Shares in SGX-ST and issue of convertible loans and the increase in recurring expenses due to the commencement of assembly arm in August 2007.

Profit from operations

The profit from operations of the Group increased by approximately US$2.52 million from approximately US$8.46 million for the financial year ended 31 March 2007 to approximately US$10.98 million for financial year ended 31 March 2008. Such increase was generally in line with the increase in revenue of the Group.

Finance costs

Finance costs of the Group increased by approximately US$0.65 million from approximately US$0.14 million for the financial year ended 31 March 2007 to approximately US$0.79 million for the financial year ended 31 March 2008. Such increase was mainly due to the interest for the finance lease of the plant and machinery for Tongqing arising from the arrangement of the finance lease of the plant and machinery used in the Group’s assembly arm for the financial year ended 31 March 2008 and the increase in interest expenses in relation to the arrangement of trust receipt loans and short term bank loans by the Group during the financial year ended 31 March 2008 for capture the

growth of the Group’s business.

- 135 -



Share of profit of jointly controlled entity

Share of profit of jointly controlled entity decreased by approximately US$0.26 million from approximately US$1.00 million for the financial year ended 31 March 2007 to approximately US$0.74 million for the financial year ended 31 March 2008. Such decrease was mainly due to the increase in cost of production, which led to the decrease in gross profit margin of the jointly controlled entity.

Profit before tax

Profit before tax of the Group increased by approximately US$1.61 million from approximately US$9.32 million for the financial year ended 31 March 2007 to approximately US$10.93 million for the financial year ended 31 March 2008. Such increase was in line with the increase in revenue of the Group.

Income tax

Income tax of the Group increased by approximately US$0.36 million from approximately US$0.45 million for the financial year ended 31 March 2007 to approximately US$0.81 million for the financial year ended 31 March 2008. The increase in effective tax rate from approximately 4.78% for the financial year ended 31 March 2007 to approximately 7.41% for the financial year ended 31 March 2008 was mainly due to (i) the exceptional non-recurring expenses related to the initial public offering of the Shares in SGX-ST which was not allowable for tax deduction; and (ii) the first taxable and profitable year of Zeus starting from its financial year ended 31 December 2008.

Profit for the year

Net profit of the Group increased by approximately US$1.24 million from approximately US$8.88 million for the financial year ended 31 March 2007 to approximately US$10.12 million for the financial year ended 31 March 2008, which was primarily due to the factors described above.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Group’s financial information has been prepared in accordance with the International Financial Reporting Standards (“IFRSs”). The preparation of the financial information in conformity with IFRSs requires the Group’s management to adopt accounting policies and make estimates and assumptions that affect amounts reported to the Group’s financial information.

The preparation of financial information often requires the selection of specific accounting methods and policies from several acceptable alternatives. Furthermore, significant estimates and judgments may be required in selecting and applying those methods and policies in the recognition of the assets and liabilities in the Group’s consolidated statements of financial position, the revenue and expenses in the Group’s consolidated income statements and consolidated statements of comprehensive income and the information that is contained in the significant accounting policies and notes to the Group’s financial information. The management continually evaluates its estimates and judgments based on historical experience and other factors, including expectations of future events, that it believes are reasonable under the circumstances. Actual results may differ from these estimates and judgments under different assumptions or conditions.

- 136 -



We believe that the following are some of the more critical accounting policies under IFRSs

that affect the Group’s reported financial condition and results of operations. For a further discussion

of the application of these and other accounting policies, please refer to Note 4 in the Accountants’

Report set out in Appendix I to this prospectus.

(a) Consolidation

The Financial Information includes the financial statements of the Group made up to 31 March.

Subsidiaries are entities over which the Group has control. Control is the power to govern the financial

and operating policies of an entity so as to obtain benefits from its activities. The existence and effect

of potential voting rights that are currently exercisable or convertible are considered when assessing

whether the Group has control.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group.

They are deconsolidated from the date the control ceases.

The gain or loss on the disposal of a subsidiary represents the difference between the proceeds

of the sale and the Group’s share of its net assets together with any remaining goodwill relating to the

subsidiary and also any related accumulated foreign currency translation reserve.

Intragroup transactions, balances and unrealised profits on transactions between Group companies

are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an

impairment of the asset transferred. Accounting policies of subsidiaries have been changed where

necessary to ensure consistency with the policies adopted by the Group.

Minority interests represent the interests of minority shareholders in the operating results and net

assets of subsidiaries. Minority interests are presented in the consolidated statements of financial position

and consolidated statements of changes in equity within equity. Minority interests are presented in the

consolidated income statements and consolidated statements of comprehensive income as an allocation

of profit or loss for the year/period between minority interests and owners of the Company (“minority

interests”). Losses applicable to the minority in excess of the minority interests in the subsidiary’s

equity are allocated against the majority interests except to the extent that the minority has a binding

obligation and is able to make an additional investment to cover the losses. If the subsidiary subsequently

reports profits, such profits are allocated to the majority interests until the minority interests’ share of

losses previously absorbed by majority has been recovered.

In the Company’s statements of financial position the investment in a subsidiary is stated at cost

less allowance for impairment losses. The result of the subsidiary is accounted for by the Company on

the basis of dividends received and receivable.

(b) Business combination (other than Restructuring Exercise) and goodwill

The purchase method of accounting is used to account for the acquisition of subsidiaries

by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity

instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly

attributable to the acquisition. Identifiable assets, liabilities and contingent liabilities of the

subsidiary in an acquisition are measured at their fair values at the acquisition date.

- 137 -



The excess of the cost of acquisition over the Group’s share of the net fair value of the

subsidiary’s identifiable assets, liabilities and contingent liabilities is recorded as goodwill.

Any excess of the Group’s share of the net fair value of the identifiable assets, liabilities and

contingent liabilities over the cost of acquisition is recognised in the consolidated income

statements.

Goodwill is tested annually for impairment or more frequently if events or changes in

circumstances indicate that it might be impaired. Goodwill is measured at cost less accumulated

impairment losses. The method of measuring impairment losses of goodwill is the same as that

of other assets as stated in the accounting policy (ac) below. Impairment losses of goodwill are

recognised in the consolidated income statements and are not subsequently reversed. Goodwill

is allocated to cash-generating units that are expected to benefit from the synergies of the

acquisition for the purpose of impairment testing.

The interests of minority shareholders in the subsidiary is initially measured at the

minority’s proportion of the net fair value of the subsidiary’s identifiable assets, liabilities and

contingent liabilities at the acquisition date.

(c) Business combination under Restructuring Exercise

In connection with the listing of the Company’s share on the SGX-ST on 21 November 2007, the

Group underwent a restructuring exercise (the “Restructuring Exercise”) on 28 March 2007. Details of

the Restructuring Exercise is more fully explained in the Section headed “History and Development”

in the Prospectus.

The Restructuring Exercise involved companies which are under common control since all

of the entities which took part in the Restructuring Exercise were controlled by the same ultimate

shareholders before and immediately after the Restructuring Exercise. Consequently, immediately after

the Restructuring Exercise, there was a continuation of the risks and benefits to the ultimate shareholders

that existed prior to the Restructuring Exercise.

The Restructuring Exercise had been accounted for using the pooling of interests method,

under which the Company had been treated as the holding company of its subsidiaries during the

Relevant Periods or since their respective dates of incorporation or acquisition whichever was shorter.

Accordingly, the consolidated income statement, consolidated statement of comprehensive income,

consolidated statement of changes in equity and consolidated statement of cash flows for the year ended

31 March 2007 included the results of operations and cash flows of the Company and its subsidiaries

as if the structure of the Group on 31 March 2007 had been in existence throughout the year ended 31

March 2007, except for companies newly set up during the year ended 31 March 2007 and companies

accounted for using purchase method of accounting were included in the Financial Information since

their respective dates of incorporation or acquisition whichever was shorter.

(d) Property, plant and equipment

All property, plant and equipment are stated at cost less accumulated depreciation and

impairment losses.

- 138 -



Subsequent costs are included in the asset’s carrying amount or recognised as a separate

asset, as appropriate, only when it is probable that future economic benefits associated with

the item will flow to the Group and the cost of the item can be measured reliably. All other

repairs and maintenance are expensed in the consolidated income statements during the period

in which they are incurred.

Depreciation of property, plant and equipment is calculated at rates sufficient to write

off their cost less their residual values over the estimated useful lives on a straight-line basis.

The principal annual rates are as follows:

Plant and machinery 10%

Furniture, fixtures, equipment and motor vehicles 20% – 25%

Leasehold improvements 20% – 25%

The residual values, useful lives and depreciation method are reviewed and adjusted, if

appropriate, at the end of each reporting period.

For acquisition and disposal during the Relevant Periods, depreciation is provided from

the month of acquisition to the month before disposal. Fully depreciated property, plant and

equipment are retained in the book of accounts until they are no longer in use.

The gain or loss on disposal of property, plant and equipment is the difference between

the net sales proceeds and the carrying amount of the relevant asset, and is recognised in the

consolidated income statements.

(e) Computer software sublicense, license and CDMA software solutions

Computer software sublicense, license and CDMA software solutions are measured initially

at purchase costs and are amortised on a straight-line basis over their estimated useful lives of

three years less impairment losses.

(f) Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined using

the first-in, first-out basis. Cost comprises all costs of purchase, cost of conversion and other

costs incurred in bringing the inventories to their present location and condition. Net realisable

value is the estimated selling price in the ordinary course of business less the estimated costs

necessary to make the sale.

(g) Investments

Investments are recognised and derecognised on a trade date basis where the purchase

or sale of an investment is under a contract whose terms require delivery of the investment

within the timeframe established by the market concerned, and are initially measured at fair

value, plus directly attributable transaction costs except in the case of financial assets at fair

value through profit or loss.

- 139 -



Investments are classified as either financial assets at fair value through profit or loss or available-for-sale financial assets.

(i) Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss are either investments held for trading or designated as at fair value through profit or loss upon initial recognition. These investments are subsequently measured at fair value. Gains or losses arising from changes in fair value of these investments are recognised in the income statement.

(ii) Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets not classified as trade and other receivables, held-to-maturity investments or financial assets at fair value through profit or loss. Available-for sale financial assets are subsequently measured at fair value. Gains or losses arising from changes in fair value of these investments are recognised directly in equity, until the investments are disposed of or are determined to be impaired, at which time the cumulative gains or losses previously recognised in equity are recognised in the income statement.

Impairment losses recognised in the income statement for equity investments classified as available-for sale financial assets are not subsequently reversed through the income statement.

For available-for-sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured, they are measured at cost less any identified impairment losses at the end of each reporting period subsequent to initial recognition. An impairment loss is recognised in income statement where there is objective evidence that the asset is impaired. The amount of the impairment loss is measured as the difference between the carrying amount of the asset and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses will not reverse in subsequent periods.

(h) Trade and other receivables

Trade and other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less allowance for impairment. An allowance for impairment of trade and other receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. The amount of the allowance is the difference between the receivables’ carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate computed at initial recognition. The amount of the allowance is recognised in the consolidated income statements.

Impairment losses are reversed in subsequent periods and recognised in the consolidated income statements when an increase in the receivables’ recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to the restriction that the carrying amount of the receivables at the date the impairment is reversed shall not exceed what the amortised cost would have been had the impairment not been recognised.

- 140 -



(i) Convertible loans

Convertible loans which entitle the holder to convert the loans into equity instruments,

other than into a fixed number of equity instruments at a fixed conversion price, are regarded

as combined instruments consist of a liability and a derivative component. At the date of issue,

the fair value of the derivative component is determined using an option pricing model; and this

amount is carried as a derivative liability until extinguished on conversion or redemption. The

remainder of the proceeds is allocated to the liability component and is carried as a liability at

amortised cost using the effective interest method until extinguished on conversion or redemption.

The derivative component is measured at fair value with gains and losses recognised in the

income statement.

Transaction costs are apportioned between the liability and derivative components of the

convertible loans based on the allocation of proceeds to the liability and derivative components

on initial recognition.

(j) Taxation

Income tax represents the sum of the current tax and deferred tax.

The tax currently payable is based on taxable profit for the year/period. Taxable profit

differs from profit as reported in the 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 not

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 each reporting period.

Deferred tax is recognised on differences between the carrying amounts of assets and

liabilities in the financial statements and the corresponding tax bases used in the computation

of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax

liabilities are generally recognised for all taxable temporary differences and deferred tax assets

are recognised to the extent that it is probable that taxable profits will be available against which

deductible temporary differences, unused tax losses or unused tax credits 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 arising on

investments in subsidiaries and interests in joint ventures, 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.

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

and reduced to the extent that it is no longer probable that sufficient taxable profits will be

available to allow all or part of the asset to be recovered.

- 141 -



Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised, based on tax rates that have been enacted or substantively enacted by the end of each reporting period. Deferred tax is recognised in the income statement, except when it relates to items recognised in other comprehensive or directly in equity, in which case the deferred tax is also recognised in other comprehensive imcome or directly in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

LIqUIDITy, FINANCIAL RESOURCES AND CAPITAL STRUCTURE

Overview

During the Track Record Period, the Group’s operations were generally financed through a combination of shareholders’ equity, internally generated cash flows and bank borrowings. The Directors believe that in the long term, the Group’s operations will be funded by internally generated cash flows and, if necessary, additional equity financing and bank borrowings.

Net current assets

Details of the Group’s current assets and liabilities as of respective dates of the consolidated statements of the financial position are extracted as follows:

31 March 30 September 2007 2008 2009 2009 US$ US$ US$ US$

Current assetsInventories 2,073,209 6,470,727 3,594,946 6,870,356Trade receivables 3,886,598 24,041,113 19,086,865 20,887,985Prepayments, deposits and other receivables 2,262,342 1,280,182 3,620,978 8,018,574Derivative financial instruments – 91,460 285,831 132,000Assets of disposal group classified as held for sale – – 1,726,321 –Jointly controlled entity classified as held for sale – – 3,005,224 3,005,224Due from a jointly controlled entity/jointly controlled entity classified as held for sale – 706,941 – –Due from related parties 656,440 – – –Current tax refundable 25,652 25,652 – –Restricted bank balances 715,000 3,010,995 6,299,692 3,330,352Bank and cash balances 5,906,121 20,411,008 28,186,543 25,960,125

15,525,362 56,038,078 65,806,400 68,204,616

- 142 -




Current liabilitiesTrade and bills payables 475,194 9,662,135 3,305,326 6,977,308

Due to directors 81,232 – – –

Due to a related party 8,446 – – –

Accruals and other payables 326,650 1,495,409 2,678,755 2,202,219

Derivative components of

convertible loans 105,152 – – –

Bank loans 1,463,514 1,269,396 4,638,218 2,798,804

Other loans – – – 435,733

Trust receipt loans 715,000 1,775,829 8,172,422 8,730,138

Derivative financial instruments – 136,460 – –

Finance lease payables – 1,054,169 1,178,969 1,205,562

Current tax liabilities 563,600 1,373,600 346,120 531,000

Liabilities directly associated

with disposal group classified

as held for sale – – 1,268,600 –

3,738,788 16,766,998 21,588,410 22,880,764

Net current assets 11,786,574 39,271,080 44,217,990 45,323,852

The net current assets of the Group increased by approximately 2.33 times from approximately

US$11.79 million as at 31 March 2007 to approximately US$39.27 million as at 31 March 2008,

which was due to the increase of revenue of the Group arising from the new Assembly Segment for the

financial year ended 31 March 2008 and the fund raised through the invitation to the public in Singapore

to subscribe for the Shares during the listing of the Shares in SGX-ST in November 2007.

The net current assets of the Group further increased from approximately US$39.27 million as

at 31 March 2008 to approximately US$44.22 million as at 31 March 2009, representing an increase

of approximately US$4.95 million or approximately 12.60%. Such increase was due to the continuous

expansion of the Group and the reclassification of an interest in a jointly controlled entity under non-

current assets to a jointly controlled entity classified as held for sale under current assets.

The net current assets of the Group slightly increased from approximately US$44.22 million

as at 31 March 2009 to approximately US$45.32 million as at 30 September 2009. The increase was

due to the continuous expansion of the Group.

- 143 -



Cash flows

Overview

The following table sets out the changes in cash flows of the Group for the Track Record

Period:


US$ US$ US$ US$ US$

Cash and cash equivalents at beginning

of the year/period 46,024 5,263,447 20,411,008 20,411,008 12,479,669

Net cash generated from/(used in)

operations 6,040,338 (606,644 ) 4,117,595 (9,477,207 ) (5,053,289 )


investing activities (6,637,039 ) (7,481,950 ) (18,716,052 ) (8,513,670 ) 3,555,672

Net cash generated from

financing activities 5,776,340 23,007,868 6,603,757 11,333,666 453,651

Effect of foreign exchange rate changes 37,784 228,287 63,361 251,103 –

Cash and cash equivalents at the end

of the year/period 5,263,447 20,411,008 12,479,669 14,004,900 11,435,703

Operations

Net cash generated from/(used in) operations primarily consists of profit before tax adjusted for

certain major non cash items such as share of profit of a jointly controlled entity, impairment losses,

fair value changes on derivative financial instruments, depreciation and amortisation, the net effect

of changes in working capital and payment of interest expenses and income tax.

For the financial year ended 31 March 2007, net cash generated from the Group’s operations was

approximately US$6.04 million, while the Group’s profit before tax for the same year was approximately

US$9.32 million. The difference of approximately US$3.28 million was mainly attributable to the

adjustment of the non-cash items, payment of interest expenses and income tax and the net cash

inflow arising from the combined effect of the increase in trade receivables, inventories, amounts due

to directors and decrease in prepayments, deposits and other receivables.

- 144 -



For the financial year ended 31 March 2008, net cash used in the Group’s operations was

approximately US$0.61 million, while the Group’s profit before tax for the same year was approximately



outflow arising from the combined effect of the increase in trade receivables, inventories, trade and

bills payables and accruals and other payables.

For the financial year ended 31 March 2009, net cash generated from the Group’s operations

was approximately US$4.12 million, while the Group’s profit before tax for the same year was

approximately US$4.50 million. The difference of approximately US$0.38 million was mainly

attributable to the adjustment of the non-cash items, payment of interest expenses and income tax and

the net cash inflow arising from the combined effect of the increase in the prepayments, deposits and

other receivables and accruals and other payables and the decrease in trade receivables, inventories

and trade and bills payables.

For the six months ended 30 September 2008, net cash used in the Group’s operations was

approximately US$9.48 million, while the Group’s profit before tax for the same period was approximately



outflow arising from the combined effect of the increase in trade receivables, trade and bills payables

and accruals and other payables and the decrease in inventories.

For the six months ended 30 September 2009, net cash used in the Group’s operations was

approximately US$5.05 million, while the Group’s profit before tax for the same period was approximately


increase in inventories, trade receivables, prepayments, deposits and other receivables and trade and

bills payables.

Investing activities

Net cash generated from/(used in) investing activities primarily consists of interests and dividend

received, purchases of non-current assets including property, plant and equipment, intangible assets

and available-for-sale financial asset; acquisition of subsidiaries, acquisition of minority interests in

a subsidiary and changes in time deposits and restricted bank balances.

For the financial year ended 31 March 2007, net cash used in the Group’s investing activities

was approximately US$6.64 million, which was mainly due to the purchases of property, plant and

equipment and intangible assets, acquisition of a subsidiary and changes in time deposits with original

maturity over three months and restricted bank balances.


was approximately US$7.48 million, which was mainly due to the purchases of property, plant and

equipment, purchase of an available-for-sale financial asset and changes in time deposits with original

maturity over three months and restricted bank balances.

- 145 -




was approximately US$18.72 million, which was mainly due to the changes in the time deposits with

original maturity over three months and restricted bank balances.

For the six months ended 30 September 2008, net cash used in the Group’s investing activities

was approximately US$8.51 million, which was mainly due to the changes in the restricted bank

balances.

For the six months ended 30 September 2009, net cash flow generated from the Group’s investing activities was approximately US$3.56 million, which was primarily due to the changes in time deposits with original maturity over three months and restricted bank balances.

Financing activities

Net cash generated from financing activities primarily consists of net proceeds from issue of new shares and convertible loans, net bank loans raised, changes in trust receipt loans, repayment of finance lease payables and distribution of dividends.

For the financial year ended 31 March 2007, net cash generated from the Group’s financing activities was approximately US$5.78 million, which was mainly due to the net proceeds from the issue of convertible loans and the net bank loans raised.

For the financial year ended 31 March 2008, net cash generated from the Group’s financing activities was approximately US$23.01 million, which was mainly from the net proceeds from issue of convertible loans and new Shares in the initial public offering of the Shares in SGX-ST and distribution of dividends.

For the financial year ended 31 March 2009, net cash generated from the Group’s financing activities was approximately US$6.60 million, which was mainly due to the net bank loans raised, increase in trust receipt loans and distribution of dividends.

For the six months ended 30 September 2008, net cash generated from the Group’s financing activities was approximately US$11.33 million, which was mainly due to the net bank loans raised and the increase in trust receipt loans.

For the six months ended 30 September 2009, net cash generated from the Group’s financing activities was approximately US$0.45 million, which was mainly due to the increase in the trust receipt loans.

- 146 -



Major financial ratios

Key financial ratios and other information

For the financial year ended For the six months ended 31 March 30 September 2007 2008 2009 2008 2009

Trade receivables turnover days (Note 1) 31 73 67 103 70Trade payables turnover days (Note 2) 5 27 8 18 15Return on equity (Note 3) 69.78% 19.60% 7.25% 7.24% 3.57%

31 March 30 September 2007 2008 2009 2008 2009

Gearing ratio (Note 4) 29.52% 9.88% 20.49% 24.00% 19.89%Current ratio (Note 5) 4.15 3.34 3.05 2.30 2.98

Notes:

(1) Trade receivables turnover days equals to the closing trade receivables of the period divided by the revenue during

such period and then multiplied by the number of days during such period.

(2) Trade payables turnover days equals to the closing trade payables of the period divided by the cost of goods sold

during such period and then multiplied by the number of days during such period.

(3) Return on equity equals to the profit for each period divided by the closing balance of the total equity as at the

end of the respective period multiplied by 100%.

(4) Gearing ratio is calculated by dividing total borrowings and both derivative component and liability component

of convertible loans by total assets as at the end of the respective period multiplied by 100%.

(5) Current ratio is calculated by dividing current assets by current liabilities as at the end of the respective

period.

Trade receivables analysis

The following table sets forth the aging analysis of trade receivables as at the respective dates of consolidated statements of financial position:


0 to 30 days 3,886,598 16,315,051 6,268,923 14,462,87931 to 60 days – 3,553,999 4,575,937 6,140,71861 to 90 days – 2,740,422 4,091,003 284,388More than 90 days – 1,431,641 4,151,002 –

Total 3,886,598 24,041,113 19,086,865 20,887,985

- 147 -



The Group generally grants its customers a normal credit period between 30 days to 90 days, the exact term of which is based on factors such as past sales performance, credit history and its expansion plans. As a matter of policy, the Group does not grant credit periods of over 90 days to any of its customers under normal circumstances.

Trade receivables as at 31 March 2008 were approximately US$24.04 million, representing an increase of approximately 5.19 times as compared to that as at 31 March 2007. Such increase was mainly due to the substantial growth of the Distribution and Marketing Segment, which was beneficial from the growth of the mobile handset industry.

Trade receivables as at 31 March 2009 were approximately US$19.09 million, representing a decrease of approximately 20.61% as compared to that as at 31 March 2008. Such decrease was in line with the decrease of the revenue of the Group for the financial year ended 31 March 2009.

Trade receivables turnover days during the Track Record Period ranged from approximately 31 days to approximately 103 days. which approximates to the normal credit period granted to customers ranging from 30 days to 90 days.

Trade and bills payables

Set out below is the breakdown of the Group’s trade and bills payables as at the respective dates of the consolidated statements of the financial position:


Trade payables 475,194 7,720,135 1,998,129 4,104,378Bills payables – 1,942,000 1,307,197 2,872,930

Total 475,194 9,662,135 3,305,326 6,977,308

The Group is generally granted by its suppliers with credit terms ranging from 15 days to 30 days. Trade and bills payables as at 31 March 2008 were approximately US$9.66 million, representing an increase of approximately 19.33 times as compared to that as at 31 March 2007. Such increase was mainly due to more purchases to satisfy the production requirements of Tongqing which was newly commencement on August 2007 and the substantial growth of the Distribution and Marketing Segment being benefical from the growth of the mobile handset industry.

Trade and bills payables as at 31 March 2009 were approximately US$3.31 million, representing a decrease of approximately 65.79% as compared to that as at 31 March 2008. Such decrease was due to the increased usage of trust receipt loans during the financial year ended 31 March 2009.

Return on equity

The Group, during the Track Record Period, recorded the highest return on equity of approximately 69.78% for the financial year ended 31 March 2007, which was mainly attributable to the lowest amount of the equity attributed to the owners of the Company before the conversion of the convertible loans and listing of Shares on SGX-ST in November 2007.

- 148 -



For the financial year ended 31 March 2008, although there was an increase in profit for the

financial year ended 31 March 2008, the return on equity decreased to approximately 19.60% as a result

of the conversion of the convertible loans and listing of Shares on SGX-ST in November 2007.

In view of the financial crisis in late 2008, the profitability of the Group for the financial year

ended 31 March 2009 was negatively affected. The net profit of the Group dropped by approximately

61.35% to approximately US$3.91 million for the financial year ended 31 March 2009, which also

led to the decrease in return on equity of the Group in that year.

Comparing to the return on equity of approximately 7.24% of the Group for the six months

ended 30 September 2008, the return on equity of the Group dropped to approximately 3.57% for

the six months ended 30 September 2009. Such decrease was mainly due to the negative effect to the

Group’s profitability resulting from the economic turmoil caused by the financial crisis occurred in

late 2008.

Gearing ratio

The gearing ratio of the Group decreased from approximately 29.52% as at 31 March 2007 to

approximately 9.88% as at 31 March 2008. Such decrease was mainly due to the conversion of the

convertible loans in September 2007 and proceeds raised in late 2007 through an invitation to the

public in Singapore to subscribe for the new Shares, which enhanced the asset base of the Group.

However the gearing ratio of the Group rebounded to approximately 20.49% as at 31 March

2009, which was due to the increase of bank borrowings by the Group for the purpose of generating

working capital. The gearing ratio of the Group remained stable as at 31 March 2009 and 30 September

2009.

Current ratio

The current ratio of the Group dropped to approximately 3.34 as at 31 March 2008 from

approximately 4.15 as at 31 March 2007, which was attributable to the increase in bank borrowings

and purchase of plant and machinery by way of finance lease.

As at 31 March 2009 and 30 September 2009, the current ratio of the Group was kept stable.

STATEMENT OF INDEBTEDNESS

As at the close of business on 31 December 2009, being the latest practicable date for the purpose

of ascertaining the indebtedness of the Group prior to the printing of this Prospectus, the Group had

outstanding indebtedness of US$18,981,089, comprising bank loans of US$5,782,216, other loans of

US$435,733, trust receipt loans of US$10,594,364 and finance lease payables of US$2,168,776.

The bank loans were secured by the following:

(i) A bank loan of US$1,742,931 was secured by corporate guarantee executed by a subsidiary

of the Company and personal guarantee executed by a director of a subsidiary;

- 149 -



(ii) A bank loan of US$1,266,746 was secured by a bank deposit;

(iii) A bank loan of US$732,648 which was arranged under the Small and Medium Enterprises

Loan Guarantee Scheme and guaranteed by the Government of the Hong Kong Special

Administrative Region, two subsidiaries of the Company and the Company; and

(iv) Remaining bank loans of US$2,039,891 were arranged under the Small and Medium

Enterprises Loan Guarantee Scheme and the Special Loan Guarantee Scheme. These loans

were guaranteed by the Government of the Hong Kong Special Administrative Region

and the Company.

Other loans of RMB3,000,000, which was about US$435,733, was borrowed by the Group from

Science and Technology Bureau, Fu Tian District, Shenzhen Municipal (深圳市福田區科學技術局)

and was guaranteed by Shen Zhen High Tech Investment & Guaranty Co., Ltd. (深圳市高新技術投資擔保有限公司), an Independent Third Party. The loan was counter-guaranteed by a subsidiary of the

Company. The legal advisor of the Company in the PRC laws considers that the above loan agreement

is in compliance with laws and regulations, and is legal and valid under the PRC.

All trust receipt loans were secured by bank deposits and all finance lease payables were

secured by the lessor’s title to the leased assets and corporate guarantee executed by a subsidiary of

the Company.

Save as aforesaid and apart from intra-group liabilities and normal trade and bills payables

in the ordinary course of the business, as at the close of business on 31 December 2009, the Group

did not have 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 have confirmed that there has been no material change in the indebtedness and

contingent liabilities of the Group since 31 December 2009.

Financial asset at fair value through profit or loss

On 24 July 2009, the Group entered into a structure deposit with a bank in Hong Kong for

an amount HK$5,000,000 or approximately US$642,673 for a term of three years. At maturity, the

amount of the deposit will be 100% of the principal deposit amount plus any cash interest and index

return in accordance with the terms agreed. The structure deposit was approved by the Board.

Financial resources

As at 31 December 2009, being the Latest Practicable Date for the purpose of ascertaining

information contained in the statement of indebtedness prior to the printing of the prospectus, other

than the leases of its offices, properties and the credit commitments in relation of its trading activities,

the Group does not have material capital commitments nor major expenditures that would have material

impact on the liquidity of the Group. Following the completion of the Share Offer, the Group expects

that its operations will be financed mainly by the net proceeds of the Share Offer, internally generated

funds and bank borrowings.

- 150 -



FINANCIAL INSTRUMENTS

The purpose of entering into financial instruments

After the listing of Shares in SGX-ST in November 2007, the scale of the businesses of the

Group increased significantly. In order to minimise any risks associated with the foreign exchange,

the Group has started to enter into foreign exchange forward contracts with its principal bankers in

Hong Kong or major banks in the PRC since January 2008. All the foreign exchange forward contracts

related to either the currency pair of US dollars/RMB or US dollars/HK dollars. These are the major

currencies the Group used for its daily operations, such as sales and cash receipts cycle and purchases

and cash disbursements cycle. In addition, the entering of the foreign exchange forward contracts

was based on the forecast transactions on the probable receipts of sales proceeds and payments for

the procurement.

In view of the challenging year 2008 caused by the financial crisis, the Directors considered that

any changes on the pegged system and significant fluctuation on the exchange rate of US dollars/HK

dollars would result into unknown impact on the Group. Moreover, the absolute aggregate amount

of the total procurement and the operational expenses is a material one. Any changes in basis points

of the spot rate will have an unknown impact on the Group’s net profit for the year. As such, the

Group still entered into certain foreign exchange forward contracts related to US dollars/HK dollars

for contingency purposes given that HK dollars is pegged to US dollars.

Categories of the financial instruments

The foreign exchange forward contracts entered by the Group during the Track Record Period

are mainly divided into three categories, namely, foreign exchange forward contract, range foreign

exchange forward contract and target redemption forward contract.

i) Foreign exchange forward contract

Foreign exchange forward contract is an agreement for the Group to purchase or sell the

currency at a future date for a price agreed upon at the time of the contract. The derivative

financial instruments entered into by the Group under this type of foreign exchange forward

contract are US dollars/HK dollars and US dollars/RMB. For the six months ended 30 September

2009, the annualised notional amount for the US dollars/HK dollars and US dollars/RMB under

this type of foreign exchange forward contract was approximately US$6 million and US$24

million respectively.

ii) Range foreign exchange forward contract

A range foreign exchange forward contract provides protection against unfavourable

exchange rate movements by allowing the Group to exchange one currency for another at a

pre-agreed ceiling rate or a floor rate on an agreed maturity date. At the same time, the range

foreign exchange forward contract provides the Group with an ability to participate in any

favourable exchange rate movements to a pre-determined level. The contract period of the range

- 151 -



foreign exchange forward contract the Group entered into is normally two years on average.

The relative derivative financial instruments entered into by the Group under this type of

foreign exchange forward contract are US dollars/RMB. For the six months ended 30 September

2009, the annualised notional amount for the US dollars/RMB under this type of range foreign

exchange forward contract was US$36 million respectively.

iii) Target redemption forward contract

Target redemption forward contract refers to a transaction that combines a currency

barrier (knock-out) call option and a currency barrier (knock-out) put option with several partial

settlement dates. This relates to a zero cost option strategy in which the Group purchases a

right to buy or to sell a given currency and at the same time sells a right to buy or to sell that

same currency. If on any partial settlement date the relevant currency option is exercised, then

the Group cumulates the profit to that date. If the Group’s accumulated profit will at some

point reach an amount agreed in advance, then both currency barrier options are cancelled. The

notional amounts of the two options can be the same or differ depending on the arrangement

agreed with. The contract period of the target redemption forward contract the Group entered

into is normally two years on average. For the six months ended 30 September 2009, the

annualised notional amount for the US dollars/HK dollars under this type of target redemption

forward contract was approximately US$46 million.

The unrealised fair value losses on the outstanding foreign exchange forward contracts amounted

to approximately US$153,831 for the six months ended 30 September 2009. As at 30 September

2009, the deemed annualised notional amount was approximately US$111,600,000. Despite the

foreign exchange forward contracts entered by the Group during the Track Record Period does not

fulfill the stringent requirements under the hedge accounting of International Accounting Standard

39, the performance of the foreign exchange forward contracts entered into by the Group satisfies

the principle of hedging and provides hedging purpose for the Group so as to minimise its foreign

exchange exposure. According to the internal valuation performed at each quarter end based on the

existing available market data on hand to estimate the fair value of the open position of the foreign

exchange forward contracts at each quarter end, the Directors are of the view that the hedging is

effective as the aggregate amount of the net exchange differences and the net fair value changes on

the derivative financial instruments only amounted to a minimal percentage of the total purchases

and operating expenses for the corresponding financial year/period.

Hedge accounting

The foreign exchange forward contracts are used for hedging purposes by the Group although

they are not qualified as hedging purposes under the stringent and comprehensive documentation

requirements as required by the International Accounting Standard. Hedge accounting requires certain

stringent criteria to be fulfilled. These strict criteria, including the existence of formal documentation

and the achievement of effectiveness tests, must be met at inception and throughout the term of the

hedge relationship in order for hedge accounting to be applied. This can be achieved only if entities

have appropriate systems and procedures to monitor each hedging relationship. The formal designation

and documentation of the hedging relationship for undertaking the hedge must be tested regularly

throughout its life. The effectiveness of the hedging relationship as required under hedge accounting

- 152 -



must fall within a range of 80% to 125% over with the assessment of the effectiveness of each of

the hedging instrument. The International Accounting Standard 39 also sets out that a net open

position cannot be designated as a hedged item. As the Group does not have formal designation and

documentation on the identification of the hedging instrument, the hedged item or transaction, the

nature of the risk being hedged and the hedged instrument’s effectiveness, the hedging instruments

the Group used for do not qualify for hedging accounting. The Directors also are of the view that it

is not cost-effective to fulfill all the stringent conditions as required by the International Accounting

Standard 39. However, the Board will closely monitor the open position of the foreign exchange

forward contracts.

Internal control

The Group has no formal and written foreign currency hedging policy and it has not sought any

advice from qualified investment advisers for entering into such foreign exchange forward contracts

during the Track Record Period. However, internal valuation is performed at each quarter end based

on the existing available market data on hand and the open position of the foreign exchange forward

contracts at quarter end is reviewed by the audit committee. The entering of the foreign exchange

forward contacts must be approved by the chairman of the Company. The management will consider

to enter into any suitable foreign exchange forward contracts according to the expectation by the

management to the trend of the value of US dollars/RMB and US dollars/HK dollars.

Hedging policy

For the purpose of internal control, the Group intends to adopt hedging policies and implement

the procedures to enter into any new open position of the foreign exchange forward contracts in the

future. According to the hedging policies, any foreign exchange forward contracts to be entered into by

the Group that must be made with the well-known banks for hedging purposes. Such foreign exchange

forward contract must be approved by the chairman of the Group and the open position of the foreign

exchange forward contracts should be reviewed by the audit committee. The open position of the

foreign exchange forward contracts should be reviewed by the audit committee at each quarter end.

All the foreign exchange forward contracts entered into by the Group are not used for speculation

purposes although the foreign exchange forward contracts entered into by the Group did not meet the

criteria for hedge accounting.

Mechanism of the derivative financial instruments

The foreign exchange forward contracts entered by the Group are settled monthly or at specific

maturity date and will be calculated by the bank for the settlement value based on the difference

between the spot rate at the expiration time on the expiration date and the pre-determined contract

forward rate at each month or at specific maturity date.

- 153 -



Net fair value gains/(losses) on the derivative financial instruments

The fluctuation of the net fair value gains/(losses) on the derivative financial instruments were

derived from the realised and unrealised fair value changes on the foreign exchange forward contracts

entered into by the Group during the Track Record Period.

Breakdown of the net realised and unrealised fair value gains/(losses) for the foreign exchange forward contracts entered into by the Group during the Track Record Period is set out below:

For the six months For the financial year ended ended 31 March 30 September 2007 2008 2009 2009 US$ US$ US$ US$

Net realised fair value gainsUS$:RMB – – 212,306 129,676US$:HK$ – – 327,796 100,122

Sub-total – – 540,102 229,798

Net unrealised fair value gains/(losses)

US$:RMB – 60,567 119,203 65,649US$:HK$ – (105,567 ) 211,628 (219,480 )

Sub-total – (45,000 ) 330,831 (153,831 )

Total – (45,000 ) 870,933 75,967

Deemed annualised notional amount (1)

US$:HK$ – 33,600,000 93,600,000 51,600,000US$:RMB – 1,300,000 82,400,000 60,000,000

– 34,900,000 176,000,000 111,600,000

Note: 1. Deemed annualised notional amount is used for and it is calculated by the notional amount of the next

12 months period for each of the signed and open position of the foreign exchange forward contract as

at each balance sheet date.

2. As the changes of fair value on the derivative financial instruments have already been recognised in the

Group’s consolidated income statement, there is no further contingent liabilities to be disclosed.

- 154 -



UNLISTED EqUITy INvESTMENT

The unlisted equity investment represents a 15% equity interest in a private PRC company

which is principally engaged in design and manufacturing of mobile handsets, and has been recognised

as a Software Enterprise and New & High Technology Enterprise by Shenzhen Bureau of Science

Technology & Information.

EARNINGS PER SHARE

The figures of earnings per Share in the prospectus have not taken in account of 20,000,000 new Shares issued on 8 October 2009 pursuant to the subscription agreements dated 24 September 2009 as such transaction occurred after the balance sheet date which did not affect the capital used to produce the profit and loss for the corresponding period.

On 24 September 2009, the Company entered into eight subscription agreements with eight

existing Shareholders respectively, being Independent Third Parties, for the allotment and issue by the

Company to such subscribers of the Subscription Shares, at a subscription price of S$0.13 (equivalent

to approximately HK$0.72) per Share. The subscription price was determined with reference to the

trading market price of the Shares preceding the execution of the subscription agreements and was

agreed upon arms’ length negotiation between the Company and the subscribers. The subscription

price of S$0.13 per Share amounted to a discount of approximately 13.33% to the volume weighted

average price of S$0.15 of the Shares of the Company traded on the SGX-ST for the full market

day on 24 September 2009, being the full market day immediately preceding the execution of the

subscription agreements.


US$4,140,589 comprising 517,573,662 Shares after the Completion of the allotment and issue of the


No share consolidation, share split, bonus issue or other share capital reorganisation having similar effect has been taken place in respect of the share capital of the Company since the Company’s listing on SGX-ST up to the Latest Practicable Date. Further, the Company has no intention to conduct any share capital reorganisation from the date of this prospectus to the Listing Date (which is expected to be on 1 March 2010).

DIvIDEND POLICy

The payment and the amount of any dividends to be declared by the Group in the future will

be determined at the sole discretion of the Directors and will depend on, among other things, the

results of operations, working capital requirements, the amount of distributable profits based on the

applicable laws and regulations.

The Group has declared interim dividend of US$257,069, nil and nil for the three financial

years ended 31 March 2007, 2008 and 2009.

- 155 -



The Group has declared final dividend of US$2,200,000, US$2,040,052 and nil for the three

financial years ended 31 March 2007, 2008 and 2009.

The Group has not declared any interim dividend for the six months ended 30 September

2009.

The Group currently does not have a fixed dividend policy. The form, frequency and amount

of future dividends on the Shares will depend on the level of cash and retained earnings, the results

of operations, the capital expenditure requirements, the expansion and/or investment plans and other

factors that the Directors may deem appropriate. There is no assurance that dividends will be paid in

the future. Neither will there be any assurance regarding the amount or timing of any dividends that

will be paid in the future. Cash dividends on the Shares, if any, will be paid in Hong Kong dollars

converted from US dollars.

WORKING CAPITAL

Taking into account cash flow position of the Group and credit facilities available to the Group,

the Directors are of the opinion that the Group will have sufficient funds to meet its working capital

requirements and financial requirements for capital expenditure for at least the next 12 months from

the date of this prospectus.

DISTRIBUTABLE RESERvES

The Company had no reserve available for distribution to the Shareholders as at 30 September

2009.

DISCLOSURE UNDER RULES 13.13 TO 13.19 OF THE LISTING RULES

The Directors confirm that, saved as disclosed above, as at the Latest Practicable Date, they

were not aware of any circumstances which would give rise to a disclosure obligation pursuant to

Rules 13.13 to 13.19 of the Listing Rules.

ONGOING DISCLOSURE OF INFORMATION OF THE COMPANy

The Shares have been listed on the SGX-ST and the Company is required to file quarterly

financial result announcement containing unaudited financial information prepared in accordance

with the requirements of the Listing Manual. In connection with the reporting obligations to the

SGX-ST, the Company has published unaudited interim financial statements for the three months and

six months ended 30 September 2009 together with the comparative figures for the corresponding

same periods in 2008 prepared in accordance with requirements of the Listing Manual.

In accordance with Rule 13.09(2) of the Hong Kong Listing Rules, the Company is required to

simultaneously release in Hong Kong, among other things, the quarterly and interim reports or any

information, when the Company is required to release these reports to the SGX-ST.

- 156 -



DIRECTORS’ CONFIRMATION ON NO MATERIAL ADvERSE CHANGE

The Directors confirm that there has been no material adverse change in the financial or trading

positions or prospects of the Group since 30 September 2009, the date on which the latest audited

consolidated financial statements of the Group were made up.

PROPERTy INTERESTS AND PROPERTy vALUATION

BMI Appraisals Limited, an independent property valuer, has valued the property interests of

the Group as at 31 December 2009 at nil value. The full text of the letter with a summary of valuation

and valuation certificates in connection with the Group’s property interests are set out in Appendix

III to this prospectus.

- 157 -

future plans


future plans

strengthening of r&D team

The Directors consider that it is important to further strengthen the Group’s R&D team, especially

in the application development and industrial design and mechanical design teams. The Group plans

to recruit additional professionals to join its R&D team and improve the R&D team’s equipments. It

is the Group’s strategy to focus on a few core areas of mobile handset application development.

Development of 3G technologies and applications

The Directors believe that the official launch of the 3G mobile handset may increase the demand

for the 3G mobile handset and module in the PRC. The Group intends to invest in research on the

application of 3G technologies and solutions and the development of operating system of mobile

handsets in order to capture the potential opportunities of the rising demand for 3G mobile handset

and module especially in the multi-functions mobile handset.

strengthening of the brand awareness of “VIM” or in Chinese “偉恩”

It is the intention of the Group to strengthen the brand awareness of “VIM” or in Chinese

“偉恩” in the mobile handset market in the PRC in order to position the Group’s strong industrial

design of mobile handset with fashionable and trendy styles. Therefore, the Group intends to increase

its distribution network and sales channel in the PRC by entering into distribution agreement with

major retail chain stores in the PRC and opens its own retail shops under the branding of “VIM” or

in Chinese “偉恩” in major cities of the PRC.

In view of the challenging year 2008 caused by the financial crisis which led to the drop of

the Group’s profitability in the financial year ended 31 March 2009 and the six months ended 30

September 2009, the Directors consider that the above business strategies and future plans may (i)

attract different types of new customers by increasing the product mix of the Group; (ii) increase the

sales of mobile handset under the brand name of the Group “VIM” or in Chinese “偉恩” by continuous

working and promotion and raising the market awareness of “VIM” or in Chinese “偉恩”; and (iii)

maintain and foster close business relationship with existing customers by the Group’s reliable research

and development capability and quality of its products. By adopting the business strategies and future

plans mentioned above, the Directors are optimistic about the prospects of the Group and shall use

their best endeavors to improve the profitability of the Group in order to facilitate a turnaround in

the business performance of the Group.

- I-� -

APPENDIX I ACCOUNTANTS’ REPORT OF THE GROUP


The following is the text of a report, prepared for the purpose of inclusion in this Prospectus,

received from the independent reporting accountants, RSM Nelson Wheeler, Certified Public Accountants,

Hong Kong.

29th Floor

Caroline Centre

Lee Gardens Two

28 Yun Ping Road

Hong Kong

�2 February 20�0

The Board of Directors

Z-Obee Holdings LimitedSinoPac Securities (Asia) Limited

Dear Sirs,

We set out below our report on the financial information (the “Financial Information”) of

Z-Obee Holdings Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as

the “Group”) for each of the three years ended 3� March 2009 and the six months ended 30 September

2009 (the “Relevant Periods”) for inclusion in the Prospectus dated �2 February 20�0 issued by the

Company (the “Prospectus”) in connection with the listing of the shares of the Company on the Main

Board of The Stock Exchange of Hong Kong Limited by way of placing and public offer.

The Company was incorporated in Bermuda on 30 January 2007 under the Companies Act �98�

of Bermuda as an exempted company with limited liability and its shares have been listed on the

Mainboard of the Singapore Exchange Securities Trading Limited (the “SGX-ST”) since 2� November

2007. Through a corporate restructuring as detailed in the section headed “History and Development”

in the Prospectus and note 2 to the Financial Information below, the Company became the holding

company of the Group since 28 March 2007.

As at the date of this report, the Company has direct and indirect interests in the subsidiaries

as set out in note 20 to the Financial Information.

All the companies now comprising the Group have adopted 3� March as their financial year

end date, except for 深圳市杰特電信控股有限公司 (Zeus Telecommunication Technology Holdings

Ltd.) (“Zeus”), 上海風凌通訊技術有限公司 (Shanghai PhoneLink Communications Technology

Co., Ltd.) (“PhoneLink”), 久宜通信技術(深圳)有限公司 (CCDH Technology (Shenzhen) Limited)

(“CCDH”) and 統慶通信設備(深圳)有限公司 (Tongqing Communication Equipment (Shenzhen) Co.,

Ltd.) (“Tongqing”) which adopts 3� December as their financial year end date as required by the

relevant laws in the People’s Republic of China (the “PRC”). We acted as one of the joint-auditors

of the Company and the sole auditor of all the remaining companies now comprising the Group for

the years ended 3� March 2007, 2008 and 2009 except as disclosed below.

- I-2 -



The statutory financial statements of Zeus, CCDH and Tongqing have been prepared in accordance

with the relevant accounting principles and financial regulations applicable to companies established

in the PRC and were audited by the following certified public accountants registered in the PRC.

Name of company Financial year/period Name of auditors

深圳市杰特電信控股有限公司 3� December 2006 深圳財智會計師事務所(Zeus Telecommunication and 3� December 2007 (Shenzhen Caizhi Public

Technology Holdings Ltd.) Certified Accountants)

3� December 2008 深圳國邦會計師事務所 (Shenzhen Guobang Certified

Public Accountants)

久宜通信技術(深圳)有限公司 3� December 2006 深圳財智會計師事務所(CCDH Technology (Shenzhen) and 3� December 2007 (Shenzhen Caizhi Public

Limited) Certified Accountants)

3� December 2008 深圳國邦會計師事務所 (Shenzhen Guobang Certified

Public Accountants)

統慶通信設備(深圳)有限公司 20 March 2007 (date of 深圳財智會計師事務所(Tongqing Communication incorporation) to (Shenzhen Caizhi Public

Equipment (Shenzhen) Co., 3� December 2007 Certified Accountants)

Ltd.) 3� December 2008 深圳國邦會計師事務所 (Shenzhen Guobang Certified

Public Accountants)

No statutory audited financial statements of PhoneLink for each of the three years ended 3�

December 2008 have been issued up to the date of this report.

No audited financial statements of Max Pixel Limited have been issued as no business was

conducted since its incorporation and up to the date of disposal by the Group on �0 February 2009.

No audited financial statements of Elastic Glory Investment Limited (“Elastic Glory”), CCDH

Technology Limited, Finet Enterprises Limited and Finet Technology Limited have been prepared

for the Relevant Periods, while no audited financial statements of State Tech International Limited

(“State Tech”) have been prepared for the year ended 3� March 2009 as there is no statutory audit

requirement in their respective countries of incorporation.

The directors of the Company have prepared the consolidated financial statements of the Group

for the Relevant Periods in accordance with International Financial Reporting Standards (“IFRSs”)

(the “IFRS Financial Statements”).

- I-3 -



We have performed our independent audit on the IFRS Financial Statements in accordance with

International Standards on Auditing and have examined the IFRS Financial Statements in accordance

with Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant” issued by the Hong Kong

Institute of Certified Public Accountants.

The Financial Information has been prepared from the IFRS Financial Statements in accordance

with IFRSs and on the basis of preparation set out in note 2 to the Financial Information. No adjustments

were considered necessary for the purpose of preparing our report for inclusion in the Prospectus.

The directors of the Company are responsible for the preparation of the IFRS Financial

Statements and the contents of the Prospectus in which this report is included. It is our responsibility

to compile the Financial Information set out in this report from the IFRS Financial Statements, to

form an independent opinion on the Financial Information and to report our opinion to you.

The directors of the Company have prepared the comparative financial information of the Group

for the six months ended 30 September 2008 (the “Comparative Financial Information”) in accordance

with IFRSs and on the basis of preparation set out in note 2 to the Financial Information. We have

reviewed the Comparative Financial Information in accordance with International Standard on Review

Engagements 24�0 “Review of Interim Financial Information Performed by the Independent Auditor

of the Entity”. A review consists principally of making enquiries of the Group’s management and

applying analytical procedures to the Comparative Financial Information and, based thereon, assessing

whether the accounting policies and presentation have been consistently applied unless otherwise

disclosed. A review excludes audit procedures such as tests of controls and verification of assets,

liabilities and transactions. It is substantially less in scope than an audit and therefore provides a lower

level of assurance than an audit. Accordingly we do not express an audit opinion on the Comparative

Financial Information.

On the basis of our review which does not constitute an audit, we are not aware of any material

modifications that should be made to the Comparative Financial Information.

In our opinion, for the purpose of this report and on the basis of preparation set out in note 2 to

the Financial Information, the Financial Information gives a true and fair view of the state of affairs

of the Company and of the Group as at 3� March 2007, 2008 and 2009 and 30 September 2009 and

of the Group’s results and cash flows for the Relevant Periods.

- I-4 -



CONSOLIDATED INCOME STATEMENTS

For the six months For the year ended 31 March ended 30 September 2007 2008 2009 2008 2009 Note US$ US$ US$ US$ US$

(unaudited)

Revenue 7 46,26�,33� ��9,594,��6 �03,623,852 72,848,930 54,780,243

Cost of goods sold (35,836,026 ) (�03,4�9,592 ) (95,��6,448 ) (66,726,032 ) (49,873,560 )

Gross profit �0,425,305 �6,�74,524 8,507,404 6,�22,898 4,906,683

Other income 8 38,578 576,463 �,256,790 580,060 244,639

Selling and distribution costs (6,9�3 ) (�,309 ) (47,29� ) (�5,428 ) (�2,239 )

Administrative expenses (�,993,8�3 ) (5,773,36� ) (5,�03,964 ) (2,709,373 ) (2,606,322 )

Profit from operations 8,463,�57 �0,976,3�7 4,6�2,939 3,978,�57 2,532,76�

Finance costs 10 (�39,236 ) (792,�27 ) (543,70� ) (2��,��8 ) (�83,899 )

Share of profit of a jointly

controlled entity 21 999,800 743,595 434,886 446,�46 –

Profit before tax 9,323,72� �0,927,785 4,504,�24 4,2�3,�85 2,348,862

Income tax expense 12 (446,076 ) (8�0,000 ) (593,608 ) (308,008 ) (347,500 )

Profit for the year/period 13 8,877,645 �0,��7,785 3,9�0,5�6 3,905,�77 2,00�,362

Profit for the year/ period attributable to:Owners of the Company 8,948,047 �0,�80,7�0 3,959,40� 3,936,993 2,00�,362

Minority interests (70,402 ) (62,925 ) (48,885 ) (3�,8�6 ) –

8,877,645 �0,��7,785 3,9�0,5�6 3,905,�77 2,00�,362

Earnings per shareBasic (US cents) 16 2.�8 2.3� 0.80 0.79 0.40

- I-5 -



CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


(unaudited)

Profit for the year/period 8,877,645 �0,��7,785 3,9�0,5�6 3,905,�77 2,00�,362

Other comprehensive incomeExchange differences on

translating foreign operations 38,834 �,303,78� 502,6�7 495,653 –

Release of foreign currency

translation reserve directly

associated with disposal

group classified as

held for sale 41(c) – – – – 64,366

Other comprehensive income for the year/period, net of tax 38,834 �,303,78� 502,6�7 495,653 64,366

Total comprehensive income for the year/period 8,9�6,479 ��,42�,566 4,4�3,�33 4,400,830 2,065,728

Total comprehensive income for the year/period attributable to:Owners of the Company 8,986,88� ��,467,356 4,462,0�8 4,432,646 2,065,728

Minority interests (70,402 ) (45,790 ) (48,885 ) (3�,8�6 ) –

8,9�6,479 ��,42�,566 4,4�3,�33 4,400,830 2,065,728

- I-6 -



CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

At At 31 March 30 September 2007 2008 2009 2009 Note US$ US$ US$ US$

Non-current assetsProperty, plant and equipment 17 543,474 8,2�6,��5 7,845,44� 7,36�,0�3

Intangible assets 18 955,890 �,253,878 83,673 2,�58,3�7

Goodwill 19 �,04�,434 �,�87,434 �,480,086 �,480,086

Interest in a jointly controlled entity 21 2,048,�08 2,505,338 – –

Financial asset at fair value through

profit or loss 22 – – – 642,673

Available-for-sale financial asset 23 – 2,�20,823 2,�78,663 2,�78,663

4,588,906 �5,283,588 ��,587,863 �3,820,752

Current assetsInventories 24 2,073,209 6,470,727 3,594,946 6,870,356

Trade receivables 25 3,886,598 24,04�,��3 �9,086,865 20,887,985

Prepayments, deposits and

other receivables 26 2,262,342 �,280,�82 3,620,978 8,0�8,574

Derivative financial instruments 27 – 9�,460 285,83� �32,000

Assets of disposal group classified

as held for sale 28 – – �,726,32� –

Jointly controlled entity classified

as held for sale 21 – – 3,005,224 3,005,224

Due from a jointly controlled

entity/jointly controlled entity

classified as held for sale 45(b) – 706,94� – –

Due from related parties 45(b) 656,440 – – –

Current tax refundable 25,652 25,652 – –

Restricted bank balances 29 7�5,000 3,0�0,995 6,299,692 3,330,352

Bank and cash balances 29 5,906,�2� 20,4��,008 28,�86,543 25,960,�25

�5,525,362 56,038,078 65,806,400 68,204,6�6

- I-7 -




Current liabilitiesTrade and bills payables 30 475,�94 9,662,�35 3,305,326 6,977,308Due to directors 45(b) 8�,232 – – –Due to a related party 45(b) 8,446 – – –Accruals and other payables 31 326,650 �,495,409 2,678,755 2,202,2�9Derivative component of convertible loans 35 �05,�52 – – –Bank loans 32 �,463,5�4 �,269,396 4,638,2�8 2,798,804Other loans 33 – – – 435,733Trust receipt loans 34 7�5,000 �,775,829 8,�72,422 8,730,�38Derivative financial instruments 27 – �36,460 – –Finance lease payables 36 – �,054,�69 �,�78,969 �,205,562Current tax liabilities 563,600 �,373,600 346,�20 53�,000Liabilities directly associated with disposal group classified as held for sale 28 – – �,268,600 –

3,738,788 �6,766,998 2�,588,4�0 22,880,764

Net current assets ��,786,574 39,27�,080 44,2�7,990 45,323,852

Total assets less current liabilities �6,375,480 54,554,668 55,805,853 59,�44,604

Non-current liabilitiesBank loans 32 – – – �,882,�56Convertible loans 35 3,653,568 – – –Finance lease payables 36 – 2,946,329 �,868,795 �,259,662

3,653,568 2,946,329 �,868,795 3,�4�,8�8

NET ASSETS �2,72�,9�2 5�,608,339 53,937,058 56,002,786

Capital and reservesShare capital 38 2,570,694 3,980,590 3,980,590 3,980,590Reserves �0,0�2,�8� 47,534,502 49,956,468 52,022,�96

Equity attributable to the owners of the Company �2,582,875 5�,5�5,092 53,937,058 56,002,786Minority interests �39,037 93,247 – –

TOTAL EQUITY �2,72�,9�2 5�,608,339 53,937,058 56,002,786

- I-8 -



STATEMENTS OF FINANCIAL POSITION


Non-current assetsInvestment in a subsidiary 20 2,570,694 2,570,694 2,570,694 2,570,694

Current assetsPrepayments, deposits and

other receivables 26 ��7,�80 – – –

Due from subsidiaries 20 3,4�8,�46 27,742,047 29,688,��3 29,322,003

Bank and cash balances 29 60,567 39,69� 34,892 26,994

3,595,893 27,78�,738 29,723,005 29,348,997

Current liabilitiesAccruals and other payables 31 – 436,9�� 462,777 7�7,32�

Derivative component of

convertible loans 35 �05,�52 – – –

�05,�52 436,9�� 462,777 7�7,32�

Net current assets 3,490,74� 27,344,827 29,260,228 28,63�,676

Total assets less current liabilities 6,06�,435 29,9�5,52� 3�,830,922 3�,202,370

Non-current liabilitiesConvertible loans 35 3,653,568 – – –

NET ASSETS 2,407,867 29,9�5,52� 3�,830,922 3�,202,370

Capital and reservesShare capital 38 2,570,694 3,980,590 3,980,590 3,980,590

Reserves 39(b) (�62,827 ) 25,934,93� 27,850,332 27,22�,780

TOTAL EQUITY 2,407,867 29,9�5,52� 3�,830,922 3�,202,370

- I-9 -



CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Attributable to owners of the Company Foreign currency Share Share Merger translation Retained Reserve Minority Total capital premium reserve reserve * profits funds* Total interests equity (Note 39 (Note 39 (Note 39 (Note 39

(c)(i)) (c)(ii)) (c)(iii)) (c)(iv))

US$ US$ US$ US$ US$ US$ US$ US$ US$

At � April 2006 – – �,000 – �,282,369 – �,283,369 – �,283,369

Total comprehensive income

for the year – – – 38,834 8,948,047 – 8,986,88� (70,402 ) 8,9�6,479

Capital contribution from

the then shareholders of

a subsidiary 2,569,694 – – – – – 2,569,694 – 2,569,694

Arising on the restructuring

exercise �,000 – (�,000 ) – – – – – –

Acquisition of a subsidiary

(note 41(b)) – – – – – – – 373,57� 373,57�

Acquisition of minority

interests in a subsidiary – – – – – – – (�64,�32 ) (�64,�32 )

Transfer to reserve funds – – – – (�27,0�6 ) �27,0�6 – – –

Interim dividend distributed to

the then shareholders

(note 15) – – – – (257,069 ) – (257,069 ) – (257,069 )

Changes in equity for the year 2,570,694 – (�,000 ) 38,834 8,563,962 �27,0�6 ��,299,506 �39,037 ��,438,543

At 3� March 2007 and

� April 2007 2,570,694 – – 38,834 9,846,33� �27,0�6 �2,582,875 �39,037 �2,72�,9�2

Total comprehensive

income for the year – – – �,286,646 �0,�80,7�0 – ��,467,356 (45,790 ) ��,42�,566

Issue of shares 252,��4 �,328,�27 – – – – �,580,24� – �,580,24�

Conversion of

convertible loans 453,782 8,328,�45 – – – – 8,78�,927 – 8,78�,927

Issue of shares upon listing 704,000 �8,598,693 – – – – �9,302,693 – �9,302,693

Transfer to reserve funds – – – – (2�5,448 ) 2�5,448 – – –

Dividends paid (note 15) – – – – (2,200,000 ) – (2,200,000 ) – (2,200,000 )

Changes in equity for the year �,409,896 28,254,965 – �,286,646 7,765,262 2�5,448 38,932,2�7 (45,790 ) 38,886,427

- I-�0 -



Attributable to owners of the Company Foreign currency Share Share Merger translation Retained Reserve Minority Total capital premium reserve reserve * profits funds* Total interests equity (Note 39 (Note 39 (Note 39 (Note 39 (c)(i)) (c)(ii)) (c)(iii)) (c)(iv)) US$ US$ US$ US$ US$ US$ US$ US$ US$

At 3� March 2008 and � April 2008 3,980,590 28,254,965 – �,325,480 �7,6��,593 342,464 5�,5�5,092 93,247 5�,608,339

Total comprehensive income for the year – – – 502,6�7 3,959,40� – 4,462,0�8 (48,885 ) 4,4�3,�33Acquisition of minority interests in a subsidiary – – – – – – – (44,362 ) (44,362 )Transfer to reserve funds – – – – (�,233,698 ) �,233,698 – – –Dividends paid (note 15) – – – – (2,040,052 ) – (2,040,052 ) – (2,040,052 )

Changes in equity for the year – – – 502,6�7 685,65� �,233,698 2,42�,966 (93,247 ) 2,328,7�9

At 3� March 2009 and � April 2009 3,980,590 28,254,965 – �,828,097 �8,297,244 �,576,�62 53,937,058 – 53,937,058

Total comprehensive income for the period – – – 64,366 2,00�,362 – 2,065,728 – 2,065,728

Changes in equity for the period – – – 64,366 2,00�,362 – 2,065,728 – 2,065,728

At 30 September 2009 3,980,590 28,254,965 – �,892,463 20,298,606 �,576,�62 56,002,786 – 56,002,786

At � April 2008 3,980,590 28,254,965 – �,325,480 �7,6��,593 342,464 5�,5�5,092 93,247 5�,608,339

Total comprehensive income for the period (unaudited) – – – 495,653 3,936,993 – 4,432,646 (3�,8�6 ) 4,400,830Dividends paid (unaudited) – – – – (2,040,052 ) – (2,040,052 ) – (2,040,052 )

Changes in equity for the period (unaudited) – – – 495,653 �,896,94� – 2,392,594 (3�,8�6 ) 2,360,778

At 30 September 2008 (unaudited) 3,980,590 28,254,965 – �,82�,�33 �9,508,534 342,464 53,907,686 6�,43� 53,969,��7

* The balances at 3� March 2009 include equity directly associated with disposal group classified as held for sale and a jointly controlled entity classified as held for sale amounted to a debit balance of US$64,366 and a credit balance of US$938,�00 respectively.

The balance at 30 September 2009 includes equity directly associated with a jointly controlled entity classified as held for sale amounted to a credit balance of US$938,�00.

- I-�� -



CONSOLIDATED STATEMENTS OF CASH FLOWS

For the six months For the year ended 31 March ended 30 September 2007 2008 2009 2008 2009 US$ US$ US$ US$ US$

(unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES

Profit before tax 9,323,72� �0,927,785 4,504,�24 4,2�3,�85 2,348,862

Adjustments for:

Finance costs �39,236 792,�27 543,70� 2��,��8 �83,899

Share of profit of a jointly controlled entity (999,800 ) (743,595 ) (434,886 ) (446,�46 ) –

Interest income (2�,904 ) (�06,�34 ) (�78,480 ) (96,448 ) (�68,672 )

Impairment of trade receivables – – 844,667 – –

Impairment of prepayments, deposits

and other receivables – �4�,387 – – –

Impairment of assets of disposal group

classified as held for sale – – 447,397 – –

Fair value losses on derivative

component of convertible loans 78,�43 234,063 – – –

Fair value losses/(gains) on derivative

financial instruments, net – 45,000 (330,83� ) 50,000 �53,83�

Depreciation of property, plant and equipment 84,289 608,270 �,08�,979 379,592 576,728

Amortisation of intangible assets 255,35� 489,826 496,�28 327,057 427,796

Loss on disposals of property,

plant and equipment 253 – 6,930 – 27,379

Loss on disposals of disposal group

classified as held for sale – – – – 64,366

Share-based payments – 370,696 – – –

Operating profit before working

capital changes 8,859,289 �2,759,425 6,980,729 4,638,358 3,6�4,�89

(Increase)/decrease in inventories (�,86�,773 ) (4,378,722 ) 2,888,3�� 4,�09,386 (3,275,4�0 )

(Increase)/decrease in trade receivables (2,299,�58 ) (20,084,565 ) 2,654,228 (�6,8�8,92� ) (�,80�,�20 )

(Increase)/decrease in prepayments,

deposits and other receivables �,�89,207 �30,466 (2,3�3,045 ) (844,�63 ) (6,439,875 )

(Increase)/decrease in amounts

due from related parties (650,76� ) 656,440 – – –

Increase/(decrease) in trade

and bills payables �84,382 9,�27,052 (6,393,395 ) (�,2�2,553 ) 3,67�,982

- I-�2 -




(unaudited)

Increase/(decrease) in amounts

due to directors �,070,867 (8�,232 ) – – –

Increase/(decrease) in an amount due

to a related party 8,446 (8,446 ) – – –

Increase/(decrease) in accruals

and other payables (378,024 ) �,��9,492 �,�63,304 �,055,5�5 (448,536 )

Exchange realignment – 505,�47 – (35,703 ) –

Cash generated from/(used in) operations 6,�22,475 (254,943 ) 4,980,�32 (9,�08,08� ) (4,678,770 )

Interest on bank loans and bank overdraft (56,485 ) (�48,075 ) (330,672 ) (�22,83� ) (�46,940 )

Finance lease charges paid – (�67,��0 ) (�77,920 ) (88,287 ) (63,638 )

Other finance costs – (36,5�6 ) (27,�09 ) – (�,32� )

Income tax paid, net (25,652 ) – (326,836 ) (�58,008 ) (�62,620 )


operating activities 6,040,338 (606,644 ) 4,��7,595 (9,477,207 ) (5,053,289 )

CASH FLOWS FROM INVESTING ACTIVITIES

Interest received 2�,904 �06,�34 �78,480 96,448 �68,672

Dividends received from

a jointly controlled entity – 56�,365 – – –

Purchases of property, plant

and equipment (note 41(d)(iv)) (572,765 ) (2,88�,8�2 ) (3�7,268 ) (425,�76 ) (��9,679 )

Deposits paid for purchases of property,

plant and equipment (830,355 ) – – – –

Purchases of intangible assets (note 41(d)(vii)) (�,�62,49� ) (786,552 ) (5,674 ) (4,832 ) (2,440 )

Purchase of financial asset at fair

value through profit or loss – – – – (642,673 )

Purchase of an available-for-sale

financial asset – (2,�20,823 ) – – –

Acquisition of a subsidiary (note 41(a)) (2,493,200 ) – – – –

Piece meal acquisition of

a subsidiary (note 41(b)) 4,666 – – – –

Acquisition of minority interests

in a subsidiary (247,�24 ) – (305,0�4 ) – –

- I-�3 -



For the six months For the year ended 31 March ended 30 September 2007 2008 2009 2008 2009 US$ US$ US$ US$ US$ (unaudited)

Proceeds from disposals of property, plant and equipment – – 2,774 – –(Loans to)/repayment from a jointly controlled entity – (706,94� ) 726,22� 59,406 –(Increase)/decrease in time deposits (642,674 ) 642,674 (�5,706,874 ) – �,�82,452(Increase)/decrease in restricted bank balances (7�5,000 ) (2,295,995 ) (3,288,697 ) (8,239,5�6 ) 2,969,340

Net cash (used in)/generated from investing activities (6,637,039 ) (7,48�,950 ) (�8,7�6,052 ) (8,5�3,670 ) 3,555,672

CASH FLOWS FROM FINANCING ACTIVITIES

Bank loans raised �,908,93� �,269,396 �2,�35,�39 ��,�26,207 4,827,763Other loans raised – – – – 435,733Repayment of bank loans (445,4�7 ) (�,463,5�4 ) (8,766,3�7 ) (�,489,459 ) (4,785,02� )Repayment of finance lease payables – (539,799 ) (�,�2�,606 ) (55�,44� ) (582,540 )Increase in trust receipt loans 7�5,000 �,060,829 6,396,593 4,288,4�� 557,7�6Dividends paid – (2,200,000 ) (2,040,052 ) (2,040,052 ) –Net proceeds from issue of convertible loans 3,597,826 4,368,7�8 – – –Net proceeds from issue of shares – 20,5�2,238 – – –

Net cash generated from financing activities 5,776,340 23,007,868 6,603,757 ��,333,666 453,65�

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 5,�79,639 �4,9�9,274 (7,994,700 ) (6,657,2�� ) (�,043,966 )

Effect of foreign exchange rate changes 37,784 228,287 63,36� 25�,�03 –

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR/PERIOD 46,024 5,263,447 20,4��,008 20,4��,008 �2,479,669

CASH AND CASH EQUIVALENTS AT END OF YEAR/PERIOD 5,263,447 20,4��,008 �2,479,669 �4,004,900 ��,435,703

ANALYSIS OF CASH AND CASH EQUIVALENTS

Bank and cash balances (note 29) 5,263,447 20,4��,008 �2,479,669 �4,004,900 ��,435,703

- I-�4 -



NOTES TO THE FINANCIAL INFORMATION

1. GENERAL INFORMATION

The Company (Registration No. 395�9) was incorporated in Bermuda on 30 January 2007 under the Companies Act �98�

of Bermuda as an exempted company with limited liability. The registered office of the Company is located at Clarendon House,

2 Church Street, Hamilton HM ��, Bermuda. Its principal place of business is located at Room 40�, Building �4, West Park of

Software Park Hi-Tech Park, Second Road Nanshan, Shenzhen, the People’s Republic of China (the “PRC”). The Company’s

shares are listed on the SGX-ST.

The Company is an investment holding company. For the purpose of listing of the Company’s shares on the SGX-ST,

the Company and its subsidiaries has undertaken a restructuring exercise (the “Restructuring Exercise”) which was completed

on 28 March 2007. The Restructuring Exercise is more fully explained in the section headed “History and Development” in the

Prospectus and note 2 to the Financial Information below.

The principal activities of its subsidiaries are set out in note 20 to the Financial Information.

2. THE RESTRUCTURING EXERCISE AND BASIS OF PREPARATION

(a) Restructuring Exercise

In connection with the listing of the Company’s shares on the SGX-ST on 2� November 2007, the Group

underwent a restructuring exercise (the “Restructure Exercise”) on 28 March 2007. Pursuant to the Restructure Exercise

on 28 March 2007, the Company entered into a restructuring agreement with Mr. Wang Shih Zen and Ms. Wang Tao in

respect of their shareholdings in Elastic Glory (collectively, the “Elastic Glory Vendors”), which was the intermediate

holding company of the other subsidiaries comprising the Group, to acquire in aggregate 2,570,694 fully paid-up ordinary

shares of US$� each in the capital of Elastic Glory from the Elastic Glory Vendors comprising the entire issued and

paid-up share capital of Elastic Glory.

In consideration thereof and in exchange therefore, the Company

(i) credited as fully paid at par the one ordinary share that was previously issued nil paid to Mr. Wang Shih

Zen, upon incorporation of the Company as initial subscriber; and

(ii) allotted and issued 2,570,693 new ordinary shares of US$� each, credited as fully paid to the Elastic

Glory Vendors.

Upon completion of the above-mentioned share swaps, the Company became the ultimate holding company of

Elastic Glory on 28 March 2007, and 55% and 45% shareholding interests of the Company were then owned by Mr.

Wang Shih Zen and Ms. Wang Tao respectively.

The Restructuring Exercise is more fully explained in the section headed “History and Development” in the

Prospectus.

(b) Basis of preparation

The Restructuring Exercise involved companies which are under common control since all of the entities which

took part in the Restructuring Exercise were controlled by the same ultimate shareholders before and immediately after

the Restructuring Exercise. Consequently, immediately after the Restructuring Exercise, there was a continuation of the

risks and benefits to the two ultimate shareholders, Mr. Wang Shih Zen and Ms. Wang Tao, that existed prior to the

Restructuring Exercise.

- I-�5 -



The Restructuring Exercise had been accounted for using the pooling of interests method, under which the Company

had been treated as the holding company of its subsidiaries during the Relevant Periods or since their respective dates of

incorporation or acquisition whichever was shorter. Accordingly, the consolidated income statement, consolidated statement

of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the

year ended 3� March 2007 included the results of operations and cash flows of the Company and its subsidiaries as if

the structure of the Group on 3� March 2007 had been in existence throughout the year ended 3� March 2007, except

for companies newly set up during the year ended 3� March 2007 and companies accounted for using purchase method

of accounting were included in the Financial Information since their respective dates of incorporation or acquisition

whichever was shorter.

3. ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS

During the Relevant Periods, the Group has adopted all the new and revised International Financial Reporting Standards

(“IFRSs”) that are relevant to its operations and effective for accounting periods beginning on � April 2009. IFRSs comprise

International Financial Reporting Standards; International Accounting Standards (“IAS”); and Interpretations.

The Group has not applied the new IFRSs that have been issued but are not yet effective. The Group has already

commenced an assessment of the impact of these new IFRSs but is not yet in a position to state whether these new IFRSs would

have a material impact on its results of operations and financial position.

4. SIGNIFICANT ACCOUNTING POLICIES

The Financial Information has been prepared in accordance with IFRSs and the applicable disclosure required by the

Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and by the Hong Kong Companies

Ordinance.

The Financial Information has been prepared under the historical cost convention, as modified by the financial asset at

fair value through profit or loss, the derivative financial instruments and the derivative component of convertible loans which

are carried at their fair values.

The preparation of the Financial Information in conformity with IFRSs requires the use of certain key assumptions

and estimates. It also requires the directors to exercise its judgements in the process of applying the accounting policies. The

areas involving critical judgements and areas where assumptions and estimates are significant to the Financial Information, are

disclosed in note 5 to the Financial Information.

The significant accounting policies applied in the preparation of the Financial Information are set out below.

(a) Consolidation

The Financial Information includes the financial statements of the Group made up to 3� March. Subsidiaries

are entities over which the Group has control. Control is the power to govern the financial and operating policies of an

entity so as to obtain benefits from its activities. The existence and effect of potential voting rights that are currently

exercisable or convertible are considered when assessing whether the Group has control.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are

deconsolidated from the date the control ceases.

The gain or loss on the disposal of a subsidiary represents the difference between the proceeds of the sale and

the Group’s share of its net assets together with any remaining goodwill relating to the subsidiary and also any related

accumulated foreign currency translation reserve.

- I-�6 -



Intragroup transactions, balances and unrealised profits on transactions between Group companies are eliminated.

Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted

by the Group.

Minority interests represent the interests of minority shareholders in the operating results and net assets of

subsidiaries. Minority interests are presented in the consolidated statements of financial position and consolidated

statements of changes in equity within equity. Minority interests are presented in the consolidated income statements and

consolidated statements of comprehensive income as an allocation of profit or loss for the year/period between minority

interests and owners of the Company (“minority interests”). Losses applicable to the minority in excess of the minority

interests in the subsidiary’s equity are allocated against the majority interests except to the extent that the minority has

a binding obligation and is able to make an additional investment to cover the losses. If the subsidiary subsequently

reports profits, such profits are allocated to the majority interests until the minority interests’ share of losses previously

absorbed by majority has been recovered.

In the Company’s statements of financial position the investment in a subsidiary is stated at cost less allowance

for impairment losses. The result of the subsidiary is accounted for by the Company on the basis of dividends received

and receivable.

(b) Business combination (other than Restructuring Exercise) and goodwill

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The

cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred

or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets, liabilities and

contingent liabilities of the subsidiary in an acquisition are measured at their fair values at the acquisition date.

The excess of the cost of acquisition over the Group’s share of the net fair value of the subsidiary’s identifiable

assets, liabilities and contingent liabilities is recorded as goodwill. Any excess of the Group’s share of the net fair value

of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition is recognised in the consolidated

income statements.

Goodwill is tested annually for impairment or more frequently if events or changes in circumstances indicate

that it might be impaired. Goodwill is measured at cost less accumulated impairment losses. The method of measuring

impairment losses of goodwill is the same as that of other assets as stated in the accounting policy (ac) below. Impairment

losses of goodwill are recognised in the consolidated income statements and are not subsequently reversed. Goodwill

is allocated to cash-generating units that are expected to benefit from the synergies of the acquisition for the purpose

of impairment testing.

The interests of minority shareholders in the subsidiary is initially measured at the minority’s proportion of the

net fair value of the subsidiary’s identifiable assets, liabilities and contingent liabilities at the acquisition date.

(c) Joint venture

A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity

that is subject to joint control. Joint control is the contractually agreed sharing of control over the economic activity

when the strategic financial and operating decisions relating to the activity require the unanimous consent of the parties

sharing control (the “venturers”).

A jointly controlled entity is a joint venture that involves the establishment of a separate entity in which each

venturer has an interest.

Investment in a jointly controlled entity is accounted for in the Financial Information by the equity method

of accounting and is initially recognised at cost. Identifiable assets, liabilities and contingent liabilities of the jointly

controlled entity in an acquisition are measured at their fair values at the acquisition date.

- I-�7 -



The Group’s share of the jointly controlled entity’s post-acquisition profits or losses is recognised in the

consolidated income statements, and its share of the post-acquisition movements in reserves is recognised in the

consolidated reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the

investment. When the Group’s share of losses in the jointly controlled entity equals or exceeds its interest in the jointly

controlled entity, including any other unsecured receivables, the Group does not recognise further losses, unless it has

incurred obligations or made payments on behalf of the jointly controlled entity.

Unrealised profits on transactions between the Group and its jointly controlled entity are eliminated to the extent

of the Group’s interest in the jointly controlled entity. Unrealised losses are also eliminated unless the transaction provides

evidence of an impairment of the asset transferred. Accounting policies of the jointly controlled entity have been changed

where necessary to ensure consistency with the policies adopted by the Group.

(d) Foreign currency translation

(i) Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency

of the primary economic environment in which the entity operates (the “functional currency”). The Financial

Information is presented in United States dollar (“US$”), which is the Company’s functional and presentation

currency.

(ii) Transactions and balances in each entity’s financial statements

Transactions in foreign currencies are translated into the functional currency using the exchange rates

prevailing on the transaction dates. Monetary assets and liabilities in foreign currencies are translated at the

exchange rates at the end of each reporting period. Gains and losses resulting from this translation policy are

included in consolidated income statements.

Non-monetary items that are measured at fair values in foreign currencies are translated using the exchange

rates at the dates when the fair values are determined.

When a gain or loss on a non-monetary item is recognised in other comprehensive income, any exchange

component of that gain or loss is recognised in other comprehensive income. When a gain or loss on a nonmonetary

item is recognised in profit or loss, any exchange component of that gain or loss is recognised in consolidated

income statements.

(iii) Translation on consolidation

The results and financial position of all the Group entities that have a functional currency different from

the Company’s presentation currency are translated into the Company’s presentation currency as follows:

– Assets and liabilities for each statement of financial position presented are translated at the closing

rate at the date of that statement of financial position;

– Income and expenses for each income statement are translated at average exchange rates (unless

this average is not a reasonable approximation of the cumulative effect of the rates prevailing

on the transaction dates, in which case income and expenses are translated at the exchange rates

on the transaction dates); and

– All resulting exchange differences are recognised in the foreign currency translation reserve.

- I-�8 -



On consolidation, exchange differences arising from the translation of the net investment in foreign

entities and of borrowings are recognised in the foreign currency translation reserve. When a foreign operation

is sold, such exchange differences are recognised in the consolidated income statements as part of the profit or

loss on disposal.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets

and liabilities of the foreign entity and translated at the closing rate.

(e) Property, plant and equipment

All property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate,

only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of

the item can be measured reliably. All other repairs and maintenance are expensed in the consolidated income statements

during the period in which they are incurred.

Depreciation of property, plant and equipment is calculated at rates sufficient to write off their cost less their

residual values over the estimated useful lives on a straight-line basis. The principal annual rates are as follows:

Plant and machinery �0%

Furniture, fixtures, equipment and motor vehicles 20% – 25%

Leasehold improvements 20% – 25%

The residual values, useful lives and depreciation method are reviewed and adjusted, if appropriate, at the end

of each reporting period.

For acquisition and disposal during the Relevant Periods, depreciation is provided from the month of acquisition

to the month before disposal. Fully depreciated property, plant and equipment are retained in the book of accounts until

they are no longer in use.

The gain or loss on disposal of property, plant and equipment is the difference between the net sales proceeds

and the carrying amount of the relevant asset, and is recognised in the consolidated income statements.

(f) Leases

(i) Operating leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor

are classified as operating leases. Lease payments (net of any incentives received from the lessor) are expensed

on a straight-line basis over the lease term.

(ii) Finance leases

Leases that substantially transfer to the Group all the risks and rewards of ownership of assets are

accounted for as finance leases. At the commencement of the lease term, a finance lease is capitalised at the

lower of the fair value of the leased asset and the present value of the minimum lease payments, each determined

at the inception of the lease.

- I-�9 -



The corresponding liability to the lessor is included in the statements of financial position as finance

lease payable. Lease payments are apportioned between the finance charge and the reduction of the outstanding

liability. The finance charge is allocated to each reporting period during the lease term so as to produce a constant

periodic rate of interest on the remaining balance of the liability.

Assets under finance leases are depreciated the same as owned assets.

(g) Research and development expenditure

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

(h) Computer software sublicense, license and CDMA software solutions

Computer software sublicense, license and CDMA software solutions are measured initially at purchase costs

and are amortised on a straight-line basis over their estimated useful lives of three years less impairment losses.

(i) Jointly controlled entity and disposal group classified as held for sale

Jointly controlled entity and disposal group are classified as held for sale if their carrying amounts will be recovered

principally through a sale transaction rather than through continuing use. This condition is regarded as met only when

the sale is highly probable and the jointly controlled entity and disposal group is available for immediate sale in their

present conditions. The Group must be committed to the sale, which should be expected to qualify for recognition as a

completed sale within one year from the date of classification.

Jointly controlled entity and disposal group classified as held for sale are measured at the lower of the interest

in jointly controlled entity’s and disposal group’s previous carrying amount and fair value less costs to sell.

(j) Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in, first-out

basis. Cost comprises all costs of purchase, cost of conversion and other costs incurred in bringing the inventories to

their present location and condition. Net realisable value is the estimated selling price in the ordinary course of business

less the estimated costs necessary to make the sale.

(k) Recognition and derecognition of financial instruments

Financial assets and financial liabilities are recognised in the statements of financial position when the Group

becomes a party to the contractual provisions of the instruments.

Financial assets are derecognised when the contractual rights to receive cash flows from the assets expire; the

Group transfers substantially all the risks and rewards of ownership of the assets; or the Group neither transfers nor

retains substantially all the risks and rewards of ownership of the assets but has not retained control on the assets. On

derecognition of a financial asset, the difference between the asset’s carrying amount and the sum of the consideration

received and receivable and the cumulative gain or loss that had been recognised directly in equity is recognised in the

income statement.

Financial liabilities are derecognised when the obligation specified in the relevant contract is discharged, cancelled

or expired. The difference between the carrying amount of the financial liability derecognised and the consideration paid

is recognised in the consolidated income statements.

- I-20 -



(l) Investments

Investments are recognised and derecognised on a trade date basis where the purchase or sale of an investment is

under a contract whose terms require delivery of the investment within the timeframe established by the market concerned,

and are initially measured at fair value, plus directly attributable transaction costs except in the case of financial assets

at fair value through profit or loss.

Investments are classified as either financial assets at fair value through profit or loss or available-for-sale financial

assets.

(i) Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss are either investments held for trading or designated

as at fair value through profit or loss upon initial recognition. These investments are subsequently measured at

fair value. Gains or losses arising from changes in fair value of these investments are recognised in the income

statement.

(ii) Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets not classified as trade and other

receivables, held-to-maturity investments or financial assets at fair value through profit or loss. Available-for

sale financial assets are subsequently measured at fair value. Gains or losses arising from changes in fair value

of these investments are recognised directly in equity, until the investments are disposed of or are determined

to be impaired, at which time the cumulative gains or losses previously recognised in equity are recognised in

the income statement.

Impairment losses recognised in the income statement for equity investments classified as available-for

sale financial assets are not subsequently reversed through the income statement.

For available-for-sale equity investments that do not have a quoted market price in an active market and

whose fair value cannot be reliably measured, they are measured at cost less any identified impairment losses at

the end of each reporting period subsequent to initial recognition. An impairment loss is recognised in income

statement where there is objective evidence that the asset is impaired. The amount of the impairment loss is

measured as the difference between the carrying amount of the asset and the present value of the estimated future

cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses

will not reverse in subsequent periods.

(m) Trade and other receivables

Trade and other receivables are non-derivative financial assets with fixed or determinable payments that are not

quoted in an active market and are recognised initially at fair value and subsequently measured at amortised cost using

the effective interest method, less allowance for impairment. An allowance for impairment of trade and other receivables

is established when there is objective evidence that the Group will not be able to collect all amounts due according to the

original terms of receivables. The amount of the allowance is the difference between the receivables’ carrying amount and

the present value of estimated future cash flows, discounted at the effective interest rate computed at initial recognition.

The amount of the allowance is recognised in the consolidated income statements.

Impairment losses are reversed in subsequent periods and recognised in the consolidated income statements when

an increase in the receivables’ recoverable amount can be related objectively to an event occurring after the impairment

was recognised, subject to the restriction that the carrying amount of the receivables at the date the impairment is reversed

shall not exceed what the amortised cost would have been had the impairment not been recognised.

- I-2� -



(n) Cash and cash equivalents

For the purpose of the consolidated statements of cash flows, cash and cash equivalents represent cash at bank

and on hand, demand deposits with banks and other financial institutions, and short-term highly liquid investments which

are readily convertible into known amounts of cash and subject to an insignificant risk of change in value.

(o) Financial liabilities and equity instruments

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements

entered into and the definitions of a financial liability and an equity instrument under IFRSs. An equity instrument is any

contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. The accounting

policies adopted for specific financial liabilities and equity instruments are set out in note 4(p) to 4(t) below.

(p) Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred, and subsequently measured

at amortised cost using the effective interest method.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement

of the liability for at least �2 months after the end of each reporting period.

(q) Financial guarantees

The Company has issued several guarantees to several banks for banking facilities granted to its subsidiaries.

These guarantees are financial guarantees as they require the Company to reimburse the banks if the subsidiaries fail to

make principal or interest payments when due in accordance with the terms of their facilities.

Financial guarantees are initially recognised at their fair values plus transaction costs in the Company’s statement

of financial position.

Financial guarantees are subsequently amortised to the income statement over the period of the subsidiaries’

borrowings, unless it is probable that the Company will reimburse a bank for an amount higher than the unamortised

amount. In this case, the financial guarantees shall be carried at the expected amount payable to the bank in the Company’s

statement of financial position.

(r) Convertible loans

Convertible loans which entitle the holder to convert the loans into equity instruments, other than into a fixed

number of equity instruments at a fixed conversion price, are regarded as combined instruments consist of a liability and

a derivative component. At the date of issue, the fair value of the derivative component is determined using an option

pricing model; and this amount is carried as a derivative liability until extinguished on conversion or redemption. The

remainder of the proceeds is allocated to the liability component and is carried as a liability at amortised cost using the

effective interest method until extinguished on conversion or redemption. The derivative component is measured at fair

value with gains and losses recognised in the income statement.

Transaction costs are apportioned between the liability and derivative components of the convertible loans based

on the allocation of proceeds to the liability and derivative components on initial recognition.

- I-22 -



(s) Trade and other payables

Trade and other payables are stated initially at their fair value and subsequently measured at amortised cost

using the effective interest method unless the effect of discounting would be immaterial, in which case they are stated

at cost.

(t) Equity instruments

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

(u) Derivative financial instruments

Derivatives are initially recognised at fair value on the contract date and are subsequently measured at fair

value.

Changes in the fair value of derivatives are recognised in the income statement as they arise.

The fair value of foreign exchange forward contracts is determined using forward exchange market rates at the

end of the reporting period.

(v) Dividends

Final dividend proposed by the directors are not accounted for in owners’ equity as an appropriation of retained

profits, until they have been approved by the owners in a general meeting. When these dividends have been approved

by the owners and declared, they are recognised as a liability.

Interim dividends are simultaneously proposed and declared, because of the Bye-laws of the Company grant the

directors the authority to declare interim dividends. Consequently, interim dividends are recognised directly as a liability

when they are proposed and declared.

(w) Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and is recognised when it is

probable that the economic benefits will flow to the Group and the amount of revenue can be measured reliably.

Revenue from the distribution and marketing of mobile handset and mobile handset components and assembly

of mobile handset and surface mounting technology of printed circuit board are recognised on the transfer of significant

risks and rewards of ownership, which generally coincides with the time when the goods are delivered and the title has

passed to the customers.

Revenue from provision of design and production solution service for mobile handset is recognised on the

following basis:

(i) the customer has accepted the solution packages together with significant risks and rewards of ownership

in relation to provision of certain mobile handset solutions other than stated in (ii) below; or

(ii) by reference to the stage of completion, as measured by reference to services performed to date as a

percentage of total services to be performed in relation to design and prescribed services as agreed with

customers to be rendered in different phases.

Interest income is recognised on a time-proportion basis using the effective interest method.

- I-23 -



(x) Employee benefits

(i) Employee leave entitlements

Employee entitlements to annual leave and long service leave are recognised when they accrue to

employees. A provision is made for the estimated liability for annual leave and long service leave as a result of

services rendered by employees up to the end of each reporting period.

Employee entitlements to sick leave and maternity leave are not recognised until the time of leave.

(ii) Pension obligations

The Group contributes to defined contribution retirement schemes which are available to all employees.

Contributions to the schemes by the Group and employees are calculated as a percentage of employees’ basic

salaries. The retirement benefit scheme cost charged to the income statement represents contributions payable

by the Group to the funds.

(iii) Key management personnel

Key management personnel are those persons having the authority and responsibility for planning, directing

and controlling the activities of the Group, directly or indirectly, including any director (whether executive or

otherwise) of that entity.

(y) Share-based payments

The Group issued equity-settled share-based payments to a consulting firm. Equity-settled share-based payments

were measured at fair value (excluding the effect of non market-based vesting conditions) of the equity instruments at

the date of grant. The fair value determined at the grant date of the equity-settled share-based payments was expensed

on a straight-line basis over the vesting period, based on the Group’s estimate of shares that would eventually vest and

adjusted for the effect of non market-based vesting conditions.

(z) 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 capitalised

as part of 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.

To the extent that funds are borrowed generally and used for the purpose of obtaining a qualifying asset, the

amount of borrowing costs eligible for capitalisation is determined by applying a capitalisation rate to the expenditures

on that asset. The capitalisation rate is the weighted average of the borrowing costs applicable to the borrowings of the

Group that are outstanding during the period, other than borrowings made specifically for the purpose of obtaining a

qualifying asset.

All other borrowing costs are recognised in income statement in the period in which they are incurred.

- I-24 -



(aa) Taxation

Income tax represents the sum of the current tax and deferred tax.

The tax currently payable is based on taxable profit for the year/period. Taxable profit differs from profit as

reported in the 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 not 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 each reporting period.

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial

statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance

sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred

tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible

temporary differences, unused tax losses or unused tax credits 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 arising on investments in subsidiaries

and interests in joint ventures, 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.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the

extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be

recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the

asset is realised, based on tax rates that have been enacted or substantively enacted by the end of each reporting period.

Deferred tax is recognised in the income statement, except when it relates to items recognised in other comprehensive

or directly in equity, in which case the deferred tax is also recognised in other comprehensive imcome or directly in

equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets

against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group

intends to settle its current tax assets and liabilities on a net basis.

(ab) Related parties

A party is related to the Group if:

(i) directly or indirectly through one or more intermediaries, the party controls, is controlled by, or is under

common control with, the Group; has an interest in the Group that gives it significant influence over the

Group; or has joint control over the Group;

(ii) the party is an associate;

(iii) the party is a joint venture;

(iv) the party is a member of the key management personnel of the Company or its parent;

(v) the party is a close member of the family of any individual referred to in (i) or (iv);

- I-25 -



(vi) the party is an entity that is controlled, jointly controlled or significantly influenced by or for which

significant voting power in such entity resides with, directly or indirectly, any individual referred to in

(iv) or (v); or

(vii) the party is a post-employment benefit plan for the benefit of employees of the Group, or of any entity

that is a related party of the Group.

(ac) Impairment of assets

At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets

except goodwill, available-for-sale financial asset, financial asset at fair value through profit or loss, derivative financial

instruments, inventories, receivables and assets of disposal group and jointly controlled entity classified as held for sale

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 any impairment loss. Where

it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount

of the cash-generating unit (“CGU”) to which the asset belongs.

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 is discounted to its 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.

If the recoverable amount of an asset or CGU is estimated to be less than its carrying amount, the carrying

amount of the asset or CGU is reduced to its recoverable amount. An impairment loss is recognised immediately in the

income statement, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated

as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset or CGU 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 (net of amortisation or depreciation) had no impairment loss been recognised

for the asset or CGU in prior years/periods. A reversal of an impairment loss is recognised immediately in the income

statement, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is

treated as a revaluation increase.

(ad) Provisions and contingent liabilities

Provisions are recognised for liabilities of uncertain timing or amount when the Group has a present legal or

constructive obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be

required to settle the obligation and a reliable estimate can be made. Where the time value of money is material, provisions

are stated at the present value of the expenditures expected to settle the obligation.

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated

reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow is remote. Possible

obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events

are also disclosed as contingent liabilities unless the probability of outflow is remote.

(ae) Events after the reporting period

Events after the reporting period that provide additional information about the Group’s position at the end of

each reporting period or those that indicate the going concern assumption is not appropriate are adjusting events and are

reflected in the Financial Information. Events after the reporting period that are not adjusting events are disclosed in the

notes to the Financial Information when material.

- I-26 -



5. CRITICAL JUDGEMENTS AND KEY ESTIMATES

Key sources of estimation uncertainty

The key assumptions concerning the future, and other key sources of estimation uncertainty at the end of each

reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and

liabilities within the next reporting period, are discussed below.

(a) Property, plant and equipment and depreciation

The Group’s management determines the estimated useful lives and related depreciation charges for the Group’s

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. The Group will revise the depreciation charge where useful lives

are different to those previously estimated, or it will write-off or write-down technically obsolete or non-strategic assets

that have been abandoned or sold.

(b) Impairment of property, plant and equipment

The Group assesses annually whether property, plant and equipment have any indication of impairment in

accordance with the accounting policy. The recoverable amounts of property, plant and equipment have been determined

based on value-in-use calculations. These calculations require the use of judgement and estimates.

(c) Intangible assets and amortisation

The Group determines the estimated useful lives and related amortisation for the Group’s intangible assets. The

useful lives of intangible assets are assessed to be either finite or indefinite, based on the expected usage and technical

obsolescence from the changes in the market demands or services output from the assets. Intangible assets with finite useful

lives are amortised over the expected useful economic lives and assessed for impairment whenever there is an indication

that the intangible assets may be impaired. The amortisation period and the amortisation method for the intangible assets

with a finite useful lives are reviewed by the management at least at the end of each reporting period.

(d) Impairment of goodwill

The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of

the value in use of the CGU to which the goodwill is allocated. Estimating the value in use of the CGU requires the

Group to make an estimate of the expected future cash flows from the CGU and also to choose a suitable discount rate

in order to calculate the present value of those cash flows. The carrying amount of goodwill at 3� March 2007, 2008 and

2009 and 30 September 2009 was US$�,04�,434, US$�,�87,434, US$�,480,086 and US$�,480,086 respectively. Details

are set out in note �9 to the Financial Information.

(e) Impairment of available-for-sale financial asset

The Group determines whether the unlisted equity investment is impaired at least on an annual basis and based

on the financial information available from the unlisted equity investment. Details are set out in note 23 to the Financial

Information.

(f) Impairment of investment in a subsidiary

Determining whether investment in a subsidiary is impaired requires an estimation of the value-in-use of that

investment. The value-in-use calculation requires the Company to estimate the future cash flows expected from the

CGUs and an appropriate discount rate in order to calculate the present value of the future cash flows. Management has

evaluated the recoverability of the investment based on such estimates.

- I-27 -



(g) Impairment of trade and other receivables

The Group makes impairment of trade and other receivables based on assessments of the recoverability of the

trade and other receivables, including the current creditworthiness and/or the past collection history of each debtor.

Impairment arises where events or changes in circumstances indicate that the balances may not be collectible. The

identification of bad and doubtful debts requires the use of judgement and estimates. Where the actual result is different

from the original estimate, such difference will have impact on the carrying value of the trade and other receivables and

doubtful debt expenses in the reporting period in which such estimate has been changed.

(h) Allowance for obsolete inventories

The Group makes allowance for obsolete inventories based on an assessment of the utilisation of the inventories.

Allowance is applied to inventories where events or changes in circumstances indicate that the inventories may not be

utilised. The identification of obsolete inventories requires the use of judgement and estimates. Where the expectation is

different from the original estimate, such difference will have impact on the carrying value of inventories and allowance

for obsolete inventories in the reporting period in which such estimate has been changed.

(i) Income taxes

The Group is subject to income taxes in several jurisdictions. Significant estimates are required in determining

the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination

is uncertain during the ordinary course of business. Where the final tax outcome of these matters is different from the

amounts that were initially recorded, such difference will impact the income tax and deferred tax provisions in the

reporting period in which such determination is made.

(j) Presentation of convertible loans and fair value of derivative component of convertible loans

Convertible loans of the Group are allocated to the derivative component and the liability component of the

convertible according to IAS 39. This requires an initial recognition of the derivative component at fair value and the

liability component as the balancing amount.

The derivative component initially recognised and subsequently measured at fair value is determined by an option

pricing model. The amount of liability component initially recognised is determined with reference to the net proceeds

from the issuance of the convertible loans and the fair value of derivative component at initial recognition. The liability

component is subsequently measured at amortised cost using the effective interest rate method until it is extinguished

on conversion or redemption.

The fair value of the derivative component and the carrying amount of the liability component of convertible

loans at 3� March 2007 was US$�05,�52 and US$3,653,568, respectively (note 35) and all of the convertible loans were

converted into shares during the year ended 3� March 2008. The fair value loss of the derivative component of convertible

loans for the years ended 3� March 2007 and 2008 amounted to US$78,�43 and US$234,063 respectively.

- I-28 -



6. FINANCIAL RISK MANAGEMENT

The Group’s activities expose it to a variety of financial risks: foreign currency risk, credit risk, liquidity risk and interest

rate risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to

minimise potential adverse effects on the Group’s financial performance.

(a) Foreign currency risk

The Group has minimal exposure to foreign currency risk as most of its business transactions, assets and liabilities

are principally denominated in the functional currencies of respective subsidiaries. The Group currently does not have

a foreign currency hedging policy in respect of foreign currency transactions, assets and liabilities. The Group will

monitor its foreign currency exposure closely and will consider hedging significant foreign currency exposure should

the need arise.

(b) Credit risk

The carrying amount of the bank and cash balances, trade and other receivables, due from a jointly controlled

entity/jointly controlled entity classified as held for sale and derivative financial instruments included in the consolidated

statements of financial position represents the Group’s maximum exposure to credit risk in relation to the Group’s

financial assets.

The Group has certain exposure to credit risk. It has policies in place to ensure that sales are made to customers

with an appropriate credit history. The credit risk on amount due from a jointly controlled entity/jointly controlled entity

classified as held for sale is closely monitored by the directors.

The credit risk on bank balances and derivative financial instruments is limited because the counterparties are

banks with high credit-ratings assigned by international credit-rating agencies.

(c) Liquidity risk

The Group’s policy is to regularly monitor current and expected liquidity requirements to ensure that it maintains

sufficient reserves of cash to meet its liquidity requirements in the short and longer term.

The maturity analysis of the Group’s financial liabilities based on contractual undiscounted cash flows is as

follows:

Less than Between Between 1 year 1 and 2 years 2 and 5 years US$ US$ US$

At 30 September 2009Bank loans 2,920,�95 759,8�0 �,255,034

Other loans 435,733 – –

Trust receipt loans 8,769,�74 – –

Finance lease payables �,292,26� �,080,277 220,365

Trade and bills payables 6,977,308 – –

Accruals and other payables 2,202,2�9 – –

- I-29 -



Less than Between Between 1 year 1 and 2 years 2 and 5 years US$ US$ US$

At 31 March 2009Bank loans 4,692,506 – –

Trust receipt loans 8,2�9,608 – –

Finance lease payables �,292,26� �,292,26� 654,497

Trade and bills payables 3,305,326 – –

Accruals and other payables 2,678,755 – –

At 31 March 2008Bank loans �,3�5,22� – –

Trust receipt loans �,783,829 – –

Finance lease payables �,3�3,4�2 �,3�3,4�2 �,9�5,�77

Trade and bills payables 9,662,�35 – –

Accruals and other payables �,495,409 – –

Derivative financial instruments �36,460 – –

At 31 March 2007Bank loans �,503,022 – –

Trust receipt loans 7�5,000 – –

Convertible loans – 4,�74,728 –

Trade and bills payables 475,�94 – –

Accruals and other payables 326,650 – –

Due to directors 8�,232 – –

Due to a related party 8,446 – –

(d) Interest rate risk

The Group’s exposure to interest rate risk mainly arises from its bank balances, finance lease payables, trust

receipt loans, bank loans and convertible bonds. As at 3� March 2007, 2008 and 2009 and 30 September 2009, bank

balances of US$5,966,487, US$�2,673,623, US$9,640,980 and US$8,70�,�48 respectively; finance lease payables of

Nil, US$4,000,498, US$2,9�2,66� and US$2,347,009 respectively; trust receipt loans of US$7�5,000, US$�,775,829,

US$4,393,022 and US$8,730,�38 respectively; and bank loans of Nil, US$�,269,396, US$4,638,2�8 and US$4,680,960

respectively bear interest at variable rates varied with the then prevailing market condition. The remaining balances at

3� March 2007, 2008 and 2009 and 30 September 2009, together with convertible loans at 3� March 2007 bear interests

at fixed interest rates and therefore are subject to fair value interest rate risk.

The Group does not have significant exposure to interest rate risk.

- I-30 -



(e) Categories of financial instruments at the end of each reporting period

At At 31 March 30 September 2007 2008 2009 2009 US$ US$ US$ US$

Financial assets:Financial assets at fair value

through profit or loss – 9�,460 285,83� 774,673

Loans and receivables

(including cash and

cash equivalents) ��,584,329 48,883,896 53,6�9,0�5 50,507,863

Available-for-sale financial asset – 2,�20,823 2,�78,663 2,�78,663

Financial liabilities:Financial liabilities at fair value

through profit or loss �05,�52 �36,460 – –

Financial liabilities at

amortised cost 6,5�0,903 �3,323,994 �8,254,�63 2�,889,596

(f) Fair values

Except as disclosed in note 23 to the Financial Information, the carrying amounts of the Group’s financial assets

and financial liabilities as reflected in the consolidated statements of financial position approximate their respective fair

values.

Financial assets and liabilities at fair value through profit or loss includes financial asset at fair value through

profit or loss, derivative financial instruments and the derivative component of convertible loans. The fair value of the

financial asset at fair value through profit or loss is measured by using the fair value quoted by the bank; the fair value

of derivative financial instruments and the derivative component of convertible loans are measured by using valuation

techniques based on market inputs that are observable for the assets and liabilities, either directly (i.e. as prices) or

indirectly (i.e. derived from prices), other than quoted prices in active markets for identical assets or liabilities.

The total gains or losses recognised in profit or loss including those for assets held at the end of each reporting

period are presented in the consolidated income statements.

- I-3� -



7. REVENUE


(unaudited)

Distribution and marketing of mobile

handset and mobile handset

components 37,025,775 97,88�,544 75,897,585 55,873,7�4 37,372,727

Provision of design and production

solution services for mobile handset 9,235,556 �2,�09,�8� 7,289,224 4,04�,752 �,886,536

Assembly of mobile handset and

surface mounting technology of

printed circuit board – 9,603,39� 20,437,043 �2,933,464 �5,520,980

46,26�,33� ��9,594,��6 �03,623,852 72,848,930 54,780,243

8. OTHER INCOME


(unaudited)

Interest income 2�,904 �06,�34 �78,480 96,448 �68,672

Foreign exchange gains – 428,796 207,377 374,095 –

Fair value gains on derivative

financial instruments, net – – 870,933 �09,5�7 75,967

Sundry income �6,674 4�,533 – – –

38,578 576,463 �,256,790 580,060 244,639

9. SEGMENT INFORMATION

The Group has three reportable segments as follows:

Distribution and Marketing – distribution and marketing of mobile handset and mobile handset components

Solution – provision of design and production solution services for mobile handset

Assembly – assembly of mobile handset and surface mounting technology of printed circuit

board

The Group’s reportable segments are strategic business units that offer different products and services.

The accounting policies of the operating segments are the same as those described in note 4 to the Financial

Information.

- I-32 -



Segment profits and losses do not include the following items:

– Interest income and other income

– Corporate administrative expenses

– Share of profit of a jointly controlled entity

– Finance costs

– Income tax expense

Segment assets do not include the following items:

– Property, plant and equipment for general administrative use

– Interest in a jointly controlled entity/jointly controlled entity classified as held for sale

– Financial asset at fair value through profit or loss

– Available-for-sale financial asset

– Prepayments, deposits and other receivables for general administrative use

– Derivative financial instruments

– Assets of disposal group classified as held for sale

– Due from related parties/a jointly controlled entity

– Current tax refundable

– Restricted bank balances

– Bank and cash balances

Segment liabilities do not include the following items:

– Accruals and other payables for general administrative use

– Bank loans

– Other loans

– Trust receipt loans

– Derivative financial instruments

– Convertible loans and its derivative component

– Finance lease payables

– Current tax liabilities

– Due to directors/a related party

– Liabilities directly associated with disposal group classified as held for sale

Segment non-current assets do not include the following items:

– Property, plant and equipment for general administrative use

– Interest in a jointly controlled entity

– Financial asset at fair value through profit or loss

– Available-for-sale financial asset

- I-33 -



Information about reportable segment profit or loss, assets and liabilities:

Distribution and Marketing Solution Assembly Consolidated US$ US$ US$ US$

Six months ended 30 September 2009

Revenue from external customers 37,372,727 �,886,536 �5,520,980 54,780,243

Segment profits �,386,257 �,452,54� �,98�,035 4,8�9,833

Interest income �68,672Other income (excluding interest income) 75,967Corporate administrative expenses (2,53�,7�� )Finance costs (�83,899 )Income tax expense (347,500 )

Profit for the period 2,00�,362

Depreciation and amortisation 4�6,666 46,296 464,653 927,6�5

As at 30 September 2009

Segment assets 29,027,463 2,�53,677 �4,527,096 45,708,236

Property, plant and equipment for general administrative use 485,7�8Jointly controlled entity classified as held for sale 3,005,224Financial asset at fair value through profit or loss 642,673Available-for-sale financial asset 2,�78,663Prepayments, deposits and other receivables for general administrative use 582,377Derivative financial instruments �32,000Restricted bank balances 3,330,352Bank and cash balances 25,960,�25

Total assets 82,025,368

Additions to non-current assets – 2,440 2,6��,093 2,6�3,533

Segment liabilities 2,959,066 – 4,205,460 7,�64,526

Accruals and other payables for general administrative use 2,0�5,00�Bank loans 4,680,960Other loans 435,733Trust receipt loans 8,730,�38Finance lease payables 2,465,224Current tax liabilities 53�,000

Total liabilities 26,022,582

- I-34 -



Distribution and Marketing Solution Assembly Consolidated US$ US$ US$ US$ (unaudited) (unaudited) (unaudited) (unaudited)

Six months ended 30 September 2008

Revenue from external customers 55,873,7�4 4,04�,752 �2,933,464 72,848,930

Segment profits �,776,985 3,�80,�33 767,458 5,724,576

Interest income 96,448Other income (excluding interest income) 483,6�2Corporate administrative expenses (2,326,479 )Share of profit of a jointly controlled entity 446,�46Finance costs (2��,��8 )Income tax expense (308,008 )

Profit for the period 3,905,�77

Depreciation and amortisation – 337,039 32�,02� 658,060

As at 30 September 2008

Segment assets 39,905,864 3,968,023 9,738,669 53,6�2,556

Property, plant and equipment for general administrative use 309,652Interest in a jointly controlled entity 3,0�6,484Available-for-sale financial asset 2,�78,663Prepayments, deposits and other receivables for general administrative use 2,�88,980Derivative financial instruments 9�,460Due from a jointly controlled entity 666,7�0Current tax refundable 25,652Restricted bank balances ��,690,089Bank and cash balances �4,004,900

Total assets 87,785,�46

Additions to non-current assets – �9,754 7�,�88 90,942

Segment liabilities 7,086,�38 42,725 �,572,207 8,70�,070

Accruals and other payables for general administrative use 2,335,820Bank loans ��,386,9�0Trust receipt loans 6,064,240Derivative financial instruments �86,460Finance lease payables 3,6�7,929Current tax liabilities �,523,600

Total liabilities 33,8�6,029

- I-35 -




Year ended 31 March 2009

Revenue from external customers 75,897,585 7,289,224 20,437,043 �03,623,852

Segment profits �,497,708 4,652,768 909,426 7,059,902

Interest income �78,480Other income (excluding interest income) �,078,3�0Corporate administrative expenses (3,703,753 )Share of profit of a jointly controlled entity 434,886Finance costs (543,70� )Income tax expense (593,608 )

Profit for the year 3,9�0,5�6

Depreciation and amortisation – 524,580 9�5,030 �,439,6�0

Impairment of trade receivables – �39,434 705,233 844,667

Impairment of assets of disposal group classified as held for sale – – – 447,397

As at 31 March 2009

Segment assets �9,97�,60� 4,055,7�� 0,69�,204 34,7�8,5�6

Property, plant and equipment for general administrative use 58�,422Jointly controlled entity classified as held for sale 3,005,224Available-for-sale financial asset 2,�78,663Prepayments, deposits and other receivables for general administrative use 4�2,05�Derivative financial instruments 285,83�Assets of disposal group classified as held for sale �,726,32�Restricted bank balances 6,299,692Bank and cash balances 28,�86,543

Total assets 77,394,263

Additions to non-current assets – 2�,948 79,098 �0�,046

Segment liabilities �,769,678 42,725 2,039,3�9 3,85�,722

Accruals and other payables for general administrative use 2,�32,359Bank loans 4,638,2�8Trust receipt loans 8,�72,422Finance lease payables 3,047,764Current tax liabilities 346,�20Liabilities directly associated with disposal group classified as held for sale �,268,600


- I-36 -





Revenue from external customers 97,88�,544 �2,�09,�8� 9,603,39� ��9,594,��6

Segment profits 4,490,099 9,969,564 �,097,032 �5,556,695

Interest income �06,�34Other income (excluding interest income) 470,329Corporate administrative expenses (5,�56,84� )Share of profit of a jointly controlled entity 743,595Finance costs (792,�27 )Income tax expense (8�0,000 )

Profit for the year �0,��7,785

Depreciation and amortisation – 6�6,967 376,677 993,644

Impairment of prepayments deposits and other receivables – �4�,387 – �4�,387

Share-based payments – – – 370,696

As at 31 March 2008

Segment assets 25,070,042 3,�67,404 �2,949,468 4�,�86,9�4

Property, plant and equipment for general administrative use 33�,936Interest in a jointly controlled entity 2,505,338Available-for-sale financial asset 2,�20,823Prepayments, deposits and other receivables for general administrative use 930,599Derivative financial instruments 9�,460Due from a jointly controlled entity 706,94�Current tax refundable 25,652Restricted bank balances 3,0�0,995Bank and cash balances 20,4��,008

Total assets 7�,32�,666

Additions to non-current assets – 704,533 8,058,682 8,763,2�5

Segment liabilities 6,829,384 4�,59� 2,79�,�60 9,662,�35

Accruals and other payables for general administrative use �,495,409Bank loans �,269,396Trust receipt loans �,775,829Derivative financial instruments �36,460Finance lease payables 4,000,498Current tax liabilities �,373,600

Total liabilities �9,7�3,327

- I-37 -





Revenue from external customers 37,025,775 9,235,556 – 46,26�,33�

Segment profits 2,526,555 7,602,067 – �0,�28,622

Interest income 2�,904Other income (excluding interest income) �6,674Corporate administrative expenses (�,704,043 )Share of profit of a jointly controlled entity 999,800Finance costs (�39,236 )Income tax expense (446,076 )

Profit for the year 8,877,645

Depreciation and amortisation – 292,825 – 292,825

As at 31 March 2007

Segment assets 6,�78,562 2,83�,569 – 9,0�0,�3�

Property, plant and equipment for general administrative use 224,277Interest in a jointly controlled entity 2,048,�08Prepayments, deposits and other receivables for general administrative use �,528,539Due from related parties 656,440Current tax refundable 25,652Restricted bank balances 7�5,000Bank and cash balances 5,906,�2�

Total assets 20,��4,268

Additions to non-current assets – �,594,�94 – �,594,�94

Segment liabilities 523,943 – – 523,943

Accruals and other payables for general administrative use 277,90�Bank loans �,463,5�4Trust receipt loans 7�5,000Derivative component of convertible loans �05,�52Convertible loans 3,653,568Current tax liabilities 563,600Due to directors 8�,232Due to a related party 8,446


- I-38 -



Geographical information:


(unaudited)

RevenueThe PRC except Hong Kong 43,874,807 �06,763,743 88,399,329 6�,720,455 43,79�,302

Hong Kong 2,386,524 �2,830,373 �5,224,523 ��,�28,475 �0,988,94�

Consolidated total 46,26�,33� ��9,594,��6 �03,623,852 72,848,930 54,780,243

At 31 March At 30 September 2007 2008 2009 2008 2009 US$ US$ US$ US$ US$

(unaudited)

Non-current assetsThe PRC except Hong Kong 4,585,353 �5,275,38� ��,444,82� �5,594,594 �0,967,989

Hong Kong 3,553 8,207 �43,042 �72,899 2,852,763

Consolidated total 4,588,906 �5,283,588 ��,587,863 �5,767,493 �3,820,752

In presenting the geographical information, revenue is based on the locations of the customers.

Revenue from major customers:

For the year ended 3� March 2007, revenue from three major customers contributed to the Group’s revenue of

approximately US$��,902,930, US$7,35�,997 and US$4,8�9,590 respectively were included in both Distribution and

Marketing Segment and Solution Segment.

For the year ended 3� March 2008, revenue from three major customers contributed to the Group’s revenue of

approximately US$22,503,00�, US$�6,753,82� and US$�3,�48,627 respectively were included in both Distribution and

Marketing Segment and Solution Segment; revenue from another major customer contributed to the Group’s revenue of

approximately US$22,577,563 was included in all three presented operating segments.

For the year ended 3� March 2009, revenue from a major customer contributed to the Group’s revenue of

approximately US$�3,327,238 was included in both Distribution and Marketing Segment and Assembly Segment; revenue

from another major customer contributed to the Group’s revenue of approximately US$�5,860,�78 was included in both

Distribution and Marketing Segment and Solution Segment.

For the six months ended 30 September 2008, revenue from a major customer contributed to the Group’s revenue

of approximately US$��,�28,475 was included in both Distribution and Marketing Segment and Assembly Segment;

revenue from another major customer contributed to the Group’s revenue of approximately US$�4,028,556 was included

in both Distribution and Marketing Segment and Solution Segment.

For the six months ended 30 September 2009, revenue from two major customers contributed to the Group’s

revenue of approximately US$7,566,�26 and US$6,773,666 respectively were included in both Distribution and Marketing

Segment and Assembly Segment; revenue from another major customer contributed to the Group’s revenue of approximately

US$7,�62,�48 was included in Distribution and Marketing Segment.

- I-39 -



10. FINANCE COSTS


(unaudited)

Interest on bank loans and

bank overdraft 56,485 158,075 341,672 122,831 125,940

Finance lease charges – 177,110 174,920 88,287 56,638

Interest on convertible loans 82,751 420,426 – – –

Others – 36,516 27,109 – 1,321

139,236 792,127 543,701 211,118 183,899

11. SALARIES AND EMPLOYEE BENEFITS (INCLUDING DIRECTORS’ REMUNERATION)


(unaudited)

Wages and salaries 1,640,191 2,374,273 3,058,945 1,754,674 1,590,888

Pension costs of defined

contribution plans (a) 199,252 180,986 229,805 81,275 73,522

1,839,443 2,555,259 3,288,750 1,835,949 1,664,410

Note:

(a) The Group operates a mandatory provident fund scheme (the “MPF Scheme”) under the Hong Kong Mandatory

Provident Fund Schemes Ordinance for all qualifying employees in Hong Kong. The Group’s contributions to the

MPF Scheme are calculated at 5% of the salaries and wages subject to a monthly maximum amount of HK$1,000

per employee and vest fully with employees when contributed into the MPF Scheme.

The employees of the Group’s subsidiaries established in the PRC are members of a central pension scheme

operated by the local municipal government. These subsidiaries are required to contribute certain percentage of

the employees’ basic salaries and wages to the central pension scheme to fund the retirement benefits. The local

municipal governments undertake to assume the retirement benefits obligations of all existing and future retired

employees of these subsidiaries. The only obligation of these subsidiaries with respect to the central pension

scheme is to meet the required contributions under the scheme.

- I-40 -



(b) Directors’ and employees’ emoluments

The emoluments of each director were as follows:

For the six months ended 30 September 2009

Retirement benefits Salaries and scheme Name of directors Fees allowances contributions Total US$ US$ US$ US$

Wang Shih Zen – 15,424 772 16,196

Wang Tao – 6,655 1,255 7,910

Lu Shangmin (note(i)) – 35,367 867 36,234

Chan Kam Loon 16,413 – – 16,413

Guo Yanjun 13,678 – – 13,678

David Lim Teck Leong (note(iii)) 13,678 – – 13,678

43,769 57,446 2,894 104,109

For the six months ended 30 September 2008 (unaudited)


Wang Shih Zen – 15,424 772 16,196

Wang Tao – 5,181 1,426 6,607

Guo Yanjun 12,864 – – 12,864

Chan Kam Loon 15,437 – – 15,437

Lim Quee Teck (note(ii)) 12,864 – – 12,864

41,165 20,605 2,198 63,968

- I-41 -



For the year ended 31 March 2009


Wang Shih Zen (note(v)) 1,000 30,328 1,542 32,870

Wang Tao 1,000 9,937 2,853 13,790

Lu Shangmin (note(i)) – 3,607 128 3,735

Chan Kam Loon 32,135 – – 32,135

Guo Yanjun 26,422 – – 26,422

Lim Quee Teck(note(ii)) 6,923 – – 6,923

David Lim Teck Leong (note(iii)) 10,792 – – 10,792

78,272 43,872 4,523 126,667



Wang Shih Zen – 23,656 1,028 24,684

Wang Tao – 14,617 2,669 17,286

Chan Kam Loon 11,277 – – 11,277

Guo Yanjun 11,277 – – 11,277

Lim Quee Teck (note(ii)) 11,277 – – 11,277

33,831 38,273 3,697 75,801



Wang Shih Zen 15,424 – 771 16,195

Wang Tao(note(iv)) – 10,181 795 10,976

Chan Kam Loon – – – –

Guo Yanjun – – – –

Lim Quee Teck(note(ii)) – – – –

15,424 10,181 1,566 27,171

- I-42 -



Note:

(i) Appointed on 3 March 2009

(ii) Resigned on 12 September 2008

(iii) Appointed on 28 October 2008

(iv) Ms. Wang Tao was appointed on 19 June 2007 but she has been acting as a director of Elastic Glory

Investment Limited, a subsidiary of the Company, since September 2002. Although Ms. Wang Tao did not

act as director of the Group for the year ended 31 March 2007, her duties were in substance to represent

directors’ duties of the Group and the emoluments paid to Ms. Wang Tao for the year ended 31 March

2007 was included to illustrate the actual amount of directors’ emoluments.

(v) Salaries and allowances of US$46,272 (equivalent to HK$360,000) payable to Mr. Wang Shih Zen was

waived without any compensation during the year ended 31 March 2009.

The five highest paid individuals in the Group during the year ended 31 March 2007, 2008 and 2009 and the

six months ended 30 September 2008 and 2009 included nil, nil, nil, nil and 2 directors respectively whose emoluments

are reflected in the analysis presented above. The emoluments of the remaining 5, 5, 5, 5 and 3 individuals are set out

below respectively:


Basic salaries and allowances 207,561 303,312 373,842 179,480 137,936

Discretionary bonuses 9,897 64,267 12,853 – –

Retirement benefit

scheme contributions 6,553 6,163 7,410 3,962 2,185

224,011 373,742 394,105 183,442 140,121

The emoluments fell within the following bands:

Number of individuals For the six months For the year ended 31 March ended 30 September

2007 2008 2009 2008 2009 (unaudited)

Below HK$1,000,000

(equivalent to below

US$128,535) 5 4 4 5 3

HK$1,000,001 to

HK$1,500,000 (equivalent to

US$128,536 to US$192,802) – 1 1 – –

During the Relevant Periods, no emoluments were paid by the Group to any of the directors or the highest paid

individuals as an inducement to join or upon joining the Group as compensation for loss of office.

- I-43 -



12. INCOME TAX EXPENSE


Current tax – Hong Kong

Profit Tax

Provision for the year/period 446,076 760,000 170,000 200,000 250,000

Current tax – PRC Enterprise

Income Tax

Provision for the year/period – 50,000 423,608 108,008 97,500

446,076 810,000 593,608 308,008 347,500

Hong Kong Profits Tax has been provided at a rate of 17.5% based on the estimated assessable profit for the years ended

31 March 2007 and 2008.

Hong Kong Profits Tax has been provided at a rate of 16.5% based on the estimated assessable profit for the year ended

31 March 2009 and the six months ended 30 September 2008 and 2009.

PRC Enterprise Income Tax is calculated at the applicable rates based on estimated taxable income earned by the companies

with certain tax preference, based on existing legislation, interpretation and practice in respect thereof.

Tax charge on profits assessable elsewhere have been calculated at the rates of tax prevailing in the countries in which

the Group operates, based on existing legislations, interpretations and practices in respect thereof.

- I-44 -



The reconciliation between the income tax expense and the product of profit before tax multiplied by the Hong Kong

Profits Tax rate is as follows:


Profit before tax 9,323,721 10,927,785 4,504,124 4,213,185 2,348,862

Hong Kong Profits Tax rate 17.5% 17.5% 16.5% 16.5% 16.5%

Tax at Hong Kong Profits Tax rate 1,631,651 1,912,362 743,181 695,176 387,562

Tax effect of share of profit of

a jointly controlled entity (174,965 ) (130,129 ) (71,756 ) (73,614 ) –

Tax effect of income that is not taxable (983,488 ) (1,121,214 ) (163,456 ) (173,458 ) –

Tax effect of expenses that

are not deductible 81,080 628,469 311,257 180,187 203,942

Tax effect of temporary differences

not recognised 38,634 26,872 56,901 29,054 203,418

Tax effect of utilisation of tax losses

not previously recognised (1,921 ) – – – –

Tax effect of tax losses not recognised 110,543 269,254 101,249 44,505 35,174

Tax effect of tax exemption (234,756 ) (649,179 ) (25,836 ) (95,210 ) (273,493 )

Effect of different tax rates of subsidiaries (20,702 ) (126,435 ) (357,932 ) (298,632 ) (209,103 )

Income tax expense 446,076 810,000 593,608 308,008 347,500

The new PRC Enterprise Income Tax law passed by the Tenth National People’s Congress on 16 March 2007 introduces

various changes which include the unification of the Enterprise Income Tax rate for domestic and foreign enterprises at 25%. The

new tax law has been effective from 1 January 2008. On 26 December 2007, the State Council announced the detailed measures

and regulations of the New Law (“Implementation Rules”). The Implementation Rules ratcheted the PRC Enterprise Income Tax

rate from 15% to 25% over five years for grandfathering of incentives. The tax rate would be 18%, 20%, 22%, 24% and 25%

in 2008, 2009, 2010, 2011 and 2012 respectively.

Under the new PRC Enterprise Income Tax law, from 1 January 2008, non-resident enterprises without an establishment

or place of business in the PRC or which have an establishment or place of business in the PRC but whose relevant income is

not effectively connected with the establishment or a place of business in the PRC, will be subject to withholding tax at the rate

of 10% (unless reduced by treaty) on various types of passive income such as dividends derived from sources within the PRC.

According to the notice Caishui 2008 No. 1 released by the Ministry of Finance and the State Administration of Taxation,

distributions of the pre-2008 retained profits of a foreign invested enterprise to a foreign investor in 2008 or after are exempted

from withholding tax. Accordingly, the retained profits as at 31 December 2007 in the Group’s PRC subsidiaries will not be

subject to 10% withholding tax on future distributions.

The Group is liable to withholding tax on dividends distributed from the Group’s PRC subsidiaries in respect of their

profits generated on or after 1 January 2008. No deferred tax liabilities have been recognised in respect of this as the Group

considers that as of the date of this Financial Information, no such liability will be arisen in the foreseeable future.

- I-45 -



13. PROFIT FOR THE YEAR/PERIOD

The Group’s profit for the year/period is stated after charging/(crediting) the following:


Depreciation of property, plant

and equipment (1) 84,289 608,270 1,081,979 379,592 576,728

Auditors’ remuneration 142,005 191,247 134,763 70,000 133,121

Amortisation of intangible assets (2) 255,351 489,826 496,128 327,057 427,796

Loss on disposals of property,

plant and equipment 253 – 6,930 – 27,379

Loss on disposals of disposal group

classified as held for sale – – – – 64,366

Directors’ remuneration – As directors 15,424 33,831 78,272 41,165 43,769

– For management 11,747 41,970 48,395 22,803 60,340

27,171 75,801 126,667 63,968 104,109

Foreign exchange losses/(gains), net 52,898 (428,796 ) (207,377 ) (374,095 ) 24,340

Operating lease charges in respect

of land and buildings (3) 137,302 704,170 885,180 512,112 427,897

Cost of inventories sold 34,499,219 100,365,475 89,574,713 64,284,555 47,313,669

Research and development expenditure

(included in cost of goods sold) – 658,623 987,547 – –

Fair value losses on derivative

component of convertible loans 78,143 234,063 – – –

Fair value losses/(gains) on derivative

financial instruments, net – 45,000 (870,933 ) (109,517 ) (75,967 )

Key management personnel

(other than directors) remuneration Salaries, bonuses

and allowances 106,139 184,352 194,577 90,158 91,835

Retirement benefits scheme

contributions 2,128 1,542 1,542 2,107 2,103

108,267 185,894 196,119 92,265 93,938

Staff costs excluding directors’

remuneration and key management

personnel remuneration (4) Salaries bonuses

and allowances 1,508,447 2,117,817 2,742,224 1,602,746 1,397,838

Retirement benefits scheme

contributions 195,558 175,747 223,740 76,970 68,525

1,704,005 2,293,564 2,965,964 1,679,716 1,466,363

Impairment of trade receivables – – 844,667 – –

Impairment of prepayments,

deposits and other receivables – 141,387 – – –

Impairment of assets of disposal

group classified as held for sale – – 447,397 – –

Share-based payments – 370,696 – – –

- I-46 -



Note:

(1) The amounts included in cost of goods sold for the years ended 31 March 2007, 2008 and 2009 and the six months

ended 30 September 2008 and 2009 amounted to Nil, US$359,816, US$873,091, US$331,721 and US$377,106

respectively.

(2) The amounts included in cost of goods sold for the years ended 31 March 2007, 2008 and 2009 and the six

months ended 30 September 2008 and 2009 amounted to Nil, Nil, Nil, Nil and US$416,666 respectively.


ended 30 September 2008 and 2009 amounted to Nil, US$235,867, US$378,877, US$189,446 and US$189,446

respectively.


ended 30 September 2008 and 2009 amounted to US$914,373, US$1,304,652, US$2,264,251, US$1,249,618 and

US$1,056,272 respectively.

14. PROFIT FOR THE YEAR/PERIOD ATTRIBUTABLE TO OWNERS OF THE COMPANY

For the years ended 31 March 2007, 2008 and 2009 and the six months ended 30 September 2008 and 2009 the profit

attributable to owners of the Company included a (loss)/profit of (US$162,827), US$42,793, US$3,955,453, US$3,799,088 and

(US$628,552) respectively which has been dealt with in the financial statements of the Company.

15. DIVIDENDS


Interim 257,069 – – – –

Proposed final 2,200,000 2,040,052 – – –

2,457,069 2,040,052 – – –

Note:

(a) An interim dividend of US$0.1 per ordinary share totalling US$257,069 was declared and distributed by a

Company’s subsidiary to its then shareholders for the year ended 31 March 2007 prior to the Restructuring

Exercise as set out in note 2 to the Financial Information.

(b) A final dividend of US$0.8558 and US$0.0041 per ordinary share was proposed for the years ended 31 March

2007 and 2008. The directors did not recommend the payment of any interim or final dividend for the six months

ended 30 September 2008 and the year ended 31 March 2009.

(c) The directors do not recommend the payment of any interim dividend for the six months ended 30 September

2009.

- I-47 -



16. EARNINGS PER SHARE


EarningsEarnings for the purpose of

calculating basic earnings

per share 8,948,047 10,180,710 3,959,401 3,936,993 2,001,362

For the six months For the year ended 31 March ended 30 September 2007 2008 2009 2008 2009 (unaudited)

Number of sharesWeighted average number of ordinary

shares for the purpose of

calculating basic earnings

per share 409,573,662 441,311,367 497,573,662 497,573,662 497,573,662

For the year ended 31 March 2007, the weighted average number of ordinary shares of 409,573,662 shares represented

the pre-invitation number of shares of the Company in connection to the listing of the Company’s shares on the Mainboard of

the SGX-ST and were assumed to be in issue throughout the year ended 31 March 2007. The pre-invitation number of shares of

the Company of 409,573,662 shares represents the ordinary shares of the Company issued prior to the listing of the Company’s

shares on the Mainboard of SGX-ST.

For the year ended 31 March 2008, the weighted average number of ordinary shares of 441,311,367 shares is calculated

based on the pre-invitation number of shares of 409,573,662 shares of the Company, which represented the pre-invitation number

of shares deemed on 1 April 2007 and the weighted average number of shares of 88,000,000 shares issued upon listing.

As there were no dilutive potential ordinary shares during the Relevant Periods, no dilution earnings per share is

presented.

The earnings per share presented have not taken into accounts of the issuance of 20,000,000 new ordinary shares of the

Company on 8 October 2009.

- I-48 -



17. PROPERTY, PLANT AND EQUIPMENT

Group

Furniture, fixtures, equipment Plant and and motor Leasehold machinery vehicles improvements Total US$ US$ US$ US$

CostAt 1 April 2006 – 1,772 – 1,772

Exchange realignment – 1,994 – 1,994

Acquisition of subsidiaries – 53,019 – 53,019

Additions – 511,922 60,843 572,765

Disposals – (379 ) – (379 )

At 31 March 2007 and 1 April 2007 – 568,328 60,843 629,171

Exchange realignment – 67,801 – 67,801

Additions 7,254,644 176,371 821,449 8,252,464

At 31 March 2008 and 1 April 2008 7,254,644 812,500 882,292 8,949,436

Exchange realignment 197,854 23,177 22,403 243,434

Additions 42,017 444,123 – 486,140

Disposals – (11,834 ) – (11,834 )

At 31 March 2009 and 1 April 2009 7,494,515 1,267,966 904,695 9,667,176

Additions 98,653 8,586 12,440 119,679

Disposals – – (60,843 ) (60,843 )

At 30 September 2009 7,593,168 1,276,552 856,292 9,726,012

- I-49 -



Furniture, fixtures, equipment Plant and and motor Leasehold machinery vehicles improvements Total US$ US$ US$ US$

Accumulated depreciationAt 1 April 2006 – 590 – 590

Exchange realignment – 944 – 944

Charge for the year – 78,205 6,084 84,289

Disposals – (126 ) – (126 )

At 31 March 2007 and 1 April 2007 – 79,613 6,084 85,697


Charge for the year 303,140 217,394 87,736 608,270

At 31 March 2008 and 1 April 2008 316,070 301,954 115,297 733,321


Charge for the year 743,719 157,321 180,939 1,081,979

Disposals – (2,130 ) – (2,130 )

At 31 March 2009 and 1 April 2009 1,063,537 459,813 298,385 1,821,735

Charge for the period 377,106 110,870 88,752 576,728

Disposals – – (33,464 ) (33,464 )

At 30 September 2009 1,440,643 570,683 353,673 2,364,999

Carrying amountAt 30 September 2009 6,152,525 705,869 502,619 7,361,013

At 31 March 2009 6,430,978 808,153 606,310 7,845,441

At 31 March 2008 6,938,574 510,546 766,995 8,216,115

At 31 March 2007 – 488,715 54,759 543,474

At 31 March 2007, 2008 and 2009 and 30 September 2009, the carrying amount of property, plant and equipment

held by the Group under finance leases was amounted to approximately Nil, US$6,690,000, US$6,274,997 and US$5,893,855

respectively.

- I-50 -



18. INTANGIBLE ASSETS

Group

Computer CDMA software software sublicense License solutions Total US$ US$ US$ US$

CostAt 1 April 2006 1,002,571 – – 1,002,571Additions – 208,670 – 208,670

At 31 March 2007 and 1 April 2007 1,002,571 208,670 – 1,211,241Exchange realignment – 1,476 – 1,476Additions 700,000 86,552 – 786,552

At 31 March 2008 and 1 April 2008 1,702,571 296,698 – 1,999,269Exchange realignment – 2,763 – 2,763Additions – 5,674 – 5,674Transfer to assets of disposal group classified as held for sale (1,702,571 ) (195,376 ) – (1,897,947 )

At 31 March 2009 and 1 April 2009 – 109,759 – 109,759Additions – 2,440 2,500,000 2,502,440

At 30 September 2009 – 112,199 2,500,000 2,612,199

Accumulated amortisationAt 1 April 2006 – – – –Charge for the year 222,222 33,129 – 255,351

At 31 March 2007 and 1 April 2007 222,222 33,129 – 255,351Exchange realignment – 214 – 214Charge for the year 421,155 68,671 – 489,826

At 31 March 2008 and 1 April 2008 643,377 102,014 – 745,391Exchange realignment – 119 – 119Charge for the year 425,643 70,485 – 496,128Transfer to assets of disposal group classified as held for sale (1,069,020 ) (146,532 ) – (1,215,552 )

At 31 March 2009 and 1 April 2009 – 26,086 – 26,086Charge for the period – 11,130 416,666 427,796

At 30 September 2009 – 37,216 416,666 453,882

Carrying amountAt 30 September 2009 – 74,983 2,083,334 2,158,317

At 31 March 2009 – 83,673 – 83,673

At 31 March 2008 1,059,194 194,684 – 1,253,878

At 31 March 2007 780,349 175,541 – 955,890

- I-51 -



The Group’s computer software sublicense, license and CDMA software solutions are for the design and development of

the Group’s products. As at 31 March 2007, 2008 and 2009 and 30 September 2009, the average remaining amortisation period

of computer software sublicense is 2 years, 2 years, Nil and Nil respectively, while the average remaining amortisation period

of license is and 3 years, 2 years, 1 year and 1 year respectively. As at 30 September 2009, the average remaining amortisation

period of CDMA software solutions is 3 years.

19. GOODWILL

Group

US$

Cost and carrying amountAt 1 April 2006 –

Arising on acquisition of subsidiaries (Note41(a)and41(b)) 1,041,434

At 31 March 2007 and 1 April 2007 1,041,434

Exchange realignment 146,000

At 31 March 2008 and 1 April 2008 1,187,434

Exchange realignment 32,000

Arising on acquisition of minority interests in a subsidiary 260,652

At 31 March 2009, 1 April 2009 and 30 September 2009 1,480,086

Goodwill acquired in a business combination is allocated, at acquisition, to the following CGU that is expected to be

benefit from that business combination. The carrying amount of goodwill had been allocated as follows:


Solution CGU

Zeus Telecommunication Technology

Holdings Limited and PhoneLink

Communication Technology Co., Ltd. 1,041,434 1,187,434 1,480,086 1,480,086

The recoverable amounts of the CGU are determined from value in use calculations. The key assumptions for the value

in use calculations are those regarding the discount rates, growth rates and budgeted gross margin and revenue during the period.

The Group estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money and

the risks specific to the CGU. The growth rates are based on long-term average economic growth rate of the geographical area

in which the businesses of the CGU operate. Budgeted gross margin and revenue are based on past practices and expectations

on market development.

The Group prepares cash flow forecasts derived from the most recent financial budgets approved by management for

the next 3 years. Discount rate of 16.5%, 9.34%, 8.56% and 8.56% are used for the cash flow forecasts at 31 March 2007, 2008

and 2009 and 30 September 2009 respectively.

- I-52 -



20. INVESTMENT IN A SUBSIDIARY

Company


Unlisted investment, at cost 2,570,694 2,570,694 2,570,694 2,570,694

Due from subsidiaries 3,418,146 27,742,047 29,688,113 29,322,003

The amounts due from subsidiaries represent advances and are unsecured, interest-free and repayable on demand.

Particulars of the subsidiaries at the end of each reporting period are as follows:

Percentage of Date of Place of ownership interest/ incorporation/ incorporation/ Issued and voting power/ PrincipalName establishment registration paid-up capital profit sharing activities Legal form At 30 At 31 March September 2007 2008 2009 2009

Directly held:Elastic Glory Investment Limited (1) 16 September 2002 British Virgin Islands 2,570,694 100% 100% 100% 100% Investment holding Limited

ordinary shares liability company

of US$1 each

Indirectly held:Elite Link Technology Limited (6) 26 March 2004 Hong Kong 20,000,001 100% 100% 100% 100% Provision of Limited

ordinary shares management liability company

of HK$1 each services to

the Group

State Tech International Limited (1) (7) 1 November 2002 British Virgin Islands 1 ordinary share 100% 100% 100% – Distribution and Limited

of US$1 each marketing of liability company

mobile handset

components, software

and solution for mobile

appliances and mobile

handset hardware

CCDH Technology Limited (1) 18 January 2005 British Virgin Islands 50,000 ordinary 100% 100% 100% 100% Dormant Limited

shares of liability company

US$1 each

Finet Enterprises Limited (1) 28 April 2004 British Virgin Islands 1 ordinary share 100% 100% 100% 100% Trademark and Limited

of US$1 each patents registration liability company

- I-53 -



Percentage of Date of Place of ownership interest/ incorporation/ incorporation/ Issued and voting power/ PrincipalName establishment registration paid-up capital profit sharing activities Legal form At 30 At 31 March September 2007 2008 2009 2009

深圳市杰特電信控股有限公司(2) (3) 17 August 2004 PRC Registered and 100% 100% 100% 100% Development, distribution Wholly foreign–

(Zeus Telecommunication paid-up capital of and marketing of owned enterprise

Technology Holdings Ltd) RMB20,000,000 software and

solution for mobile

appliances and mobile

handset hardware

上海風凌通訊技術有限公司(2) (5) 8 March 2005 PRC Registered and 81% 81% 100% 100% Development of Wholly domestic–

(PhoneLink paid-up capital of software and solution for owned enterprise

Communication RMB10,000,000 mobile appliances

Technology Co., Ltd.)

Max Sunny Limited (6) 16 December 2005 Hong Kong 100,000 ordinary 100% 100% 100% 100% Distribution and marketing Limited

shares of HK$1 of mobile handset and liability company

each mobile handset

components

Max Pixel Limited (9) 22 February 2008 Hong Kong Nil – 100% – – Dormant Limited

liability company

久宜通信技術(深圳)有限公司(2)(3) (7) 9 August 2006 PRC Registered and 100% 100% 100% – Development, distribution Wholly foreign–

(CCDH Technology (Shenzhen) paid-up capital of and marketing of owned enterprise

Limited) US$500,000 software and

solution for mobile

appliances

Finet Technology Limited(1) (8) 16 May 2006 Macau 2 shares with total 100% – – – Dormant Limited

paid-up capital of liability company

MOP100,000

統慶通信設備(深圳)有限公司(2) (4) 20 March 2007 PRC Registered and 100% 100% 100% 100% Assembly of mobile handset Wholly foreign–

(Tongqing Communication paid-up capital of and surface mounting owned enterprise

Equipment (Shenzhen) Co., Ltd.) HK$75,000,000 technology of printed

circuit board

Note:

(1) Not required to be audited under the laws of country of incorporation.

(2) Statutory financial statements not audited by RSM Nelson Wheeler.

(3) Statutory financial statements for the years ended 31 December 2006 and 2007 audited by Shenzhen Caizhi

Public Certified Accountants (深圳財智會計師事務所) and for the year ended 31 December 2008, by Shenzhen

Guobang Certified Public Accountants (深圳國邦會計師事務所).

- I-54 -



(4) Statutory financial statements for the period from 20 March 2007 (date of incorporation) to 31 December 2007

audited by Shenzhen Caizhi Public Certified Accountants (深圳財智會計師事務所) and for the year ended 31

December 2008, by Shenzhen Guobang Certified Public Accountants (深圳國邦會計師事務所).

(5) Statutory financial statements for the each of the three years ended 31 December 2006, 2007 and 2008 have not

been issued by the local auditor.

(6) Statutory financial statements audited by RSM Nelson Wheeler.

(7) Disposed of to an independent third party during the six months ended 30 September 2009 as set out in note 28

to the Financial Information.

(8) Dissolved on 23 June 2007 by way of a member’s voluntary winding up.

(9) No statutory audited financial statements have been issued since its incorporation and up to the date of disposal

by the Group on 10 February 2009.

21. INTEREST IN A JOINTLY CONTROLLED ENTITY/JOINTLY CONTROLLED ENTITY CLASSIFIED AS HELD FOR SALE

Group


Unlisted investments

Share of net assets 2,048,108 2,505,338 – –

Classified as held for sale,

at carrying amounts – – 3,005,224 3,005,224

Details of the jointly controlled entity at the end of each reporting period are as follows:

Percentage of Date of Place of ownership interest/ Incorporation/ incorporation/ Issued and voting power/ PrincipalName establishment registration paid-up capital profit sharing activities Legal form At 30 At 31 March September 2007 2008 2009 2009

貴州振華歐比通信有限公司 21 March 2006 PRC Registered and 42% 42% 42% 42% Manufacturing, selling Sino-foreign

(GuiZhou Zhenhua OBEE paid-up capital of and marketing of mobile owned equity

Communication Co., Ltd) RMB20,000,000 appliance and providing joint venture

technical support

services in respect of

manufacturing and selling

of mobile phone appliance

- I-55 -



In January 2009, the directors of Elite Link Technology Limited (“Elite Link”), a subsidiary of the Company which held

the equity interest of a jointly controlled entity, 貴州振華歐比通信有限公司 (GuiZhou Zhenhua OBEE Communication Co.,

Ltd.), resolved to dispose of the equity interest in the jointly controlled entity. Negotiations with several interested parties have

subsequently taken place. The interest in the jointly controlled entity, which is expected to be sold within twelve months, has

been classified as held for sale and is presented separately in the consolidated statements of financial position as at 31 March

2009 and 30 September 2009.

On 22 May 2009, the Group entered into sale and purchase agreements for the disposal of the equity interest in the

jointly controlled entity for a total consideration approximately US$1,469,000 (equivalent to RMB10,113,600). A final dividend

of approximately US$885,000 (equivalent to RMB6,095,209) declared by the jointly controlled entity to the Group during the

year ended 31 March 2009 will be received directly from the jointly controlled entity and is expected to be receivable within next

twelve months. As at 30 September 2009 the Group’s 42% equity interest in the jointly controlled entity remained unchanged

as the above transaction has not yet been approved by the PRC government authorities.

The proceeds of disposal plus dividend to be received directly from the jointly controlled entity are expected to exceed

the net carrying amounts of the jointly controlled entity classified as held for sale and, accordingly, no impairment loss has been

recognised for during the Relevant Periods.

The following amounts were the Group’s share of the jointly controlled entity that were accounted for by the equity

method of accounting prior to the reclassification to the jointly controlled entity classified as held for sale and recognised in the

Financial Information during the Relevant Periods:


Current assets 2,985,010 5,408,051 N/A N/A

Non-current assets 930,408 764,542 N/A N/A

Current liabilities (1,867,310 ) (3,667,255 ) N/A N/A

Share of net assets 2,048,108 2,505,338 N/A N/A

For the six months ended For the year ended 31 March 30 September 2007 2008 2009 2009 US$ US$ US$ US$

Revenue 4,222,293 10,048,943 12,102,077 N/A

Expenses 3,222,493 9,305,348 11,667,191 N/A

Share of profit for the year 999,800 743,595 434,886 N/A

- I-56 -



22. FINANCIAL ASSET AT FAIR VALUE THROUGH PROFIT OR LOSS

Group


Unlisted investment, at fair value – – – 642,673

The investment represents structured deposit placed to a bank with a maturity of 3 years and classified as a financial

asset at fair value through profit or loss. The fair value of the investment is based on the price quoted by the bank. The directors

believe that the estimated fair value quoted by the bank is reasonable, and that it is the most appropriate value at the end of

each reporting period.

23. AVAILABLE-FOR-SALE FINANCIAL ASSET

Group


Unlisted equity investment, at cost – 2,120,823 2,178,663 2,178,663

Unlisted equity investment is stated at cost as there is no quoted price in an active market. As such, it is not practicable

to determine with sufficient reliability the fair value of the unlisted equity investment.

24. INVENTORIES

Group


Raw materials – 459,451 859,205 1,106,080

Finished goods 2,073,209 6,011,276 2,735,741 5,764,276

2,073,209 6,470,727 3,594,946 6,870,356

All inventories are carried at cost.

- I-57 -



25. TRADE RECEIVABLES

Group

The Group’s trading terms with customers are mainly on credit. During the Relevant Periods, the credit terms

generally range from 30 to 90 days, depending on the creditworthiness of customers and the existing relationships with

the Group.

An aging analysis of trade receivables, based on invoice dates, is as follows:


0 to 30 days 3,886,598 16,315,051 6,268,923 14,462,879

31 to 60 days – 3,553,999 4,575,937 6,140,718

61 to 90 days – 2,740,422 4,091,003 284,388

More than 90 days – 1,431,641 4,151,002 –

3,886,598 24,041,113 19,086,865 20,887,985

As at 31 March 2007, 2008 and 2009 and 30 September 2009, trade receivables of Nil, US$4,172,063, US$7,817,165

and US$369,356 were past due but not impaired. These relate to a number of independent customers for whom there is

no recent history of default. An aging analysis of these trade receivables is as follows:


Past due 0 to 90 days – 2,740,422 7,547,195 369,356

Past due more than 90 days – 1,431,641 269,970 –

– 4,172,063 7,817,165 369,356

Trade receivables are denominated in the following currencies:


United States dollar 3,642,586 22,722,202 16,566,647 17,373,847

Renminbi 244,012 1,318,911 2,520,218 3,514,138

3,886,598 24,041,113 19,086,865 20,887,985

- I-58 -



26. PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES

Group


Prepayments 202,134 153,468 2,697,331 7,502,479

Deposits 1,640,038 554,262 1,022,976 331,938

Other receivables 420,170 713,839 45,915 329,401

2,262,342 1,421,569 3,766,222 8,163,818

Less: Impairment losses – (141,387 ) (145,244 ) (145,244 )

2,262,342 1,280,182 3,620,978 8,018,574

Company


Prepayments 117,180 – – –

27. DERIVATIVE FINANCIAL INSTRUMENTS

Group


Foreign exchange forward contracts,

at fair value

– Financial assets – 91,460 285,831 132,000

– Financial liabilities – 136,460 – –

The Group has entered into various foreign exchange forward contracts to manage its foreign exchange risk exposures

which did not meet the criteria for hedge accounting. For the years ended 31 March 2007, 2008 and 2009 and the six months ended

30 September 2009, net fair value gains/(losses) on non-hedging derivative financial instruments amounting to Nil, (US$45,000),

US$870,933 and US$75,967 respectively were recognised in the consolidated income statements during the Relevant Periods.

Non-hedging derivative financial instruments represent derivative financial instruments which do not fulfill the conditions of

hedging relationship as defined in IAS 39 “Financial Instruments: Recognition and Measurement”.

- I-59 -



28. DISPOSAL GROUP CLASSIFIED AS HELD FOR SALE

In December 2008, the directors of Elastic Glory, a subsidiary of the Company which held the equity interest of State

Tech, resolved to dispose of one of the Group’s trading operations. On 31 March 2009, the Group entered into a sale and purchase

agreement with an independent third party to dispose of that trading operation through the disposal of its entire 100% equity

interest of State Tech and CCDH (collectively known as the “State Tech Group”) for US$457,721. As at 31 March 2009, the

Group maintained control over the assets and liabilities of State Tech Group and the assets and liabilities associated with that

trading operation, which are expected to be disposed of upon the completion of the disposal, have been classified as assets and

liabilities directly associated with the disposal group classified as held for sale and are presented separately in the consolidated

statements of financial position. The disposal was completed during the six months ended 30 September 2009 as described in

note 41(c) to the Financial Information.

The proceeds of disposal are less than the net carrying amounts of the assets and liabilities directly associated with the

disposal group classified as held for sale and, accordingly, an impairment loss of US$447,397 has been recognised during the

year ended 31 March 2009.

The major classes of assets and liabilities comprising the disposal group classified as held for sale at 31 March 2009

are as follows:

US$

Intangible assets 682,395

Trade receivables 1,043,926

Total assets of disposal group classified as held for sale 1,726,321

Liabilities directly associated with disposal group classified as held for sale (1,268,600 )

Net assets of disposal group classified as held for sale 457,721

29. RESTRICTED BANK BALANCES AND BANK AND CASH BALANCES

Group


Bank and cash balances 5,263,447 20,411,008 12,479,669 11,435,703

Time deposits with original maturity

over three months 642,674 – 15,706,874 14,524,422

Restricted bank balances 715,000 3,010,995 6,299,692 3,330,352

6,621,121 23,422,003 34,486,235 29,290,477

- I-60 -



Company


Bank and cash balances 60,567 39,691 34,892 26,994

The Group’s restricted bank balances represented deposits to secure the bank loans, bills payables, trust receipt loans

and general banking facilities.

Restricted bank balances and bank and cash balances are denominated in the following currencies:

Group


United States dollar 3,083,418 1,988,465 2,409,195 345,085

Hong Kong dollar 1,420,318 6,812,045 5,711,001 6,777,118

Renminbi 2,056,585 11,649,897 23,377,682 19,295,523

Singapore dollar 60,607 2,971,596 2,988,357 2,872,751

Others 193 – – –

6,621,121 23,422,003 34,486,235 29,290,477

Company


Singapore 60,567 39,691 34,892 26,994

Renminbi is not freely convertible to other currencies as such amounts were held by the subsidiaries located in the

PRC. Under the PRC’s Foreign Exchange Control Regulations and Administration of Settlement, Sale and Payment of Foreign

Exchange Regulations, the Group is permitted to exchange Renminbi for foreign currencies only through banks that are authorised

to conduct foreign exchange business.

- I-61 -



For the purpose of consolidated statements of cash flows, the cash and cash equivalents comprised the following:


Bank and cash balances 5,906,121 20,411,008 28,186,543 25,960,125

Less: Time deposits with original

maturity over three months (642,674 ) – (15,706,874 ) (14,524,422 )

5,263,447 20,411,008 12,479,669 11,435,703

30. TRADE AND BILLS PAYABLES

Group


Trade payables 475,194 7,720,135 1,998,129 4,104,378

Bills payables – 1,942,000 1,307,197 2,872,930

475,194 9,662,135 3,305,326 6,977,308

An aging analysis of trade and bills payables, based on the date of receipt of goods, is as follows:


0 to 30 days 464,674 8,444,992 985,656 2,809,238

31 to 60 days 10,520 415,622 5,963 48,991

More than 60 days – 801,521 2,313,707 4,119,079

475,194 9,662,135 3,305,326 6,977,308

Trade payables generally have credit terms ranging from 15 days to 30 days.

Bills payables are interest free and have an average maturity period of Nil, 30 days, 180 days and 180 days at 31 March

2007, 2008 and 2009 and 30 September 2009 respectively.

- I-62 -



Except for bills payables of US$1,307,197 and US$2,074,087 as at 31 March 2009 and 30 September 2009 respectively

was secured by bank deposits and jointly guaranteed by a subsidiary of the Company and a director of a subsidiary of the

Company, other bills payables were secured by bank deposits. The guarantees provided by a director of a subsidiary of the

Company were subsequently released.

Trade and bills payables are denominated in the following currencies:


United States dollar 461,641 8,320,649 1,753,572 2,931,810

Renminbi 13,553 1,341,486 1,551,754 4,045,498

475,194 9,662,135 3,305,326 6,977,308

31. ACCRUALS AND OTHER PAYABLES

Group


Accruals 212,701 878,775 540,558 1,136,762

Other payables 113,949 616,634 2,138,197 1,065,457

326,650 1,495,409 2,678,755 2,202,219

Company


Accruals – 145,000 170,866 425,410

Other payables – 291,911 291,911 291,911

– 436,911 462,777 717,321

- I-63 -



32. BANK LOANS

Group

The bank loans are repayable as follows:


On demand or within one year 1,463,514 1,269,396 4,638,218 2,798,804

In the second year – – – 692,001

In the third to fifth years, inclusive – – – 1,190,155

1,463,514 1,269,396 4,638,218 4,680,960

Less: Amount due for settlement

within 12 months (shown under

current liabilities) (1,463,514 ) (1,269,396 ) (4,638,218 ) (2,798,804 )

Amount due after 12 months – – – 1,882,156

Bank loans at 31 March 2007 are arranged at fixed interest rates as agreed with respective banks and exposed the Group

to fair value interest rate risk. Bank loans at 31 March 2008, 31 March 2009 and 30 September 2009 are arranged at floating

rates and exposed the Group to cash flow interest rate risk.

The average effective borrowing rates at the end of each reporting period are as follows:


Bank loans 6.12% 4.26% 6.00% 4.60%

Bank loans at 31 March 2007 are secured by (i) personal guarantees executed by a related party and a director of the

Company; and (ii) a letter of guarantee issued by the Shenzhen Small and Medium Enterprises Credit Guarantee Centre in favour

of the bank to a subsidiary which was secured by the pledge of properties owned by the related parties of the Company (note

45(a)(iv)). These securities were released after the settlement of the bank loans during the year ended 31 March 2008.

- I-64 -



All bank loans at 31 March 2008, 31 March 2009 and 30 September 2009 were secured by bank deposits except for the

followings:

– a bank loan of US$522,879 at 31 March 2009 was secured by bank deposits and jointly guaranteed by a subsidiary

of the Company and a director of a subsidiary of the Company;

– bank loans of US$2,166,821 at 30 September 2009 were arranged under the Small and Medium Enterprises Loan

Guarantee Scheme and the Special Loan Guarantee Scheme and were guaranteed by the Government of the Hong

Kong Special Administrative Region and the Company;

– a bank loan of US$771,208 at 30 September 2009 was arranged under the Small and Medium Enterprises Loan

Guarantee Scheme was guaranteed by the Government of the Hong Kong Special Administrative Region, the

Company and two subsidiaries of the Company; and

– a bank loan of US$1,742,931 at 30 September 2009 was secured by corporate guarantee executed by a subsidiary

of the Company and personal guarantees executed by a director of a subsidiary and a director of the Company.

The guarantee executed by a director of a subsidiary of the Company for a bank loan of US$522,879 at 31 March 2009

was released during the six months ended 30 September 2009 and the guarantee executed by a director of the Company for a

bank loan of US$1,742,931 at 30 September 2009 was subsequently released.

Bank loans were denominated in the following currencies:


Hong Kong dollar – – – 2,938,029

United States dollar – 1,269,396 4,115,339 –

Renminbi 1,463,514 – 522,879 1,742,931

1,463,514 1,269,396 4,638,218 4,680,960

33. OTHER LOANS At At 31 March 30 September 2007 2008 2009 2009 US$ US$ US$ US$

Other loans – – – 435,733

Other loans were denominated in Renminbi, interest free and was guaranteed by a PRC company which provides guarantee

services. The other loans were counter-guaranteed by a subsidiary of the Company.

- I-65 -



34. TRUST RECEIPT LOANS

Group

The trust receipt loans are secured by bank deposits and are repayable within 90 days from their respective drawdown

dates.

At 31 March 2007, 2008 and 2009 and 30 September 2009, trust receipt loans of US$715,000, US$1,775,829, US$4,393,022

and US$8,730,138 respectively are interest bearing at floating rates agreed with respective banks. Others are interest bearing at

fixed rates as agreed with respective banks.

The average effective borrowing rates at the end of each reporting period are as follows:

At At 31 March 30 September 2007 2008 2009 2009

Trust receipt loans 2.74% 5.16% 3.76% 2.93%

Trust receipt loans are denominated in United States dollar.

35. CONVERTIBLE LOANS

Group and Company

The Company issued US$3,906,453, US$2,604,303 and US$1,953,227 convertible loans on 25 January 2007, 19 April

2007 and 4 June 2007, respectively. The convertible loans were denominated in Singapore dollar. The entire principal amount of

the convertible loans has been converted into fully paid ordinary shares of the Company on 24 September 2007, at a conversion

price as stated in the convertible loan agreements. The holders waived all accrued interests on the convertible loans when the

convertible loans were converted into new ordinary shares of the Company.

The fair value of the derivative component was estimated at the issuance date using an option pricing model and the

change in fair value of the component is recognised in the consolidated income statements.

- I-66 -



The movements of each component of the convertible loans for the Relevant Periods are set out below:

Derivative Liability component component Total US$ US$ US$

Proceeds of issue 3,906,453

Transaction costs related to liability component (308,627 )

Amount at date of issue after allocation 27,009 3,570,817 3,597,826

Interest charged and amortisation of transaction costs – 82,751 82,751

Fair value loss recognised for the year 78,143 – 78,143

At 31 March 2007 and 1 April 2007 105,152 3,653,568 3,758,720

Proceeds of issue 4,557,530

Transaction costs related to liability component (188,812 )

Amount at date of issue after allocation 37,470 4,331,248 4,368,718

Interest charged and amortisation of transaction costs – 420,426 420,426

Fair value loss recognised for the year 234,063 – 234,063

Total movement of derivative component and

liability component during the year ended

31 March 2008 before conversion 271,533 4,751,674 5,023,207

Total derivation component and liability

component before conversion 376,685 8,405,242 8,781,927

Transfer to share capital and share

premium upon conversion (376,685 ) (8,405,242 ) (8,781,927 )

At 31 March 2008, 1 April 2008,

31 March 2009, 1 April 2009 and

30 September 2009 – – –

The convertible loans are secured by personal guarantees executed by and a charge up to 50% of the issued shares of

the Company held by the directors of the Company, Wang Shih Zen and Wang Tao. All of the personal guarantees were released

on 24 September 2007 upon conversion of the convertible loans.

- I-67 -



36. FINANCE LEASE PAYABLES

Group

Minimum lease payments At At 31 March 30 September

2007 2008 2009 2009 US$ US$ US$ US$

Within one year – 1,313,412 1,292,261 1,292,261

In the second to fifth years, inclusive – 3,228,589 1,946,758 1,300,642

– 4,542,001 3,239,019 2,592,903

Less: Future finance charges – (541,503 ) (191,255 ) (127,679 )

Present value of lease obligations – 4,000,498 3,047,764 2,465,224

Present value of minimum lease payments At At 31 March 30 September

2007 2008 2009 2009 US$ US$ US$ US$

Within one year – 1,054,169 1,178,969 1,205,562

In the second to fifth years, inclusive – 2,946,329 1,868,795 1,259,662

Present value of lease obligations – 4,000,498 3,047,764 2,465,224

Less: Amounts due for settlement

within 12 months

(shown under current liabilities) – (1,054,169 ) (1,178,969 ) (1,205,562 )

Amounts due from settlement

after 12 months – 2,946,329 1,868,795 1,259,662

It is the Group’s policy to lease certain of its property, plant and equipment under finance leases. At 31 March 2007,

2008 and 2009 and 30 September 2009, the average remaining lease term is Nil, 4 years, 3 years and 2.5 years respectively and

the average effective borrowing rate was approximately Nil, 7.5%, 4.3% and 4.3% respectively.

All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments. At

the end of each lease term, the Group has the option to purchase the property, plant and equipment at nominal prices.

- I-68 -



The finance lease payables are denominated in the following currencies:

At At 31 March 30 September

2007 2008 2009 2009 US$ US$ US$ US$

United States dollar – 4,000,498 2,912,661 2,347,009

Hong Kong dollar – – 135,103 118,215

– 4,000,498 3,047,764 2,465,224

At 31 March 2008 and 31 March 2009, the Group’s finance lease payables are secured by the lessor’s title to the leased

assets and corporate guarantees executed by two subsidiaries of the Company. At 30 September 2009, the Group’s finance lease

payables are secured by the lessor’s title to the leased assets and corporate guarantee executed by a subsidiary of the Company.

The lessors are Independent Third Parties to the Group.

37. DEFERRED TAX

No provision for deferred tax has been made in the Financial Information as the tax effect of temporary differences is

immaterial to the Group.

38. SHARE CAPITAL

Group and Company

Number of Note shares Amount US$

Authorised:

Ordinary shares (a) 10,000 10,000

Increase in authorised ordinary shares (b) 9,990,000 9,990,000

At 31 March 2007 and 1 April 2007

(Ordinary share of US$1 each) 10,000,000 10,000,000

Share sub-division (e) 1,240,000,000 –

At 31 March 2008, 1 April 2008, 31 March 2009,

1 April 2009 and 30 September 2009

(Ordinary share of US$0.008 each) 1,250,000,000 10,000,000

- I-69 -



Number of Note shares Amount US$

Issued and fully paid:

Issue of a new share on incorporation (a),(c) 1 1

Issue of new shares on the Restructuring Exercise (c) 2,570,693 2,570,693

At 31 March 2007 and 1 April 2007

(Ordinary share of US$1 each) 2,570,694 2,570,694

Issue of new shares (d) 117,660 117,660

2,688,354 2,688,354

Share sub-division (e) 333,355,896 –

336,044,250 2,688,354

Conversion of the convertible loans (f) 56,722,689 453,782

Issue of new shares (g) 16,806,723 134,454

Issue of shares upon listing on the

Main Board of the SGX-ST (h) 88,000,000 704,000

At 31 March 2008, 1 April 2008, 31 March 2009,

1 April 2009 and 30 September 2009

(Ordinary share of US$0.008 each) 497,573,662 3,980,590

Note:

(a) The Company was incorporated on 30 January 2007 with an authorised share capital of US$10,000 divided into

10,000 ordinary shares of US$1 each.

On 1 February 2007, one share of US$1 each was allotted and issued nil paid to the initial subscriber to incorporate

the Company.

(b) By a written resolution passed on 28 March 2007, the authorised share capital of the Company was increased

from US$10,000 to US$10,000,000 by the creation of 9,990,000 ordinary shares of US$1 each, such new shares

ranking pari passu in all respects with the existing shares of the Company.

(c) On 28 March 2007, 2,570,693 shares of US$1 each was allotted and issued at par to the shareholders of the

Company, and credit as fully paid at par the one ordinary share in the Company which was issued nil paid to the

initial subscriber for the Restructuring Exercise.

(d) On 4 June 2007, 117,660 shares of US$1 each were allotted and issued to an independent third party for cash

at a subscription price of US$10.28 per share.

(e) By a written resolution passed on 24 September 2007, every one ordinary share of par value US$1 in the

authorised, issued and paid-up share capital of the Company was sub-divided into 125 ordinary shares of par

value US$0.008 each.

(f) On 24 September 2007, 56,722,689 shares of US$0.008 each were allotted and issued to convertible loans holders

upon the conversion of the convertible loans.

- I-70 -



(g) On 24 September 2007, 16,806,723 shares of US$0.008 each were allotted and issued to an independent third party for the consultancy services provided in relation to liaison and co-ordination support in connection with the listing of the Company’s shares on the Main Board of the SGX-ST.

(h) On 21 November 2007, 88,000,000 shares of US$0.008 each were allotted and issued at S$0.34 each to the public pursuant to the listing of the Company’s shares on the Main Board of the SGX-ST.

On 24 September 2009, the Company entered into subscription agreements with Lim Tiong Kheng Steven, Tan Poon Kuan Daniel, Lim Chye Huat Bobby, Chan Kok Khoon, Teo Yong Ping, Ang Ber Hua, Tan Lay Eng @ Mindy Tan and Low Chui Heng, all of them are Independent Third Parties, (collectively, the “Subscribers”) for the issue and allotment of the Shares of an aggregate number of 20,000,000 new Shares in the capital of the Company at a subscription price of US$0.09 (equivalent to S$0.13) per share. Pursuant to the agreements, these new Shares shall rank pari passu in all aspects with the Shares currently issued by the Company. The issue and allotment of 20,000,000 new Shares to the Subscribers was completed on 8 October 2009.

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern and to maximise the return to the shareholders through the optimisation of the debt and equity balance.

The Group sets the amount of capital in proportion to risk. The Group manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group may adjust the payment of dividends, issue new shares, buy-back shares, raise new debts, redeem existing debts or sell assets to reduce debts.

The Group monitors capital on the basis of the debt-to-adjusted capital ratio. This ratio is calculated as net debt divided by adjusted capital. Net debt is calculated as total debts plus unaccrued proposed dividends less cash and cash equivalents. Adjusted capital comprises all components of equity (i.e. share capital, share premium, retained earnings, other reserves and if any, minority interests) less unaccrued proposed dividends and includes some forms of subordinated debts.

During the Relevant Periods, the Group’s strategy was to maintain the debt-to-adjusted capital ratio at the lowest as possible, in order to secure access to finance at a reasonable cost. The debt-to-adjusted capital ratios at the end of each reporting period were as follows:

At At 31 March 30 September

2007 2008 2009 2009 US$ US$ US$ US$

Total debt 2,178,514 7,045,723 15,858,404 16,312,055Add: proposed final dividend 2,200,000 2,040,052 – –Less: cash and cash equivalents (5,263,447 ) (20,411,008 ) (12,479,669 ) (11,435,703 )

Net debt (884,933 ) (11,325,233 ) 3,378,735 4,876,352

Total equity 12,721,912 51,608,339 53,937,058 56,002,786Add: convertible loans 3,653,568 – – –Less: proposed final dividend (2,200,000 ) (2,040,052 ) – –

Adjusted capital 14,175,480 49,568,287 53,937,058 56,002,786

Debt-to-adjusted capital ratio N/A N/A 6.26% 8.71%

According to the Rule 723 of the Listing Manual of the SGX-ST, at least 10% of the Company’s shares should be held in the hands of the public.

Apart from the above, the Group is not subject to any other externally imposed capital requirements.

- I-71 -



39. RESERVES

(a) Group

The amounts of the Group’s reserves and the movements therein are presented in the consolidated statements

of changes in equity.

(b) Company

Share Accumulated premium losses Total US$ US$ US$

At 1 April 2006 – – –

Loss for the year – (162,827 ) (162,827 )

At 31 March 2007 and 1 April 2007 – (162,827 ) (162,827 )

Profit for the year – 42,793 42,793

Issue of shares 1,328,127 – 1,328,127

Conversion of convertible loans 8,328,145 – 8,328,145

Issue of shares upon listing 18,598,693 – 18,598,693

Dividend paid (note15) – (2,200,000 ) (2,200,000 )

At 31 March 2008 and 1 April 2008 28,254,965 (2,320,034 ) 25,934,931

Profit for the year – 3,955,453 3,955,453

Dividend paid (note15) – (2,040,052 ) (2,040,052 )

At 31 March 2009 and 1 April 2009 28,254,965 (404,633 ) 27,850,332

Loss for the period – (628,552 ) (628,552 )

At 30 September 2009 28,254,965 (1,033,185 ) 27,221,780

(c) Nature and purpose of reserves

(i) Sharepremium

The application of the share premium is governed by section 40 of the Bermuda Companies Act 1981

of Bermuda.

(ii) Mergerreserve

The merger reserve arising from the Restructuring Exercise represents differences between the nominal

value of the shares of the Company and the capital contributed by the controlling shareholder in obtaining control

in subsidiaries.

(iii) Foreigncurrencytranslationreserve

The foreign currency translation reserve comprises all foreign exchange differences arising from the

translation of the financial statements of foreign operations as well as the effective portion of any foreign exchange

differences arising from hedges of the net investment in these foreign operations. The reserve is dealt with in

accordance with the accounting policies set out in note 4(d)(iii) to the Financial Information.

- I-72 -



(iv) Reservefunds

Pursuant to the relevant PRC laws and regulations, Sino-foreign joint ventures registered in the PRC are

required to transfer a certain percentage, as approved by the board of directors, of their profit after income tax

to the reserve funds. These funds are restricted as to use.

40. SHARE BASED PAYMENTS

Equity-settled share option scheme

(a) Employeeshareoptionscheme(“ESOS”)

Pursuant to a written resolution of all shareholders of the Company passed on 24 September 2007, the Company

adopted the ESOS for the purpose of providing incentive to directors and eligible employees on the same date. Eligible

participants include any confirmed employee, including executive directors and non-executive directors of the Company

and the Company’s subsidiaries. The ESOS will be expired on 23 September 2017, unless otherwise terminated by the

remuneration committee or by resolution of shareholders at a general meeting.

The aggregate nominal amount of ordinary shares over which may grant options on any date, when added to

the nominal amount of ordinary shares issued and issuable in respect of all options granted under the ESOS, all awards

granted under the performance share plan, and any other share-based incentive schemes of the Company, shall not exceed

15% of the issued share capital of the Company on the day immediately preceding the offer date of the option. The

maximum number of ordinary shares issuable under share options to each eligible participant in the ESOS is determined

at the discretion of the remuneration committee.

The number and terms of share options granted to a shareholder exercising control over the Company or substantial

shareholder, or to any of their associates, are subject to approval in advance by independent shareholders.

The offer of a grant of share options may be accepted within 30 days from the date of the offer, upon payment

of nominal consideration of S$1 in total by the grantee. The exercise period of share options granted commences after a

certain vesting period up to two years and ends on a date which is not later than tenth anniversary of the grant date.

The exercise price of the option is determinable by the remuneration committee of the Company, and will not

be less than 80% of the average of the last dealt prices for the shares on the SGX-ST over the five consecutive trading

days immediately preceding the date of grant of the share options.

No share options have been granted or agreed to be granted by the Company under the ESOS since the adoption

date of the ESOS.

Pursuant to the special general meeting of the Company held on 11 February 2010, ESOS was revoked and the

terms of a new share option scheme was adopted. There was no outstanding share options granted under ESOS and

details of the new share option scheme was more fully explained in section headed “Share Option Scheme” of Appendix

V to the Prospectus.

(b) Performanceshareplan(the“Plan”)

Pursuant to a written resolution of all shareholders of the Company passed on 24 September 2007, the Company

adopted the Plan for the purpose of providing incentive to directors and eligible employees on the same date. Eligible

participants include any confirmed employees, including executive directors and non-executive directors of the Company

and the Company’s subsidiaries. The Plan will be expired on 23 September 2017, unless otherwise terminated by the

remuneration committee or by resolution of shareholders at a general meeting.

- I-73 -



The aggregate nominal amount of ordinary shares which may be issued pursuant to the vesting of the contingent

award of ordinary shares granted on any date, when added to the nominal amount of ordinary shares issued and issuable

in respect of all awards granted under the Plan, all options granted under the ESOS, and any other share-based incentive

schemes of the Company, shall not exceed 15% of the issued share capital of the Company on the day immediately

preceding the offer date of the contingent award of ordinary shares. The maximum number of ordinary shares issuable

to each eligible participant in the Plan is determined at the discretion of the remuneration committee.

The number and terms of contingent award of ordinary shares granted to a shareholder exercising control over the

Company or substantial shareholder, or to any of their associates, are subject to approval by independent shareholders.

The remuneration committee shall decide in relation to a contingent award of ordinary shares: i) the participant;

ii) the date of grant of the contingent award of ordinary shares; iii) the performance period; iv) the number of ordinary

shares which are the subject of the grant of contingent award of ordinary shares; v) the performance condition; vi) the date

on which the ordinary shares comprised in the contingent award of ordinary shares shall be released to the participant;

and vii) any other condition which the remuneration committee may determine in relation to the grant of the contingent

award of ordinary shares.

The grantees are not required to pay for the grant of contingent award of ordinary shares.

No contingent award of ordinary shares have been granted or agreed to be granted by the Company under the

Plan since the adoption date of the Plan.

Pursuant to the special general meeting of the Company held on 11 February 2010, the Plan was terminated.

(c) Share-basedpaymentstoaconsultingfirm

The Company and a consulting firm have entered into a consultancy agreement dated 15 June 2007. The

consultancy services (the “Services”) were in relation to liaison and co-ordination support in connection with the listing

of Company’s shares on the SGX-ST and such other logistical assistance and co-ordination work as the Company may

required to achieve a listing of the Company shares on the SGX-ST. In consideration for the provision of the Services, the

Company would issue to the consulting firm such number of shares of the Company using a formula which was based on

the indicative invitation price (the “Consideration Shares”). The Consideration Shares was issued to the consulting firm

on 24 September 2007 and the fair value of the Consideration Shares amounted to US$3,706,964, in which US$370,696

was charged to the income statement. The fair value of the Consideration Shares was determined with reference to the

tentative offering price of public offer of the Company’s share. The share-based payments were not measured at fair

value of services received by the Company as the fair value of services cannot be reliably measured.

41. NOTES TO THE CONSOLIDATED STATEMENTS OF CASH FLOWS

(a) Business combination/acquisition of a subsidiary

On 29 May 2006, prior to the Restructuring Exercise, Elite Link acquired 100% of the issued and registered capital

of Zeus for a cash consideration of US$2,524,005 (equivalent to RMB20,000,000). Zeus was engaged in the development,

distribution and marketing of software and solution for mobile appliances and mobile handset hardware.

- I-74 -



The fair value of the identifiable assets and liabilities of Zeus acquired as at its date of acquisition, which has

no significant difference from its carrying amount, is as follows:

US$

Net assets acquired:

Property, plant and equipment 25,328

Interest in an associate 268,174

Trade receivables 241,992

Inventories 205,888

Prepayments, deposits and other receivables 1,701,762

Bank and cash balances 30,805

Trade payables (285,064 )

Accruals and other payables (577,519 )

1,611,366

Goodwill 912,639

2,524,005

Satisfied by:

Cash 2,524,005

Net cash outflow arising on acquisition:

Cash consideration paid (2,524,005 )

Cash and cash equivalents acquired 30,805

(2,493,200 )

The goodwill arising on the acquisition of Zeus is attributable to the anticipated profitability of the development,

distribution and marketing of the Group’s products and the future operating synergies from the combination.

Zeus contributed approximately US$3,787,086 to the Group’s revenue and approximately US$1,565,040 to the

Group’s profit before tax, for the period between the date of acquisition and 31 March 2007.

If the acquisition had been completed on 1 April 2006, total Group revenue for the year ended 31 March 2007

would have been US$46,669,046, and profit for the year ended 31 March 2007 would have been US$8,826,541. The pro

forma information is for illustrative purpose only and is not necessarily an indication of revenue and results of operations

of the Group that actually would have been achieved had the acquisition been completed on 1 April 2006, nor is intended

to be a projection of future results.

(b) Piece meal acquisition of a subsidiary

On 9 June 2006, prior to the Restructuring Exercise, the registered capital of PhoneLink was increased from

US$873,537 (equivalent to RMB7,000,000) to US$1,247,910 (equivalent to RMB10,000,000), contributed entirely by

Zeus. Equity interest in PhoneLink then held by Zeus increased from 45% to 61.5% through this capital contribution.

PhoneLink was engaged in the development of software and solution for mobile appliance.

- I-75 -



The fair value of the identifiable assets and liabilities of PhoneLink acquired as at its date of acquisition, which

has no significant difference from its carrying amount, is as follows:

US$

Net assets acquired:

Property, plant and equipment 27,691

Prepayments, deposits and other receivables 564,211

Bank and cash balances 379,039

Accruals and other payables (626 )

Minority interests (373,571 )

Reversal of the carrying amount of an associate (268,174 )

328,570

Goodwill 45,803

374,373

Satisfied by:

Cash 374,373

Net cash inflow arising on piece meal acquisition:

Cash consideration paid (374,373 )

Cash and cash equivalents acquired 379,039

4,666

On 1 August 2006, prior to the Restructuring Exercise, Zeus further acquired 4.2% of the issued capital of

PhoneLink, from the minority interests, for a cash consideration of US$52,413 (equivalent to RMB420,000). Goodwill

of US$13,087 arose from this piece meal acquisition.

On 6 February 2007, prior to the Restructuring Exercise, Zeus further acquired 15.3% of the issued share capital of

PhoneLink from the minority interests, for a cash consideration of US$194,711 (equivalent to RMB1,530,000). Goodwill

of US$69,905 arose from this piece meal acquisition.

The goodwill arising on the acquisition of PhoneLink is attributable to the anticipated profitability of the

development of the Group’s products and the future operating synergies from the combination.

PhoneLink has not contributed any revenue and profit to the Group since the date of its acquisition.

If the acquisition had been completed on 1 April 2006, total Group revenue for the year ended 31 March 2007

would have been US$46,266,331, and profit for the year ended 31 March 2007 would have been US$8,843,570. The pro

forma information is for illustrative purpose only and is not necessarily an indication of revenue and results of operations

of the Group that actually would have been achieved had the acquisition been completed on 1 April 2006, nor is intended

to be a projection of future results.

- I-76 -



(c) Disposals of disposal group classified as held for sale

As referred to in note 28 to the Financial Information, the Group completed the disposal of disposal group classified

as held for sale during the six months ended 30 September 2009. The loss on disposals of the disposal group classified

as held for sale was recognised in the consolidated income statement for the six months ended 30 September 2009.

Net assets of the disposal group classified as held for sale at the date of disposal are as follows:

US$

Assets of disposal group classified as held for sale 1,726,321

Liabilities directly associated with disposal group classified as held for sale (1,268,600 )

Release of foreign currency translation reserve directly associated with disposal

group classified as held for sale 64,366

Loss on disposals of disposal group classified as held for sale (64,366 )

Total consideration receivable 457,721

(d) Major non-cash transactions

(i) During the year ended 31 March 2007, prior to the Restructuring Exercise, interim dividend of US$257,069

was declared and accrued in amounts due to directors.

(ii) During the year ended 31 March 2007, the Group incurred other payables of US$48,750 to intangible

assets suppliers for additions of intangible assets.

(iii) During the year ended 31 March 2007, share capital of US$2,569,694 was contributed from the then

shareholders of a subsidiary by capitalisation of amounts due to directors of the Company.

(iv) During the years ended 31 March 2008 and 2009, additions to property, plant and equipment of

US$4,540,297 and US$168,872 respectively were financed by finance leases.

(v) During the year ended 31 March 2008, convertible loans including their derivative component of

US$8,781,927 were transferred to share capital and share premium upon conversion.

(vi) During the year ended 31 March 2008, 16,806,723 shares of the Company were issued for the services

rendered by the consulting firm. Details are set out in note 40(c) to the Financial Information.

(vii) During the six months ended 30 September 2009, additions of intangible assets of US$2,500,000 were

transferred from prepayments, deposits and other receivables.

- I-77 -



42. CONTINGENT LIABILITIES

Financial guarantees issued

At the end of each reporting period, the Company has the following financial guarantees:

(a) guarantees to banks in respect of banking facilities granted to two subsidiaries of the Group at 31 March

2008 and 31 March 2009 amounted to US$8,979,049 and US$10,110,154 respectively; guarantees to banks

in respect of banking facilities granted to a subsidiary of the Group at 30 September 2009 amounted to

US$15,508,612. No such guarantee was issued at 31 March 2007;

(b) an unlimited guarantee to a bank in respect of banking facilities granted to two subsidiaries of the Group

at 31 March 2008 and 31 March 2009; unlimited guarantees to a bank in respect of banking facilities

granted to a subsidiary of the Group at 30 September 2009. No such guarantee was issued at 31 March

2007; and

(c) a corporate guarantee to a bank in respect of banking facilities granted to two subsidiaries of the Group

at 31 March 2008 and 31 March 2009; a corporate guarantee to a bank in respect of banking facilities

granted to a subsidiary of the Group at 30 September 2009. No such guarantee was issued at 31 March

2007.

At the end of each reporting period, the directors do not consider it probable that a claim will be made against the

Company under any of the above guarantees. The maximum liability of the Company at the end of each reporting period under

the financial guarantees issued is as follows:


Guarantee as mentioned in (a) above

– amounts of finance leases and

other bank borrowings drawn – 4,700,938 5,587,068 7,853,320

Guarantee as mentioned in (b) above

– amounts of bank borrowings drawn – 1,942,000 4,393,002 6,979,478

Guarantee as mentioned in (c) above

– amounts of bank borrowings drawn – 1,075,389 1,105,000 290,892

– 7,718,327 11,085,070 15,123,690

The fair value of the guarantees at date of inception is not material and is not recognised in the Financial Information.

- I-78 -



43. CAPITAL COMMITMENTS

The Group’s capital commitments at the end of each reporting period are as follows:


Property, plant and equipment

Contracted but not provided for 3,567,065 244,935 71,745 –

44. LEASE COMMITMENTS

At the end of each reporting period the total future minimum lease payments under non-cancellable operating leases

are payable as follows:


Within one year 354,552 762,303 795,306 759,045

In the second to fifth years inclusive 712,607 1,797,192 1,494,668 1,130,425

1,067,159 2,559,495 2,289,974 1,889,470

Operating lease payments represent rentals payable by the Group for certain of its offices and factory premises. For the

years ended 31 March 2007, 2008 and 2009 and the six months ended 30 September 2009, leases are negotiated for an average

term of three years, three years, five years and five years respectively and rentals are fixed over the lease terms and do not

include contingent rentals.

- I-79 -



45. MATERIAL RELATED PARTY TRANSACTIONS

(a) Transactions with related parties

In addition to those related party transactions and balances disclosed elsewhere in the Financial Information, the Group had the following material transactions with its related parties during the Relevant Periods:

For the six months For the year ended 31 March ended 30 September 2007 2008 2009 2008 2009 Note US$ US$ US$ US$ US$ (unaudited)

Administrative expenses reimbursed by a related company (i) 26,652 3,166 – – –Sale of goods to a jointly controlled entity/jointly controlled entity classified as held for sale (ii) 690,852 13,045 – – 297,937Acquisition of 50% equity interest in a subsidiary from a related party (iii) 1,247,910 – – – –Personal guarantees provided by a related party and a director for a bank loan obtained (iv) 1,908,931 2,034,062 – – –Properties provided by related parties as collateral for a bank loan obtained (iv) 1,309,527 1,395,366 – – –Personal guarantee provided by a director for finance lease payables (v) – 3,352,000 – – –Personal guarantee provided by a director for a bank loan obtained (vi) – – – – 1,742,931Settlement of mortgage loans on behalf of related parties (vii) 643,440 – – – –Settlement of liabilities on behalf of the Group by a director 52,204 – – – –

Notes:

(i) One of the directors of the Company has beneficial interest in and control over the related company. These transactions were carried out in accordance with terms determined and agreed by both parties.

(ii) The sale of goods to a jointly controlled entity were carried out in the ordinary course of business of the Group according to the prices and conditions offered to regular customers of the Group.

(iii) On 27 April 2006, the Group entered into an agreement with a related party, who is the brother of one of the directors of the Company, to acquire 50% equity interest in Zeus for a consideration of RMB10,000,000.

(iv) As at 31 March 2007, the bank loan as set out in note 32 to the Financial Information was secured by personal guarantee to the extent of RMB15,000,000 given by a related party and a director and letter of guarantee issued by the Shenzhen Small and Medium Enterprises Credit Guarantee Centre, which was secured by the pledge of properties owned by related parties, Mr. Wang Xu and Mr. Wang Shih Wen. The bank loan was settled on 6 July 2007 and the guarantees were released during the year ended 31 March 2008.

(v) During the year ended 31 March 2008, one of the security arrangements for the finance lease payables was the personal guarantee executed by one of the Company’s director amounted to US$3,352,000, and the guarantee was released on 21 November 2007.

(vi) As at 30 September 2009, a bank loan of RMB12,000,000 was secured by corporate guarantee executed by a subsidiary of the Company and personal guarantees executed by a director of a subsidiary and a director of the Company. The bank loan was subsequently settled.

(vii) During the year ended 31 March 2007, the Group settled the mortgage loans of the properties on behalf of related parties, Mr. Wang Xu and Mr. Wang Shih Wen.

- I-80 -



(b) Balances with related parties


Amount due from a jointly controlled entity/jointly controlled entity classified as held for sale GuiZhou Zhenhua OBEE

Communication Co., Ltd. (i) – 706,941 – –

Amounts due from related parties Wang Xu and Wang Shih Wen (ii) 656,440 – – –

656,440 706,941 – –


Amount due to directors Wang Tao and Wang Shih Zen (iii) 81,232 – – –

Amounts due to a related party Moosik Limited (iv) 8,446 – – –

89,678 – – –

Note:

(i) The amount due is denominated in Renminbi and is unsecured, interest-free and repayable on demand.

The amount due was subsequently settled.

(ii) The amounts due are denominated in Renminbi and are unsecured, interest-free and repayable within

twelve months as at 31 March 2007. The related parties are brothers of directors of the Company, Wang

Tao and Wang Shih Zen, respectively. Pursuant to section 161B of the Hong Kong Companies Ordinance,

the maximum outstanding amount due from two related parties Wang Xu and Wang Shih Wen for the

years ended 31 March 2007 and 2008 are US$354,336 and US$302,104 respectively.

(iii) The amounts due are unsecured, interest-free and have no fixed repayment terms. US$69,778 of the amounts

due are denominated Hong Kong dollar and the remaining balance are denominated in Renminbi.

(iv) The amount due is unsecured, interest-free and has no fixed repayment terms. The related party is a

company in which one of the directors of the Company, Mr. Wang Shih Zen has beneficial interest in

and control over the related party. The amounts due are denominated in Hong Kong dollar. In September

2009, Mr. Wang Shih Zen ceased to have beneficial interest in and control over the related party.

- I-81 -



(c) Key management personnel remuneration.

Remuneration for key management personnel is disclosed in note 13 to the Financial Information.

(d) During the year ended 31 March 2007, related parties, Wang Xu and Wang Shih Wen, provide office premises

to a subsidiary of the Company for which no charges were made.

(e) During the years ended 31 March 2007 and 2008, the convertible loans of the Company were secured by personal

guarantees executed by and a charge up to 50% of the issued shares of the Company held by the directors of the

Company, namely Mr. Wang Shih Zen and Ms. Wang Tao. Details of the convertible loans are set out in note 35

to the Financial Information.

(f) During the year ended 31 March 2008, certain banking facilities granted by a bank are secured by personal

guarantee executed by two directors for an unlimited amount. Such personal guarantee has been released as at

31 March 2008.

46. SUBSEQUENT EVENTS

Subsequent to 30 September 2009 and up to the date of this report, the Group has the following significant subsequent

event:

a) Pursuant to the special general meeting of the Company held on 11 February 2010, ESOS was revoked and the

terms of a new share option scheme was adopted. There was no outstanding share option granted under ESOS

and details of the new share option scheme was more fully explained in section headed “Share Option Scheme”

of Appendix V to the Prospectus. At the same special general meeting, the Plan as detailed in note 40(b) to the

Financial Information was terminated.

Other than the subsequent events as described above and in note 38 to the Financial Information, no significant events

took place subsequent to 30 September 2009 and up to the date of this report.

47. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by the Company or any of its subsidiaries in respect of any period

subsequent to 30 September 2009.

Yours faithfully,

RSM Nelson WheelerCertifiedPublicAccountants

Hong Kong

- III-� -

appendix iii property valuation


The following is the text of a letter, summary of values and valuation certificates, prepared for

the purpose of incorporation in this prospectus received from BMI Appraisals Limited, an independent

valuer, in connection with its valuations as at 31 December 2009 of the properties leased by the

Group in Hong Kong and the PRC.

�2 February 20�0

The Directors

Z-obee Holdings limitedUnit 605, 6th Floor

Yen Sheng Centre

No. 64 Hoi Yuen Road

Kwun Tong, Kowloon

Hong Kong

Dear Sirs,

inStruCtionS

We refer to the instructions from Z-Obee Holdings Limited (the “Company”) for us to value

the properties leased by the Company and/or its subsidiaries (together referred to as the “Group”)

located in Hong Kong and the People’s Republic of China (the “PRC”). We confirm that we have

performed inspections, made relevant enquiries and obtained such further information as we consider

necessary for the purpose of providing you with our opinion of the market values of the properties

as at 3� December 2009 (the “date of valuation”).

BaSiS oF valuation

Our valuations of the concerned properties have been based on the Market Value, which is defined

as “the estimated amount for which a property 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”.

property CateGoriZation

In the course of our valuations, the portfolio of properties of the Group is categorized into the

following groups:–

Group I – Property leased by the Group in Hong Kong

Group II – Properties leased by the Group in the PRC

- III-2 -



valuation MetHodoloGy

In valuing the properties leased by the Group, we are of the opinion that they have no commercial value either because of their non-assignability in the open market or there are prohibitions against assignment and/or subletting contained in the tenancy agreements or the lack of marketable and substantial profit rents.

title inveStiGation

We have not searched the titles of the properties and have not scrutinized the original title documents to verify ownership or to ascertain the existence of any amendments, which do not appear on the copies handed to us. However, we have been provided with copies of the tenancy agreements of the properties leased by the Group. All documents have been used for reference only.

valuation aSSuMptionS

Our valuations have been made on the assumption that the properties are sold in the open market in their existing states without the benefit of deferred terms contract, leaseback, joint venture, management agreement or any other similar arrangement which might serve to affect the values of the properties.

In addition, no account has been taken of any option or right of pre-emption concerning of effecting sale of the properties and no forced sale situation in any manner is assumed in our valuations.

valuation ConSiderationS

We have inspected the exterior and wherever possible, the interior of the properties. During the course of our inspections, we did not note any serious defects. However, no structural surveys have been made nor have any tests been carried out on any of the services provided in the properties. We are, therefore, unable to report that the properties are free from rot, infestation or any other structural defects.

In the course of our valuations, we have relied to a considerable extent on the information given by the Group and have accepted advice given to us on such matters as planning approvals or statutory notices, easements, tenures, particulars of occupancy, floor areas, identification of the properties and other relevant information.

We have not carried out detailed on-site measurements to verify the correctness of the floor areas in respect of the properties but have assumed that the floor areas shown on the documents handed to us are correct. Dimensions, measurements and areas included in the valuation certificates are based on information contained in the documents provided to us by the Group and are therefore only approximations.

We have no reason to doubt the truth and accuracy of the information provided to us by the Group and we have relied on the Group’s confirmation that no material facts have been omitted from the information so supplied. We consider that we have been provided with sufficient information to reach an informed view.

- III-3 -



No allowance has been made in our valuations for any charges, mortgages or amounts owing

on the properties or for any expenses or taxation, which may be incurred in effecting a sale.

Unless otherwise stated, it is assumed that the properties are free from encumbrances, restrictions

and outgoings of an onerous nature, which could affect their values.

Our valuations have been prepared in accordance with the HKIS Valuation Standards on Properties

(First Edition 2005) published by the Hong Kong Institute of Surveyors.

Our valuations have been prepared under the generally accepted valuation procedures and are in

compliance with the requirements contained in Chapter 5 and Practice Note �2 of the Rules Governing

the Listing of Securities on The Stock Exchange of Hong Kong Limited.

reMarKS

Unless otherwise stated, all money amounts stated herein are in Hong Kong Dollars (HK$) and

no allowances have been made for any exchange transfers.

Our Summary of Values and the Valuation Certificates are attached herewith.

Yours faithfully,

For and on behalf of

BMi appraiSalS liMited

dr. tony C.H. Cheng Joannau W.F. Chan BSc., MUD, MBA(Finance), MSc.(Eng), PhD(Econ), BSc., MSc., MRICS, MHKIS, RPS(GP)

MHKIS, MCIArb, AFA, SIFM, FCIM, Senior Director

MASCE, MIET, MIEEE, MASME, MIIE

Managing Director

Notes:

Dr. Tony C.H. Cheng is a member of the Hong Kong Institute of Surveyors (General Practice) who has over 17 years’ experience

in valuations of properties in Hong Kong and the People’s Republic of China.

Ms. Joannau W.F. Chan is a member of the Hong Kong Institute of Surveyors (General Practice) who has over 17 years’

experience in valuations of properties in Hong Kong and over 11 years’ experience in valuations of properties in the People’s

Republic of China.

- III-4 -



SuMMary oF valueS

Market value in existing stateno. property as at 31 december 2009 HK$

Group i – property leased by the Group in Hong Kong

�. Unit No. 5 on 6th Floor, No Commercial Value

Yen Sheng Centre,

64 Hoi Yuen Road,

Kwun Tong,

Kowloon,

Hong Kong

Sub-total: nil

Group ii – properties leased by the Group in the prC

2. Room 40�, Building �4, No Commercial Value

West Part of Software Park,

Hi-Tech Park in the Second Road,

Nanshan District,

Shenzhen,

the PRC

中國深圳市南山區高新科技園中二路軟件園西區�4棟40�室

3. Unit No. �206, No Commercial Value

Block A of Jiazhaoye Centre,

Shangbu South Road,

Futian District,

Shenzhen,

the PRC

中國深圳市福田區上步南路佳兆業中心A�206

- III-5 -



Market value in existing stateno. property as at 31 december 2009 HK$

4. Portions of an industrial complex located at No Commercial Value

Jingangshan Industrial District,

Jiuwei Society Road,

Xixiang Street,

Baoan District,

Shenzhen,

the PRC

中國深圳市寶安區西鄉街道九圍社區路金崗山工業區之工業園之部分

5. Unit Nos. 9�� & 9�2, No Commercial Value

Simike Building,

No. 800 Shangcheng Road,

Pudong New District,

Shanghai,

the PRC

中國上海市浦東新區商城路800號斯米克大廈9��、9�2室

Sub-total: nil

Grand-total: nil

- III-6 -



valuation CertiFiCate

Group i – property leased by the Group in Hong Kong

no. property description and tenureparticulars of occupancy

Market value in existing state as at 31 december 2009

HK$

�. Unit No. 5 on

6th Floor,

Yen Sheng Centre,

64 Hoi Yuen

Road,

Kwun Tong,

Kowloon,

Hong Kong

The property comprises an office

unit on the 6th Floor of a 24-

storey industrial/office building

which was completed in �995.

The gross floor area of the

property is approximately �,740

sq.ft. (or about �6�.6 sq.m.).

Pursuant to a tenancy agreement

entered into between an

independent third-party landlord

and Elite Link Technology

Limited (referred to as “Elite

Link”) dated 28 July 2008, the

property is leased to Elite Link

for the purpose of industrial/

godown/offices ancillary and

directly related to an industrial

or godown operation for a term

of 2 years commencing on �6

May 2008 and expiring on �5

May 20�0 at a monthly rent of

HK$2�,750 exclusive of rates,

air conditioning, management

charges and other outgoings.

The property

is occupied by

the Group for

office purpose.

No Commercial

Value

Note:–

Pursuant to the aforesaid tenancy agreement, the tenant of the property is Elite Link, which is an indirect wholly-owned subsidiary

of the Company.

- III-7 -




Group ii – properties leased by the Group in the prC



HK$

2. Room 40�,

Building �4,

West Part of

Software Park,

Hi-Tech Park in

the Second Road,

Nanshan District,

Shenzhen,

the PRC

中國深圳市南山區高新科技園中二路軟件園西區�4棟40�室


unit on the 4th Floor of a

7-storey commercial building

which was completed in about

2008.


property is approximately

�,�32.46 sq.m. (or about �2,�90

sq.ft.).


and its supplementary agreement


independent third-party landlord

and Zeus Telecommunication

Technology Holdings Ltd.

(referred to as “Zeus”) both

dated 6 May 2008, the property

is leased to Zeus for research and

office uses for a term of 5 years

commencing on 22 April 2008

and expiring on 2� April 20�3 at

a monthly rent of RMB55,490.54

exclusive of water, electricity and

sanitary charges and management

fee.

The property

is occupied by

the Group for

office purpose.

No Commercial

Value

- III-8 -



Notes:–

�. Pursuant to the aforesaid tenancy agreement, the tenant of the property is Zeus, which is an indirect wholly-owned

subsidiary of the Company.

2. The opinion given by the PRC legal adviser – Haihua Yongtai Law Firm dated [•••] to the Group is as follows:

a. The content and format of the tenancy agreement are in compliance with the relevant laws and regulations in the

PRC and the said agreement is legally valid and binding on the contracting parties;

b. The landlord has obtained all necessary authorization, permission and approval from the PRC Government

departments or any third parties and has the right to lease the property;

c. Zeus is entitled to legally use and occupy the property during the term of the tenancy. The current use of the

property by Zeus is in compliance with the use specified in the relevant tenancy agreement and does not violate

the existing laws and regulations in the PRC;

d. The tenancy agreement has been registered with the relevant department in accordance with laws, regulations,

administrative rules and local regulations in the PRC; and

e. The property is not subject to other material encumbrances.

- III-9 -






HK$

3. Unit No. �206,

Block A of

Jiazhaoye Centre,

Shangbu South

Road,

Futian District,

Shenzhen,

the PRC

中國深圳市福田區上步南路佳兆業中心A�206


unit on the �2th Floor of a

29-storey residential/commercial

building which was completed in

about 2007.


property is approximately 39.8

sq.m. (or about 428 sq.ft.).



independent third party landlord

and Zeus Telecommunication

Technology Holdings Ltd.

(referred to as “Zeus”) dated

25 July 2008, the property is

leased to Zeus for office use for

a term of � year commencing on

� August 2009 and expiring on

3� July 20�0 at a monthly rent

of RMB�,200 exclusive of water,

electricity and sanitary charges

and management fee.

The property

is occupied by

the Group for

office purpose.

No Commercial

Value

Notes:–

�. Pursuant to the aforesaid tenancy agreement, the tenant of the property is Zeus, which is an indirect wholly-owned subsidiary of the Company.


a. The content and format of the tenancy agreement are in compliance with the relevant laws and regulations in the PRC and the said agreement is legally valid and binding on the contracting parties;

b. The landlord has obtained all necessary authorization, permission and approval from the PRC Government departments or any third parties and has the right to lease the property;

c. Zeus is entitled to legally use and occupy the property during the term of the tenancy. The current use of the property by Zeus is in compliance with the use specified in the relevant tenancy agreement and does not violate the existing laws and regulations in the PRC;

d. The landlord possesses valid title certificates of the property and the tenancy agreement has been registered; and


- III-�0 -






HK$

4. Portions of an

industrial complex

located at

Jingangshan

Industrial District,

Jiuwei Society

Road,

Xixiang Street,

Baoan District,

Shenzhen,

the PRC

中國深圳市寶安區西鄉街道九圍社區路金崗山工業區之工業園之部分

The property comprises seven

single- to 5-storey industrial and

dormitory buildings (Blocks �,

2, 3, 4, A, B & C) which were

completed in about 2007.

The total gross floor area

(“GFA”) of the property is

approximately 26,482.6 sq.m. (or

about 285,059 sq.ft.).

Pursuant to a 4 tenancy

agreements entered into between

an independent third party

landlord and the Group, the

property is leased to the Group

for various purposes at a total

monthly rent of RMB357,5�5.6

for a term expiring on � March

20�2.

The property

is occupied

by the Group

for factory,

dormitory and

other ancillary

purposes.

As advised by

the Group, the

front portion

of Level � of

Block 4 with

a GFA of

approximately

500 sq.m. is

subleased to

an independent

third party

for a term

of � year

commencing

on � June

2009 and

expiring on 3�

May 20�0 at a

monthly rent

of RMB6,750

exclusive

of water,

electricity

and sanitary

charges and

management

fee.

No Commercial

Value

- III-�� -



Notes:–

�. Pursuant to the aforesaid tenancy agreements, the tenants of the property are Max Sunny Limited (referred to as “Max

Sunny”) and Tongqing Communication Equipment (Shenzhen) Co., Ltd. (referred to as “Tongqing”), which are indirect

wholly-owned subsidiaries of the Company. The details of the agreements are summarized as follows:

Monthlyno. Building tenant GFa term rent use (sq.m.) (RMB)

�. Level � of Blocks �, 2 & 3 Max Sunny 7,872.0 �6 Apr 2007 – �06,272.0 Factory

� Mar 20�2

2. Block A (Levels 2 & 3), Tongqing �2,293.0 �6 Jul 2007 – �65,956.0 Domestic

Blocks B & C � Mar 20�2 (Dormitory)

3. Level � of Block A Tongqing 3,��7.6 �6 Jul 2007 – 50,087.6 Commercial

� Mar 20�2 (Canteen)

4. Level � of Block 4 Tongqing 3,200.0 � Aug 2007 – 35,200.0 Factory

� Mar 20�2

total: 26,482.6 357,515.6


a. The content and format of the tenancy agreements are in compliance with the relevant laws and regulations in

the PRC and the said agreements are legally valid and binding on the contracting parties;

b. The landlord has obtained all necessary authorization, permission and approval from the PRC Government

departments or any third parties and has the right to lease the property;

c. Tongqing and Max Sunny are entitled to legally use and occupy the property during the term of the tenancies.

The current uses of the property by Tongqing and Max Sunny are in compliance with the uses specified in the

relevant tenancy agreements and do not violate the existing laws and regulations in the PRC;

d. Max Sunny, being a company in Hong Kong, does not violate the laws and regulations by renting a property in

the PRC;

e. The tenancy agreements have been registered with the relevant department in accordance with laws, regulations,

administrative rules and local regulations in the PRC; and

f. The property is not subject to other material encumbrances.

- III-�2 -






HK$

5. Unit Nos. 9�� & 9�2,Simike Building,No. 800 Shangcheng Road,Pudong New District,Shanghai,the PRC

中國上海市浦東新區商城路800號斯米克大廈9��、9�2室

The property comprises two office units on the 9th Floor of a high-rise commercial building which was completed in about 2000.

The gross floor area of the property is approximately 246.96 sq.m. (or about 2,658 sq.ft.).

Pursuant to a tenancy renewal agreement entered into between an independent third party landlord and Shanghai PhoneLink Communications Technology Co., Ltd. (referred to as “PhoneLink”) dated �3 January 2009, the property is leased to PhoneLink for office use for a term of � year commencing on �8 February 2009 and expiring on �7 February 20�0 at a monthly rent of RMB26,800 exclusive of water, electricity, gas, telephone, facilities, air conditioning charges and management fee.

The property is occupied by the Group for office purpose.

No Commercial Value

Notes:–

�. Pursuant to the aforesaid tenancy agreement, the tenant of the property is PhoneLink, which is an indirect wholly-owned subsidiary of the Company.


a. The content and format of the tenancy agreement are in compliance with the relevant laws and regulations in the PRC and the said agreement is legally valid and binding on the contracting parties;

b. The landlord has obtained all necessary authorization, permission and approval from the PRC Government departments or any third parties and has the right to lease the property;

c. PhoneLink is entitled to legally use the property during the term of the tenancy. The current use of the property by PhoneLink is in compliance with the use specified in the relevant tenancy agreement and does not violate the existing laws and regulations in the PRC;

d. The landlord possesses valid title certificates of the property and the tenancy agreement has been registered; and


- IV-� -

APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY AND BERMUDA COMPANY LAW


Set out below is a summary of certain provisions of the Memorandum of Association and New

Bye-laws and of certain aspects of Bermuda company law.

1. MEMORANDUM OF ASSOCIATION

The Memorandum of Association states, inter alia, that the liability of members of the Company

is limited to the amount, if any, for the time being unpaid on the shares respectively held by them and

that the Company is an exempted company as defined in the Companies Act. The Memorandum of

Association also sets out the objects for which the Company was formed which are unrestricted and

that the Company has the capacity, rights, powers and privileges of a natural person. As an exempted

company, the Company will be carrying on business outside Bermuda from a place of business within

Bermuda.

In accordance with and subject to section 42A of the Companies Act, the Memorandum of

Association empowers the Company to purchase its own shares and pursuant to its New Bye-laws,

this power is exercisable by the board of Directors (the “board”) upon such terms and subject to such

conditions as it thinks fit.

2. NEW BYE-LAWS

The New Bye-laws were adopted on �� February 20�0. The following is a summary of certain

provisions of the New Bye-laws:

(a) Directors

(i) Power toallotand issuesharesandwarrants

Subject to any special rights conferred on the holders of any shares or class of shares,

any share may be issued with or have attached thereto such rights, or such restrictions,

whether with regard to dividend, voting, return of capital, or otherwise, as the Company

may by ordinary resolution determine (or, in the absence of any such determination or so

far as the same may not make specific provision, as the board may determine). Subject to

the Companies Act, the New Bye-laws and to any special rights conferred on the holders

of any shares or attaching to any class of shares, any preference shares may be issued

or converted into shares that are liable to be redeemed, at a determinable date or at the

option of the Company or, if so authorised by the Memorandum of Association, at the

option of the holder, on such terms and in such manner as the Company before the issue or

conversion may by ordinary resolution determine. The board may issue warrants conferring

the right upon the holders thereof to subscribe for any class of shares or securities in the

capital of the Company on such terms as it may from time to time determine. Provided

that such issue must be specifically approved by the Company in general meeting if

required by the rules or regulations of the Designated Stock Exchange.

- IV-2 -



Subject to the provisions of the Companies Act, no shares may be issued by the

board without the prior approval of the Company in general meeting but subject thereto

and to the New Bye-laws and without prejudice to any special rights or restrictions for

the time being attached to any shares or any class of shares, all unissued shares in the

Company shall be at the disposal of the board, which may offer, allot, grant options

over or otherwise dispose of them to such persons, at such times, for such consideration

and on such terms and conditions as it in its absolute discretion thinks fit, but so that

no shares shall be issued at a discount, provided always that: (a) no shares shall be

issued to transfer a controlling interest in the Company without the prior approval of

the members in general meeting; (b) (subject to any direction to the contrary that may

be given by the Company in general meeting or except as permitted under the rules or

regulations of the Designated Stock Exchange (as defined in the New Bye-laws)) any

issue of shares for cash to members holding shares of any class shall be offered to such

members in proportion as nearly as may be to the number of shares of such class then

held by them; and (c) any other issue of shares, the aggregate of which would exceed

the limits referred to in the relevant New Bye-law, shall be subject to the approval of

the Company in general meeting.

Neither the Company nor the board shall be obliged, when making or granting any

allotment of, offer of, option over or disposal of shares, to make, or make available, any

such allotment, offer, option or shares to members or others with registered addresses

in any particular territory or territories being a territory or territories where, in the

absence of a registration statement or other special formalities, this would or might, in

the opinion of the board, be unlawful or impracticable. Members affected as a result of

the foregoing sentence shall not be, or be deemed to be, a separate class of members for

any purpose whatsoever.

Except as permitted under the rules or regulations of the Designated Stock Exchange

(as defined in the New Bye-laws) or if any direction is given by the Company in general

meeting, all new shares shall before issue be offered to such persons who as at the date

of the offer are entitled to receive notices from the Company of general meetings in

proportion, as far as the circumstances admit, to the amount of the existing shares to

which they are entitled.

Notwithstanding the provision above but subject to the Statutes (as defined in the

New Bye-laws) and the rules and regulations of the Designated Stock Exchange, the

Company in general meeting may by ordinary resolution grant to the Directors a general

authority, either unconditionally or subject to such conditions as may be specified in

the said ordinary resolution, to issue shares in the capital of the Company whether by

way of rights, bonus or otherwise and/or to make or grant offers, agreements or options

(collectively, “Instruments”) that might or would require shares to be issued, including but

not limited to the creation and issue of (as well as adjustments to) warrants, debentures

or other instruments convertible into shares and (notwithstanding that the authority

conferred by the said ordinary resolution may have ceased to be in force) to issue shares

- IV-� -



in pursuance of any Instrument made or granted by the Directors while the said ordinary

resolution was in force Provided that:

(a) the aggregate number of shares to be issued pursuant to the said ordinary

resolution (including shares to be issued in pursuance of Instruments made

or granted pursuant to the said ordinary resolution) shall be subject to such

limits and manner of calculation as may be prescribed by the Designated

Stock Exchange, and

(b) such general authority shall only remain in force until (i) the conclusion

of the annual general meeting of the Company next following the passing

of the resolution granting the said authority or (ii) the date by which such

annual general meeting is required to be held or (iii) it is revoked or varied

by ordinary resolution of the Company in general meeting, whichever is the

earliest.

(ii) Power todisposeof theassetsof theCompanyoranyof itssubsidiaries

There are no specific provisions in the New Bye-laws relating to the disposal of

the assets of the Company or any of its subsidiaries.

Note: The Directors may, however, exercise all powers and do all acts and things which may be exercised

or done or approved by the Company and which are not required by the New Bye-laws or the

Companies Act to be exercised or done by the Company in general meeting.

(iii) Compensationorpayments for lossofoffice

Payments to any Director or past Director of any sum by way of compensation for

loss of office or as consideration for or in connection with his retirement from office

(not being a payment to which the Director is contractually entitled) must be approved

by the Company in general meeting.

(iv) Loansandprovisionofsecurity for loans toDirectors

There are no provisions in the New Bye-laws relating to the making of loans to

Directors. However, the Companies Act contains restrictions on companies making loans

or providing security for loans to their directors, the relevant provisions of which are

summarised in the paragraph headed “Bermuda company law” in this Appendix.

(v) Financialassistance topurchasesharesof theCompany

Neither the Company nor any of its subsidiaries shall directly or indirectly give

financial assistance to a person who is acquiring or proposing to acquire shares in the

Company for the purpose of that acquisition whether before or at the same time as the

acquisition takes place or afterwards, provided that the New Bye-laws shall not prohibit

transactions permitted under the Companies Act.

- IV-4 -



(vi) Disclosureof interests incontractswith theCompanyoranyof itssubsidiaries

A Director may hold any other office or place of profit with the Company (except

that of auditor of the Company) in conjunction with his office of Director for such period

and, subject to the Companies Act, upon such terms as the board may determine, and may

be paid such extra remuneration (whether by way of salary, commission, participation

in profits or otherwise) in addition to any remuneration provided for by or pursuant to

any other New Bye-law. A Director may be or become a director or other officer of, or a

member of, any company promoted by the Company or any other company in which the

Company may be interested, and shall not be liable to account to the Company or the

members for any remuneration, profits or other benefits received by him as a director,

officer or member of, or from his interest in, such other company. Subject as otherwise

provided by the New Bye-laws, the board may also cause the voting power conferred

by the shares in any other company held or owned by the Company to be exercised in

such manner in all respects as it thinks fit, including the exercise thereof in favour of

any resolution appointing the Directors or any of them to be directors or officers of such

other company, or voting or providing for the payment of remuneration to the directors

or officers of such other company.

Subject to the Companies Act and to the New Bye-laws, no Director or proposed

or intending Director shall be disqualified by his office from contracting with the

Company, either with regard to his tenure of any office or place of profit or as vendor,

purchaser or in any other manner whatsoever, nor shall any such contract or any other

contract or arrangement in which any Director is in any way interested be liable to be

avoided, nor shall any Director so contracting or being so interested be liable to account

to the Company or the members for any remuneration, profit or other benefits realised

by any such contract or arrangement by reason of such Director holding that office or

the fiduciary relationship thereby established. A Director who to his knowledge is in any

way, whether directly or indirectly, interested in a contract or arrangement or proposed

contract or arrangement with the Company shall declare the nature of his interest at the

meeting of the board at which the question of entering into the contract or arrangement

is first taken into consideration, if he knows his interest then exists, or in any other case,

at the first meeting of the board after he knows that he is or has become so interested.

A Director shall not vote (nor be counted in the quorum) on any resolution of the

board in respect of any contract or arrangement or proposed contract or arrangement in

which he or any of his associates has directly or indirectly a material interest. Matters

in which he or his associate(s) shall not be considered to have a material interest shall

include the following:

(aa) any contract or arrangement for the giving to such Director or any of his

associate(s) any security or indemnity in respect of money lent by him or

any of his associates or obligations incurred or undertaken by him or any

of his associates at the request of or for the benefit of the Company or any

of its subsidiaries;

- IV-� -



(bb) any contract or arrangement for the giving of any security or indemnity to

a third party in respect of a debt or obligation of the Company or any of

its subsidiaries for which the Director or any of his associate(s) has/have

himself/themselves assumed responsibility in whole or in part whether alone

or jointly under a guarantee or indemnity or by the giving of security;

(cc) any contract or arrangement in which he or any of his associate(s) is/are

interested in the same manner as other holders of shares or debentures or other

securities of the Company or any of its subsidiaries by virtue only of his/their

interest in shares or debentures or other securities of the Company;

(dd) any contract or arrangement concerning any other company in which he or

his associate(s) is/are interested only, whether directly or indirectly, as an

officer or executive or a shareholder other than a company in which the

Director together with any of his associates is beneficially interested in

(other than through his interest (if any) in the Company) five (�) per cent

or more of the issued shares or of the voting rights of any class of shares of

such company (or any third company through which his interest is derived);

or

(ee) any proposal concerning the adoption, modification or operation of a share

option scheme, a pension fund or retirement, death or disability benefits

scheme or other arrangement which relates to directors, his associates

and employees of the Company or of any of its subsidiaries and does not

provide in respect of any Director or his associate(s) as such any privilege

or advantage not accorded to the employees to which such scheme or fund

relates.

(vii) Remuneration

The ordinary remuneration of the Directors shall from time to time be determined

by the Company in general meeting, shall not be increased except pursuant to an ordinary

resolution passed at a general meeting where notice of the proposed increase shall have

been given in the notice convening the general meeting and shall (unless otherwise

directed by the resolution by which it is voted) to be divided amongst the Directors

in such proportions and in such manner as the board may agree or, failing agreement,

equally, except that any Director holding office for part only of the period in respect of

which the remuneration is payable shall only rank in such division in proportion to the

time during such period for which he held office. The Directors shall also be entitled to

be prepaid or repaid all travelling, hotel and incidental expenses reasonably incurred or

expected to be incurred by them in attending any board meetings, committee meetings

or general meetings or separate meetings of any class of shares or of debentures of the

Company or otherwise in connection with the discharge of their duties as Directors.

- IV-� -



Any Director who, by request, goes or resides abroad for any purpose of the

Company or who performs services which in the opinion of the board go beyond the

ordinary duties of a Director may be paid such extra remuneration (whether by way of

salary, commission, participation in profits or otherwise) as the board may determine

and such extra remuneration shall be in addition to or in substitution for any ordinary

remuneration provided for by or pursuant to any other New Bye-law.

A Director appointed to be a managing director, joint managing director, deputy

managing director or other executive officer shall receive such remuneration (whether

by way of salary, commission or participation in profits or otherwise or by all or any

of those modes) and such other benefits (including pension and/or gratuity and/or other

benefits on retirement) and allowances as the board may from time to time decide. Such

remuneration may be either in addition to or in lieu of his remuneration as a Director,

but he shall not in any circumstances be remunerated by a commission on or a percentage

of turnover.

The board may establish or concur or join with other companies (being subsidiary

companies of the Company or companies with which it is associated in business) in

establishing and making contributions out of the Company’s monies to any schemes or

funds for providing pensions, sickness or compassionate allowances, life assurance or

other benefits for employees (which expression as used in this and the following paragraph

shall include any Director or ex-Director who may hold or have held any executive office

or any office of profit with the Company or any of its subsidiaries) and ex-employees of

the Company and their dependants or any class or classes of such persons.

The board may pay, enter into agreements to pay or make grants of revocable or

irrevocable, and either subject or not subject to any terms or conditions, pensions or other

benefits to employees and ex-employees and their dependants, or to any of such persons,

including pensions or benefits additional to those, if any, to which such employees or

ex-employees or their dependants are or may become entitled under any such scheme or

fund as is mentioned in the previous paragraph. Any such pension or benefit may, as the

board considers desirable, be granted to an employee either before and in anticipation

of, or upon or at any time after, his actual retirement.

(viii) Retirement,appointmentandremoval

At each annual general meeting, one third of the Directors for the time being (or if

their number is not a multiple of three, then the number nearest to but not less than one

third) will retire from office by rotation provided that every Director shall be subject to

retirement at least once every three years. The Directors to retire in every year will be

those who have been longest in office since their last re-election or appointment but as

between persons who became or were last re-elected Directors on the same day those to

retire will (unless they otherwise agree among themselves) be determined by lot.

Note: There are no provisions relating to retirement of Directors upon reaching any age limit.

- IV-� -



The Directors shall have the power from time to time and at any time to appoint

any person as a Director either to fill a casual vacancy on the board or, where a maximum

number of Directors has been determined by the members and the members have authorised

the board to appoint additional Directors, as an additional Director. Any Director appointed

by the board shall retire at the next annual general meeting of the Company and shall then

be eligible for re-election at that meeting. Neither a Director nor an alternate Director is

required to hold any shares in the Company by way of qualification.

A Director may be removed by an ordinary resolution of the Company before the

expiration of his period of office (but without prejudice to any claim which such Director

may have for damages for any breach of any contract between him and the Company)

provided that the notice of any such meeting convened for the purpose of removing a

Director shall contain a statement of the intention to do so and be served on such Director

�4 days before the meeting and, at such meeting, such Director shall be entitled to be

heard on the motion for his removal. The Company may from time to time by ordinary

resolution determine the maximum number of directors and increase or reduce the number

of Directors but the number of Directors shall never be less than two.

The board may from time to time appoint one or more of its body to be managing

director or a person holding an equivalent position, joint managing director, or deputy

managing director or to hold any other employment or executive office with the Company

for such period (subject to their continuance as Directors) and upon such terms as the

board may determine and the board may revoke or terminate any of such appointments.

The board may delegate any of its powers, authorities and discretions to committees

consisting of such Director or Directors and other persons as the board thinks fit, and it

may from time to time revoke such delegation or revoke the appointment of and discharge

any such committees either wholly or in part, and either as to persons or purposes, but

every committee so formed shall, in the exercise of the powers, authorities and discretions

so delegated, conform to any regulations that may from time to time be imposed upon

it by the board.

(ix) Borrowingpowers

The board may exercise all the powers of the Company to raise or borrow money,

to mortgage or charge all or any part of the undertaking, property and assets (present and

future) and uncalled capital of the Company and, subject to the Companies Act, to issue

debentures, bonds and other securities of the Company, whether outright or as collateral

security for any debt, liability or obligation of the Company or of any third party.

Note: These provisions, in common with the New Bye-laws in general, can be varied with the sanction

of a special resolution of the Company.

- IV-� -



(b) Alterations to constitutional documents

The New Bye-laws may be rescinded, altered or amended by the Directors with the prior

written approval of the Designated Stock Exchange (as defined in the New Bye-laws) (if required

by the rules of the Designated Stock Exchange) and subject to the confirmation of the Company

in general meeting. The New Bye-laws state that a special resolution shall be required to alter

the provisions of the Memorandum of Association, to confirm any such rescission, alteration

or amendment to the New Bye-laws or to change the name of the Company.

(c) Alteration of capital

The Company may from time to time by ordinary resolution in accordance with the

relevant provisions of the Companies Act:

(i) increase its capital by such sum, to be divided into shares of such amounts as the

resolution shall prescribe;

(ii) consolidate and divide all or any of its capital into shares of larger amount than

its existing shares;

(iii) divide its shares into several classes and without prejudice to any special rights

previously conferred on the holders of existing shares as the directors may

determine;

(iv) sub-divide its shares or any of them into shares of smaller amount than is fixed

by the Memorandum of Association;

(v) change the currency denomination of its share capital;

(vi) make provision for the issue and allotment of shares which do not carry any voting

rights; and

(vii) cancel any shares which, at the date of passing of the resolution, have not been

taken, or agreed to be taken, by any person, and diminish the amount of its capital

by the amount of the shares so cancelled.

The Company may, by special resolution, subject to any confirmation or consent required

by law, reduce its authorised or issued share capital or any share premium account or other

undistributable reserve in any manner permitted by law.

- IV-� -



(d) Variation of rights of existing shares or classes of shares

Whenever the share capital of the Company is divided into different classes of shares,

subject to the provisions of the Statutes (as defined in the New Bye-laws), preference capital

other than redeemable preference capital may be repaid and the special rights attached to any

class may be varied or abrogated either with the consent in writing of the holders of three-

quarters in nominal value of the issued shares of the class or with the sanction of a special

resolution passed at a separate general meeting of the holders of the shares of the class (but

not otherwise) and may be so repaid, varied or abrogated either whilst the Company is a

going concern or during or in contemplation of a winding-up. To every such separate general

meeting and all adjournments thereof all the provisions of the New Bye-laws relating to general

meetings of the Company and to the proceedings thereat shall mutatismutandis apply, except

that the necessary quorum (other than at an adjourned meeting) shall be two persons (or in the

case of a member being a corporation, its duly authorised representative) at least holding or

representing by proxy at least one-third in nominal value of the issued shares of the class and

at any adjourned meeting, two holders present in person (or in the case of a member being a

corporation, its duly authorised representative) or by proxy (whatever the number of shares

held by them) shall be a quorum and that any holder of shares of the class present in person

or by proxy may demand a poll and that every such holder shall on a poll have one vote for

every share of the class held by him, provided always that where the necessary majority for

such a special resolution is not obtained at such general meeting, consent in writing if obtained

from the holders of three-quarters in nominal value of the issued shares of the class concerned

within two months of such general meeting shall be as valid and effectual as a special resolution

carried at such general meeting.

(e) Special resolution-majority required

A special resolution of the Company must be passed by a majority of not less than three-

fourths of the votes cast by such members as, being entitled so to do, vote in person or, in the

case of such members as are corporations, by their duly authorised representatives or, where

proxies are allowed, by proxy at a general meeting of which not less than 2� clear days and not

less than ten (�0) clear business days notice, specifying the intention to propose the resolution

as a special resolution, has been duly given. Provided that if permitted by the Designated Stock

Exchange (as defined in the Bye-laws), except in the case of an annual general meeting, if it

is so agreed by a majority in number of the members having a right to attend and vote at such

meeting, being a majority together holding not less than ninety-five per cent. (��%) in nominal

value of the shares giving that right and, in the case of an annual general meeting, if so agreed

by all members entitled to attend and vote thereat, a resolution may be proposed and passed as

a special resolution at a meeting of which notice of less than twenty-one (2�) clear days and

not less than ten (�0) clear business days has been given.

- IV-�0 -



(f) Voting rights (generally and on a poll) and rights to demand a poll

Subject to any special rights or restrictions as to voting for the time being attached to

any shares by or in accordance with the New Bye-laws, at any general meeting (i) on a show

of hands every member present in person (or being a corporation, is present by a representative

duly authorised under Section �� of the Companies Act), or by proxy shall have one vote and the

chairman of the meeting shall determine which proxy shall be entitled to vote where a member

(other than a member which is the Depository (as defined in the New Bye-laws) or a clearing

house (or its nominee(s)), is represented by two proxies, and (ii) on a poll every member present

in person or by proxy or, in the case of a member being a corporation, by its duly authorised

representative shall have one vote for every fully paid share of which he is the holder or which

he represents and in respect of which all calls due to the Company have been paid, but so that

no amount paid up or credited as paid up on a share in advance of calls or instalments is treated

for the foregoing purposes as paid up on the share. Notwithstanding anything contained in the

New Bye-laws, where more than one proxy is appointed by a member which is the Depository

(as defined in the New Bye-laws) or a clearing house (or its nominee(s)), each such proxy shall

have one vote on a show of hands or by poll.

A resolution put to the vote of a general meeting shall be decided on a show of hands

unless voting by way of a poll is required by the rules of the Designated Stock Exchange (as

defined in the New Bye-laws) or (before or on the declaration of the result of the show of hands

or on the withdrawal of any other demand for a poll) a poll is demanded:

(a) by the chairman of such meeting; or

(b) by at least three members present in person (or in the case of a member being a

corporation by its duly authorised representative) or by proxy for the time being

entitled to vote at the meeting; or

(c) by a member or members present in person (or in the case of a member being a

corporation by its duly authorised representative) or by proxy and representing

not less than one-tenth of the total voting rights of all members having the right

to vote at the meeting; or

(d) by a member or members present in person (or in the case of a member being a

corporation by its duly authorised representative) or by proxy and holding shares

in the Company conferring a right to vote at the meeting being shares on which an

aggregate sum has been paid up equal to not less than one-tenth of the total sum

paid up on all shares conferring that right; or

(e) where the Depository (as defined in the New Bye-laws) is a member, by at least

three proxies representing the Depository (as defined in the New Bye-laws).

- IV-�� -



Where a member is the Depository (as defined in the New Bye-laws) or a clearing house

(or its nominee(s)), in each case, being a corporation), it may authorise such persons as it thinks

fit to act as its representatives at any meeting of the Company or at any meeting of any class

of members provided that the authorisation shall specify the number and class of shares in

respect of which each such representative is so authorised. Each person so authorised under this

provision shall be deemed to have been duly authorised without further evidence of the facts

and be entitled to exercise the same rights and powers on behalf of the Depository (as defined

in the New Bye-laws) or clearing house (or its nominee(s)) as if such person was the registered

holder of the shares of the Company held by the Depository (as defined in the New Bye-laws)

or clearing house (or its nominee(s)) in respect of the number and class of shares specified in

the relevant authorisation including the right to vote individually on a show of hands.

Where the Company has any knowledge that any shareholder is, under the rules of the

Designated Stock Exchange (as defined in the New Bye-laws), required to abstain from voting

on any particular resolution of the Company or restricted to voting only for or only against

any particular resolution of the Company, any votes cast by or on behalf of such shareholder

in contravention of such requirement or restriction shall not be counted.

(g) Requirements for annual general meetings

An annual general meeting of the Company must be held in each year other than the year

in which its statutory meeting is convened at such time (within a period of not more than ��

months after the holding of the last preceding annual general meeting unless a longer period

would not infringe the rules of any Designated Stock Exchange (as defined in the New Bye-

laws)) and place as may be determined by the board.

(h) Accounts and audit

The board shall cause to be kept proper records of account with respect to all sums of

money received and expended by the Company, and the matters in respect of which such receipt

and expenditure take place; all sales and purchases of goods by the Company; the assets and

liabilities of the Company; and all other matters required by the provisions of the Companies

Act or necessary to give a true and fair view of the Company’s affairs and to explain its

transactions.

The records of account shall be kept at the registered office or, subject to the Companies

Act, at such other place or places as the board decides and shall always be open to inspection

by any Director. No member (other than a Director) shall have any right of inspecting any

accounting record or book or document of the Company except as conferred by law or authorised

by the board or the Company in general meeting.

- IV-�2 -



Subject to the Companies Act, a printed copy of the Directors’ report, accompanied

by the balance sheet and profit and loss account, including every document required by law

to be annexed thereto, made up to the end of the applicable financial year and containing a

summary of the assets and liabilities of the Company under convenient heads and a statement

of income and expenditure, together with a copy of the auditors’ report, shall be sent to each

person entitled thereto at least 2� days before the date of the general meeting and at the same

time as the notice of annual general meeting and laid before the Company in general meeting

in accordance with the requirements of the Companies Act provided that this provision shall

not require a copy of those documents to be sent to any person whose address the Company

is not aware or to more than one of the joint holders of any shares or debentures; however, to

the extent permitted by and subject to compliance with all applicable laws, including the rules

of the Designated Stock Exchange (as defined in the New Bye-laws), the Company may send

to such persons summarised financial statements derived from the Company’s annual accounts

and the directors’ report instead provided that any such person may by notice in writing served

on the Company, demand that the Company sends to him, in addition to summarised financial

statements, a complete printed copy of the Company’s annual financial statement and the

directors’ report thereon.

Subject to the Companies Act, at each annual general meeting or at a subsequent special

general meeting in each year, the members shall appoint an auditor to hold office until the close

of the next annual general meeting, and if an appointment is not so made, the auditor shall

continue in office until a successor is appointed. Such auditor may be a member but no Director

or officer or employee of the Company shall, during his continuance in office, be eligible to act

as an auditor of the Company. The remuneration of the auditor shall be fixed by the Company

in general meeting or in such manner as the members may determine.

The financial statements of the Company shall be audited by the auditor in accordance

with generally accepted auditing standards. The auditor shall make a written report thereon

in accordance with generally accepted auditing standards and the report of the auditor shall

be submitted to the members in general meeting. The generally accepted auditing standards

referred to herein may be those of a country or jurisdiction other than Bermuda. If the auditing

standards of a country or jurisdiction other than Bermuda are used, the financial statements and

the report of the auditor should disclose this fact and name such country and jurisdiction.

(i) Notices of meetings and business to be conducted thereat

An annual general meeting shall be called by notice of not less than twenty-one (2�) clear

days and not less than twenty (20) clear business days and any special general meeting at which

it is proposed to pass a special resolution shall (save as set out in sub-paragraph (e) above) be

called by notice of at least twenty-one (2�) clear days and not less than ten (�0) clear business

days. All other special general meeting shall be called by notice of at least fourteen (�4) clear

days and not less than ten (�0) clear business days. The notice must specify the time and place

of the meeting and, in the case of special business, the general nature of that business. The

notice convening an annual general meeting shall specify the meeting as such.

- IV-�� -



(j) Transfer of shares

Subject to the New Bye-laws, any member may transfer all or any of his shares by an

instrument of transfer in the form acceptable to the board provided always that the Company

shall accept for registration an instrument of transfer in a form approved by the Designated

Stock Exchange (as defined in the New Bye-laws).

The instrument of transfer of any share shall be signed by or on behalf of both the

transferor and the transferee and be witnessed, provided always that an instrument of transfer

in respect of which the transferee is the Depository (as defined in the New Bye-laws) shall

be effective although not signed or witnessed by or on behalf of the Depository (as defined

in the New Bye-laws) and provided further that when a corporation executes an instrument of

transfer under seal, the affixation and attestation of the corporation’s seal may be accepted as

compliance with the requirements of the relevant New Bye-law. The board may also resolve,

either generally or in any particular case, upon request by either the transferor or transferee,

to accept mechanically executed transfers.

The board in so far as permitted by any applicable law may, in its absolute discretion, at any

time and from time to time transfer any share upon the principal register to any branch register

or any share on any branch register to the principal register or any other branch register.

Unless the board otherwise agrees, no shares on the principal register shall be transferred

to any branch register nor may shares on any branch register be transferred to the principal

register or any other branch register. All transfers and other documents of title shall be lodged for

registration and registered, in the case of shares on a branch register, at the relevant Registration

Office (as defined in the New Bye-laws) and, in the case of shares on the principal register, at

the registered office in Bermuda or such other place in Bermuda at which the principal register

is kept in accordance with the Companies Act.

The board may, in its absolute discretion, and without assigning any reason, refuse to

register a transfer of any share (not being a fully paid up share) to a person of whom it does

not approve or any share issued under any share incentive scheme for employees upon which

a restriction on transfer imposed thereby still subsists, and it may also refuse to register any

transfer of any share to more than three joint holders or any transfer of any share (not being a

fully paid up share) on which the Company has a lien.

- IV-�4 -



The board may decline to recognise any instrument of transfer unless a fee of such sum

(not exceeding two Singapore dollars (S$2.00) (or the equivalent Hong Kong dollars)) or such

other maximum sum as any Designated Stock Exchange (as defined in the New Bye-laws) may

determine to be payable as the Directors may from time to time require is paid to the Company

in respect thereof, the instrument of transfer, if applicable, is properly stamped, is in respect

of only one class of share and is lodged at the relevant registration office or registered office

or such other place at which the principal register is kept accompanied by the relevant share

certificate(s) and such other evidence as the board may reasonably require to show the right of

the transferor to make the transfer (and if the instrument of transfer is executed by some other

person on his behalf, the authority of that person so to do).

The registration of transfers may be suspended and the register closed on giving notice

by advertisement in an appointed newspaper and, where applicable, any other newspapers in

accordance with the requirements of any Designated Stock Exchange (as defined in the New

Bye-laws), at such times and for such periods as the board may determine and either generally

or in respect of any class of shares. The register of members shall not be closed for periods

exceeding in the whole �0 days in any year.

(k) Power for the Company to purchase its own shares

The New Bye-laws supplement the Company’s Memorandum of Association (which gives

the Company the power to purchase its own shares) by providing that the power is exercisable by

the board in accordance with and subject to the Companies Act, the Memorandum of Association

and, for so long as the shares of the Company are listed on the Designated Stock Exchange (as

defined in the New Bye-laws), the prior approval of the members in general meeting.

(l) Power for any subsidiary of the Company to own shares in the Company

There are no provisions in the New Bye-laws relating to ownership of shares in the

Company by a subsidiary.

(m) Dividends and other methods of distribution

The board may, subject to the New Bye-laws and in accordance with the Companies Act,

declare a dividend in any currency to be paid to the members and such dividend may be paid

in cash or wholly or partly in specie in which case the board may fix the value for distribution

in specie of any assets. The board may declare and make such other distributions (in cash or

in specie) to the members as may be lawfully made out of the assets of the Company. The

Company in general meeting may also, subject to the New Bye-laws and in accordance with

the Companies Act, declare a dividend or such other distribution to be paid to the members but

no dividend or distribution shall be declared by the Company in general meeting in excess of

the amount recommended by the board. No dividend shall be paid or distribution made if to do

so would render the Company unable to pay its liabilities as they become due or the realisable

value of its assets would thereby become less than the aggregate of its liabilities and its issued

share capital and share premium account.

- IV-�� -



Except in so far as the rights attaching to, or the terms of issue of, any share may

otherwise provide, (i) all dividends shall be declared and paid according to the amounts paid

up on the shares in respect whereof the dividend is paid but no amount paid up on a share in

advance of calls shall for this purpose be treated as paid up on the share and (ii) all dividends

shall be apportioned and paid pro rata according to the amount paid up on the shares during

any portion or portions of the period in respect of which the dividend is paid. The Directors

may deduct from any dividend or other monies payable to a member by the Company on or in

respect of any shares all sums of money (if any) presently payable by him to the Company on

account of calls or otherwise.

For so long as the shares of the Company are listed on the Designated Stock Exchange,

any scheme which enables the Members to elect to receive securities in lieu of cash amount of

any dividend must be approved by the Members in general meeting in accordance with applicable

rules or regulations of the Designated Stock Exchange.

Whenever the board or the Company in general meeting has resolved that a dividend be

paid or declared the board may further resolve that such dividend be satisfied wholly or in part

by the distribution of specific assets of any kind.

All dividends or bonuses unclaimed for one year after having been declared may be

invested or otherwise made use of by the board for the benefit of the Company until claimed

and the Company shall not be constituted a trustee in respect thereof. All dividends or bonuses

unclaimed for six years after having been declared may be forfeited by the board and shall

revert to the Company.

(n) Proxies

Any member entitled to attend and vote at a meeting of the Company who is the holder

of two or more shares shall be entitled to appoint not more than two proxies to attend and vote

instead of him at the same general meeting provided that if the member is the Depository (as

defined in the New Bye-laws) or a clearing house (or its nominee(s)), the Depository (as defined

in the New Bye-laws) or clearing house (or its nominee(s)) may appoint more than two proxies

to attend and vote at the same general meeting and each proxy shall be entitled to exercise the

same powers on behalf of the Depository (as defined in the New Bye-laws) or the clearing house

(or its nominee(s)) as the Depository (as defined in the New Bye-laws) or the clearing house

(or its nominee(s)) could exercise including the right to vote individually on a show of hands.

A proxy need not be a member of the Company. In addition, a proxy or proxies representing

either a member who is an individual or a member which is a corporation shall be entitled to

exercise the same powers on behalf of the member which he or they represent as such member

could exercise including the right to vote individually on a show of hands.

- IV-�� -



(o) Call on shares and forfeiture of shares

Subject to the New Bye-laws and to the terms of allotment, the board may from time

to time make such calls upon the members in respect of any monies unpaid on the shares

held by them respectively (whether on account of the nominal value of the shares or by way

of premium). A call may be made payable either in one lump sum or by installments. If the

sum payable in respect of any call or instalment is not paid on or before the day appointed

for payment thereof, the person or persons from whom the sum is due shall pay interest on

the same at such rate not exceeding 20 per cent. per annum as the board may agree to accept

from the day appointed for the payment thereof to the time of actual payment, but the board

may waive payment of such interest wholly or in part. The board may, if it thinks fit, receive

from any member willing to advance the same, either in money or money’s worth, all or any

part of the monies uncalled and unpaid or installments payable upon any shares held by him,

and upon all or any of the monies so advanced the Company may pay interest at such rate (if

any) as the board may decide.

If a member fails to pay any call on the day appointed for payment thereof, the board

may serve not less than �4 clear days’ notice on him requiring payment of so much of the call

as is unpaid, together with any interest which may have accrued and which may still accrue up

to the date of actual payment and stating that, in the event of non-payment at or before the time

appointed, the shares in respect of which the call was made will be liable to be forfeited.

If the requirements of any such notice are not complied with, any share in respect of

which the notice has been given may at any time thereafter, before the payment required by the

notice has been made, be forfeited by a resolution of the board to that effect.

Such forfeiture will include all dividends and bonuses declared in respect of the forfeited

share and not actually paid before the forfeiture.

A person whose shares have been forfeited shall cease to be a member in respect of the

forfeited shares but shall, notwithstanding, remain liable to pay to the Company all monies

which, at the date of forfeiture, were payable by him to the Company in respect of the shares,

together with (if the board shall in its discretion so require) interest thereon from the date of

forfeiture until the date of actual payment at such rate not exceeding 20 per cent. per annum

as the board determines.

(p) Inspection of register of members

The register and branch register of members shall be open to inspection between �0:00

a.m. and �2:00 noon on every business day by members of the public without charge at the

registered office or such other place in Bermuda at which the register is kept in accordance

with the Companies Act or, at the Registration Office (as defined in the New Bye-laws) or at

the office of a share transfer agent of the Company, unless the register is closed in accordance

with the Companies Act.

- IV-�� -



(q) Quorum for meetings and separate class meetings

For all purposes the quorum for a general meeting shall be two members present in person

(or, in the case of a member being a corporation, by its duly authorised representative) or by

proxy. In respect of a separate class meeting (other than an adjourned meeting) convened to

sanction the modification of class rights the necessary quorum shall be two persons holding

or representing by proxy not less than one-third in nominal value of the issued shares of that

class.

(r) Rights of the minorities in relation to fraud or oppression

There are no provisions in the New Bye-laws relating to rights of minority shareholders

in relation to fraud or oppression. However, certain remedies are available to shareholders of

the Company under Bermuda law, as summarised in paragraph 4(e) of this Appendix.

(s) Procedures on liquidation

A resolution that the Company be wound up by the court or be wound up voluntarily

shall be a special resolution.

If the Company shall be wound up (whether the liquidation is voluntary or by the court)

the liquidator may, with the authority of a special resolution and any other sanction required

by the Companies Act, divide among the members in specie or kind the whole or any part of

the assets of the Company whether the assets shall consist of property of one kind or shall

consist of properties of different kinds and the liquidator may, for such purpose, set such value

as he deems fair upon any one or more class or classes of property to be divided as aforesaid

and may determine how such division shall be carried out as between the members or different

classes of members. The liquidator may, with the like authority, vest any part of the assets in

trustees upon such trusts for the benefit of members as the liquidator, with the like authority,

shall think fit, but so that no contributory shall be compelled to accept any shares or other

property in respect of which there is a liability.

- IV-�� -



(t) Untraceable members

The Company may sell any of the shares of a member who is untraceable if (i) all cheques

or warrants (being not less than three in total number) for any sum payable in cash to the holder

of such shares have remained uncashed for a period of �2 years; (ii) upon the expiry of the �2

year period, the Company has not during that time received any indication of the existence of

the member; and (iii) the Company has caused an advertisement to be published in accordance

with the rules of the Designated Stock Exchange (as defined in the New Bye-laws) giving

notice of its intention to sell such shares and a period of three months, or such shorter period

as may be permitted by the Designated Stock Exchange (as defined in the New Bye-laws), has

elapsed since such advertisement and the Designated Stock Exchange (as defined in the New

Bye-laws) has been notified of such intention. The net proceeds of any such sale shall belong to

the Company and upon receipt by the Company of such net proceeds, it shall become indebted

to the former member of the Company for an amount equal to such net proceeds.

(u) Other provision

The New Bye-laws provide that the Company is required to maintain at its registered

office a register of directors and officers in accordance with the provisions of the Companies

Act and such register is open to inspection by members of the public without charge between

�0:00 a.m. and �2:00 noon on every business day.

3. VARIATION OF MEMORANDUM OF ASSOCIATION AND NEW BYE-LAWS

The Memorandum of Association may be altered by the Company in general meeting. The New

Bye-laws may be amended by the Directors with the prior written approval of the Designated Stock

Exchange (as defined in the New Bye-laws) (if required by the rules of the Designated Stock Exchange)

subject to the confirmation of the Company in general meeting. The New Bye-laws state that a special

resolution shall be required to alter the provisions of the Memorandum of Association or to confirm

any amendment to the New Bye-laws or to change the name of the Company. For these purposes, a

resolution is a special resolution if it has been passed by a majority of not less than three-fourths

of the votes cast by such members of the Company as, being entitled to do so, vote in person or, in

the case of such members as are corporations, by their respective duly authorised representatives or,

where proxies are allowed, by proxy at a general meeting of which notice of not less than 2� clear

day and not less than ten (�0) clear business days specifying the intention to propose the resolution

as a special resolution has been duly given. Except in the case of an annual general meeting, the

requirement of 2� clear days’ notice may be waived by a majority in number of the members having

the right to attend and vote at the relevant meeting, being a majority together holding not less than

�� percent in nominal value of the shares giving that right.

- IV-�� -



4. BERMUDA COMPANY LAW

The Company is incorporated in Bermuda and, therefore, operates subject to Bermuda law. Set

out below is a summary of certain provisions of Bermuda company law, although this does not purport

to contain all applicable qualifications and exceptions or to be a complete review of all matters of

Bermuda company law and taxation, which may differ from equivalent provisions in jurisdictions

with which interested parties may be more familiar:

(a) Share capital

The Companies Act provides that where a company issues shares at a premium, whether

for cash or otherwise, a sum equal to the aggregate amount or value of the premiums on those

shares shall be transferred to an account, to be called the “share premium account”, to which

the provisions of the Companies Act relating to a reduction of share capital of a company shall

apply as if the share premium account were paid up share capital of the company except that

the share premium account may be applied by the company:

(i) in paying up unissued shares of the company to be issued to members of the

company as fully paid bonus shares;

(ii) in writing off:

(aa) the preliminary expenses of the company; or

(bb) the expenses of, or the commission paid or discount allowed on, any issue

of shares or debentures of the company; or

(iii) in providing for the premiums payable on redemption of any shares or of any

debentures of the company.

In the case of an exchange of shares the excess value of the shares acquired over the

nominal value of the shares being issued may be credited to a contributed surplus account of

the issuing company.

The Companies Act permits a company to issue preference shares and subject to the

conditions stipulated therein to convert those preference shares into redeemable preference

shares.

- IV-20 -



The Companies Act includes certain protections for holders of special classes of shares,

requiring their consent to be obtained before their rights may be varied. Where provision is

made by the memorandum of association or New Bye-laws for authorising the variation of rights

attached to any class of shares in the company, the consent of the specified proportions of the

holders of the issued shares of that class or the sanction of a resolution passed at a separate

meeting of the holders of those shares is required, and where no provision for varying such rights

is made in the memorandum of association or New Bye-laws and nothing therein precludes a

variation of such rights, the written consent of the holders of three-fourths of the issued shares

of that class or the sanction of a resolution passed as aforesaid is required.

(b) Financial assistance to purchase shares of a company or its holding company

A company is prohibited from providing financial assistance for the purpose of an

acquisition of its own or its holding company’s shares unless there are reasonable grounds for

believing that the company is, and would after the giving of such financial assistance be, able

to pay its liabilities as they become due. In certain circumstances, the prohibition from giving

financial assistance may be excluded such as where the assistance is only an incidental part of

a larger purpose or the assistance is of an insignificant amount such as the payment of minor

costs.

(c) Purchase of shares and warrants by a company and its subsidiaries

A company may, if authorised by its memorandum of association or New Bye-laws, purchase

its own shares. Such purchases may only be effected out of the capital paid up on the purchased

shares or out of the funds of the company otherwise available for dividend or distribution or

out of the proceeds of a fresh issue of shares made for the purpose. Any premium payable on

a purchase over the par value of the shares to be purchased must be provided for out of funds

of the company otherwise available for dividend or distribution or out of the company’s share

premium account. Any amount due to a shareholder on a purchase by a company of its own

shares may (i) be paid in cash; (ii) be satisfied by the transfer of any part of the undertaking

or property of the company having the same value; or (iii) be satisfied partly under (i) and

partly under (ii). Any purchase by a company of its own shares may be authorised by its board

of directors or otherwise by or in accordance with the provisions of its New Bye-laws. Such

purchase may not be made if, on the date on which the purchase is to be effected, there are

reasonable grounds for believing that the company is, or after the purchase would be, unable

to pay its liabilities as they become due. The shares so purchased may either be cancelled or

held as treasury shares. Any purchased shares that are cancelled will, in effect, revert to the

status of authorised but unissued shares. If shares of the company are held as treasury shares,

- IV-2� -



the company is prohibited to exercise any rights in respect of those shares, including any right

to attend and vote at meetings, including a meeting under a scheme of arrangement, and any

purported exercise of such a right is void. No dividend shall be paid to the company in respect

of shares held by the company as treasury shares; and no other distribution (whether in cash

or otherwise) of the company’s assets (including any distribution of assets to members on a

winding up) shall be made to the company in respect of shares held by the company as treasury

shares. Any shares allotted by the company as fully paid bonus shares in respect of shares held

by the company as treasury shares shall be treated for the purposes of the Companies Act as

if they had been acquired by the company at the time they were allotted.

A company is not prohibited from purchasing and may purchase its own warrants subject to

and in accordance with the terms and conditions of the relevant warrant instrument or certificate.

There is no requirement under Bermuda law that a company’s memorandum of association or

its New Bye-laws contain a specific provision enabling such purchases.

Under Bermuda law, a subsidiary may hold shares in its holding company and in certain

circumstances, may acquire such shares. The holding company is, however, prohibited from

giving financial assistance for the purpose of the acquisition, subject to certain circumstances

provided by the Companies Act. A company, whether a subsidiary or a holding company, may

only purchase its own shares if it is authorised to do so in its memorandum of association or

New Bye-laws pursuant to section 42A of the Companies Act.

(d) Dividends and distributions

A company may not declare or pay a dividend, or make a distribution out of contributed

surplus, if there are reasonable grounds for believing that (i) the company is, or would after the

payment be, unable to pay its liabilities as they become due; or (ii) the realisable value of the

company’s assets would thereby be less than the aggregate of its liabilities and its issued share

capital and share premium accounts. Contributed surplus is defined for purposes of section �4

of the Companies Act to include the proceeds arising from donated shares, credits resulting

from the redemption or conversion of shares at less than the amount set up as nominal capital

and donations of cash and other assets to the company.

(e) Protection of minorities

Class actions and derivative actions are generally not available to shareholders under

the laws of Bermuda. The Bermuda courts, however, would ordinarily be expected to permit a

shareholder to commence an action in the name of a company to remedy a wrong done to the

company where the act complained of is alleged to be beyond the corporate power of the company

or is illegal or would result in the violation of the company’s memorandum of association and

New Bye-laws. Furthermore, consideration would be given by the court to acts that are alleged

to constitute a fraud against the minority shareholders or, for instance, where an act requires

the approval of a greater percentage of the company’s shareholders than actually approved it.

- IV-22 -



Any member of a company who complains that the affairs of the company are being

conducted or have been conducted in a manner oppressive or prejudicial to the interests of

some part of the members, including himself, may petition the court which may, if it is of the

opinion that to wind up the company would unfairly prejudice that part of the members but

that otherwise the facts would justify the making of a winding up order on just and equitable

grounds, make such order as it thinks fit, whether for regulating the conduct of the company’s

affairs in future or for the purchase of shares of any members of the company by other members

of the company or by the company itself and in the case of a purchase by the company itself,

for the reduction accordingly of the company’s capital, or otherwise. Bermuda law also provides

that the company may be wound up by the Bermuda court, if the court is of the opinion that

it is just and equitable to do so. Both these provisions are available to minority shareholders

seeking relief from the oppressive conduct of the majority, and the court has wide discretion

to make such orders as it thinks fit.

Except as mentioned above, claims against a company by its shareholders must be based

on the general laws of contract or tort applicable in Bermuda.

A statutory right of action is conferred on subscribers of shares in a company against

persons, including directors and officers, responsible for the issue of a prospectus in respect of

damage suffered by reason of an untrue statement therein, but this confers no right of action

against the company itself. In addition, such company, as opposed to its shareholders, may take

action against its officers including directors, for breach of their statutory and fiduciary duty

to act honestly and in good faith with a view to the best interests of the company.

(f) Management

The Companies Act contains no specific restrictions on the power of directors to dispose

of assets of a company, although it specifically requires that every officer of a company, which

includes a director, managing director and secretary, in exercising his powers and discharging

his duties must do so honestly and in good faith with a view to the best interests of the company

and exercise the care, diligence and skill that a reasonably prudent person would exercise in

comparable circumstances. Furthermore, the Companies Act requires that every officer should

comply with the Companies Act, regulations passed pursuant to the Companies Act and the

New Bye-laws of the company. The directors of a company may, subject to the New Bye-laws

of the company, exercise all the powers of the company except those powers that are required

by the Companies Act or the New Bye-laws to be exercised by the members of the company.

(g) Accounting and auditing requirements

The Companies Act requires a company to cause proper records of accounts to be kept

with respect to (i) all sums of money received and expended by the company and the matters in

respect of which the receipt and expenditure takes place; (ii) all sales and purchases of goods

by the company and (iii) the assets and liabilities of the company.

- IV-2� -



Furthermore, it requires that a company keeps its records of account at the registered

office of the company or at such other place as the directors think fit and that such records

shall at all times be open to inspection by the directors or the resident representative of the

company. If the records of account are kept at some place outside Bermuda, there shall be kept

at the office of the company in Bermuda such records as will enable the directors or the resident

representative of the company to ascertain with reasonable accuracy the financial position of

the company at the end of each three month period, except that where the company is listed on

an appointed stock exchange, there shall be kept such records as will enable the directors or

the resident representative of the company to ascertain with reasonable accuracy the financial

position of the company at the end of each six month period.

The Companies Act requires that the directors of the company must, at least once a year,

lay before the company in general meeting financial statements for the relevant accounting

period. Further, the company’s auditor must audit the financial statements so as to enable him

to report to the members. Based on the results of his audit, which must be made in accordance

with generally accepted auditing standards, the auditor must then make a report to the members.

The generally accepted auditing standards may be those of a country or jurisdiction other than

Bermuda or such other generally accepted auditing standards as may be appointed by the Minister

of Finance of Bermuda under the Companies Act; and where the generally accepted auditing

standards used are other than those of Bermuda, the report of the auditor shall identify the

generally accepted auditing standards used. All members of the company are entitled to receive

a copy of every financial statement prepared in accordance with these requirements, at least

five (�) days before the general meeting of the company at which the financial statements are to

be tabled. A company the shares of which are listed on an appointed stock exchange may send

to its members summarized financial statements instead. The summarized financial statements

must be derived from the company’s financial statements for the relevant period and contain

the information set out in the Companies Act. The summarized financial statements sent to the

company’s members must be accompanied by an auditor’s report on the summarized financial

statements and a notice stating how a member may notify the company of his election to receive

financial statements for the relevant period and/or for subsequent periods.

The summarized financial statements together with the auditor’s report thereon and the

accompanied notice must be sent to the members of the company not less than twenty-one

(2�) days before the general meeting at which the financial statements are laid. Copies of the

financial statements must be sent to a member who elects to receive the same within seven (�)

days of receipt by the company of the member’s notice of election.

(h) Auditors

At each annual general meeting, a company must appoint an auditor to hold office until

the close of the next annual general meeting; however, this requirement may be waived if all

of the shareholders and all of the directors, either in writing or at the general meeting, agree

that there shall be no auditor.

- IV-24 -



A person, other than an incumbent auditor, shall not be capable of being appointed auditor

at an annual general meeting unless notice in writing of an intention to nominate that person

to the office of auditor has been given not less than twenty-one (2�) days before the annual

general meeting. The company must send a copy of such notice to the incumbent auditor and give

notice thereof to the members not less than seven (�) days before the annual general meeting.

An incumbent auditor may, however, by notice in writing to the secretary of the company waive

the requirements of the foregoing.

Where an auditor is appointed to replace another auditor, the new auditor must seek from

the replaced auditor a written statement as to the circumstances of the latter’s replacement.

If the replaced auditor does not respond within fifteen (��) days, the new auditor may act in

any event. An appointment as auditor of a person who has not requested a written statement

from the replaced auditor is voidable by a resolution of the shareholders at a general meeting.

An auditor who has resigned, been removed or whose term of office has expired or is about

to expire, or who has vacated office is entitled to attend the general meeting of the company

at which he is to be removed or his successor is to be appointed; to receive all notices of, and

other communications relating to, that meeting which a member is entitled to receive; and to

be heard at that meeting on any part of the business of the meeting that relates to his duties

as auditor or former auditor.

(i) Exchange control

An exempted company is usually designated as “non-resident” for Bermuda exchange

control purposes by the Bermuda Monetary Authority. Where a company is so designated, it

is free to deal in currencies of countries outside the Bermuda exchange control area which

are freely convertible into currencies of any other country. The permission of the Bermuda

Monetary Authority is required for the issue of shares and securities by the company and the

subsequent transfer of such shares and securities. In granting such permission, the Bermuda

Monetary Authority accepts no responsibility for the financial soundness of any proposals or

for the correctness of any statements made or opinions expressed in any document with regard

to such issue. Before the company can issue or transfer any further shares and securities in

excess of the amounts already approved, it must obtain the prior consent of the Bermuda

Monetary Authority.

The Bermuda Monetary Authority has granted general permission for the issue and

transfer of shares and securities to and between persons regarded as resident outside Bermuda

for exchange control purposes without specific consent for so long as any equity securities,

including shares, are listed on an appointed stock exchange (as defined in the Companies Act).

Issues to and transfers involving persons regarded as “resident” for exchange control purposes

in Bermuda will be subject to specific exchange control authorisation.

- IV-2� -



(j) Taxation

Under present Bermuda law, no Bermuda withholding tax on dividends or other distributions,

nor any Bermuda tax computed on profits or income or on any capital asset, gain or appreciation

will be payable by an exempted company or its operations, nor is there any Bermuda tax in the

nature of estate duty or inheritance tax applicable to shares, debentures or other obligations

of the company held by non-residents of Bermuda. Furthermore, a company may apply to

the Minister of Finance of Bermuda for an assurance, under the Exempted Undertakings Tax

Protection Act �� of Bermuda, that no such taxes shall be so applicable until 2�th March

20��, although this assurance will not prevent the imposition of any Bermuda tax payable in

relation to any land in Bermuda leased or let to the company or to persons ordinarily resident

in Bermuda.

(k) Stamp duty

An exempted company is exempt from all stamp duties except on transactions involving

“Bermuda property”. This term relates, essentially, to real and personal property physically

situated in Bermuda, including shares in local companies (as opposed to exempted companies).

Transfers of shares and warrants in all exempted companies are exempt from Bermuda stamp

duty.

(l) Loans to directors

Bermuda law prohibits the making of loans by a company to any of its directors or to

their families or companies in which they hold more than a twenty per cent. (20%) interest,

without the consent of any member or members holding in aggregate not less than nine-tenths

of the total voting rights of all members having the right to vote at any meeting of the members

of the company. These prohibitions do not apply to (a) anything done to provide a director

with funds to meet the expenditure incurred or to be incurred by him for the purposes of the

company, provided that the company gives its prior approval at a general meeting or, if not,

the loan is made on condition that it will be repaid within six months of the next following

annual general meeting if the loan is not approved at or before such meeting, (b) in the case of

a company whose ordinary business includes the lending of money or the giving of guarantees

in connection with loans made by other persons, anything done by the company in the ordinary

course of that business, or (c) any advance of moneys by the company to any officer or auditor

under Section ��(2)(c) of the Companies Act which allows the company to advance moneys to

an officer or auditor of the company for the costs incurred in defending any civil or criminal

proceedings against them, on condition that the officer or auditor shall repay the advance if

any allegation of fraud or dishonesty is proved against them. If the approval of the company

is not given for a loan, the directors who authorised it will be jointly and severally liable for

any loss arising therefrom.

- IV-2� -



(m) Inspection of corporate records

Members of the general public have the right to inspect the public documents of a

company available at the office of the Registrar of Companies in Bermuda which will include

the company’s certificate of incorporation, its memorandum of association (including its objects

and powers) and any alteration to the company’s memorandum of association. The members

of the company have the additional right to inspect the New Bye-laws of a company, minutes

of general meetings and the company’s audited financial statements, which must be presented

to the annual general meeting. Minutes of general meetings of a company are also open for

inspection by directors of the company without charge for not less than two (2) hours during

business hours each day. The register of members of a company is open for inspection by

members of the public without charge. The company is required to maintain its share register

in Bermuda but may, subject to the provisions of the Companies Act, establish a branch register

outside Bermuda. Any branch register of members established by the company is subject to

the same rights of inspection as the principal register of members of the company in Bermuda.

Any person may on payment of a fee prescribed by the Companies Act require a copy of the

register of members or any part thereof which must be provided within fourteen (�4) days of

a request. Bermuda law does not, however, provide a general right for members to inspect or

obtain copies of any other corporate records.

A company is required to maintain a register of directors and officers at its registered

office and such register must be made available for inspection for not less than two (2) hours

in each day by members of the public without charge. If summarized financial statements are

sent by a company to its members pursuant to section ��A of the Companies Act, a copy of

the summarized financial statements must be made available for inspection by the public at the

registered office of the company in Bermuda.

(n) Winding up

A company may be wound up by the Bermuda court on application presented by the

company itself, its creditors or its contributors. The Bermuda court also has authority to order

winding up in a number of specified circumstances including where it is, in the opinion of the

Bermuda court, just and equitable that such company be wound up.

A company may be wound up voluntarily when the members so resolve in general

meeting, or, in the case of a limited duration company, when the period fixed for the duration

of the company by its memorandum expires, or the event occurs on the occurrence of which

the memorandum provides that the company is to be dissolved. In the case of a voluntary

winding up, such company is obliged to cease to carry on its business from the time of passing

the resolution for voluntary winding up or upon the expiry of the period or the occurrence of

the event referred to above. Upon the appointment of a liquidator, the responsibility for the

company’s affairs rests entirely in his hands and no future executive action may be carried out

without his approval.

- IV-2� -



Where, on a voluntary winding up, a majority of directors make a statutory declaration

of solvency, the winding up will be a members’ voluntary winding up. In any case where such

declaration has not been made, the winding up will be a creditors’ voluntary winding up.

In the case of a members’ voluntary winding up of a company, the company in general

meeting must appoint one or more liquidators within the period prescribed by the Companies

Act for the purpose of winding up the affairs of the company and distributing its assets. If the

liquidator at any time forms the opinion that such company will not be able to pay its debts in

full, he is obliged to summon a meeting of creditors.

As soon as the affairs of the company are fully wound up, the liquidator must make up an

account of the winding up, showing how the winding up has been conducted and the property

of the company has been disposed of, and thereupon call a general meeting of the company

for the purposes of laying before it the account and giving an explanation thereof. This final

general meeting requires at least one month’s notice published in an appointed newspaper in

Bermuda.

In the case of a creditors’ voluntary winding up of a company, the company must call a

meeting of creditors of the company to be summoned on the day following the day on which

the meeting of the members at which the resolution for winding up is to be proposed is held.

Notice of such meeting of creditors must be sent at the same time as notice is sent to members.

In addition, such company must cause a notice to appear in an appointed newspaper on at least

two occasions.

The creditors and the members at their respective meetings may nominate a person to be

liquidator for the purposes of winding up the affairs of the company provided that if the creditors

nominate a different person, the person nominated by the creditors shall be the liquidator. The

creditors at the creditors’ meeting may also appoint a committee of inspection consisting of

not more than five persons.

If a creditors’ winding up continues for more than one year, the liquidator is required to

summon a general meeting of the company and a meeting of the creditors at the end of each

year to lay before such meetings an account of his acts and dealings and of the conduct of the

winding up during the preceding year. As soon as the affairs of the company are fully wound

up, the liquidator must make an account of the winding up, showing how the winding up has

been conducted and the property of the company has been disposed of, and thereupon shall call

a general meeting of the company and a meeting of the creditors for the purposes of laying the

account before such meetings and giving an explanation thereof.

- IV-2� -



5. GENERAL

Conyers Dill & Pearman, the Company’s legal advisers on Bermuda law, have sent to the

Company a letter of advice summarising certain aspects of Bermuda company law. This letter, together

with a copy of the Companies Act, is available for inspection as referred to in the paragraph headed

“Documents available for inspection” in Appendix VIII. Any person wishing to have a detailed summary

of Bermuda company law or advice on the differences between it and the laws of any jurisdiction

with which he is more familiar is recommended to seek independent legal advice.

- V-� -

APPENDIX V STATUTORY AND GENERAL INFORMATION


FURTHER INFORMATION ABOUT THE COMPANY AND ITS SUBSIDIARIES

1. Incorporation of the Company

The Company was incorporated in Bermuda under the Companies Act �98� as an exempted

company with limited liability under the name “EGG Technology (Holdings) Limited” on 30 January

2007. Pursuant to written resolutions of the sole member of the Company passed on �0 May 2007, the

name of the Company was changed to “Z-Obee Holdings Limited” with effect from �7 May 2007.

The Company has established a principal place of business and head office in Hong Kong at

Unit 605, 6th Floor, Yen Sheng Centre, 64 Hoi Yuen Road, Kwun Tong, Kowloon, Hong Kong and

was registered in Hong Kong as an oversea company under Part XI of the Companies Ordinance,

with Mr. Wang of Flat B, 3�F, Win Shun Mansion, 9 Kin Wah Street, North Point, Hong Kong and

Shum Hoi Luen of Room 3��, Block K, Kornhill, Quarry Bay, Hong Kong appointed as the authorised

representatives of the Company, and each of them has been appointed by the Company for the acceptance

of service of process and any documents and notices on behalf of the Company in Hong Kong under

Part XI of the Companies Ordinance.

As the Company was incorporated in Bermuda, it operates subject to the Companies Act,

the Memorandum of Association and the New Bye-laws. A summary of various provisions of the

Memorandum of Association and New Bye-laws and relevant aspects of Bermuda company law is set

out in Appendix IV to this prospectus.

The Company’s registered office is at Clarendon House, 2 Church Street, Hamilton HM ��,

Bermuda and its principal place of business in the PRC is located at Room 40�, Building �4, West

Park of Software Park Hi-Tech Park, Second Road Nanshan, Shenzhen, PRC.

2. Changes in share capital of the Company

On 24 September 2009, the Company entered into subscription agreements with Lim Tiong

Kheng Steven, Tan Poon Kuan Daniel, Lim Chye Huat Bobby, Chan Kok Khoon, Teo Yong Ping,

Ang Ber Hua, Tan Lay Eng @ Mindy Tan and Low Chui Heng, all of them are Independent Third

Parties, (collectively, the “Subscribers”) for the issue and allotment of an aggregate of 20,000,000

Shares at S$0.�3 per Share.


US$4,�40,589 comprising 5�7,573,662 Shares upon the allotment and issue of 20,000,000 Shares to

the Subscribers after the completion of a placement of the Shares.

Save as disclosed herein, there has been no alteration in the share capital of the Company within

two years immediately preceding the date of this prospectus.

- V-2 -



3. Resolutions of the Shareholders passed at the Company’s annual general meeting held on 30 July 2009

At the annual general meeting held on 30 July 2009, the following resolutions were passed:–

(�) a mandate (the “Issue Mandate”) was given to the Directors to allot, issue and deal

with Shares whether by way of rights, bonus or otherwise, and/or make or grant offers,

agreements or options (collectively, ‘‘Instruments’’) that might or would require Shares

to be issued, including but not limited to the creation and issue of (as well as adjustments

to) warrants, debentures or other instruments convertible into Shares, at any time and upon

such terms and conditions and to such persons as the Directors may, in their absolute

discretion, deem fit provided that the aggregate number of Shares (including Shares to

be issued in pursuance of Instruments made or granted pursuant to the resolution) does

not exceed 50% of the total number of issued Shares (excluding treasury shares) in the

share capital of the Company at the time of the passing of this resolution, of which the

aggregate number of Shares and convertible securities to be issued other than on a pro

rata basis to Shareholders shall not exceed 20% of the total number of issued Shares

(excluding treasury shares) in the share capital of the Company. Unless revoked or varied

by the Company in a general meeting, such authority shall continue in force (�) until

the conclusion of the Company’s next annual general meeting or the date by which the

next annual general meeting of the Company is required by law to be held, whichever is

earlier; or (2) in the case of Shares to be issued in accordance with the terms of convertible

securities issued, made or granted pursuant to the Issue Mandate until the issue of such

Shares in accordance with the terms of such convertible securities;

(2) subject to the approval of the Issue Mandate, a mandate (the “Discount Mandate”) was

granted to the Directors to allot and issue Shares for cash consideration other than on

a pro rata basis to Shareholders, at a discount of not more than 20% to the Weighted

Average Price, at any time and upon such terms and conditions and for such purposes

and to such persons as the Directors may in their absolute discretion deem fit, where:

“Weighted Average Price’’ means the weighted average price of the Shares for trades

done on the SGX-ST for the full market day on which the placement or subscription

agreement is signed (or if not available, the weighted average price based on the trades

done on the preceding market day).

The Discount Mandate, unless revoked or varied by the Company in a general meeting, shall

continue in force until the conclusion of the next annual general meeting of the Company or the date

by which the next annual general meeting of the Company is required by law to be held, whichever

is the earlier.

- V-3 -



Notwithstanding the above, it shall be noted that the Listing Rules provide that the general

mandate obtained from Shareholders in general meeting shall be subject to a restriction that the

aggregate number of Shares allotted or agreed to be allotted under the general mandate must not exceed

the aggregate of 99,5�4,732 Shares, representing 20% of the issued share capital of the Company

as at the date of passing of the relevant resolution. Consequently, going forward, the Company will

comply with the Listing Rules in relation to the issue of general mandate as the Listing Rules are

generally more onerous than the Listing Manual in this aspect.

For the purpose of determining the aggregate number of Shares that may be issued under the

authority granted above, the total number of issued Shares (excluding treasury shares) shall be based

on the total number of issued Shares (excluding treasury shares) of the Company as at the date of

passing of the resolution, after adjusting for: (i) new Shares arising from the conversion or exercise of

convertible securities; (ii) new Shares arising from exercising share options at the time this resolution

is passed; and (iii) any subsequent bonus issue, consolidation or subdivision of Shares.

Pursuant to the Listing Rules, the Listing Manual and the New Bye-laws, the maximum aggregate

number of Shares and convertible securities of the Company (other than on a pro rata basis to all

Shareholders) which may be issued under the Issue Mandate before the next annual general meeting

of the Company is 99,5�4,732 Shares, representing 20% of the issued share capital of the Company

as at the date of grant of the Issue Mandate.

4. Resolutions of the Shareholders passed at the Company’s special general meeting held on 11 August 2009

At a special general meeting of the Company held on �� August 2009, the following resolutions

were passed:–

(�) for the purposes of the Listing Manual and the Companies Act and pursuant to the

Memorandum of Association and Bye-laws, the Directors be and are hereby authorised

to exercise all the powers of the Company to repurchase or otherwise acquire issued

ordinary shares fully paid in the capital of the Company (“Shares”) not exceeding in

aggregate the Maximum Percentage (as hereafter defined), at such price or prices as may

be determined by the Directors of the Company from time to time up to the Maximum

Price (as hereafter defined), whether by way of:-

(a) market purchases (each a “Market Purchase”) on the SGX-ST transacted through

the SGX-ST’s ready market; and/or

(b) off-market purchases (each an “Off-Market Purchase”) effected otherwise than on

the SGX-ST in accordance with any equal access scheme(s) as may be determined

or formulated by the Directors of the Company as they consider fit, which scheme(s)

shall satisfy all the conditions prescribed by the Bermuda Companies Act and the

Listing Manual of the SGX-ST.

(the “Share Repurchase Mandate”);

- V-4 -



(2) unless varied or revoked by the Company in general meeting, the authority conferred on

the Directors pursuant to the Share Repurchase Mandate may be exercised by the Directors

at any time and from time to time during the period commencing from the date of the

passing of this Resolution and expiring on the earliest:–

(a) the conclusion of the next annual general meeting of the Company or the date by

which such annual general meeting is required to be held; or

(b) the date on which Share purchases have been carried out to the full extent mandated;

or

(c) the date on which the authority conferred by the Share Repurchase Mandate is

revoke or varied by ordinary resolution of the Company in general meeting.

In this Resolution:–

“Maximum Percentage” means ten per cent (�0%) of the issued ordinary share capital

of the Company (as at the date of the last annual general meeting of the Company or

the date of the Share Repurchase Mandate is approved by Shareholders, whichever is

higher) unless the Company has effected a reduction of its share capital in accordance

with the applicable provisions under the Companies Act, at any time during the Relevant

Period, in which event the issued ordinary share capital of the Company shall be taken

to be the amount of the issued ordinary share capital of the Company as altered by the

capital reduction (excluding any treasury shares that may be held by the Company from

time to time).

“Maximum Price” in relation to a Share to be purchased, means the purchase price

(excluding brokerage, commission, applicable goods and services tax, stamp duties,

clearance fees and other related expenses) not exceeding:–

(i) in the case of a Market Purchase, �05% of the Average Closing Price of the Shares;

and

(ii) in the case of an Off-Market Purchase, �20% of the Average Closing Price of the

Shares.

“Average Closing Price” means the average of the closing market prices of a Share

over the last five (5) Market Days on which the Shares are transacted on the SGX-ST or,

as the case may be, such securities exchange on which the Shares are listed or quoted,

immediately preceding the date of the Market Purchase by the Company or, as the case

may be, the date of the making of the offer pursuant to the Off-Market Purchase, and

deemed to be adjusted, in accordance with the rules of the SGX-ST, for any corporate

action that occurs after the relevant five-day period.

- V-5 -



“date of the making of the offer” means the date on which the Company makes an

offer for the purchase or acquisition of Shares from holders of Shares, stating therein the

relevant terms of the equal access scheme for effecting the Off-Market Purchase.

“Relevant Period” means the period commencing from the date the last annual general

meeting of the Company was held before this Ordinary Resolution is passed, and expiring

on the date the next annual general meeting of the Company is held or is required to be

held, whichever is the earlier, after the date of this Ordinary Resolution is passed.

(3) the Directors and/or any of them be and are hereby authorised to complete and do all

such acts and things (including executing all such documents as may be required) as they

and/or he may consider expedient or necessary or in the interests of the Company to give

effect to the transactions contemplated and/or authorised by this Resolution.

5. Resolutions of the Shareholders passed at the Company’s special general meeting held on 30 December 2009

At a special general meeting of the Company held on 30 December 2009, the following

resolutions were passed:–

(i) Listing Of All Shares Of The Company In Issue (“Shares”) On The Main Board Of The

Stock Exchange By Way Of Introduction (“Introduction”)

That approval be and is hereby given for the listing of all Shares of the Company in issue

on the Stock Exchange by way of Introduction and all matters relating thereto; and the

Company and the directors of the Company (“Directors”) be and are hereby authorized

and empowered to take all necessary steps, to do all such acts and things and sign all

such documents and deed (including approving any matters in relation to the Introduction)

as they may consider necessary, desirable or expedient to give effect to or carrying into

effect this resolution, provided where the Company seal is required to be affixed to the

documents and deeds, such documents and deeds shall be signed and the Company seal

shall be affixed in accordance with the New Bye-laws.

(ii) Proposed Termination Of The Z-Obee Holdings Limited Employee Share Option Scheme

(“Esos”) And Performance Share Plan (“Plan”)

That the termination of the ESOS and the Plan be and is hereby approved and the

Directors be and are hereby authorized to do any act or thing or take such steps as may

be necessary to facilitate or as may be incidental in connection with the termination of

the ESOS and termination of the Plan.

- V-6 -



(iii) The Adoption Of The Z-Obee Holdings Limited Employee Share Option Scheme 2009

That the share option scheme to be known as the Z-Obee Holdings Limited Employee

2009 Scheme pursuant to which options to be granted under the 2009 Scheme (“Options”)

may be granted to the eligible Participants (as defined in Rule 4 of the 2009 Scheme) to

subscribe for ordinary shares in the capital of the Company (“Shares”), particulars of which

are set out in the Circular dated 7 December 2009 to shareholders of the Company, be

and is hereby approved and adopted and the Directors be and are hereby authorized (i) to

establish and administer the 2009 Scheme; (ii) subject to compliance with the requirement

of the Listing Rules and the Listing Manual, to amend and/or alter and/or modify the

2009 Scheme from time to time provided that such amendments and/or alterations and/or

modifications are effected in accordance with the provisions of the 2009 Scheme and to

do all such acts and to enter into all such transactions, arrangements and agreements as

may be necessary or expedient in order to give full effect to the 2009 Scheme, and the

Directors be and are hereby authorised to offer and grant Options in accordance with the

provisions of the 2009 Scheme and to allot, issue or deal with from time to time such

number of Shares as may be required to be allotted, issued or deal with pursuant to the

exercise of the Options under the 2009 Scheme, provided that the aggregate number of

Shares to be allotted, issued or dealt with pursuant to the Options granted under this

Scheme shall not, in aggregate exceed ten per cent. (�0%) of the issued share capital of

the Company (excluding treasury shares) on the date immediately following completion

of the Introduction.

(iv) Proposed Adoption Of The New Share Repurchase Mandate

That for the purposes of the Listing Manual, the Listing Rules and the Companies Act and

pursuant to the Memorandum of Association and New Bye-laws, the Directors be and are

hereby authorised to exercise all the powers of the Company to repurchase or otherwise

acquire issued ordinary shares fully paid in the capital of the Company (“Shares”) not

exceeding in aggregate the Maximum Percentage (as hereafter defined), at such price or

prices as may be determined by the Directors of the Company from time to time up to

the Maximum Price (as hereafter defined), whether by way of market purchases (each a

“Market Purchase”) on the SGX-ST transacted through the SGX-ST’s ready market and/or

the Stock Exchange (or any other stock exchange on which the securities of the Company

may be listed and recognized by the SFC and the Stock Exchange for this purpose), through

one or more duly licensed stock brokers appointed by the Company for the purpose and

subject to and otherwise in accordance with all other laws and regulations, including but

not limited to, the provisions of the Companies Act, Chapter 50 of Singapore Laws, and

the Listing Manual and the Listing Rules as may for the time being be applicable (the

“Share Repurchase Mandate”) and unless varied or revoked by the Company in general

meeting, the authority conferred on the Directors pursuant to the Share Repurchase

Mandate may be exercised by the Directors at any time and from time to time during the

period commencing from the date of the passing of this Resolution and expiring on the

earliest of:– (a) the conclusion of the next annual general meeting of the Company or

the date by which such annual general meeting is required to be held; or (b) the date on

- V-7 -



which Share purchases have been carried out to the full extent mandated; or (c) the date

on which the authority conferred by the Share Repurchase Mandate is revoke or varied

by ordinary resolution of the Company in general meeting.

“Maximum Percentage” means ten per cent (�0%) of the issued ordinary share capital of

the Company (as at the date of the Share Repurchase Mandate is approved by Shareholders)

unless the Company has effected a reduction of its share capital in accordance with the

applicable provisions under the Companies Act, at any time during the Relevant Period,

in which event the issued ordinary share capital of the Company shall be taken to be

the amount of the issued ordinary share capital of the Company as altered by the capital

reduction (excluding any treasury shares that may be held by the Company from time

to time).

“Maximum Price” in relation to a Share to be purchased, means the purchase price

(excluding brokerage, commission, applicable goods and services tax, stamp duties,

clearance fees and other related expenses) not exceeding in the case of a Market Purchase,

�05% of the Average Closing Price of the Shares.

“Average Closing Price” means the average of the closing market prices of a Share over

the last five (5) Market Days on which the Shares are transacted on the SGX-ST or,

as the case may be, such securities exchange on which the Shares are listed or quoted,

immediately preceding the date of the Market Purchase by the Company or (if the Market

Purchase is made on the Stock Exchange) the average closing market price for the 5

preceding trading days on which the Shares were traded the SEHK).

“Relevant Period” means the period commencing from the date the last annual general

meeting of the Company was held before ordinary resolution 4 is passed, and expiring

on the date the next annual general meeting of the Company is held or is required to be

held, whichever is the earlier, after the date of ordinary resolution 4 is passed.

(v) Adoption Of The New Bye-Laws Of The Company

That the New Bye-laws of the Company which contain all the proposed amendments to

the existing Bye-laws of the Company be and are hereby approved and adopted as the

New Bye-laws of the Company in substitution for and to the exclusion of all the existing

Bye-laws of the Company.

More information on the resolutions can be found in the announcement of the Company

released on the SGX-ST on 7 December 2009, the results of the special general meeting

announced on 30 December 2009 and in the circular to Shareholders dated 7 December

2009.

Pursuant to the announcement of the Company released on the SGX-ST on �4 January

20�0, the Company has decided to revise the proposal for the HK Listing. The Company

proposes to proceed with the proposed HK Listing involving a proposed Public Offer in

- V-8 -



Hong Kong, i.e. an offer of New Shares and Vendor Shares by way of public offering and

a placement, instead of by way of introduction as previously proposed. As the proposed

HK Listing involving the proposed Public Offer is different from the earlier proposed HK

Listing by way of introduction, the Directors decided to convene another special general

meeting to seek the approval of the Shareholders for, inter alia, the proposed HK Listing.

As such, the resolutions of the Shareholders passed at the Company’s special general

meeting held on 30 December 2009 would not be taken to have become unconditional as

the Company would no longer proceed with the proposed Introduction.

6. Changes in the share capital of subsidiaries of the Company

The subsidiaries of the Company are listed in the Accountants’ Report set out in Appendix I to

this prospectus. The alterations in the share capital of each of the Company’s subsidiaries took place

within the two years immediately preceding the date of this prospectus are as follows:

Tongqing

Tongqing was established in the PRC on 20 March 2007 as a wholly foreign owned

company with a registered capital of HK$60,000,000 and with a total investment amount of

HK$�20,000,000 and was wholly owned by Max Sunny. On 28 March 2008, Max Sunny injected

a sum of HK$5,387,000 into Tongqing so as to fulfil its registered capital contribution obligations

under the articles of Tongqing. After such injection, the paid-up registered capital of Tongqing

increased from HK$54,6�3,000 to HK$60,000,000. On �7 July 2009, approval was granted for

the increase of the registered capital of Tongqing from HK$60,000,000 to HK$90,000,000 and for

the increase of total investment amount from HK$�20,000,000 to HK$�80,000,000. On 23 July

2009, Max Sunny injected a sum of HK$�5,000,000 into Tongqing so as to fulfil its additional

contribution obligations after the increase of registered capital. The actual amount of paid-up

capital of Tongqing was HK$75,000,000 as at the Latest Practicable Date. The shortfall of

HK$�5,000,000 has to be paid within one year from the date of grant of the revised Enterprise

Legal Person Business Licence of Tongqing (i.e. by 28 July 20�0).

PhoneLink

On �6 February 2009, China Zhenhua (Group) Science & Technology Co., Limited

transferred �9% equity interest in Phonelink to Zeus at the consideration of RMB2,�00,000.

Upon the completion of such transfer, Zeus held �00% equity interest of Phonelink.

Save as disclosed above, there has been no alteration in the share capital of any of

the subsidiaries of the Company within the two years immediately preceding the date of this

prospectus.

- V-9 -



7. Repurchase by the Company of its own securities

This section contains information required by the Stock Exchange to be included in this

prospectus concerning the repurchase by the Company of its own securities.

(A) Provisions of the Listing Rules

The Listing Rules permit a company listed on the Stock Exchange to repurchase its

securities on the Stock Exchange subject to certain restrictions, the more important of which

are summarised below:

(i) Shareholders’ approval

All proposed repurchases of securities (which must be fully paid up in the case of

shares) by a company listed on the Stock Exchange must be approved in advance by an

ordinary resolution of the shareholders, either by way of general mandate or by specific

approval of a particular transaction.

(Note: Pursuant to the Shareholders’ resolution passed at the special general meeting of the Company on

�� August 2009, the Repurchase Mandate was given to the Directors authorising any repurchase

by the Company as described above in the paragraph headed “Resolutions of the Shareholders

passed at the Company’s special general meeting held on �� August 2009.)

(ii) Source of funds

Repurchases must be funded out of funds legally available for the purpose in

accordance with the Memorandum of Association and New Bye-laws, and the applicable

laws and regulations of Hong Kong, Bermuda and Singapore. A dual-listed company on

the Stock Exchange and SGX-ST may not repurchase its own securities on the SGX-ST

and the Stock Exchange for a consideration other than cash or for settlement otherwise

than in accordance with the trading rules of the SGX-ST and/or the trading rules of the

Stock Exchange (as the case may be) from time to time.

(B) Reasons for repurchases

The Directors believe that it is in the best interests of the Company and the Shareholders

for the Directors to have general authority from the Shareholders to enable the Company to

repurchase Shares in the market at any time, subject to market conditions, during the period

when the Repurchase Mandate is in force. The Directors believe that the repurchases of Shares

will enhance the return on equity of the Company, and will facilitate the return of excess cash

and surplus funds to Shareholders in an expedient, effective and cost-efficient manner.

- V-�0 -



(C) Funding of repurchases

In repurchasing securities, the Company may only apply funds legally available for

such purpose in accordance with its Memorandum of Association and New Bye-laws and

the applicable laws of Hong Kong, Bermuda and Singapore. The Company may only apply

funds for the purchase or acquisition of the Shares as provided in the New Bye-laws and in

accordance with the applicable laws in Hong Kong, Singapore and Bermuda. The Company

may not purchase its Shares for a consideration other than in cash or, in the case of a Market

Purchase (as defined under the paragraph headed “Resolutions of Shareholders passed at the

Company’s annual general meeting and special general meeting held on 30 July 2009 and ��

August 2009 respectively” above), for settlement otherwise than in accordance with the trading

rules of the SGX-ST or the trading rules of the Stock Exchange (as the case may be) prevailing

from time to time.

The Companies Act permits the Company to purchase or acquire its own Shares out of

capital paid up on the purchased Shares, or from funds of the Company which would otherwise

be available for dividend or distribution, or out of the proceeds of a fresh issue of shares made

for the purpose of the purchase. Apart from using its internal sources of funds, the Company

may obtain or incur borrowings to finance its purchase or acquisition of Shares.

The Directors do not propose to exercise the Repurchase Mandate to such an extent as

would, in the circumstances, have a material adverse effect on the working capital requirements

of the Group. The purchase or acquisition of the Shares will only be effected after considering

relevant factors such as the working capital requirement, availability of financial resources,

the expansion and investment plans of the Group and the prevailing market conditions. The

proposed Repurchase Mandate will be exercised with a view of enhancing the earnings per

Share and/or the net tangible assets value per Share.

The exercise in full of the Repurchase Mandate, on the basis of 497,573,662 Shares in

issue on the date of the grant of the Repurchase Mandate, would result in 49,757,366 Shares

being repurchased by the Company during the period in which the Repurchase Mandate remains

in force.

(D) General

None of the Directors nor, to the best of their knowledge and belief having made all

reasonable enquiries, any of their associates currently intends to sell any Shares to the Company

or its subsidiaries.

However, as the Share Repurchase Mandate is not in compliance with the requirements

under the Listing Rules, the Share Repurchase Mandate will not be exercised by the Directors

after the Listing.

- V-�� -



If, as a result of the repurchase of the securities by the Company pursuant to the

Repurchase Mandate, a Shareholder’s proportionate interest in the voting rights of the Company

is increased, such increase will be treated as an acquisition for the purpose of the Takeovers

Code. Accordingly, a Shareholder or a group of Shareholders acting in concert could obtain

or consolidate control of the Company and become obliged to make a mandatory offer in

accordance with Rule 26 of the Takeovers Code. Save as aforesaid, the Directors are not aware

of any consequences which would arise under the Takeovers Code as a consequence of any

repurchases pursuant to the Repurchase Mandate.

No connected person has notified the Company that he has a present intention to sell Shares

to the Company, or has undertaken not to do so if the Repurchase Mandate is exercised.

The Company has not repurchased any Shares on the SGX-ST or by any other means in

the previous six months from the Latest Practicable Date.

FURTHER INFORMATION ABOUT THE BUSINESS OF THE GROUP

1. Summary of material contracts

The following contracts (not being contracts in the ordinary course of business) have been

entered into by members of the Group within the two years preceding the date of this prospectus and

are or may be material:

(i) a sale and purchase agreement dated �6 February 2009 entered into between Zeus (as

purchaser) and the then minority shareholder of PhoneLink (as vendor) pursuant to which

the minority shareholder agreed to sell, and the purchaser agreed to acquire �9% of the

equity interest in PhoneLink for a consideration of RMB2,�00,000;

(ii) a share transfer agreement dated 3� March 2009 between Elastic Glory as the transferor and Manchester International Group Limited as the transferee pursuant to which the transferor transferred its entire equity interest in State Tech and CCDH to the transferee for a consideration of US$457,72�;

(iii) a share transfer agreement dated 22 May 2009 between Elite Link as the transferor and China Zhenhua (Group) Science & Technology Co., Ltd as the transferee pursuant to which the transferor transferred �5% of the equity interest in Zhenhua Obee to the transferee for a consideration of RMB3,6�2,000;

(iv) a share transfer agreement dated 22 May 2009 between Elite Link as the transferor and Full Wealth (Hong Kong) Limited the transferee pursuant to which the transferor transferred 27% of the equity interest in Zhenhua Obee to the transferee for a consideration of RMB6,50�,600;

- V-�2 -



(v) the subscription agreement dated 24 September 2009 and made between the Company and Teo Yong Ping pursuant to which the Company has agreed to allot and issue and Teo Yong Ping has agreed to subscribe for, 2,800,000 Shares at a subscription price of S$0.�3 per Share;

(vi) the subscription agreement dated 24 September 2009 and made between the Company and Lim Chye Huat Bobby pursuant to which the Company has agreed to allot and issue and Lim Chye Huat Bobby has agreed to subscribe for, 3,000,000 Shares at a subscription price of S$0.�3 per Share;

(vii) the subscription agreement dated 24 September 2009 and made between the Company and Tan Poon Kuan Daniel pursuant to which the Company has agreed to allot and issue and Tan Poon Kuan Daniel has agreed to subscribe for, 2,000,000 Shares at a subscription price of S$0.�3 per Share;

(viii) the subscription agreement dated 24 September 2009 and made between the Company and Tan Lay Eng@ Mindy Tan pursuant to which the Company has agreed to allot and issue and Tan Lay Eng@ Mindy Tan has agreed to subscribe for, �,000,000 Shares at a subscription price of S$0.�3 per Share;

(ix) the subscription agreement dated 24 September 2009 and made between the Company and Lim Tiong Kheng Steven pursuant to which the Company has agreed to allot and issue and Lim Tiong Kheng Steven has agreed to subscribe for, 4,000,000 Shares at a subscription price of S$0.�3 per Share;

(x) the subscription agreement dated 24 September 2009 and made between the Company and Low Chui Heng pursuant to which the Company has agreed to allot and issue and Low Chui Heng has agreed to subscribe for, 2,500,000 Shares at a subscription price of S$0.�3 per Share;

(xi) the subscription agreement dated 24 September 2009 and made between the Company and Ang Ber Hua pursuant to which the Company has agreed to allot and issue and Ang Ber Hua has agreed to subscribe for, 2,000,000 Shares at a subscription price of S$0.�3 per Share; and

(xii) the subscription agreement dated 24 September 2009 and made between the Company and Chan Kok Khoon pursuant to which the Company has agreed to allot and issue and Chan Kok Khoon has agreed to subscribe for, 2,700,000 Shares at a subscription price of S$0.�3 per Share.

- V-�3 -



2. Further information about the Company’s PRC establishments

The Group has interests in the registered capital of three entities established under the laws of PRC. A summary of the corporate information of these PRC entities are set out as follows:

(a) Tongqing

Date of establishment: 20 March 2007

Nature: wholly foreign-owned enterprise

Total investment amount: HK$�80,000,000

Registered capital: HK$90,000,000

Paid up capital: HK$75,000,000

Equity holder: Max Sunny

Attributable interest to the Group: �00%

Term: 20 years from 20 March 2007 to 20 March 2027

Scope of business: technical development for network communication products and transmission equipments as well as telecommunication products and equipments. Manufacture of mobile handsets as well as components of mobile handsets and wholesales, import and export and other related business of similar products.

(b) Zeus

Date of establishment: �7 August 2004

Nature: wholly foreign-owned enterprise

Total investment amount: RMB20,000,000

Registered capital: RMB20,000,000

(all of which has been paid-up in full)

Equity holder: Elite Link


Term: �0 years from �7 August 2004 to �7 August 20�4

- V-�4 -



Scope of business: technology development, wholesale, import and

export of telecommunication products, electronic

products, digital products software and hardware of

computers, relevant facilities and electronic parts;

relevant technology service; service after sale.

(c) PhoneLink

Date of establishment: 8 March 2005

Nature: domestic enterprise

Registered capital: RMB�0,000,000

(all of which has been paid-up in full)

Equity holder: Zeus


Term: 20 years from 8 March 2005 to 7 March 2025

Scope of business: development and sale of electronic products, communication facilities and relevant products; development, sale of software/hardware of computers and other technology service; integration of network; development, design, installation and maintenance of network; establishment of branch

Information on the branch: Phonelink has established a branch in Shanghai, PRC on 6 February 2007. The branch does not have a separate legal status and whose civil liabilities shall be borne by the parent company, i.e. Phonelink. The business scope of the branch is the same as that of Phonelink. The term of the branch is from 6 February 2007 to 7 March 2025.

- V-�5 -



Business licenses held by the Group

Name of licenseName of the Company Issued by Validity term

Business license Tongqing State Administration of

Industry and Commerce,

Shenzhen Municipal

from 20 March 2007

to 20 March 2027

Business license Zeus State Administration of

Industry and Commerce,

Shenzhen Municipal

from �7 August 2004

to �7 August 20�4

Business license PhoneLink Pu Dong New Area

Branch of Shanghai

Administration of

Industry and Commence

from 8 March 2005

to 7 March 2025

The following licenses are held by Tongqing

(�) license for telecommunication equipments to enter into public telecommunication networks

(電信設備進網許可證)

No. Applicant Model Name of equipment Issuing date Issued by

02-8309-

803485

Tongqing VIM E8�8 Dual-band GSM/

GPRS digital

mobile phone

�6 December

2008

Ministry of Industry

and Information

02-8309-

803648

Tongqing VIM M520 Dual-band GSM/

GPRS digital

mobile phone

24 December

2008


and Information

02-8309-

900099

Tongqing VIM D52 Dual-band GSM/

GPRS digital

mobile phone

�2 January

2009


and Information

02-8309-

90�409

Tongqing VIM F82� Dual-band GSM/

GPRS digital

mobile phone

�0 April 2009 Ministry of Industry

and Information

02-8309-

90�489

Tongqing VIM F820 Dual-band GSM/

GPRS digital

mobile phone

2� April 2009 Ministry of Industry

and Information

02-8309-

902642

Tongqing VIM R98 Dual-band GSM/

GPRS digital

mobile phone

24 June 2009 Ministry of Industry

and Information

Note: The validity term of the above license is 3 years commencing from the issuing date.

- V-�6 -



(2) Certificate for china compulsory product certification (中國國家強制性產品認證證書)

No. Applicant TrademarkName, model and specification Issuing date Issued by

20080��6063�4588 Tongqing VIM Dual-band GSM/

GPRS digital

mobile phone

(VIM E8�8)

�9 December

2008

China Quality

Certification

centre


GPRS digital

mobile phone

(VIM M520)

30 December

2008

China Quality

Certification

centre

20090��606322892 Tongqing VIM Dual-band GSM/

GPRS digital

mobile phone

(VIM D52)

22 January

2009

China Quality

Certification

centre

20090��606337725 Tongqing VIM Dual-band GSM/

GPRS digital

mobile phone

(VIM F82�)

�5 April 2009 China Quality

Certification

centre

20090��60633998� Tongqing VIM Dual-band GSM/

GPRS digital

mobile phone

(VIM F820)

24 April 2009 China Quality

Certification

centre


GPRS digital

mobile phone

(VIM R98)

30 June 2009 China Quality

Certification

centre

Note: The validity of above certificates will be maintained by continuous examination by issued institute.

- V-�7 -



(3) Type approval certificate of radio transmission equipment (無綫電發射設備核准證)

No. Applicant Model Name of equipment Issuing date Issued by

2008-4�33 Tongqing VIM E8�8 GSM/blue tooth

mobile phone

2� November

2008

Ministry of

Industry and

Information

2008-4624 Tongqing VIM M520 GSM/blue tooth

mobile phone

�6 December

2008

Ministry of

Industry and

Information

2008-4992 Tongqing VIM D52 GSM/blue tooth

mobile phone

30 December

2008

Ministry of

Industry and

Information

2009-�35� Tongqing VIM F82� GSM/blue tooth

mobile phone

8 April 2009 Ministry of

Industry and

Information

2009-�457 Tongqing VIM F820 GSM/blue tooth

mobile phone

�4 April 2009 Ministry of

Industry and

Information

2009-2759 Tongqing VIM R98 GSM/blue tooth

mobile phone

23 June 2009 Ministry of

Industry and

Information

Note: The validity term of the above license is 5 years commencing from the issuing date.

- V-�8 -



3. Intellectual property rights of the Group

Patent

As at the Latest Practicable Date, the Group has submitted the following patent applications

to the State Intellectual Property Bureau of the PRC for the following inventions:

Invention

Country of

Registration Applicant Application No.

Date of

Application Status

Method of

message

transfer

PRC Zeus 2005�0�02338.9 �6 December

2005

Publication Notice

issued on

20 June 2007

Method of call

transfer

PRC Zeus 2005�0�2�323.7 30 December

2005

Publication Notice

issued on

28 June 2007

Method of

message

sending

PRC Zeus 2005�0�2�324.� 30 December

2005

Publication Notice

issued on

28 June 2006

Method of

automatic

message

receipt

PRC Zeus 2006�0034�94.2 �0 March

2006

Publication Notice

issued on

�3 September

2006

Method and

installation

of automatic

voice recorder

PRC Zeus 2006�0034�93.8 �0 March

2006

Publication Notice

issued on

30 August 2006

Method and

installation of

long-distance

lock

PRC Zeus 2006�0066244.5 30 March

2006

Publication Notice

issued on

6 September 2006

Method and

installation of

address list

PRC Zeus 2006�00602�3.9 7 April 2006 Publication Notice

issued on

6 September 2006

Method of

signature on

message


issued on

�5 November

2006

Method of

message

reminder

PRC Zeus 2006�00602��.X 7 April 2006 Publication Notice

issued on

6 September 2006

Method of

playing

background

music


issued on

6 September 2006

Method and

installation of

message typing

PRC Zeus 2006�0060640.7 22 May 2006 Publication Notice

issued on

8 November 2006

- V-�9 -



Invention

Country of


Date of

Application Status

Method and

installation of

long-distance

photography

PRC Zeus 2006�0060639.4 22 May 2006 Publication Notice

issued on

8 November 2006

Method of

message

recording

PRC Zeus 2006�006�057.8 �3 June 2006 Publication Notice

issued on

27 December

2006

Method of

prompt

message

sending


issued on

29 November

2006

Method and

installation of

battery saving

device


issued on

29 November

2006

System and

method of

automatic

security alarm


issued on

29 November

2006

Method of

ring tone

composition

PRC Zeus 2006�006�389.6 30 June 2006 Publication Notice

issued on

�3 December

2006

Installation

of energy

production

device through

vibration

PRC Zeus 2006�006�390.9 30 June 2006 Publication Notice

issued on

�3 December

2006

Battery charger PRC Zeus 2006�0062294.6 28 August

2006

Publication Notice

issued on

�4 March 2007

Method of

sending mass

messages

PRC Zeus 2006�0062292.7 28 August

2006

Publication Notice

issued on

�4 February 2007

Method of

ring tone

composition

PRC Zeus 2006�0062556.9 �3 September

2006

Publication Notice

issued on

25 April 2007

Method of long

distance

remote control

PRC Zeus 2006�0062763.4 25 September

2006

Publication Notice

issued on

�4 March 2007

Mobile

phone with

independent

hard disk

PRC Zeus 2006�0062764.9 25 September

2006

Publication Notice

issued on

�4 March 2007

Method of

identification

PRC Zeus 2006�0063483.5 7 November

2006

Publication Notice

issued on

�8 April 2007

- V-20 -



Invention

Country of


Date of

Application Status

Method of

automatically

switching off

mobile phone

PRC Zeus 2007�0075�9�.8 26 June 2007 Publication Notice

issued on

28 November

2007

Method of

text input

by mobile

phone camera

shooting

PRC Zeus 2007�007453�.5 24 May 2007 Publication Notice

issued on

24 October 2007

Method of

encrypting

and decrypting

messages

PRC Zeus 2007�0074532.X 24 May 2007 Publication Notice

issued on

24 October 2007

Wireless charging

mobile phone,

charging

device and

mechanism of

charging

PRC Zeus 2007�0075358.0 2 August

2007

Publication Notice

issued on

�3 February 2008

Method of

editing

mobile phone

messages by

computers

PRC Zeus 2007�0075359.5 2 August

2007

Publication Notice

issued on

�3 February 2008

Coding system

and its method

applied on

checking

attendance

PRC Zeus 2007�0075798.6 2� August

2007

Publication Notice

issued on

30 January 2008

Method of

checking

attendance

based on

finger print

recognition

mobile phone

PRC Zeus 2007�0075797.� 2� August

2007

Publication Notice

issued on

30 January 2008

Method of

drawing

PRC Zeus 2008�02�6853.3 �5 October

2008

Publication Notice

issued on

�� March 2009

Method of

inserting and

playing media

files

PRC Zeus 2008�02�7538.2 �2 November

2008

Publication Notice

issued on

8 April 2009

- V-2� -



Utility Model

As at the Latest Practicable Date, the Group has submitted the following utility model applications to the State Intellectual Property Bureau of the PRC for the following utility models:

Utility ModelCountry of Registration Applicant Application No.

Date of Application Status

Method of hand held communication

PRC Zeus 200520�20593.� 20 December 2005

Acceptance Notice of Patent Application (專利申請受理通知書) (“ANPA”) issued on 29 December 2005

Ear piece with display screen

PRC Zeus 200520�2�330.2 30 December 2005

ANPA issued on 6 January 2006

Mobile phone PRC Zeus 200620055996.7 �0 March 2006

ANPA issued on �0 March 2006

Installation of message typing device

PRC Zeus 2006200�3944.3 22 May 2006 ANPA issued on 22 May 2006

As the Latest Practicable Date, the Group has obtained registrations of the following utility models issued by State Intellectual Property Bureau of the PRC:

Utility ModelCountry of Registration Applicant Application No.


Device for safe charging

PRC Zeus 200520�2�329.X 30 December 2005

Registration Notice issued on �3 June 2007

Communication device

PRC Zeus 200520�2�33�.7 30 December 2005

Registration Notice issued on �4 February 2007

Mobile phone PRC Zeus 2006200�8680.0 30 March 2006

Registration Notice issued on �8 July 2007

Wireless frequency signal transmitter

PRC Zeus 2006200�3943.9 22 May 2006 Registration Notice issued on 24 October 2007

Installation of flash card reader cum writer

PRC Zeus 2006200�4356.� 30 June 2006 Registration Notice issued on �8 July 2007

A device for code input

PRC Zeus 200720�2�06�.9 26 June 2007 Registration Notice issued on �4 May 2008

- V-22 -



Software Product

As at the Latest Practicable Date, the Group has obtained the following software product

registrations from the following agencies:

Software Product Agency Applicant Application No. Effective Date

Zeus GSM Product 636 v2.�

Science Technology and Information Bureau of Shenzhen, PRC

Zeus 深DGY-2006-0�74 �6 March 2006

Zeus GSM 6�6 PC Communication Software v2.0


Zeus 深DGY-2006-070� �7 August 2006

Zeus GSM V� Debugging Software v2.4


Zeus 深DGY-2006-0702 �7 August 2006

Zeus GSM V8 Debugging Software v2.0


Zeus 深DGY-2006-0796 2� September 2006

Zeus GSM V�2 Debugging Software v2.0


Zeus 深DGY-2006-0797 2� September 2006

Zeus GSM BM�02 mobile phone communication v3.2


Zeus 深DGY-2008-0238 3� March 2008



Zeus 深DGY-2008-0237 3� March 2008

Zeus GSM BM�05 mobile phone communication v3.�


Zeus 深DGY-2008-�320 28 November 2008



Zeus 深DGY-2008-�32� 28 November 2008

Zeus GSM C6�0 mobile phone communication v3.�



- V-23 -



Software Product Agency Applicant Application No. Effective Date

Zeus GSM F�325 mobile phone communication v2.�



PhoneLink Communication GSM M8 Communication Software v�.43

Shanghai Municipal Informatization Commission, PRC

PhoneLink 沪DGY-2006-0604 �0 September 2006

PhoneLink Communication GSM BM737 v2.�


PhoneLink 沪DGY-2007-�4�9 3� December 2007

PhoneLink Communication GSM BM755 v2.6



PhoneLink Communication GSM BM800 v�.8



Copyright

As at the Latest Practicable Date, the Group has obtained the following Certificates of

Computer Software Copyright Registration (計算機軟件著作權登記證書) issued by National

Copyright Administration of the PRC (中華人民共和國國家版權局) (hereinafter as “NCA”).

PhoneLink Communication GSM M8 Communication Software v�.43

NCA PhoneLink 2006SR�3904 �2 October 2006

PhoneLink Communication GSM BM755 V2.6

NCA PhoneLink 2008SR0360� 2� February 2008

PhoneLink Communication GSM BM800 V�.8

NCA PhoneLink 2008SR03600 2� February 2008

PhoneLink Communication GSM BM737 V2.�

NCA PhoneLink 2008SR03599 2� February 2008

- V-24 -



Trademark

As of the Latest Practicable Date, the Group applied for the registrations of the following

trademarks to Trademark Office, SAIC:

Trademark ClassPlace of Registration Applicant

Application No. Date of Application

VIM 38 PRC Tongqing 685�47� 2� July 2008

VIM 35 PRC Tongqing 685�472 2� July 2008

VIM 9 PRC Tongqing 685�473 2� July 2008

VIM 25 PRC Tongqing 696�043 �9 September 2008

VIM 42 PRC Tongqing 696�044 �9 September 2008

VIM 4� PRC Tongqing 696�045 �9 September 2008

VIM �8 PRC Tongqing 696�046 �9 September 2008

VIM �4 PRC Tongqing 696�047 �9 September 2008

�8 PRC Zeus 70�99�7 27 October 2008

�4 PRC Zeus 70�99�8 27 October 2008

9 PRC Zeus 70�99�9 27 October 2008

42 PRC Zeus 70�9935 27 October 2008

25 PRC Zeus 70�9936 27 October 2008

偉恩 9 PRC Tongqing 7474674 �6 June 2009

偉恩 �4 PRC Tongqing 7474688 �6 June 2009

偉恩 �8 PRC Tongqing 7474703 �6 June 2009




偉恩 4� PRC Tongqing 7477259 �7 June 2009


- V-25 -



As at the Latest Practicable Date, the Group is the registered proprietor and beneficial

owner of the following trademarks:

Trademark ClassPlace of Registration Applicant

Application No.

Date of Registration Expiry Date

9, 35, 38 Hong Kong

Finet Enterprises

300578205 9 February 2006 8 February 20�6

9, 35, 38 European Union

Finet Enterprises

0048952�5 �0 February 2006 �0 February 20�6

35 Singapore Finet Enterprises

T0708802A 26 April 2007 26 April 20�7


T0708803Z 26 April 2007 26 April 20�7

9, 35, 38 Hong Kong

Finet Enterprises

300943308 29 August 2007 28 August 20�7

9, 35, 38 European Union

Finet Enterprises

006230452 7 August 2008 28 August 20�7


T07�7884E 29 August 2007 29 August 20�7


T07�7885C 29 August 2007 29 August 20�7


T07�7886A 29 August 2007 29 August 20�7

VIM 9, 25, 35, 38 Singapore Finet Enterprises

T08��9�5Z 2 September 2008

2 September 20�8

VIM 9, 25, 35, 38 Australia Finet Enterprises

�260242 3 September 2008

3 September 20�8

9, 25, 35, 38 Hong Kong Finet Enterprises

30�294065 �8 December 2009

25 February 20�9

- V-26 -



As at the Latest Practicable Date, the Group has applied for registration of the following

trademarks in respect of the classes of goods specified below:

Trademark ClassPlace of Registration Applicant Application No.


OBEE 9 Singapore Finet Enterprises

T070880�C 26 April 2007 Application opposed


T08�6347G 22 November 2008

Refunded


T08�6348E 22 November 2008

Published on 30 October 2009

OBEE 9, 35, 38 USA Finet Enterprises

78/8�7,229 �7 February 2006

Application withdrawn

9, 35, 38 USA Finet Enterprises

773�976� 2 November 2007

Accepted for registration. Published on 4 August 2009

VIM 9, 25, 35, 38 Philippines Finet Enterprises

04-2009-000677 2� January 2009

Under examination

VIM 9, 25, 35, 38 India Finet Enterprises

�730439 �� September 2008

Under examination

VIM 9, 25, 35 Indonesia Finet Enterprises

D002008033560 �2 September 2008

Under examination

VIM 38 Indonesia Finet Enterprises

J00200803356� �2 September 2008

Under Examination

VIM 9, 25, 35, 38 Vietnam Finet Enterprises

4-2008-20227 �9 September 2008

Notification issued by National Office of Intellectual Property of Vietnam on �6 December 2008

VIM 9 Malaysia Finet Enterprises

080�795� 5 September 2008

Under examination


080�7952 5 September 2008

Accepted for registration (pending advertisement in Government Gazette)


080�7953 5 September 2008

Under examination


080�7954 5 September 2008

Under examination

VIM 9 South Africa Finet Enterprises

2008/20606 2 September 2008

Under examination


2008/20607 2 September 2008

Under examination

- V-27 -



Trademark ClassPlace of Registration Applicant Application No.



2008/20608 2 September 2008

Under examination


2008/20609 2 September 2008

Under examination

VIM 9, 25, 35, 38 Hong Kong Finet Enterprises

30��93959 3 September 2008

Application refused

VIM 9, 25, 35, 38 European Union

Finet Enterprises

007204324 2 September 2008


VIM 9, 25, 35, 38 USA Finet Enterprises

77577553 24 September 2008


9, 25, 35, 38 European Union

Finet Enterprises

0083625�9 �5 June 2009 Under examination

9, 25, 35, 38 USA Finet Enterprises

778924�4 �5 June 2009 Under examination

Also, as disclosed above, the Group had applied for the registration of various trademarks in Hong Kong, the PRC, Singapore, USA, Philippines, India, Indonesia, Vietnam, Malaysia, South Africa, European Union and Australia. As at the Latest Practicable Date, the approvals for the Group’s application for registration of the “VIM” text mark in Hong Kong, the PRC, USA, Philippines, India, Indonesia, Vietnam, Malaysia, South Africa and European Union were still pending while the applications for registration of the “VIM” text mark in both Singapore and Australia had been approved.

Save as disclosed above, the Company’s business or profitability is not materially dependent

on any other registered trademark or patent or any other intellectual property rights. As at the

Latest Practicable Date, the Group had not given any consent to any other party for the use of

any intellectual property rights owned by the Group. The Directors confirm that they are not

aware of (i) any material allegations or claims that the names and marks of the products of the

Group having infringed the intellectual property rights of other third parties during the Track

Record Period; (ii) any material infringement of the Group’s intellectual property rights by

other third parties during the Track Record Period; and (iii) any litigation or material disputes

regarding the intellectual property rights used by the Group during the Track Record Period

which may have any material adverse impact on the Group’s business.

- V-28 -



FURTHER INFORMATION ABOUT DIRECTORS, SENIOR MANAGEMENT AND SUBSTANTIAL SHAREHOLDERS

1. Disclosure of Interests

(a) Interests of Directors in the share capital of the Company

Immediately following completion of the Share Offer, so far as is known to the Directors,

the interests or short positions of the Directors in the shares, underlying shares and debentures

of the Company or its associated corporations (within the meaning of Part XV of the SFO)

which will have to be notified to the Company and the Stock Exchange pursuant to Divisions

7 and 8 of Part XV of the SFO (including interests and short positions which they are taken

or deemed to have taken under such provisions) once the Shares are listed, or which will be

required, pursuant to section 352 of the SFO, to be entered in the register required to be kept

therein once the Shares are listed, or will be required pursuant to the Model Code for Securities

Transactions by Directors of Listing Companies contained in the Listing Rules to be notified

to the Company and the Stock Exchange once the Shares are listed, will be as follows:

Number of ApproximateName of Capacity/nature Shares directly percentage ofShareholder of interests or indirectly held issued share capital

Wise Premium Beneficial owner �68,��0,250 28.23%

Limited

Wang Tao Beneficial owner 97,206,500 �6.32%

Lu Shangmin Beneficial owner 5,300,000 0.89%

* Wise Premium Limited is �00% owned by Wang Shih Zen.

(b) Interests of Substantial Shareholders in the share capital of the Company

So far as the Directors are aware, immediately following completion of the Share Offer,

no persons not being a Director or chief executive of the Company will have an interest or short

position in the Shares and/or the underlying Shares which would fall to be disclosed to the

Company under provisions of Divisions 2 and 3 of Part XV of the SFO, or, directly or indirectly

interested in �0% or more of the nominal value of any class of share capital carrying right to

vote in all circumstances at general meetings of any other members of the Group.

(c) Interests in suppliers and customers of the Group

As at the Latest Practicable Date, so far as the Directors are aware, none of the Directors or their respective associate or persons who are interested in more than 5% of the issued share capital of the Company had an interest in the five largest customers or suppliers of the Group.

- V-29 -



2. Particulars of Directors’ service agreements

(a) Executive Directors

Mr. Wang Shih Zen (“Mr. Wang”) entered into a service agreement with the Company on 24 September 2007, pursuant to which he has been appointed as the Executive Chairman and Chief Executive Officer of the Company commencing from 2� November 2007 for a period of 3 years. Under such service agreement, Mr. Wang is entitled to an annual remuneration of US$�,000 payable yearly in arrears, and is entitled to a discretionary annual bonus of such amount as the Board may in its absolute discretion determine. All traveling and travel-related expenses, entertainment expenses and out-of-pocket expenses reasonably and properly incurred by Mr. Wang in the reasonable and proper performance of his duties during such appointment shall be borne by the Company. The Company shall also maintain medical insurance for Mr. Wang according to the statutory requirements in Hong Kong.

Ms. Wang Tao (“Ms. Wang”) entered into a service agreement with the Company on 24 September 2007, pursuant to which she has been appointed as the Executive Director of the Company commencing from 2� November 2007 for a period of 3 years. Under such service agreement, Ms. Wang is entitled to a yearly salary of US$�,000 payable yearly in arrears, and is entitled to a discretionary annual bonus of such amount as the Board may in its absolute discretion determine. All traveling and travel-related expenses, entertainment expenses and out-of-pocket expenses reasonably and properly incurred by Ms. Wang in the reasonable and proper performance of her duties during such appointment shall be borne by the Company. The Company shall also maintain medical insurance for Ms. Wang according to the statutory requirements in Hong Kong.

Mr. Lu Shangmin (“Mr. Lu”) entered into a service agreement with the Company on 3 February 20�0, pursuant to which he has been appointed as the Executive Chairman and Chief Executive Officer of the Company commencing from 3 March 2009 for a period of 3 years. Under such service agreement, Mr. Lu is entitled to an annual remuneration of US$�,000 payable yearly in arrears, and is entitled to a discretionary annual bonus of such amount as the Board may in its absolute discretion determine. All traveling and travel-related expenses, entertainment expenses and out-of-pocket expenses reasonably and properly incurred by Mr. Lu in the reasonable and proper performance of his duties during such appointment shall be borne by the Company. The Company shall also maintain medical insurance for Mr. Lu according to the statutory requirements in Hong Kong.

(b) Non-executive director

Mr. David Lim Teck Leong (“Mr. Lim”) has not entered into a service agreement

with the Company as at the Latest Practicable Date. Mr. Lim is entitled to an annual salary of

S$40,000 and his appointment is subject to the normal retirement provisions under the New

Bye-laws of the Company.

- V-30 -



(c) Independent non-executive Directors

Mr. Chan Kam Loon (“Mr. Chan”) has not entered into a service agreement with the Company as at the Latest Practicable Date. Mr. Chan is entitled to an annual salary of S$48,000 and his appointment is subject to the normal retirement provisions under the New Bye-laws of the Company.

Mr. Guo Yanjun (“Mr. Guo”) has not entered into a service agreement with the Company as at the Latest Practicable Date. Mr. Guo is entitled to an annual salary of S$40,000 and his appointment is subject to the normal retirement provisions under the New Bye-laws of the Company.

Mr. Lo Hang Fong (“Mr. Lo”) has not entered into a service agreement with the

Company as at the Latest Practicable Date. Mr. Lo is entitled to an annual salary of S$40,000

and his appointment is subject to the normal retirement provisions under the New Bye-laws

of the Company.

3. Directors’ remuneration and remuneration policies

The Company determines its Directors’ remuneration based on factors including, but not limited

to duties, qualifications, experience and performance of the Directors. For the three years ended

3� March 2007, 3� March 2008, 3� March 2009 and the six months ended 30 September 2009, the

Directors’ remuneration paid by the Company were approximately US$27,000, US$76,000, US$�27,000

and US$�04,000 respectively. Details of the remuneration packages of the Directors are set out under

the sub-paragraph headed “Particulars of Directors’ service agreements” above.

The Company estimates the aggregate amount of remuneration of the Directors, excluding annual

bonus of the executive Directors mentioned above, payable for the year ending 3� March 20�0 will

be approximately US$2�0,000. The Directors confirm that the Company’s remuneration policies for

Directors will remain the same immediately after the Share Offer.

None of the directors or any past directors of any member of the Group has been paid any sum

of money for each of the three years ended 3� March 2009 and the six months ended 30 September

2009:

(i) as an inducement to join or upon joining the Company; or

(ii) for loss of office as a director of any member of the Group or of any other notice in

connection with the management of the affairs of any member of the Group.

There has been no arrangement under which a Director has waived or agreed to waive any

emoluments for each of the three years ended 3� March 2009 and the six months ended 30 September

2009 except for an amount of US$46,272 waived by one of the Directors for the year ended 3� March

2009. Save as disclosed in this prospectus, no remuneration or benefit in kind have been made or are

payable, in respect of the three years ended 3� March 2009 and the six months ended 30 September

2009, by the Group to or on behalf of any of the Directors.

- V-3� -



4. Personal guarantees

As at the Latest Practicable Date, none of the Directors has provided any personal guarantees

in favour of lenders in connection with banking facilities to the Group.

5. Related party transactions

The Group had entered into related party transactions within the two years immediately preceding

the date of this prospectus as mentioned in note 43 headed “Material related party transactions” of

the Accountants’ Report set out in Appendix I to this prospectus and the section headed “Continuing

connected transactions” of this prospectus.

6. Disclaimers

Save as disclosed in this prospectus, as at the Latest Practicable Date:

(a) none of the Directors nor any of the persons whose names are listed in the paragraph headed

“Consent of experts” under the section headed “Other information” in this Appendix:

i. is interested in the promotion of the Company or in any assets which have within

the two years immediately preceding the issue of this prospectus been acquired

or disposed of by or leased to any member of the Group, or are proposed to be

acquired or disposed of by or leased to any member of the Group; or

ii. is materially interested in any contract or arrangement subsisting at the date of

this prospectus which is significant in relation to the business of the Group;

(b) none of the persons whose names are listed in the paragraph headed “Consents of experts”

under the section headed “Other information” in this Appendix has any shareholding 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;

(c) no cash, securities or other benefit has been paid, allotted or given within the two years

preceding the date of this prospectus to any promoter of the Company nor is any such

cash, securities or benefit intended to be paid, allotted or given on the basis of the Share

Offer or related transaction as mentioned in this prospectus; and

(d) none of the Directors or chief executive of the Company has any interest, any long

and short positions in shares and underlying shares, listed or unlisted derivatives of, or

debentures of the Company or any associated corporation (within the meaning of Part

XV of the SFO) which will have to be notified to the Company and the Stock Exchange

pursuant to Divisions 7 and 8 of Part XV of the SFO or which will be required, pursuant

to section 352 of the SFO, to be entered in the register referred to therein or which will

be required, pursuant to the Model Code for Securities Transactions by Directors of Listed

Companies in the Listing Rules, to be notified to the Company and the Stock Exchange

once the Shares are listed;

- V-32 -



(e) there are no existing or proposed service contracts (excluding contracts expiring or

determinable by the employer within one year without payment of compensation (other

than statutory compensation)) between the Directors and any member of the Group;

(f) so far as known to the Directors, none of the Directors is aware of any person (not being

a Director or chief executive of the Company) who will immediately following the Share

Offer be interested or have a short position in the Shares or underlying Shares which

would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of

Part XV of the SFO, or directly or indirectly interested in �0% or more of the nominal

value of any class of share capital carrying rights to vote in all circumstances at general

meetings of any member of the Group; and

(g) so far as is known to the Directors, none of the Directors, their respective associates or Shareholders who are interested in 5% or more of the issued share capital of the Company have any interests in the five largest customers or the five largest suppliers of the Group.

SHARE OPTION SCHEME

At the special general meeting of the Company held on �� February 20�0, the former share option scheme and performance share plan adopted on 24 September 2007 were terminated and the terms of the Share Option Scheme was adopted. There were no outstanding share options granted under the former share option scheme. Therefore, there would not be any impact on the issued share capital of the Company.

The following is a summary of the principal terms of the Share Option Scheme but does not form nor was it intended to be, part of the terms of the Share Option Scheme nor should it taken as affecting the interpretation of the rules of the Share Option Scheme:

1. Definitions

1.1 In the Share Option Scheme the following expressions have the following meanings:

“Adoption Date” means �� February 20�0 (the date on which the Share Option Scheme is conditionally adopted by the resolution of the Shareholders);

“Auditors” means the auditors of the Company for the time being;

“Business Day” means a day on which the Stock Exchange and SGX-ST is open for the business of dealing in securities;

- V-33 -



“CDP” means the Centra l Deposi tory (Pte) Limited of Singapore;

“Committee” a committee of Directors who are duly authorised and appointed by the Board to administer the Share Option Scheme for the time being and where the Company has established a remuneration committee pursuant to the Code of Corporate Governance under the SGX Listing Manual, the remuneration committee shall administer the Share Option Scheme;

“Controlling means such terms as defined in the Listing Manual;

Shareholder”

“Grantee” means any Participant who accepts an Offer in accordance

with the terms of the Share Option Scheme or (where

the context so permits) a person who is entitled to any

such Option in consequence of the death of the original

Grantee;

“Offer” means the offer of the grant of an Option made in accordance

with paragraph 5;

“Offer Date” means the date on which an Offer is made to a

Participant;

“Option” means a right to subscribe for Shares granted pursuant to

the Share Option Scheme;

“Option Period” means, in respect of any particular Option, a period of

not less than one year and not more than �0 years after

the Offer Date to be notified by the Committee to each

Grantee which period of time shall commence on the first

anniversary of the Offer Date and expire on the last day

of such period as determined by the Committee;

“Participants” means persons eligible to participate in the Share Option

Scheme and who are holders of Options;

“Subscription Price” means the price per Share at which a Grantee may subscribe

for Shares on the exercise of an Option as described in

paragraph 6;

- V-34 -



“Subsidiary” means, in relation to a company, a company which is for

the time being and from time to time a subsidiary within

the meaning of Section 2 of the Companies Ordinance

(Chapter 32 of the Laws of Hong Kong) (as amended

from time to time) whether incorporated in Hong Kong

or elsewhere;

“Substantial as such term is defined under the Listing Manual.

Shareholder”

2. Purpose of the Share Option Scheme

The purpose of the Share Option Scheme is to provide persons who are eligible under the

Share Option Scheme and working for the interests of the Group with an opportunity to obtain

an equity interest in the Company, thus linking their interest with the interests of the Group

and thereby providing them with an incentive to work better for the interests of the Group.

The Share Option Scheme will also help:-

(A) to motivate each Participant to optimise his performance standards and efficiency

and to maintain a high level of contribution to the Group;

(B) to retain key employees and Group’s executive Directors whose contributions are

essential to the long-term growth and profitability of the Group; and

(C) to attract potential employees with relevant skills to contribute to the Group.

3. Eligibility

Confirmed employees of the Group (including Group’s executive Directors and Group’s

non-executive Directors) and who are not undischarged bankrupts and have not entered into a

composition with their respective creditors on or prior to the relevant Offer Date, shall be eligible

to participate in the Share Option Scheme at the absolute discretion of the Committee.

Controlling Shareholder and their Associates (as defined under Listing Manual) shall, if

each person meets the eligibility criteria, be eligible to participate in the Share Option Scheme

if:-

(A) the aggregate number of Shares available to Controlling Shareholder and their

Associates (as defined under Listing Manual) shall not exceed 25% of the Shares

available under the Share Option Scheme;

(B) the aggregate number of Shares available to each Controlling Shareholder or his

Associate (as defined under Listing Manual) shall not exceed �0% of the Shares

available under the Share Option Scheme; and

- V-35 -



(C) the separate approval of independent Shareholders is obtained for each Participant

in respect of his participation and the number of Shares comprise in the Options

and the terms thereof.

There will be no restriction on the eligibility of any Participant to participate in any

other share option or share incentive schemes implemented by any other companies within the

Group. Subject to the Companies Act, any requirement of the SGX-ST and the Stock Exchange,

the terms of eligibility to participate in the Share Option Scheme may be amended from time

to time at the absolute discretion of the Board.

4. Duration and administration of the Share Option Scheme

The Share Option Scheme shall be valid and effective for a period of �0 years from the Adoption Date, after which period no further Options will be granted but in respect of all Options which remain exercisable at the end of such period, the provisions of the Share Option Scheme shall remain in full force and effect.

The Share Option Scheme shall be administered by the Committee in its absolute discretion with such powers and duties as are conferred on it by the Board, provided that no member of the Committee shall participate in any deliberation or decision in respect of Options to be granted to him.

5. Grant of Options

On and subject to the terms of the Share Option Scheme and all applicable statutory regulatory requirements, the Committee shall be entitled at any time within �0 years after the Adoption Date to make an Offer to any Participant as the Committee may in its absolute discretion select to subscribe for such number of Shares as the Committee may (subject to paragraph 9) determine at the Subscription Price.

A grant of Options shall not be made after a price sensitive development of the Group has occurred or a price sensitive matter has been the subject of a decision of the Group until the following Business Day after such price sensitive information has been announced pursuant to the requirements of the Listing Rules and the Listing Manual. In particular, during the period of one month immediately preceding the earlier of:-

(A) the date of the Board meeting (as such date is first notified to the Stock Exchange in accordance with the Listing Rules) for the approval of the Company’s results for any year, half-year, quarterly or any other interim period (whether or not required under the Listing Rules); and

- V-36 -



(B) the deadline for the Company to publish an announcement of its result for any year, half-year under the Listing Rules, or quarterly or any other interim period (whether or not required under the Listing Rules),

and ending on the date of the results announcements, no Option may be granted.

An Offer shall be made to a Participant by letter in such form as the Committee may from time to time determine (the “Offer Letter”), specifying the number of Shares under the Option, the Subscription Price and the Option Period in respect of which the Offer is made and requiring the Participant to undertake to hold the Option on the terms on which it is to be granted and to be bound by the provisions of the Share Option Scheme. The grant of an Option shall be deemed to have been accepted when the duplicate of the Offer Letter comprising acceptance of the Offer duly signed by the Grantee with the number of Shares in respect of which the Offer is accepted clearly stated therein together with a payment or remittance in favour of the Company of HK$�.00 by way of consideration for the grant thereof is received by the Company within

2� days from the Offer Date.

Any Offer may be accepted or deemed to have been accepted in respect of less than the

number of Shares for which it is offered provided that it is accepted in respect of a board lot

for dealing in Shares on the Stock Exchange or the SGX-ST or an integral multiple thereof. To

the extent that the Offer is not accepted and received by the Company within 2� days, it will

be deemed to have been irrevocably declined and the Offer will lapse.

Subject to the provisions of the Share Option Scheme, the Bermuda Companies Act, the

Listing Rules and the Listing Manual, the Committee may, when making the Offer, impose any

conditions, restrictions or limitations in relation thereto as it may at its absolute discretion

think fit.

6. Subscription Price

Subject to any adjustments, the Subscription Price in respect of each Share issued pursuant

to the exercise of Options granted hereunder shall be a price determined by the Committee in

its absolute discretion and notified to a Participant (which shall be stated in the Offer Letter)

and shall be at least the higher of :-

(A) the closing price of the Shares as stated in the daily quotations sheet issued by the

Stock Exchange or the closing price of the Shares as stated in the daily quotations

sheet issued by the SGX-ST, whichever is higher, on the Offer Date which must

be a Business Day;

(B) the average closing prices of the Shares as stated in the daily quotations sheet

issued by the Stock Exchange or the average closing prices of the Shares as stated

in the daily quotations sheet issued by SGX-ST for the five consecutive Business

Days immediately preceding the Offer Date, whichever is higher; or

(C) the nominal value of a Share on the Offer Date.

- V-37 -



7. Exercise of Options

Options granted with the Subscription Price shall only be exercisable in whole or in

part (provided that an Option may be exercised in part only in respect of �,000 Shares or any

multiple thereof), at any time, by a Participant after the first anniversary of the Offer Date of

that Option provided always that the Options shall be exercised before the tenth anniversary of

the relevant Offer Date, or such earlier date as may be determined by the Committee, failing

which all unexercised Options shall immediately lapse and become null and void and a Participant

shall have no claim against the Company.

An Option shall be personal to the Grantee and shall not be assignable or transferrable

and no Grantee shall in any way sell, transfer, charge, mortgage, encumber, assign or create

any interest (whether legal or beneficial) in favour of any third party over or in relation to any

Option or enter into any agreement to do so. Any breach of the foregoing by the Grantee shall

entitle the Company to cancel any Option or part thereof granted to such Grantee (to the extent

not already exercised) without incurring any liability on the part of the Company.

Unless otherwise determined by the Committee and specified in the Offer Letter at the

time of the Offer, there is no performance target required to be achieved before an Option can

be exercised. An Option may be exercised in whole or in part (but if in part only, in respect

of a board lot or any integral multiple thereof) in the manner as set out in the Offer Letter and

other provisions of the Share Option Scheme by the Grantee (or his personal representative(s)),

by giving notice in writing to the Company stating that the Option is thereby exercised and the

number of Shares in respect of which it is exercised. Each such notice must be accompanied

by a remittance for the full amount of the total Subscription Price for the Shares in respect of

which the notice is given.

Subject as hereinafter provided and to the restrictions which may be imposed by the

Committee, the Option may be exercised by the Grantee at any time during the Option Period

provided that:-

(A) in the event that the Grantee ceases to be a Participant for any reason (other than

on his death) including the termination of his employment or engagement on one

or more of the grounds specified in paragraph 8(E)(ii) below, the Option granted

to such Grantee will lapse on the date of such cessation (to the extent not already

exercised) and will not be exercisable unless the Committee otherwise determines

to grant an extension (which shall not be more than � month from the date of

cessation) at the absolute discretion of the Committee in which event the Grantee

may exercise the Option within such period of extension;

(B) in the event the Grantee who is an individual dies before exercising the Option

in full and none of the events which would be a ground for termination of his

employment or engagement under paragraph 8(E)(ii) below arises, the personal

representative(s) of the Grantee shall be entitled within a period of �2 months or

- V-38 -



such longer period as the Committee may at its absolute discretion determine from

the date of death to exercise the Option up to the entitlement of such Grantee as

at the date of death (to the extent which has become exercisable and not already

exercised);

(C) if a general or partial offer, whether by way of take-over or share re-purchase offer

is made to all the holders of Shares (other than by way of Share Option Scheme

of arrangement pursuant to paragraph (D) below) (or all such holders other than

the offeror and/or any person controlled by the offeror and/or any person acting in

association or concert (within the meaning of the Codes on Takeovers and Mergers

and Share Repurchases of Hong Kong and the Singapore Code on Take-Over and

Mergers) with the offeror) and if such offer becomes or is declared unconditional

prior to the expiry of the relevant Option Period, the Grantee (or his personal

representative(s)) shall be entitled to exercise the Option in full (to the extent to

which it has become exercisable on the date of the notice of the offeror and not

already exercised) at any time within one month after the date on which the offer

becomes or is declared unconditional;

(D) if a general or partial offer by way of scheme of arrangement is made to all the

holders of Shares and has been approved by the necessary number of holders of

Shares at the requisite meetings, the Grantee (or his personal representative(s)) may

thereafter (but only until such time as shall be notified by the Company, after which

it shall lapse) exercise the Option (to the extent which has become exercisable and

not already exercised) to its full extent or to the extent specified in such notice;

(E) other than a general or partial offer or a scheme of arrangement contemplated in

paragraph (D) above, if a compromise or arrangement between the Company and

its members or creditors is proposed for the purposes of or in connection with a

scheme for the reconstruction of the Company or its amalgamation with any other

company or companies, the Company shall give notice thereof to all the Grantees on

the same day as it despatches the notice which is sent to each member or creditor of

the Company summoning the meeting to consider such a compromise or arrangement,

and thereupon each Grantee (or his personal representative(s)) may by notice in

writing to the Company accompanied by the remittance of the Subscription Price in

respect of the relevant Option (such notice to be received by the Company not later

than two Business Days before the proposed meeting) exercise any of his Options

(to the extent which has become exercisable and not already exercised) whether

in full or in part, but the exercise of an Option as aforesaid shall be conditional

upon such compromise or arrangement being sanctioned by the court of competent

jurisdiction and becoming effective. The Company shall as soon as possible and

in any event no later than the Business Day immediately prior to the date of the

proposed meeting referred to above, allot and issue such number of Shares to the

Grantee which may fall to be issued on such exercise credited as fully paid and

register the Grantee as holder of such Shares. Upon such compromise or arrangement

becoming effective, all Options shall lapse except insofar as previously exercised

under the Share Option Scheme; and

- V-39 -



(F) if a notice is given by the Company to its members to convene a general meeting for

the purposes of considering, and if thought fit, approving a resolution to voluntarily

wind-up the Company, the Company shall on the same day as or soon after it

despatches such notice to each member of the Company give notice thereof to all the

Grantees and thereupon, each Grantee (or his respective personal representative(s))

may by notice in writing to the Company, accompanied by the remittance of the

Subscription Price in respect of the relevant Option (such notice to be received by

the Company not later than two Business Days prior to the proposed general meeting

of the Company) exercise the Option (to the extent which has become exercisable

and not already exercised) whether in full or in part and the Company shall as

soon as possible and, in any event, no later than the Business Day immediately

prior to the date of the proposed general meeting referred to above, allot and issue

such number of Shares to the Grantee which may fall to be issued on such exercise

credited as fully paid and register the Grantee as holder of such Shares.

(G) If a Participant ceases to be employed by the Group by reason of his:-

(a) ill health, injury or disability, in each case, as certified by a medical practitioner

approved by the Committee;

(b) redundancy;

(c) retirement at or after the legal retirement age; or

(d) retirement before the legal retirement age with the consent of the

Committee;

or for any other reason approved by the Committee, he may, at the absolute discretion

of the Committee, exercise any unexercised Option within the relevant Option Period.

The Shares to be allotted and issued upon the exercise of an Option will be subject to

all the provisions of the memorandum of association and New Bye-laws of the Company for

the time being in force and will rank pari passu in all respects with the fully paid Shares in

issue on the date of their allotment and issue (the “Exercise Date”) and accordingly will entitle

the holders to participate in all dividends or other distributions paid or made on or after the

Exercise Date other than any dividend or other distribution previously declared or recommended

or resolved to be paid or made if the record date therefor shall be before the Exercise Date.

Shares allotted and issued upon the exercise of an Option shall not carry voting rights until

the name of the Grantee has been duly entered into the register of members of the Company

as the holder thereof.

- V-40 -



8. Lapse of option

An Option shall lapse automatically and not be exercisable (to the extent not already

exercised) on the earliest of :-

(A) the expiry of the Option Period;

(B) the expiry of the periods referred to in paragraphs 7(A), (B), (E), or (G) where

applicable;

(C) subject to the court of competent jurisdiction not making an order prohibiting the

offeror from acquiring the remaining Shares in the offer, the expiry of the period

referred to in paragraph 7(C);

(D) subject to the scheme of arrangement as referred to in paragraph 7(D) becoming

effective, the expiry of the period referred to in paragraph 7(D);

(E) (i) subject to the expiry of the period of extension (if any) referred to in

paragraph 7(A), the date on which the Grantee ceases to be a Participant

for any reason other than his death or the termination of his employment

or engagement on one or more grounds specified in paragraph (ii) below. A

transfer of employment from one company to another company within the

Group shall not be considered a cessation of employment;

(ii) the date on which the Grantee ceases to be a Participant by reason of the

termination of his employment or engagement on the grounds that he has been

guilty of misconduct, or has been in breach of a material term of the relevant

employment contract or engagement contract, or appears either to be unable to

pay or have no reasonable prospect to be able to pay debts, or has committed

any act of bankruptcy, or has become insolvent, or has been served a petition

for bankruptcy or winding-up, or has made any arrangements or composition

with his creditors generally, or has been convicted of any criminal offence or

(if so determined by the Board, the board of the relevant Subsidiary or the

board of the relevant associated company of the Company, as the case may

be) on any other ground on which an employer or a sourcing party would

be entitled to terminate his employment or engagement at common law or

pursuant to any applicable laws or under the Grantee’s service contract or

supply contract with the Company, the relevant Subsidiary or the relevant

associated company of the Company (as the case may be);

(F) the date of the commencement of the winding-up of the Company referred to in

paragraph 7(F);

(G) the date on which the Grantee transfer or assigns any Options to other persons;

or

- V-4� -



(H) the date on which the Option is cancelled by the Board as provided under the

provisions of the Share Option Scheme.

If an Option shall lapse, the Committee shall notify the Grantee in writing of such

lapse.

9. Maximum number of Shares available for subscription

Subject to the paragraph immediately following hereinbelow:

(A) The total number of Shares which may be allotted and issued upon exercise of all

Options to be granted under this Share Option Scheme and any other share option

scheme of the Company must not exceed the aggregate of 59,557,366 Shares,

representing �0 per cent. (the “Share Option Scheme Mandate Limit”) of the

Shares in issue immediately following completion of the Listing (as defined in this

prospectus) unless the Company obtains a fresh approval from the Shareholders

pursuant to paragraph 9(B) below. Options lapsed in accordance with paragraph

8 shall not be counted for the purpose of calculating the Share Option Scheme

Mandate Limit.

(B) The Company may seek approval of the Shareholders in general meeting to renew

the Share Option Scheme Mandate Limit such that the total number of Shares in

respect of which options may be granted by the Directors under the Share Option

Scheme and any other share option schemes of the Company shall not exceed �0

per cent. (the “Renewal Limit”) of the issued share capital of the Company at the

date of approval to renew such limit. Options previously granted under the Share

Option Scheme (including those outstanding, cancelled, lapsed in accordance

with the Share Option Scheme or exercised Options) shall not be counted for the

purpose of calculating the Renewal Limit. The Company shall send a circular to

the Shareholders containing the information required under the Listing Rules and

the Listing Manual for the purpose of seeking the approval of the Shareholders for

the Renewal Limit.

(C) The Company may authorise the Directors to grant Options to specified Participants

beyond the Share Option Scheme Mandate Limit or the Renewal Limit if the grant

of such Options is specifically approved by the Shareholders in general meeting.

In such case, the Company must send a circular to the Shareholders in connection

with the general meeting at which their approval will be sought containing a generic

description of the specified Participants who may be granted such Options, the

number and terms of the Option to be granted, the purpose of granting Options to

the specified Participants with an explanation as to how the terms of the Options

serve such purpose, the information and the disclaimer required under the Listing

Rules and the Listing Manual and such further information as may be required by

the Stock Exchange and SGX-ST from time to time.

- V-42 -



Notwithstanding anything in above paragraph, the maximum number of Shares which

may be issued upon exercise of all outstanding Options granted and yet to be exercised under

the Share Option Scheme and any other share-based incentive Share Option Schemes of the

Company shall not exceed �5 per cent. of the total number of Shares in issue (excluding treasury

shares) from time to time. No Options shall be granted under the Share Option Scheme or any

other share-based incentive scheme of the Company or any of its Subsidiaries which will result

in the limit being exceeded.

Subject to paragraph 3 above, the total number of Shares issued and to be issued upon

exercise of the options granted and to be granted pursuant to the Share Option Scheme and any

other share-based incentive scheme of the Group to each Participant (including both exercised

and outstanding options) in any �2-month period up to and including the date of grant of the

options must not exceed � per cent. of the total number of Shares in issue.

Any further grant of options in excess of the � per cent. limit must be subject to the

approval of the Shareholders in general meeting, at which such Participant and his associates

must abstain from voting. A circular shall be sent to the Shareholders with disclosure of the

identity of the Participant, the number and terms of the options to be granted and any options

previously granted to such Participant. The number and terms (including the exercise price) of

options to be granted to such Participant under the circumstances set out in this paragraph shall

be fixed before the Shareholders’ approval. The date of the board meeting of the Company for

proposing such further grant shall be taken as the Offer Date for the purpose of calculating

the Subscription Price.

Any grant of Options to a Participant who is a Director, chief executive, or Substantial

Shareholder (as defined in the Listing Rules) of the Company, or any of their respective

associates (including discretionary trust in which any Connected Persons are beneficiary) must

be approved by the independent non-executive Directors (excluding any independent non-

executive Director who is the relevant Grantee). Where the Committee proposes to grant any

Option to a Participant who is a Substantial Shareholder (as defined in the Listing Rules) or

an independent non-executive Director, or any of their respective associates and such Option

which if exercised in full, would result in the Shares issued and to be issued upon exercise of

all options already granted and to be granted pursuant to the Share Option Scheme and other

share-based incentive scheme of the Company (including option exercised and outstanding) to

such Participant in the �2-month period up to and including the date of grant being proposed

by the Committee (the “Relevant Date”):

(i) representing in aggregate more than 0.� per cent. of the total number of Shares in

issue at the Relevant Date; and

(ii) having an aggregate value, based on the higher of closing prices of the Shares as

stated in the Stock Exchange’s and as stated in the SGX-ST’s daily quotations sheet

on the Relevant Date and if the Relevant Date is not a Business Day, the Business

Day immediately preceding the Relevant Date, in excess of HK$5,000,000,

- V-43 -



such proposed grant of Options must be approved by the Shareholders of the Company by way

of a poll in general meeting with the Participant concerned and all connected persons abstaining

from voting in favour. The Company must send a circular to the Shareholders of the Company

which must contain:

(i) details of the number and terms (including Subscription Price) of the Options to be

granted to each Participant, which must be fixed before the Shareholders’ meeting

and the date of the Board meeting for proposing such further grant is to be taken

as the date of grant for the purposes of calculating the Subscription Price;

(ii) a recommendation from the independent non-executive Directors (excluding

independent non-executive Director who is the relevant Grantee) to the independent

Shareholders as to voting; and

(iii) the information and disclaimer required under the Listing Rules and the Listing

Manual and the information as may be required by the Stock Exchange and SGX-

ST from time to time.

The Relevant Date shall be taken as the date of grant of the Option(s) to the relevant

Participant for the purpose of this paragraph.

10. Reorganisation of capital structure

In the event of any alternation in the capital structure of the Company whilst any Option

remains exercisable or the Share Option Scheme remains in effect, and such event arises from

a capitalisation issue, rights issue or other offer of securities to the Shareholders (including

any securities convertible into share capital or warrants or options to subscriber for any share

capital of the Company, but excluding Options under the Share Option Scheme and options under

any other similar employee share option scheme of the Company, repurchase, sub-division or

consolidation of the Shares or reduction of capital in the Company or otherwise howsoever then,

in any such case (other than in the case of capitalisation of profits or reserves), the Committee

shall instruct the Auditor or the independent financial adviser (acting as experts and not as

arbitrators) to certify in writing:

(A) the adjustment to the number or nominal amount of Shares to which the Share

Option Scheme or any option(s) relates (insofar as it is/ they are unexercised); the

Subscription Price; the maximum number of Shares referred to in paragraph 9(A);

the method of the exercise of the Options, and/or any combination thereof, as an

independent financial adviser appointed by the Company or the Auditors shall certify

in writing to the Committee, either generally or as regards any particular Grantee, to

be in their opinion fair and reasonable, provided that (i) any such alterations shall

give a Grantee the same proportion of the issued share capital of the Company as

that to which he was previously entitled; (ii) any such alternation shall be made

on the basis that the aggregate Subscription Price payable by a Grantee on the

full exercise of any Option shall remain as nearly as possible the same (but shall

- V-44 -



not be greater than) as it was before such event; (iii) no such alterations shall be

made the effect of which would be to enable any Share to be issued at less than

its nominal value; (iv) the issue of securities of the Company as consideration in a

transaction shall not be regarded as a circumstance requiring any such adjustment;

and (v) such alterations shall not be to the advantage in any respect of the Grantee

without specific prior approval of the Shareholders.

(B) in respect of any such adjustment, other than any made on capitalisation issue, the

independent financial adviser or the Auditors must confirm to the Committee in

writing that the adjustment so made satisfies the requirements of Rule �7.03(�3) of

the Listing Rules and Rule 850 of the Listing Manual, the supplementary guidance

issued by the Stock Exchange on 5 September 2005, any relevant provisions of

the Listing Rules, Listing Manual and any guidance/interpretation issued by Stock

Exchange and the note thereto from time to time.

The capacity of the independent financial adviser or the Auditors in this paragraph is

that of experts and not of arbitrators and their certification shall, in the absence of manifest

error, be final, conclusive and binding on the Company and the Grantees.

Unless the Committee considers an adjustment to be appropriate, the issue of securities

as consideration for a private placement of securities or in connection with an acquisition of

any assets or upon the exercise of any options or conversion of any loan stock or any other

securities convertible into Shares or subscription rights of any warrants, or the cancellation

of issued Shares purchased or acquired by the Company by way of a market purchase of such

Shares undertaken by the Company on the SGX-ST or the Stock Exchange during the period

when a share purchase mandate granted by shareholders of the Company (including any renewal

of such mandate) is in force, shall not normally be regarded as a circumstances requiring

adjustment under this paragraph.

11. Share capital

The Board shall make available sufficient authorised but unissued share capital of the

Company to meet subsisting requirements on the exercise of Options.

12. Disputes

Any dispute arising in connection with the Share Option Scheme (whether as to the

number of Shares the subject of an Option, the amount of the Subscription Price or otherwise)

shall be referred to the decision of an independent financial adviser appointed by the Company

or the Auditors who shall act as experts and not as arbitrators and whose decision, save in the

case of manifest error, shall be final, conclusive and binding.

- V-45 -



13. Alteration of the Share Option Scheme

The Share Option Scheme may be altered in any respect by resolution of the Committee

except that:-

(a) any modification or alteration which shall alter adversely the rights attaching to any

Option granted prior to such modification or alteration and which in the opinion of

the Committee, materially alters the rights attaching to any Option granted prior

to such modification or alteration, may only be made with the consent in writing

of such number of Participants who, if they exercised their Options in full, would

thereby become entitled to not less than three-quarters (3/4) in nominal amount of

all the Shares which would fall to be allotted upon exercise in full of all outstanding

Options;

(b) any modification or alteration which would be to the advantage of Participants

under the Share Option Scheme or to extend the class of persons eligible for the

grant of options shall be subject to the prior approval of the Shareholders in general

meeting;

(c) no modification or alteration shall be made without compliance with the Listing

Manual, Listing Rules and such other regulatory authorities as may be necessary;

and

(d) matters contained in Rules 844 to 849, and Rules 853 to 854 of the Listing

Manual.

Except with the prior approval of a resolution of the Shareholders in general meeting,

with Grantees and their Associates (as defined under Listing Manual) abstaining from voting, for

the purposes of paragraph �3(a), the opinion of the Committee as to whether any modification

or alteration would adversely affect the rights attaching to any Option shall be final, binding

and conclusive.

Any alterations to the terms and conditions of the Share Option Scheme, which are of a

material nature or any change to the terms of options granted, shall be approved by the Stock

Exchange and the Shareholders, except where the alterations take effect automatically under

the existing terms of the Share Option Scheme.

Any change to the authority of the Committee or Share Option Scheme administrators

in relation to any alteration to the terms of the Share Option Scheme must be approved by the

Shareholders at general meeting.

Notwithstanding anything to the contrary contained in this paragraph, the Committee

may at any time by resolution (and without other formality, save for the prior approval of the

shareholders, the SGX-ST and Stock Exchange) amend or alter the Share Option Scheme in

any way to the extent necessary or desirable, in the opinion of the Committee, to cause the

- V-46 -



Share Option Scheme to comply with, or take into account, any statutory provision (or any

amendment or modification thereto, including amendment of or modification to the Companies

Act) or the provision or the regulations of any regulatory or other relevant authority or body

(including the SGX-ST and the Stock Exchange).

14. Termination

The Company by an ordinary resolution in general meeting or the Committee may at any

time terminate the operation of the Share Option Scheme and in such event no further Options

shall be offered. Options granted prior to such termination and not then exercised shall continue

to be valid and exercisable subject to and in accordance with the Share Option Scheme, the

Listing Rules and the Listing Manual.

15. Cancellation of Options granted

The Committee may, with the consent of the relevant Grantee, at any time at its absolute

discretion cancel any Option granted but not exercised. Where the Company cancels Options

and offers new Options to the same Option holder, the offer of such new Options may only be

made under this Share Option Scheme with available Options (to the extent not yet granted and

excluding the cancelled Options) within the limit approved by the Shareholders as mentioned

herein.

The Options carry no rights to vote at general meeting of shareholders of the Company,

and are not entitled to receive dividends. The Shares to be allotted and issued upon the exercise

of an Option will be subject to all the provisions of the memorandum of association and New

Bye-laws of the Company for the time being in force and will rank pari passu in all respects

with the fully paid Shares in issue on the date of their allotment and issue (the “Exercise Date”)

and accordingly will entitle the holders to participate in all dividends or other distributions paid

or made on or after the Exercise Date other than any dividend or other distribution previously

declared or recommended or resolved to be paid or made if the record date therefor shall be

before the Exercise Date. Shares allotted and issued upon the exercise of an Option shall not

carry voting rights until the name of the Grantee has been duly entered into the register of

members of the Company as the holder thereof.

16. Miscellaneous

The Share Option Scheme shall not form part of any employment contract, service contract,

supply contract or engagement contract between any member of the Group and any Participant

and the rights and obligations of any Participant under the terms of his office or employment

or engagement any member of the Group shall not be affected by his participation in the Share

Option Scheme or any right which he may have to participate in it and the Share Option Scheme

shall afford such a Participant no additional rights to compensation or damages in consequence

of the termination of such office or employment or engagement for any reason.

- V-47 -



The Share Option Scheme and all Options granted hereunder shall be governed by and

construed in accordance with the Companies Act, the Listing Rules, the Listing Manual and

the laws of Hong Kong in force from time to time.

Notwithstanding any provisions herein contained and subject to the Companies Act, the

Board, the Committee and the Company shall not under any circumstances be held liable for

any costs, losses, expenses and damages whatsoever and howsoever arising in respect of any

matter under or in connection with the Share Option Scheme, including but not limited to the

Company’s delay in allotting and issuing the Shares or in applying for or procuring the listing

of the new Shares on the SGX-ST or the Stock Exchange. Grantee who are Shareholders are to

abstain from voting on any Shareholders’ resolution relating to the Share Option Scheme.

No directors are trustees of the Share Option Scheme or have a direct or indirect interest

in the trustees of the Share Option Scheme.

17. Present status of the Options

Application has been made to the Listing Committee of the Stock Exchange for the approval

of the Share Option Scheme, the subsequent grant of Options under the Share Option Scheme

and the listing of, and permission to deal in, the Shares to be issued pursuant to the exercise of

any Options which may be granted under the Share Option Scheme which shall represent �0%

of the Shares in issue as at the date of adoption of the Share Option Scheme.

As at the date of this prospectus, no Options have been granted or agreed to be granted

under the Share Option Scheme.

18. Value of Options

The Directors consider it inappropriate to disclose the value of Options which may be

granted under the Share Option Scheme as if they had been granted as at the Latest Practicable

Date. Any such valuation will have to be made on the basis of certain option pricing model

or other methodology, which depends on various assumptions including, the exercise price,

the exercise period, interest rate, expected volatility and other variables. As no Options have

been granted, certain variables are not available for calculating the value of the options. The

Directors believe that any calculation of the value of the options as at the Latest Practicable

Date based on a number of speculative assumptions would not be meaningful and would be

misleading to investors.

- V-48 -



OTHER INFORMATION

1. Litigation

As at the Latest Practicable Date, no member of the Group is engaged in any litigation or

arbitration of material importance and no such litigation or claim is known to the Directors or the

Company to be pending or threatened by or against any member of the Group.

2. Sponsor

The Sponsor has made an application on behalf of the Company to the Listing Committee of

the Stock Exchange for the listing of, and permission to deal in the Shares in issue as mentioned in

this prospectus, and any Shares which may fall to be allotted and issued upon exercise of the options

which may be granted under the Share Option Scheme.

3. Preliminary expenses

The estimated preliminary expenses of the Company in relation to its incorporation are

approximately HK$40,000 and have been paid-up by the Company.

4. Qualifications of experts

The qualifications of the experts who have given opinions and/or whose names are included

in this prospectus are as follows:

Name Qualification

SinoPac A corporation licensed to conduct type � (dealing in securities,

type 4 (advising on securities), type 6 (advising on corporate

finance) and type 9 (asset management) regulated activities

under the SFO

RSM Nelson Wheeler Certified Public Accountants

Haihua Yongtai Law Firm the PRC legal advisers

Conyers Dill & Pearman Bermuda Barristers and Attorneys

BMI Appraisals Limited Professional property valuer

- V-49 -



5. Consents of experts

Each of SinoPac, RSM Nelson Wheeler, Haihua Yongtai Law Firm, Conyers Dill & Pearman

and BMI Appraisals Limited has given and has not withdrawn its written consent to the issue of

this prospectus with copy of its reports, valuation, letters or opinions (as the case may be) and the

references to each of their respective name or summary of opinions included herein in the form and

context in which it appears.

6. Register of members and branch register of members

Subject to the provisions of the Companies Act, the principal register of members of the Company

will be maintained in Bermuda and a branch register of members of the Company will be maintained

in Hong Kong. Unless the Directors otherwise agree, all transfers and other documents of title of

Shares which are traded on the Stock Exchange must be lodged for registration with and registered

by, the Company’s branch share registrar in Hong Kong and may not be lodged in Bermuda.

7. Promoter

The promoter of the Company is Ms. Wang Tao.

Save as disclosed in this prospectus, within the two years immediately preceding the date of

this prospectus, no cash, securities or other benefit had been paid, allotted or given, nor are any such

cash, securities or other benefit intended to be paid, allotted or given, to the promoter of the Company

in connection with the formation of the Company and the Share Offer or the related transactions

described in this prospectus.

8. Taxation of holders of Shares

(a) Hong Kong

The sale, purchase and removal of Shares registered with the Company’s Hong Kong

register of members will be subject to Hong Kong stamp duty, the current rate charged on each

of the purchaser and the seller is 0.�% of the consideration of or the fair value of, the Shares

being sold or transferred, whichever is the higher. Profits from dealings in the Shares arising

in or derived from Hong Kong may also be subject to Hong Kong profits tax.

(b) Bermuda

Under present Bermuda law, transfers and other dispositions of Shares are exempt from

Bermuda stamp duty.

(c) Consultation with professional advisers

Potential holders of Shares are recommended to consult their professional advisers if

they are in any doubt as to the taxation implications of subscribing for, purchasing, holding or

- V-50 -



disposing of or dealing in, Shares or exercising any rights attaching to them. It is emphasised

that none of the Company, the Directors or the other parties involved in the Share Offer can

accept responsibility for any tax effect on, or liabilities of, holders of Shares resulting from

their subscription for, purchase, holding or disposal of or dealing in, Shares or exercising any

rights attaching to them.

9. Binding effect

This prospectus shall have the effect, if any application is made in pursuance hereof, of rendering

all persons concerned bound by all the provisions (other than the penal provisions) of sections 44A

and 44B of the Companies Ordinance so far as applicable.

10. Share register and transfer office

The Company’s register of members will be maintained in Hong Kong by its registrar and

transfer office, Tricor Investor Services Limited, at 26th Floor, Tesbury Centre, 28 Queen’s Road

East, Hong Kong. Unless the Directors otherwise agree, all transfers and other documents of title to

shares must be lodged for registration with and registered by the share registrar and transfer office

in Hong Kong.

11. Miscellaneous

(a) Save as disclosed in this prospectus:

(i) within the two years immediately preceding the date of this prospectus, no share

or loan capital of the Company or any of its subsidiaries has been issued or agreed

to be issued fully or partly paid either for cash or for a consideration other than

cash;

(ii) no share or loan capital of the Company or any of its subsidiaries is under option

or is agreed conditionally or unconditionally to be put under option;

(iii) no founders, management or deferred shares of the Company or any of its subsidiaries

have been issued or agreed to be issued;

(iv) within the two years immediately preceding the date of this prospectus, no

commissions, discounts, brokerages or other special terms have been granted in

connection with the issue or sale of any capital of the Company or any of its

subsidiaries;

(v) within the two years preceding the date of this prospectus, no commission has been

paid or payable to any persons for subscription, agreeing to subscribe, procuring

subscription or agreeing to procure subscription of any shares of the Company or

any of its subsidiary;

- V-5� -



(vi) there is no arrangement under which future dividends are waived or agreed to be

waived;

(vii) there has not been any interruption in the business of the Group which may have

or has had a significant effect on the financial position of the Group in the �2

months immediately preceding the date of this prospectus; and

(viii) the Directors confirm that there has been no material adverse change in the financial

or trading position or prospects of the Group since 30 September 2009 (being the

date to which the latest audited consolidated financial statements of the Group

were made up).

(b) None of SinoPac, RSM Nelson Wheeler, Haihua Yongtai Law Firm, Conyers Dill &

Pearman or BMI Appraisals Limited:

(i) is interested beneficially or non-beneficially in any shares in any member of the

Group; or

(ii) has any right or option (whether legally enforceable or not) to subscribe for or to

nominate persons to subscribe for any shares in any member of the Group.

(c) Save for the Company, no company within the Group is presently listed on any stock

exchange or traded on any trading system.

(d) All necessary arrangements have been made to enable the Shares to be admitted into

CCASS for clearing and settlement.

- VI-� -

APPENDIX VI SUMMARY OF SALIENT PROVISIONS OF THE LAWS OF SINGAPORE


The following summarises the salient provisions of the laws of Singapore as at the date of

this prospectus. The summaries below are for general guidance only and do not constitute legal

advice, nor must they be used as a substitute for, or specific legal advice, on the corporate law of

Singapore. The summaries below are not meant to be a comprehensive or exhaustive description of

all the obligations, rights and privileges of Shareholders imposed or conferred by the corporate law

of Singapore. In addition, prospective investors and/or Shareholders should also note that the laws

applicable to Shareholders may change, whether as a result of proposed legislative reforms to the

Singapore laws or otherwise. Prospective investors and/or Shareholders should consult their own legal

advisers for specific legal advice concerning their legal obligations under the relevant laws.

Prospective investors, and/or Shareholders can access the full text of the relevant Singapore

legislations cited in the summaries below via the weblinks listed in [•••] of this prospectus.

CORPORATE LAW OF SINGAPORE

1. REPORTING OBLIGATIONS OF SHAREHOLDERS

1.1 Obligation To Notify Company Of Substantial Shareholding And Change In Substantial Shareholding

Section 81 of the Singapore Companies Act

A person has a substantial shareholding in a company if he has an interest or

interests in one or more voting shares in the company, and the total votes attached to

that share, or those shares, is not less than 5 per cent of the total votes attached to all

the voting shares in the company.


A substantial shareholder of a company is required to notify the company of his

interests in the voting shares in the company within two business days after becoming

a substantial shareholder.

Sections 83 and 84 of the Singapore Companies Act

A substantial shareholder is required to notify the company of changes in the

percentage level of his shareholding or his ceasing to be a substantial shareholder, within

two business days after he is aware of such changes.

The reference to changes in “percentage level” means any changes in a substantial

shareholder’s interest in the company which results in his interest, following such change,

increasing or decreasing to the next discrete �% threshold.

- VI-� -



1.2 Consequences Of Non-Compliance


Section 89 of the Companies Act provides for the consequences of non-compliance

with sections 8�, 83 and 84. Under section 89, a person who fails to comply shall be

guilty of an offence and shall be liable on conviction to a fine not exceeding S$5,000

and in the case of a continuing offence to a further fine of S$500 for every day during

which the offence continues after conviction.


Section 90 provides for a defence to a prosecution for failing to comply with

sections 8�, 83 or 84. It is a defence if the defendant proves that his failure was due

to his not being aware of a fact or occurrence the existence of which was necessary to

constitute the offence and that he was not so aware on the date of the summons; or he

became so aware less than 7 days before the date of the summons. However, a person

will conclusively be presumed to have been aware of a fact or occurrence at a particular

time (a) of which he would, if he had acted with reasonable diligence in the conduct of

his affairs, have been aware at that time; or (b) of which an employee or agent of the

person, being an employee or agent having duties or acting in relation to his master’s

or principal’s interest or interests in a share or shares in the company concerned, was

aware or would, if he had acted with reasonable diligence in the conduct of his master’s

or principal’s affairs, have been aware at that time.

1.3 Powers of the court with respect to defaulting substantial shareholders


Under section 9� of the Companies Act, where a substantial shareholder fails to

comply with sections 8�, 83 or 84, the Court may, on the application of the Minister,

whether or not the failure still continues, make one of the following orders:

(a) an order restraining the substantial shareholder from disposing of any

interest in shares in the company in which he is or has been a substantial

shareholder;

(b) an order restraining a person who is, or is entitled to be registered as, the

holder of shares referred to in paragraph (a) from disposing of any interest

in those shares;

(c) an order restraining the exercise of any voting or other rights attached to

any share in the company in which the substantial shareholder has or has

had an interest;

- VI-3 -



(d) an order directing the company not to make payment, or to defer making

payment, of any sum due from the company in respect of any share in which

the substantial shareholder has or has had an interest;

(e) an order directing the sale of all or any of the shares in the company in

which the substantial shareholder has or has had an interest;

(f) an order directing the company not to register the transfer or transmission

of specified shares;

(g) an order that any exercise of the voting or other rights attached to specified

shares in the company in which the substantial shareholder has or has had

an interest be disregarded;

(h) for the purposes of securing compliance with any other order made under

this section, an order directing the company or any other person to do or

refrain from doing a specified act.

Any order made under this section may include such ancillary or consequential

provisions as the Court thinks just.

The Court may not make an order other than an order restraining the exercise of

voting rights, if it is satisfied (a) that the failure of the substantial shareholder to comply

was due to his inadvertence or mistake or to his not being aware of a relevant fact or

occurrence; and (b) that in all the circumstances, the failure ought to be excused.

Any person who contravenes or fails to comply with an order made under this section

that is applicable to him shall be guilty of an offence and shall be liable on conviction to

a fine not exceeding S$5,000 and, in the case of a continuing offence, to a further fine

of S$500 for every day during which the offence continues after conviction.

1.4 Obligation To Notify The SGX-ST Of Substantial Shareholding And Change In Substantial Shareholding

Section 137(1) of the Securities and Futures Act (“SFA”)

A substantial shareholder is also required under section �37(�) of the SFA to give

the above notifications to the SGX-ST, when the shareholder becoming a substantial

shareholder, changes to the percentage level of his substantial shareholding, or his ceasing

to be a substantial shareholder. Any person who fails to comply with section �37(�) is

guilty of an offence and shall be liable on conviction to a fine not exceeding S$�5,000

and, in the case of a continuing offence, to a further fine of S$�,500 for every day or

part thereof during which the offence continues after conviction.

- VI-4 -



1.5 Duty not to furnish false statements to securities exchange, futures exchange, designated clearing house and Securities Industry Council

Section 330 of the SFA

Under section 330 of the SFA, any person who, with intent to deceive, makes or

furnishes, or knowingly and wilfully authorises or permits the making or furnishing of,

any false or misleading statement or report to a securities exchange, futures exchange,

designated clearing house or any officers thereof relating to dealing in securities shall be

guilty of an offence and shall be liable on conviction to a fine not exceeding S$50,000 or

to imprisonment for a term not exceeding � years or to both. Section 330 further provides

that any person who, with intent to deceive, makes or furnishes or knowingly and wilfully

authorises or permits the making or furnishing of, any false or misleading statement or

report to the Securities Industry Council or any of its officers, relating to any matter or

thing required by the Securities Industry Council in the exercise of its functions under the

SFA shall be guilty of an offence and shall be liable on conviction to a fine not exceeding

S$50,000 or to imprisonment for a term not exceeding � years or to both.

1.6 Obligation to disclose beneficial interest in the voting shares of the company


Section 9� of the Companies Act provides that a company which has all of its shares

listed on a stock exchange in Singapore may require any member to inform it whether the

member holds the voting shares in the company as beneficial owner or trustee, and in the

latter, who the beneficiaries are. If the member discloses that he is holding the shares on

trust for another party, the company may additionally require the other party to inform

it whether the other party holds the interests as beneficial owner or as trustee and if the

latter, for whom. A listed company also has the right to require the member to inform it

of any voting agreement that he may have in relation to the shares held by him.

1.7 Consequences of non-compliance


Under section 9�(6), the failure to comply with a notice requiring disclosure of

information is an offence, unless it can be shown that the information was already in the

possession of the company or that the requirement to give it was frivolous or vexatious.

A person who deliberately or recklessly makes a statement that is false in a material

particular in compliance to a request for information under section 9� is also guilty of

an offence, and is likewise liable on conviction to a fine not exceeding S$�0,000 or to

imprisonment for a term not exceeding � years.

- VI-5 -



2. PROHIBITED CONDUCT IN RELATION TO TRADING IN THE SECURITIES OF THE COMPANY

2.1 Prohibitions against false trading and market manipulation


Section �97 of the SFA prohibits (i) the creation of a false or misleading appearance

of active trading in any securities on a securities exchange; (ii) the creation of a false

or misleading appearance with respect to the market for, or price of, any securities on a

securities exchange; (iii) affecting the price of securities by way of purchases or sales

which do not involve a change in the beneficial ownership of those securities; and (iv)

affecting the price of securities by means of any fictitious transactions or devices.

Under section �97(3), a person is deemed to have created a false or misleading

appearance of active trading in securities on a securities market if he does any of the

following acts:

(i) if he effects, takes part in, is concerned in or carries out, directly or indirectly,

any transaction of purchase or sale of any securities, which does not involve

any change in the beneficial ownership of the securities;

(ii) if he makes or causes to be made an offer to sell any securities at a specified

price where he has made or caused to be made or proposes to make or to

cause to be made, or knows that a person associated with him has made or

caused to be made or proposes to make or to cause to be made, an offer to

purchase the same number, or substantially the same number, of securities

at a price that is substantially the same as the first-mentioned price; or

(iii) if he makes or causes to be made an offer to purchase any securities at a

specified price where he has made or caused to be made or proposes to make

or to cause to be made, or knows that a person associated with him has made

or caused to be made or proposes to make or to cause to be made, an offer

to sell the same number, or substantially the same number, of securities at

a price that is substantially the same as the first-mentioned price,

unless he establishes that the purpose or purposes for which he did the act was

not, or did not include, the purpose of creating a false or misleading appearance of active

trading in securities on a securities market.

Section �97(5) provides that a purchase or sale of securities does not involve a

change in the beneficial ownership if a person who had an interest in the securities before

the purchase or sale, or a person associated with the first-mentioned person in relation

to those securities, has an interest in the securities after the purchase or sale.

- VI-6 -



Section �97(6) provides a defence to proceedings against a person in relation to a

purchase or sale of securities that did not involve a change in the beneficial ownership of

those securities. It is a defence if the defendant establishes that the purpose or purposes

for which he purchased or sold the securities was not, or did not include, the purpose

of creating a false or misleading appearance with respect to the market for, or the price

of, securities.

2.2 Prohibition against securities market manipulation


Under section �98(�) of the SFA, no person shall carry out directly or indirectly,

� or more transactions in securities of a corporation, being transactions that have, or

likely to have, the effect of raising, lowering, maintaining or stabilising the price of the

securities with intent to induce other persons to purchase them. Section �98(�) provides

that transactions in securities of a corporation includes (i) the making of an offer to

purchase or sell such securities of the corporation; and (ii) the making of an invitation,

however expressed, that directly or indirectly invites a person to offer to purchase or sell

such securities of the corporation.

2.3 Prohibition against the manipulation of the market price of securities by the dissemination of misleading information

Sections 199 and 202 of the SFA

Section �99 of the SFA prohibits the making of false or misleading statements.

Under this provision, a person shall not make a statement, or disseminate information, that

is false or misleading in a material particular and is likely (a) to induce other persons to

subscribe for securities; (b) to induce the sale or purchase of securities by other persons;

or (c) to have the effect of raising, lowering, maintaining or stabilising the market price

of securities, if, when he makes the statement or disseminates the information, he either

does not care whether the statement or information is true or false, or knows or ought

reasonably to have known that the statement or information is false or misleading in a

material particular.

Section �0� of the SFA prohibits the dissemination of information about illegal

transactions. This provision prohibits the circulation or dissemination of any statement

or information to the effect that the price of any securities of a corporation will rise,

fall or be maintained by reason of transactions entered into in contravention of sections

�97 to �0� of the SFA. This prohibition applies where the person who is circulating or

disseminating the information or statements (i) is the person who entered into the illegal

transaction; or (ii) is associated with the person who entered into the illegal transaction;

or (iii) is the person, or associated with the person, who has received or expects to receive

(whether directly or indirectly) any consideration or benefit of circulating or disseminating

the information or statements.

- VI-7 -



2.4 Prohibition against fraudulently inducing persons to deal in securities


Section �00 of the SFA prohibits a person from inducing or attempting to induce

another person to deal in securities, (a) by making or publishing any statement, promise

or forecast that he knows or ought reasonably to have known to be misleading, false

or deceptive; (b) by any dishonest concealment of material facts; (c) by the reckless

making or publishing of any statement, promise or forecast that is misleading, false or

deceptive; or (d) by recording or storing in, or by means of, any mechanical, electronic or

other device information that he knows to be false or misleading in a material particular,

unless it is established that, at the time when the defendant so recorded or stored the

information, he had no reasonable grounds for expecting that the information would be

available to any other person.

2.5 Prohibition against employment of manipulative and deceptive devices


Section �0� of the SFA prohibits (i) the employment of any device, scheme or

artifice to defraud; (ii) engaging in any act, practice or course of business which operates

as a fraud or deception, or is likely to operate as a fraud or deception, upon any person;

and (iii) making any untrue statement of a material fact or omitting to state a material fact

necessary to make statements made not misleading, in connection with the subscription,

purchase or sale of any securities.

2.6 Prohibition against the dissemination of information about illegal transactions


Section �0� of the SFA prohibits the circulation or dissemination of any statement

or information to the effect that the price of any securities of a corporation will rise,

fall or be maintained by reason of any transaction entered into or to be entered into in

contravention of sections �97 to �0� of the SFA. This prohibition applies where the

person who is circulating or disseminating the information or statements (i) is the person

who entered into the illegal transaction; or (ii) is associated with the person who entered

into the illegal transaction; or (iii) is the person, or associated with the person, who has

received or expects to receive (whether directly or indirectly) any consideration or benefit

of circulating or disseminating the information or statements.

- VI-8 -



3. PROHIBITION AGAINST INSIDER TRADING

Sections 218 and 219 of the SFA

Sections ��8 and ��9 of the SFA prohibit persons from dealing in securities of a corporation

if person knows or reasonably ought to know that he is in possession of information that is

not generally available, which is expected to have a material effect on the price or value of

securities of that corporation. Such persons include substantial shareholders of a corporation

or a related corporation, and persons who occupy a position reasonably expected to give him

access to inside information by virtue of professional or business relationship by being an

officer of a substantial shareholder of the corporation or a related corporation, or any other

person in possession of inside information. For an alleged contravention of section ��8 or ��9,

section ��0 makes it clear that it is not necessary for the prosecution or plaintiff to prove that

the accused person or defendant intended to use the information referred to in section ��8(�)

(a) or (�A) (a) or ��9(�) (a) in contravention of section ��8 or ��9, as the case may be.


Section ��6 sets out when a reasonable person would be taken to expect information to

have a material effect on the price or value of securities. Section ��6 provides that a reasonable

person would be taken to expect information to have a material effect on the price or value of

securities if the information would, or would be likely to, influence persons who commonly

invest in securities in deciding whether or not to subscribe for, buy or sell the first-mentioned

securities.

3.1 Penalties


Section �3� of the SFA provides that the Monetary Authority of Singapore may,

with the consent of the Public Prosecutor, bring an action in a court against the offender

to seek an order for a civil penalty in respect of any contravention. If the court is satisfied

on the balance of probabilities that the contravention resulted in the gain of a profit or

avoidance of a loss by the offender, the offender may have to pay a civil penalty of a sum

(a) not exceeding 3 times the amount of the profit that the person gained; or the amount

of the loss that he avoided, as a result of the contravention; or (b) equal to S$50,000 if

the person is not a corporation, or S$�00,000 if the person is a corporation, whichever

is the greater. If the court is satisfied on a balance of probabilities that the contravention

did not result in the gain of a profit or avoidance of a loss by the offender, the court

may make an order against him for the payment of a civil penalty of a sum not less than

S$50,000 and not more than S$� million.

- VI-9 -




Any person who contravenes sections �97, �98, �0� or �0� is guilty of an offence

and shall be liable on conviction to a fine not exceeding S$�50,000 or to imprisonment

for a term not exceeding 7 years or to both under section �04 of the SFA. Section �04

further provides that no proceedings shall be instituted against a person for the offence

after a court has made an order against him for the payment of a civil penalty under

section �3� in respect of the contravention.


Any person who contravenes section ��8 or ��9, is guilty of an offence and shall be

liable on conviction to a fine not exceeding S$�50,000 or to imprisonment for a term not

exceeding 7 years or to both under section �� of the SFA. Section �� further provides

that no proceedings shall be instituted against a person for an offence in respect of a

contravention of section ��8 or ��9 after a court has made an order against him for the

payment of a civil penalty under section �3� in respect of that contravention.

4. TAKEOVER OBLIGATIONS

4.1 Offences and obligations relating to take-overs


Section �40 of the SFA provides that a person shall not give notice or publicly

announce that he intends to make a take-over offer if (a) he has no intention to make a

take-over offer; or (b) he has no reasonable or probable grounds for believing that he

will be able to perform his obligations if the take-over offer is accepted or approved, as

the case may be. A person who contravenes section �40 is guilty of an offence and shall

be liable on conviction to a fine not exceeding S$�50,000 or to imprisonment for a term

not exceeding 7 years or to both.

4.2 Obligations under the Singapore Code on Take-overs and Mergers (the “Singapore Takeover Code”) and the consequences of non-compliance

(i) Obligations under the Singapore Takeover Code

The Singapore Takeover Code regulates the acquisition and transfer of ordinary

shares (and other instruments convertible into shares) of public companies and contain

certain provisions that regulates any potential or possible takeover or change in control

of the Company.

- VI-�0 -



Any person acquiring an interest, either on his own or together with parties acting

in concert with him, in 30.0% or more of voting Shares, or, if such person holds, either

on his own or together with parties acting in concert with him, between 30.0% and

50.0% (both inclusive) of voting Shares, and if he (or parties acting in concert with him)

acquires additional voting Shares representing more than �.0% of voting Shares in any

six-month period, must, except with the consent of the Securities Industry Council in

Singapore, extend a takeover offer for the remaining voting Shares in accordance with

the provisions of the Singapore Takeover Code.

“Parties acting in concert” comprise individuals or companies who, pursuant to

an agreement or understanding (whether formal or informal), co-operate, through the

acquisition by any of them of Shares in a company, to obtain or consolidate effective

control of that company. Certain persons are presumed (unless the presumption is rebutted)

to be acting in concert with each other. They are as follows:

• a company and its related companies, the associated companies of any of the

company and its related companies, companies whose associated companies

include any of these companies and any person who has provided financial

assistance (other than a bank in the ordinary course of business) to any of

the foregoing for the purchase of voting rights;

• a company and its directors (including their close relatives, related trusts

and companies controlled by any of the directors, their close relatives and

related trusts);

• a company and its pension funds and employee share schemes;

• a person with any investment company, unit trust or other fund whose

investment such person manages on a discretionary basis;

• a financial or other professional adviser and its clients in respect of Shares

held by the adviser and persons controlling, controlled by or under the

same control as the adviser and all the funds managed by the adviser on a

discretionary basis, where the shareholdings of the adviser and any of those

funds in the client total �0.0% or more of the client’s equity share capital;

• directors of a company (including their close relatives, related trusts and

companies controlled by any of such directors, their close relatives and

related trusts) which is subject to an offer or where the directors have reason

to believe a bona fide offer for the company may be imminent;

• partners; and

- VI-�� -



• an individual and his close relatives, related trusts, any person who is

accustomed to act in accordance with his instructions and companies controlled

by the individual, his close relatives, his related trusts or any person who is

accustomed to act in accordance with his instructions and any person who

has provided financial assistance (other than a bank in the ordinary course

of business) to any of the foregoing for the purchase of voting rights.

In the event that one of the abovementioned trigger-points is reached, the person

acquiring an interest (the “Offeror”) must make a public announcement stating, inter

alia, the terms of the offer and its identity. The Offeror must post an offer prospectus not

earlier than �4 days and not later than �� days from the date of the offer announcement.

An offer must be kept open for at least �8 days after the date on which the offer prospectus

was posted.

The Offeror may vary the offer by offering more for the shares or by extending the

period in which the offer remains open. If a variation is proposed, the Offeror is required to

give a written notice to the offeree company and its shareholders, stating the modifications

made to the matters set out in the offer prospectus. The revised offer must be kept open

for at least another �4 days. Where the consideration is varied, shareholders who agree

to sell before the variation are also entitled to receive the increased consideration.

A mandatory offer must be in cash or be accompanied by a cash alternative at not

less than the highest price paid by the offeror or parties acting in concert with the offeror

within the six months preceding the acquisition of Shares that triggered the mandatory

offer obligation.

Under the Singapore Takeover Code, where effective control of a company is

acquired or consolidated by a person, or persons acting in concert, a general offer to all

other shareholders is normally required. An offeror must treat all shareholders of the same

class in an offeree company equally. A fundamental requirement is that shareholders in

the company subject to the takeover offer must be given sufficient information, advice

and time to consider and decide on the offer.

(ii) Consequences of non-compliance with the requirements under the Singapore Takeover

Code

The Singapore Takeover Code is non-statutory in that it does not have the force of

law. Therefore, as provided in section �39(8) of the SFA, a failure of any party concerned

in a take-over offer or a matter connected therewith to observe any of the provisions

of the Singapore Takeover Code shall not of itself render that party liable to criminal

proceedings.

- VI-�� -



However, the failure of any party to observe any of the provisions of the Singapore

Takeover Code may, in any civil or criminal proceedings, be relied upon by any party

to the proceedings as tending to establish or to negate any liability which is in question

in the proceedings.

Section �39 further provides that where the Securities Industry Council has reason

to believe that any party concerned in a take-over offer or a matter connected therewith

is in breach of the provisions of the Singapore Takeover Code or is otherwise believed

to have committed acts of misconduct in relation to such take-over offer or matter, the

Securities Industry Council has power to enquire into the suspected breach or misconduct.

The Securities Industry Council may summon any person to give evidence on oath or

affirmation, which it is thereby authorised to administer, or produce any prospectus or

material necessary for the purpose of the enquiry.

- VII-� -

APPENDIX VII FURTHER INFORMATION RELATING TO DUAL PRIMARY LISTING


The Shares are currently listed on the SGX-ST and the Company intends to list its Shares on the Stock Exchange following the Share Offer. The Company sets out below a summary of the major differences between the Listing Rules and the Listing Manual, certain applicable laws and regulations of Singapore and Hong Kong, and the takeover rules under the Singapore Code, the Takeovers Code and certain relevant legislations concerning companies with listed securities. However, this summary is for general guidance only and is not and shall not be relied on as legal advice or any other advice to Shareholders of the Company. The summary is not meant to be a comprehensive or exhaustive description of all the relevant Singapore and Hong Kong laws, rules and regulations. In addition, Shareholders should also note that the laws, rules and regulations applicable to the Company and Shareholders may change, whether as a result of proposed legislative reforms to the Singapore or Hong Kong laws, rules or regulations or otherwise. Prospective investors and/or Shareholders should consult their own legal advisers for specific legal advice concerning their legal rights and obligations under Singapore laws and Hong Kong laws. In the event of any conflict between the Listing Rules and the Listing Manual, the Company shall comply with the more restrictive and stringent rule. The Sponsor and the Directors are not aware of any major conflicts between the Listing Rules and the Listing Manual of SGX-ST, which may cause difficulties to the Company to comply with the rules under both regimes.

1. MAJOR DIFFERENCES BETWEEN THE LISTING RULES OF THE SGX-ST AND THE STOCK EXCHANGE AND CERTAIN APPLICABLE SINGAPORE AND HONG KONG LAWS AND REGULATIONS

Listing Rules and Listing Manual andNO. Hong Kong Laws Singapore Laws

Reporting requirements

�. Issuers in Hong Kong are required to comply

with disclosure obligations under the Listing

Rules upon the occurrence of the events which

are prescribed under such rules.

Chapter 13 of the Listing RulesRule 13.09(1)

An issuer in Hong Kong is required to keep

the Stock Exchange and members of the

listed company and other holders of its listed

securities informed as soon as reasonably

practicable of any information relating to the

group (including information on any major new

developments in the group’s sphere of activity

which is not public knowledge) which:

(�) is necessary to enable them and the

public to appraise the position of the

group; or

* As to the reporting obligations under the

listing rules of the SGX-ST below, in the

case that the Company makes a disclosure

pursuant to Singapore laws, it will make

the same disclosure in Hong Kong.

Chapter 7 of the List ing Manual (Continuing Obligations) Rule 703, Listing Manual: Disclosure of Material Information

(�) An issuer must announce any

information known to the issuer

concerning it or any of its subsidiaries

or associated companies which:–

(a) is necessary to avoid the

establishment of a false market

in the issuer’s securities; or

- VII-� -




(�) is necessary to avoid the establishment

of false market in its securities; or

(3) might be reasonably expected materially

to affect market activity and the price

of its securities.

Rule 13.09(2)

If securities of the issuer are also listed on

other stock exchanges, the Stock Exchange

must be simultaneously informed of any

information released to any of such other

exchanges and the issuer must ensure that

such information is released to the market

in Hong Kong at the time as it is released to

the other markets.

Rule 13.25A and Rule 13.25B

An issuer shall submit to the Hong Kong

Stock Exchange for publication:

(�) a next day disclosure return by 9:00 a.m.

on the next business day following an

issue of shares reporting the changes

resulting from a placing, consideration

issue, open offer, rights issue or other

capital reorganisation. The disclosure

is subject to a 5% de minimis threshold

and certain other criteria including

aggregation requirements; and

(�) a monthly return by 9:00 a.m. on

the fifth business day after the end

of each calendar month, updating

share capital and other movements in

securities, including future obligations

and commitments to issue shares.

(b) would be likely to materially

affect the price or value of its

securities.

(�) Rule 703(�) does not apply to

information which it would be a

breach of law to disclose.

(3) Rule 703(�) does not apply to

particular information while each of

the following conditions applies.

Condition �: a reasonable person would not

expect the information to be disclosed;

Condition �: the information is confidential;

and

Condition 3: one or more of the following

applies:

(i) the information concerns

an incomplete proposal or

negotiation;

(ii) the information comprises

matters of supposition or

is insufficiently definite to

warrant disclosure;

(iii) the information is generated

for the internal management

purposes of the entity;

(iv) the information is a trade

secret.

- VII-3 -




A suspension of trading may be required

if an issuer is not able to file the relevant

disclosure forms in time.

Rule 13.51

An issuer shall publish an announcement as

soon as practicable in respect of:

(�) any proposed alteration of the issuer’s

memorandum or articles of association

or equivalent documents;

(�) any changes in i ts directorate or

supervisory committee, including

any appointment or resignation or re-

designation of director or supervisor or

any important change in the holding of

an executive office;

(3) any change in the rights attaching to any

class of listed securities and any change

in the rights attaching to any shares

into which any listed debt securities

are convertible or exchangeable;

(4) any change in its auditors or financial

year end; and

(5) any change in its secretary or registered

address or where applicable, agent for

the service of process in Hong Kong

or registered office or registered place

of business in Hong Kong.

Rules 13.73 and 13.39

An issuer is required to give notice of every

general meeting of its shareholders which

should contain details of the meeting including

the proposed resolutions, and the date, time

and place of the meeting. If voting at a general

meeting is taken on a poll, the issuer shall

announce the results of the poll.

(4) In complying with the SGX-ST’s

disclosure requirements, an issuer

must:

(a) o b s e r ve t h e C o r p o r a t e

Disclosure Policy set out in

Appendix 7.� of the SGX-ST

Listing Manual, and

(b) ensure that its directors and

executive officers are familiar

with the SGX-ST’s disclosure

requirements and Corporate

Disclosure Policy.

(5) The SGX-ST will not waive any

requirements under this Rule.

Rule 704, Listing Manual:Announcement of Specific Information

In addition to Rule 703, an issuer must

immediately announce the following:–

General

(�) Any change of address of the

registered office of the issuer or

of any office at which the Register

of Members or any other register

of securities of the issuer is kept.

(�) Any proposed alteration to the

Memorandum o f Assoc ia t ion

or Art ic les of Associat ion or

Constitution of the issuer.

(3) Any notice of substantial shareholders’

and directors’ interests in the issuer’s

securities or changes thereof received

by the issuer.

- VII-4 -




Rule 13.23

An issuer is required to disclose details of

acquisitions and realisations of assets and

other transactions as required by Chapters

�4 and �4A of the Listing Rules, and where

applicable shall circularise holders of its

securities with details thereof and obtain their

approval thereto.

Rules 13.09(1) and 13.25

An issuer is required to make an announcement

in respect of the winding up or liquidation of

the issuer, its holding company or its major

subsidiary.

Rules 13.09(1), 13.45(1), (2)

An issuer is required to announce its decision

on declaration, recommendation or payment

of dividends.

Rule 13.66

An issuer is required to publish a notice

of closure of its transfer books or register

of members in respect of securities listed

in Hong Kong at least �4 days before such

closure. Where the dates of such closure are

altered, the issuer is required to publish a

further notice.

(4) Any call to be made on partly paid

securities of the issuer or of any of

its principal subsidiaries.

(5) Any qualification or emphasis of

a matter by the auditors on the

financial statements of:–

(a) the issuer; or

(b) any of the issuer’s subsidiaries

or associated companies, if the

qualification or emphasis of a

matter has a material impact

on the issuer’s consolidated

accounts or the group’s

financial position.

(6) Any adjustment to the issuer’s

preliminary full year results made

subsequently by auditors.

Appointment or resignation

(7) Any appointment or resignation of

any director, chief executive officer,

general manager or other executive

officer of equivalent rank, company

secretary, registrar or auditors of

the issuer.

(8) Any appointment or reappointment of

a director to the audit committee.

(9) Any appointment of a person who

is a relative of a director or chief

executive officer or substantial

shareholder of the issuer to a

managerial position in the issuer or

any of its principal subsidiaries.

- VII-5 -




Rule 17

The adoption of share option scheme for

employees is subject to the approval of the

shareholders of the issuer, and the board shall

be authorised by the shareholders to grant

options to subscribe for the shares under the

scheme and to allot and issue shares pursuant

to the exercise of such option. The total

number of securities which may be issued

upon the exercise of the option to be granted

under the scheme and any other schemes must

not in aggregate exceed �0% of the relevant

class of securities of the scheme of the issuer

(or the subsidiary) in issue as at the date of

approval of the scheme. The issuer may seek

shareholders’ approval to refresh the �0%

limit under the scheme, in which event the

shareholders will also authorise the board to

grant option to subscribe for shares under

the scheme and to allot and issue the same

pursuant to the exercise of such option.

General Meetings

According to paragraph E.�.3 in Appendix �4

to the Listing Rules, the issuers are required

to provide:

(�) at least �0 clear business days notice

for annual general meetings; and

(�) at least �0 clear business days notice

for all other general meetings.

(�0) Any promotion of an appointee referred to in Rule 704(9).

(��) Within two months after each financial year, the issuer must make an announcement in the format in Appendix 7.4 of the Listing Manual Listing Manual of each person occupying a managerial position in the issuer or any of its principal subsidiaries who is a relative of a director or chief executive officer or substantial shareholder of the issuer. If there are no such persons, the issuer must make an appropriate negative statement. The SGX-ST may require the issuer to provide additional information on any such person, including his remuneration, any changes to his duties, responsibilities and remuneration package.

Appointment of Special Auditors

(��) SGX-ST may require an issuer to appoint a special auditor to review or investigate the issuer’s affairs and report its findings to SGX-ST or the issuer’s audit committee or such other party as SGX-ST may direct. The issuer may be required by the SGX-ST to immediately announce the requirement, together with such other information as SGX-ST directors. The issuer may be required by SGX-ST to announce the findings of the special auditors.

General Meetings

(�3) The date, time and place of any general meeting.

(�4) All resolutions put to a general meeting of an issuer, and immediately after such meeting, whether or not the resolutions were passed.

- VII-6 -




Chapter 14 of the Listing Rules

Under Chapter �4 of the Listing Rules, the

transactions are classified as:

(�) share transaction: an acquisition of

assets (excluding cash) by a listed

issuer where the consideration includes

securities for which listing will be

sought and where all percentage ratios

are less than 5%;

(�) discloseable transaction: a transaction

or a series of transactions by a listed

issuer where any percentage ratio is

5% or more, but less than �5%;

(3) major transaction: a transaction or

a series of transactions by a listed

issuer where any percentage ratio is

�5% or more, but less than �00% for

an acquisition or 75% for a disposal;

(4) very substantial disposal: a disposal

or a series of disposals of assets by

a listed issuer where any percentage

ratio is 75% or more;

(5) very subs tant ia l acquis i t ion : an

acquisition or a series of acquisitions

of assets by a listed issuer where any

percentage ratio is �00% or more;

(6) reverse takeover: an acquisition or a

series of acquisitions of assets by a

listed issuer which, in the opinion of

the Stock Exchange, constitutes, or is

part of a transaction or arrangement or

series of transactions or arrangements

which constitute, an attempt to achieve

a listing of the assets to be acquired and

a means to circumvent the requirements

for new applicants set out in Chapter

8 of the Listing Rules.

Acquisitions and Realisations

(�5) Any acquisition of:–

(a) Shares resulting in the issuer

holding �0% or more of the

total number of issued shares

excluding treasury shares of

a quoted company;

(b) Except for an issuer which

is a bank, finance company,

securities dealing company or

approved financial institution,

quoted securities resulting in

the issuer’s aggregate cost of

investment exceeding each

multiple of 5% of the issuer’s

latest audited consolidated net

tangible assets;

(c) Shares resulting in a company

becoming a subsidiary or an

associated company of the

issuer; and

(d) Shares resulting in the issuer

increasing its shareholding in

a subsidiary or an associated

company.

(�6) Any sale of:

(a) Shares resulting in the issuer

holding less than �0% of the

total number of issued shares

excluding treasury shares of

a quoted company;

- VII-7 -




The relevant category that a transaction falls

under depends on the following percentage

ratios computed on the following basis:

(�) Asset ratio: the total assets which are

the subject of the transaction divided by

the total assets of the listed issuer;

(�) Profits ratio: the profits attributable

to the assets which are the subject of

the transaction divided by the profits

of the listed issuer;

(3) Revenue ratio: the revenue attributable

to the assets which are the subject of

the transaction divided by the revenue

of the listed issuer;

(4) Consideration ratio: the consideration

divided by the total market capitalisation

of the listed issuer. The total market

capitalisation is the average closing

price of the listed issuer’s securities

as stated in the Stock Exchange’s daily

quotations sheets for the five business

days immediately preceding the date of

the transaction; and

(5) Equity ratio: the nominal value of the

listed issuer’s equity capital issued as

consideration divided by the nominal

value of the listed issuer’s issued

equity capital immediately before the

transaction.

An announcement in respect of the above

transactions shall be made by the listed issuer

as soon as practicable after the terms of such

transactions have been finalised.

(b) except for an issuer which

is a bank, finance company,

securities dealing company

or an approved financial

institution, quoted securities

resul t ing in the issuer’s

aggregate cost of investment

in quoted securities falling

below each multiple of 5%

of the issuer’s latest audited

consolidated net tangible

assets;

(c) Shares resulting in a company

ceasing to be a subsidiary or

an associated company of the

issuer; and

(d) Shares resulting in the issuer

reducing its shareholding in

a subsidiary or an associated

company.

(�7) Any acquisition or disposal of shares

or other assets which is required to

be announced under Chapter �0 of

the SGX-ST Listing Manual.

Winding Up, Judicial Management, etc

(�8) Any application filed with a court

to wind up the issuer or any of its

subsidiaries, or to place the issuer

or any of its subsidiaries under

judicial management.

(�9) The appointment of a receiver,

judicial manager or liquidator of the

issuer or any of its subsidiaries.

- VII-8 -




Further, major transaction, very substantial

disposal, very substantial acquisition and

reverse takeover requires prior shareholders’

approval.

Rule 17.06A

According to Rule �7.06A, as soon as possible

upon the granting by the issuer of an option

under its share option scheme, the issuer

must publish an announcement setting out

the following details:

(a) date of grant;

(b) exercise price of the options grant;

(c) number of options granted;

(d) market price of its securities on the

date of grant;

(e) where any of the grantees is a director,

chief executive or substantial shareholder

of the issuer, or an associate of any of

them, the names of such grantees and

the number of options granted to each

of them; and

(f) validity period of the options.

(�0) Any breach of any loan covenants or

any notice received from principal

bankers or from the trustee of

any debenture holders to demand

repayment of loans granted to the

issuer or any of its subsidiaries

which, in the opinion of the issuer’s

directors, would result in the issuer

facing a cash flow problem.

(��) Where Rule 704(�8), (�9) or (�0)

applies, a monthly update regarding

the issuer’s financial situation. If

any material development occurs

between the monthly updates, it

must be announced immediately.

Announcement of Results, Dividends, etc

(��) Any recommendation or declaration

of a dividend (including a bonus or

special dividend, if any), the rate

and amount per share and date of

payment.

(�3) After the end of each of the first

three quarters of its financial year,

half year or financial year, as the

case may be, an issuer must not

announce any:–

(a) dividend;

(b) cap i t a l i s a t i on o r r i gh t s

issue;

(c) closing of the books;

(d) capital return;

(e) passing of a dividend; or

- VII-9 -




(f) sales or turnover, unless it is

accompanied by the results

of the quarter, half year or

financial year, as the case

may be, or the results have

been announced.

Books Closure

(�4) Any intention to fix a books closure

date, stating the date, reason and

address of the share registry at

which the relevant documents will

be accepted for registration. At least

�0 market days of notice (excluding

the date of announcement and the

books closure date) must be given

for any books closure date. Subject

to the provisions of the Singapore

Companies Act, the SGX-ST may

agree to a shorter books closure

period. In fixing a books closure

date, an issuer must ensure that the

last day of trading on a cum basis

falls at least � day after the general

meeting, if a general meeting is

required to be held.

(�5) The issuer must not close its books

for any purpose until at least 8

market days after the last day of

the previous books closure period.

This rule does not prohibit identical

books closure dates for different

purposes.

Treasury Shares

(�6) Any sale, transfer, cancellation and/

or use of treasury shares, stating the

following:–

- VII-�0 -




(a) Date of the sale, transfer,

cancellation and/or use;

(b) Purpose of such sale, transfer,

cancellation and/or use;

(c) Number of treasury shares

sold, transferred, cancelled

and/or used;

(d) Number of treasury shares

before and after such sale,

transfer, cancellation and/or

use;

(e) Percentage of the number

of treasury shares against

the total number of shares

outstanding in a class that is

listed before and after such

sale, transfer, cancellation

and/or use; and

(f) Value of the treasury shares

if they are used for a sale or

transfer, or cancelled.

Employee share option scheme

(�7) A ny g r a n t o f o p t i o n s . T h e

announcement must be made on

the date of the offer and provide

details of the grant, including the

following:–

(a) Date of grant;

(b) Exercise price of options

granted;

(c) Number of options granted;

- VII-�� -




(d) Market price of its securities

on the date of grant;

(e) Number of options granted

to directors and controlling

s h a r e h o l d e r ( a n d t h e i r

associates), if any; and

(f) Va l i d i t y p e r i o d o f t h e

options.

Chapter 10 of the Listing Manual(Acquisitions and Realisations)

Under Chapter �0, t ransact ions are

classified as:

(a) Non-Discloseable Transactions,

(b) Discloseable Transactions;

(c) Major Transactions; and

(d) Very Substantial Acquisitions or

Reverse Takeovers.

Rule 1006, Listing Manual

The relevant category that a transaction

falls under depends on the size of the

relative figures computed on the following

bases:–

(a) The net asset value of the assets to

be disposed of, compared with the

group’s net asset value. This basis

is not applicable to an acquisition

of assets.

(b) The net profits attributable to the

assets acquired or disposed of,

compared with the group’s net

profits.

- VII-�� -




(c) The agg rega t e va lue o f t he

consideration given or received,

compared with the issuer’s market

capitalisation based on the total

number of issued shares excluding

treasury shares.

(d) The number of equity securities

issued by the issuer as consideration

for an acquisition, compared with

the number of equity securities

previously in issue.

Tr a n s a c t i o n s a r e c a t e g o r i s e d a s

follows:–

– Non-Discloseable Transact ion:

Where any of the relative figures

in Rule �006 is 5% or less

– Discloseable Transaction: Where any

of the relative figures in Rule �006

exceeds 5% but does not exceed

�0%

– Major Transaction: Where any of

the relative figures in Rule �006

exceeds �0%

– Very Substantial Acquisition or

Reverse Takeover: Where any of

the relative figures in Rule �006 is

�00% or more, or where there is a

change in control of the issuer

- VII-�3 -




Where a transaction is classified as a

Discloseable Transaction, Major Transaction

or Very Substantial Acquisition/Reverse

Takeover, the Company must make an

immediate announcement, which includes

the details prescribed in Rule �0�0 of the

Listing Manual (as set out below):–

(�) Particulars of the assets acquired

or disposed of, including tjhe name

of any company or business, where

applicable;

(�) A description of the trade carried

on, if any;

(3) The agg rega t e va lue o f t he

consideration, stating the factors

taken into account in arriving at it

and how it will be satisfied, including

the terms of payment;

(4) Whether there are any material

conditions attaching to the transaction

including a put, call or other option

and details thereof;

(5) The value (book value, net tangible

asset value and the latest available

open market value) of the assets

being acquired or disposed of, and

in respect of the latest available

valuation, the value placed on the

assets, the party who commissioned

the valuation and the basis and date

of such valuation;

- VII-�4 -




(6) In the case of a disposal, the excess

or deficit of the proceeds over the

book value, and the intended use of

the sale proceeds. In the case of an

acquisition, the source(s) of funds

for the acquisition;

(7) The net profits attributable to the

assets being acquired or disposed of.

In the case of a disposal, the amount

of any gain or loss on disposal;

(8) The effect of the transaction on

the net tangible assets per share

of the issuer for the most recently

completed financial year, assuming

that the transaction had been effected

at the end of that financial year;

(9) The effect of the transaction on the

earnings per share of the issuer for

the most recently completed financial

year, assuming that the transaction

had been effected at the beginning

of that financial year;

(�0) The rationale for the transaction

including the benefits which are

expected to accrue to the issuer as

a result of the transaction;

(��) Whether any director or controlling

shareholder has any interest, direct

or indirect, in the transaction and

the nature of such interests;

(��) Details of any service contracts of the

directors proposed to be appointed

to the issuer in connection with the

transaction; and

- VII-�5 -




(�3) The relat ive figures that were

computed on the bases set out in

Rule �006.

For very Substantial Acquisitions/Reverse

Takeovers, the issuer must also immediately

announce the latest three years of proforma

financial information of the assets to be

acquired.

Further, transactions that are Major

Transactions are conditional upon the

prior approval of shareholders. Very

Substantial Acquisitions/Reverse Takeovers

transactions are conditional upon the

approval of shareholders and the approval

of the SGX-ST.

A circular to shareholders will need

to be distributed to seek shareholders’

approval.

The disclosures required to be made in such

circular for these types of transactions are

prescribed in the Listing Manual.

- VII-�6 -




2. Chapter 13 of the Listing Rules

An issuer is required to:

(�) publish its annual report within 4 months

after its financial year end;

(�) publish its interim report within 3

months after the end of the first half

year period in its financial year;

(3) announce its preliminary results for

each financial year within 4 months

after its financial year end; and

(4) announce its preliminary results for the

first half of each of its financial year

period within 3 months after the end

of such half year period.

Rule 4.03

All accountant’s reports must be prepared by

professional accountants who are qualified

under the Professional Accountants Ordinance

(Chapter 50 of the Laws of Hong Kong) for

appointment as auditors of a company and

who are independent of both of the issuer

and of any other company concerned to the

same extent as that required of an auditor

under the Companies Ordinance of the Laws

of Hong Kong and in accordance with the

requirements on independence issued by the

Hong Kong Society of Accountants.

Announcement of financial results and

annual reports

Rule 705, Listing Manual: Financial Statements

(�) An issuer must announce the financial

statements for the full financial

year immediately after the figures

are available, but in any event not

later than 60 days after the relevant

financial period.

(�) An issuer must announce the financial

statements for each of the first

three quarters of its financial year

immediately after the figures are

available, but in any event not later

than 45 days after the quarter end

if:–

(a) i t s market capi ta l isa t ion

exceeded S$75 million as at

3� March �003; or

(b) i t wa s l i s t e d a f t e r 3�

March �003 and its market

capitalisation exceeded S$75

million at the time of listing

(based on the IPO issue price);

or

(c) its market capitalisation is

S$75 million or higher on

the last trading day of each

calendar year commencing

from 3� December �006. An

issuer whose obligation falls

within this sub-section (c)

will have a grace period of a

year to prepare for quarterly

reporting. As an illustration,

- VII-�7 -




an i ssuer whose market

capitalisation is S$75 million

or higher as at the end of the

calendar year 3� December

�006 must announce i t s

quarterly financial statements

for any quarter of its financial

year commencing in �008.

Notwithstanding the grace

period, all issuers whose

obligation falls under this

sub-section (c) are strongly

encouraged to adopt quarterly

reporting as soon as

possible.

(3) (a) An issuer who falls within

the sub-sect ions in Rule

705(�) above must comply

with Rule 705(�) even if

i t s market capi ta l isa t ion

subsequently decreases below

S$75 million.

(b) An issuer who does not fall

within the sub-sections in

Rule 705(�) above must

announce its first half financial

statements immediately after

the figures are available, but

in any event not later than

45 days after the relevant

financial period.

(4) In the case of an announcement

of interim financial statements

(qua r t e r ly o r ha l f -yea r ly, a s

applicable, but excluding full year

financial statements), an issuer’s

directors must provide a confirmation

- VII-�8 -




that, to the best of their knowledge,

nothing has come to the attention

of the board of directors which

may render the interim financial

statements to be false or misleading

in any material aspect. In order to

make this confirmation, Directors

would not be expected to commission

an audit of these financial statements.

The confirmation may be signed by

� directors on behalf of the board

of directors.

Rule 707, Listing Manual: Annual Report

(�) The time between the end of an

issuer’s financial year and the date

of its annual general meeting (if any)

must not exceed four months.

(�) An issuer must issue its annual report

to shareholders and the SGX-ST at

least �4 days before the date of its

annual general meeting.

Rule 712 and 713, Listing Manual: Appointment of Auditors Rule 712:

(�) An issuer must appoint a suitable

accounting firm to meet its audit

obligations, having regard to the

adequacy of the resources and

experience of the accounting firm

and the persons assigned to the audit,

the firm’s audit engagements, the

size and complexity of the listed

group being audited, and the number

and experience of supervisory and

professional staff assigned to the

particular audit.

- VII-�9 -




(�) A change in auditors must be

specifically approved by shareholders

in a general meeting.

Rule 713

(�) An issuer must disclose in its annual

report the date of appointment and

the name of the audit partner in

charge of auditing the issuer and

its group of companies. The audit

partner must not be in charge of more

than 5 consecutive audits for a full

financial year, the first audit being

for the financial year beginning on

or after � January �997, regardless of

the date of listing. The audit partner

may return after two years.

(�) If the listing of an issuer occurs

after 5 consecutive audits by the

same audit partner in charge, the

same audit partner may complete

the audit of the financial year in

which the issuer lists.

- VII-�0 -




Share Dispersion Requirement

3. Rule 8.08

Save and except for the circumstances specified

under Chapter 8 of the Listing Rules, an

issuer must maintain at least �5% of its total

issued share capital at all times be held by the

public. Under Rule 7�3 of the Listing Manual,

an issuer must ensure that at least �0% of

the total number of issued shares excluding

treasury shares (excluding preference shares

and convertible equity securities) in a class that

is listed is at all times held by the public.

Shareholders’ reporting obligations

4. Part XV of the SFO

Substantial shareholders, being individuals

and corporations who are interested in 5%

or more of any class of voting shares in an

issuer must disclose their interests and short

positions in voting shares of such issuer

upon the occurrence of the relevant events

as prescribed under the SFO.

For relevant events falling under the category

of “initial notification” as provided for under

section �.7 of the “Outline of Part XV of the

SFO – Disclosure of Interests” issued by the

SFC (the “Outline”), the time allowed for

filing a notice is �0 business days after the

occurrence of the relevant event. As for other

relevant events, the time allowed for filing a

notice is 3 business days after the occurrence

of the relevant event.

Under Rule 7�4 of the Listing Manual,

if the percentage of securities in public

hands falls below �0%, the issuer must

make an announcement and the SGX-ST

may suspend trading of the shares.

Under Rule 7�5 of the Listing Manual,

the SGX-ST may allow the issuer a period

of 3 months, or such longer period as the

SGX-ST may agree, to raise the public

percentage to at least �0%, failing which

the issuer may be delisted.

Obligation to notify Company and SGX

of substantial shareholding and change in

substantial shareholding.

Substantial shareholder

Under the Singapore Companies Act

(Cap 50) (“Singapore Companies Act”),

a substantial shareholder (i.e. shareholder

having not less than 5 per cent of the total

votes attached to all the voting shares in

the company) of a company shall within �

business days after becoming a substantial

shareholder, or when there is a change

in the percentage level (as defined in

the Singapore Companies Act) of the

substantial shareholder’s interest, or when

he ceases to be a substantial shareholder,

give notice in writing to the company.

Under the Securities and Futures Act (Cap

�89) (“Singapore SFA”), a substantial

shareholder shall within � business days

after becoming a substantial shareholder, or

when there is a change in the percentage level

of the substantial shareholder’s interest,

or when he ceases to be a substantial

shareholder give notice in writing to the

SGX-ST.

- VII-�� -





A person has a substantial shareholding in

a company if he has an “interest” in voting

shares in the company, and the total votes

attached to those shares is not less than 5

per cent of the total votes attached to all

the voting shares in the company.


A substantial shareholder of a company

is required to notify the company of his

“interests” in the voting shares in the

company within two business days after

becoming a substantial shareholder.

Sections 83 and 84 of the Singapore Companies Act

A substantial shareholder is required to

notify the company of changes in the

“percentage level” of his shareholding or

his ceasing to be a substantial shareholder,

again within two business days after he

is aware of such changes.

The reference to changes in “percentage

level” means any changes in a substantial

shareholder’s interest in the company which

results in his interest, following such

change, increasing or decreasing to the

next discrete �% threshold. For example,

an increase in interests in the company

from 5.�% to 5.9% need not be notified,

but an increase from 5.9% to 6.�% will

have to be notified.

Section 137(1), SFA

A substantial shareholder is also required

to give the above notifications to the SGX-

ST at the same time.

- VII-�� -




5. Part XV of the SFO

Directors and chief executives of an issuer

must disclose any of their interests, short and

long positions in any shares in the issuer (or

any of its associated corporations) and their

interests in any debentures or the issuer (or

any of its associated corporations) upon the

occurrence of the relevant events as prescribed

under the SFO.

For relevant events falling under the category

of “initial notification” as provided for under

section 3.9 of the Outline, the time allowed

for filing a notice is �0 business days. As for

other relevant events, the time allowed for

filing a notice is 3 business days after the

occurrence of the relevant event.

Directors

Under section �64(�) of the Companies Act

(Cap 50), a company shall keep a register

showing with respect to each director of

the company particulars of:

(a) shares;

(b) debentures;

(c) rights or options of the director;

and

(d) contracts to which the director or

under which he is entitled to a

benefit;

of the company or a related company.

A director of a company shall be deemed

to hold or have an interest or a right in

or over any shares or debentures if the

spouse or infant child of the director

holds or has an interest or a right in or

over any shares or debentures or makes

or is granted any contract, assignment or

right of subscription.

Under section �65(�) of the Singapore

Companies Act, a director of a company

shall give notice in writing to the company

of such particulars relating to shares,

debentures, participatory interests, rights,

options and contracts as are necessary for

the purposes of compliance by the first-

mentioned company with section �64,

among other disclosure requirements.

- VII-�3 -




Purchase of Treasury Stocks

6. Rule 10.06(1) and (5)

An issuer with primary listing on the Stock

Exchange can purchase its shares on the

Stock Exchange if the relevant shares are

fully-paid up, the issuer has provided its

shareholders with the information as required

by Rule �0.06(�) of the Listing Rules and

that the shareholder of the issuer has given

specific approval or a general mandate to the

directors to make such a purchase, provided

that the amount of shares so purchased under

the general mandate shall not exceed �0%

of the issued share capital of the issuer as

at the date of the passing of the relevant

shareholders’ resolution granting the mandate

of purchase.

Rule 10.06(1)(a)

For the purpose of obtaining shareholders’

approval, the issuer must have previously

sent to its shareholders an Explanatory

Statement which sets out information required

under Rule �0.06(�)(b) of the Listing Rules,

including:–

(�) the total number and description of

shares which the issuer proposes to

purchase;

(�) reasons for the proposed purchase of

shares;

(3) proposed source of funds for making

the proposed purchase of shares;

Share Buyback(a) Shareholder ApprovalRule 881, Listing Manual

An issuer may purchase its own shares if

it has obtained the prior specific approval

of shareholders in general meeting.

Rule 882, Listing Manual:

A share buy-back may only be made on

the SGX-ST or on another stock exchange

on which the issuer’s securities are listed

(“Market Purchases”) or by way of an off-

market acquisition in accordance with an

equal access scheme as defined in section

76C of the Singapore Companies Act.


For the purpose of obtaining shareholder

approval, the issuer must provide at least the

following information to shareholders:–

(�) The information required under the

Singapore Companies Act;

(�) The reasons for the proposed share

buy-back;

(3) The consequences, if any, of share

purchases by the issuer that will

arise under the Singapore Code or

other applicable takeover rules;

(4) Whether the share buy-back, if made,

could affect the listing of the issuer’s

equity securities on the SGX-ST;

- VII-�4 -




(4) any material adverse impact on the

working capital or gearing position of

the issuer in the event that the proposed

purchases were to be carried out in

full at any time during the proposed

purchase period;

(5) particulars of the directors who have a

present intention to sell shares to the

issuer in the event that the proposal is

approved by shareholders;

(6) undertaking by the directors to the

Stock Exchange to exercise the power

of the issuer to make purchases

pursuant to the proposed resolution in

accordance with the Listing Rules and

the laws of the jurisdiction in which

the issuer is incorporated or otherwise

established;

(7) the consequences of any purchases which

will arise under the HK Takeovers Code

of which the Directors are aware, if any,

details of any purchases by the issuer

of share made in previous 6 months

(whether on the Stock Exchange or

otherwise);

(8) whether or not any connected persons of

the issuer have notified the issuer that

they have any present intention to sell

shares to the issuer or have undertaken

not to sell any of the shares held by

them to the issuer, in the event that the

issuer is authorised to make purchases

of shares;

(9) the highest and lowest prices at which

the relevant shares have traded on the

Stock Exchange during each of the

previous �� months; and

(5) Details of any share buy-back made

by the issuer in the previous ��

months, giving the total number of

shares purchased, the purchase price

per share or the highest and lowest

prices paid for the purchases, where

relevant, and the total consideration

paid for the purchases; and

(6) Whether the shares purchased by

the issuer will be cancelled or kept

as treasury shares.

(b) Shareholding Spread RequirementsRule 723, Listing Manual

An issuer must ensure that at least �0% of

the total number of issued shares excluding

treasury shares (excluding preference shares

and convertible equity securities) in a

class that is listed is at all times held by

the public.

(c) Dealing Restrictions:Rule 884, Listing Manual

In the case of a Market Purchase, the

purchase price must not exceed �05% of

the Average Closing Price.

“Average Closing Price” means the average

of the closing market prices of a share over

the last 5 market days preceding the day of

the Market Purchase on which transactions

in the shares were recorded and deemed to

be adjusted for any corporate action that

occurs after the relevant 5-day period.

- VII-�5 -




(�0) the disclaimer of the Stock Exchange

in the form set out under the Listing

Rules.

Rule 8.08

There must be an open market in the securities

for which listing is sought. This will normally

mean at least �5% of the issuer’s total issued

share capital must at all times be held by the

public, although if the market capitalisation of

the company is over HK$�0 billion, the Stock

Exchange may accept a percentage of between

�5% and �5%. In addition, there must be a

minimum of 300 public shareholders and not

more than 50% of the shares in public hands at

the time of listing can be beneficially owned

by the three largest public shareholders.

Rule 10.06(2)

The repurchase of shares by an issuer is subject

to various dealing restrictions, including,

among others, that an issuer shall not purchase

its shares on the Stock Exchange if the

purchase price is higher by 5% or more than

the average closing market price for the 5

preceding trading days on which its shares

were traded on the Stock Exchange.

Rule 10.06(4)

An issuer is required to report to the Stock

Exchange within 30 minutes before the earlier

of the commencement of the morning trading

session or any pre-opening session on the

business day following any day on which the

issuer makes a purchase of shares by filing a

Form G in Appendix 5 of the Listing Rules

which contains the prescribed details with

the Stock Exchange.


In the case of off market purchase in accordance with an equal access scheme, an issuer must issue an offer prospectus to all shareholders containing at least the following information:

(�) Terms and conditions of offer(�) P e r i o d a n d p r o c e d u r e s f o r

acceptances’, and(3) Information in Rule 883(�), (3), (4)

and (5)

(d) Reporting RequirementsRule 886(1), Listing Manual

Where an issuer purchases its shares by way of a Market Purchase, the issuer shall report all purchases or acquisitions of its shares to the SGX-ST not later than 9 a.m. on the market day following the day of purchase of any of its shares.

In a case of an off market purchase under an equal access scheme, an issuer must notify the SGX-ST by 9:00 a.m. on the second market day after the close of acceptances of the offer.

Rule 886(2), Listing Manual

Notification of a purchase by the company of its shares must be in the form of Appendix 8.3.� of the Listing Manual. Such notification would include, inter alia, the name of the overseas exchange on which the company’s shares are also listed, the maximum number of shares authorised for purchase, details of the total number of shares authorised for purchase, the date of purchases, the total number of shares purchased, the purchase price per share, the highest and lowest prices paid for such shares, the total purchase consideration, the cumulative number of shares purchased to date and the number of issued shares after the purchase.

- VII-�6 -




Solicitation for Proxy

7. Investors holding securities in listed companies

listed on the Stock Exchange through CCASS

who want to attend the shareholders’ meetings

in person or appoint proxies to vote on their

behalf have to solicit for proxy by giving

instructions to CCASS directly or through their

broker firms (as the case may be) to authorize

the investors as corporate representatives or

proxies of HKSCC Nominees Limited (or

any successor thereto) in respect of such

shareholding of the investors in the listed

companies.

Depositors who wish to attend and vote

at the SGM, and whose names are shown

in the records of CDP as at a time not

earlier than 48 hours prior to the time

of the SGM supplied by CDP to the

Company, may attend as CDP’s proxies.

Such Depositors who are individuals and

who wish to attend the SGM in person

need not take any further action and can

attend and vote at the SGM without the

lodgment of any proxy form.

Issuance of New Shares, Convertible Bonds or Bonds with Warrants

8. Rule 13.36(5)

In case of a placing of securities for cash consideration, the issuer may not issue any securities pursuant to a general mandate given by its shareholders if the relevant price represents a discount of �0% or more to the benchmarked price of the securities prescribed under the HK Listing Rules, unless the Stock Exchange is satisfied that the issuer is in a serious financial position and the only way that it can be saved is by an urgent rescue operation, or that there are other exceptional circumstances.

Rule 15.02

The securities to be issued on exercise of warrants to subscribe securities must not, when aggregated with all other equity securities which remain to be issued on exercise of any other subscription rights, if all such rights were immediately exercised, whether or not such exercise is permissible, exceed �0% of the issued equity capital of the issuer at the time such warrants are issued.

Pricing Formulae prescribed under the Listing Manual for various Issues of Additional Securities

Issue of Shares, Company Warrants and Convertible Securities For Cash (Other than Rights Issues)


(�) An issue of shares must not be priced at more than �0%(�) discount to the weighted average price for trades done on the SGX-ST for the full market day on which the placement or subscription agreement is signed. If trading in the issuer’s shares is not available for a full market day, the weighted average price must be based on the trades done on the preceding market day up to the time the placement agreement is signed.

note (�): On �9 February �009, SGX-ST

announced a series of interim

measures to accelerate and facilitate

listed issuers' fund raising efforts.

One of the interim measures is to

allow listed issuers to undertake non

- VII-�7 -




Options granted under employee or executive share schemes which comply with Chapter �7 of the Listing Rules are excluded for the purpose of this limit.

Also, such warrants must expire not less than � and not more than 5 years from the date of issue or grant and must not be convertible into further rights to subscribe securities which expire less than � year or more than 5 years after the date of issue or grant of the original warrants.

Rule 15.03

The circular or notice to be sent to shareholders convening the requisite meeting under Rule �5.0� must include at least the following information:

(�) the maximum number of securities which would be issued on exercise of the warrants;

(�) the period during which the warrants may be exercised and the date when this right commences;

(3) the amount payable on the exercise of the warrants;

(4) the rights of the holders on the liquidation of the issuer;

(5) the arrangements for t ransfer or transmission of the warrants;

(6) the arrangements for the variation in the subscription or purchase price or number of securities to take account of alterations to the share capital of the issuer;

pro-rata placements of new shares

priced at discounts of up to �0%

to the weighted average price for

trades done on the SGX-ST for a full

market day on which the placement

or subscription agreement in relation

to such units is executed. This interim

measure will be effective until 3�

December �0�0.

In view of the interim measures, at

the annual general meeting of the

Company held on 30 July �009,

the Shareholders of the Company

passed a resolution to authorise the

Directors of the Company to issue

new Shares on a non pro-rata basis,

at a discount of not more than �0%

to the weighted average market price

of the Company's Shares, determined

in accordance with the requirement

of SGX-ST.

(�) An issue of company warrants or other convertible securities is subject to the following requirements:–

(a) if the conversion price is fixed, the price must not be more than �0% discount to the prevailing market price of the underlying shares prior to the signing of the placement or subscription agreement.

(b) if the conversion price is based on a formula, any discount in the price-fixing formula must not be more than �0% of the prevailing market price of the underlying shares before conversion.

(3) Rule 8��(�) and (�) is not applicable if specific shareholder approval i s ob ta ined for the i ssue of shares, company warrants or other convertible securities.

- VII-�8 -




(7) the rights (if any) of the holders to participate in any distribution and/or offers of further securities made by the issuer; and

(8) a summary of any other material terms of the warrants.

Rule 17.03

The terms and provisions of the scheme must provide, inter alia:

(�) the total number of securities which may be issued upon exercise of all options to be granted under the scheme and any other schemes must not in aggregate exceed �0% of the relevant class of securities of the issuer (or the subsidiary) in issue as at the date of approval of the scheme;

(�) the limit on the number of securities which may be issued upon exercise of all outstanding options granted and yet to be exercised under the scheme and any other schemes must not exceed 30% of the relevant class of securities of the issuer (or subsidiary) in issue from time to time;

(3) the maximum entitlement of each participant under the scheme (including both exercised and outstanding options) in any ��-month period must not exceed �% of the relevant class of securities of the issuer (or the subsidiary) in issue; and

Issue of Company Warrants or otherConvertible Securities, by way of a Rights Issue or Bought Deal or otherwise


The number of new shares arising from the exercise/conversion of outstanding company warrants or other convertible securities must in aggregate not exceed 50% of the total number of issued shares excluding treasury shares.


The following additional requirements apply to an offer of company warrants or other convertible securities by way of a rights issue or bought deal:–

(�) The issuer’s announcement of the rights issue or bought deal must include either:–

(a) the exercise or conversion price of the company warrants or other convertible securities, or

(b) a price-fixing formula to determine the exercise or conversion price. The price-fixing formula must not contain any discretionary element and the amount of premium or discount (in relation to the underlying share price) must be specified.

(�) Where a price-fixing formula is adopted:–

(a) if the issue is not underwritten, the issuer must fix and announce the exercise or conversion price before the close of the offer; or

- VII-�9 -




(4) the exercise price of the scheme, which must be at least the higher of: (i) the closing price of the securities as stated in the Stock Exchange’s daily quotations sheet on the date of grant, which must be a business day; and (ii) the average closing price of the securities as stated in the Stock Exchange’s daily quotations sheets for the five business days immediately preceding the date of grant. When securities are offered to the public, a prospectus must be prepared and registered unless the offer falls within the scope of exempted offers specified under the Companies Ordinance (Cap 3� of the Laws of Hong Kong) (the “CO”).

Section 57B of the CO and Rule 13.36 of the Listing Rules

Powers of directors to issue and allot shares or otherwise grant securities convertible into shares or options or warrants or similar rights to subscribe for any shares or such convertible securities are usually vested in them subject to the provisions in the memorandum and articles of association of the issuer.

Notwithstanding anything to the contrary in a company’s memorandum or articles, the directors shall not without the prior approval of the company in general meeting exercise any power of the company to allot shares. However, no such prior approval from shareholders of an issuer is required in relation to the allotment of shares in the issuer under an offer made pro rata by the issuer to its members. Shareholders may grant a general mandate to the directors the issue and allot shares, provided that the amount of shares to be issued in aggregate must be within �0% of the total amount of issued shares of the issuer at the time when the mandate was granted.

(b) if the issue is underwritten, the issuer must fix and announce the exercise or conversion price before the commencement of nil-paid rights trading.

Share Option Schemes or Share SchemesRule 845, Listing Manual

A limit on the size of each scheme, the maximum entitlement for each class or category of participant (where applicable), and the maximum entitlement for any one participant (where applicable) must be stated.

For SGX Main Board issuers, the following limits must not be exceeded:–

(�) The aggregate number of shares available under all schemes must not exceed �5% of the total number of issued shares excluding treasury shares from time to time;

(�) The aggregate number of shares available to controlling shareholder and their associates must not exceed �5% of the shares available under a scheme;

(3) The number of shares available to each controlling shareholder or his associate must not exceed �0% of the shares available under a scheme;

(4) The aggregate number of shares available to directors and employees of the issuer’s parent company and its subsidiaries must not exceed �0% of the shares available under a scheme; and

(5) The maximum discount under the scheme must not exceed �0%. The discount must have been approved by shareholders in a separate resolution.

- VII-30 -




According to Rule �3.36(5) of the Listing Rules, in the case of issue of placing of securities for cash consideration, the issuer must not issue any securities pursuant to a general mandate if the relevant price represents a discount of �0% or more to the benchmarked price of the securities, such benchmarked price being the higher of:

(a) the closing price on the date of the relevant placing agreement or other agreement involving the proposed issue of securities under the general mandate; and

(b) the average of the closing prices in the 5 trading days immediately prior to the earlier of:

(i) the date of the announcement of the placing or the proposed t ransact ion or a r rangement involving the proposed issue of securities under the general mandate;

(ii) the date of the placing agreement or other agreement involving the proposed issue of securities under the general mandate; and

(iii) the date on which the placing or subscription price is fixed.

A general mandate to directors to issue and allot shares shall only continue in force until (a) the conclusion of the first annual general meeting of the issuer following the passing of the resolution at which time it shall lapse, unless such mandate is renewed by the shareholders; or (b) revoked or varied by the shareholders at general meeting.

Offering of Securities in Singapore

No person shall make an offer of securities in Singapore unless that offer is accompanied by a prospectus or falls within any of the exemptions provided under the SFA.

Power of Directors to Allot and Issue Shares

The power to issue shares in a company is usually vested with the directors of that company subject to any restrictions in the Bye-laws of that company. However, notwithstanding anything to the contrary in the Bye-laws of a company, prior approval of the company at a general meeting is required to authorize the directors to exercise any power of the company to issue shares. Such approval need not be specific but may be general.


A company need not obtain the prior approval of shareholders in a general meeting for the issue of securities if the shareholders had by ordinary resolution in a general meeting, given a general mandate to the directors of the issuer to issue.

(i) shares; or

(ii) convertible securities; or

(iii) additional convertible securities issued pursuant to Rule 8�9, notwithstanding that the general mandate may have ceased to be inforce at the time the securities are issued, provided that the adjustment does not give the holder a benefit that a shareholder does not receive; or

(iv) shares arising from the conversion of the securities in (ii) and (iii) notwithstanding that the general mandate may have ceased to be inforce at the time the shares are to be issued.

- VII-3� -




Where the issuer has obtained a general mandate from its shareholders, any refreshment of the general mandate before the next annual general meeting shall be subject to, shall be subject to the following provisions:

(a) any contro l l ing shareholder and their associates or, where there are no controlling shareholder, directors (excluding independent non-executive directors) and the chief executive of the issuer and their respective associates shall abstain from voting in favour;

(b) the Exchange reserves the right to require the following parties to abstain from voting in favour of the relevant resolution at the general meeting:

(i) any parties who were controlling shareholder of the issuer at the time the decision to seek a refreshment of the mandate was made or approved by the board, and their associates; or

(ii) where there were no such controlling shareholder, directors (excluding independent non-executive directors) and the chief executive of the issuer at the time the decision to seek a refreshment of the mandate was made or approved by the board, and their respective associates;

(c) the issuer must comply with the requirements set out in rules �3.39(6) and (7), �3.40, �3.4� and �3.4�;


A general mandate must limit the aggregate number of shares and convertible securities that may be issued. The limit must be not more than 50% of the total number of issued shares excluding treasury shares, of which the aggregate number of shares and convertible securities issued other than on a pro rata basis to existing shareholders must be not more than �0% of the total number of issued shares excluding treasury shares.

Unless prior shareholder approval is required under the Listing Rules, an issue of treasury shares will not require further shareholder approval, and will not be included in the aforementioned limits.


A general mandate may remain in force until the earlier of the following:–

(a) the conclusion of the first annual general meeting of the issuer following the passing of the resolution. By an ordinary resolution passed at that meeting, the mandate may be renewed, either unconditionally or subject to conditions; or

(b) it is revoked or varied by ordinary resolution of the shareholders in general meeting.

Specific MandateRule 824, Listing Manual

Every issue of company warrants or other convertible securities not covered under a general mandate must be specifically approved by shareholders in general meeting.

- VII-3� -




(d) the relevant circular to shareholders must contain information relating to the issuer’s history of refreshments of mandate since the last annual general meeting, the amount of proceeds raised from the utilisation of such mandate, the use of such proceeds, the intended use of any amount not yet utilised and how the issuer has dealt with such amount. The circular must also contain information required under rule �.�7; and

(e) where the issuer offers or issues securities to its shareholders pro rata to their existing holdings (including where overseas shareholders are excluded for legal or regulatory reasons), it will not be necessary for the issuer to comply with rules �3.36(4)(a), (b) or (c) in order for it to refresh its general mandate immediately thereafter such that the amount in percentage terms of the unused part of the general mandate upon refreshment is the same as the unused part of the general mandate immediately before the issue of securities. In such cases, it need only obtain approval from its shareholders and comply with rule �3.36(4)(d).


The following are some of the factors will be taken into account by the SGX in considering an application for listing of additional equity securities:

(�) Rationale for the issue;

(�) Whether the issuer is and has been in compliance with the listing rules;

(3) Whether the issuer has made full disclosure of the material facts relating to the issue necessary for the exchange to decide on the application; and

(4) SGX-ST must be notified immediately if, before the commencement of dealing in any equity securities which are subject of an application, the issuer becomes aware that:–

(a) There has been a significant charge affecting any matter contained in the application; or

(b) A significant new matter has arisen, which would have been required to be included in the application if it had arisen before the application was submitted.

“significant” means significant for the purpose of making an assessment of the activities, assets and liabilities, financial position, management and prospects of the group, and of its profits and losses and of the rights attaching to the securities.

- VII-33 -




Rule 13.36(1)(a)

Unless otherwise excepted under the Listing

Rules, which include the issue and allotment

pursuant to a general mandate granted to the

directors of the issuer, the directors of the

issuer shall obtain the consent of shareholders

in general meeting prior to allotting, issuing

or granting any shares, securities convertible

into shares, options, warrants or similar rights

to subscribe for any shares or such convertible

securities.

The Stock Exchange, in determining whether

to grant listing approval and permission to deal

in shares of an issuer, will take into account

various factors including whether the issuer

has complied with the Listing Rules and if

full disclosure of the material facts relating

to the issue of shares have been made.

- VII-34 -




Prohibition of Unfair Trading Activities

9. Section 270 of the SFO

In general terms, subject to the specified

exempted circumstances, Section �70 of the

SFO prohibits persons from dealing in listed

securities (or their derivatives) of a corporation,

or otherwise counsels or procures another

person to deal in such listed shares (or their

derivatives) when such person is connected

with the corporation and has information

which he knows is relevant information in

relation to the corporation.

10. Section 278 of the SFO

In general terms, Section �78 of the SFO

prohibits persons to carry out � or more

transactions in securities of a corporation

that by themselves or in conjunction with

any other transaction increase, or are likely

to affect the price of any securities traded on

a relevant recognized market or by means of

authorized automated trading services, with

the intention of inducing another person to

purchase or subscribe for, or to refrain from

selling, securities of the corporation or of a

related corporation of the corporation.

11. Rules 3.10 and 8.12

Every board of directors of an issuer must

include at least three independent non-executive

directors. A new applicant applying for a

primary listing on the Stock Exchange must

have sufficient management presence in Hong

Kong, which normally means to have at least

two of its executive directors be ordinarily

resident of Hong Kong.

Sections 218 and 219, SFA

Sections ��8 and ��9 of the SFA prohibit

persons from dealing in securities of a

corporation if any such person knows

or reasonably ought to know that he is

in possession of information that is not

generally available, and if it was generally

available if might have a material effect

on the price or value of securities of that

corporation.

Such persons include:

(�) Officers of a corporation or a related

corporation;

(�) Substant ia l shareholders of a

corporation or a related corporation;

and

(3) Pe r son who occupy pos i t ion

reasonably expected to give him

access to inside information by

virtue of:

– profess ional or bus iness

relationship existing between

himself (or his employer or a

corporation of which he is an

officer) and that corporation

or a related corporation; or

– being an officer of a substantial

shareholder in that corporation

or in a related corporation.

- VII-35 -




Securities Market ManipulationSection 198(1), SFA

No person shall effect, take part in,

be concerned in or carry out, directly

or indirectly, � or more transactions

in securities of a corporation, being

transactions that have or likely to have the

effect of raising, lowering, maintaining, or

stabilising the price of the securities with

intent to induce other persons to subscribe

for, purchase or sell securities of the

corporation or of a related corporation.

Board compositionRule 720 (read with Rule 221) Listing Manual

Foreign issuers are required to have at

least two independent directors who

are Singapore residents on the Board of

Directors on a continuing basis, and not

just on listing.

- VII-36 -




12. Rules 3.21, 3.22 and paragraph C.3 of Appendix 14 of the Listing Rules

Every listed issuer must establish an audit

committee comprising non-executive directors

only. The audit committee must comprise a

minimum of three members, at least one of

whom is an independent non-executive director

with appropriate professional qualifications or

accounting or related financial management

expertise. The board of directors of the listed

issuer must approve and provide written terms

as required under Rules 3.�0 and 3.�� of

reference for the audit committee.

Rule 3.25 & paragraph B.1 of Appendix 14 of the Listing Rules

It is a recommended best practice that issuers

should establish a remuneration committee

with specific written terms of reference. A

majority of the members of the remuneration

committee should be independent nonexecutive

directors.

Rule 3.25 & paragraph A.4 of Appendix 14 of the Listing Rules

It is a recommended best practice that issuers

should establish a nomination committee. A

majority of the members should be independent

non-executive directors.

Audit CommitteeRule 11 of the Code of Corporate Governance (“COCG”)

The Board or Directors should establish

an Audit Committee (“AC”) with written

terms of reference which clearly set out

its authority and duties.

Rule 11.1, COCG

The AC should comprise at least three

directors, all non-executive, the majority

of whom including the chairman should

be independent.

Rule 11.2, COCG

The Board of Directors should ensure that

at least � members of the AC should have

accounting or related financial management

expertise or experience.

Remuneration CommitteeRule 7.1, COCG

The Board of Directors should set up a

Remuneration Committee (“RC”) comprising

a majority of non-executive directors who

are independent of management and free

from any business or other relationships,

which may materially interfere with the

exercise of their independent judgment.

Nominating CommitteeRule 4.1, COCG

Companies should establish a Nominating

Committee (“NC”) to make recommendations

to the Board on all Board appointments. The

NC should comprise at least 3 directors, a

majority of whom, including the Chairman

should be independent.

- VII-37 -




13. Chapter 14A of the Listing Rules

Chapter �4A of the Listing Rules specifies

circumstances in which transactions between

an issuer and certain specified persons

(including connected persons) are, unless

otherwise exempted, subject to the reporting,

announcement and independent shareholders’

approval requirements.

“Connected person” is defined to include

a director, chief executive or substantial

shareholder of the listed issuer, any person

who was a director of the listed issuer within

the preceding �� months, a promoter or

supervisor of a PRC issuer (as defined under the

Listing Rules), the associates (with meaning

ascribed to it under the Listing Rules) of

the respective persons as aforesaid, any

non wholly-owned subsidiary of the listed

issuer where any connected person(s) of the

listed issuer (other than at the level of its

subsidiaries) is/are (individually or together)

entitled to exercise, or control the exercise

of, �0% or more of the voting power at any

general meeting of such non wholly-owned

subsidiary, and any subsidiary of such non

wholly-owned subsidiary.

Chapter 14A of the Listing Rules

Where any connected transaction is proposed,

the transaction must be announced publicly

and a circular must be sent to shareholders

giving information about the transaction. Prior

approval of the independent shareholders in

general meeting will be required before the

transaction can proceed, unless it is otherwise

exempted under the HK Listing Rules. Certain

categories of transactions are exempt from

the disclosure and independent shareholders’

approval requirements, and certain transactions

are subject only to disclosure requirements.

Chapter 9, Listing Manual

Chapter 9 of the Listing Manual, which

applies to the Company, prescribes

situations in which transactions between

entities at risk (as defined in the Listing

Manual) and interested persons (as defined

in the Listing Manual) are required to

be disclosed or are subject to the prior

approval of shareholders.


For the purposes of Chapter 9, the following

definitions apply:–

(�) “ a p p r ove d ex c h a n g e ” m e a n s

a stock exchange that has rules

which safeguard the interests of

shareholders against interested

person transactions according to

similar principles to Chapter 9.

(�) “entity at risk” means:

(a) the issuer;

(b) a subsidiary of the issuer that

is not listed on the SGX-ST or

an approved exchange; or

(c) an associated company of the

issuer that is not listed on

the SGX-ST or an approved

exchange, provided that the

listed group, or the listed

group and i ts in terested

person(s), has control over

the associated company.

Interested Person Transactions or Connected Transactions

- VII-38 -




Amongst other exemptions under the HK

Listing Rules, (�) a one-off connected

transaction on normal commercial terms

will constitute a de minimis transaction under

Rule �4A.3�(�), which will be exempt from

the reporting, announcement and independent

shareholders’ approval requirements, where

each of the percentage ratios (other than the

profits ratio) is less than 0.�%, or each of

the percentage ratios (other than the profits

ratio) is equal to or more than 0.�% but less

than �.5% and the total consideration is less

than HK$�,000,000; and

(�) a one-off connected transaction on

normal commercial terms will be exempt

from the independent shareholders’ approval

requirement only under Rule �4A.3� of the

Listing Rules where each of the percentage

ratios (other than the profits ratio) is less than

�.5%, or each of the percentage ratios (other

than the profits ratio) is equal to or more

than �.5% but less than �5% and the total

consideration is less than HK$�0,000,000.

As regards continuing connected transactions,

amongst other exemptions under the Listing

Rules:

(�) a continuing connected transaction on

normal commercial terms will constitute

a de minimis transaction under Rule

�4A.33(3), which will be exempt

from the reporting, announcement and

independent shareholders’ approval

requirements, where each of the

percentage ratios (other than the profits

ratio) is on an annual basis less than

0.�%, or each of the percentage ratios

(other than the profits ratio) is on an

annual basis equal to or more than

0.�% but less than �.5% and the annual

consideration is less than HK$�,000,000;

and

(3) “financial assistance” includes:

(a) the lending or borrowing of

money, the guaranteeing or

providing security for a debt

incurred or the indemnifying

of a guarantor for guaranteeing

or providing security; and

(b) the forgiving of a debt, the

releasing of or neglect in

enforcing an obligation of

another, or the assuming of

the obligations of another.

(4) “interested person” means:

(a) a director, chief executive

o f f i c e r , o r c o n t r o l l i n g

shareholder of the issuer; or

(b) an associate of any such

director, chief execut ive

o f f i c e r , o r c o n t r o l l i n g

shareholder.

(5) “interested person transaction” means

a transaction between an entity at

risk and an interested person.

(6) “transaction” includes:–

(a) the provision or receipt of

financial assistance;

(b) the acquisition, disposal or

leasing of assets;

(c) the provision or receipt of

services;

(d) the issuance or subscription

of securities;

- VII-39 -




(�) a continuing connected transaction on

normal commercial terms will be exempt

from the independent shareholders’

approval requirement only under Rule

�4A.34 where each of the percentage

ratios (other than the profits ratio) is

on an annual basis less than �.5%, or

each of the percentage ratios (other than

the profits ratio) is on an annual basis

equal to or more than �.5% but less

than �5% and the annual consideration

is less than HK$�0,000,000.

Rule 14A.45

The following details of the connected

transaction must be included in the listed

issuer’s next published annual report and

accounts:

(�) the transaction date;

(�) the parties to the transaction and

a descript ion of their connected

relationship;

(3) a brief description of the transaction

and its purpose;

(4) the total consideration and terms;

and

(5) the nature and extent of the connected

person’s interest in the transaction.

(e) the granting of or being

granted options; and

(f) t h e e s t a b l i s h m e n t o f

j o in t ven tu re s o r j o in t

investments;

whether or not in the ordinary course

of business, and whether or not

entered into directly or indirectly

(for example, through one or more

interposed entities).

When Announcement RequiredRule 905, Listing Manual

(�) An issuer must make an immediate

announcement of any interested

person transaction of a value equal

to, or more than, 3% of the group’s

latest audited net tangible assets.

(�) I f the aggregate value of a l l

transactions entered into with the

same interested person during the

same financial year amounts to 3%

or more of the group’s latest audited

net tangible assets, the issuer must

make an immediate announcement of

the latest transaction and all future

transactions entered into with that

same interested person during that

financial year.

(3) Rule 905(�) and (�) does not apply to

any transaction below $�00,000.

- VII-40 -




Rules 14A.25 and 14A.26

The Stock Exchange will aggregate a series

of connected transactions and treat them as

if they were one transaction if they were all

completed within a ��-month period or are

otherwise related. In such cases, the listed

issuer must comply with the requirements for

the relevant classification of the connected

transactions when aggregated.

For the purpose of aggregating connected

transactions, the issuer must consult the Hong

Kong Stock Exchange before it enters into any

proposed connected transaction(s) if:

(�) any circumstances described in Rule

�4A.�6 or Rule �4A.�7 exist in respect of

such proposed connected transaction(s)

any other connected transaction(s)

entered into by the listed issuer in the

preceding ��-month period; or

(�) the proposed connected transaction(s)

and any other transaction(s) entered

into by the issuer involve acquisitions

of assets from a person or group of

persons or any of his/their associates

within �4 months of such person or

group of persons gaining control (as

defined in the Takeovers Code) of the

issuer (other than at the level of its

subsidiaries)

The issue must provide details of the

t ransact ions to the Hong Kong Stock

Exchange to enable it to determine whether

the transactions will be aggregated.

When Shareholder Approval RequiredRule 906, Listing Manual

(�) An issuer must obtain shareholder

approval for any interested person

transaction of a value equal to, or

more than:–

(a) 5% of the group’s latest

audited net tangible assets;

or

(b) 5% of the group’s latest

audited net tangible assets,

when aggregated with other

transactions entered into with

the same interested person

during the same financial

year. However, a transaction

which has been approved by

shareholders, or is the subject

of aggregation with another

transaction that has been

approved by shareholders,

need not be included in any

subsequent aggregation.

(�) Rule 906(�) does not apply to any

transaction below $�00,000.


An issuer must disclose the aggregate

value of interested person transactions

entered into during the financial year under

review in its annual report. The name of

the interested person and the corresponding

aggregate value of the interested person

transactions entered into with the same

interested person must be presented in the

prescribed format.

- VII-4� -





In interpreting the term “same interested

person” for the purpose of aggregation

in Rules 905 and 906, the following

applies:–

Transactions between an entity at risk and

interested persons who are members of the

same group are deemed to be transactions

between the entity at risk with the same

interested person.

If an interested person, (which is a member

of a group) is listed, its transactions with

the entity at risk need not be aggregated

with transactions between the entity at risk

and other interested persons of the same

group, provided that the listed interested

person and other listed interested persons

have boards the majority of whose directors

are different and are not accustomed to act

on the instructions of the other interested

persons and their associates and have audit

committees whose members are completely

different.


If a transaction requires shareholder

approval, it must be obtained either prior to

the transaction being entered into or, if the

transaction is expressed to be conditional

on such approval, prior to the completion

of the transaction.

Factors which the Stock Exchange may take

into account in determining whether connected

transactions will be aggregated include whether

the transactions:

(�) are entered into by the listed issuer

with the same party or with parties

connected or otherwise associated with

one another;

(�) involve the acquisition or disposal of

securities or an interest in one particular

company or group of companies;

(3) involve the acquisition or disposal of

parts of one asset; or

(4) together lead to a substantial involvement

by the listed issuer in a business activity

which did not previously form part of

the listed issuer’s principal business

activities.

Rule 14A.18

The Stock Exchange will require that connected

t ransact ions and continuing connected

transactions are made conditional on prior

approval by the independent shareholders of

the listed issuer in general meeting.

- VII-4� -




ExceptionsRule 915, Listing Manual

The fol lowing t ransact ions are not

required to comply with Rules 905, 906

and 907:–

(�) A payment of dividends, a subdivision

of shares, an issue of securities by

way of a bonus issue, a preferential

offer, or an off-market acquisition

of the issuer’s shares, made to all

shareholders on a pro-rata basis,

including the exercise of rights,

options or company warrants granted

under the preferential offer.

(�) The grant of options, and the issue

of securities pursuant to the exercise

of options, under an employees’

share option scheme approved by

the SGX-ST.

(3) A transaction between an entity at

risk and an investee company, where

the interested person’s interest in

the investee company, other than

that held through the issuer, is less

than 5%.

(4) A transaction in marketable securities

carried out in the open market

where the counterparty’s identity

is unknown to the issuer at the time

of the transaction.

- VII-43 -




(5) A transaction between an entity at

risk and an interested person for

the provision of goods or services

if:–

(a) the goods or services are sold

or rendered based on a fixed

or graduated scale, which is

publicly quoted; and

(b) the sale prices are applied

consistently to all customers

or class of customers.

S u c h t r a n s a c t i o n s i n c l u d e

te lecommunicat ion and posta l

services, public utility services,

and sale of fixed price goods at

retail outlets.

(6) The provision of financial assistance

or services by a financial institution

that is licensed or approved by the

Monetary Authority of Singapore,

on normal commercial terms and in

the ordinary course of business.

(7) The receipt of financial assistance or

services from a financial institution

that is licensed or approved by the

Monetary Authority of Singapore,

on normal commercial terms and in

the ordinary course of business.

(8) Director’s fees and remuneration, and

employment remuneration (excluding

“golden parachute” payments).

- VII-44 -




A listed issuer audits officers should

not deal in the listed issuer’s securities

during the period commencing two weeks

before the announcement of the company’s

financial statements for each of the first

three quarters of its financial year, or one

month before half year or financial year, as

the case may be, and ending on the date of

announcement of the relevant results.

RESTRICTIONS ON DEALINGS OF DIRECTORS BEFORE PUBLICATION OF THE FINANCIAL RESULTS

A director must not deal in any securities of the

listed issuer on any day on which its financial results

are published and:

(i) during the period of 60 days immediately

preceding the publication date of the annual

results or, if shorter, the period from the

end of the relevant financial year up to the

publication date of the results; and

(ii) during the period of 30 days immediately

preceding the publication date of the quarterly

results (if any) and half-year results or,

if shorter, the period from the end of the

relevant quarterly or half-year period up to

the publication date of the results,

unless the circumstances are exceptional as described

in the immediately succeeding paragraph below.

In any event, the director must comply with the

procedure in the rules of the Model Code for

Securities Transactions by Directors of Listed Issuers

(the “Directors Dealing Code”).

If a director proposes to sell or otherwise dispose

of securities of the listed issuer under exceptional

circumstances where the sale or disposal is otherwise

prohibited under the Directors Dealing Code, the

director must comply with the provisions of the

rules in the Directors Dealing Code regarding prior

written notice and acknowledgement.

- VII-45 -



The director must satisfy the chairman or the

designated director that the circumstances are

exceptional and the proposed sale or disposal is the

only reasonable course of action available to the

director before the director can sell or dispose of

the securities. The listed issuer shall give written

notice of such sale or disposal to the Stock Exchange

as soon as practicable stating why it considered

the circumstances to be exceptional. The listed

issuer shall publish an announcement in accordance

with the Listing Rules immediately after any such

sale or disposal and state that the chairman or the

designated director is satisfied that there were

exceptional circumstances for such sale or disposal

of securities by the director.

Under the Directors Dealing Code, a director must

not deal in any securities of the listed issuer without

first notifying in writing the chairman or a director

(otherwise than himself) designated by the board for

the specific purpose and receiving a dated written

acknowledgement. In his own case, the chairman

must first notify the board at a board meeting, or

alternatively notify a director (otherwise than himself)

designated by the board for the purpose and receive

a dated written acknowledgement before any dealing.

The designated director must not deal in

any securities of the listed issuer without first

notifying the chairman and receiving a dated written

acknowledgement.

In each case, (a) a response to a request for clearance

to deal must be given to the relevant director within

five business days of the request being made; and (b)

the clearance to deal in accordance with (a) above

must be valid for no longer than five business days

of clearance being received.

- VII-46 -



2. TAKEOVER OBLIGATIONS

2.1 The Singapore Code

The Singapore Code regulates the acquisition of ordinary shares of public companies and

contain certain provisions that may delay, deter or prevent a future takeover or change in control

of the Company. Any person acquiring an interest, either on his own or together with parties

acting in concert with him, in 30.0% or more of the Company’s voting Shares, or, if such person

holds, either on his own or together with parties acting in concert with him, between 30.0% and

50.0% (both inclusive) of the Company’s voting Shares, and if he (or parties acting in concert

with him) acquires additional voting Shares representing more than �.0% of the Company’s

voting Shares in any six-month period, must, except with the consent of the Securities Industry

Council in Singapore, extend a takeover offer for the remaining voting Shares in accordance

with the provisions of the Singapore Code.

• “Parties acting in concert” comprise individuals or companies who, pursuant to an

agreement or understanding (whether formal or informal), co-operate, through the

acquisition by any of them of Shares in a company, to obtain or consolidate effective

control of that company. Certain persons are presumed (unless the presumption is

rebutted) to be acting in concert with each other. They are as follows:

• a company and its related companies, the associated companies of any of the

company and its related companies, companies whose associated companies

include any of these companies and any person who has provided financial

assistance (other than a bank in the ordinary course of business) to any of

the foregoing for the purchase of voting rights;

• a company and its directors (including their close relatives, related trusts

and companies controlled by any of the directors, their close relatives and

related trusts);

• a company and its pension funds and employee share schemes;

• a person with any investment company, unit trust or other fund whose

investment such person manages on a discretionary basis;

• a financial or other professional adviser and its clients in respect of Shares

held by the adviser and persons controlling, controlled by or under the

same control as the adviser and all the funds managed by the adviser on a

discretionary basis, where the shareholdings of the adviser and any of those

funds in the client total �0.0% or more of the client’s equity share capital;

- VII-47 -



• directors of a company (including their close relatives, related trusts and

companies controlled by any of such directors, their close relatives and

related trusts) which is subject to an offer or where the directors have reason

to believe a bona fide offer for the company may be imminent;

• partners; and

• an individual and his close relatives, related trusts, any person who is

accustomed to act in accordance with his instructions and companies controlled

by the individual, his close relatives, his related trusts or any person who is

accustomed to act in accordance with his instructions and any person who

has provided financial assistance (other than a bank in the ordinary course

of business) to any of the foregoing for the purchase of voting rights.

A mandatory offer must be in cash or be accompanied by a cash alternative at not less

than the highest price paid by the offeror or parties acting in concert with the offeror within the

six months preceding the acquisition of Shares that triggered the mandatory offer obligation.

Under the Singapore Code, where effective control of a company is acquired or consolidated

by a person, or persons acting in concert, a general offer to all other shareholders is normally

required. An offeror must treat all shareholders of the same class in an offeree company equally.

A fundamental requirement is that shareholders in the company subject to the takeover offer

must be given sufficient information, advice and time to consider and decide on the offer.

2.2 Takeovers Code

Public companies with a primary listing of their equity securities in Hong Kong fall

within the regulatory framework of the Takeovers Code. The Takeovers Code is not legally

enforceable. Its purpose is to provide guidelines for companies and their advisers contemplating,

or becoming involved in, takeovers and mergers affecting public companies in Hong Kong.

The aim of the Takeovers Code is to ensure fair treatment of shareholders affected by merger

or takeover transactions. It requires the timely disclosure of adequate information to enable

shareholders to make an informed decision as to the merits of any offer.

The Takeovers Code regulates acquisitions of Shares (whether by way of takeovers,

mergers and share repurchases) in an offeree company which changes its control, currently

defined as a holding, or aggregate holdings, of 30% or more of the voting rights of a company,

regardless of whether that holding or holdings gives de facto control.

The Takeovers Code also applies not only to the offeror and the offeree company, but

also to those persons “acting in concert” with the offeror. Under the Takeovers Code, “persons

acting in concert” are persons who “pursuant to an agreement or understanding, actively co-

operate to obtain or consolidate control of a company through the acquisition by any of them

of voting rights of the company”. The Takeovers Code also describes classes of persons who

are presumed to be acting in concert with others in the same class.

- VII-48 -



The Takeovers Code requires the making of a mandatory general offer to all shareholders

of the offeree company, unless a waiver has been granted by the SFC, where a person or a

group of persons acting in concert (�) acquires control of a company (meaning 30% or more

of the voting rights), whether by a series of transactions over a period of time, or not, or (�)

when already holding between 30% and 50% of the voting rights of a company, acquires more

than �% of the voting rights in the target company in a ��-month period from the date of the

relevant acquisition.

In either of the above cases, an offer must be made to the shareholders for the balance of

the Shares of the public company. The offer must be in cash or accompanied by a cash alternative

at not less than the highest price paid by the purchaser (or persons acting in concert with it) for

Shares of that class during the offer period and within 6 months prior to its commencement.

Z-Obee Holdings Limited - HKEXnews

Documents

Transcript of Z-Obee Holdings Limited - HKEXnews