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Application Proof of

In-Tech Holdings (Cayman) Limited(incorporated in the Cayman Islands with limited liability)

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In-Tech Holdings (Cayman) Limited精達控股有限公司

(incorporated in the Cayman Islands with limited liability)

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IMPORTANT


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EXPECTED TIMETABLE(1)

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IMPORTANT NOTICE TO INVESTORS

This document is issued by us solely in connection with the [REDACTED] and does

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CONTENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [v]

SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [1]

DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [27]

GLOSSARY OF TECHNICAL TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [40]

FORWARD-LOOKING STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [50]

RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [52]

INFORMATION ABOUT THIS DOCUMENT ANDTHE [REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [83]

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DIRECTORS AND PARTIES INVOLVED IN THE [REDACTED] . . . . . . . . . . . [89]

CORPORATE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [93]

INDUSTRY OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [95]

REGULATORY OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [118]

HISTORY, REORGANISATION AND CORPORATE STRUCTURE . . . . . . . . . . [147]

BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [164]

RELATIONSHIP WITH CONTROLLING SHAREHOLDERS . . . . . . . . . . . . . . [279]

DIRECTORS AND SENIOR MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . [283]

SUBSTANTIAL SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [297]

SHARE CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [298]

FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [302]

FUTURE PLANS AND USE OF [REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . . . [357]

[REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [367]

STRUCTURE OF THE [REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [379]

HOW TO APPLY FOR [REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [391]

APPENDIX I – ACCOUNTANT’S REPORT . . . . . . . . . . . . . . . . . . . . . . I-1

APPENDIX II – UNAUDITED PRO FORMA FINANCIALINFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-1

APPENDIX III – PROPERTY VALUATION REPORT . . . . . . . . . . . . . . . III-1

APPENDIX IV – SUMMARY OF THE CONSTITUTION OF THECOMPANY AND CAYMAN COMPANY LAW . . . . . IV-1

APPENDIX V – STATUTORY AND GENERAL INFORMATION . . . . . V-1

APPENDIX VI – DOCUMENTS DELIVERED TO THE REGISTRAROF COMPANIES AND AVAILABLE ON DISPLAY . VI-1

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This summary aims to give you an overview of the information contained in this

document. Since this is a summary, it does not contain all the information that may be

important to you. You should read the whole document, before you decide to invest in the

[REDACTED]. There are risks associated with any investment. Some of the particular

risks in investing in the [REDACTED] are set forth in the section headed “Risk Factors”

in this document. You should read that section carefully before you decide to invest in the

[REDACTED].

OVERVIEW

We are a specialised end-to-end electronics development and manufacturing services

provider focused on customised IoT and jointly-developed products for demanding customers

across the world, particularly those in specialised and highly-regulated industries such as the

automotive, aerospace, medical, marine, banking, security and wireless communication

network industries. As an electronic manufacturing services (“EMS”) provider, we provide our

customers integrated product design and development, manufacturing and validation solutions

for electronic products and sub-assemblies. We work in close collaboration with our customers

at all stages of the product cycle to deliver customised end-to-end solutions for complicated

projects.

We offer a comprehensive range of services including initial product specification and

development, hardware and mechanical product design, selection of components, sub-supplier

management, performance testing of parts and products and product certification. In particular,

our on-site accredited laboratory in Dongguan allows for real time product and part verification

and validation and environmental testing under “one roof” and can help increase process

efficiency and minimise our customers’ time to market.

We develop and produce electronics products, including complete electronic products,

sub-assemblies and assembled PCBs, in response to specific customer requests for customers

in a variety of different industries. Examples of products we produced during the Track Record

Period include power management systems for commercial aircraft, marine navigational

systems, intelligent driver surveillance systems, ultra low power IoT utility meters and IoT

devices and monitoring systems for elderly persons, among many others.

We are often actively involved in the early stages of product conceptualisation and

development for our customers. As such, our research and development capabilities are key to

our success. In the context of our business model and consistent with other EMS providers,

R&D does not generally relate to the invention of new technologies, but primarily to skilful

application of the latest technologies in the pursuit of product engineering, development and

approval of new products, development of new product concepts and other product engineering

activities such as the development of specific test and production processes. As at 31 March

2022, we had over 300 engineers carrying out our R&D activities. These engineers cover a

variety of relevant fields, including electrical hardware engineering, software engineering,

SUMMARY

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mechanical engineering and information technology. According to the Frost & Sullivan Report,

our ratio of R&D expenses to revenue (5.3%, 4.2% and 4.4% in FY2020, FY2021 and FY2022,

respectively) indicates a higher focus on R&D and new product development capabilities than

other leading EMS providers in the specialised electronics segment, who generally have R&D

expenses to revenue ratios ranging from 1% to 2%. We expense all of our R&D expenses as

staff costs and they are recognised in our consolidated income statement under cost of sales or

administrative expenses.

Areas in which we have developed particular proficiency include development and

manufacture of IoT devices and design, verification and production of rugged products that

need to be sealed from and operate reliably in harsh external environments, including products

that require waterproofing and protection from dust and other solid objects or which will

operate in conditions of extreme temperatures and/or humidity. See “Business – Our Core

Technological Competencies” for details. In particular, we believe our in-house development

of IoT solutions provides us with a competitive edge in this growing market, particularly in

niche product segment areas which require real-time and accurate information. We have the

ability to develop and to demonstrate total solutions for new innovative IoT applications to

potential customers. In FY2020, FY2021 and FY2022, revenue from IoT devices and modules

represented approximately 39.8%, 58.6% and 59.4%, respectively, of our total revenue for the

year, and we plan to continue to invest further in our IoT capabilities to facilitate growth of

revenue from this sector.

COMPETITIVE STRENGTHS

We believe the following competitive strengths contribute to our success and differentiate

us from our competitors: (i) we have comprehensive solutions spanning the development,

testing, verification and manufacturing stages of complex projects for highly-regulated

industries; (ii) we have strong long-term relationships with customers spanning multiple key

specialised industry sectors; (iii) we have strategically-located, top-tier facilities; (iv) we are

well-positioned to benefit from growth in the electronics industry, in particular with respect to

RF/IoT related electronic applications in various industries; and (v) we have stable,

experienced management team with deep industry knowledge and technical knowhow who has

established a strong corporate culture. See “Business – Our Competitive Strengths” for further

details.

OUR BUSINESS STRATEGIES

We aim to strengthen our position in the market for providing development and

manufacturing services for the industrial electronics sector by increasing our scope and

enhancing the quality of our services. We aim to achieve these objectives through the following

principal business strategies: (i) increase our IoT business capabilities and market presence;

(ii) increase our production capacity and upgrade our production facilities; (iii) invest in

sustainable manufacturing capabilities; and (iv) expand our operations into new jurisdictions

through acquisition. See “Business – Our Business Strategies” for further details.

SUMMARY

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OUR BUSINESS MODEL

Our revenue is derived from assembling and manufacturing products for sale to ourcustomers, as well as from the fees that we charge for our value-added product developmentservices. We generally price our products, inclusive of manufacturing services, on a “cost-plus”basis agreed between us and our customers.

Our customers typically engage us on a Joint Development or OEM basis. For JointDevelopment Projects, we engage in hardware, mechanical and software design for the projectin conjunction with our customer’s in-house design team and/or take a major role in productand component validation services. For OEM projects, our customers provide the key elementsof hardware, mechanical and software design for the project and lead the validation activities.However, even on projects for which we are not engaged to develop a product, we offer a rangeof ancillary services to support the process. Many of our major OEM customers still use ourengineers to manage the design of production and test equipment as well as manage localsuppliers. Such activities include supplier sourcing and tooling bring-up and will also ask usto carry out product and component validation work. For all projects, we will engage with ourcustomer’s engineering teams to carry out Design for Manufacturing, Design for Assembly andDesign for Test reviews to ensure the products are able to be produced without major yieldissues or inefficient procedures. See “Business – Our Business Model” for a description of theactivities we carry out throughout the design and production process when engaged on a jointdevelopment or OEM basis.

The following table sets forth a breakdown of our revenue by business model for the yearsindicated:

Business Model FY2020 FY2021 FY2022HK$’000 % HK$’000 % HK$’000 %

Joint Development 594,682 42.6 989,745 54.9 995,048 47.6OEM 800,379 57.4 811,925 45.1 1,093,727 52.4

Total 1,395,061 100.0 1,801,670 100.0 2,088,775 100.0

The following table sets forth a breakdown of our gross profit margin by business modelfor the years indicated:

Business Model FY2020 FY2021 FY2022% % %

Joint Development 16.3 14.0 14.8OEM 20.7 19.2 17.1

Overall Gross Profit Margin 18.8 16.3 16.0

SUMMARY

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OUR PRODUCTION FACILITIES

As at the Latest Practicable Date, we had production plants in two locations: one plant in

Dongguan, the PRC and two plants in Penang, Malaysia. Our production facilities in Dongguan

and Penang are fully-functional and are equipped with a wide range of advanced automated

machinery and equipment for our production processes, including SMT assembly, wave

soldering and aqueous cleaning, in addition to testing and laboratory capabilities. We also have

offices and a workshop in Hong Kong providing product refurbishment and repair services. We

have office premises located in Xili, Shenzhen, the PRC, which acts as our operations centre

to carry out a range of services, including R&D services, engineering, purchasing, sales and

marketing, IT, finance and human resources management.

We relocated and expanded our production facilities during the Track Record Period. In

FY2020 we relocated our PRC production facilities from leased premises in Shenzhen to new,

larger premises we constructed in Dongguan. We acquired the land for our Dongguan site in

May 2018, began setting up production lines there in October 2019 and commenced production

in December 2019. We continued to gradually relocate our production and equipment from

Shenzhen to Dongguan through March 2020, at which time we vacated the premises and the

land upon which the Shenzhen production facilities were located was returned to the landlord.

This migration did not result in any suspension of operation or adversely affect our revenue.

Since that time, our production facilities in Dongguan have served as our main production

facilities. Over the Track Record Period, we incurred capital expenditure of RMB123.3 million

(equivalent to HK$139.2 million) for construction of our Dongguan production facilities.

In order to expand our production capacity and diversify our operations given the

unpredictable nature of recent global events, in particular growing Sino-US trade tensions and

announcement of US tariffs on certain types of goods exported from the PRC, we commenced

operations in our production facilities in Penang, Malaysia in 2019. In February 2019, we

leased a site with GFA of 6,038 sq.m, and leased a second site with GFA of 5,888 sq.m. in

September 2020 to further expand the scope of our business operations in Penang. In order to

further expand our production facilities in Penang and consolidate them in a single location,

in January 2021, we purchased a larger third site with a GFA of 32,702 sq.m. at consideration

of MYR31.8 million (equivalent to HK$58.8 million). We commenced operations at this third

site in March 2022 and expect to complete migration of all equipment and operations to the site

by the end of 2022, at which point it will function as our sole operational location in Penang.

This third site will provide enough space to absorb the operations of our first two Penang sites

as well as provide significant room for future expansion. We ceased operations at our first

Penang production site following commencement of operations at our new third Penang site in

March 2022.

The expansion and relocation of our production facilities have impacted our consolidated

income statements, consolidated statements of financial position, and consolidated statements

of cash flows for the Track Record Period in a number of ways, including (i) significant cash

outflows for purchases of property, plant and equipment amounting to approximately

HK$144.2 million, HK$118.3 million and HK$46.1 million in FY2020, FY2021 and FY2022,

SUMMARY

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respectively, most of which related to our new production facilities in Dongguan and Penang,

(ii) payment of severance compensation to redundant employees with respect to our closure of

our site in Shenzhen and relocation of our production facilities to Dongguan, which contributed

to net operating cash outflow of approximately HK$17.6 million in FY2020, (iii) additional

bank borrowings to finance such expansion and (iv) increased depreciation expenses relating

to our property, plant and equipment and right-of-use assets. See “Financial Information –

Factors Affecting our Financial Results – Expansion and relocation of our production

facilities”.

The table below sets forth the utilisation rate of our SMT lines for the years indicated, as

well as our projected total production capacity in terms of maximum potential SMT run hours

for the years ending 31 March 2023, 2024 and 2025, respectively:

FY2020 FY2021 FY2022 FY2023 FY2024 FY2025

PRC Production 8.5 lines(4)(5) 8 lines(5) 8 linesTotal actual SMT run

hours 31,479 42,526 45,027Maximum potential SMT

run hours(1) 48,017(5) 45,192(5) 45,192Utilisation rate(2) 65.6% 94.1%(6) 99.6%

Penang Production 0.5 lines(4) 1.75 lines(4) 2 linesTotal actual SMT run


run hours(1) 2,825 9,886 11,298Utilisation rate(2)(3) 44.5% 49.9%(6) 55.5%

Total across PRC andPenang Production 9 lines 9.75 lines(4) 10 lines 10.5 lines(4) 11.5 lines(4) 12.75 lines(4)

Total actual SMT run


run hours(1) 50,841 55,078 56,490 59,315 64,964 72,025Utilisation rate(2) 64.4% 86.2%(6) 90.8%

Notes:

1. Assuming maximum operating time of 21 hours a day and 22 days a month across our PRC and Penang sites.

2. Based on total actual hours of operation divided by maximum potential hours of operation over the year.

3. The relatively low utilisation rates in our Penang production facilities over the Track Record Period werelargely the result of our Penang operations being in the initial set-up stage. See “Business – Our BusinessStrategies – Increase our production capacity and upgrade our production facilities – 2. Upgrade and expandfunctionality at our production facilities in Penang” for further details.

4. Partial lines are due to retirement/new purchase of SMT lines during the year.

SUMMARY

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5. The decrease in the number of SMT lines in the PRC and the resulting decrease in maximum potential SMTrun hours in the PRC related to the retirement of one older SMT production line during FY2020.

6. The increase in utilisation rate in the PRC from 65.6% in FY2020 to 94.1% in FY2021 was due to increasedproduction in FY2021, in-line with total increase in our revenue from HK$1,395.1 million in FY2020 toHK$1,801.7 million in FY2021, on 0.5 fewer lines, as one older SMT production line was retired duringFY2020. Production increases in Penang were largely offset by introduction of one additional SMT line in the

first half of FY2021.

OUR CUSTOMERS

We have built strong, long-term relationships with reputable multi-national companies,

including global leaders in a wide range of demanding industries, including the automotive,

medical, aerospace, marine, insurance, banking and wireless communications network

industries. We focus on customers in industries that are highly regulated and require a high

degree of specialised technical knowledge and target customers who are undertaking

challenging tasks that EMS companies may not have the capability, or patience, to support.

Through providing end-to-end solutions and engineering services, we have developed strong

working relations with numerous teams throughout our customers’ company structure. Our

customers also typically make significant investments in time and resources to approve our

production processes and product-specific assembly and production test solutions. As a result,

we have generally retained our customers and have continued to work with them on an

on-going basis. Over the Track Record Period, 85.3% of our total revenue came from customers

with whom we had worked for over 10 years.

The following table sets out a breakdown of our revenue by our customers’ industry sector

for the years indicated:

Industry Sector FY2020 FY2021 FY2022HK$’000 % HK$’000 % HK$’000 %

Transportation(1) 483,645 34.7 392,485 21.8 485,411 23.2Medical/Assisted

Living/Wellness 354,850 25.4 406,954 22.5 591,302 28.3Smart Module/

Smart Device 260,576 18.7 644,104 35.8 635,779 30.5Communication/Postal 215,718 15.5 293,490 16.3 317,747 15.2Others(2) 80,272 5.7 64,637 3.6 58,536 2.8

Total 1,395,061 100.0 1,801,670 100.0 2,088,775 100.0

Notes:

1. Transportation primarily included the aerospace, marine and automotive industries.

2. Others primarily included other products, sub-assemblies and PCBAs, for industrial applications not includedin the above, such as commercial X-Ray machines and audio/video streaming equipment.

SUMMARY

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The following table sets out a breakdown of our gross profit margin by our customers’

industry sector for the years indicated:

Industry Sector FY2020 FY2021 FY2022% % %

Transportation(1) 20.5 17.6 25.7Medical, assisted living, and wellness 16.9 17.7 10.0Smart module and smart device 16.3 12.3 11.2Communication and postal 20.5 20.4 20.1Others(2) 20.7 22.0 26.2


Notes:


2. Others primarily included other products, sub-assemblies and PCBAs, for industrial applications notincluded in the above, such as commercial X-Ray machines and audio/video streaming equipment.

Gross profit margin by industry sector generally reflected the decreases exhibited by our

overall gross profit margin over the Track Record Period, as further discussed below. See “–

Summary Consolidated Financial Information”, “Financial Information – Principal Items in the

Consolidated Income Statements”.

In particular, gross profit margin from customers in the transportation industry sector

decreased from 20.5% in FY2020 to 17.6% in FY2021 as demand from aerospace, which was

particularly hit by COVID-related travel restrictions, decreased. As demand from customers in

the aerospace sector recovered in FY2022, gross profit margins from customers in the

transportation sector also increased to 25.7%.

Revenue contribution from customers in the smart module and smart device industry

sector increased significantly over the Track Record Period, from HK$260.6 million in FY2020

to HK$635.8 million in FY2022. Gross profit margins over the same period decreased, largely

due to the execution of large volume projects for Customer A, which due to their overall size

and batch size contributed to an increase in the revenue and gross profit generated from the

smart modules/smart devices industry from FY2020 to FY2022 and justified lower margins.

Gross profit margin from customers in the medical, assisted living and wellness industry

sector increased from 16.9% in FY2020 to 17.7% in FY2021. Gross profit margin decreased

to 10.0% in FY2022, largely due to product mix, as we sold a large amount of a lower-margin

product to a customer in this sector over the year.

SUMMARY

– 7 –


Gross profit margin from customers in the communications and postal industry sector

remained relatively stable over the Track Record Period at 20.5% in FY2020, 20.4% in FY2021

and 20.1% in FY2022.

Our products are sold to customers throughout the world, primarily in North America,

Europe and Asia-Pacific (including Australia). The following table sets out a breakdown of our

revenue by geographical location for the years indicated:

GeographicRegion(1)

FY2020 FY2021 FY2022HK$’000 % HK$’000 % HK$’000 %

Europe 732,173 52.5 1,073,497 59.6 1,302,074 62.3North America 480,635 34.5 397,252 22.0 498,293 23.9Asia-Pacific 178,540 12.8 329,282 18.3 288,340 13.8Others(2) 3,713 0.2 1,639 0.1 68 0.0

Grand Total 1,395,061 100.0 1,801,670 100.0 2,088,775 100.0

Notes:

1. The breakdown is based on the location of the contracting party of our customers. Our customers, inparticular multinational corporations, may place purchase orders from various regional offices. Thelocations where our products are ultimately used may be different from the location of the contractingentity.

2. Others mainly includes locations in South America.

For FY2020, FY2021 and FY2022, the revenue attributable to our five largest customers

amounted to HK$699.2 million, HK$1,211.1 million and HK$1,354.1 million, representing

50.2%, 67.2% and 64.7%, respectively, of our total revenue for the year and the revenue

attributable to our largest customer amounted to HK$185.9 million, HK$575.9 million and

HK$548.0 million, representing 13.3%, 32.0% and 26.2%, respectively, of our total revenue for

the year. All of our five largest customers during the Track Record Period are Independent

Third Parties.

SUMMARY

– 8 –


The following table sets out a breakdown of our gross profit margin by geographical

location for the years indicated:

Geographic Region(1) FY2020 FY2021 FY2022% % %

Europe 15.6 14.0 12.4North America 22.2 20.3 23.8Asia-Pacific 23.0 19.3 18.8Others(2) 20.7 15.1 15.3


Notes:



Gross profit margin by geographic location generally reflected the decreases exhibited by

our overall gross profit margin over the Track Record Period, as further discussed below. See

“– Summary Consolidated Financial Information”, “Financial Information – Principal Items in

the Consolidated Income Statements”.

Revenue contribution from orders placed by customers in Europe increased significantly

over the Track Record Period, representing 59.6% of total revenue in FY2021 and 62.3% of

total revenue in FY2022. Much of this growth was driven by customers in the smart modules

and devices industry sector. As a result gross profit margins for Europe decreased over the

Track Record Period.

Gross profit margin from orders placed by customers in North America decreased from

22.2% in FY2020 to 20.3% in FY2021, largely reflecting downturns in the aerospace and

commercial postal and printing industries. As demand, particularly from customers in the

aerospace industry recovered in FY2022, gross profit margins from customers in North

America also recovered to 23.8%.

Gross profit margin from orders placed by customers in Asia-Pacific decreased from

23.0% in FY2020 to 18.8% in FY2022, primarily due to the execution of a large scale project

for Customer E, which resulted in them being one of our five largest customers in FY2021 and

FY2022.

SUMMARY

– 9 –


OUR SUPPLIERS

During the Track Record Period, we purchased materials, components and parts

predominantly from the PRC, the United States, Europe, Hong Kong, Australia, Japan and

Taiwan and had over 700 suppliers in each of FY2020, FY2021 and FY2022. For FY2020,

FY2021 and FY2022, purchases from our five largest suppliers amounted to HK$236.6 million,

HK$455.2 million and HK$499.5 million, representing 26.1%, 37.2% and 30.5% of our total

purchases, respectively. In the same years, purchases from our largest supplier amounted

HK$105.1 million, HK$174.0 million and HK$198.2 million, representing 11.6%, 14.2% and

12.1% of our total purchases for the same years, respectively. All of our five largest suppliers

during the Track Record Period are Independent Third Parties.

MAJOR CUSTOMERS WHO WERE ALSO OUR SUPPLIERS

During the Track Record Period, to the best knowledge and belief of our Directors, four

of our major customers were also our suppliers with respect to certain purchases we made for

projects on which they were our customers. In FY2020, FY2021 and FY2022, purchases from

these four customers represented 0.3%, 0.2% and 1.4% of our total purchases for the year. The

reasons for these purchases generally related to situations in which the customer was better

able to procure needed materials, such as in cases of material shortages. Based on their

experience in the electronics manufacturing and development services market in the PRC, our

Directors note that the practice of purchasing materials, components and parts from customers

is commonly adopted in this market in the circumstances.

COMPETITIVE LANDSCAPE

According to the Frost & Sullivan Report, the specialised electronics sector of the EMS

market in the PRC is relatively fragmented with approximately over 600 industry players in

2021 and the top 10 EMS providers in the sector accounting for an aggregate market share of

approximately 59.5% in 2021. The high degree of fragmentation in the specialised electronics

sector of the EMS market is attributed to the wide variety of products and coverage of

industries, including but not limited to, industrial, automotive, medical, and other applications.

According to the Frost & Sullivan Report, based on the revenue generated from sales of

products manufactured in the PRC, it is estimated that we had a market share of approximately

0.1% and 0.2% in the overall EMS market and specialised electronics segment, respectively,

in the PRC in 2021.

SUMMARY CONSOLIDATED FINANCIAL INFORMATION

The following tables set forth a summary of our financial information for FY2020,

FY2021 and FY2022. The summary consolidated financial information has been prepared in

accordance with HKFRS. You should read this summary together with the consolidated

financial information as set forth in the Accountants’ Report in Appendix I to this document,

including the related notes, as well as the information set forth in “Financial Information” in

this document.

SUMMARY

– 10 –


Summary consolidated income statements

FY2020 FY2021 FY2022HK$’000 HK$’000 HK$’000

Revenue 1,395,061 1,801,670 2,088,775Cost of sales (1,132,464) (1,507,434) (1,754,213)

Gross profit 262,597 294,236 334,562Administrative expenses (190,852) (189,133) (217,609)Distribution costs (5,783) (5,689) (5,830)Reversal of impairment

loss on financial assets, net 239 52 169Other income 9,688 7,631 3,574Other (losses)/gains, net (26,223) 23,371 16,023

Operating profit 49,666 130,468 130,889- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Finance income 1,007 509 2,576Finance costs (4,199) (10,883) (9,857)

Finance costs, net (3,192) (10,374) (7,281)- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Profit before income tax 46,474 120,094 123,608Income tax expense (13,888) (30,455) (28,828)

Profit for the year 32,586 89,639 94,780

SUMMARY

– 11 –


Non-HKFRS Measure

To supplement our consolidated income statements which are presented in accordance

with HKFRS, we also use adjusted profit as an additional financial measure. We present this

financial measure because it is used by our management to evaluate our operating performance

as it excludes charges and gains our management do not expect to recur and thus provides

useful information on our on-going business. We believe that such non-HKFRS measure

provides useful information to investors in understanding and evaluating our results of

operations in the same manner as it helps our management and in comparing financial results

across accounting periods and to those of our peer companies.

Adjusted profit eliminates the effects of (i) [REDACTED] expenses and (ii) government

grants received. The term of adjusted profit is not defined under HKFRS. The use of adjusted

profit has material limitations as an analytical tool, as adjusted profit does not include all items

that impact our profit for the year. We compensate for these limitations by reconciling this

financial measure to the nearest HKFRS performance measure, which should be considered

when evaluating our performance. The following table reconciles our adjusted profit for the

year presented to profit for the year, the most directly comparable financial measure calculated

and presented in accordance with HKFRS:

FY2020 FY2021 FY2022HK$’000 HK$’000 HK$’000

Profit for the year 32,586 89,639 94,780Add:[REDACTED] expenses 885 825 14,430

Less:Government grants (9,045) (7,386) (3,341)

Adjusted profit (Non-HKFRS measure) 24,426 83,078 105,869

Our revenue in FY2020 was relatively low, primarily due to the outbreak of the

COVID-19 pandemic and measures taken in response to the pandemic which resulted in the

closure of our production facilities in the PRC from 18 January 2020 to 9 February 2020, and

in Penang from 18 March 2020 through 8 April 2020 and further closed down from 19 October

2021 to 27 October 2021 in order to prevent spreading of COVID-19 as stipulated by the

Malaysian government. Moreover, production in our PRC production facilities ramped up

gradually over the course of February 2020 and March 2020 as our workers, many who had

returned home for the Chinese New Year, returned back to work. Certain products originally

expected to launch in FY2020 were delayed until FY2021. The delivery of products accounting

for approximately HK$106.1 million of revenue originally scheduled to be made in FY2020

was postponed to FY2021 (of which approximately HK$58.8 million was due to component

shortages). Our revenue increased approximately 29.1% from FY2020 to FY2021, primarily

due to full operation of our production facilities and increased orders in FY2021. For FY2022,

our revenue increased approximately 15.9% as compared with the previous year, driven

primarily by increased sales and revenue from customers in the medical, assisted living and

SUMMARY

– 12 –


wellness and transportation industry sectors. To a lesser extent, the increase in revenuestracked increases in prices due to spot-buying of materials and components due to supplyconstraints stemming from the global shortages of IC components. Such spot buys are onlymade after our customer authorises such purchases and agrees that any increase in cost is alsoadded to the price of the product. Additional revenue and equivalent amounts of costs of salesfrom spot-buys increased from HK$6.2 million in FY2021 to HK$87.8 million in FY2022.

Our cost of sales primarily includes cost of inventory sold and staff costs. For FY2020,FY2021 and FY2022, cost of inventory sold accounted for 78.6%, 82.9% and 82.9%,respectively, and staff costs accounted for 13.2%, 10.9% and 10.8%, respectively, of our totalcost of sales for the period.

The decrease of gross profit margin from 18.8% for FY2020 to 16.3% for FY2021 wasprimarily due to (i) increased depreciation expenses related to increased purchases of property,plant and equipment in connection with the opening of, and relocation of our operations to, ourproduction facilities in Dongguan, the PRC, and Penang, Malaysia, and (ii) a shift in productmix in FY2021, in particular as (a) revenue contribution and gross profit margin fromcustomers in the transportation industry sector decreased as demand from aerospace, whichwas particularly hit by COVID-related travel restrictions, decreased; and (b) revenuecontribution from customers in the smart module and smart device industry sector increasedsignificantly while gross profit margins decreased, largely due to execution of large volumeprojects, as further discussed below. Gross profit margin remained relatively stable at 16.3%in FY2021 and 16.0% at FY2022. There was an increase in spot-buys in FY2022, whichresulted in an additional HK$87.8 million in spot-buy premiums being added to both revenueand cost of sales in FY2022 (compared to HK$6.2 million in FY2021). Due to our customersagreeing to increase price to cover any increase in costs, this adjustment had no effect on ourgross profit but lowered gross profit margin for the periods.

Operating profit and profit for the year also decreased in FY2020 mainly attributable todecreased production and sales in FY2020 due to the effect of the COVID-19 pandemic as‘detailed above. In addition, the costs of commencing operations and transferring productionto Penang and Dongguan during FY2020 were significant. For example, they included the costof operation of a fully-loaded new factory in Penang while output was minimal. We alsoincurred additional costs in connection with shifting our production to new productionfacilities: from Shenzhen to Dongguan in the PRC and to Penang in Malaysia. All projectsbegun in, or moved to, such new production facilities and equipment installed needed to gothrough extensive validation and acceptance tests before mass production of any product couldbegin. Other costs during this time included the training of new staff in Penang, the travel ofstaff between Penang and Dongguan to facilitate the transfer of knowledge andtroubleshooting, and other duplicated cost of organisation associated with running multiplesites in parallel, which was not the case in FY2019. These costs adversely affected ouroperating profit and profit for the year in FY2020 and were only partly offset by governmentgrants and waiver of social insurance in FY2020. Operating profit remained relatively stableat HK$130.5 million for FY2021 and HK$130.9 million for FY2022. However, profit for theyear increased from FY2021 to FY2022 primarily due to a decrease in effective tax rate as wewere able to use previously unrecognised tax losses and there was no withholding tax ondividends as compared to withholding tax on dividends of HK$4.8 million in FY2021.

SUMMARY

– 13 –


Summary consolidated statements of financial position

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

Non-current assets 526,000 623,176 655,216Current assets 764,170 964,698 1,208,878Inventories 300,613 351,475 583,620Trade receivables 183,519 275,915 355,006Deposits, prepayments and other receivables 70,729 56,657 51,896Pledged deposits 9,316 70,735 9,070Cash and cash equivalents 198,640 206,285 204,839

Current liabilities 645,510 843,554 1,123,713Trade payables 221,689 310,862 401,606Other payables and accruals 255,417 326,817 335,701Income tax liabilities 8,508 899 14,083Bank borrowings 149,905 192,859 359,659Lease liabilities 9,991 12,117 12,131Provisions – – 533Net current assets 118,660 121,144 85,165Non-current liabilities 29,224 23,865 13,761Equity attributable to owners of the

Company 615,436 720,455 726,620

Our net current assets increased from HK$118.7 million as at 31 March 2020 to

HK$121.1 million as at 31 March 2021 primarily due to (i) an increase of HK$92.4 million in

trade receivables, (ii) an increase of HK$61.4 million in pledged deposits, and (iii) an increase

of HK$50.9 million in inventories. These increases in current assets in FY2021 were partly

offset by (i) an increase of HK$89.2 million in trade payables, (ii) an increase of HK$71.4

million in other payables and accruals, and (iii) an increase of HK$43.0 million in bank

borrowings, which were primarily used to fund our new production facilities in Dongguan and

Penang. Our net current assets decreased from HK$121.1 million as at 31 March 2021 to


trade payables, (ii) an increase of HK$166.8 million in bank borrowings, (iii) an increase of

HK$13.2 million in income tax liabilities and (iv) a decrease of HK$61.7 million in pledged

deposits, largely offset by (i) an increase of HK$79.1 million in trade receivables, and (ii) an

increase of HK$232.1 million in inventories.

SUMMARY

– 14 –


Our equity attributable to the owners of the Company increased from HK$615.4 million

as at 31 March 2020 to HK$720.5 million as at 31 March 2021 primarily due to total

comprehensive income of HK$125.0 million in FY2021. Our equity attributable to the owners

of the Company remained relatively stable at HK$720.5 million as at 31 March 2021 and

HK$726.6 million as at 31 March 2022.

Summary consolidated statements of cash flows

FY2020 FY2021 FY2022HK$’000 HK$’000 HK$’000

Operating cashflows before movement in

working capital 103,222 170,011 160,718Changes in working capital (100,961) 45,420 (190,879)Income tax paid (19,890) (27,796) (12,356)Net cash (used in)/generated from operating

activities (17,629) 187,635 (42,517)Net cash used in investing activities (141,939) (117,763) (44,111)Net cash generated from/(used in) financing

activities 82,460 (69,152) 80,884

For FY2020, we recorded cash outflow from operating activities of approximately

HK$17.6 million. This was primarily due to the payment of severance compensation to

redundant employees pursuant to the closing of our previous production facility in Shenzhen

and relocation of our production facilities to Dongguan in FY2019. In respect of such

restructuring measures, we had made provisions amounting to HK$76.9 million as at 31 March

2019 and all such provisions were fully paid as at 31 March 2020, thereby contributing towards

a net operating cash outflow for FY2020. For FY2022, we recorded cash outflow from

operating activities of approximately HK$42.5 million. This was primarily due to an increase

in inventories of HK$221.5 million in FY2022. Such increase was primarily due to (i) an

increase in production activities and orders, (ii) shortages in certain electronic components

causing longer lead times and increased raw materials inventories while we waited for delivery

of electronic components, and (iii) some of our customers giving us binding commitments so

that we could commence purchase of electronic components earlier and stockpile such

components to mitigate the effect of any potential shortages or increase in delivery lead times.

See “Risk Factors – Risks Related to our Business and our Industry – We had net operating cash

outflows for FY2020 and FY2022”

SUMMARY

– 15 –


Key financial ratios

FY2020 FY2021 FY2022

Gross profit margin(1) 18.8% 16.3% 16.0%Net profit margin(2) 2.3% 5.0% 4.5%Adjusted net profit margin

(Non-HKFRS measure)(3) 1.8% 4.6% 5.1%Return on equity(4) 5.2% 13.4% 13.1%Return on total assets(5) 2.6% 6.2% 5.5%Interest coverage ratio(6) 12.1 12.0 13.5Current ratio(7) 1.2 1.1 1.1Quick ratio(8) 0.7 0.7 0.6Gearing ratio(9) 30.0% 30.7% 52.0%Net debt-to-equity ratio(10) N/A 2.1% 23.9%

Notes:

(1) The calculation of gross profit margin is based on gross profit for the year divided by revenue and multipliedby 100%.

(2) The calculation of net profit margin is based on profit for the year divided by revenue and multiplied by 100%.

(3) Our non-HKFRS measure of adjusted net profit margin is calculated based on our adjusted profit for therelevant year divided by our revenue for the corresponding year and multiplied by 100%. We define adjustedprofit as profit for the year excluding [REDACTED] expenses and government grants. The term adjustedprofit is not defined under HKFRS. Our adjusted profit is solely for reference and does not include theabovementioned items that impact our profit for the relevant years.

(4) The calculation of return on equity is based on profit for the year divided by average balance of total equityand multiplied by 100%.

(5) The calculation of return on total assets is based on profit for the year divided by average balance of total assetsand multiplied by 100%.

(6) The calculation of interest coverage ratio is based on profit before interest and tax divided by finance costs.

(7) The calculation of current ratio is calculated as current assets divided by current liabilities.

(8) The calculation of quick ratio is calculated as current assets less inventories divided by current liabilities.

(9) The calculation of gearing ratio is calculated as total debt (being total borrowings plus lease liabilities) dividedby total equity and multiplied by 100%

(10) The calculation of net debt to equity ratio is based on net debt (being total borrowings plus lease liabilities lesscash and cash equivalents) divided by total equity and multiplied by 100%. For FY2020 we had a net cashposition.

SUMMARY

– 16 –


DIVIDENDS

Our Company has no fixed dividend policy specifying a dividend payout ratio. Any

amount of dividends we pay will be at the discretion of our Directors and will depend on our

future operations and earnings, capital requirements, contractual restrictions and others factors

which our Directors consider relevant. Any declaration and payment as well as the amount of

dividends will be subject to our constitutional documents and the Cayman Companies Act. Our

Shareholders in a general meeting may approve any declaration of dividends, which must not

exceed the amount recommended by our Board. No dividend shall be declared or payable

except out of our profits and reserves lawfully available for distribution. Our future

declarations of dividends may or may not reflect our historical declarations of dividends and

will be at the absolute discretion of the Board.

As at the Latest Practicable Date, no dividends had been declared or paid by our Company

since its incorporation. Pursuant to a directors’ resolution dated 17 June 2021, dividends of

HK$40 million were declared by In-Tech Investment, a company now comprising our Group,

to the equity holders of that company as at 31 March 2021. Such dividends were paid in cash

on 22 June 2021. Pursuant to a directors’ resolution dated 26 August 2021, dividends of HK$60

million were declared by In-Tech Investment to the equity holders of that company as at 31

March 2021. HK$4.5 million of such dividends were offset by the consideration of the disposal

of equity interests in a private company incorporated in the United Kingdom from our Group

to In-Tech Holdings on 30 September 2021, and the remaining HK$55.5 million were paid in

cash on 5 October 2021 using our internal resources. Pursuant to a directors’ resolution dated

31 May 2022, dividends of HK$125 million were declared by In-Tech Electronics HK to

In-Tech Electronics BVI, which in turn declared such dividends to its equity holders as at 31

March 2021. Pursuant to the resolution, such dividends are to be paid on or before 31

December 2022. As at 1 June 2022, none of such dividends have been paid.

CONTROLLING SHAREHOLDERS

Immediately following the completion of the Capitalisation Issue and the [REDACTED]

(assuming that the [REDACTED] is not exercised and without taking into account any Shares

to be issued upon exercise of any options which may be granted under the [REDACTED]

Share Option Scheme and the Share Option Scheme), In-Tech Holdings will be beneficially

interested in approximately [REDACTED]% of the issued share capital of our Company and

is accordingly entitled to exercise or control the exercise of 30% or more of the voting power

at general meetings of our Company. In-Tech Holdings is an investment holding company

owned as to 77.11% by Source Capital and 22.89% by Piggy Doggy. Source Capital is in turn

held by 15 shareholders. As these shareholders have decided to restrict their ability to exercise

control over In-Tech Holdings and thus our Company by holding their interests through a

common investment holding company, namely Source Capital, they are all presumed to be a

group of Controlling Shareholders, together with In-Tech Holdings and Source Capital. See

“Relationship with Controlling Shareholders” for further details.

SUMMARY

– 17 –


[REDACTED] SHARE OPTION SCHEME

Our Company has adopted the [REDACTED] Share Option Scheme on [●] 2022 and

granted options under the [REDACTED] Share Option Scheme to seven grantees, including

one Director and two senior management members, to subscribe for an aggregate of

[REDACTED] Shares, representing [REDACTED]% of the issued Shares immediately

following the completion of the Capitalisation Issue and the [REDACTED] (assuming no

exercise of the [REDACTED] or any options that may be granted under the [REDACTED]

Share Option Scheme or the Share Option Scheme). Assuming full exercise of the outstanding

options granted under the [REDACTED] Share Option Scheme, the shareholding of the

Shareholders immediately following completion of the Capitalisation Issue and the

[REDACTED] (assuming no exercise of the [REDACTED] or any options that may be

granted under the Share Option Scheme) will be diluted by approximately [REDACTED]% as

calculated based on [REDACTED] Shares then in issue. See “E. [REDACTED] Share Option

Scheme and Share Option Scheme – 1. [REDACTED] Share Option Scheme” in Appendix V

to this document for further details.

SHARE OPTION SCHEME

Our Company has conditionally adopted the Share Option Scheme on [●]. The principal

terms of the Share Option Scheme are set out in “E. [REDACTED] Share Option Scheme and

Share Option Scheme – 2. Share Option Scheme” in Appendix V to this document.

[REDACTED] EXPENSES

Assuming the [REDACTED] of HK$[REDACTED] per Share, being the mid-point of

the indicative range of the [REDACTED] stated in this document, and the [REDACTED] is

not exercised, the total amount of expenses in relation to the [REDACTED], including the

[REDACTED] commission, are estimated to be HK$[REDACTED] million (equivalent to

approximately [REDACTED]% of the expected gross [REDACTED]), of which (i)

[REDACTED] expenses (including but not limited to commissions and fees) amount to

HK$[REDACTED] million, and (ii) non-[REDACTED] expenses amount to

HK$[REDACTED] million, comprising fees and expenses of accountants of

HK$[REDACTED] million, fees and expenses of legal advisors of HK$[REDACTED]

million and other fees and expenses of HK$[REDACTED] million. Approximately

HK$[REDACTED] million of the total amount of expenses in relation to the [REDACTED]

is directly attributable to the [REDACTED] of the Shares to the public and will be accounted

for as a deduction from equity upon completion of the [REDACTED]. The remaining

estimated expenses in relation to the [REDACTED] of approximately HK$[REDACTED]

million was or will be charged to our profit or loss, of which approximately

HK$[REDACTED] million had been recorded in our consolidated income statements during

the Track Record Period, approximately HK$[REDACTED] million had been recorded in our

consolidated income statements during FY2019, and approximately HK$[REDACTED]

million is expected to be charged to our profit or loss for the year ending 31 March 2023.

SUMMARY

– 18 –


[REDACTED]

Based on theminimumindicative

[REDACTED] ofHK$[REDACTED]

per Share

Based on themaximumindicative

[REDACTED] ofHK$[REDACTED]

per ShareHK$ HK$

Market capitalisation upon completion of

the [REDACTED](2) [REDACTED] [REDACTED]Unaudited pro forma adjusted consolidated net tangible

assets per Share(3) [REDACTED] [REDACTED]

Notes:

1. All statistics in this table are based on the assumption that the [REDACTED] is not exercised. For details,please see “Appendix II – Unaudited Pro Forma Financial Information”.

2. The market capitalisation is calculated based on [REDACTED] Shares in issue immediately following thecompletion of the [REDACTED], which assumes that the [REDACTED] is not exercised and does not takeinto account any Shares which may be allotted and issued pursuant to the exercise of the options which maybe granted under the [REDACTED] Share Option Scheme and the Share Option Scheme.

3. The unaudited pro forma adjusted net tangible assets per Share is calculated after making the adjustments asset out in “Appendix II – Unaudited Pro Forma Financial Information” to this document and on the basis that[REDACTED] Shares are issued immediately following the completion of the Capitalisation Issue and the[REDACTED].

4. Save as disclosed above, no adjustment has been made to reflect any trading result or other transactions enteredinto subsequent to 31 March 2022.

(5) The unaudited pro forma adjusted consolidated net tangible assets of the Group does not take into account thedividend of approximately HK$125,000,000 declared by the Group on 31 May 2022. The unaudited pro formaadjusted consolidated net tangible assets per Share would have been HK$[REDACTED] andHK$[REDACTED] per Share based on the [REDACTED] of HK$[REDACTED] and HK$[REDACTED],respectively, after taking into account the declaration of dividend of HK$125,000,000.

SUMMARY

– 19 –


USE OF [REDACTED]

We estimate that the aggregate net [REDACTED] to us from the [REDACTED] (afterdeducting [REDACTED] fees and estimated expenses payable by us in connection with the[REDACTED], and assuming an [REDACTED] of HK$[REDACTED] per [REDACTED],being the mid-point of the indicative [REDACTED] range) will be approximatelyHK$[REDACTED] million, assuming that the [REDACTED] is not exercised. We currentlyintend to apply such net [REDACTED] in the following manner:

• approximately HK$[REDACTED] million, representing approximately[REDACTED]% of the net [REDACTED], will be used for increasing ourproduction capacity and upgrading our production facilities, including: (i)approximately HK$[REDACTED] million will be used for increasing ourproduction capacity, including: (a) approximately HK$[REDACTED] million willbe used for purchasing three SMT lines to replace existing SMT lines in ourDongguan facilities and purchasing three additional SMT lines and relatedequipment such as solder paste printers, inspection equipment, reflow ovens forPCB assembly, wave soldering machines, and AOI machines; and (b) approximatelyHK$[REDACTED] million will be used for additional component and producttesting facilities, including ICT and other testing stations and a new flying probetester, to increase our processing capacity to correspond with the additional SMTcapacity; and (ii) approximately HK$[REDACTED] million will be used forupgrading and expanding functionality at our production facilities, particularly inPenang, including: (a) approximately HK$[REDACTED] million will be used forrenovating our third site in Penang to bring it up to EMS standards; (b)approximately HK$[REDACTED] million will be used for the expansion andaccreditation of our reliability, environmental and product verification facilities; (c)approximately HK$[REDACTED] million will be used for hiring 21 additionalcustomer-facing engineers; and (d) approximately HK$[REDACTED] million willbe used for purchasing laboratory equipment related to new product introduction andlicencing;

• approximately HK$[REDACTED] million, representing approximately[REDACTED]% of the net [REDACTED], will be used for increasing our IoTbusiness capabilities and market presence, including: (i) approximatelyHK$[REDACTED] million will be used to invest in product development resourcesand equipment for IoT projects, including: (a) approximately HK$[REDACTED]million will be used for hiring an additional 21 engineers to handle the additionalproject volume, (b) approximately HK$[REDACTED] million will be used forpurchasing additional tools and equipment (including software development toolsand hardware validation equipment), and (c) approximately HK$[REDACTED]million will be used for funding of other project development expenses; and (ii)approximately HK$[REDACTED] million will be used for enhancing our B2B saleschannels and our global market presence by appointing six sales and marketingagents with technical backgrounds and relevant industry experience and increasingattendance at trade shows for relevant industries;

SUMMARY

– 20 –


• approximately HK$[REDACTED] million, representing approximately[REDACTED]% of the net [REDACTED], will be used for funding the acquisitionof an electronics product development and marketing company based in one of ourmajor markets;

• approximately HK$[REDACTED] million, representing approximately[REDACTED]% of the net [REDACTED], will be used for investing in sustainablemanufacturing capabilities in our production facilities in Dongguan and Penang,including: (i) approximately HK$[REDACTED] million will be used for purchasingand installing solar panels; and (ii) approximately HK$[REDACTED] million willbe used for developing and implementing our ongoing ESG initiatives,encompassing reduced water consumption, energy waste and usage of forestry;

• approximately HK$[REDACTED] million, representing approximately[REDACTED]% of the net [REDACTED], will be used for upgrading our ITcapabilities; and

• approximately HK$[REDACTED] million, representing approximately[REDACTED]% of the net [REDACTED], will be used for funding our generalworking capital.

RISK FACTORS

There are a number of risks involved in our operations and in connection with the[REDACTED], many of which are beyond our control. Major risks we face that may have amaterial adverse effect on us include, but are not limited to, the following: (i) we may benegatively affected by price increases or a shortage or delay in supply of materials, componentsand parts required for our business operation; (ii) we have no long-term binding agreementswith our customers and rely on our ability to maintain good business relationships with ourmajor customers; (iii) the Sino-US trade war and potential new tariffs could materially andadversely affect our business, financial condition and results of operations; (iv) we relysignificantly on the North America and Europe markets, and we may be affected by global andregional social, political, regulatory and economic conditions; (v) we may not be able tocontinue to grow and to implement our business expansion plans successfully; (vi) our successdepends to a large extent on our product designs, research and development; and (vii) ourbusiness has been and may continue to be affected by the COVID-19 pandemic. See “RiskFactors” for a detailed discussion of these and other risks we face.

RECENT DEVELOPMENTS AND NO MATERIAL ADVERSE CHANGE

Impact of COVID-19 on our operations

In December 2019, a respiratory illness known as COVID-19 emerged and has spreadglobally. Various government measures and controls have since been implemented to tackleCOVID-19, including, among others, travel restrictions, lock-down orders, mandatoryquarantine for travellers or returnees from affected regions, and extended closure of schoolsand businesses. Despite such government measures to contain the spread of the pandemic, andeven though vaccines have been developed, the pandemic has continued, especially with the

SUMMARY

– 21 –


emergence of new variants such as the Delta and Omicron strains. Countries around the worldare continuing to be impacted by fluctuations in infection rates, making it difficult to fully liftexisting containment measures and reopen economies.

Our businesses operations are primarily located in Dongguan, the PRC; Penang,

Malaysia; and Hong Kong, which are among the areas affected by the COVID-19 pandemic.

Since the outbreak of COVID-19, we have experienced periodic suspensions and/or limitations

on staffing in our production facilities which has impacted our operations. Our production

facilities located in Dongguan were temporarily closed beginning in 18 January 2020 to 9

February 2020, and production ramped back up over the course of February and March 2020

as our workers, many who had returned home for the Chinese New Year, gradually returned

back to work. Largely as a result of such suspension, the annual utilisation rate for SMT lines

based in our production facilities in the PRC fell to 65.6% for FY2020. See “Business – Recent

Developments – Measures Taken in Response to the Coronavirus Outbreak” for further

information regarding the impact of COVID-19 on our production. Likewise, our facilities

located in Penang were also temporarily closed from 18 March 2020 through 8 April 2020

pursuant to the imposition of various movement control orders throughout 2020 and a state of

emergency order in January 2021 by the Malaysian government, and further closed down from

19 October 2021 to 27 October 2021 in order to prevent spreading of COVID-19 as stipulated

by the Malaysian government. Other than these periods, as of the Latest Practicable Date, we

have been able to operate our production facilities as usual and there have been no further

closures of our production facilities due to COVID-19, including the more recent Delta and

Omicron variants, or for any other reasons.

The outbreak of COVID-19 in the PRC and Malaysia has also resulted in the temporary

closure of many corporate offices, retail stores and manufacturing facilities across these

countries. Various government measures to control COVID-19 have resulted and may continue

to result in limitations on our ability to travel, delays in transportation, shortage of manpower

and has affected our discussing of new opportunities with existing and potential clients, the

results of which may materially and adversely affect our business and results of operations. See

“Risk Factors – Risks relating to our business and industry in which we operate – Risks relating

to our Business and our Industry – Our business has been and may continue to be interrupted

by the outbreak of COVID-19” for further details. Furthermore, where we were responsible for

the delivery of products to our customers, we were impacted by the delay in transportation of

our finished products as a result of COVID-19 due to the decreased frequency of freight. These

issues continued as of the Latest Practicable Date. The delivery of products accounting for

approximately HK$106.1 million of revenue originally scheduled to be made in FY2020 was

postponed to FY2021, delivery of products representing HK$125.2 million in revenue

originally scheduled to be made in FY2021 was delayed to FY2022 and delivery of products

representing HK$266.3 million in revenue originally scheduled to be made in FY2022 was

delayed to FY2023 (of which approximately HK$260.6 million was due to component

shortages).

SUMMARY

– 22 –


The COVID-19 pandemic has also affected our customers and the industries in which they

operate. For example, due to the quarantine requirements imposed on travellers and

international travel restrictions, our aerospace customers were disproportionately affected by

COVID-19. This, in turn, affected their ability and willingness to engage the services of their

suppliers, such as our Company.

Largely as a result of these factors, our revenue and profit for the year for FY2020 were

relatively low. In FY2021, our revenue and profit recovered. However, our gross profit margin

decreased from 18.8% in FY2020 to 16.3% in FY2021, due in part to a shift in product mix

in FY2021, in particular as (a) revenue contribution and gross profit margin from customers in

the transportation industry sector decreased as demand from aerospace, which was particularly

hit by COVID-related travel restrictions, decreased; and (b) revenue contribution from

customers in the smart module and smart device industry sector increased significantly while

gross profit margins decreased, largely due to execution of large volume projects, as well as

increased depreciation expenses related to increased purchases of property, plant and

equipment in connection with the opening of, and relocation of our operations to, our

production facilities in Dongguan, the PRC, and Penang, Malaysia. See “Financial Information

– Year to Year Comparison of Results of Operations” for further details. Due to the diverse

range of industries we serve, we were able to mitigate the impact of COVID-19 on our

operations and revenues due to increased orders from our customers operating in the education

and leisure and marine industries. We also benefited from government subsidies in Hong Kong

in the amount of HK$4.0 million under the employment support scheme of the Hong Kong

government’s anti-epidemic fund in FY2021 and had certain social insurance obligation waived

by the government in the PRC in FY2020, FY2021 and FY2022 in the amount of HK$2.6

million, HK$15.1 million and nil, respectively. We believe our ability to respond to the

COVID-19 pandemic highlights the flexibility provided by our extensive and diverse product

and service offerings and the resilience it provides to our business and financial results in

unexpected and changing circumstances.

The impact of component shortages on our operations

Starting at the end of 2020 and continuing through 2021 and into 2022, electronic

components, along with certain other commodities such as metals, steel, resin and fibreglass,

were trading at high prices. In addition, the operations of our suppliers were adversely affected

due to the global spread of COVID-19 and we have experienced shortages, continuing as at the

Latest Practicable Date, of certain electronic components, including chip components LCDs

and PCBs, which have also become acutely challenging to obtain due to demand exceeding

supply. Such shortages have led to increased lead times, delayed deliveries and, in some cases,

delays in orders, which did adversely affect our revenue. According to the Frost & Sullivan

Report, the average lead delivery time of chips has increased from 12.7 weeks in January 2020

to 15.0 weeks in January 2021, and subsequently further escalated to 26.2 weeks in January

2022. The delivery times of high demand components such as microcontroller and power-

management components applied in industries such as consumer electronics, smart module and

automotive industries have been recorded with even longer duration. Such delays in component

supplies are expected to continue to affect lead times through 2022 and potentially into 2023.

SUMMARY

– 23 –


Partially as a result of such shortages, our delivery of products accounting for


postponed to FY2021 (of which approximately HK$58.8 million was due to component

shortages), delivery of products representing HK$125.2 million in revenue originally

scheduled to be made in FY2021 was delayed to FY2022 (of which approximately HK$72.5

million was due to component shortages) and HK$266.3 million of revenue originally

scheduled to be made in FY2022 was postponed to FY2023 (of which approximately HK$260.6

million was due to component shortages). Delays in shipments while we waited for delivery of

electronics components, and receipt of orders by certain of our customers further in advance,

to allow us to purchase electronic components earlier and stockpile such components to

mitigate the effect of any potential shortages or increase in delivery lead times, has also

resulted in increased inventory balances. Largely as a result of such factors, our inventories

increased by HK$232.1 million, from HK$351.5 million as at 31 March 2021 to HK$583.6

million as at 31 March 2022 and our average inventory turnover days increased from 79 days

for FY2021 to 97 days for FY2022.

In order to mitigate the impact of such shortages on our and our customers’ operations,

we have established a spot-buy team to procure components from alternate sources where

possible upon pre-approval by our customers, have increased on-going discussions with

suppliers and have worked with our customers to expand the list of approved suppliers and, in

some cases, consider the use of alternate components. Where needed, spot-buys are made from

component traders known to our procurement team. In certain cases, our customers will help

identify alternate suppliers from which spot-buys can be made. Such spot-buys are only made

after our customer authorises such purchases and agrees that any increase in cost is added to

the price of the product. Additional revenue and costs of sales from spot-buys increased from

HK$2.4 million in FY2020 to HK$6.2 million in FY2021, and further to HK$87.8 million in

FY2022. When there were any shortages in the supply of any materials, components or parts,

we have identified them at an early stage and cooperated with our customers to identify

alternative sources, with our customers covering any resulting increase in cost. See “–

Procurement of Materials and Inventory Management – Materials, Components and Parts used

to Produce our Products” and “Risk Factors – Risks relating to our Business and our Industry

– We may be negatively affected by price increases or a shortage or delay in supply of

materials, components and parts required for our business operations” in this document for

further details.

Book-to-bill ratio

We use a book-to-bill ratio (the ratio of orders received to revenue for a specified period)

to measure ongoing demand for our products and indicate potential future growth. A ratio

above one indicates we were receiving more orders than we were filling, implying strong

demand. A ratio below one indicates we were receiving fewer new orders than we were filling,

implying potentially weaker demand. For FY2021, our book-to-bill ratio was 1.2 indicating

new orders were coming in at a faster pace than we were fulfilling existing orders

notwithstanding a 29.1% growth in revenue year on year. This high ratio has continued and our

book-to-bill ratio for FY2022 was 1.2.

SUMMARY

– 24 –


The following table sets forth our orders received and book-to-bill ratio for the periods

indicated:

FY2020 FY2021 FY2022

1 April2022 up tothe Latest

PracticableDate

(unaudited)

Book-to-bill ratio(1) 1.2 1.2 1.2 1.4

Note:

1. Equivalent to the value of new orders received in a period divided by revenue for the period.

The following table sets forth the change in our backlog of orders for the years/periods

indicated:

FY2020 FY2021 FY2022


PracticableDate

HK$

millions

HK$

millions

HK$

millions

HK$

millions

(unaudited)

Backlog of orders at the

beginning of the year 672.2 895.1 1,278.1 1,697.4Add

Order value of new orders

awarded during the year 1,618.0 2,184.7 2,508.1 346.7Less:

Revenue recognised during

the year 1,395.1 1,801.7 2,088.8 244.4

Backlog of orders at the end

of the year 895.1 1,278.1 1,697.4 1,799.7

Our Directors confirm that since 31 March 2022 (being the date on which our latest

audited consolidated financial information was prepared) and up to the date of this document,

there had been no material adverse change in the industry in which we operate or in our

financial or trading position that would materially affect the information shown in our

consolidated financial statements included in the Accountant’s Report set forth in Appendix I

SUMMARY

– 25 –


to this document. During the same periods, our results of operations were largely in line with

our expectations. Please see “Industry Overview” and “Financial Information” for further

details of the industry and our results of operations.

Impact of the recent power outages in the PRC on our operations

The PRC government’s efforts to curb energy consumption and reduce carbon emissions,

along with surging coal prices, have led to power outages across many of the PRC’s

manufacturing hubs in recent months, including in Guangdong Province. As of the Latest

Practicable Date, our production facilities and our operations have not been materially

impacted by the recent power outages in the PRC. In the event that the areas in the PRC in

which our production facilities are located experience a power outage, we have in-house power

generators that are able to generate power to support the operation of our production facilities

in Dongguan. Our Directors therefore do not currently view this as a material risk. However,

any unexpected power outages affecting us could have a material adverse effect on our business

and financial results. See “Risk Factors – Our production and operations may be affected by

factors beyond our control”.

SUMMARY

– 26 –


In this document, unless the context otherwise requires, the following terms have the

following meanings.

“Accountant’s Report” the accountant’s report prepared by

PricewaterhouseCoopers for the Track Record Period, as

set out in Appendix I to this document

“AQSIQ” General Administration of Quality Supervision,

Inspection and Quarantine of the People’s Republic of

China (國家質量監督檢驗檢疫總局)

“Articles of Association” or

“Articles”

the amended and restated articles of association of our

Company adopted on [●] and amended from time to time

“ASP” average selling price

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

“Audit Committee” the audit committee of the Board

“Biden Administration” the presidential administration headed by President Joe

Biden, the 46th and current president of the US

“Board” or “Board of Directors” the board of Directors

“business day” any day (other than Saturday and Sunday) on which

banks in Hong Kong are generally open for normal

banking business

“BVI” the British Virgin Islands

“Capitalisation Issue” the allotment and issue of [REDACTED] Shares to be

made upon capitalisation of certain sums standing to the

credit of the share premium account of our Company as

referred to in “Statutory and General Information – A.

Further information about our company – 4. Written

Resolutions of the then Shareholders of our Company

passed on [●]” in Appendix V to this document

“CCASS” the Central Clearing and Settlement System established

and operated by HKSCC

DEFINITIONS

– 27 –


“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 [REDACTED]” the application for the [REDACTED] to be issued in the

name of HKSCC Nominees and deposited directly into

CCASS to be credited to your or a designated CCASS

Participant’s stock account through causing HKSCC

Nominees to apply on your behalf, including by (i)

instructing your broker or custodian who is a CCASS

Clearing Participant or a CCASS Custodian Participant to

give electronic application instructions via CCASS

terminals to apply for the [REDACTED] on your behalf,

or (ii) if you are an existing CCASS Investor Participant,

giving electronic application instructions through the

CCASS Internet System (https://ip.ccass.com) or through

the CCASS Phone System (using the procedures in

HKSCC’s “An Operating Guide for Investor

Participants” in effect from time to time). HKSCC can

also input electronic application instructions for CCASS

Investor Participants through HKSCC’s Customer

Service Centre by completing an input request

“CCASS Investor Participant” a person admitted to participate in CCASS as an investor

participant who may be an individual or joint individuals

or a corporation

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

Participant or a CCASS Investor Participant (if it is a

participant or accountholder with the relevant clearing

system) or its direct or indirect custodian

“cm” centimetre

“Companies Act” or “Cayman

Companies Act”

the Companies Act, Cap 22 (Act 3 of 1966, as

consolidated and revised) of the Cayman Islands, as

amended, supplemented or otherwise modified from time

to time

DEFINITIONS

– 28 –


“Companies Ordinance” the Companies Ordinance (Chapter 622 of the Laws of

Hong Kong), as amended, supplemented or otherwise

modified from time to time

“Companies (WUMP) Ordinance” the Companies (Winding Up and Miscellaneous

Provisions) Ordinance (Chapter 32 of the Laws of Hong

Kong) as the same may be amended, supplemented or

otherwise modified from time to time

“Company” or “our Company” In-Tech Holdings (Cayman) Limited (精達控股有限公司), an exempted company incorporated in the Cayman

Islands with limited liability on 16 August 2021

“connected person(s)” has the meaning ascribed to it under the Listing Rules

“Controlling Shareholders” has the meaning ascribed to it under the Listing Rules

and, in the context of this document, refers to In-Tech

Holding, Source Capital and the 15 shareholders of

Source Capital, namely Mr. Albert Ho, Mr. Lee Lap Fai,

Mr. Cheung Wing Hung, Mr. Ho Wun Man Terence, Ms.

So Sau San, Mr. Poon Chin Chung Philip, Mr. Chan Shui

Shing, Mr. Woo James, Mr. Tsui Kwan Keung Jackson,

Blue Avenue Holdings Ltd, a subsidiary of Accolade

Investments Limited which is in turn wholly-owned by

Mr. Tan Chuen Yan Paul, Ms. Chan Po On Ella, Mr. Chan

Kwok Cheong, Ms. Kong Hoy Wein, Mr. Law Kim Ching

and Mr. Li Ping Chung

“COVID-19” coronavirus disease 2019, an infectious disease caused by

severe acute respiratory syndrome coronavirus

(SARS-CoV-2) and first identified in late 2019

“CSRC” the China Securities Regulatory Commission (中國證券監督管理委員會)

“CY Lo Family Trust” a family trust established on 19 July 2005 by Ms. Lo Chui

Yuk Michelle as the settlor, details of which are set out in

“History, Reorganisation and Corporate Structure” in this

document

DEFINITIONS

– 29 –


“Deed of Indemnity” a deed of indemnity dated [●] and entered into by In-Tech

Holdings and Source Capital in favour of our Company

(for ourselves and as trustee for each of our subsidiaries)

to provide certain indemnities, see “Statutory and

General Information – F. Other Information – 1. Deed of

Indemnity” in Appendix V to this document for further

particulars

“Director(s)” the director(s) of our Company

“Exchange Act” the U.S. Securities Exchange Act of 1934, as amended

“Extreme Conditions” extreme conditions caused by a super typhoon as

announced by the government of Hong Kong

“FIE(s)” foreign invested enterprise(s)

“FRC” The Financial Reporting Council of Hong Kong

“Frost & Sullivan” Frost & Sullivan Limited, the independent industry

consultant of the Company

“Frost & Sullivan Report” the independent industry report commissioned by us and

prepared by Frost & Sullivan

“FY2019” the financial year of our Group ended 31 March 2019




“FY2023” the financial year of our Group ending 31 March 2023



[REDACTED]

DEFINITIONS

– 30 –


“Gold Concord” Gold Concord Asia Limited (formerly known as Gold

Concord Limited), a business company incorporated

under the laws of BVI on 12 July 2000 and is an indirect

wholly-owned subsidiary of our Company

[REDACTED]

“Group”, “our Group”, “our”,

“we” or “us”

our Company and its subsidiaries and jointly-controlled

entity, and where the context otherwise requires, in

respect of the period before our Company becoming the

holding company of its present subsidiaries and jointly-

controlled entity, the present subsidiaries and jointly-

controlled entity and their respective predecessors, or the

business operated by such subsidiaries and jointly-

controlled entity, as the case may be

[REDACTED]

“HKD” or “HK$” Hong Kong dollars, the lawful currency of Hong Kong

“HKFRS” Hong Kong Financial Reporting Standards, as issued by

the Hong Kong Institute of Certified Public Accountants

“HKSCC Nominees” HKSCC Nominees Limited, a wholly owned subsidiary

of HKSCC

“HKSCC” Hong Kong Securities Clearing Company Limited

“Hong Kong Legal Advisers” Cheung & Yip, our Company’s legal advisers as to certain

aspects of Hong Kong laws

[REDACTED]

DEFINITIONS

– 31 –


[REDACTED]

“Hong Kong Takeovers Code” The Codes on Takeovers and Mergers and Share

Repurchases issued by the SFC, as amended,

supplemented or otherwise modified from time to time

[REDACTED]

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

PRC

[REDACTED]

“Independent Third Party(ies)” party(ies) which is/are independent of and not a

connected person (within the meaning of the Listing

Rules) of our Group

“In-Tech Dongguan” In-Tech Electronics (Dongguan) Co. Ltd.* (精達電子(東莞)有限公司), a limited liability company established in

the PRC on 15 June 2015 and is an indirect wholly-owned

subsidiary of our Company

“In-Tech Electronics BVI” In-Tech Electronics Holdings Ltd., a business company

incorporated under the laws of BVI on 10 September

1997 and is a direct wholly-owned subsidiary of our

Company

DEFINITIONS

– 32 –


“In-Tech Electronics HK” In-Tech Electronics Limited (精達電子有限公司), a

limited company incorporated under the laws of Hong

Kong on 19 September 1997 and is an indirect wholly-

owned subsidiary of our Company

“In-Tech Electronics Malaysia” In-Tech Electronics Sdn. Bhd., a private company limited

by shares incorporated under the laws of Malaysia on 18

September 2018 and is an indirect wholly-owned


“In-Tech Electronics Singapore” In-Tech Electronics Pte. Ltd., a private company limited

by shares incorporated under the laws of Singapore on 3

January 2020 and is an indirect wholly-owned subsidiary

of our Company

“In-Tech Enterprise HK” In-Tech Enterprise Limited (精達貿易發展有限公司), a

private company limited by shares incorporated under the

laws of Hong Kong on 10 July 2002 and is an indirect


“In-Tech Enterprise Malaysia” In-Tech Enterprise Sdn. Bhd., a private company limited

by shares incorporated under the laws of Malaysia on 21

January 2020 and is an indirect wholly-owned subsidiary

of our Company

“In-Tech Holdings” In-Tech Holdings Limited, a BVI business company

incorporated under the laws of BVI on 13 August 2021

and is one of our Controlling Shareholders

“In-Tech Investment” In-Tech Investment (HK) Limited (精達投資有限公司), a

limited company incorporated under the laws of Hong

Kong on 9 May 2001 and is an indirect wholly-owned


“In-Tech Manufacturing” In-Tech Manufacturing Limited, a business company

incorporated under the laws of BVI on 19 December 1997

and is an indirect wholly-owned subsidiary of our

Company

“In-Tech Shenzhen R&D” Jinglianda R&D (Shenzhen) Co. Ltd* (精聯達研發(深圳)

有限公司), a limited liability company established in the

PRC on 20 January 2020 and is an indirect wholly-owned


DEFINITIONS

– 33 –


“In-Tech Shenzhen Science &

Technology”

In-Tech Science & Technology R&D Ltd.* (精達科技研發(深圳)有限公司), a limited liability company

established in the PRC on 5 January 2004 and is an

indirect wholly-owned subsidiary of our Company

[REDACTED]

“Latest Practicable Date” 26 May 2022, being the latest practicable date for

ascertaining certain information in this document before

its publication

[REDACTED]

“Listing Committee” the Listing Committee of the Stock Exchange

[REDACTED]

“Listing Rules” The Rules Governing the Listing of Securities on The

Stock Exchange of Hong Kong Limited, as amended,

supplemented or otherwise modified from time to time

“Malaysian Legal Advisers” Ong and Manecksha, our Company’s legal advisers as to

Malaysian laws

“Malaysia Ringgit” or “MYR” the lawful currency of Malaysia

DEFINITIONS

– 34 –


“Memorandum of Association” or

“Memorandum”

the amended and restated memorandum of association of

our Company adopted on [●], as amended from time to

time

“m” metre

“Ministry of Finance” the Ministry of Finance of the PRC

“Ministry of Industry and

Information Technology”

the Ministry of Industry and Information Technology of

the PRC (中華人民共和國工業和信息化部)

“MOFCOM” the Ministry of Commerce of the PRC (中華人民共和國商務部)

“Mr. Albert Ho” Mr. Ho Woon Wah Albert (何煥華), chairman of our

Board, our chief executive officer and executive Director,

and is one of our Controlling Shareholders

“National People’s Congress” the National People’s Congress of the PRC (中華人民共和國全國人民代表大會)

“NDRC” the National Development and Reform Commission of

the PRC (中華人民共和國國家發展和改革委員會)

“Nomination Committee” the nomination committee of the Board

“Ocean Target” Ocean Target Asia Limited (formerly known as Ocean

Target Limited), a business company incorporated under

the laws of BVI on 10 July 2000 and is an indirect


[REDACTED]

DEFINITIONS

– 35 –


[REDACTED]

“Piggy Doggy” Piggy Doggy Company Limited, a business company

incorporated under the laws of BVI on 18 March 2005

and is wholly-owned by Mianma Company Limited

which is in turn wholly-owned by the CY Lo Family

Trust

“PRC”, “China” or the “People’s

Republic of China”

the People’s Republic of China, which for the purposes of

this document only (unless otherwise indicated) excludes

Hong Kong, Macau Special Administrated Region of

PRC and Taiwan

“PRC EIT Law” the PRC Enterprise Income Tax Law (中華人民共和國企業所得稅法), promulgated on March 16, 2007 by the

National People’s Congress and effective on January 1,

2008 and amended from time to time

“PRC government” the government of the PRC, including all governmental

sub-divisions (such as provincial, municipal and other

regional or local government entities)

“PRC Legal Advisers” Commerce & Finance Law Offices, our Company’s legal

advisers as to PRC laws

“[REDACTED] Share Option

Scheme”

the [REDACTED] share option scheme conditionally

adopted by our Company on [●] 2022, the principal terms

of which are set out in “E. [REDACTED] Share Option

Scheme and Share Option Scheme – 1. [REDACTED]

Share Option Scheme” in Appendix V to this document

[REDACTED]

DEFINITIONS

– 36 –


[REDACTED]

“Regulation S” Regulation S under the U.S. Securities Act

“Reorganisation” the reorganisation of our Group in preparation for

[REDACTED], details of which are described in

“History, Reorganisation and Corporate Structure –

Reorganisation” in this document

“RMB” or “Renminbi” Renminbi, the lawful currency of the PRC

“Remuneration Committee” the remuneration committee of the Board

“SEC” the U.S. Securities and Exchange Commission

“Securities Act” the U.S. Securities Act of 1933, as amended

“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 or supplemented from

time to time

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

Company on [●], the principal terms of which are

summarised in “E. [REDACTED] Share Option Scheme

and Share Option Scheme – 2. Share Option Scheme” in

Appendix V to this document

“Share(s)” ordinary share(s) with a nominal value of HK$0.01 each

in our share capital

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

[REDACTED]

DEFINITIONS

– 37 –


“Source Capital” Source Capital Investment Ltd. (formerly known as

Source Fund Investment Ltd.), a business company

incorporated in BVI on 28 July 1997 and is owned as to

(i) 39.18% by Mr. Albert Ho; (ii) 13.32% by Mr. Lee Lap

Fai; (iii) 5.94% by Mr. Poon Chin Chung Philip; (iv)

5.94% by Mr. Chan Shui Shing; (v) 5.94% by Mr. Woo

James; (vi) 5.46% by Mr. Tsui Kwan Keung Jackson;

(vii) 3.56% by Blue Avenue Holdings Ltd, a company

wholly-owned by Mr. Tan Chuen Yan Paul; (viii) 4.30%

by Mr. Cheung Wing Hung; (ix) 2.37% by Ms. Chan Po

On Ella; (x) 2.37% by Mr. Chan Kwok Cheong; (xi)

2.37% by Ms. Kong Hoy Wein; (xii) 2.87% by Mr. Ho

Wun Man Terence; (xiii) 2.37% by Mr. Law Kim Ching;

(xiv) 2.80% by Ms. So Sau San; and (xv) 1.19% by Mr.

Li Ping Chung, and is one of our Controlling

Shareholders

“Sole Sponsor” Dongxing Securities (Hong Kong) Company Limited, a

licenced corporation under the SFO to engage in on type

1 (dealing in securities), type 4 (advising on securities)

and type 6 (advising on corporate finance) regulated

activities (as defined under the SFO)

[REDACTED]

“State Administration for

Industry and Commerce”

the State Administration for Industry and Commerce of

the PRC (中華人民共和國工商行政管理總局)

“State Administration of

Taxation” or “SAT”

the State Administration of Taxation of the PRC (中華人民共和國國家稅務總局)

“State Administration of Foreign

Exchange” or “SAFE”

the State Administration of Foreign Exchange of the PRC

(中華人民共和國國家外匯管理局), the PRC

governmental agency responsible for matters relating to

foreign exchange administration, including local

branches, when applicable

“State Council” the State Council of the PRC (中華人民共和國國務院)

“State Environmental Protection

Administration”

the Ministry of Environmental Protection of the PRC (中華人民共和國環境保護部)

DEFINITIONS

– 38 –


“Stock Exchange” The Stock Exchange of Hong Kong Limited, a wholly

owned subsidiary of Hong Kong Exchanges and Clearing

Limited

“subsidiary” has the meaning ascribed thereto under the Listing Rules

“Track Record Period” the three financial years ended 31 March 2022

“Trump Administration” the presidential administration headed by President

Donald J. Trump, the 45th president of the US

[REDACTED]

“United States Dollar(s)”, “U.S.

dollar(s)”, “USD” or “US$”

United States dollars, the lawful currency of the United

States

“United States”, “USA”, “US” or

“U.S.”

The United States of America, its territories, its

possessions and all areas subject to its jurisdiction

“US Trade Representative” or

“United States Trade

Representative”

the Office of the U.S. Trade Representative

“VAT” value added tax

“%” percent

Unless otherwise specified, all references to any shareholdings of our Company assume

the [REDACTED] is not exercised and do not take into account any Shares which may be

issued upon the exercise of any options which may be granted under the [REDACTED] Share

Option Scheme and the Share Option Scheme.

For ease of reference, the names of Chinese laws and regulations, licences, permits and

approvals, institutions, natural persons or other entities (including certain of our subsidiaries)

have been included in this document in both the Chinese and English languages and in the

event of any inconsistency, the Chinese version shall prevail. English translations of company

names and other terms from the Chinese language are marked with “*” and are provided for

identification purposes only.

DEFINITIONS

– 39 –


This glossary of technical terms contains terms used in this document in connection withour Group and our business. Some of these terms and their given meanings may not correspondto standard industry definitions as used by others.

“3D” three-dimensional

“3G”; “4G” and “5G” the third, fourth and fifth generation of broadbandcellular network technology standards, respectively, thatconform with various International MobileTelecommunication specifications, which are standardsfor mobile telecommunications defined by theInternational Telecommunication Union

“5G NR” a new radio access technology specification for the 5Gstandard

“6-Sigma” Six Sigma, a quality-control methodology which uses adata-driven approach to eliminate defects in a corporateor business process

“AC7120 (CCA/PBA)” Nadcap audit criteria for circuit card assemblies

“AC7121 (CHA)” Nadcap audit criteria for electronics cable and harnessassemblies

“AOI” automated optical inspection

“AS9100” a standard issued by the International Aerospace QualityGroup, which sets out requirements for creating andmaintaining a comprehensive quality system providingsafe and reliable products to the aviation, space anddefence industry

“Atex” a certification granted pursuant to the fulfilment of healthand safety requirements and conformity assessmentprocedures, as set forth in Directive 2014/34/EU of theEuropean Parliament and of the Council of the EuropeanUnion, in respect of equipment and protective systemsintended for use in potentially explosive atmospheres

“B2B” business-to-business

“BLE” Bluetooth low energy, a form of Bluetooth technologywhich is designed for low power consumption whilemaintaining comparable communication range totraditional Bluetooth

GLOSSARY OF TECHNICAL TERMS

– 40 –


“Bluetooth” a short-range wireless technology standard for dataexchange between fixed and mobiles devices over shortdistances

“CAGR” compound annual growth rate, a method of assessing theaverage growth of a value over a certain time period

“CE” the Conformitè Europëenne Mark, which is the EuropeanUnion’s mandatory marking on certain products toindicate conformity with essential health and safetyrequirements set out in all applicable Directives issued bythe European Union

“China Compulsory certification” a compulsory safety and quality mark for certain productslisted in the Catalogue of Products Subject to ChinaCompulsory Certification (中國強制性認證產品目錄)which include, among others, electric cables and wiring;electrical switches, protective devices and connectiondevices; lower voltage electrical equipment; electrictools; and electric welding machines

“Circular Economy” economic activities with a sustainable resourcesmanagement and a model of production and consumptionto maximise the use made of resources throughout aproduct’s lifecycle, which can be achieved throughsustainable design, reuse, remanufacturing, refurbishingand recycling

“CNAS” a certification granted pursuant to satisfaction of theChina National Accreditation Service for ConformityAssessment

“Cpk” Process capability index, which quantifies the ability of aprocess to produce output within specification limits

“CSA” CSA Group, a global organisation which develops andissues technical and management standards with respectto safety, health, the environment, and economicefficiency

“C-TICK” a certification established and issued by the SpectrumManagement Agency (now the AustralianCommunications and Media Authority) for productssupplied to the Australian market that comply with theAustralian electromagnetic compatibility standards


– 41 –


“C-TPAT” a certification with respect to supply-chain securityissued by the United States Custom and BorderProtection pursuant to its Customs Trade PartnershipAgainst Terrorism program

“DDP” “delivered duty paid”, a delivery agreement whereby theseller assumes all responsibilities, risks, and costsassociated with the transportation of goods until thebuyer receives them at the destination port

“DECT” digital enhanced cordless telecommunications, a digitalcommunication standard primarily used for creatingcordless phone systems

“Design for Assembly” a process or concept under which a product and its designare simplified to the extent possible, for the purposes ofease of assembly

“Design for Manufacturing” a process or concept under which products are designedwith the goal of optimising their manufacturing ease

“Design for Test” a process or concept under which products are designedwith the goal of optimising their testability

“ELP” early life performance testing, a method of exposingproducts to environmental stress in order to detect latentdefects during a screening process

“EMC” electromagnetic compatibility, the ability of electronicequipment not to cause or react to electromagneticinterference from other electronic equipment

“EMS” electronics manufacturing services

“ESG” environmental, social and governance

“FOB” “free on board”, a term of trade whereby the seller paysfor transportation of the goods to the port of shipment aswell as loading costs; the buyer pays cost of marinefreight transport, insurance, unloading and transportationfrom the arrival port to the final destination; and thepassing of risks occurs when the goods are loaded onboard at the port of shipment


– 42 –


“FCA” “free carrier”, a term of trade under which the right ofownership is transferred to the buyer at a specified pointor place, as defined by the contract in question

“FCC” the FCC Declaration of Conformity, a certificationmarking for electronic products that the electromagneticinterference from the product in question within thelimits prescribed by the Federal CommunicationsCommission of the United States

“FDA” the United States Food and Drug Administration

“GFA” gross floor area

“GPS” Global Positioning System, a space-based navigationsystem owned by the United States that provides userswith positioning, navigation, and timing services

“GSM” Global System for Mobile Communications, a second-generation digital cellular radio access technology

“HALT” Highly Accelerated Life Test, a testing protocol whichtakes place during the design phase of a product’s lifecycle, in which the product is subject to varied thermaland vibration stresses

“HASS” Highly Accelerated Stress Screen, a testing protocolwhich takes place in the production phase of a product’slife cycle, in which the highest possible stress levels areapplied on the product in question

“Hz” hertz, a unit of frequency

“IATF16949” a certification issued by the International AutomotiveTask Force, which emphasises the development of aprocess-oriented quality management system thatprovides for continual improvement, defect prevention,and reduction of variation and waste in the supply chain

“IC(s)” integrated circuit(s)

“ICASA” the Independent Communications Authority of SouthAfrica

“ICT” information and communications technology

“ICTI” the ICTI Ethical Toy Program


– 43 –


“IDA” the Infocomm Development Authority of Singapore

“IEEE” the Institute of Electrical and Electronic Engineers

“IEEE 802.15.4” a standard developed by the Institute of Electrical andElectronic Engineers in respect of low-rate wirelessnetworks, providing for ultra-low complexity, ultra-lowcost, ultra-low power consumption, and low data ratewireless connectivity among inexpensive devices

“Industry 4.0” a term commonly used to refer to “the fourth industrial

revolution”, or the digitisation of manufacturing,

whereby machines used in manufacturing and production

processes are augmented with intelligent networking and

web connectivity, as well as data and machine learning

“IoT” Internet of Things, which refers to the internet working of

physical devices, smart devices, and other items

embedded with electronics, sensors, actuators, and

network connectivity which enable these devices or items

to collect and exchange data

“IP66” a rating under the Ingress Protection Code, published by

the International Electrotechnical Commission,

indicating that the product in question is dust-tight and is

protected against direct high-pressure water jets




protected against immersion in water of up to 1 metre for

30 minutes




protected against continuous immersion in water, of

which the conditions of the latter are agreed between

manufacturer and user

“IPC” the IPC, a global trade association that publishes and

provides standards, certifications, and trainings for the

electronics industry


– 44 –


“IP6x” a rating under the Ingress Protection Code, published by


indicating that the product in question is dust-tight

“IPx6” a rating under the Ingress Protection Code, published by


indicating that the product in question is protected

against direct high-pressure water jets

“IPx7” a rating under the Ingress Protection Code, published by


indicating that the product in question is protected

against immersion in water of up to 1 metre for 30

minutes

“IR” infrared radiation

“ISO” International Organization for Standardization, a non-

governmental organisation that develops and publishes

international standards

“ISO 9000” or “ISO 9001” a standard developed and issued by the ISO, which sets

out the requirements for a quality management system

“ISO 13485” a standard developed and issued by the ISO, which

specifies requirements for a quality management system

where an organisation needs to demonstrate its ability to

provide medical devices and related services that

consistent meet customer and applicable regulatory

requirements

“ISO 14000” or “ISO 14001” a standard developed and issued by the ISO, which sets

out the requirements for an environmental management

system

“ISO 17025” a standard developed and issued by the ISO, which

specifies the general requirements for the competence,

impartiality, and consistent operation of laboratories

“ISO 45000” or “ISO 45001” a standard developed and issued by the ISO, which

defines the requirements for a management system in

relation to occupational health and safety

“IT” information technology


– 45 –


“Joint Development” a mode of manufacturing whereby the outsourcer and the

outsourcee work together on the design and manufacture

of a product

“Joint Development Project(s)” projects which are undertaken on a Joint Development

basis

“KC” the Korea Certification mark, a product certificationissued by the Korean Agency for Technology andStandards which indicates that the product in question isin compliance with the relevant safety standards in theRepublic of Korea

“KT” the Kepner Tregoe method, comprising of problemsolving and decision-making processes which in turnencompass situation appraisal, problem analysis, decisionanalysis, and potential problem and/or opportunityanalysis

“LAN” local area network

“LCD” liquid crystal display

“LoRa” a method for transmitting radio signals that uses achirped, multi-symbol format to encode information

“LTE” Long-Term Evolution, a standard for 4G wirelessbroadband technology offering increased networkcapacity and speed for mobile devices and data terminals

“LTE-M1” LTE-M1 as a connectivity technology allowing IoTdevices to connect directly to a 4G or LTE networkwithout a gateway

“LTE-NB” LTE-NB (also known as NB-IoT or (at-MZ) has a goalsimilar to that of LTE-M1, however it uses DSSSmodulation instead of LTE radio)

“manufacturing resourcesplanning” or “MRP”

a method for the effective managing, monitoring andcontrol of a manufacturer’s resources

“master production schedule”or “MPS”

a process through which manufacturers plan whichproducts to produce, as well as when and how many ofsuch products to produce


– 46 –


“MBTI” the Myers-Briggs Type Indicator, a tool intended for arange of applications, including team development,leadership development, conflict management, stressmanagement, and career transition and planning

“MTBF” mean time between failures

“MWh” megawatt-hour, a measure of electricity output equivalentto 1,000 kilowatts of electricity generated per hour

“Nadcap” the National Aerospace and Defense ContractorsAccreditation Program, a global cooperative standards-setting program in relation to conformity assessment ofspecial processes for the aerospace and defence industries

“NB” narrowband

“nm” nanometre, which is equal to one billionth of a metre

“NRE” non-recurring engineering expenditure(s), which arefixed and one-time costs for the purposes of conductingresearch, design, development and testing of a newproduct or product enhancement

“ODM(s)” manufacturers offering product design and manufacturingservices for brand owners; in general, such manufacturerscreate their own intellectual property and product designwhile brand owners own the copyrights to the branding ofthe product in question

“OEM(s)” manufacturers which undertake the manufacture andassembly of electronics based on design licenced bybrand owners and without owning the intellectualproperty, with the finished goods in question being soldunder the brand names of customers

“PCB(s)” printed circuit board(s), a board that electronicallyconnects electronic components using conductive traces,pads, and other features carved from copper foillaminated onto a non-conductive substrate

“PCBA(s)” printed circuit board assembly(ies), the board after allcomponents and parts have been soldered and installed onthe PCB, capable of accomplishing the electronicfunction for which it was designed


– 47 –


“PCB assembly” or “PCBassembling”

the process of assembling, populating, and solderingvarious kinds of electronic components onto a PCB toform a functional PCBA

“Production Part ApprovalProcess” or “PPAP”

a process to ensure that engineering design and productspecification requirements are met

“PV” photovoltaic

“R&D” research and development

“Radio Access Technology” the physical connection method for a radio-based mobile

communication network such as Bluetooth, Wi-Fi, 3G,

4G, and LTE

“RF” radio frequency

“RFID” radio-frequency identification, a technology that

identifies and tracks objects through the application of

electronic tags and readers which communicate with

radio waves

“Sigfox” a narrowband (or ultra-narrowband) technology, which

adopts a standard radio transmission method called

binary phase-shift keying, takes very narrow chunks of

spectrum and changes the phase of the carrier radio wave

to encode data, thereby providing a combination of

ultra-low cost and ultra-low power technologies

supporting by a dedicated radio-based network

“SIRIM” SIRIM Berhad, an industrial research and technology

organisation and testing, inspection and certification

services provider, which is wholly owned by the

government of Malaysia

“SMT” surface mount technology, a process by which electronic

components are mounted directly on the surface of a

PCB, facilitating product miniaturisation and enabling

advanced automation of production

“sq.ft.” square feet

“sq.m.” square metres


– 48 –


“TELEC” Telecom Engineering Centre, a radio equipment

certification and testing organisation in Japan

“TFT-LCD” thin-film transistor liquid crystal display(s)

“UL” UL, LLC, a safety science company which provides

testing, inspection and certification, training, advisory

and risk management services, decision-making tools and

intelligence with respect to safety, security and

sustainability

“USB” Universal Serial Bus, a common interface enabling

communication between devices and a host controller

such as personal computers and smartphones

“UV” ultraviolet radiation

“Wifi”, “Wi-Fi” or “wi-fi” a wireless local area network certified by the Wi-Fi

Alliance for wireless local area network products based

on the IEEE 802.11 standards, and a common IoT

communication protocol which is available in home and

business environments

“Wi-Fi 6” the IEEE 802.11ax-2021 standard for wireless local area

networks, an iteration of the Wi-Fi network protocol

approved by the IEEE on 9 February, 2021

“XRF” X-ray fluorescence, an analytical technique used to

determine the elemental composition of materials

“Zigbee” a wireless protocol and open global standard designed by

the Connectivity Standards Alliance (formerly known as

the Zigbee Alliance), featuring low-power operation and

a high level of security


– 49 –


This document contains forward-looking statements that are based on various

assumptions regarding our Group’s present and future business strategy and the environment

in which our Group will operate in the future and are, by their nature, subject to significant

risks and uncertainties. These forward-looking statements include, without limitation,

statements relating to:

• our business and operating strategies and our various measures and initiatives to

implement them;

• our future business development and various business opportunities that we may

pursue;

• fluctuations in general business conditions globally, particularly in the PRC, Hong

Kong, Malaysia and U.S.;

• changes in competitive conditions and our ability to compete under these conditions;

• changes in the political, economic, legal and social conditions globally, particularly

in the PRC, Hong Kong, Malaysia and U.S.;

• costs of bank loans and other forms of financing, and our ability to secure adequate

financing for our business operations;

• our financial conditions;

• our dividend policy;

• our ability to enter into new geographic markets and expand our operations;

• our ability to obtain permits and licences to carry on our business;

• changes in foreign exchange rates;

• the other factors referenced in this document, including without limitation, under the

sections headed “Risk Factors”, “Business” and “Financial Information”; and

• other factors beyond our control.

The words “anticipate”, “believe”, “could”, “expect”, “going forward”, “intend”, “may”,

“plan”, “seek”, “will”, “would” and similar expressions, as they relate to us, in particular, in

the sections headed “Business” and “Financial Information” in this document, are intended to

identify a number of these forward-looking statements. These statements are based on

numerous assumptions regarding our present and future business strategy and the environment

in which we will operate in the future. They reflect the current views of our management with

respect to future events and are subject to certain risks, uncertainties and assumptions,

FORWARD-LOOKING STATEMENTS

– 50 –


including the risk factors described in this document. Subject to the requirements of applicable

laws, rules and regulations, we do not have any obligation to update or otherwise revise the

forward-looking statements in this document, whether as a result of new information, future

events or otherwise. Hence, should one or more of these risks or uncertainties materialise, or

should underlying assumptions prove to be incorrect, our financial condition may be adversely

affected and may vary materially from those described herein as anticipated, believed, or

expected. Accordingly, such statements are not a guarantee of future performance and you

should not place undue reliance on such forward-looking information. All forward-looking

statements contained in this document are qualified by reference to the cautionary statements

set out in this section.

In this document, statements of or references to our intentions or those of any of our

Directors are made as of the date of this document. Any such intentions may change in light

of future developments.

FORWARD-LOOKING STATEMENTS

– 51 –


Potential investors should consider carefully all the information set out in this

document and, in particular, should evaluate the following risks associated with the

investment in our Shares. You should pay particular attention to the fact that we conduct

our operations in the PRC and Malaysia, the legal and regulatory environment of which

in some respects may differ from that in Hong Kong and other jurisdictions. Any of the

risks and uncertainties described below could have a material adverse effect on our

business, results of operations, financial condition or on the [REDACTED] of our

Shares, and could cause you to lose all or part of your investment.

RISKS RELATING TO OUR BUSINESS AND OUR INDUSTRY

We may be negatively affected by price increases or a shortage or delay in supply ofmaterials, components and parts required for our business operations.

The principal materials, components and parts that we source externally for ourproduction include electronic components (such as microprocessors, integrated circuits,chipsets, and passive components), electromechanical components (including LCDs),assembled wires, plastic, rubber and metal parts and packaging materials.

For FY2020, FY2021 and FY2022, our cost of materials, components and parts accountedfor 63.8%, 69.3% and 69.6% of our total revenue, respectively. During the Track RecordPeriod, we purchased materials, components and parts predominantly from across the globe.We expect that our demand for these materials, components and parts will continue to increaseas our business grows. Any shortages or disruption in the supply of principal materials,components and parts would limit or delay our production, which could have a material adverseeffect on our business, results of operations and financial condition.

Since we generally do not enter into any long-term procurement agreements with oursuppliers, there can be no assurance that our suppliers will not significantly increase ourpurchase price of materials, components or parts in the future, in particular, upon the increasein the market price of or the market demand for such materials, components or parts. While wetypically price our products and services on a cost plus margin basis and pass on increases incost of materials, components and parts to our customers, there can be no assurance that wewill be able to pass on any increase in such costs to our customers in the future, in a timelymanner or at all to avoid any adverse impacts on our profitability. Furthermore, the prices ofthese materials, components and parts may be affected by factors beyond our control, includingglobal demand for and supply of such materials, components and parts, the outbreak andcontinuing spread of COVID-19, inflation and local economic cycles, international tradebarriers, and government price control measures. We do not hedge our exposure to movementsin the prices of commodities or other materials, components or parts. While we believe that ourresources and experience allow us in most cases to estimate and control costs effectively,should the factors described above prevent us from doing so, our results of operations andfinancial condition may be materially and adversely affected. Starting at the end of 2020 andcontinuing through 2021 and into 2022, certain commodities such as metals, steel, resin andfibreglass, were trading at relatively high prices. In addition, the operations of our suppliers

RISK FACTORS

– 52 –


were adversely affected due to the global spread of COVID-19. We have also experiencedshortages of certain electronic components, including chip components, LCDs, and PCBs,which continued to persist as of the Latest Practicable Date. Such shortages have led toincreased lead times, delayed deliveries and, in some cases, delays in orders, which didadversely affect our revenue. According to the Frost & Sullivan Report, the average leaddelivery time of chips increased from 12.7 weeks in January 2020 to 15.0 weeks in January2021, and subsequently further escalated to 26.2 weeks in January 2022. The delivery times ofhigh demand components such as microcontroller and power-management components appliedin industries such as consumer electronics, smart module and automotive industries have beenrecorded with even longer duration. Such delays in component supplies are expected tocontinue to affect lead times through 2022 and potentially into 2023. Partially as a result ofsuch shortages, our delivery of products accounting for approximately HK$106.1 million ofrevenue originally scheduled to be made in FY2020 was postponed to FY2021 (of whichapproximately HK$58.8 million was due to component shortages), delivery of productsrepresenting HK$125.2 million in revenue originally scheduled to be made in FY2021 wasdelayed to FY2022 (of which approximately HK$72.5 million was due to componentshortages) and delivery of products representing HK$266.3 million in revenue originallyscheduled to be made in FY2022 was delayed to FY2023 (of which approximately HK$260.6million was due to component shortages). There can be no assurance that fluctuations in themarket price and shortages of these major types of materials, or similar price fluctuationsand/or shortages, will not materially affect us going forward.

In addition, our ability to complete a customer’s purchase order on time is dependent ontimely delivery of sufficient quantities of key materials, components and parts. There can beno assurance that our suppliers will be able to supply and deliver the required materials,components and parts to us in a timely manner or that the materials, components and parts willnot be defective or sub-standard. Any delay in the delivery of materials, components and partsor any defect in the materials, components and parts supplied to us may materially andadversely affect or delay our production schedule and, if we cannot secure materials,components and parts of similar quality and at reasonable prices from alternative suppliers ina timely manner or at all, we may not be able to deliver our products to our customers on time.In such circumstances, we may lose customer loyalty and confidence on our services andproducts. This may also harm our reputation and our results of operations and financialcondition may be materially and adversely affected.

We have no long-term binding agreements with our customers and rely on our ability tomaintain good business relationships with our major customers.

As most of our customers only place orders with us on a project-by-project andorder-by-order basis, there can be no assurance that moving forward, our customers willcontinue placing orders with us at a comparable level as they did during the Track RecordPeriod or at all. Further, our customers are manufacturers, suppliers or brand owners operatingin industries such as the medical, aerospace, marine, communications infrastructure,automotive, banking and home security industries. If there is an adverse change in ourrelationship with our customers or a downturn in our customers’ businesses or a deterioration

RISK FACTORS

– 53 –


of their respective industries, which results in a reduction or cessation of their purchases fromus, and if we do not anticipate or keep pace with changes in customer demand, or fail to attractnew customers, our business, results of operations and financial condition may be adverselyaffected.

Our success, to a certain extent, hinges upon our ability to build and maintain strongpartnerships with our customers. During the Track Record Period, our existing customerscontributed a large percentage of our revenue, with 85.3% of our total revenue coming fromcustomers with whom we had worked for over 10 years. Moreover, a substantial part of ourrevenue is derived from a limited number of customers. For FY2020, FY2021 and FY2022,sales to our five largest customers collectively accounted for approximately 50.2%, 67.2% and64.7% of our total revenue, respectively. For the same years, sales to our largest customeraccounted for approximately 13.3%, 32.0% and 26.2% of our total revenue, respectively. Therecan be no assurance that any of our major customers will continue to place orders with us asthey have done so in the past or, even if they continue to do so, for the same volume and/orat similar price terms or profit margins. Given there is no purchase commitment from our majorcustomers, the purchase volume or amount of their purchase orders we receive may fluctuatefrom time to time, and it will be difficult for us to accurately forecast the future orders. If wecannot secure purchase orders from our customers on an on-going basis or cannot expand ourcustomer base, or if our relationship with any of our major customers is terminated forwhatever reason, our business, results of operations and financial condition may be materiallyand adversely affected.

The Sino-US trade war and potential new tariffs could materially and adversely affect ourbusiness, financial condition and results of operations.

During the Track Record Period, growing Sino-U.S. trade tensions have materiallyimpacted the trade flows for certain goods exported from the PRC to the U.S., most notably viathe imposition of additional tariffs on goods with the PRC as its country of origin. Since 2018,the U.S. Trade Representative has announced several lists of goods with the PRC as its countryof origin which are subject to additional tariffs, with the highest additional tariff level being25%.

During the Track Record Period, a portion of our revenue was derived from the sale andexport of our products to the U.S., whereas most of our products were manufactured in thePRC. Certain of our products, to the extent exported from the PRC to the U.S., were subjectto a tariff rate of 10% from 1 August 2018 to 10 May 2019, and a tariff rate of 25% from 11May 2019 to the Latest Practicable Date. For FY2020, FY2021 and FY2022, the revenuegenerated from the sales of our products to customers located in the U.S. for whom we arrangedshipment or imported products into the U.S., all of which products were subject to theadditional tariff rates, amounted to approximately HK$211.9 million, HK$84.1 million andHK$127.0 million respectively, accounting for 15.2%, 4.7% and 6.1%, respectively, of ourtotal revenue for those years.

RISK FACTORS

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Owing to the imposition of such tariffs, we commenced operations in our productionfacilities in Penang, Malaysia in early 2019 and made our first shipment in April 2019, withthe intention that such facilities are to house all projects and products for which there may bepotential exposure to the abovementioned tariffs. To the extent that there were any such tariffsimposed upon us during the Track Record Period, all such amounts were reimbursed by ourcustomers. However, we cannot assure you that our sales to customers in the U.S. in the futurewill remain unaffected or that our customers will continue to reimburse us for all tariffs we payor that the nature and scope of such tariffs will not alter, in light of uncertainties in the ongoingdevelopment of Sino-U.S. trade tensions. Such uncertainties may cause difficulties for ourcustomers to forecast their purchasing plans and may cause them to reduce or cancel theirpurchase orders from us. As such, our financial position, business and results of operationscould be materially and adversely affected.

We rely significantly on the North America and Europe markets, and we may be affectedby global and regional social, political, regulatory and economic conditions.

During the Track Record Period, our revenue generated from the sales of our products to

customers located in North America (primarily including the United States) and Europe in

aggregate amounted to approximately HK$1,212.8 million, HK$1,470.7 million and

HK$1,800.4 million, accounting for approximately 86.9%, 81.6% and 86.2% of our total

revenue for FY2020, FY2021 and FY2022, respectively. In the foreseeable future, our

Directors expect that the North America and Europe markets will continue to be our principal

markets. Our export operations are generally subject to certain inherent risks, including

exposure to local, economic, political and labour conditions; changes in laws, regulations,

industry standards, trade, monetary or fiscal policy; tariffs, quotas, customs and other import

or export restrictions and other trade barriers or trade sanctions; and compliance with the

requirement of applicable sanctions, anti-bribery and related laws and regulations.

International relations and political tensions between the PRC and other countries in which we

have established a business presence or where our customers are situated or have operations

may also adversely affect our export business.

Government policies favouring domestic companies in certain foreign markets, or trade

barriers including export requirements, tariffs, taxes and other restrictions and charges may

adversely affect our ability to export our products to customers in other countries at favourable

or reasonable terms or at all. Moreover, changes to trade policies in the countries in which we

or our customers operate, or the perception that these changes could occur, could adversely

affect the financial and economic conditions in the countries in which we or our customers

operate, as well as our business, financial condition and results of our operations. Owing to

such changes, customers previously sourcing products or components from us may source

products or components from our competitors domiciled in other countries.

In addition, our business, results of operations and financial condition are also subject to

economic, political, regulatory and social developments, both globally as well as regionally in

the PRC, Malaysia and other countries where our customers conduct their business. Global and

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regional conditions may be affected by many unpredictable factors such as financial crises,

economic recessions, or political and social turmoil and events which could adversely affect

our business in unpredictable ways.

We may suffer losses from fluctuation in foreign exchange rates.

During the Track Record Period, most of our purchases were denominated and settled inHK$ and US$, and our other manufacturing costs were denominated in MYR and RMB. Inaddition, we have production facilities and/or offices in the PRC, Hong Kong and Malaysia,overheads for which are settled in local currencies and therefore expose us to foreign exchangerisks. For FY2020, FY2021 and FY2022, we recorded net exchange losses of HK$26.2 million,net exchange gains of HK$23.6 million and net exchange gains of HK$16.0 million,respectively. In addition, for FY2020, FY2021 and FY2022, exchange differences ontranslation of foreign operations resulted in other comprehensive loss of HK$32.6 million,other comprehensive income of HK$38.1 million and other comprehensive income of HK$11.8million, respectively. See “Financial Information – Factors Affecting our Financial Results –Fluctuations in foreign exchange rates”.

Fluctuations in foreign exchange may be caused by various factors such as changes ingovernment policies and changes in domestic and international economic and politicalconditions and are always unpredictable. We cannot guarantee that we will not suffer losses onforeign exchanges in the future. During the Track Record Period, we did not use derivativeinstruments to manage our foreign exchange risks and have relied primarily on a natural offsetof our foreign currency receivables with our foreign currency payables. In the event that we areunable to manage our foreign currency risks effectively or at all in the future, our business,results of operation and financial condition may be materially and adversely affected.

Our operations may be subject to transfer pricing adjustments by relevant authorities.

During the Track Record Period, we have adopted transfer pricing arrangements amongour group companies to regulate intra-group transactions. The intra-group transactionsinvolved the materials purchased by In-Tech Electronics HK sold at cost to our productionfacilities, finished products assembled by our production facilities and sold to In-TechElectronics HK and provision of back office and software services which were provided by thestaff and engineers of In-Tech Investment and its subsidiaries In-Tech Shenzhen Science &Technology and In-Tech Shenzhen R&D to our production facilities in the PRC and In-TechElectronics HK. See “Business – Transfer Pricing” for more details.

Accordingly, our tax position may be subject to review and possible challenge by HongKong, the PRC and the Malaysian tax authorities due to the intra-group transactions. Duringthe Track Record Period and as at the Latest Practicable Date, we are not aware of anynon-compliance with the relevant laws and regulations in respect of the intra-grouptransactions. However, there is no assurance that the tax authorities will not subsequentlychallenge the appropriateness of our Group’s transfer pricing arrangements, or that the relevantrules governing such arrangement will not be modified. If the relevant tax authorities later findthe transfer prices and the terms that our Group has applied are not appropriate, such

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authorities may require us to re-assess the transfer prices and re-allocate income or adjust thetaxable income. Any such reallocation or adjustment could result in a higher tax liability forour Group and could adversely affect our business, financial condition and results ofoperations.

We may not be able to continue to grow and to implement our business expansion planssuccessfully.

Despite the negative impact the COVID-19 pandemic had on our business operations and

financial performance in FY2020 and FY2021, and additional costs associated with expansion

and moving of our production facilities, we managed to grow our revenue during the Track

Record Period from HK$1,395.1 million in FY2020 to HK$1,801.7 million in FY2021 and

further to HK$2,088.8 million in FY2022. Our continued growth depends, to a significant

extent, on the continued growth in the demand of our electronics development and

manufacturing services in relevant industry sectors, including the automotive, medical,

aerospace, marine, insurance, banking and wireless communications network industries.

Moreover, we plan to secure further growth by expanding our IoT business capabilities and

market presence, upgrading and expanding our production facilities in Penang in a single,

consolidated production site, increasing our production capacity and investing in and

deploying sustainable technologies in our manufacturing operations. The success of our plans

for growth depends on certain factors, some of which may be beyond our control, including our

ability to:

• expand and operate our production facilities;

• ensure a timely and sufficient supply of materials, components and parts on

commercially reasonable terms;

• secure financing necessary for business expansion;

• operate in an efficient manner;

• maintain and expand our existing customer base;

• manage relationships with our suppliers;

• develop technical know-how for upgrading existing products and processes and

launching new products;

• hire, train and retain qualified personnel; and

• overcome challenges that may arise in new and existing markets and business areas.

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Although the demand has grown in the past, such growth rate may not remain the same

or increase in future periods. While we are committed to continue to diversify our customer

base, any future reduced demand of our electronics development and manufacturing services

or any downturn in the relevant sector(s) in which any of our major customers operate could

materially and adversely affect our sales and profitability.

Our success depends to a large extent on our product designs, research and development.

Our Directors believe our success depends significantly on whether we can successfully

co-design and develop products which can satisfy our customers’ needs, which is influenced by

our ability to anticipate and respond to factors such as the latest technology development

trends, customer preferences, government and regulatory requirements, and market demand. As

a result, we have placed a strong emphasis on our research and development activities, which

require considerable human resources and capital investment.

However, our research and development efforts may not be successful or yield the

anticipated level of economic benefit. We may experience delays or be unsuccessful in any

stage of research and development. Furthermore, we are subject to the latest developments in

technology and production processes. If there is a change in market preferences or if we fail

to keep pace with relevant technology changes, we may not be able to achieve the growth as

expected and our business may be adversely affected. In addition, even if our research and

development efforts are successful, our customers may not be receptive to our new applications

and solutions. Also, there is no assurance that our major customers and their suppliers will not

continue to strengthen their own research and development capabilities and thereby obviating

the need to engage our services, or turn to our other competitors for the provision of electronics

development and manufacturing solutions. If the competition intensifies, our competitiveness,

business, results of operations, profitability and prospects may be adversely affected.

We may not be able to adequately protect our intellectual property rights.

We rely primarily on patents and proprietary technologies to protect our technological

know-how, which includes designs and technologies for our current and potential future

products. As at the Latest Practicable Date, we had registered 19 patents and submitted 12

patent applications across various jurisdictions, and were the registered owner of one domain

name which we believe are material to our business. For details of such registered patents or

patent applications, see “Statutory and General Information – B. Further Information about Our

Business – 2. Intellectual Property Rights of Our Group” in Appendix V to this document.

Like many businesses, some know-how cannot be registered, and we rely on our suppliers

and employees observing confidentiality and trade secrets protection obligations to protect

such know-how. We cannot assure you that these measures will be sufficient to prevent any

infringement of our intellectual property rights or that our competitors will not independently

develop alternative technologies that are equivalent or superior to our technologies.

Furthermore, we cannot assure you that all our registration or extension applications will be

successful, or our registered intellectual property rights will not be subject to any objections.

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In the event that the steps we have taken and the protections afforded by law do not adequately

safeguard our intellectual property rights, or in the event that we are not able to register or

extend or defend our intellectual property rights, our competitors may exploit our intellectual

property in the manufacturing and sale of competing products, which could materially and

adversely affect our business.

As at the Latest Practicable Date, we had successfully registered our trademark in Hong

Kong and had submitted seven trademark applications in the U.S., all of which are pending

registration. We cannot assure you that our trademark registration applications will be

successful, or that infringements upon our intellectual property rights or misappropriation of

our proprietary knowledge by third parties will not negatively affect our image or marketing

efforts. This could, in turn, result in a material adverse effect on our business, financial

condition or operating results. If we were to initiate litigation to protect and enforce our

trademarks or other intellectual property rights, and to protect our trade secrets, we could incur

substantial costs and suffer from diversion of resources, which could negatively affect our

sales, profitability and prospects. Moreover, even if any such litigation is resolved in our

favour, there is no assurance that we can successfully enforce the judgment and remedies

awarded by the court, and it is possible that such remedies are inadequate to compensate our

loss.

We are dependent on the contributions of our key management personnel.

Our success depends, to a significant extent, upon the continued service of key members

of our management team. In particular, Mr. Albert Ho, our general manager, CEO, and

executive Director, and Mr. Gordon Christopher Pope, our deputy CEO and executive Director,

have over 30 years of relevant industry experience. The knowledge and experience of Mr.

Albert Ho and Mr. Gordon Christopher Pope in the electronics industry, as well as that of other

senior management members, have been a major factor in our success. As such, to a certain

extent, our future relies on our ability to retain the services of key management personnel.

While Mr. Albert Ho, Mr. Gordon Christopher Pope and other members of the Board have

entered into service agreements with us, there is no assurance that they or any of them will not

terminate their service agreements or decline to renew their service agreements with us. If we

were to lose the services of any of the existing key senior management members without a

suitable replacement or were unable to attract new members with the requisite experience and

credentials to join our senior management team as the scope of our operations grow, there could

be a negative impact on our operations. The loss of one or more members of our senior

management team may pose a threat to our future business and continued growth as such

member(s) could be difficult to replace or we may not be able to replace them on a timely basis.

In addition, we may lose business to our competitors if any member of our management team

were to join them after leaving employment with us.

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We are exposed to credit risks in relation to our trade and other receivables.

As at 31 March 2020, 2021 and 2022, our trade receivables were approximately

HK$183.5 million, HK$275.9 million and HK$355.0 million, respectively, representing

approximately 24.0%, 28.6% and 29.4% of our total current assets as at the respective dates.

As at those same dates we had deposits and other receivables of HK$20.2 million, HK$21.7

million and HK$32.0 million, respectively, representing approximately 2.6%, 2.2% and 2.6%

of our total current assets as at the respective dates and primarily made up of other receivables

from customers for sourcing tooling and testing equipment.

If our customers default on or delay their payments, we may have to make additional

provision for impairment, write off the relevant receivables, and/or incur substantial legal costs

to recover the outstanding balance, which could in turn have an adverse effect on our business,

financial condition, and results of operations. We are therefore subject to credit risks in relation

to our trade and other receivables, and our profitability and cash flow are dependent on our

receipt of timely payments from our customers.

There is no assurance that we will be able to collect our receivables in a timely manner,

or at all. If any of our customers face unexpected adverse situations, including, but not limited

to, financial difficulties, significant decreases in demand for their products, and disruption in

their business operations, we may not be able to receive full or any payment of uncollected

sums or enforce any judgment debts against such customers. Non-payments or delays in

payment by our customers could materially and adversely affect our business, financial

condition, and results of operations.

We may face cash flow pressure due to potential difference in time between payment ofcertain material/component costs product development expenses and receipt of paymentfrom customers upon sale of products.

We receive the majority of payments from our customers upon sales of specific batches

of products. However, we incur certain expenses associated with production of our products,

including purchases of materials and parts, in advance of payment from our customers. While

certain design and development, testing and tooling and other expenses are paid by customers

in advance and recognised as service revenue over the period such services are rendered, we

may still record significant cash outflow due to cash flow mismatch in anticipation of strong

demand of equipment arising from upcoming projects and orders, particularly in circumstances

where ramp-up is delayed. There can be no assurance that cash flow management measures we

take in such circumstances will function to mitigate such risks sufficiently or at all.

Furthermore, while we have not experienced significant capital expenditure in relation to

product development over the Track Record Period, with product development expenses

largely being made up of salary expenses of our engineers dedicated to such tasks and which

are recognised throughout the year, there can be no assurance that such expenses will not

increase in the future, particularly if we invest in developing solutions in advance of receiving

orders.

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If we face any significant and substantial cash flow mismatch in the future, we may have

to raise funds by resorting to internal resources and/or banking facilities in order to meet our

payment obligations in full and on time.

We had net operating cash outflows for FY2020 and FY2022.

For FY2020, we recorded cash outflow from operating activities of approximately

HK$17.6 million. This was primarily due to the payment of severance compensation to

redundant employees pursuant to the closing of our previous production facility in Shenzhen

and relocation of our production facilities to Dongguan in FY2019. In respect of such

restructuring measures, we had made provisions amounting to HK$76.9 million as at 31 March

2019 and all such provisions were fully paid as at 31 March 2020, thereby contributing towards

a net operating cash outflow for FY2020.

For FY2022, we recorded cash outflow from operating activities of approximatelyHK$42.5 million. This was primarily due to an increase in inventories of HK$221.5 million inFY2022. Such increase was primarily due to (i) increase in production activities and orders,and (ii) shortages in certain electronic components causing longer lead times and increased rawmaterials inventories while we waited for delivery of electronic components, and (iii) some ofour customers giving us binding commitments so that we could commence purchase ofelectronic components earlier and stockpile such components to mitigate the effect of anypotential shortages or increase in delivery lead times.

We cannot assure you that we will not experience net operating cash outflows in the futureand if such a situation is not managed properly, it could negatively affect our businessoperations. Our future liquidity, the payment of other payables and accruals, as well as therepayment of any potential debt obligations as and when they become due, will primarilydepend on our ability to maintain adequate cash inflows from operating activities and possiblyproceeds from external financings. If we are unable to maintain adequate cash inflows, we maynot be able to meet our payment obligations to support our operations. As a result, our business,financial position, results of operations, and prospects may be adversely affected.

We are uncertain about the recoverability of our deferred tax assets, which may affect ourfinancial positions in the future.

As at 31 March 2020, 2021 and 2022, our deferred tax assets amounted to HK$21.3million, HK$10.7 million and HK$7.3 million, respectively. For details of the movements ofour deferred tax assets during the Track Record Period, see “Appendix I – Accountant’s Report– 25. Deferred Income Tax”. Deferred tax assets are recognised only to the extent that it isprobable that the future taxable profit will be available against which the deductible temporarydifferences can be utilised. This requires significant judgement on the tax treatments of certaintransactions and also assessment on the probability that adequate future taxable profits will beavailable for the deferred tax assets to be recovered. We cannot guarantee our deferred taxassets will continue to be deemed as recoverable and recognised at current values or at all. Tothe extent any deferred tax assets are not deemed recoverable, our results of operations may bematerially and adversely affected.

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If we fail to fulfil our obligations with respect to our contract liabilities, our results ofoperations, liquidity and financial position may be materially and adversely affected.

As at 31 March 2020, 2021 and 2022, we had contract liabilities of approximatelyHK$116.4 million, HK$129.6 million and HK$141.5 million, respectively, primarily made upof prepayments received from customers. Contract liabilities increased during the TrackRecord Period due to the negotiation of larger prepayments from our customers. Revenuerecognised during FY2020, FY2021 and FY2022 that was included in the contract liabilitiesbalance at the beginning of the year amounted to approximately HK$42.1 million, HK$24.4million and HK$48.5 million, respectively. See “Financial Information – Analysis on majorcomponents of the consolidated statements of financial position – Other payables andaccruals”.

There is no assurance that we will be able to fulfil our obligations with respect to contract

liabilities as the completion of our obligations is subject to various factors, including the

supply of raw materials and consumables and normal operations of our production facilities.

If we fail to fulfil our obligations with respect to our contract liabilities, the amount of contract

liabilities will not be recognised as revenue and we may have to return the advance payments

made by our customers. As a result, our results of operations, liquidity and financial position

may be materially and adversely affected.

If we fail to manage our inventories effectively, we may experience a heightened risk ofinventory obsolescence, a decline in inventory value and significant inventory write-downs or write-offs.

While we typically procure materials, components and parts upon receipt of purchase

orders from our customers based on the volume of purchase orders and our production planning

on a “back-to-back” basis and only arrange for delivery in accordance with the production

schedule of the product(s) in question so as to maintain our inventory at a minimum level, there

is no assurance that our customers will not subsequently cancel or reduce their purchase orders,

in which case we may not be able to resell the materials, components and parts ordered for

them and/or the products manufactured according to their specifications. Customer demand

may be affected by various uncertainties, including the progress of their projects, the timing

and success of their product trial(s), and other factors beyond our control, all of which may

result in an increase in our inventory level. For FY2020, our provision for impairment of

inventories charged to our consolidated income statements was approximately HK$3.0 million.

For FY2021, our reversal of impairment of inventories credited to our consolidated income

statements was approximately HK$0.4 million. For FY2022, our reversal of impairment of

inventories credited to our consolidated income statements was approximately HK$10.7

million, mainly representing the utilisation of previously written off raw materials as a result

of sales to certain customers. For FY2020, FY2021 and FY2022, our average inventory

turnover days was 95 days, 79 days and 97 days, respectively. The reason the average inventory

turnover days was relatively high in FY2020 was primarily due to the increase in inventory

levels as at 31 March 2020 due to the impact of COVID-19. Average inventory turnover days

were relatively high in FY2022 due to increased early purchases of certain materials and

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components to mitigate the effect of any potential shortages or increase in delivery lead times

and delays in delivery of certain components, resulting in higher levels of other components

from the same products remaining in inventory.

If we fail to effectively manage the level of our inventories, we may experience a

heightened risk of inventory obsolescence, a decline in inventory value and significant

inventory write-downs or write-offs. Any of the above circumstances may materially and

adversely affect our financial condition and results of operations.

Our production machinery and equipment are subject to breakdown and depreciation,and we may not be able to procure readily available replacements.

The nature of our business requires the heavy and substantial usage of various types of

machinery and equipment. Our production facilities in Dongguan and Penang are equipped

with a variety of automated machinery and equipment for different stages of assembly,

production and testing services, including, among others, SMT equipment, testing equipment,

casing equipment, and laboratory equipment. For details of our principal machinery and

equipment, see “Business – Our Production Facilities and Equipment – Our Machinery and

Equipment”. Such machinery and equipment are subject to breakdown and depreciation, and in

the event of such, we may not be able to procure readily available replacements. Furthermore,

our machinery and equipment will require continuous maintenance and inspections, whether by

our internal personnel or external vendors, so as to ensure their safety and suitability for our

production purposes. The servicing, maintenance, and, if necessary, replacement of our

machinery and equipment may incur material expenditure on our part, which, in turn, could

materially and adversely affect our financial position.

Our profit margin could be adversely affected if we are unable to continuously maintaina high utilisation rate for our machinery and equipment.

Our ability to maintain a steady production output and, by extension, our profitability

depends partly on our ability to maintain a high utilisation rate for our production machinery

and equipment in our production facilities in the PRC and Penang. As a certain portion of our

costs of sales, such as direct labour and factory overhead costs, are relatively fixed in nature,

the extent to which our production machinery and equipment are efficiently and effectively

utilised therefore directly impacts upon our operating results. A high utilisation rate for our

production machinery and equipment allows us to spread our fixed costs over a larger quantity

of our products, resulting in a higher profit margin. Conversely, a low utilisation rate for our

production machinery and equipment will adversely affect our profit margin. During the Track

Record Period, the utilisation rate for our SMT lines was 64.4%, 86.2% and 90.8% for FY2020,

FY2021 and FY2022, respectively.

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Our recent and future capital expenditure on expansion of and improvements to ourproduction facilities and the purchase of property, plant and equipment may result in anincrease in our depreciation expenses.

Over the Track Record Period we invested significantly in upgrading our facilities and

purchasing property, plant and equipment. For the three years ended 31 March 2022, we

invested HK$276.6 million, representing 5.2% of our total revenue for the period in purchases

of property, plant and equipment. Going forward, we plan to invest additional amounts,

including a portion of the net [REDACTED] from the [REDACTED], in property, plant and

equipment, most notably including investments to more fully equip our Penang facilities and

consolidate our capabilities in Penang in a single site, investment in product development tools

needed to increase our IoT business, and investments in increasing the capacity and capabilities

of our production facilities across sites. See “Business – Our Business Strategies” and “Future

Plans and Use of [REDACTED]”. We estimate such upgrades and additions may increase our

depreciation expenses by approximately HK$[REDACTED] million and HK$[REDACTED]

million for FY2023 and FY2024, respectively, and could adversely affect our financial

condition and results of operations to the extent such costs are not offset by corresponding

increases in revenue.

We may face labour shortages, increases in labour cost and labour disputes.

Our success also depends upon the continued service of our skilled workforce and on our

ability to continue to attract, retain and motivate such workforce. During the Track Record

Period, employee benefit expenses we incurred amounted to 20.2%, 17.0% and 16.2% of our

total revenue for FY2020, FY2021 and FY2022, respectively.

Our production facilities are located in Dongguan, the PRC, and Penang, Malaysia, and

our workshop for providing refurbishment and repair services and headquarters are situated in

Hong Kong. The cost of labour in the jurisdictions in which we have operations has been

increasing over the past several years. We have thus incurred and will continue to incur

increased costs to ensure that our facilities and employees are in compliance with any

necessary legal and regulatory requirements and any other applicable labour laws that are

implemented in the future.

If we experience labour shortages or significant increases in labour costs because of

changes in relevant labour laws and regulations, increasing competition for employees, higher

employee turnover rates, increase in wages and/or other employee benefits costs, our operating

expenses could increase and our growth could be materially and adversely affected. During the

Track Record Period, we engaged labour dispatching agents to provide us with dispatched

workers to fill certain non-essential positions in the PRC. However, we cannot assure you that

dispatched workers in the amounts we need will always be available.

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Moreover, while we did not experience disruption to our operations due to any labour

disputes during the Track Record Period, we cannot assure you that future labour disputes will

not occur. If they do occur, they could interrupt our operations, harm our reputation and divert

our management’s attention and resources, which could have a material adverse effect on our

business operations and financial condition. In addition, we may be liable for fines assessed by

the relevant governmental authorities or incur settlement costs in order to resolve labour

disputes and become subject to higher labour costs in the future when recruiting new

employees due to the reputational damage caused by labour disputes or related incidents.

Our quality control system may not be as effective as we expect, which may lead to ourfailure to conform with both international and domestic quality standards in relation toour products and give rise to product returns and replacement.

The quality of our products depends significantly on the effectiveness of our quality

control systems, which in turn rely on a number of factors, including the design of our quality

control systems, our quality control training programmes organised for our employees, and our

employees’ commitment in adhering to our quality control policies and guidelines as

implemented from time to time. Any significant failure or deterioration of our quality control

systems could result in the production of defective or substandard products, delay in delivery

of our products, replacement of defective or substandard products, product returns and damage

to our reputation.

As a provider of electronic development and manufacturing services, if our products do

not meet the specifications and requirements agreed with or requested by our customers, or if

any of our products are defective, we may be subject to demands for product returns or recalls,

product liability claims, indemnity claims, and other claims for compensation. Any

reimbursement of repair costs of a substantial amount, or any large-scale product returns or

replacements, will not only damage our reputation in the industry and diminish our customers’

confidence in the quality of our products, but will also materially and adversely affect our

financial condition and results of operations. Product failure or defects, and any complaints or

negative publicity resulting therefrom, could result in decreased sales of our products, or

claims or litigation against us regarding the quality of our products. We may also incur

significant legal costs regardless of the outcome of any claim of alleged defect. As a result, this

could have a material adverse effect on our business, reputation, financial conditions and

results of operations.

We may be subject to product liability claims.

Our products can expose us to potential product liability claims. Such claims may arise

if our products fail to perform as expected, or are proven to be defective, or if their use causes,

results in, or is alleged to have caused or resulted in personal injuries, property damages or

other adverse effects. Any product liability claim, whether relating to personal injuries or

property damages, or related regulatory actions could prove costly and time-consuming to

defend and could potentially harm our brand and reputation. If successful, product liability

claims may require us to pay substantial damages and recall relevant products. We may be

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unable to obtain sufficient product liability insurance coverage on commercially reasonable

terms, or at all. Furthermore, certain product liability claims may be the result of defects from

parts and components purchased from third-party suppliers. Such third-party suppliers may not

indemnify us for defects as to such parts and components or may only provide us with limited

indemnification that is insufficient to cover our damages resulting from any product liability

claim(s) as to such parts and components. Any product liability claim, with or without merit,

may result in significant negative publicity and thus may materially and adversely affect the

marketability of our products and our reputation, as well as our business, results of operations

and financial condition.

Substantial injury to persons or loss of property may occur at our production facilities.

Work injury accidents may occur at our production facilities, which may result in personal

injuries or fatalities and damage to property and equipment. Accidents relating to any of these

incidents may result in personal injury claims, cessation of business, or civil and criminal

penalties. If we incur substantial losses or liabilities as a result of workplace accidents and

insurance coverage is unavailable or inadequate to cover such losses or liabilities, our results

of operations and financial condition may be materially and adversely affected.

We may fail to renew required licences, permits, approvals, and certifications for ourbusiness operations.

In order to operate our businesses, we are required to obtain a variety of licences, permits,

approvals and certifications. See “Business – Licences and Permits” and “Business –

Certifications”. While we were able to obtain necessary licences, approvals, and permits over

the Track Record Period, we cannot assure you that we will be able to renew our existing

licences, permits, approvals and certifications, or that such existing licences, permits,

approvals, and certifications will not be revoked by the relevant authorities. Further, we cannot

assure you that we will be able to successfully obtain, retain or renew future licences, permits,

approvals, and certifications in a timely manner or at all. Failure to renew such licences,

permits, approvals, and certifications as planned may cause us to experience delays or

suspension in the manufacturing and sales of our products or our expansion plans, thereby

materially and adversely affecting our business, financial condition and results of operations.

Compliance with more stringent regulations may have negative effects on our operations.

Our operations require a certain number of government approvals and we are subject to

a broad range of laws and regulations governing various matters, including our business

operations and production. In particular, the continuance of our operations depends upon

compliance with applicable environmental, health and safety and other regulations. Any

change in the scope or application of these laws, regulations or approvals may limit our

production capacity or increase our costs, and therefore could have an adverse effect on our

financial condition and results of operations. We may be unable to, or elect not to, comply with

such laws and regulations, which could result in fines, penalties or lawsuits. There can also be

no assurance that the relevant governmental authorities will not impose additional or more

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stringent laws or regulations. Compliance with such additional or more stringent laws or

regulations may be time consuming or cause us to incur significant capital expenditures, which

we may be unable to pass on to our customers. In the event this occurs, our business, results

of operation and financial condition could be materially and adversely affected.

Our business has been and may continue to be interrupted by the COVID-19 pandemic.

In December 2019, a respiratory illness known as COVID-19 emerged and has spread

globally. Various government measures and controls have since been implemented to tackle

COVID-19, including, among others, travel restrictions, lock-down orders, mandatory

quarantine for travellers or returnees from affected regions, and extended closure of schools

and businesses. Such measures have resulted and may continue to result in limitations in our

ability to conduct our business operations.

Our businesses operations are primarily located in Dongguan, the PRC; Penang,

Malaysia; and Hong Kong, which are among the areas affected by the COVID-19 pandemic.

Since the outbreak of COVID-19, we have experienced production suspension which has

impacted our sales. Our facilities located in Dongguan were temporarily closed beginning in

18 January 2020 to 9 February 2020, and production ramped back up over the course of

February and March 2020 as our workers, many who had returned home for the Chinese New

Year, gradually returned back to work. Largely as a result of such suspension, the annual

utilisation rate for SMT lines based in our production facilities in the PRC fell to 65.6% for

FY2020. Likewise, our facilities located in Penang were also temporarily closed from 18

March 2020 through 8 April 2020 pursuant to the imposition of various movement control

orders throughout 2020 and a state of emergency order in January 2021 by the Malaysian

government, and further closed down from 19 October 2021 to 27 October 2021 in order to

prevent spreading of COVID-19 as stipulated by the Malaysian government. The outbreak of

COVID-19 in the PRC and Malaysia has also resulted in the temporary closure of many

corporate offices, retail stores and manufacturing facilities across these countries. We also

delayed shipments as our domestic and international suppliers’ businesses were impacted, and

the delivery of materials to us were delayed. The delivery of products accounting for





million was due to component shortages) and delivery of products representing HK$266.3

million in revenue originally scheduled to be made in FY2022 was delayed to FY2023 (of

which approximately HK$260.6 million was due to component shortages). See “Business –

Recent Developments – Measures Taken in Response to the Coronavirus Outbreak”.

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The COVID-19 pandemic and steps taken to control it have also had significant effects

on the operations of our customers and the industries in which they operate. This could

adversely affect demand from these clients for our products and services. Notably, the

aerospace industry faced significant challenges as a result of the COVID-19 pandemic. Largely

as a result, according to the Frost and Sullivan Report, the total revenue of global aircraft

manufacturers declined from US$173.4 billion in 2019 to US$128.1 billion in 2020,

representing a year-on-year growth of -26.1%.




in FY2021, in particular as (a) revenue contribution and gross profit margin from customers in

the transportation industry sector decreased as demand from aerospace, which was particularly

hit by COVID-related travel restrictions, decreased; and (b) revenue contribution from

customers in the smart module and smart device industry sector increased significantly while

gross profit margins decreased, largely due to execution of large volume projects, as well as

to increased depreciation expenses related to increased purchases of property, plant and

equipment in connection with the opening of, and relocation of our operations to, our


– Year to Year Comparison of Results of Operations” for further details.

As at the Latest Practicable Date, save for the temporary closures detailed above, there

has been no extended closure of our facilities or disruption to our business operations.

Moreover, as at the Latest Practicable Date, public COVID-19 vaccination programmes have

been gradually rolled out in the locations where our primary business operations are situated.

However, despite such government measures to contain the spread of the pandemic, and even

though vaccines have been developed, the pandemic has continued, especially with the

emergence of new variants such as the Delta and Omicron strains. Countries around the world

are continuing to be impacted by fluctuations in infection rates, making it difficult to fully lift

existing containment measures and reopen economies. There has continued to be cases of

COVID-19 in various provinces in the PRC in recent months, the Malaysian government

declared a state of emergency order in January 2021 that was effective up until 1 August 2021

which permitted the discretionary imposition of a total lockdown and/or restrictions on all or

part of the economic activities at any time, new variants of COVID-19 have emerged and there

is still significant uncertainty as to the future progress of the disease. There can be no assurance

that, moving forward, we will be able to adequately mitigate the impact of the COVID-19

pandemic or that our operations will not be materially disrupted, particularly if the COVID-19

continues for a prolonged period or worsens in the PRC, Malaysia, Hong Kong and/or

worldwide.

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Any discontinuation, reduction or delay of government grants that may be available to uscould materially and adversely affect our business, financial condition and results ofoperations.

We received government grants in the form of various non-recurring subsidies and

incentives, primarily related to our capital investments in equipment/machinery and COVID-

19. The amount of government grants we recognised in FY2020, FY2021 and FY2022

amounted to HK$9.0 million, HK$7.4 million and HK$3.3 million, respectively. See “Financial

Information – Principal items in the consolidated income statements – Other income”. There

can be no assurance that we will be able to receive government grants in the future.

Our production and operations may be affected by factors beyond our control.

In addition to the risks relating to the COVID-19 pandemic detailed above, our

manufacturing businesses may also be interrupted in the future for reasons beyond our control,

which may include natural disasters such as extreme weather conditions, flooding, cyclones,

typhoons, blizzards, snowstorms, landslides, earthquakes and fire, pandemics and infectious

diseases, as well as power outage, equipment failure, labour strikes, union strikes or social

turmoil. Any major interruption of our business may have a material and adverse effect on our

ability to manufacture and sell our products. The occurrence of any of such events could have

a material and adverse effect on our production capacity, business, results of operations and

financial condition.

We may not have adequate insurance coverage to cover potential liabilities and losses.

We maintain insurance to protect our assets and resources against specific losses and

damages. We also maintain insurance to protect employees and third parties to ensure that we

are in compliance with relevant laws and regulations. For more details, see “Business –

Insurance” in this document. However, there may be circumstances for which we may not be

insured against adequately, or at all. If we incur substantial losses or liabilities and our

insurance coverage is unavailable or inadequate to cover such losses or liabilities, our business,

financial conditions and results of operations may be materially and adversely affected.

We engage independent third-party logistics service providers to deliver our products andtheir failure to provide timely and high-quality logistics services may adversely affect ourbrand image and our financial condition.

We engage Independent Third-Party logistics service providers to deliver our productsfrom our facilities to the forwarders at the designated ports of shipment of our customers.Disruptions to delivery, which may take form as transportation bottlenecks, inclement weather,natural disasters, social unrest, vehicle breakdowns and other factors beyond our control mayresult in delayed or lost deliveries. There is no assurance that the logistics service providersthat we engage will be able to deliver our products in accordance with our delivery schedules.If such logistics service providers fail to deliver our products in a timely manner, or if our

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products are damaged in the course of delivery, our customers may refuse to accept ourproducts, which in turn may affect our reputation and brand image. We may also be subject topenalties in the event of late delivery, which may materially and adversely affect our financialposition.

We may be exposed to fair value changes for financial assets measured at fair valuethrough other comprehensive income and valuation uncertainty due to the use ofunobservable inputs that require judgement and assumptions which are inherentlyuncertain.

During certain periods in the Track Record Period, we had financial assets measured atfair value through other comprehensive income (“FVOCI”), mainly comprising unlisted equityinstruments. As at 31 March 2020 and 2021, our financial assets measured at FVOCI amountedto approximately HK$5.2 million and HK$4.8 million, respectively. We disposed of allfinancial assets measured at FVOCI in FY2022 and, as such, our financial assets measured atFVOCI as at 31 March 2022 was nil.

Since the value of our financial assets depends on the investment performance of theunderlying financial instruments, our investments are subject to all of the risks associated withthose underlying financial instruments, including the possibility of a default by, or bankruptcyof, the issuers of such products. Any potential realised or unrealised losses in our investmentsin the future resulting from the changes in the value of the financial instruments we investedin may adversely affect our business, our results of operations and our financial condition.

The fair value of our financial assets that are not traded in an active market is determinedusing valuation techniques, which require judgement and assumptions and involve the use ofunobservable input, such as the discount for lack of marketability of 30%. In estimating the fairvalue of the financial asset at FVOCI, we use market-observable data to the extent it isavailable and engage a third party qualified valuer to perform the valuation, where appropriate.Changes in the basis and assumptions used in the estimation could materially affect the fairvalue of these financial assets. Factors beyond our control can significantly influence and causeadverse changes to the estimates and thereby affect the fair value. These factors include, butare not limited to, general economic conditions, changes in market interest rates and stabilityof the capital markets. The valuation may involve a significant degree of judgement andassumptions which are inherently uncertain, and may result in material adjustment, which inturn may materially and adversely affect our results of operations. See “Appendix I – 3.Financial risk management – 3.3 Fair value estimation” for further description of the way weestablish values of financial assets at FVOCI.

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Future acquisitions may expose us to new risks or fail to perform as expected.

One of our key business strategies is to expand our operations into new jurisdictionsthrough selective acquisition. Any future acquisition, particularly of a target in a jurisdictionin which we are not familiar, may expose us to operational, regulatory and market risks, as wellas risks associated with additional capital requirements. We may not be able to identify suitableacquisition candidates or complete an acquisition on commercially acceptable terms in thefuture. If we fail to identify appropriate candidates or complete desired acquisition, we may notbe able to implement our growth strategy effectively.

In addition, our ability to realise the expected benefits from the acquisition may dependon our ability to retain the employees, efficiently integrate the operations, understand thefactors contributing to the success of the acquired company and to adapt to local marketdynamics. Our ability to successfully integrate an acquired company and its operation may beadversely affected by a number of factors, including division of management’s attention anddifficulties in retaining customers of the acquired company. The acquired company might notperform as expected for a number of reasons, including legislative or regulatory changes or lossof key customers and personnel. We have no prior experience establishing and/or operating injurisdictions outside of Hong Kong, the PRC and Malaysia, and may experience challengesentering into such jurisdictions, including failure to obtain relevant regulatory approvals. Wemay also fail to identify potential issues or risks in our due diligence of the target or addressthem properly prior to our acquisition. If such risks materialise after the acquisition iscompleted, we may suffer losses or be subject to liabilities. If we fail to realise the benefitsenvisioned from such acquisition, our overall profitability and growth plans may be hindered.

RISKS RELATING TO CONDUCTING BUSINESS IN THE PRC

Changes in the economic, political and social conditions in the PRC may have a materialand adverse effect on our business, financial condition, and results of operations.

The economic, political and social conditions in the PRC differ from those in moredeveloped countries in many respects, including government involvement, control of capitalinvestment and foreign exchange, overall level of development, and allocation of resources.Before the adoption of its reform and opening-up policies in 1978, the PRC was primarily aplanned economy. In recent years, the PRC government has been continually reforming thePRC economic system and government structure. In terms of economic reforms, the PRCgovernment has emphasised the independence of enterprises and the utilisation of marketforces in effecting economic growth. These reforms have resulted in significant economicgrowth and social prospectus. However, economic reform measures may be adjusted, modifiedor applied inconsistently from industry to industry or across different regions of the country.

We cannot predict whether changes in the PRC’s political, economic and social conditionswill have any material and adverse effects on our present or future business, financial conditionor results of operations. Notwithstanding the economic reforms outlined above, the PRCgovernment continues to play a significant role in regulating industrial development, allocationof resources, production, pricing and management of currency. There can be no certainty thatthe PRC government will continue to pursue a policy of economic reform or that the directionof such economic reforms will continue to be market-friendly.

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Uncertainty in the PRC legal system may make it difficult for us to predict the outcomeof any disputes that we may be involved in and may affect the protection afforded to ourbusiness and our Shareholders.

The PRC legal system is based on the PRC Constitution and consists of written laws,regulations, circulars and directives. Prior court decisions may be cited for reference but havelimited precedential value. Since the late 1970s, the PRC government has promulgated lawsand regulations dealing with economic matters such as foreign investment, corporateorganisation and governance, commerce, taxation and trade. However, as these laws andregulations are relatively new and continue to evolve, the implementation, interpretation andenforcement of such laws and regulations involve significant uncertainties and differentdegrees of inconsistency due to the lack of established practice available for reference.

We cannot predict the effect of future legal developments in the PRC, including thepromulgation of new laws, changes in existing laws or their interpretation or enforcement, orthe pre-emption of local regulations by national laws. As a result, there is substantialuncertainty as to the legal protection available to our Group and our Shareholders.Furthermore, due to the limited volume of published cases and the non-binding nature of priorcourt decisions, the outcome of dispute resolution in the PRC may not be as consistent orpredictable as in other more developed jurisdictions. As such, any litigation in the PRC maybe protracted and result in substantial costs and the diversion of resources and managementattention.

Government control over the conversion of foreign exchange may affect our results ofoperations and financial condition.

The RMB is not currently a freely convertible currency. Under existing PRC foreignexchange regulations, payments of current account items, including profit distributions,interest payments and expenditures from trade-related transactions, can be made in foreigncurrencies without prior approval from SAFE, by complying with certain proceduralrequirements. Approval from or filing with appropriate government authorities is requiredwhere RMB is to be converted into foreign currency and remitted out of China to pay capitalexpenses such as the repayment of loans denominated in foreign currencies. If we fail to obtainapproval or make filing to converting currencies for such purposes, our capital expenditureplans, business operations and subsequently our results of operations and financial conditioncould be adversely affected. In addition, the PRC government may, at its discretion, imposerestrictions on access to foreign currencies for current account transactions and if this occursin the future, we may not be able to pay dividends in foreign currencies to our Shareholders.

Fluctuation in the value of RMB may have a material and adverse effect on our businessand your investment.

The value of the RMB has been under pressure of appreciation in recent years. Due tointernational pressure on the PRC to allow for more flexible exchange rates for the RMB,coupled with financial market developments in the PRC and abroad, the PRC government hasdecided to proceed further with the reform of the RMB exchange rate regime and to enhancethe RMB exchange rate flexibility.

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Fluctuations in exchange rates may adversely affect the value of our net assets, earningsor any declared dividends (which could be funded by RMB but paid in HK$) when translatedor converted into US$ or HK$ (which are pegged to the US$). In addition, any unfavourablemovement in exchange rates may lead to an increase in our costs or a decline in sales, whichcould materially affect our results of operations. During the Track Record Period, we did notenter into any agreements to hedge our exchange rate exposure.

We mainly operate in Hong Kong, the PRC and Malaysia. While most of our purchasesare denominated and settled in HK$ and US$, other manufacturing costs are denominated inMYR, and RMB. We cannot predict how the RMB will fluctuate in the future. The RMB maybe revalued further against the US$ or other currencies, which may result in an appreciationor depreciation in the value of the RMB against the US$ or other currencies, and couldmaterially impact our financial results. Fluctuations in foreign exchange rates may be causedby various factors such as change in government policies, change in domestic and internationaleconomic and political conditions, and is always unpredictable. We cannot assure you that wewill not suffer losses on foreign exchanges in the future.

It may be difficult to effect service of process on, or to enforce any judgments obtainedoutside China against, our subsidiaries in the PRC.

“An Arrangement between the Mainland and Hong Kong Special Administrative Regionon Reciprocal Recognition and Enforcement of judgments of Civil and Commercial Casesunder the Jurisdictions as Agreed to by the Parties Concerned” (關於內地與香港特別行政區法院相互認可和執行當事人協議管轄的民商事案件判決的安排) (the “2006 Arrangement”) wasexecuted on 14 July 2006 and became effective on 1 August 2008. Under the 2006Arrangement, where any designated people’s court in the PRC or designated Hong Kong courthas made an enforceable final judgment requiring payment of money in a civil and commercialcase pursuant to a choice of court agreement by the parties, any party concerned may apply tothe relevant people’s court in the PRC or Hong Kong court for recognition and enforcement ofjudgment. Although this arrangement became effective on 1 August 2008, the outcome andeffectiveness of any action brought under the arrangement may still be uncertain.

On 18 January 2019, the Supreme People’s Court of the PRC and the Department ofJustice under the Government of the Hong Kong Special Administrative Region signed theArrangement on Reciprocal Recognition and Enforcement of Judgments in Civil andCommercial Matters by the Courts of the Mainland and the Hong Kong Special AdministrativeRegion (關於內地與香港特別行政區法院相互認可和執行民商事案件判決的安排) (the “2019Arrangement”). The 2019 Arrangement, for the reciprocal recognition and enforcement ofjudgments in civil and commercial matters between the courts in mainland China and those inthe Hong Kong Special Administrative Region, stipulates the scope and particulars ofjudgments, the procedures and ways of application for recognition or enforcement, the reviewof the jurisdiction of the court that issued the original judgment, the circumstances where therecognition and enforcement of a judgment shall be refused, and the approaches towardsremedies. After the judicial interpretation has been promulgated by the Supreme People’s Courtand the relevant procedures have been completed by Hong Kong, both sides shall announce adate on which the 2019 Arrangement shall come into effect. The 2019 Arrangement shall applyto any judgment made on or after its effective date by the court of both sides. The 2006Arrangement shall be terminated on the same day when the 2019 Arrangement comes into

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effect. If a written choice of court agreement has been signed by parties according to the 2006Arrangement prior to the effective date of the 2019 Arrangement, the 2006 Arrangement shallstill apply. Although the 2019 Arrangement has been signed, its effective date has yet to beannounced. Therefore, there are still uncertainties about the outcomes and effectiveness ofenforcement or recognition of judgments under the 2019 Arrangement.

Therefore, it may be difficult for investors to effect service of process upon oursubsidiaries in the PRC or to enforce against us in the PRC any judgments obtained fromnon-PRC courts. China does not have treaties providing for the reciprocal recognition andenforcement of judgments of courts with the Cayman Islands, the United States, the UnitedKingdom, Japan and many other developed countries. Therefore, the recognition andenforcement in China of judgments of a court in any of these jurisdictions in relation to anymatter not subject to a binding arbitration provision may be difficult or even impossible.

Inflation in the PRC could negatively affect our profitability and growth.

The economy of the PRC has been experiencing significant growth, leading to inflationand increased labour costs. Inflation in the PRC may lead to an increase in interest rates anda slowdown in economic growth in the PRC, which may negatively impact our business. Theoverall impact of inflationary pressure may adversely affect our business, financial condition,results of operations, and growth prospects.

Dividends payable to us by our PRC subsidiaries may be subject to PRC withholding tax,which could materially and adversely affect the amount of dividends, if any, that we maypay to our Shareholders.

The PRC EIT Law and its implementation rules stipulate that if an entity is deemed to bea non-resident enterprise, which (i) does not have any establishment or place of business in thePRC or (ii) have an establishment or place of business in the PRC but the relevant income hasno actual relationship with such establishment or place of business in the PRC, shall pay EITon its income deriving from inside China at the reduced rate of EIT of 10%. Further, pursuantto the Treaty between Hong Kong and the PRC for the Avoidance of Double Taxation and thePrevention of Fiscal Evasion with respect to Taxes on Income which came into effect on 8December 2006 (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)(“Double Tax Avoidance Treaty”) and the Notice of the State Administration of Taxation onissues regarding the administration of the dividend provision in tax treaties (國家稅務總局關於執行稅收協定股息條款有關問題的通知) promulgated on 20 February 2009, if a Hong Kongresident enterprise owns more than 25% of the equity interest in a PRC enterprise at all timesduring the 12-month period immediately preceding the receipt of dividends from the PRCenterprise, the 10% withholding tax can then be reduced to 5%. Pursuant to the Fifth Protocolof the Arrangement between the Mainland and Hong Kong for the Avoidance of DoubleTaxation 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> 第五議定書) which came intoeffect on 6 December 2019, such reduced withholding tax rate shall not apply to anyarrangement or transactions made for the primary purpose of availing oneself of such taxbenefits.

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We are a Cayman Islands holding company and we have a BVI subsidiary, namely In-Tech

Electronics BVI, and 2 Hong Kong subsidiaries, namely In-Tech Investment and In-Tech

Electronics HK, which in turn hold the controlling equity interest of our PRC subsidiaries in

Dongguan and Shenzhen. If we, our BVI subsidiary, and our Hong Kong subsidiaries are

considered as non-resident enterprises and are determined by the relevant PRC tax authority to

have satisfied relevant conditions under the Double Tax Avoidance Treaty, along with any other

applicable PRC laws and regulations, then dividends paid to our Hong Kong subsidiaries by

our PRC subsidiaries may be subject to the reduced withholding tax rate of 5%. If we are

required under the PRC EIT Law to pay income tax for any dividends we receive from our PRC

subsidiaries, or if our Hong Kong subsidiaries are determined by the relevant PRC tax authority

as receiving a reduced withholding tax rate by reason of a corporate structure or arrangement

that is primarily tax-driven, this would materially and adversely affect the amount of dividends,

if any, that we pay to our Shareholders.

RISKS RELATING TO CONDUCTING BUSINESS IN MALAYSIA

Social, political, regulatory, economic, and legal developments in Malaysia, as well as anychanges in Malaysian governmental policies, could materially and adversely affect ourbusiness and results of operations.





leased a site with GFA of 6,038 sq.m, and leased a second site with GFA of 5,888 sq.m. in

September 2020 to further expand the scope of our business operations in Penang. In order to

further expand our production facilities in Penang and consolidate them in a single location,

in January 2021, we purchased a larger third site with a GFA of 32,702 sq.m. at consideration

of MYR31.8 million (equivalent to HK$58.8 million). We commenced operations at this third

site in March 2022 and expect to complete migration of all equipment and operations to the site

by the end of 2022, at which point it will function as our sole operational location in Penang.

This third site will provide enough space to absorb the operations of our first two Penang sites

as well as provide significant room for future expansion. We ceased operations at our first

Penang production site following commencement of operations at our new third Penang site in

March 2022. Given that we maintain a material presence in Malaysia, our business, financial

conditions and results of operations are subject to social, political, regulatory, economic, and

legal developments in Malaysia. There are uncertainties in these areas which include, but are

not limited to, war, terrorism, demonstrations, riots, extremism, nationalism, changes in

political leadership, sudden restrictive changes to government policies, and introduction ofnew

rules and regulations from time to time. If Malaysia experiences any adverse social, political,

regulatory, economic or legal changes due to such uncertainties, our business, financial

condition and results of operations could be materially and adversely affected.

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There is no assurance that social and civil disturbances will not occur in the future and

such disturbances will not, directly or indirectly, materially and adversely affect our business,

operations, prospects and financial performance. Terrorist attacks, increased hostilities and

other acts of violence or war may adversely affect the regional and worldwide financial

markets. The occurrence of any of these events may result in a loss of business confidence,

which could potentially lead to economic recession and have an adverse effect upon our

business, prospects, financial performance and/or operations. In addition, any deterioration in

international relations may result in increased investors’ concern regarding regional stability,

which may in turn, adversely affect our business.

Our business and operations are subject to a wide range of laws and regulations, such as

those relating to pricing, consumer protection, quality of goods, and product safety. The

government authorities may inspect, examine or enquire on our compliance with the relevant

statutory and regulatory requirements from time to time. If we fail to comply with any

applicable laws and regulations, it may face penalties, fines, suspension or revocation of any

of its licences, permits, approvals or certifications necessary to conduct business in Malaysia,

as well as be subject to administrative sanctions and civil and criminal liability. Should any

such penalties, sanctions, and liabilities be imposed on us for non-compliance with the

applicable laws and regulations, our business, financial conditions and results of operations

may be materially and adversely affected.

We may be subject to foreign exchange risks in Malaysia.

The Foreign Exchange Administration Rules in Malaysia entail the monitoring of capital

flows into and out of the country in order to preserve its financial and economic stability. The

Financial Services Act 2013 (“FSA”) and the Islamic Financial Services Act 2013 (“IFSA”)

govern the foreign exchange control framework in Malaysia. In exercising its powers under the

FSA and IFSA, the Malaysian central bank, Bank Negara Malaysia (“Bank Negara”), has

issued foreign exchange notices (the “Foreign Exchange Notices”) which embody Bank

Negara’s general permissions and directions setting out transactions that are allowed by Bank

Negara which are otherwise prohibited under the FSA and the IFSA. Such policies and notices

monitor and regulate activities of both residents and non-residents.

The Foreign Exchange Notices are reviewed regularly according to changing

circumstances. As at the Latest Practicable Date, our Malaysian subsidiaries are free to remit

out divestment proceeds, profits, dividends or any income arising from the investments in

Malaysia to its overseas holding company. However, there is no assurance that such rules and

regulations on foreign exchange control in Malaysia will not change. In the event that Bank

Negara introduces any additional restrictions in the future, it may limit our ability to repatriate

dividends or distributions, if any, from our Malaysian subsidiaries and thereby adversely affect

our financial condition.

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We may be subject to tax audits and investigations in Malaysia.

The Malaysian tax regime is based on a self-assessment system. Persons chargeable,which include companies in Malaysia, are required to conduct a self-assessment on their taxpayables and file necessary annual tax returns along with their tax remittance. Pursuant to theIncome Tax Act 1967, the Malaysian Inland Revenue Board (“MIRB”) is authorised to conductaudits and investigations on persons chargeable to determine whether their tax returns areaccurate and complete, and to impose additional tax and/or penalties on persons chargeable ifthe MIRB determines that the persons chargeable in question are in fact subject to more taxpayables than as reported in their self-assessed tax returns.

Our Malaysian subsidiaries calculate the amount of taxes payable and make paymentthereof in accordance with the relevant laws and regulations. Since their incorporation and upto the Latest Practicable Date, our Malaysian subsidiaries have never acted in contravention oftheir tax obligations, nor have they been subject to any tax audits and investigations by theMIRB. However, we may be subject to additional taxes and/or penalties if the MIRB considersthat our self-assessed tax payables are less than the amount which it determines to be payable.In this case, our profit margins may decrease and this consequently adversely affects ourfinancial results.

RISKS RELATING TO THE [REDACTED]

There has been no prior public market for our Shares and an active or liquid tradingmarket for our Shares may not develop.

Prior to the [REDACTED], there has not been a public market for our Shares. Althoughapplication has been made for the [REDACTED], we cannot assure you that an active publicmarket for our Shares will develop or that the market price of our Shares will not decline belowtheir initial [REDACTED]. The [REDACTED] of our Shares will be determined throughnegotiation between us and the [REDACTED] (for itself and on behalf of the [REDACTED])and it may not be indicative of the market price of the Shares after the [REDACTED] iscompleted. You may be unable to sell your Shares at or above the [REDACTED], and as aresult, may lose all or part of your investment in such Shares. Failure in the development ofan active and liquid public trading market may materially and adversely affect the market priceand liquidity of our Shares.

The liquidity, trading volume and market price of our Shares following the [REDACTED]may be volatile.

The [REDACTED] of our Shares following the [REDACTED] may be volatile and canfluctuate significantly and rapidly in response to, inter alia, the following factors, some ofwhich are beyond our control:

• our financial results;

• changes in securities analysts’ estimates, if any, of our financial performance;

• the history of, and the prospects for, us and the industry in which we compete;

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• an assessment of our management, our past and present operations, and theprospects for, and timing of, our future revenues and cost structures such as theviews of independent research analysts, if any;

• the present state of our development;

• the valuation of publicly traded companies that are engaged in business activitiessimilar to ours;

• general market sentiment regarding the EMS industry and the industries of ourmajor customers;

• changes in laws and regulations in the PRC and/or Malaysia;

• our ability to compete effectively in the market; and

• political, economic, financial and social developments in the PRC, Malaysia andworldwide.

The Stock Exchange has from time to time experienced significant price and tradingvolume fluctuations which are not related to the operating performance of companies. As aresult, investors in our Shares may experience volatility in the market price of the Shares anda decrease in the value of our Shares regardless of our operating performance or prospects.

You will incur immediate and significant dilution and may experience further dilution ifwe issue additional Shares in the future.

The [REDACTED] of the [REDACTED] is higher than the net tangible asset value perShare immediately prior to the [REDACTED]. Therefore, purchasers of the [REDACTED] inthe [REDACTED] will experience an immediate dilution in pro forma consolidated nettangible asset value. There can be no assurance that if we were to immediately liquidate afterthe [REDACTED], any assets will be distributed to Shareholders after the creditors’ claims.To expand our business, we may consider offering and issuing additional Shares in the future.Purchasers of the [REDACTED] may experience dilution in the net tangible asset value perShare of their Shares if we issue additional Shares in the future at a price which is lower thanthe net tangible asset value per Share at that time.

Substantial future sales or the expectation of substantial sales of our Shares in the publicmarket could cause the price of our Shares to decline.

Sales of substantial amounts of Shares in the public market after the completion of the[REDACTED], or the perception that these sales could occur, could adversely affect themarket price of our Shares. Our Controlling Shareholders agreed that any Shares held by themwill be subject to a lock-up after the [REDACTED]. For more details, please see“[REDACTED] – [REDACTED] and Expenses” in this document. However, the[REDACTED] may release these securities from these restrictions and such Shares will befreely tradable after the expiry of the lock-up period. There is no assurance that our ControllingShareholders will not dispose of their Shares following the end or expiration of their respectivelock-up periods after the [REDACTED].

RISK FACTORS

– 78 –


The interest of our Controlling Shareholders may differ from your interests and they mayexercise their vote to the disadvantage of our minority Shareholders.

Immediately after the completion of the [REDACTED] and the Capitalisation Issue

(without taking into account the Shares which may be issued upon the exercise of the

[REDACTED] or the Shares which may be issued upon the exercise of any options which may

be granted under the [REDACTED] Share Option Scheme and the Share Option Scheme), our

Controlling Shareholders will own approximately [REDACTED]% of our Shares. As such, our

Controlling Shareholders, subject to the Articles and applicable laws and regulations, will

have, through Board representation or otherwise, substantial influence over our business,

including decisions regarding mergers, consolidations and the sale of all or substantially all of

our assets, election of Directors and other significant corporate actions. These actions may be

taken even if they are opposed by our other Shareholders, including those who purchased

Shares in the [REDACTED]. In addition, the interests of our Controlling Shareholders may

differ from the interests of our other Shareholders.

Since there will be a gap of several days between pricing and [REDACTED] of our Shares,holders of our Shares are subject to the risk that the price of our Shares could fall duringthe period before trading of our Shares begins.

The [REDACTED] of our [REDACTED] is expected to be determined on the

[REDACTED]. However, our Shares will not commence [REDACTED] on the Stock

Exchange until they are delivered, which is expected to be several business days after the

[REDACTED]. As a result, investors may not be able to sell or [REDACTED] our Shares

during that period. Accordingly, holders of our Shares are subject to the risk that the price of

our Shares could fall before [REDACTED] begins as a result of adverse market conditions or

other adverse developments, that could occur between the time of sale and the time trading

begins.

Prior dividend distributions are not an indication of our future dividend policy.

Any future dividend declaration and distribution by our Company will be at the discretion

of our Directors and will depend on our future operations and earnings, capital requirements

and surplus, general financial condition, contractual restrictions and other factors that our

Directors deem relevant. Any declaration and payment as well as the amount of dividends will

also be subject to our Articles of Association and the laws of the jurisdictions in which our

principal subsidiaries have operations, including (where required) the approvals from our

Shareholders and our Directors. In addition, our future dividend payments will depend upon the

availability of dividends received from our subsidiaries. As a result of the above, we cannot

assure you that we will make any dividend payments on our Shares in the future with reference

to our historical dividends. See “Financial Information – Dividends”.

RISK FACTORS

– 79 –


We may require additional funding for future growth.

We may be presented with opportunities to expand our business through acquisitions in

the future. Under such circumstances, secondary issue(s) of securities after the [REDACTED]

may be necessary to raise the required capital to capture these growth opportunities. If

additional funds are raised by means of issuing new equity securities in the future to new

and/or existing Shareholders after the [REDACTED], such new Shares may be priced at a

discount to the then prevailing market price. Inevitably, existing Shareholders if not being

offered with an opportunity to participate, their shareholding interest in our Company will be

diluted. Also, if we fail to utilise the additional funds to generate the expected earnings, this

could adversely affect our financial results and in turn exert pressure to the market price of our

Shares. Even if additional funds are raised by means of debt financing, 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.

We may grant employee share options and other share-based compensation, which maymaterially and adversely affect our results of operations and the [REDACTED] of ourShares in the future.

We may adopt a series of future employee incentive schemes, under which we may grant

options and issue shares from time to time to our Directors, senior management and employees

as rewards for their contributions and to attract and retain key personnel. The fair value of the

services received in exchange for the grant of these share options will be recognised as

share-based compensation expenses, which will have a material adverse effect on our profits.

Moreover, exercise of the share options we have granted or plan to grant will increase the

number of our Shares in issue. Any actual or perceived sale of additional Shares acquired upon

the exercise of the share options we have granted or plan to grant may materially and adversely

affect the [REDACTED] of our Shares.

We cannot assure the accuracy of facts and other statistics with respect to certaininformation obtained from the Frost & Sullivan Report contained in this document.

Certain facts and statistics in this document, including but not limited to information and

statistics relating to the global EMS industry, are based on the Frost & Sullivan Report or are

derived from various publicly available publications, which our Directors believe to be

reliable.

We cannot guarantee the quality or reliability of such facts and statistics. We have taken

reasonable care to ensure that the facts and statistics presented are accurately extracted and

reproduced from such publications and the Frost & Sullivan Report. However, these facts and

statistics have not been independently verified by us, the [REDACTED], the [REDACTED]

or any other party involved in the [REDACTED] (excluding Frost & Sullivan in respect of the

Frost & Sullivan Report and the information therein) and no representation is given as to its

accuracy. We therefore make no representation as to the accuracy of such facts and statistics

RISK FACTORS

– 80 –


which may not be consistent with other information complied by other sources and prospective

investors should not place undue reliance on any facts and statistics derived from public

sources or the Frost & Sullivan Report contained in this document.

We are a Cayman Island company and you may face difficulties in protecting yourinterests under the laws of the Cayman Islands.

Our corporate affairs are governed by, among other things, our Memorandum and Articles

and the Companies Act and common law of the Cayman Islands. The rights of Shareholders to

take action against our Directors, actions by minority shareholders and the fiduciary

responsibilities of our Directors to us under Cayman Islands law are to a large extent governed

by the common law of the Cayman Islands. The common law of the Cayman Islands is derived

in part from comparatively limited judicial precedent in the Cayman Islands as well as that

from English common law, which has persuasive, but not binding, authority on a court in the

Cayman Islands. The laws of the Cayman Islands relating to the protection of the interests of

minority shareholders differ in some respects from those in other jurisdictions.

Forward-looking statements contained in this document are subject to risks anduncertainties.

This document contains certain statements and information that are forward-looking and

uses forward-looking terminology such as “anticipate”, “believe”, “could”, “going forward”,

“intend”, “plan”, “project”, “seek”, “expect”, “may”, “ought to”, “should”, “would” or “will”

and similar expressions. You are cautioned that reliance on any forward-looking statement

involves risks and uncertainties and that any or all of those assumptions could prove to be

inaccurate and as a result, the forward-looking statements based on those assumptions could

also be incorrect. In light of these and other risks and uncertainties, the inclusion of

forward-looking statements in this document should not be regarded as representations or

warranties by us that our plans and objectives will be achieved and these forward-looking

statements should be considered in light of various important factors, including those set forth

in this section. Subject to the requirements of the Listing Rules, we do not intend to update or

otherwise revise the forward-looking statements in this document to the public, whether as a

result of new information, future events or otherwise. Accordingly, you should not place undue

reliance on any forward-looking information. All forward-looking statements in this document

are qualified by reference to this cautionary statement.

You should read the entire document carefully, and we strongly caution you not to placeany reliance on any information contained in press articles or other media regarding usor the [REDACTED].

There may be, subsequent to the date of this document but prior to the completion of the

[REDACTED], press and media coverage regarding us and the [REDACTED], which

contained, among other things, certain financial information, projections, valuations and other

forward-looking information about us and the [REDACTED]. We have not authorised the

disclosure of any such information in the press or other media and do not accept responsibility

RISK FACTORS

– 81 –


for the accuracy or completeness of such press articles or other media coverage. We make no

representation as to the appropriateness, accuracy, completeness or reliability of any of the

projections, valuations or other forward-looking information about us. To the extent such

statements are inconsistent with, or conflict with, the information contained in this document,

we disclaim responsibility for them. Accordingly, prospective investors are cautioned to make

their investment decisions based on the information contained in this document and any formal

announcements made by us only and should not rely on any other information.

RISK FACTORS

– 82 –


[REDACTED]

INFORMATION ABOUT THIS DOCUMENT AND THE [REDACTED]

– 83 –


[REDACTED]


– 84 –


[REDACTED]


– 85 –


[REDACTED]


– 86 –


[REDACTED]


– 87 –


[REDACTED]


– 88 –


DIRECTORS

Name Address Nationality

Executive Directors

Mr. Ho Woon Wah Albert(何煥華)

Flat A, 7/F, Hollywood Heights6 Old Peak Road, Mid-LevelsHong Kong

Canadian

Mr. Pope Gordon Christopher 17/F, Bowen’s Lookout13 Bowen RoadHong Kong

British

Mr. Lee Lap Fai (李立輝) Flat A, 2/F, House 30, JC Castle18 Shan Tong Road,Tai Po, New TerritoriesHong Kong

Chinese

Ms. Wong Sui Ling Karen(王瑞玲)

Flat C, 37/F, Tower 2, Central ParkTai Kok TsuiKowloonHong Kong

Chinese

Mr. Cheung Wing Hung(張永雄)

Flat C, 8/F, Tower 3, Mount BeaconKowloon TongKowloonHong Kong

Chinese

Independent non-executive Directors

Dr. Pang Kwok Hung (彭國雄) Flat A, 16/F, Block 1, The Belcher’s89 Pokfulam RoadPokfulamHong Kong

Chinese

Mr. Chu, Howard Ho Hwa(朱賀華)

Flat 28A, Block 2, Garden Terrace8A Old Peak RoadMid-levelsHong Kong

Chinese

Mr. Cheung Shi Yeung(張仕揚)

Room D, 43/F, Block 2The Long Beach5 Hoi Fai RoadTai Kok Tsui, KowloonHong Kong

Chinese

For further information about our Directors, please refer to “Directors and SeniorManagement” in this document.

DIRECTORS AND PARTIES INVOLVED IN THE [REDACTED]

– 89 –


PARTIES INVOLVED IN THE [REDACTED]

Sole Sponsor Dongxing Securities (Hong Kong)Company LimitedUnit Nos. 7503B-750475/F International Commerce Centre1 Austin Road WestKowloonHong Kong(A licenced corporation permitted to carryon Type 1 (dealing in securities), Type 4(advising on securities) and Type 6(advising on corporate finance) regulatedactivities under the SFO)

[REDACTED]

Legal advisers to our Company As to Hong Kong lawsMorgan, Lewis & BockiusSuites 1902-09, 19th FloorEdinburgh TowerThe Landmark15 Queen’s Road CentralHong Kong

As to certain aspects of Hong Kong lawsCheung & Yip7/F, Dah Sing Life Building99 – 105 Des Voeux Road CentralHong Kong

As to PRC lawsCommerce & Finance Law Offices23/F, Building ACASC PlazaHaide 3rd Road Nanshan DistrictShenzhen 518067PRC

As to Cayman Islands lawsConyers Dill & Pearman29th FloorOne Exchange Square8 Connaught PlaceCentralHong Kong


– 90 –


As to Malaysian lawsOng and Manecksha200, Victoria Street10300 PenangMalaysia

As to US lawsMorgan, Lewis & Bockius LLP101 Park AvenueNew York, NY 10178United States

Legal advisers to the Sole Sponsorand the [REDACTED]

[REDACTED]

As to PRC lawsShu Jin Law Firm11-12/F, TaiPing Finance TowerYitian Road 6001Futian DistrictShenzhen 518017PRC

Auditor and reporting accountant PricewaterhouseCoopersCertified Public Accountants andRegistered Public Interest Entity Auditor22/F, Prince’s BuildingCentralHong Kong

Independent Transfer Pricing Expert PricewaterhouseCoopers Ltd21/F Edinburgh Tower15 Queen’s Road CentralHong Kong

Industry consultant Frost & Sullivan Limited1706, One Exchange Square8 Connaught PlaceCentralHong Kong


– 91 –


Property valuer Cushman & Wakefield Limited27/F One Island EastTaikoo Place18 Westlands RoadQuarry BayHong Kong

[REDACTED]


– 92 –


Registered office Cricket Square

Hutchins Drive

P.O. Box 2681

Grand Cayman, KY1-1111

Cayman Islands

Headquarters and principal placeof business in Hong Kong

13/F, Wing Tai Centre

12 Hing Yip Street

Kwun Tong

Hong Kong

Company’s website http://www.in-tech.com.hk/(Information on this website does

not form part of this document)

Company secretary Ms. Wong Sui Ling Karen (王瑞玲)

(HKICPA, ACCA)

Flat C, 37/F, Tower 2, Central Park

Tai Kok Tsui

Kowloon

Hong Kong

Authorised representatives Mr. Ho Woon Wah Albert (何煥華)

Flat A, 7/F, Hollywood Heights

6 Old Peak Road, Mid-Levels

Hong Kong

Ms. Wong Sui Ling Karen (王瑞玲)

Flat C, 37/F, Tower 2, Central Park

Tai Kok Tsui

Kowloon

Hong Kong

Audit Committee Mr. Cheung Shi Yeung (張仕揚) (Chairman)

Dr. Pang Kwok Hung (彭國雄)

Mr. Chu, Howard Ho Hwa (朱賀華)

Remuneration Committee Mr. Chu, Howard Ho Hwa (朱賀華) (Chairman)

Mr. Ho Woon Wah Albert (何煥華)

Mr. Cheung Shi Yeung (張仕揚)

Nomination Committee Mr. Ho Woon Wah Albert (何煥華) (Chairman)

Dr. Pang Kwok Hung (彭國雄)

Mr. Chu, Howard Ho Hwa (朱賀華)

CORPORATE INFORMATION

– 93 –


[REDACTED]

Compliance adviser Dongxing Securities (Hong Kong)Company LimitedUnit Nos. 7503B-7504

75/F International Commerce Centre

1 Austin Road West

Kowloon

Hong Kong

Principal banks DBS Bank (Hong Kong) LtdG/F, The Center

99 Queen’s Road Central

Central

Hong Kong

Industrial & Commercial Bank of China(Asia) Limited33/F, ICBC Tower

3 Garden Road

Central

Hong Kong

The Hongkong and Shanghai BankingCorporation Limited10/F HSBC Main Building

1 Queens Road

Central

Hong Kong

CORPORATE INFORMATION

– 94 –


The information contained in this section and elsewhere in this Document have been

extracted from various official government publications, available sources from public

market research and other sources from independent suppliers, and from the independent

research report prepared by Frost & Sullivan. We engaged Frost & Sullivan to prepare

an independent industry report in connection with the [REDACTED]. The information

from official government sources has not been independently verified by our Company,

the Sole Sponsor, the [REDACTED], the [REDACTED], the [REDACTED] and the

[REDACTED] or any of our or their respective directors and advisers, or any other

persons or parties involved in the [REDACTED], and no representation is given as to

its accuracy. Accordingly, the information from official government sources contained

herein may not be accurate and should not be unduly relied upon.

SOURCE OF INFORMATION

We have commissioned Frost & Sullivan, an independent market research and consulting

company, to conduct an analysis of and to prepare a report on the global and the PRC EMS

market. The report prepared by Frost & Sullivan for us is referred to in this [REDACTED]

document as the Frost & Sullivan Report. We agreed to pay Frost & Sullivan a fee of

HK$460,000 which we believe reflects market rates for reports of this type.

Founded in 1961, Frost & Sullivan has 40 offices with more than 2,000 industry

consultants, market research analysts, technology analysts and economists globally. Frost &

Sullivan’s services include technology research, independent market research, economic

research, corporate best practices advising, training, client research, competitive intelligence

and corporate strategy.

We have included certain information from the Frost & Sullivan Report in this

[REDACTED] document because we believe this information facilitates an understanding of

the global and the PRC EMS market for prospective investors. The Frost & Sullivan Report

includes information of the global and the PRC EMS market as well as other economic data,

which have been quoted in the [REDACTED] document. Frost & Sullivan’s independent

research consists of both primary and secondary research obtained from various sources in

respect of the global and the PRC EMS market. Primary research involved in-depth interviews

with leading industry participants and industry experts. Secondary research involved reviewing

company reports, independent research reports and data based on Frost & Sullivan’s own

research database. Projected data were obtained from historical data analysis plotted against

macroeconomic data with reference to specific industry-related factors. Except as otherwise

noted, all of the data and forecasts contained in this section are derived from the Frost &

Sullivan Report, various official government publications and other publications.

INDUSTRY OVERVIEW

– 95 –


In preparation of the forecast data, Frost & Sullivan assumed that there will be a gradualresumption of economic performance globally and in the PRC during the forecast period, assupported by the (i) declining number of confirmed COVID-19 cases in the PRC since mid ofMarch in 2020, (ii) recovery of global GDP with a projected annual growth of approximately4.4% in 2022 and 3.8% in 2023, according to the International Monetary Fund, (iii) recoveryof GDP in the PRC with a year-on-year growth of approximately 12.6% in 2021, according toNational Bureau of Statistics of China, and (iv) commencement of COVID-19 vaccinationprogram since 2021 globally that supports the recovery and normalisation of economicactivities thereafter.

OVERVIEW OF GLOBAL ELECTRONICS INDUSTRY

Background and classification of electronics industry

Electronics demonstrate diverse applications across various downstream industries

The electronics industry has been one of the key industries globally. In particular,electronics play an essential role in different aspects of economic activities during the digitalera since the 20th century. Electronic products are primarily manufactured and assembled fromtransistors and integrated circuits, which can be categorised into the following types byapplications:

Types of electronic productsby application Examples of products

Consumer electronics Electronic products designed for consumers such asaudio-visual devices, multi-media players,televisions, stereo components, cameras, and smartdevices(1)

Telecommunications products Electronic equipment designed for communicatingdata, voice, text, video and images over longdistances, which include telephones, modems, localarea networks and radio transmission equipment

Automotive electronics Electronic systems designed for the use in vehicles,such as electronics for engine management, ignition,infotainment, power-train and safety systems

Marine electronics Electronic devices designed for use in marineenvironment on board ships and yachts, such as radiocommunication and navigational devices

Industrial electronics Electronic devices and equipment designed forindustrial use, such as industrial automation andmotion control, motor drive control, mechatronicsand power conversion

Medical electronics Electronic instruments and equipment designed formedical use, such as equipment for diagnosis,treatment and surgery in hospital, as well as elderlyassisted-living device and blood sugar monitor forpersonal use

INDUSTRY OVERVIEW

– 96 –


Types of electronic productsby application Examples of products

Aerospace electronics Electronic equipment, devices and systemsdesigned for the use on aircraft and spacecraft forflight management, control, instrumentation,communication, navigation and power generation

Photovoltaics (PV) module PV modules constitute the photovoltaic array of aphotovoltaic system that generates and supplies solarelectricity in commercial and residential applications

Note: a smart device is an electronic device, generally connected to other devices or networks via differentwireless protocols such as Bluetooth, Wi-Fi, 3G, etc., that can operate to some extent interactively andautonomously

Source: Frost & Sullivan

Key features of electronics for specialised industries

The Group is a specialised end-to-end electronics development and manufacturing services

provider for demanding customers mainly from different specialised industries

There are distinctive features between (i) electronics in certain specialised industries,

including but not limited to, automotive electronics, telecommunication, marine electronics,

medical electronics, aerospace electronics, and (ii) electronics designed for other general

industries whose involves generic electronics for different applications, such as consumer

electronics. In general, electronics for specialised industries demonstrate a longer product

development cycle, product lifecycle and technical barrier. Details of which are set forth as

follows:

Electronics for specialisedindustries

Electronics for othergeneral industries

Product development

cycle

10 to 20 months, up to

2 to 3 years

2 to 3 months, up to

6 months

Product lifecycle More than 24 months and

up to 10 years

12 to 24 months

Characteristics Requires high reliability or

even operate in extreme

conditions, compliance and

approvals required for

specific industries such as

aerospace, marine and

medical

Sacrifices some reliability to

meet a cost requirement

INDUSTRY OVERVIEW

– 97 –


Electronics for specialisedindustries

Electronics for othergeneral industries

Focus of product

development

Tailor made functionalities

with ruggedness and

durability

More about cost effective

design and performance


Global market size of electronics industry

The electronics industry is set to recover from the COVID-19 outbreak in future and supportthe demand for electronics development services

The global electronics industry recorded a steady growth during 2016 to 2019 assupported by the growing downstream demand. However, due to the COVID-19 outbreak in2020, electronics industry was adversely impacted and decreased 4.2% from 2019 due to haltof electronic production, delayed logistics, and unavailability of workforce. As the globaleconomy started to recover from the COVID-19 pandemic in 2021, the electronics industry hasrecorded a growth of 8.4% during the year, showing a positive sign of recovery of growth inthe coming years. Looking forward, the electronics industry is expected to grow at a CAGR of3.6% from 2022 to 2026, as driven by the rise of technology innovation, digitalisation,adoption of advanced networking technologies, and rise of demand for consumer electronicsand smart modules/devices.

0

10001000

20002000

30003000

0

1,000

2,000

3,000

2016 2017 2018 2019 2020 2021 2022E 2023E 2024E 2026E2025E

2016-2021 2022E-2026ECAGR 1.8%US$ billion 3.6%

Global market size of electronics industry by sales value, 2016-2026E

1,803.2 1,866.3 1,931.7 1,999.7 1,935.02,097.2

2,205.1 2,294.2 2,375.32,458.5

2,543.4

Note: Based on ex-factory price

Source: Trade map, Frost & Sullivan

INDUSTRY OVERVIEW

– 98 –


Global market size of electronics industry by application

Electronics for specialised industries will witness a growth in the next five years

Consumer electronics, medical electronics, and automotive electronics sectors led thegrowth of electronics industry from 2016 to 2021. Consumer electronics is the biggest sectorthat accounts for 37.8% of the overall global electronics industry in 2021. In the future,automotive electronics, medical electronics, and consumer electronics, are expected to grow ata higher CAGR from 2022 to 2026 of 4.7%, 4.7% and 3.8%, respectively. Marine electronicsis expected to grow at a CAGR of 2.5% from 2022 to 2026, respectively. Demand for marineelectronics will increase due to rise in seaborne trade and development in SAS (StatisticalAnalysis System) technology.

Concept of Internet-of-things (“IoT”) and its correlation with electronics industry

The Group can develop and manufacture IoT devices, and provide software and solutions to

customers across various industries

International Telecommunication Union (ITU) defined IoT as a global infrastructure for

the information society, enabling advanced services by interconnecting physical and virtual

objects based on existing and evolving interoperable information and communication

technologies. Alternatively, IoT may refer to the internetworking for intelligent identification,

positioning, tracking, monitoring and management of target objects, mainly through exchange

of information and communication between such targets and internet via information sensing

devices under predetermined protocol.

IoT is a subset of the electronics industry and the market size of electronic devices

embedded with IoT accounted for 20.1% of the total global electronics market in 2020. The

market coverage of IoT is expected to reach 46.3% by 2025 with a CAGR of 23.2% from 2022

to 2026. As such, the electronics industry laid the foundation for the development of IoT

industry which puts high emphasis of connectivity of devices and other elements in various

aspects.

Global market size of IoT by revenue

The global IoT market size is expected to reach over US$1.4 trillion by 2026

With the rapid digitalisation and deployment of networking infrastructure, the global

market size of IoT by revenue witnessed a significant growth at a CAGR of 25.6% from 2016

to 2021. Going forward, with the continued digitalisation trend, the global market size of IoT

by revenue is set to maintain a growing trend at a CAGR of 23.2% from 2022 to 2026.

The global IoT market demonstrated resilience against the outbreak of the COVID-19

pandemic, which, according to the Frost & Sullivan Report, was attributable to, among other

factors, (i) the COVID-19 pandemic, which has given rise to different applications in the

INDUSTRY OVERVIEW

– 99 –


healthcare sector, such as digital diagnostics and remote monitoring, and the integration of

device communication has been pivotal in medical monitoring and assisting under the

COVID-19 pandemic; (ii) the manufacturing industry, driven by the implementation of social

distancing and quarantine measures, has accelerated the adoption of automation and robotics

during production to elevate efficiency and reduce defects; (iii) the e-commerce sector has

been propelled with temporary closure of physical stores, while the rollout of vaccination in

2021 has resulted in surging demand for cold chain logistics, which has collectively propelled

the needs for scalable and IoT-enabled supply chain to support the logistics transportation; and

(iv) the COVID-19 pandemic poses a limited impact on the expedited advancement of

information system technology that supports the implementation of IoT, such as artificial

intelligence, 5G network and cloud computing, serving as integral impetus to the penetration

of IoT technology into various applications.

0

200200

400400

600600

800800

10001000

12001200

14001400

16001600

0

200

400

600

800

1,600

1,200

1,400

1,000

2016 2017 2018 2019 2020 2021 2022E 2023E 2024E 2025E 2026E

2016-2021 2022E-2026ECAGR 25.6%US$ billion 23.2%

Global market size of IoT by revenue, 2016-2026E

194.7249.2

330.8389.0

491.3619.0

775.0

964.9

1,184.0

1,424.3

157.1

Note: the market size covers revenue generated from sales/provision of IoT devices, software, solution,platform, and other related professional services.

Source: Annual Reports of Listed Companies, Trade Map, Frost & Sullivan

INDUSTRY OVERVIEW

– 100 –


Global market size of IoT by shipment of IoT device and breakdown by region

Asia Pacific has been a fast growing and the largest region in terms of IoT device shipment

over the past five years

The global IoT market has been driven by the smart hardware boom in Asia Pacific with

trending connected home and wearable devices. Asia Pacific is set to be one of the leading

regions in terms of IoT device unit shipment over the next few years. From 2022 to 2026,

global IoT devices unit shipment is estimated to increase at a CAGR of 16.3% as supported by

the strong economic growth with increasing demand for IoT devices in various industries.

Market size of IoT device by unit shipment by region, 2016-2026E

0

10,000

20,000

30,000

40,000

50,000

2016

7,340.1 9,516.7 11,901.6 14,720.1 16,704.0 19,712.3 23,751.9 28,461.2 33,712.5 39,673.6 46,196.4

13,476.2

5,184.1

1,102.1

2,920.0 3,767.0 4,744.5 5,894.0 6,073.1 6,706.3 7,851.6 9,097.5 10,435.1 11,925.1

1,820.0 2,305.0 2,790.6 3,360.6 3,450.1 3,486.7 3,875.0 4,305.7 4,702.1 4,951.8

185.9 240.6 310.9 397.1 411.2 448.6 545.5 655.8 781.5 924.2

2017 2018 2019 2020 2021 2022E 2023E 2024E 2025E

Unit: million

CAGR2016-2021

2022E-2026E

Total 19.9% 16.3%

Asia Pacific 21.8% 18.1%

18.1% 14.5%

13.9% 7.5%

19.3% 19.2%

NorthAmerica

Europe,Middle-East, Africa

LatinAmerica

Europe, Middle East, Africa

Latin America

North America

Asia-Pacific

2026E

Note: unit shipment refers to volume of devices that manufacturers deliver to distributors and retailers, whichis indicative to the output of devices from manufacturers in the respective regions


INDUSTRY OVERVIEW

– 101 –


Global market size of IoT by shipment of IoT device and breakdown by application ofdevices

The Group is capable of developing IoT devices, software and solution for different

applications including, but not limited to, building automation, security and surveillance,

factory and industrial automation, mHealth and wellness, healthcare and medical devices.

According to Frost & Sullivan, the global market sizes of IoT devices by unit shipment

for the aforesaid applications are expected to grow rapidly in the next five years as set forth

in the table below.

Global market size of IoT device by unit shipment by applicationcovered by the Group, 2016-2026E

(Unit: million) 2016 2021 2022E 2026ECAGR

(2016-2021) CAGR

(2022E-2026E)

Building automation, security andsurveillance 6,441.4 15,863.0 18,367.7 28,596.4 19.8% 11.7%

Factory and industrial automation 1,419.8 3,740.0 4,683.7 11,583.8 21.4% 25.4%

Fixed asset monitoring 936.5 2,535.9 2,832.1 3,876.8 22.0% 8.2%

Portable asset tracking 699.7 2,848.8 3,723.0 8,818.4 32.4% 24.1%

Connected consumer electronics 182.8 1,476.5 2,006.2 5,059.7 51.9% 26.0%

OEM telematics / connected car 767.8 1,061.0 1,153.6 1,615.8 6.7% 8.8%

mHealth and wellness 356.3 868.6 1,091.6 2,909.7 19.5% 27.8%

Smart grid / oil and gas 311.5 685.1 775.3 1,065.7 17.1% 8.3%

Advanced meteringInfrastructures (AMIs) and smart meters 223.0 576.7 690.6 1,248.9 20.9% 16.0%

Healthcare and medical devices 91.2 194.3 234.9 539.6 16.3% 23.1%

Vending, PoS and transaction terminals 45.0 141.6 177.2 393.7 25.8% 22.1%

Smart home / alarm monitoring 51.4 59.3 62.0 76.1 2.9% 5.3%

Note: the table indicates the unit shipment of IoT devices in application areas covered by the Group only. Otherapplications not covered by the Group include digital signage, commercial/fleet telematics, vehiclelending/financing, usage-based insurance, infotainment and aftermarket telematics, which accounted for onlyless than 2% of the global IoT device unit shipment in 2021.


INDUSTRY OVERVIEW

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Outlook of IoT applications on electronics for selected specialised industries

Automobile

IoT in automobile sector has become a hotspot for multi-purpose applications with its

usage at both industrial and commercial level. The applications of IoT have brought in a huge

development in several fields such as fleet management, connected cars, automotive

maintenance system, autonomous vehicles and in-vehicle infotainment and telematics. IoT has

revamped vehicle inspection and maintenance capabilities, as well as introduced new

entertainment options. In addition, the connected car ecosystem built by IoT technology

comprises several sub-segments that cater to different technology implementations including

telecommunication services, software, and cloud services, opening a wide range of market

opportunities in automobile industry.

Aerospace

The aerospace industry has been undergoing a trend of digitalisation in different aspects.

For example, IoT is applied to enhance productivity of aircraft manufacturing. In industrial

application of aircraft assembly, IoT can support in monitoring and control of operation in

assembly line to enhance efficiency, and IoT enabled smart meters can facilitate the

implementation of energy-saving measures to achieve cost savings and sustainable operations.

In addition, with the use of connected devices and seating, IoT as part of the smart technology

enables the airline to provide passengers a more personalised travel experience. Above all, IoT

can be used to drive efficiencies of different aspects of aircraft operations, including cabin

crew, on-ground turnaround, maintenance, and catering.

Marine

Sensors play an important role in the development of innovative marine devices, which

are primarily used for detection of various weather and navigational parameters such as

position, wind, pressure and water currents. The improvement in marine infrastructure and

deployment of remote monitoring services involves the advanced connected devices and

networking technologies. Advancements in IoT and underwater marine technologies as well as

Internet of underwater things (IoUT), defined as a network of interconnected smart underwater

objects, have enabled a wide range of smart city applications, including environmental

monitoring, underwater observations, disaster warning systems, and military applications

offshore energy and aquaculture. Adoption and proliferation of the IoT will provide an impetus

for wide-scale adoption of intelligent sensors.

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Assisted-living

Broadband communications, networking capacity, integration of devices and services

allow multi-media communications between homes, healthcare service providers and

community centres. The demand for assisted living technologies have seen a rapid growth

attributable to the trend of ageing population along with increase in retirement age and life

expectancy that requires continuous care while the socio-economic challenges brought by

ageing population open up business opportunities for assisted living industry. Currently,

telecommunication devices for elderly, motion and temperature sensor, pill dispenser, monitor

and medical alert systems are increasingly adopted assisted-living technologies that support the

physical, mental, and social health of elderly.

Global non-recurring engineering (“NRE”) expenditures for IoT applications

The significant growth of global NRE expenditures in IoT applications at a CAGR of 17.2%

from 2022 to 2026 indicates the growing importance of customised IoT devices development

in the electronics industry and of corresponding EMS providers who are capable of

delivering specialised electronics solutions

NRE expenditures refers to fixed and one-time cost for the purpose of conducting

research, design, development and testing of a new product or product enhancement. EMS

providers with high NRE expenditures implies a higher investment and capability of designing

and developing a wide range of products, which requires extensive technical know-how and

various intellectual properties. Particularly, high NRE expenditures are conducive for EMS

providers engaging in specialised electronics industry, which enables them to secure business

opportunities by developing and providing customised manufacturing solution and products to

clients. The amount of NRE expenditures varies across different industries and types of

projects, while the investment on IoT related products shall be higher considering extensive

effort is required for design and integration of sensors and backend systems with other devices

and compatible internet infrastructure, which are often customised for their specific

application.

According to Frost & Sullivan, the global NRE expenditures for IoT applications recorded

a strong growth at a CAGR of 14.7% from 2016 to 2021, and is expected to grow at a CAGR

of 17.2% from 2022 to 2026.

INDUSTRY OVERVIEW

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2016 2017 2018 2019 2020 2021 2022E 2023E 2024E 2025E 2026E

2016-2021 2022E-2026ECAGR9.4% 9.1%

US$ billion

0

40

20

60

8014.7% 17.2%7.8% 5.1%

TotalIoT applicationsNon-IoT applications

22.1 24.2 26.4 28.3 30.4 32.2 33.4 35.5 37.3 38.96.028.1 31.1

34.3 37.440.5

44.047.4

51.956.5

61.6

6.9 7.9 9.1 10.1 11.9 14.016.4

19.222.7

40.7

67.1

26.4

IoT applicationsNon-IoT applications

Global NRE expenditures byIoT and non-IoT applications, 2016-2026E

Source: Annual Reports of Listed Companies, Frost & Sullivan

Key development trends and outlook of global electronics industry

Big data, IoT, and artificial intelligence (AI) will witness high adoption in the next ten years

Big data, IoT and artificial intelligence are becoming the mainstream trends and will

significantly change the way electronics manufacturer design, produce, and deliver their

products and services. The emergence of industrial IoT, which involves the combination of IoT

technology and data with manufacturing and other industrial processes, facilitates

organisations in electronic industry to leverage data and real-time analytics that enhances

productivity and efficiency. The combination of universal connectivity and artificial

intelligence will enable personalised transportation and delivery service. Most visibly, the

interconnectivity of devices and things in general, together with the wider deployment of AI

and high-capacity processing will transform many aspects of our life including the way we

operate and navigate vehicles and manage negligent logistics, e-commerce and supply chain

operations, utilities etc. Accordingly it is a market opportunity for developers and

manufacturers of electronics to provide necessary sensors/devices for data collection under the

growing adoption to IoT.

INDUSTRY OVERVIEW

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The global electronics industry is expected to see growing participation from emerging

markets

Despite the competition from developed countries such as the United States, certain

European countries and Japan in new technology and product design, emerging economies such

as the PRC, India and Malaysia will see a higher capability in the market with enhancement

in manufacturing and innovation capabilities. Technologies including robotics, virtual and

augmented reality, 3D printing, and artificial intelligence are opening significant areas of

opportunities.

Green energy and environmental protection will gain more attention in electronics industry

In addition to offering better product quality and services to meet customers’ needs,

electronics manufacturers are paying more attention to environmental protection trends, such

as greenhouse gas, product carbon footprint, lead free and halogen-free materials etc.

Meanwhile, vertical industries such as renewable energy generation, smart grids and energy

storage, clean-energy vehicles will foresee a boost in the next few years.

Increasing penetration and diversification of electronics across different downstream

industries

The demand for electronics is set to grow in the future due to various factors such as

increasing popularity of audio and video broadcasting/conferencing, e-commerce, and adoption

to smart devices with the upgrade of digital infrastructure as well as deployment of advanced

technologies such as IoT and artificial intelligence. In particular, differentiation of electronic

products and growing penetration across downstream industries serve as key drivers of

electronics industry. For example, applications of electronics in automotive industry and

medical industry are growing rapidly in the recent years. In medical electronics, growing

demand of advanced healthcare solutions has played an eminent role to drive the needs of

medical electronics. The growing preference for minimally invasive surgeries and patient

monitor system will foster the development of medical electronics. Demand for marine

electronics is driven by increasing volume of marine trade and increasing demand for secure

navigation and communication systems from merchant naval, military sector, and leisure

marine. In marine electronics, the increase in boats being produced in the leisure marine

industry has also led to an increase in related marine systems or electronic devices.

INDUSTRY OVERVIEW

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OVERVIEW OF GLOBAL ELECTRONICS MANUFACTURING SERVICESINDUSTRY

Core services and value of EMS providers as compared to other electronicsmanufacturers

The Group is positioned as an EMS provider with value-added and end-to-end services

offered to customers. Apart from traditional OEM and ODM services, the additional scope

of services offer by the Group includes reliability testing and quality assurance, logistics

management, product repair and refurbishment, supply chain management and compliance

and product approval services. The Group is providing the aforesaid services to customers

in highly regulated, specialised industries such as aerospace, marine, automobile, medical

and telecommunications

Electronic Manufacturing Services (“EMS”) refers to an integrated production service of

electronic products and subassemblies, ranging from product design and development,

manufacturing, testing and quality assurance, supply chain management, outbound logistics

and after sales return and repair services offered to brand owners. As compared to OEMs and

ODMs, EMS providers have established procurement networks at different geographic

locations, which enable component supply at a shorter lead time and contribute to stable output

in production sites. In addition, EMS providers also put emphasis on end-to-end services with

established logistics network across different locations, thereby demonstrating a stronger

logistics capability that can shorten the turnaround time of product for customers across

different industries. However, according to the Frost & Sullivan Report, the average delivery

lead delivery time of chips has increased from 12.7 weeks in January 2020 to 15.0 weeks in

January 2021, and subsequently further escalated to 26.2 weeks in January 2022. The delivery

lead times of high demand components such as microcontroller and power-management

components applied in industries such as consumer electronics, smart module and automotive

industries have been recorded with even longer duration. Such delays in component supplies

are likely to continue to be affected by the ongoing component shortage through 2022 and

potentially into 2023.

The following diagram sets out the value chain of EMS market.

End-usersBrand ownersEMS providers

Upstream DownstreamMidstream

Services

Outsource

DistributorsDistributors

/retailers

Value chain of electronic manufacturing service

Manufacturers ofelectronic

components


INDUSTRY OVERVIEW

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Market size of the EMS market globally

Conventionally, due to robust demand, EMS manufacturing for consumer electronics and

communication electronics have been the majority market size contributor to the EMS market

globally. With the advent of digital-enabled, software-embedded and automated devices, the

penetration of EMS is expected to be more diversified into various industries, and market

growth moving forward is expected to be sustained by the expedited development in

automotive, medical, assisted living, and wellness and aerospace sectors. According to the

Frost & Sullivan Report, the market size of EMS market by revenue globally is expected grow

at a CAGR of 6.1% during 2022 to 2026.

2016-2021 2022E-2026E

CAGR 7.6% 6.1%US$ billion

00

500500

10001000

02016 2017 2018 2019 2020 2021 2022E 2023E 2024E 2026E2025E

338.9373.5

404.1 432.0 454.0488.5

523.7558.8

593.4627.8

663.6

Market size of the EMS market by revenue globally, 2016-2026E

500

1,000


The specialised electronics segment of the global EMS market by revenue increased from

approximately US$190.2 billion in 2016 to US$272.2 billion in 2021, representing a CAGR of

7.4%. Going forward, this segment of the global EMS market by revenue is expected to grow

at a CAGR of 5.8% from 2022 to 2026. In particular, EMS providers have been increasingly

engaged for the provision of customised and one-stop services to customers in specialised

industries. For example, the market size of EMS for the automotive electronics and marine

electronics industries are expected to increase at CAGRs of 8.4% and 8.7%, respectively, from

2022 to 2026. The smart module and smart devices industry, which includes sensors, chips and

device communications that incorporate IoT technology, is expected to continue to sustain its

growing trend and increase at a CAGR of approximately 9.3% from 2022 to 2026.

INDUSTRY OVERVIEW

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Breakdown of global EMS market revenue by applications, 2016-2026E

(Unit: US$ billion) 2016 2021 2022E 2026ECAGR

(2016-2021) CAGR

(2022E-2026E)

Consumer electronics 137.1 196.5 212.4 269.9 7.5% 6.2%

Smart module and smart devices 11.6 19.8 21.8 31.2 11.3% 9.3%

Communication and portal 112.0 159.4 169.8 211.7 7.3% 5.7%

Industrial electronics 22.3 33.5 35.2 42.8 8.5% 5.0%

Medical, assisted living, and wellnesselectronics

11.4 18.3 19.9 26.1 9.9% 7.0%

PV modules 5.5 7.2 7.6 9.5 5.5% 5.8%Transportation 27.4 41.1 44.0 58.4 8.4% 7.4%

Automotive electronics 17.1 26.9 28.9 39.9 9.5% 8.4%Marine electronics 2.7 4.0 4.3 6.1 8.2% 8.7%

Aerospace 7.6 10.2 10.8 12.5 6.1% 3.8%Others 11.6 12.7 13.0 13.9 1.8% 1.8%

Note: Others primarily includes audio electronics, power electronics and optoelectronics

Source: Trade Map, Annual Reports of Listed Companies, Frost & Sullivan

Breakdown of global EMS market revenue by specialised and general electronicsapplications, 2016-2026E

(Unit: US$ billion) 2016 2021 2022E 2026ECAGR

(2016-2021)CAGR

(2022E-2026E)

Specialised electronics 190.2 272.2 289.4 362.5 7.4% 5.8%

General electronics 148.7 216.3 234.3 301.1 7.8% 6.5%

Note: Specialised electronics include communication and postal, industrial electronics, medical, assisted living, andwellness electronics, PV modules, and transportation applications


Market size of the EMS market in the PRC

The PRC has been a hub for EMS providers globally, and the EMS market in the PRC is set

to grow into a RMB2.4 trillion worth industry by 2026

The growing demand for electronics globally, coupled with the increasing outsourcing

trend of electronics with growing preference towards EMS providers, and the world class local

electronics supply base located in the PRC, have collectively driven the revenue growth in the

PRC during 2016 to 2021, with a CAGR recorded at approximately 7.8%. The PRC is expected

to maintain its leading position in terms of electronics production and continues to be one of

the most economic manufacturing locations for brand owners over the other economies

considering the integrated supply chain network with flourishing amount of industry peers,

INDUSTRY OVERVIEW

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sub-suppliers and experienced engineering talents. Additionally, the increasing competition

from other regions with lower operating costs is expected to pose slight effect on the expected

growth rate in the PRC, resulting in a forecasted CAGR of approximately 6.1% during 2022

to 2026. Despite this, the growth of the PRC EMS market will still outpace the growth in the

global electronics market in this future period.

500

1,000

1,500

2,000

2,500

Market size of EMS market by revenue in the PRC, 2016-2026E

2016-2021 2022E-2026ECAGR 7.8% 6.1%

RMB billion

0

10001000

20002000

30003000

02016 2017 2018 2019 2020 2021 2022E 2023E 2024E 2026E2025E

1,218.71,347.2

1,468.41,575.9

1,676.71,770.2

1,876.42,000.3

2,126.32,253.8

2,380.1

Note: the market size includes revenue of EMS providers generated by manufacturing plants located in the PRC


Breakdown of EMS market size by applications

Electronics in certain specialised industries such as automotive electronics, marine

electronics and medical, assisted living, and wellness electronics is expected to grow more

rapidly in the next five years

Owing to the active participation and long establishment of major EMS companies,

consumer electronics, smart modules and smart devices and telecommunications are the main

application segments of the EMS market in the PRC, contributing approximately 82.5% of

revenue in 2021.

INDUSTRY OVERVIEW

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Electronics in specialised industries include automotive electronics, telecommunication,

marine electronics, medical electronics, and aerospace electronics. The market size of EMS by

revenue in specialised industries is expected to grow in the next few years. In particular, EMS

providers involved in the production of automotive electronics, marine electronics and

medical, assisted living and wellness electronics are expected to see CAGRs of 5.6%, 6.1% and

5.6%, respectively, from 2022 to 2026.

Market drivers and opportunities of EMS market

Sustained global demand for electronics will drive the demand for EMS

The market demand for EMS is driven by the development of new and advanced

electronics. Developed countries such as the United States and European countries have seen

a high adoption to electronics across various industries. The technological innovation

contributes to increasing need for upgrade of hardware and infrastructure. Specifically, the

deployment of IoT puts emphasis on the connection of devices and such connectivity requires

the development of advanced electronics designed for various vertical industries. On the other

hand, emerging economies such as the PRC and Southeast Asia countries also witnessed a

growing demand for electronics, which is attributable to the accelerated economic development

and increasing need for internet and digital infrastructure.

More distinctive advantages of EMS providers over the traditional electronics manufacturers

The electronics industry has seen various challenges such as fluctuating demand and

technology cycle between product and electronics, constraints in material sourcing, supply

chain capacity as well as keen market competition and rising production cost. In turn, brand

owners of electronics have been increasingly outsourcing the design and manufacturing

process to OEM and ODM while allocating their in-house resources to branding and product

conceptualisation. With the competitive edges such as end-to-end servicing capacity, exposure

to different vertical industries, flexibility and product lifecycle management capability, EMS

providers are well-positioned as a partner of electronics brand owner as compared to

OEMs/ODMs solely acting as contract manufacturers. In addition, EMS providers are

strengthening their design capabilities to provide higher-margin design services, which will

further increase the reliance of brand owners in electronics outsourcing to EMS providers.

Supportive policies to drive the upgrade of tech industries that require high-end EMS

In recent years, the PRC government has stepped up efforts to support domestic

electronics industry in view of the massive demand of electronics. For example, the PRC

government has set out a multi-pronged approach to reduce operation cost of electronics

companies through provision of tax relief and long-term financing assistance. Furthermore, the

well-established tertiary education system in the PRC has resulted in an increasing amount of

science and engineering graduates and a continuous supply of labour participants. On the

demand side, the digitalisation of services, investment in technology innovation across

INDUSTRY OVERVIEW

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different industries such as aerospace, renewable energy, artificial intelligence and robotics,

are encouraged by the PRC government. Accordingly, the market demand for EMS on

advanced technology in the PRC is expected to grow in the future.

Key development trend of EMS market

Higher degree of automation and digitalisation of EMS providers

Robotics, computer numerical controlled machineries are key technologies adopted by

EMS providers as part of the strategic development of smart factories, with core benefits of

improving production efficiency, ensuring product quality and achieving cost reduction. In

addition, the adoption of predictive maintenance technology coupled with enterprise resources

planning enabled EMS providers to closely monitor the inventory level and utilisation rate in

an automatic manner. In view of the market dynamics, the Group has taken the initiatives to

design and install a number of innovative automated product assembly and test production

lines.

Increasing focus on electronics for advanced degree of intelligence and communication

technologies

The rapid development of internet and information technology, such as 5G wireless

networks, serves as an impetus to the implementation of IoT at consumer, industrial and

commercial level. The development of artificial intelligence and deep machine learning has

prompted various applications such as autonomous transportation and manufacturing line using

robotics and self-learning sensors. EMS providers, especially those involved in the design and

development of high-end products, are actively assimilating the concepts of interactive

information technology, user experience and program interface into their production chain.

Growing adoption of lean management and diversifying production locations for EMS

providers

In recent years, operation of EMS providers has been increasingly adopting the lean

management approach, which involves minimum waste generation with conservation of

valuable materials to save cost, revamp of work plan to reduce cost of inefficiency during

operation, and reduce the inventory of material and tools. The incorporation of data-based

resources management system has also been conducive in decision making, identifying root

causes and propelling continuous improvement in implementing lean management. In addition,

EMS providers in the PRC has seen a trend of diversifying operation by investing in production

facilities in alternative locations such as Southeast Asia to serve customers that require flexible

and timely electronics manufacturing solutions and services in locations outside the PRC given

the intensified competition amongst brand owners of electronics in product launch.

INDUSTRY OVERVIEW

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Growing emphasis on product design capabilities

EMS providers are dedicated to enhance their capabilities in developing customised

electronics products. For example, with the need of faster signal transmission and growing

complexity of electronics, high-frequency PCBs emerged in high-performance applications

such as communication systems, aerospace and medical industry. As such, PCB design

capabilities become essential for EMS providers to develop advanced electronics products.

Alternative source of components

The COVID-19 pandemic has affected the production lead time of EMS providers

globally due to supply chain disruption. As such, spot-buying, which refers to unplanned or

one-off purchase on marketplace, has been adopted as a strategic sourcing initiatives of EMS

providers to minimise the impact as a result of delay in component supply by securing

immediate source of key components for production, which has been considered a trend during

COVID-19 pandemic. Accordingly, it is common for EMS providers to transfer the additional

cost of procurement as a result of component shortage to their customers.

Challenges, threat, and constraints of EMS market

Impact on profitability of EMS as a result of increasing cost of operation

The rising operation costs along with the fierce price competition has added cost burden

and affected the profitability of EMS providers. According to the Ministry of Industry and

Information Technology of the PRC, the profitability of enterprises in the electronics industry

has declined from 9.1% in 2018 to 5.9% in 2021. For example, given that raw material

generally accounts for majority of operation cost of EMS providers, the surge in market price

of integrated circuit during 2019 to 2020 has put additional cost pressure on EMS providers

even though it is a market norm for EMS providers to transfer the growth in material cost to

customer to alleviate its impact on profitability.

Competition amongst EMS providers located in the PRC and peers in other emerging

countries

In recent years, the electronics industry has seen a change in supply chain. Attributable

to the growing availability of skilled labour and lower labour cost, countries such as Vietnam,

Malaysia, India and Indonesia become few additional options of electronics outsourcing

locations and taking up a share of electronics manufacturing from the PRC. There is a shift of

production facilities from the PRC to other countries due to the trade dispute between the PRC

and the United States that may escalate the cost on tariffs and hinder the transfer of technology

from the United States to the PRC. As a result, the emergence of these alternative locations

shall pose a threat to EMS market in the PRC.

INDUSTRY OVERVIEW

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Established relationship barrier between ODMs and brand owners may hinder the growth of

EMS providers

As compared to EMS providers, ODMs demonstrate a first-mover advantage inundertaking design services given their long-established relationship and partnership withbrand owners with comprehensive in-house research and development capabilities. As such, theentry barriers created by ODMs hinder the growth of less sophisticated EMS providers inrespect of design services, while EMS providers such as the Group as an early adopter withdesign and development capability are more likely to increase the engagement and stickinessof customers, resulting in business sustainability.

Adverse impact on product development and production of electronics due to economicuncertainties

Economic volatility and cyclical demand cause fluctuations and uncertainty to thedemand for EMS, especially when their customer base and industries served are not sufficientlydiversified. In the event of an economic downturn, the investment on new product developmentand production volume of electronics in certain industries may be affected. The Group hassignificant diversity of customer base, geographic reach and industries served which elevatesresilience against economic instability.

Cost structure of EMS providers

Material cost (except plastic components and lithium battery) and labour cost of EMSproviders recorded a general growing trend in recent years

Material cost trend

According to Frost & Sullivan, the prices of printed circuit board, liquid crystal display,plastics and lithium battery had grown at CAGRs of 5.8%, 0.5%, 3.6% and 0.8%, respectively,during 2016 to 2021. The price of printed circuit board in particular, has increased significantlydue to the rising cost on copper foils, glass fiber and copper-clad laminates in recent years,coupled with the continuous market demand from downstream.

Price index of major materials in electronics manufacturing globally, 2016-2026E

Price index (2016 = 100) 2016 2017 2018 2019 2020 2021 2022E 2026ECAGR

(2016-2021)CAGR

(2022-2026E)

Printed circuit board 100.0 104.6 105.0 120.1 122.8 132.8 140.2 169.8 5.8% 4.9%Liquid crystal display 100.0 107.8 86.2 88.8 91.8 102.5 109.4 110.7 0.5% 0.3%Plastics 100.0 102.3 110.4 115.0 103.8 119.1 127.6 144.7 3.6% 3.2%Lithium battery 100.0 100.6 99.0 99.7 109.5 104.0 108.0 110.6 0.8% 0.6%

Note: the price index indicates the price trend of the aforesaid materials instead of the actual price for the periodindicated

Source: Trade Map, Frost & Sullivan

INDUSTRY OVERVIEW

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Labour cost trend

During 2016 to 2021, the labour cost in the manufacturing industry in the PRC increased

steadily. The average monthly wage of professional technician has increased from RMB6,212.4

to RMB9,800.9 during 2016 to 2021, representing a CAGR of approximately 9.5%. Going

forward, the average monthly wage of employed persons in manufacturing industry, including

production and equipment operator, professional technician and managerial staff are expected

to grow at a slower trend at a CAGR of 7.1%, 7.7% and 6.6%, respectively.

In Malaysia, the average monthly wage of employed persons in manufacturing industry

has increased from MYR2,696.4 in 2016 to MYR3,192.6 in 2021, representing a CAGR of

3.4% during 2016 to 2021. It is expected to grow at a similar CAGR of 3.1% during 2022 to

2026.

COMPETITIVE LANDSCAPE OF EMS MARKET IN THE PRC

Overview of market competition

The EMS market is relatively concentrated and featured with several key players

The overall EMS market in the PRC is concentrated with the top 10 players accounting

for approximately 74.8% of the market share in 2021 and there are approximately more than

1,000 industry players in the EMS market in the PRC. EMS providers are also differentiated

based on the scope of services, target industries and products, as well as scale of production.

In the PRC, majority of sizeable EMS providers focus on consumer electronics segment with

long established relationship with downstream notable brand owners around the globe.

Competitive landscape of target industry segment of the Group

Compared with major EMS providers in the PRC, the Group focuses primarily on specialised

electronics, such as medical, aerospace and maritime devices and tested electronic

sub-assemblies, which requires sophisticated and longer product development cycle,

extensive technical know-how and certification attainment

In the specialised electronics sector, the EMS market is relatively fragmented with

approximately over 600 industry players in 2021. The top 10 EMS providers in the specialised

electronics sector in the PRC accounted for an aggregate market share of approximately 59.5%

in 2021. The high degree of fragmentation in the specialised electronics market is attributed to

the wide variety of products and coverage of industries, including but not limited to, industrial,

automotive, medical, and other applications.

INDUSTRY OVERVIEW

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Based on the revenue generated from sales of product manufactured in the PRC, it is

estimated that the Group has a market share of approximately 0.1% and 0.2% in the overall

EMS market and specialised electronics segment, respectively in the PRC in 2021.

According to the Frost & Sullivan Report, our Company has a relatively higher R&D

expense to revenue ratio (5.3%, 4.2% and 4.4% in FY2020, FY2021 and FY2022, respectively)

indicating a greater focus on R&D and new product development capabilities than other

leading EMS providers in the specialised electronics segment, who generally have R&D

expense to revenue ratios ranging from 1% to 2%.

Key entry barriers

Certifications of contract manufacturers

Brand owners of electronics generally maintain stringent requirements towards their

contract manufacturers and demonstrate stickiness to qualified contract manufacturers.

Specifically, compliance to international standards and regulatory requirements serve as

pre-requisite for an EMS provider to become a qualified contract manufacturer. Apart from

general and recognition in respect to production process, quality and environmental

management for production facilities, EMS providers may need to obtain certain industry-

specific certificates (e.g. AS9100 in aerospace industry) in order to meet the certification

requirements of customers for some highly-regulated industries. In addition, EMS providers

who can conduct comprehensive verification, validation and testing for complicated and highly

regulated devices are highly preferred by customers.

Design capabilities

EMS providers who can demonstrate a proven capability in product design and

development differentiate themselves from other traditional electronics manufacturers and

potential market entrants without such capability; in particular, the rapidly evolving and

advancement of technology further enhances the technical and personnel requirements of an

EMS, which also serve as barriers for new entrants.

Supply chain management capabilities

EMS providers typically maintain an established supply chain network for procurement

and delivery of product to customers across different geographical locations to achieve

time-to-market. New entrants without capabilities of supply chain management may not be able

to meet the customers’ requirements in an efficient and timely manner.

Industry knowledge and experience

A comprehensive industry knowledge and insight is required for EMS providers to

understand and serve client and brand owners with specific requirements, and gain trust from

client to build long-term business relationships. The industry knowledge barrier is even higher

INDUSTRY OVERVIEW

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for clients from specialised industries that demonstrate a stringent requirement on knowledge

and experience of EMS providers. Clients from specialised industries generally have higher

stickiness to their existing EMS providers given the high switching cost involved to source and

engage an alternative EMS provider with similar industry know-how and experience.

Key factors relevant to market competition

Key factors relevant to competition within EMS industry include (i) establishment of

business relationship with major customers across different geographical locations, (ii)

development and manufacturing capability and capacity for various product lines and

categories across different industries, (iii) adoption to advanced development and production

technologies (e.g. automated SMT production lines, interchangeable PCB assembly production

lines), and (iv) understanding and fulfilment of customer’s requirements with high degree of

service flexibility offered to customers.

COMPETITIVE STRENGTHS OF OUR GROUP

Please refer to the paragraph headed “Business – Our Competitive Strengths” in thisdocument for a detailed discussion of competitive strengths of our Group.

INDUSTRY OVERVIEW

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LAWS AND REGULATIONS RELATED TO OUR BUSINESS IN THE PRC

The following sets out some of the general PRC laws and regulations applicable to ourbusiness in the PRC.

Laws and Regulations Relating to Foreign Investment

The Foreign Investment Law and its Implementation Regulations

The establishment, operation and management of corporate entities in China are governedby the Company Law of the PRC (《中華人民共和國公司法》) (the “Company Law”),whichwas promulgated by the Standing Committee of the National People’s Congress(the “SCNPC”)on 29 December 1993 and became effective on 1 July 1994. It was subsequently amended on25 December 1999, 28 August 2004, 27 October 2005, 28 December 2013 and 26 October2018. Pursuant to the Company Law, companies are classified into categories, namely limitedliability companies and limited companies by shares. The Company Law shall also apply toforeign-invested limited liability companies and companies limited by shares.According to theCompany Law, the provisions otherwise prescribed by the laws on foreign investment shallprevail.

The Foreign Investment Law of the PRC (《中華人民共和國外商投資法》) (the “ForeignInvestment Law”) and the Implementation Regulations on the Foreign Investment Law of thePRC (《中華人民共和國外商投資法實施條例》) came into effect on 1 January 2020 andsimultaneously replaced the Law on Sino-Foreign Equity joint ventures of the PRC (《中華人民共和國中外合資經營企業法》), the Law on Sino-Foreign Contractual Joint Ventures of thePRC (《中華人民共和國中外合作經營企業法》) and the Wholly Foreign-owned EnterpriseLaw of the PRC (《中華人民共和國外資企業法》), to become the general law applicable forforeign investment within the PRC. For discrepancies between any provisions on foreigninvestment developed before 1 January 2020 and the Foreign Investment Law with itsimplementation regulations, the latter shall prevail.

On 30 December 2019, the Ministry of Commerce of the PRC(the “MOFCOM”) and theState Administration for Market Supervision(the “SAMR”) jointly issued the Measures forReporting of Foreign Investment Information (《外商投資信息報告辦法》) (the “ForeignInvestment Information Measures”), which came into effect on January 1, 2020 and replacedthe Interim Administrative Measures for the Record-filing of the Establishment andModification of Foreign-invested Enterprises (《外商投資企業設立及變更備案管理暫行辦法》). Beginning from 1 January 2020, when foreign investors carry out investment activitiesdirectly or indirectly in China, foreign investors or foreign-invested enterprises shall submitinformation through the Enterprise Registration System and the National Enterprise CreditInformation Publicity System operated by the SAMR. Specifically, foreign investors orforeign-invested enterprises shall report their establishments, modifications and cancellationsand file their annual reports in accordance with the Foreign Investment Information Measures.When a foreign-invested enterprise has completed filing of such reports, the relevantinformation will be passed by the competent market regulation department to the competentcommercial department, so the reports do not need to be submitted separately.

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Foreign Investment Industries Guidance and the 2021 Negative List

According to Provisions on Guiding the Orientation of Foreign Investment (《指導外商投資方向規定》) which was promulgated by the State Council on 11 February 2002 and came

into effect on 1 April 2002, projects with foreign investment shall fall into four categories,

namely, encouraged, permitted, restricted and prohibited. The encouraged, restricted and

prohibited projects with foreign investment shall be listed in the Catalogue of Industries for

Guiding Foreign Investment (《外商投資產業指導目錄》), which may be revised and

promulgated by the relevant departments of the State Council from time to time, while any

project not listed in the catalogue is deemed to be a permitted project for foreign investment.

On 27 December 2021, the National Development and Reform Commission of the PRC

and the MOFCOM promulgated the Special Administrative Measures for the Access of Foreign

Investment (Negative List) (2021 version) (《外商投資准入特別管理措施(負面清單) (2021年版)》) (the “2021 Negative List”) with effect from 1 January 2022. The 2021 Negative List sets

out the areas where foreign investment is prohibited and the areas where foreign investment is

allowed only on certain conditions. Unless provided in other laws, foreign investment in areas

not listed on the 2021 Negative List is permitted and treated equally with domestic investment.

As of the Latest Practicable Date, our business did not fall within the restricted or prohibited

industries pursuant to the 2021 Negative List.

Laws and Regulations Relating to Import and Export Goods

According to the Customs Law of the PRC (《中華人民共和國海關法》) promulgated by

the SCNPC, on 22 January 1987 and was most recently amended on 29 April 2021, unless

otherwise specified, the customs formalities for import and export goods may be handled by

the consignee and the consignor of the goods themselves or by Customs brokers entrusted by

the consignor or consignee and approved by and registered with the Customs. The consignors

or consignees of the goods exported or imported as well as Customs brokers must register

themselves for declaration activities at customs in accordance with the law.

According to the Provisions of the People’s Republic of China on the Administration of

Recordation of Customs Declaration Entities (《中華人民共和國海關報關單位備案管理規定》) which was promulgated by the General Administration of Customs on 19 November

2021, the consignee or consignor of imported or exported goods or a customs declaration

enterprise who applies for recordation shall obtain the qualification of market entities. The

consignee or consignor of imported or exported goods who applies for recordation shall obtain

the registration of foreign trade business operators.

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Laws and Regulations Relating to Taxation

Enterprise Income Tax

According to the Enterprise Income Tax Law of the PRC (《中華人民共和國企業所得稅法》) (the “EIT Law”), which was promulgated on 16 March 2007 and amended on 29December 2018 and the Implementation Rules for the EIT Law of the PRC (《中華人民共和國企業所得稅法實施條例》) (the “Implementation Rules”), which was promulgated on 6December 2007 and amended on 23 April 2019 by the State Council, enterprises are dividedinto resident enterprises and non-resident enterprises. A resident enterprise shall pay EIT on itsincome deriving from both inside and outside China at the rate of EIT of 25%. A non-residententerprise that has an establishment or place of business in the PRC shall pay EIT on its incomederiving from inside China and obtained by such establishment or place of business, and on itsincome which derives from outside China but has actual relationship with such establishmentor place of business, at the rate of EIT of 25%. A non-resident enterprise that does not havean establishment or place of business in China, or has an establishment or place of business inChina but the income has no actual relationship with such establishment or place of business,shall pay EIT on its income deriving from inside China at the reduced rate of EIT of 10%.

Value-added Tax

According to the Provisional Regulations on Value-added Tax (《中華人民共和國增值稅暫行條例》), which was promulgated by the State Council on 13 December 1993, came intoeffect on 1 January 1994, and was amended on 10 November 2008, 6 February 2016 and19 November 2017, and the Detailed Implementing Rules of the Provisional Regulations onValue-added Tax (《中華人民共和國增值稅暫行條例實施細則》), which was promulgated bythe Ministry of Finance(the “MOF”) and came into effect on 25 December 1993, and wasamended on 15 December 2008 and 28 October 2011, all taxpayers selling goods, providingprocessing, repairing or replacement services or importing goods within the PRC shall payValue-added Tax (the “VAT”). The tax rate of 17% shall be levied on general taxpayers sellingor importing various goods; the tax rate of 17% shall be levied on the taxpayers providingprocessing, repairing or replacement service; the applicable rate for the export of goods bytaxpayers shall be nil, unless otherwise stipulated. Besides, unless stated otherwise, the tax ratefor value-added tax payers who are selling services, or providing intangible assets shall be 6%.According to the Notice on Adjusting the Value-added Tax Rates (《財政部、稅務總局關於調整增值稅稅率的通知》), which was promulgated by the MOF and the State Administration ofTaxation (the “SAT”) on 4 April 2018 and became effective on 1 May 2018, where a taxpayerengages in a taxable sales activity for the value-added tax purpose or imports goods, thepreviously applicable 17% and 11% tax rates were adjusted to 16% and 10%, respectively. Inaddition, on 20 March 2019, the MOF, the SAT and General Administration of Customsreleased the Announcement on Policies for Deepening the Value Added Tax Reform (《關於深化增值稅改革有關政策的公告》), according to which for general value added tax payers’ salesactivities or imports that were subject to value added tax at an existing applicable rate of 16%or 10%, the applicable value added tax rate was adjusted to 13% or 9% respectively.Furthermore, according to the Trial Scheme for the Conversion of Business Tax to Value-addedTax (《營業稅改徵增值稅試點方案》), which was promulgated by the MOF and the StateAdministration of Taxation of the PRC (the “SAT”) on 16 November 2011, the State began tolaunch taxation reforms in a gradual manner with effect from 1 January 2012, whereby thecollection of VAT in lieu of business tax items was implemented on a trial basis in regionsshowing significant radiating effects in economic development and providing outstandingreform examples, beginning with production service industries such as transportation andcertain modern service industries.

REGULATORY OVERVIEW

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Income tax relating to dividend distribution

The PRC and the government of Hong Kong entered into the Arrangement between theMainland of the PRC and the Hong Kong Special Administrative Region for the Avoidance ofDouble 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》) (the “Arrangement”)on 21 August 2006 and implemented the Arrangement from 1 January 2007. According to theArrangement, the withholding tax rate on dividends paid by a PRC resident to its shareholder,who is a Hong Kong resident and directly holds at least 25% of its equity, is 5%, and otherwisewhich is 10%, and vice versa.

Pursuant to the Circular of the State Administration of Taxation on Relevant Issuesrelating to the Implementation of Dividend Clauses in Tax Agreements (《國家稅務總局關於執行稅收協定股息條款有關問題的通知》),which was promulgated by the SAT on 20 February2009, a taxpayer of the other party, who directly holds certain percentage (normally 25% or10%) of equity interests of a PRC company, shall be entitled to the tax treatment specified inthe tax agreements if all of the following requirements are satisfied: (i) such taxpayer obtainingdividends shall be a company; (ii) the equity interests and voting shares of a PRC companydirectly hold by such taxpayer shall reach the stipulated percentage; and (iii) the equityinterests of a PRC resident enterprise directly owned by such taxpayer shall satisfy thestipulated percentage at any time during the 12 months prior to the obtainment of the dividends.Based on the Announcement on Issues with Respect to the “Beneficial Owner” in Tax Treaties(《國家稅務總局關於稅收協定中“受益所有人”有關問題的公告》), which was promulgated bythe SAT on 3 February 2018 and became effective on 1 April 2018, if an applicant’s businessactivities do not constitute substantive business activities, it could result in the negativedetermination of the applicant’s status as a “beneficial owner”, and consequently, the applicantcould be precluded from enjoying the above-mentioned reduced income tax rate of 5% underthe Arrangement.

Laws and Regulations Relating to Labour Protection

Pursuant to the Labor Law of the PRC (《中華人民共和國勞動法》), which waspromulgated by the SCNPC on 5 July 1994 and last amended on 29 December 2018, companiesmust enter into employment contracts with their employees, based on the principles of equality,consent and agreement through consultation. Companies must establish and effectivelyimplement a system of ensuring occupational safety and health, educate employees onoccupational safety and health, preventing work-related accidents and reducing occupationalhazards. Companies must also pay for their employees’ social insurance premium.

The principal regulations governing the employment contract is the Labor Contract Lawof PRC (《中華人民共和國勞動合同法》) (the “Labor Contract Law”), which waspromulgated by the SCNPC on 29 June 2007 and was amended on 28 December 2012 and cameinto effect on 1 July 2013, pursuant to which, employers shall establish an employmentrelationship with employees on the date that they start employing the employees. To establishemployment, a written employment contract shall be concluded, or employers will be liable forillegal actions. Furthermore, the probation period and liquidated damages shall be restricted bythe law to safeguard employees’ rights and interests.

REGULATORY OVERVIEW

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Pursuant to the Interim Provisions on Labor Dispatch (《勞務派遣暫行規定》), which

were implemented by the Ministry of Human Resources and Social Security of the PRC on 1

March 2014, employers may employ dispatched workers in temporary, auxiliary or

substitutable positions only which shall not exceed 10% of the total number of its workers. If

the employer violates the relevant labour dispatch regulations, according to the Labor Contract

Law, the labour administrative department shall order it to make corrections within a time

limit; if it fails to make corrections within the time limit, penalty shall be imposed on the basis

of more than RMB5,000 and less than RMB10,000 per person.

Laws and Regulations Relating to Social Insurance and Housing Fund

According to the Interim Regulations on the Collection and Payment of Social Insurance

Premiums (《社會保險費徵繳暫行條例》), the Regulations on Work Injury Insurance (工傷保險條例), the Regulations on Unemployment Insurance (《失業保險條例》) and the Trial

Measures on Employee Maternity Insurance of Enterprises (《企業職工生育保險試行辦法》),

enterprises in the PRC shall provide benefit plans for their employees, which include basic

pension insurance, unemployment insurance, maternity insurance, work injury insurance and

basic medical insurance. An enterprise must provide social insurance by processing social

insurance registration with local social insurance agencies, and shall pay or withhold relevant

social insurance premiums for or on behalf of employees. The Social Insurance Law of the PRC

(《中華人民共和國社會保險法》), which was promulgated on 28 October 2010 and amended

on 29 December 2018, has consolidated pertinent provisions for basic pension insurance,

unemployment insurance, maternity insurance, work injury insurance and basic medical

insurance, and has elaborated in detail the legal obligations and liabilities of employers who

do not comply with relevant laws and regulations on social insurance.

Pursuant to the Regulations on Housing Accumulation Funds (《住房公積金管理條例》),

which was promulgated by State Council and became effective on 3 April 1999, and was last

revised on 24 March 2019, enterprises must complete registration at the competent

administrative centre of housing provident fund and go through the procedures of opening the

account of housing provident fund for their employees at the relevant bank upon the

registration by such administrative centre of housing provident fund. Enterprises as employers

are also obliged to timely pay and deposit housing provident fund for their employees in full

amount.

Laws and Regulations Relating to Intellectual Property

The PRC government has adopted comprehensive governing laws for intellectual property

rights, including copyrights, patents, trademarks and domain names.

REGULATORY OVERVIEW

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Copyright

Copyright in China, including copyrighted software, is principally protected under the

Copyright Law of the PRC (《中華人民共和國著作權法》) promulgated by the SCNPC on 7

September 1990 and its latest amendment became effective on 1 June 2021, and its

implementation rules and Regulations on the Protection of Computer Software (《計算機軟件保護條例》), promulgated by the State Council on 4 June 1991 with the latest amendment on

30 January 2013 and became effective on 1 March 2013. Under the Regulations on the

Protection of Computer Software, the term of protection for copyrighted software is 50 years.

Patent

The Patent Law of the PRC (《中華人民共和國專利法》), promulgated by the SCNPC on

12 March 1984, which was most recently amended on 17 October 2020 and the latest

amendment became effective on 1 June 2021, provides for patentable inventions, utility models

and designs, which must meet three conditions: novelty, inventiveness and practical

applicability. The National Intellectual Property Administration is responsible for examining

and approving patent applications. The duration of a patent right is either 10 years or 20 years

from the date of application, depending on the type of patent right.

Trademark

The Trademark Law of the PRC (《中華人民共和國商標法》), promulgated by the

SCNPC on 23 August 1982, with the latest amendment became effective on 1 November 2019,

and its implementation rules (《中華人民共和國商標法實施條例》) promulgated by the State

Council on 3 August 2002 with the latest amendment became effective on 1 May 2014, protect

registered trademarks. The Trademark Law has adopted a “first-to-file” principle with respect

to trademark registration. Where registration application for a trademark that is identical or

similar to another trademark which has already registered or given preliminary examination,

the application for such trademark may be rejected. Trademark registration is effective for a

renewable ten-year period, unless otherwise revoked.

Domain name

Domain names are protected under the Administrative Measures on the Internet Domain

Names (《互聯網域名管理辦法》) which was promulgated on 24 August 2017 and became

effective on 1 November 2017 by the Ministry of Industry and Information Technology(the

“MIIT”). The MIIT is the major regulatory body responsible for the administration of the PRC

internet domain names, under supervision of which the China Internet Network Information

Center is responsible for the daily administration of .cn domain names and Chinese domain

names.

REGULATORY OVERVIEW

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Laws and Regulations Relating to Environmental Protection

Environmental protection Law of the PRC (《中華人民共和國環境保護法》) was

promulgated by the SCNPC on 26 December 1989 and was revised on 24 April 2014, and came

into force on 1 January 2015. In case of preparing any development and utilisation plan and

constructing any project with impacts on the environment, the environmental impact

assessment must be carried out in accordance with laws and regulations. Any development and

utilisation plans failing to carry out environmental impact assessment in accordance with laws

and regulations must not be implemented; for any construction project failing to carry out

environmental impact assessment in accordance with laws and regulations, the construction

must not be commenced. Any facility for preventing and control of pollution in a construction

project must be designed, constructed and put into operation parallel to the progress of the

principal part of the project. The facilities for preventing and control of pollution must comply

with requirements of approved environmental impact assessment files and must not be

dismantled without permission or left idle.

According to Environmental Impact Assessment Law of the PRC (《中華人民共和國環境影響評價法》) which was promulgated by the SCNPC on 28 October 2002 and was revised on

2 July 2016 and 29 December 2018 and Classified Management Catalogue for Environmental

Impact Assessment of Construction Projects (《建設項目環境影響評價分類管理名錄》) which

was stipulated and released by the Ministry of Ecology and Environment with the latest

amendment became effective on 1 January 2021, the states implements classified management

on environmental impact assessment of construction projects in accordance with the impact

degree on environment of the construction projects.

According to the Regulation on the Administration of Environmental Protection for

Construction Project (《建設項目環境保護管理條例》) promulgated by the State Council on

29 November 1998, and latest amended on 16 July 2017 by the State Council and took effect

on 1 October 2017, construction units shall, depending on the level of the environmental

impacts, report environmental impact reports and the required environmental impact forms

prepared by institutions which possess relevant administration. Environmental protection

facilities shall be designed, constructed and put into operation simultaneously with the main

construction works. Upon the completion of construction projects, the construction units shall

inspect and prepare the acceptance report of the completed environmental protection facilities

in accordance with the rules and procedures provided by the State Environmental Protection

Authorities.Only those construction projects that have been inspected and accepted as qualified

may commence the operation or be available for use.

Pursuant to the Administrative Measures for Pollutant Discharge Permitting (Trial) (《排污許可管理辦法(試行)》), which was promulgated by the former Ministry of Environmental

Protection and became effective on 10 January 2018 and amended on 22 August 2019, the

Ministry of Environmental Protection shall develop and issue according to law a classification

administration list of pollutant discharge permit for fixed pollution sources. The enterprises,

public institutions and other business operators on the list shall apply for and obtain a pollutant

discharge permit according to the prescribed application time limit. Pursuant to the Catalogue

REGULATORY OVERVIEW

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of Classified Management of Pollutant Discharge Permits for Stationary Pollution Sources

(2019 Edition) (《固定污染源排污許可分類管理名錄(2019年版)》), which was promulgated

by the Ministry of Ecology and Environment on 20 December 2019, the pollutant discharge

management is classified into three degrees, the key focused management, the simplified

management, and the registration management. Business operators which product and

discharge very small amounts of pollutants and have little impact on the environment are

subjected to registration administration; such business operators do not need to apply for a

pollutant discharge permit, but only need to register and file on a designated platform. In-Tech

Dongguan is a pollutant discharge unit which should be implemented with registration

management and therefore it is not required to obtain a pollutant discharge permit, but only

needs to fill in the pollutant discharge registration form. In-Tech Dongguan has completed the

pollutant discharge registration for Stationary Pollution Sources on the National Information

Platform of Pollutant Discharge Permit Management, and the registration will remain valid

until 28 June 2025.

Air Pollution

The Air Pollution Prevention Law of the People’s Republic of China (中華人民共和國大氣污染防治法), promulgated on 5 September 1987 by the SCNPC, which became effective on

1 June 1988 and was last amended on 26 October 2018, establishes the legal framework for air

pollution prevention in the PRC. The environmental protection department of the State Council

formulates national air quality standards. Each of the local environmental protection bureaus

is authorised to regulate air pollution within each of their respective jurisdictions by

formulating more specific local standards, and may impose penalties for violation.

Water Pollution

The Water Pollution Prevention Law of the People’s Republic of China (中華人民共和國水污染防治法), promulgated on 11 May 1984 by the SCNPC, which became effective on 1

November 1984, and last amended 27 June 2017, establishes the legal framework for water

pollution prevention in the PRC. The environmental protection department of the State Council

formulates national waste discharge standards. Each of the local environmental protection

bureaus is authorised to regulate water pollution within each of their respective jurisdictions

by formulating more specific local standards, and may impose penalties for violation, including

suspending operations.

Noise Pollution

The Noise Pollution Prevention Law of the People’s Republic of China (中華人民共和國環境噪聲污染防治法), promulgated by the SCNPC on 29 October 1996, which became

effective on 1 March 1997, and was amended on 29 December 2018, establishes the framework

for noise pollution prevention in the PRC. Under the Noise Pollution Prevention Law, facilities

for prevention and control of environmental noise pollution shall be designed and approved by

the environmental protection authority prior to the commencement of the project, and be built

and put into use simultaneously with the project works.

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Laws and Regulations Relating to Solar Power

In accordance with the Interim Provision on Administration of Distributed Photovoltaic

Power Generation (《分布式光伏發電項目管理暫行辦法》) promulgated by the National

Energy Administration on 18 December 2013 and Notice on the Implementation of the Reform

of Simplification and Decentralization to Optimize the Administration of Electric Power

Business License (《關於貫徹落實“放管服”改革精神優化電力業務許可管理有關事項的通知》) promulgated by the National Energy Administration on 23 March 2020, energy

regulatory authorities below provincial level shall carry out the record management on

distributed photovoltaic power generation. Solar power generation projects with an installed

capacity of less than 6MW do not need to obtain an electric power business license.

Laws and Regulations Relating to Radiation Safety

Pursuant to the Prevention and Control of Radioactive Pollution Law of the PRC (《中華人民共和國放射性污染防治法》), which was promulgated by the SCNPC on 28 June 2003

with effect from 1 October 2003, an entity producing, selling or using radioisotope and ray

devices shall, in accordance with the relevant provisions of the State Council on prevention of

radioactivity from the radioisotope and ray devices, apply to obtain a permit, and make

registration accordingly. An entity producing, selling, using or storing radioactive sources shall

set up a sound and safe security system, designate special persons to be responsible for the

system, ensure the implementation of the system of liability for safety, and formulate the

necessary measures for addressing emergencies in accidents.

According to the Regulations on the Security and Protection of Radioisotope and

Radioactive Ray Devices (《放射性同位素與射線裝置安全和防護條例》), which was

promulgated by the State Council on 14 September 2005 and revised on 29 July 2014, and 2

March 2019, and Measures for Administration of the Safety Licensing of Radioisotope and

Radioactive Ray Devices (《放射性同位素與射線裝置安全許可管理辦法》), which was

promulgated by Ministry of Environmental Protection on 18 January 2006 and last revised 4

January 2021, entities that produce, sell or use of radioisotopes or radiation-emitting devices

of different categories shall obtain a License for Safe Radiation (輻射安全許可證). According

to the Notice on Filing Administration of the Exemption of Radioactive Isotopes and

Radioactive Ray Devices (《關於規範放射性同位素與射線裝置豁免備案管理工作的通知》),which was promulgated by the Ministry of Ecology and Environment and the General

Administration of Customs on 24 December 2018,for radioactive ray devices that meet certain

standards, after the production unit or the general import agency completes the exemption

filing, the sales and use of the product can be exempted from radiation safety supervision, thus

enterprises that use these radioactive ray devices are not required to apply for a License for

Safe Radiation.

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Laws and Regulations Relating to the Real Estate

According to the Land Administration Law of the PRC (《中華人民共和國土地管理法》), which was promulgated by the SCNPC on 25 June 1986, last amended on 26 August

2019 and became effective on 1 January 2020, land owned by the State may be remised or

allotted to construction units or individuals in accordance with the law. The people’s

government at or above the county level shall register and put on record uses of state-owned

land used by units or individuals, and issue certificates to certify the land use rights.

According to the Rules on the Administration of Construction Quality (《建設工程質量管理條例》), which was promulgated by the State Council on 30 January 2000 and amended

on 7 October 2017 and 23 April 2019, respectively, and the Administrative Measures for

Recording of the Inspection and Acceptance on Construction Completion of Buildings and

Municipal Infrastructures (《房屋建築和市政基礎設施工程竣工驗收備案管理辦法》), which

was promulgated by the former Ministry of Construction on 4 April 2000 and revised by the

Ministry of Housing and Urban-Rural Development on 19 October 2009, a construction project

shall not be delivered for use unless it has passed the completion-based check. The construction

entity should file a record to a competent construction administrative department of the

people’s government at or above the county level of the place where the project is located

within 15 days after the construction project passes the acceptance checks.

According to the Fire Prevention Law of the PRC (《中華人民共和國消防法》), which

was promulgated by the SCNPC on 29 April 1998 and amended on 28 October 2008, 23 April

2019 and 29 April 2021, respectively, the fire prevention design or construction of a

construction project must conform to the national fire prevention technical standards of project

construction. Where the housing and urban-rural development authority under the State

Council requires that an application for fire prevention final inspection of an as-built

construction project should be filed, the constructing party shall file such an application to the

housing and urban-rural development authority. For a construction project other than one

specified in the preceding paragraph, the constructing party shall report to the housing and

urban-rural development authority after final inspection for record, and the housing and

urban-rural development authority shall conduct spot checks.

Pursuant to the Administrative Measures for the Leasing of Commodity Housing (《商品房屋租賃管理辦法》), issued by the Ministry of Housing and Urban-Rural Development of the

PRC on 1 December 2010, within 30 days after the execution of the housing lease contract,

parties to the leasing of housing shall handle the registration and filing procedure of the leasing

of housing at the departments in charge of construction (real estate) of the governments in the

municipality directly under the Central Government, city and county where the leased housing

is located. In the event that parties to the leasing of housing fail to handle the registration and

filing procedure of the leasing of housing, the department in charge of construction (real estate)

of the people’s government in the municipality directly under the Central Government, the

cities or the counties shall order rectification within a time limit. If rectification is not made

by an entity within the time limit, a fine of more than RMB1,000 but less than RMB10,000 may

be imposed.

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Laws and Regulations Relating to Safe Production

In accordance with the Work Safety Law of the PRC (《中華人民共和國安全生產法》),

which was issued by the SCPNC, on 29 June 2002 and recently amended on June 10, 2021,

business entities must establish and improve their work safety responsibility systems and work

safety polices and rules, improve work safety conditions, promote work safety standardisation,

improve their work safety levels and ensure work safety.

Laws and Regulations Relating to Foreign Exchange Control

Foreign exchange in the PRC is mainly regulated by the Regulations on Foreign Exchange

Administration of the PRC (《中華人民共和國外匯管理條例》), which was promulgated by

the State Council on 29 January 1996 and most recently amended on 5 August 2008. Renminbi

is freely convertible for current account items, including the distribution of dividends, interest

payments, trade and service related foreign exchange transactions, but not for capital account

items, such as direct investments, loans, repatriation of investments and investments in

securities outside of the PRC, unless prior approval is obtained from the State Administration

of Foreign Exchange(the “SAFE”) and/or prior registration with the SAFE is made.

On February 13, 2015, SAFE promulgated the Notice on Further Simplifying and

Improving Foreign Exchange Administration Policy on Direct Investment (《關於進一步簡化和改進直接投資外匯管理政策的通知》) (the “SAFE Circular 13”), which took effect on 1

June 2015 and was amended on 30 December 2019. In accordance with the SAFE Circular 13,

the banks will review and carry out foreign exchange registration under domestic direct

investment as well as foreign exchange registration under overseas direct investment directly,

and the SAFE and its branches shall implement indirect supervision over foreign exchange

registration of direct investment via the banks.

On 30 March 2015, SAFE issued the Circular on Reforming the Management Approach

Regarding the Foreign Exchange Capital Settlement of Foreign-Invested Enterprises (《國家外匯管理局關於改革外商投資企業外匯資本金結匯管理方式的通知》) (the “SAFE Circular

19”), which took effect on 1 June 2015. SAFE further issued the Circular on Reforming and

Regulating Policies on the Control over Foreign Exchange Settlement of Capital Accounts

(《國家外匯管理局關於改革和規範資本項目結匯管理政策的通知》) (the “SAFE Circular

16”) and the Notice on Annulling five Foreign Exchange Management Normative Documents

and clauses of seven Foreign Exchange Management Normative Documents (《國家外匯管理局關於廢止和失效5件外匯管理規範性文件及7件外匯管理規範性文件條款的通知》), which,

among other things, amend certain provisions of SAFE Circular 19. According to SAFE

Circular 19, the flow and use of the Renminbi capital converted from foreign currency

denominated registered capital of a foreign-invested company is regulated such that Renminbi

capital may not be used for business beyond its business scope or to provide loans to persons

other than affiliates unless otherwise permitted under its business scope. Violations of SAFE

Circular 19 or SAFE Circular 16 could result in administrative penalties.

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Pursuant to the Notice of the SAFE on Further Facilitating Cross-border Trade and

Investment (《國家外匯管理局關於進一步促進跨境貿易投資便利化的通知》), which was

promulgated by the SAFE on 23 October 2019, non-investment foreign-invested enterprises are

permitted to use their capital funds to make equity investments in the PRC, provided that such

investments do not violate the Special Administrative Measures for the Access of Foreign

Investment (Negative List) (外商投資准入特別管理措施(負面清單)) and the target investment

projects in the PRC are genuine and in compliance with laws.

According to the Circular on Optimizing Administration of Foreign Exchange to Supportthe Development of Foreign-related Business (《關於優化外匯管理支持涉外業務發展的通知》), which was promulgated by the SAFE on 10 April 2020, eligible enterprises are allowedto make domestic payments by using their capital, foreign credits and the income under capitalaccounts of overseas listing, with no need to provide the evidentiary materials concerningauthenticity of such capital for banks in advance, provided that their capital use shall beauthentic and in line with provisions, and conform to the prevailing administrative regulationson the use of income under capital accounts. The concerned bank shall conduct spot checkingin accordance with the relevant requirements.

LAWS AND REGULATIONS RELATING TO OUR BUSINESS IN MALAYSIA

The establishment, operation and management of our Malaysian subsidiaries shall be incompliance with the relevant laws and regulations in Malaysia summarised below which do notpurport to be an exhaustive description of all laws and regulations. Non-compliance with therelevant laws and regulations below may result in monetary penalties and/or custodial sentenceand/or any other orders being made.

Laws and Regulations Relating to Licences

Manufacturing Licence

The Industrial Co-ordination Act 1975 (“ICA 1975”) requires any person engaging inmanufacturing activity with shareholders’ funds of MYR2.5 million and above or employingseventy five or more full-time paid employees to obtain a manufacturing licence.

Pursuant to Section 3(1) of the ICA 1975, no person shall engage in any manufacturingactivity unless he is issued a licence in respect of such manufacturing activity. The ICA 1975defines “manufacturing activity” as “the making, altering, blending, ornamenting, finishing orotherwise treating or adapting any article or substance with a view to its use, sale, transport,delivery or disposal and includes the assembly of parts and ship repairing but shall not includeany activity normally associated with retail or wholesale trade”.

Any person who engages in any manufacturing activity without a licence in respect ofsuch shall be guilty of an offence and is liable on conviction to a fine not exceedingMYR2,000.00 or to a term of imprisonment not exceeding six months and to a further fine notexceeding MYR1,000.00 for every day during which such default continues.

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Manufacturing Warehouse Licence

The Customs Act 1967 (“CA 1967”) governs, among others, the levying of custom duties,port clearances, warehousing and other custom-related matters. Pursuant to Section 65 andSection 65A of the CA 1967 respectively, the Director General of Customs may on payment ofsuch fees as may be prescribed by him, grant a licence to any person for warehousing andmanufacturing goods liable to custom duties in a place or places specified in the licence andto carry on any manufacturing process and other operation in respect of goods liable to customduties and any other goods.

Business Premises Licence

The Local Government Act 1976 (“LGA 1976”) provides that every local authority shall

have the power to, amongst others, grant licence or permit for any trade, occupation or

premises. It further provides that every local authority may from time to time make, amend and

revoke any by-laws in respect of all such matters as are necessary or desirable for the

maintenance of the health, safety and well-being of the inhabitants or for the good order and

government of the local authority. The LGA 1976 provides that every person who is guilty of

any offence against the LGA 1976 or any by-laws, rules or regulations is punishable by a fine

not exceeding MYR2,000.00 or by imprisonment of a term not exceeding one year or by both.

Approval to Operate Within Free Zones

Pursuant to the Free Zones Act 1990 (“FZA 1990”), any person wishes to carry out any

activity within a free zone shall apply in writing for approval to the appointed authority. The

approval to be granted may be subject to such terms and conditions as the authority deems

necessary. The FZA 1990 stipulates that every omission or neglect to comply with, and every

act done or attempted to be done contrary to the provisions of the FZA 1990 or any regulations

made thereunder shall be an offence and in respect of any such offence for which no penalty

is expressly provided, the offender shall be liable on conviction to a fine not exceeding

MYR50,000.00 or to imprisonment for a term not exceeding three years or both.

Laws and Regulations Relating to Buildings

The Street, Drainage and Building Act 1974 (“SDBA 1974”) provides that the state

authority shall have the power to make by-laws in respect of every purpose which it deems

necessary for carrying out the provisions of the SDBA 1974, including but not limited to the

construction of buildings and the time, manner and procedure for the issuance of the certificate

of completion and compliance (“CCC”). The Uniform Building By-Laws 1984 (“UBBL 1984”)

is issued pursuant to the power conferred under SDBA 1974. Pursuant to the UBBL 1984, the

CCC is to be issued by a qualified person who submits building plans to the local authority for

approval in accordance with the UBBL 1984.

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Section 72 of the SDBA 1974 stipulates that where the local authority is satisfied that a

building has been erected in contravention of the SDBA 1974, the local authority may by notice

serve on the owner of the land require him to do amongst others, demolish such unauthorised

building within such time as the local authority may specify and to take steps as may be ordered

by the local authority. Any person who fails to comply with the requirements of the notice shall

be guilty of an offence and shall be liable on conviction to a fine not exceeding MYR250.00

for each day that the offence is continued after expiry of the period specified in the notice.

Laws and Regulations Relating to Environment

The Environmental Quality Act 1974 (“EQA”) sets out provisions in respect of

prevention, abatement, control of pollution and enhancement of the environment.

It is an offence under the EQA for any person, unless licenced to do so, to amongst others:

(a) emit or discharge any environmentally hazardous substances, pollutants or wastes

into the atmosphere;

(b) emit or cause or permit to be emitted any noise greater in volume, intensity or

quality;

(c) pollute or cause or permit to be polluted any soil or surface of any land; or

(d) emit, discharge or deposit any environmentally hazardous substances, pollutants or

wastes into any inland waters,

in contravention of the acceptable conditions specified in the EQA and any person who

contravenes (a) to (d) above shall be guilty of an offence and shall be liable to a fine not

exceeding MYR100,000.00 or to imprisonment for a period not exceeding five years or to both

and to a further fine not exceeding MYR1,000.00 (MYR500.00 for noise pollution) for every

day that the offence is continued after a notice issued by the Director General of Environmental

Quality (“DGEQ”) requiring him to cease the act specified therein.

The regulations made under the EQA includes, amongst others, the Environmental

Quality (Scheduled Wastes) Regulations 2005 (“Regulations 2005”), the Environmental

Quality (Clean Air) Regulations 2014 (“Regulations 2014”) and the Environmental Quality

(Industrial Effluent) Regulations 2009 (“Regulations 2009”).

The Regulations 2005 sets out the following requirements:-

(a) Any person who generates scheduled wastes (“waste generator”) shall, within

thirty days from the date of generation of scheduled wastes, notify the DGEQ of the

new categories and quantities of scheduled wastes which are generated.

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(b) Scheduled wastes shall be disposed of at prescribed premises only and shall, as far

as practicable, before disposal, be rendered innocuous.

(c) Scheduled wastes shall be treated at prescribed premises or at on-site treatment

facilities only and the residuals from treatment of scheduled wastes shall be treated

and disposed of at prescribed premises.

(d) Any waste generators may apply to the DGEQ in writing to have the scheduled

wastes generated from their particular facility or process excluded from being

treated, disposed of or recovered in premises or facilities other than at the prescribed

premises or on-site treatment or recovery facilities. If the DGEQ is satisfied with the

application made, the DGEQ may grant a written approval either with or without

conditions.

(e) Any waste generator shall ensure that scheduled wastes generated by him are

properly stored, treated on-site, recovered on-site for material or product from such

scheduled wastes or delivered to and received at prescribed premises for treatment,

disposal or recovery of material or product from scheduled wastes.

(f) Any waste generator shall ensure that scheduled wastes that are subjected to

movement or transfer be packaged, labelled and transported in accordance with the

guidelines prescribed by the DGEQ.

Any omission or neglect to comply with, or any act done or attempted to be done contrary

to the Regulations 2005 amounts to a compoundable offence and may be liable for a sum of

money not exceeding MYR2,000.00 under the EQA.

The Regulations 2014 applies to:-

(a) any premises used for any industrial or trade purposes, or on which matter is burnt

in connection with any industrial or trade purposes, including burning of waste,

whether or not the premises are prescribed the EQA;

(b) any other premises or process that discharges or is capable of discharging air

pollutants into the open air;

(c) any industrial plant; and

(d) any fuel burning equipment.

This Regulations 2014 stipulates that every premises shall be equipped with an air

pollution control system in accordance with the specifications as determined by the DGEQ. An

owner or occupier of the premises shall operate and maintain the air pollution control system

in accordance with sound engineering practice and ensure that all components of the air

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pollution control system are in good working condition. Any person who contravenes or fails

to comply with any provisions of the Regulations 2014 shall be guilty of an offence and shall

be liable to a fine not exceeding MYR100,000.00 or to imprisonment for a term not exceeding

two years or to both.

Pursuant to Regulations 2009, an owner or occupier of a premises that discharges

industrial effluent or mixed effluent onto or into any soil, or into any inland waters or

Malaysian waters shall, at his own expense monitor the concentration of chemical oxygen

demand (COD) and any parameter as specified in the regulation. The owner or the occupier is

required to install flow-meters, sampling, monitoring and recording equipment. Any person

who contravenes with the said provision shall be guilty of an offence and shall, on conviction,

be liable to a fine not exceeding MYR100,000.00 or to a term of imprisonment for a period not

exceeding five years or to both and to a further fine not exceeding MYR1,000.00 a day for

every day that the offence is continued after the notice by the DGEQ requiring him to cease

the act as specified in the notice.

Laws and Regulations Relating to Safety and Health

The Occupational Safety And Health Act 1994 (“OSHA”) imposes the duty on all

employers to ensure the safety, health and welfare to work of all his employees. The OSHA

imposes the following duties on all the employers:-

(a) to prepare and as often as may be appropriate revise a written statement of his

general policy with respect to the safety and health at work of his employees and the

organisation and arrangements for the time being in force for carrying out that

policy, and to bring the statement and any revision of it to the notice of all of his

employees;

(b) to establish a safety and health committee at the place of work if there are forty or

more persons employed at the place of work; and

(c) to notify the nearest occupational safety and health office of any accident, dangerous

occurrence, occupational poisoning or occupational disease which has occurred or is

likely to occur at the place of work.

Any person who contravenes any provision of the OSHA or any regulation made

thereunder shall be guilty of an offence, and if no penalty is expressly provided shall, on

conviction, be liable to a fine not exceeding MYR10,000.00 or to imprisonment for a term not

exceeding one year or to both and, in the case of a continuing offence, to a fine not exceeding

MYR1,000.00 for every day or part of a day during which the offence continues after

conviction.

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Laws and Regulations Relating to Employment

The employment of employees in Malaysia are governed by the Employment Act 1955

(“EA 1955”). The EA 1955 regulates all labour relations including contracts of service,

payment of wages, employment of women, rest days, hours of work, termination, lay-off and

retirement benefits and keeping of registers of employees. The EA 1955 defines employee as

any person, irrespective of his occupation, who has entered into a contract of service with an

employer under which such person’s wages do not exceed MYR2,000.00 a month. Further, the

EA 1955 provides that in the event where the terms of the employment of an employee

inconsistent with the minimum standards provided under the EA 1955, the more favourable

terms will prevail and be enjoyed by the employee. Any person who commits any offence

under, or contravenes any provision of the EA 1955 or any regulations, order or other

subsidiary legislations whatsoever made thereunder, in respect of which no penalty is provided,

shall be liable, on conviction, to a fine not exceeding MYR10,000.00.

Statutory Contributions

The Employees Provident Fund Act 1991 (“EPF 1991”) imposes statutory obligations on

employers and employees to make contribution towards the employees provident fund which

serves as a saving scheme for the retirement of an employee. Any employer who fails to

contribute to the employees provident fund shall be guilty of an offence and shall on conviction

be liable to imprisonment for a term not exceeding three years or to a fine not exceeding

MYR10,000.00 or to both.

The Social Security Organisation (SOCSO) provides two social security schemes namely,

the employment injury insurance scheme and the invalidity scheme to protect the welfare of

employees and their dependents under the Employees’ Social Security Act 1969 (“ESS 1969”).

Pursuant to the ESS 1969, the employers and the employees shall make monthly contribution

to SOCSO. Any employer who fails to pay the monthly contributions within such period as may

be prescribed by the regulations shall be liable to pay interest to be credited to SOCSO on such

amount at such rate as may be prescribed by the regulations in respect of any period during

which such amount remains unpaid. If any person is guilty of, any contravention of or

non-compliance with any of the requirements of the ESS 1969 or the rules or the regulations

in respect of which no special penalty is provided, he shall be punishable with imprisonment

for a term which may extend to two years, or with fine not exceeding MYR10,000.00 or to

both.

The Employment Insurance System Act 2017 (“EIS 2017”) imposes the statutory

obligation on employers and employees to make monthly contribution towards the employment

insurance system which is administered by SOCSO to provide certain benefits and a

re-employment placement programme for insured persons in the event of loss of employment.

Any employer who fails to pay the monthly contributions within such period as may be

prescribed by the regulations shall be liable to pay interest to be credited to SOCSO on such

amount at such rate as may be prescribed by the regulations in respect of any period during

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which such amount remains unpaid. Any employer who fails to pay monthly contributions

commits an offence and shall on conviction be liable to a fine not exceeding MYR10,000.00

or to imprisonment for a term not exceeding two years or to both.

The Pembangunan Sumber Manusia Berhad Act 2001 (“PSMB 2001”) imposes the

statutory obligation on employer in manufacturing and production industry with ten or more

employees to pay a human resources development levy in respect of each of his employees to

the human resources development fund (“HRDF”). The imposition and collection of the human

resources development levy is for the purpose of promoting the training and development of

employees, apprentices and trainees respectively. Any employer who fails to pay any human

resources development levy within such period as may be prescribed commits an offence and

shall on conviction be liable to a fine not exceeding MYR20,000.00 or to imprisonment for a

term not exceeding two years or to both.

Accommodation For the Workers

The Employees’ Minimum Standards of Housing, Accommodations and Amenities Act1990 (“EMSHA 1990”) provides that no employer or centralised accommodation provider shalluse any buildings as accommodation if such building is unfit for human habitation inaccordance with the relevant written laws and such accommodation provided for employeesshall comply with the minimum standards required under the EMSHA 1990 or any regulationsmade thereunder.

Pursuant to Section 24D(1) of the EMSHA 1990, no accommodation shall be provided toan employee unless is certified with a Certificate for Accommodation. An employer whocontravenes Section 24D(1) of the EMSHA 1990 commits an offence and shall, on conviction,be liable to a fine not exceeding MYR50,000.00.

Laws and Regulations Relating to Taxation

Income Tax

Income of any person including a company, accruing in or derived from Malaysia orreceived in Malaysia from outside Malaysia is subject to payment income tax under the IncomeTax Act 1967 (“ITA 1967”). A company is considered as a tax resident in Malaysia if itsmanagement and control of its business are exercised in Malaysia.

As at the Latest Practicable Date, resident companies are subject to a tax rate oftwenty-four per cent (24%) effective from the year of assessment 2016. Resident companieswith a paid-up capital of MYR2,500,000.00 or less with an annual gross income from sourceor sources consisting of a business not exceeding MYR50,000,000.00 are taxed at the rate ofseventeen per cent (17%) for the first MYR600,000.00 (effective from the year of assessment2020) and at the rate of twenty-four per cent (24%) for any sum in excess of MYR600,000.00.Other resident companies are taxed at the rate of twenty-four per cent (24%). For the year of

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assessment of 2022, companies with chargeable income exceeding MYR100,000,000.00 aretaxed at the rate of twenty-four per cent (24%) for the first MYR100,000,000.00 and at the rateof thirty-three per cent (33%) for any sum in excess of MYR100,000,000.00.

Pursuant to Section 77A of the ITA 1967, every company shall for each year ofassessment furnish to the Director General of Inland Revenue a return in the prescribed formwithin seven months from the date following the close of the accounting period whichconstitutes the basis period for the year of assessment failing which he shall be guilty of anoffence and shall on conviction be liable to a fine of not less than MYR200.00 and not moreMYR20,000.00 or to imprisonment for a term not exceeding six months or to both.

The ITA 1967 stipulates that any person who makes an incorrect tax return by omittingor understating any income of which he is required to make a return on behalf of himself oranother person or gives any incorrect information in relation to any matter affecting his ownchargeability to tax or the chargeability of tax of any other person, shall be guilty of an offenceand shall on conviction be liable to a fine of not less than MYR1,000.00 and not more thanMYR10,000.00. He shall also pay a special penalty of double the amount of tax which has beenundercharged in consequence of the incorrect return or incorrect information or which wouldhave been undercharged if the return or information had been accepted as correct.

The ITA 1967 further provides that any person who wilfully and with intent to evade orassist any other person to evade tax shall be guilty of an offence and shall on conviction beliable to a fine of not less than MYR1,000.00 and not more than MYR20,000.00 or toimprisonment for a term not exceeding three years or to both and shall pay a special penaltyof treble the amount of tax which has been undercharged in consequence of the offence orwhich would have been undercharged if the offence had not been detected.

Sales and Service Tax

The Sales Tax Act 2018 and the Service Tax Act 2018 together with their respectivesubsidiary legislations are introduced to replace the Goods and Service Act 2014 effective from1 September 2018. Sales tax is imposed on taxable goods manufactured in Malaysia by anyregistered manufacturer at the time the goods are sold, disposed of by him or imported intoMalaysia by any person, whereas the service tax is charged and levied on any taxable servicesprovided in Malaysia by a registered person in carrying on his business or any imported taxableservices. No sales tax is levied or payable on any taxable goods imported into the special areas(defined in the Sales Tax Act 2018 to include, amongst others, any free zone, licencedwarehouse and licenced manufacturing warehouse) or transported to the special areas fromMalaysia unless they are prescribed in the Sales Tax (Imposition of Sales Tax in Respect ofSpecial Areas) Order 2018.

The Sales Tax Act 2018 provides that manufacturers, who manufacture taxable goods witha sales value exceeding MYR500,000.00 within the period of 12 months, are required to beregistered with the Royal Malaysian Customs. As at the Latest Practicable Date, the sales taxand the service tax are generally at the rate of ten per cent (10%) and six per cent (6%)respectively.

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Any taxable person who fails to pay the sales tax due and payable within the stipulatedperiod or furnishes an incorrect return shall be guilty of an offence under the Sales Tax Act2018 and shall on conviction be liable to a fine not exceeding MYR50,000.00 or imprisonmentfor a term not exceeding three years or both. The Sales Tax Act 2018 further stipulates that anyperson who with intent to evade or to assist any other person to evade sales tax commits anoffence and shall on conviction be liable for the first offence, to a fine of not less than ten timesand not more than twenty times the amount of sales tax or to imprisonment for a term notexceeding five years or to both and for a second or subsequent offence, to a fine of not less thantwenty times and not more than forty times the amount of sales tax or to imprisonment for aterm not exceeding seven years or to both. In the event that the amount of sales tax cannot beascertained, the person shall be liable to a fine of not less than MYR50,000.00 and not morethan MYR500,000.00 or to imprisonment for a term not exceeding seven years or to both.

Withholding Tax

The ITA 1967 provides that where a person is liable to make certain types of payment toa non-resident person, he shall deduct withholding tax at the prescribed rate from such paymentand (whether or not that tax is so deducted) shall within one month after paying or creditingsuch contract payment render an account and pay the amount of that tax to the Director Generalof Inland Revenue of Malaysia. Any person who fails to pay any withholding tax due from him,that amount which he fails to pay shall be increased by a sum equal to ten per cent (10%) ofthe amount which he fails to pay, and that amount and the increased sum shall be a debt duefrom him to the Government of Malaysia and shall be payable forthwith to the Director Generalof Inland Revenue of Malaysia.

The ITA 1967 further provides that interest, royalties and payment for services under acontract and certain classes of income are subject to withholding tax when pay tonon-residents. Notwithstanding that, it should be noted that save and except for the restrictionimposed under Section 131 of the Companies Act 2016 whereby a company may only make adistribution to the shareholders out of profits of the company if the company is solvent, as atthe Latest Practicable Date, Malaysia has not imposed any restriction or withholding tax ondividend payments from Malaysian companies.

Notification Pertaining to New Recruitment and Resignation of Employee

Pursuant to the ITA 1967 where an employer:-

(a) commences to employ an individual who is or is likely to be chargeable to tax inrespect of income in respect of gains or profits from the employment, the employershall give notice in the prescribed form to the Director General of Inland Revenueof Malaysia not later than thirty days after the commencement of the employment;and

(b) is about to cease to employ an individual who is or is likely to be chargeable to taxin respect of income in respect of gains or profits from the employment or where anindividual under his employment dies, the employer shall, not less than thirty days

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before the cessation of the employment, or in respect of cessation by reason of deathnot more than thirty days after being informed of the death of the individual, givenotice in the prescribed form to the Director General of Inland Revenue of Malaysiaof the cessation of the employment except:-

(i) where the income from the employment of that individual is subject to themonthly tax deduction; or

(ii) where the total monthly remuneration from the employment of that individualis below the minimum amount of income that is subject to the monthly taxdeduction,

and where it is known to him that the individual is not retiring from anyemployment.

The ITA 1967 further stipulates that an individual chargeable to tax in respect of incomein respect of gains or profits from an employment is to the knowledge of his employer aboutto leave or intending to leave Malaysia for a period exceeding three months, the employer shallnot less than thirty days before the expected date of departure give notice in the prescribedform to the Director General of Inland Revenue of Malaysia.

Any person who fails to give the prescribed notice to the Director General of InlandRevenue of Malaysia within the stipulated time shall be liable to a fine of not less thanMYR200.00 and not more than MYR20,000.00 or to imprisonment for a term not exceeding sixmonths or to both.

Foreign Exchange Administration Notices issued by the Central Bank of Malaysia

The Central Bank of Malaysia or Bank Negara Malaysia (“Central Bank”) assumes theprimary function amongst others, to formulate and conduct monetary policy in Malaysia andto provide oversight over money and foreign exchange markets as stipulated in the CentralBank of Malaysia Act 2009. By the power vested by the Financial Services Act 2013, theCentral Bank issued foreign exchange notices to regulate the remittance of funds from and intoMalaysia. As at the Latest Practicable Date, a non-resident is allowed to repatriate funds fromMalaysia, including any income earned or proceeds from divestment of MYR asset, providedthat the repatriation is made in foreign currency.

LAWS AND REGULATIONS RELATED TO OUR BUSINESS IN HONG KONG

The following sets out some of the general Hong Kong laws and regulations applicableto our business in Hong Kong.

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Import and Export

The Import and Export Ordinance (Chapter 60 of the Laws of Hong Kong) establishes alicencing requirement for import and export of commodities other than an exempted article.Regulations 4 and 5 of the Import and Export (Registration) Regulations (Chapter 60E of theLaws of Hong Kong) provide that every person who imports or exports any article other thanan exempted article shall lodge an accurate and complete import or export declaration relatingto such article using services provided by a specific body with the Commissioner of Customsand Excise within 14 days after the importation and exportation of the article. The Export(Certificates of Origin) Regulations (Chapter 60H of the Laws of Hong Kong) provides thatmanufacturers must also obtain a factory registration before they are eligible for certificates oforigin.

Any person failing to declare within 14 days after the importation without reasonableexcuse is liable to a fine of HK$1,000 upon summary conviction and HK$100 in respect ofevery day such declaration has not been lodged. Furthermore, the Import and Export(Registration) Regulations also provide that any person who knowingly or recklessly lodgesany declaration with the Commissioner that is inaccurate in any material particular shall beliable to a fine of HK$10,000 upon summary conviction.

Telecommunications

The Telecommunications Ordinance (Chapter 106 of the Laws of Hong Kong) requiresthat every entity that establishes or maintains any means of telecommunications, or possesses,uses or deals with telecommunication apparatus in Hong Kong must obtain an appropriatelicence. Pursuant to section 8(1) of the Telecommunication Ordinance, no person shall in HongKong or on board any ship, aircraft or space object that is registered or licenced in Hong Kongdeal in the course of trade or business in apparatus or material for radiocommunications or inany component part of any such apparatus or in apparatus of any kind that generates and emitsradio waves whether or not the apparatus is intended, or capable of being used, forradiocommunications, unless with the appropriate licence granted or created by theCommunications Authority.

Non-compliance by a telecommunications licensee with the TelecommunicationsOrdinance or any of its subsidiary legislation may result in the revocation or suspension of therelevant licence.

Sale of Goods

The Sale of Goods Ordinance (Chapter 26 of the Laws of Hong Kong), which codifies thelaw in relation to the sale of goods, provides that:

(a) where there is a contract for sale of goods by description, there is an impliedcondition that the goods shall correspond with the description;

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(b) where the seller sells goods in the course of business, there is an implied conditionthat the goods supplied under the contract are of merchantable quality, except thatthere is no such condition:

(i) as regards defects specifically drawn to the buyer’s attention before thecontract is made;

(ii) if the buyer examines the goods before the contract is made, as regards defectswhich that examination ought to reveal;

(iii) if the contract is a contract for sale by sample, as regards defects which wouldhave been apparent on a reasonable examination of the sample; and

(c) where there is a contract for sale by sample, there is an implied condition that: (i)the bulk shall correspond with the sample in quality; (ii) the buyer shall have areasonable opportunity of comparing the bulk with the sample; and (iii) the goodsshall be free from any defect, rendering them unmerchantable, which would not beapparent on reasonable examination of the sample.

Subject to the Control of Exemption Clauses Ordinance (Chapter 71 of the Laws of HongKong), any right, duty or liability arising under a contract of sale of goods by implication oflaw may be negative or varied by express agreement or by the course of dealing between theparties or by usage if the usage is such as to bind both parties to the contract.

Business Registration

The Business Registration Ordinance (Chapter 310 of the Laws of Hong Kong) requiresevery entity that carries on a business in Hong Kong to apply for business registration withinone month from the date of commencement of its business and display a valid businessregistration certificate at the place of business.

Inland Revenue

The Inland Revenue Ordinance (Chapter 112 of the Laws of Hong Kong) administers theassessment and payment of various taxes. Under section 52 of the Inland Revenue Ordinance,an employer must give notice to the Commissioner of Inland Revenue if he ceases or is aboutto cease to employ in Hong Kong an individual who is or is likely to be chargeable to tax.Employer who fails to notify commits an offence and is liable to a maximum fine ofHK$10,000.

Employment

The rights and obligations of employees and employers in Hong Kong are regulated byEmployment Ordinance (Chapter 57 of the Laws of Hong Kong), which applies to everyemployee engaged under a contract of employment to an employer of such employee, and toa contract of employment between such employer and employee.

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The entitlements/protections afforded to an employee include year-end payments,maternity protection, rest days, protection against anti-union discrimination, severancepayment, long service payment, employment protection, sickness allowance, holidays with payand annual leave with pay.

Apart from the employees protection, the legislation also provides standard duties andobligations to be implied in contracts between employers and employees, as well as theformalities to be observed for employment contracts.

Mandatory Provident Fund Schemes

In Hong Kong, a system of privately managed, employment-related scheme (“Scheme”),was established to provide benefit to their members in local workforce upon their retirement.The Scheme came into operation in December 2000, and is managed by the MandatoryProvident Fund Schemes Authority.

Under the Scheme, all employees (and those who are self-employed) aged between 18 and65 years with monthly earning between HK$7,100 and HK$30,000 are obliged by law tocontribute 5% of their income to the Scheme; and those with monthly earning over HK$30,000are obliged to contribute HK$1,500 to the Scheme. In the first instance, a contribution of 5%of the total monthly income must be made to the Scheme by both the employee and employer,unless the income falls below the minimum threshold (in which case the employer alone isobliged to contribute). The employee and employer may, if they so prefer, make contributionin excess of the statutory minimum.

Under the Scheme, an employer has a duty to duly pay the mandatory contribution for itsown behalf and for the employees. An employer who, without reasonable excuse, fails to paycontribution (or failure to do so on time) commits a criminal offence, and is liable: (a) on firstconviction, to a fine at HK$100,000 and imprisonment for six months; (b) on subsequentoccasion, to a fine of HK$200,000 and imprisonment for twelve months.

Occupational and Health Safety

In Hong Kong, the occupational safety of employees is by ensuring the safety ofemployees, and to protect their health and welfare. Subsidiary legislations also set down basicrequirements for accident prevention, fire precaution, workplace environment control, hygieneat workplaces and first aid. Labour Department is responsible for enforcement of the relevantregulation.

Industrial Undertaking

The Factories and Industrial Undertaking Ordinance (Chapter 59 of the Laws of HongKong) (“FIUO”) provides for the safety and health protection of workers in an industrialundertaking. Under sections 2 and 6 of the FIUO, the proprietor of an industrial undertaking,

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which includes any factory or premises on site which machinery, tools, plants, gear andmaterials are carried on, must ensure the heath and safety of all persons employed by himworking at the industrial undertaking as far as reasonably practicable.

Under section 9 of the FIUO, any factory, mine, quarry, or any premises or place in whicha dangerous trade or scheduled trade is carried on are considered a notifiable workplace.Failure to notify the Commissioner of Labour of the particulars relating to the notifiableworkplace and industrial process or operation carried on thereon commits an offence, and isliable to a fine not exceeding HK$10,000.

LAWS AND REGULATIONS IN THE UNITED STATES

We do not currently have any subsidiaries incorporated under United States law, lease orown office, manufacturing or other business space in the United States or have employeesresident in the United States. We supply variety of products directly to customers in the U.S.or to customers who subsequently import the products into the U.S. Certain U.S. federal lawsand regulations may be applicable to our export of products directly into the United States. Inaddition, as noted below, certain U.S. federal and state laws and regulations may be applicableto our products that are ultimately sold in the United States; however, it is our customers whoare responsible for compliance with such laws and regulations. We currently have eight U.S.patents, three U.S. patent applications and seven U.S. trademark applications. The U.S. laws,rules and regulations with the most significant impact on our operations as currently conductedare described below. However, other U.S. federal, state and local laws may also impose certainobligations on us and affect our products sold within the United States.

Product liability laws

Product liability regulations are not generally promulgated under U.S. federal law, butrather state law in the United States, most of which are based on common law. Althoughdifferences do exist, the vast majority of states have adopted similar laws that share commonprinciples as discussed below. Parties involved in manufacturing, distributing or selling aproduct may be subject to liability for harm caused by a defect in that product. There are threetypes of product defects, namely, design defects, manufacturing defects and defects inmarketing. Product liability claims may be based on negligence, strict liability or breach ofwarranty. In a negligence claim, a defendant may be held liable for personal injury or propertydamage caused by the failure to use due care. Strict liability claims, however, do not dependon the degree of carefulness by the defendant. A defendant is liable when it is shown that aninjury (personal or to property) occurred as the result of a product’s defect. Breach of warrantyis also a form of strict liability in the sense that a showing of fault is not required. The plaintiffonly needs to establish the warranty was breached, regardless of how that came about.Companies that manufacture, distribute or sell a product in a particular state would fall underthe jurisdiction of such state’s product liability laws, whether the company’s jurisdiction ofincorporation or principal place of business is in that state, in another U.S. state or in anon-U.S. jurisdiction.

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Product safety laws

The law of product safety is regulatory law and is governed primarily by the ConsumerProduct Safety Commission (“CPSC”), an administrative agency of the United States federalgovernment that regulates certain classes of products sold to the public.

The Consumer Product Safety Improvement Act of 2008 (“CPSIA”) was passed byCongress in 2008. The CPSIA constituted a significant overhaul of consumer product safetylaws in the United States and was designed to enhance federal and state efforts to improve thesafety of all products imported into and distributed in the United States. Products imported intothe United States which fail to comply with CPSIA’s requirements are subject to confiscationand the importer and/or distributor in the United States is subject to civil penalties and fines,as well as possible criminal prosecution. However, while the CPSC works closely with U.S.custom agents, its jurisdiction does not extend beyond the territorial limits of the United States.

Under the CPSIA, a “general conformity certification” is required for any consumerproduct imported into the United States that is subject to a consumer product safety rule issuedunder the Consumer Product Safety Act (“CPSA”), or a similar rule, standard, regulation, orban issued by the CPSA or under any statute issued by the CPSC. The requirement applies toall manufacturers and importers of goods. Those parties must certify that their products complywith all applicable consumer product safety rules and similar rules, bans, standards, andregulations under any law administered by the CPSC. Such laws include the CPSA, FlammableFabrics Act, Federal Hazardous Substance Act, and Poison Prevention Act.

The CPSIA specifies that certification must be based on a “test of each product or areasonable testing program.” The certificate must accompany the product or shipment ofproducts, and a copy must be furnished to each distributor or retailer. The certification mustalso be furnished to the U.S. Customs and Border Protection (“CBP”). Also, if requested by theCPSC, a copy must be furnished to them. Where there is more than one manufacturer orimporter for a product, the party providing the certification should be the importer for importedproducts.

Federal Communications Commission regulations

The Federal Communications Commission (“FCC”) regulates all communications byradio, television, wire, satellite, and cable in the United States. The FCC’s mandate is toregulate private sector telecommunications in the public interest. It is done by establishingtechnical regulations for transmitters and other devices that generate or use radio frequency(“RF”) energy to minimise their potential for causing interference. The FCC establishesprocedures for products that use or emit radio frequency energy. Certain of our products aresubject to these regulations. However, it is our customers who are responsible for compliance.

Food and Drug Administration of Medical Devices

In the United States, the Food and Drug Administration (“FDA”) regulates medicaldevices under the Federal Food, Drug, and Cosmetic Act (“FDCA”) and its implementingregulations. FDA extensively regulates the research, development, testing, manufacture,

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quality control, approval, labelling, packaging, storage, record-keeping, promotion,advertising, distribution, post-approval monitoring and reporting, marketing, export, andimport of medical devices, such as the products that we and our subsidiaries are developing andcommercialising. Certain of our products are subject to these regulations. However, it is ourcustomers who are responsible for compliance.

Federal Trade Commission Act

The Federal Trade Commission Act (the “FTC Act”) broadly prohibits unfair or deceptiveacts or practices in or affecting commerce. The Federal Trade Commission (“FTC”) will finddeception if, either by the inclusion or exclusion of information, it is likely to misleadconsumers acting reasonably under the circumstances, or affect the consumer’s choice orconduct, thereby leading to injury. The FTC Act allowed the FTC to enact several related actsand regulations intended to prohibit unfair or deceptive acts or practices.

Import regulations and anti-dumping

Shipments of products to the United States are subject to customs inspection andcompliance. The CBP, which is part of the U.S. Department of Homeland Security, isresponsible for enforcing all laws and regulations on the importation of carriers andcommodities. An importer of goods and commodities to the United States is responsible toexercise reasonable care to confirm that all information declared to the CBP is complete andaccurate. Importers must prepare and file required customs entries for goods that they importor may retain a commercial broker licenced by CBP to file customs entries on their behalf.Importers must execute a power of attorney to appoint a customs broker as attorney-in-fact butremain liable to CBP for all information provided to CBP and for any duties owed to the USGovernment for those imports. The Importer of Record remains liable for any errors committedby the customs broker in connection with preparation of import paperwork or other handlingof imports on their behalf. In addition, an importer is required to obtain a customs bond froma surety company, which is a third-party guarantee for payment of duties and certain penaltiesassociated with violations of U.S. import laws. The majority of our products are sold anddelivered to the United States on an FOB or FCA basis, and for such sales we are not deemedto be the Importer of Record for those products. For FOB and FCA sales, the customer assumesresponsibility for importing the products into the U.S. rather than our Group. However, for twocustomers, we are the Importer of Record and therefore we assume the responsibility andliability for complying with U.S. import regulations. While we pay the necessary US tariffswhen importing goods into the U.S. for these customers, we are subsequently reimbursed forthe duties by those customers. We are not reimbursed for the expenses associated withimporting (i.e. surety bond expense, customs broker expense, or legal expenses).

The Customs and Border Protection agency requires all products imported into the UnitedStates to conform to certain “Country of Origin Marking” regulations. These regulationsrequire that every article of foreign origin (or its container) imported into the United States bemarked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article(or its container) will permit, in such a manner as to indicate to an ultimate purchaser in theUnited States, the English name of the country of origin of the article at the time ofimportation. The Company appropriately marks its products and has not received anyindication that its imports do not comply with these requirements.

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Import Tariffs

The United States imposes tariffs on imported goods from most countries, in accordancewith domestic policies and its international obligations. General tariff rates are established bythe legislature and set forth in the Harmonized Tariff Schedules of the United States (the“HTSUS”). Imported goods must also bear markings of the country of origin which identifywhere the product is made. The U.S. also implements various measures and countermeasuresin accordance with its international trade and treaty obligations. These can include embargoes,anti-dumping duties, countervailing duties, and other specific matters, which are administeredby the United States executive branch but are not contained in the HTSUS. Various regulationsor administrative actions allow for modification of these duties based on changedcircumstances or other policy criteria.

Section 301 of the Trade Act of 1974 authorises the President of the United States to takeall appropriate action, including retaliation, to obtain the removal of any act, policy, or practiceof a foreign government that violates an international trade agreement or is unjustified,unreasonable, or discriminatory, and that burdens or restricts U.S. commerce. The law does notrequire that the U.S. government wait until it receives authorisation from the World TradeOrganisation to take enforcement actions.

Tariff policies are unilateral and subject only to international agreements that curtail thecountry’s independence in assessing duties. If any of the countries in which we do businessincreases or decreases the tariffs assessed on either supplies we use or the products we exportto those countries, it could have an adverse impact on our revenues or profits, depending uponthe exact nature of the action.

In March 2018, the Office of the U.S. Trade Representative (“USTR”) released its Section301 report, which found that certain PRC policies result in harm to the U.S. economy. PresidentTrump signed a presidential memorandum outlining a series of remedies that his administrationwould take in response to these findings, including plans to:

• take action against the PRC at the World Trade Organization (WTO);

• increase restrictions on Chinese investment in sensitive U.S. technology; and

• increase tariffs on certain Chinese imports.

The United States implemented a series of duties detailed in four different lists. The firstlist (“List 1”) went into effect in July 2018 and imposed 25% tariffs on $34 billion worth ofgoods from the PRC. The second list (“List 2”) imposed 25% tariffs on $16 billion worth ofChinese products and went into effect in August 2018. The third list (“List 3”) went into effectin September 2018 and originally imposed a 10% tariff on $200 billion worth of goods fromthe PRC. The List 3 tariffs were increased to 25% in May 2019. The fourth list (“List 4A”) wentinto effect in September 2019 and originally imposed a 15% tariff on $112 billion worth ofgoods from the PRC. Another list (“List 4B”) was announced by the Trump Administration andwould have imposed a 15% tariff on $160 billion worth of goods from the PRC. As a result ofthe Phase One trade deal signed by the United States and the PRC in January 2020, the plansto increase tariffs on Lists 1-3 to 30% did not proceed, the List 4A tariffs were reduced from15% to 7.5%, and plans to implement the List 4B tariffs were tabled indefinitely. As at the

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Latest Practicable Date, the Biden Administration announced that it was reviewing the Section301 tariffs and the Phase One trade deal, but had not taken definitive action. The outcome ofthis review will determine if these policies will be continued, modified, or eliminated.

If products we manufacture or export to the United States are subject to the increasedtariffs, it could increase the cost to our U.S. customers and thus make our products lesscompetitive in the U.S. market. This could adversely impact our revenues from U.S. sales.

See “Business – United States Tariffs.”

The Export Administration Regulations

The Export Administration Regulations (“EAR”) are a set of U.S. regulations that controlthe export and re-export of commercial and dual-use products, software and technology, andare administered by the Bureau of Industry and Security. These regulations authorise theBureau of Industry and Security to maintain a list of names of certain foreign persons who maybe prohibited or restricted from receiving articles, technology and software subject to the EAR.The list of such persons includes businesses, research institutions, government and privateorganisations, individuals, and other types of legal persons. Inclusion on these lists makes thenamed parties subject to specific licence requirements for the export, re-export and/or transfer(in-country) of specified items. An example of such a list is in Supplement No. 4 to Part 744of the EAR (the “Entity List”). The U.S. government regularly makes additions and deletionsto the Entity List. When a company is added to the Entity List, it is generally barred frombuying U.S. technology and components without prior governmental approval. At present ourGroup does not conduct prohibited business with any entity subject to these types ofrestrictions under the EAR.

United States Tax Laws

If a foreign corporation is engaged in a trade or business within the United States, it issubject to U.S. corporate income tax (currently 35% maximum rate) on its income that iseffectively connected with its U.S. business. A branch profits tax (currently 30%) applies tosuch a corporation’s “dividend equivalent amount”. If the foreign corporation is eligible toclaim benefits under a double tax treaty with the United States, the foreign corporation will besubject to U.S. corporate income tax only with respect to profits attributable to a permanentestablishment in the United States. The branch profits tax rate may be reduced under the treaty.

Failure to pay U.S. income taxes results in interest charges and potential penalties inaddition to payment of the tax. A foreign corporation engaged in a U.S. trade or business isrequired annually to file a U.S. corporate income tax return. Failure to file a timely return couldresult in the denial of deductions. An annual return is also required to be filed by a foreigncorporation that claims that it does not have a U.S. permanent establishment.

U.S. state and local taxes may also be applicable to business activities in the UnitedStates.

Currently, our Group has determined it is not subject to income tax under U.S. federal orstate law.

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OUR HISTORY AND DEVELOPMENT

Overview


provider focused on customised IoT and jointly-developed products for demanding customers

across the world. Our Group’s history can be traced back to September 1997 when In-Tech

Electronics BVI and In-Tech Electronics HK were incorporated.

Prior to joining our Group in November 1997, Mr. Albert Ho, one of our Controlling

Shareholders, had already gained a number of years of experience in the EMS industry. As Mr.

Albert Ho was confident about the continuous growth in demand for electronics products, he

decided to start his own business. After Mr. Albert Ho presented his business plans and ideas

to Mr. Poon Chin Chung Philip (“Mr. Poon”), a long-time acquaintance of Mr. Albert Ho, Mr.

Poon was interested and agreed to support Mr. Albert Ho’s business venture by making a small

investment of HK$1.25 million and helping line up other individual investors to Mr. Albert

Ho’s new business venture, most of which were common acquaintances of Mr. Poon and Mr.

Albert Ho from the same church. In March 1998, Mr. Albert Ho, a few of his long term contacts

including Mr. Lee Lap Fai, Mr. Cheung Wing Hung, both our executive Directors, Mr. Ho Wun

Man Terrence, the younger brother of Mr. Albert Ho, and Ms. So Sau San, both our senior

management members, together with Mr. Poon and these investors, jointly invested in Source

Capital, which in turn set up In-Tech Electronics BVI and In-Tech Electronics HK to carry out

our Group’s business. Having considered that Mr. Poon was operating a company secretarial

and ancillary corporate support services business and was experienced in handling these

matters, due to the mutual trust between Mr. Albert Ho and Mr. Poon, and for the sake of easy

corporate management of Mr. Albert Ho’s business which was only at start-up stage at that

time, Mr. Albert Ho, Mr. Lee Lap Fai, Mr. Cheung Wing Hung, Mr. So Sau San and Mr. Ho

Wun Man Terrence requested Mr. Poon to hold in aggregate 56% shareholding interest in

Source Capital for and on their behalf, which was separate from Mr. Poon’s own shareholding

interest in Source Capital of 6.67%. Based on the mutual agreement and understanding between

Mr. Albert Ho, Mr. Lee Lap Fai, Mr. Cheung Wing Hung, Ms. So Sau San and Mr. Ho Wun Man

Terrence and Mr. Poon, while Mr. Poon was the registered shareholder of this 56% interest in

Source Capital, all shareholders’ rights (including but not limited to voting rights and dividend

rights) were enjoyed and exercisable by Mr. Albert Ho, Mr. Lee Lap Fai, Mr. Cheung Wing

Hung, Ms. So Sau San and Mr. Ho Wun Man Terrence individually. After years of operations

and development, as our Group’s business continued to grow, Mr. Albert Ho, Mr. Lee Lap Fai,

Mr. Cheung Wing Hung, Ms. So Sau San and Mr. Ho Wun Man Terrence considered it was

appropriate time to rationalise our Group’s shareholding structure and thus, in September 2010,

Mr. Poon transferred the 56% shareholding interests in Source Capital held under Mr. Poon’s

name back to them as follows: (i) 37.33% to Mr. Albert Ho; (ii) 12.00% to Mr. Lee Lap Fai;

(iii) 2.67% to Mr. Cheung Wing Hung; (iv) 2.67% to Mr. Ho Wun Man Terence; and (v) 1.33%

to Ms. So Sau San.

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Upon establishment of our Group, our engineers focused on the design of residential

cordless phones due to high demand for such products at the time and particularly across

Europe and the United States. We opened our first factory in Shenzhen, the PRC, in 1998 and

began shipping our products to the United States, the United Kingdom, Spain, Australia,

Finland, Sweden, Norway and Denmark.

Our Group has shifted its business focus from consumer electronic products to industrial

electronic products during the early 2000s. This was due to our management’s observations

that the manufacturing and development of consumer electronic products generally have a

relatively lower entry barrier thus high levels of competition and lower regulatory hurdles, in

addition to the short product life cycle. On the other hand, industrial electronic products tend

to involve sophisticated and demanding regulatory requirements and involve specifically

tailored engineering solutions, which require highly technical expertise and thus presents a

relatively higher barrier to potential competitors.

As at the Latest Practicable Date, we operated one self-owned manufacturing facility in

Dongguan, the PRC, and one self-owned and one leased manufacturing facilities in Penang,

Malaysia. For details of the principal business of our Group, please refer to the “Business”

section in this document.

Business Milestones

The following illustrates our major development milestones:

Year Event

1997 In-Tech Electronics HK was incorporated and our engineering team

in Hong Kong began designing residential cordless phones.

1998 We opened our first factory in Shenzhen, the PRC, and shipped our

first products to the United States, United Kingdom, Spain,

Australia, Finland, Sweden, Norway and Denmark.

2000 We started to develop and supply a leading European

telecommunications operator with a full range of cordless phones.

2002 We began production of automotive products under OEM

arrangements.

2003 We started the supply of ultra-low power ISM band smart metering

systems, a forerunner of IoT, to our customers.


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Year Event

2004 We obtained ISO 13485 accreditation for the design, manufacturingand sales of PCBAs and assemblies of medical electronic devices.

We obtained accreditation for TS 16949 for automotive qualitymanagement systems.

2006 We moved to a new manufacturing facility in Shenzhen, the PRCwith enhanced capabilities and increased capacity, and began thedesign and manufacture of marine and medical products under thejoint development model.

2009 We began to supply a renowned aerospace electronics providerunder OEM and became accreditation AS 9100 accredited to supportthe aerospace industry.

2012 We completed the ATEX 94/9/EC quality management audit andcertification to supply equipment for use in explosive atmospheres.

2013 We were the supplier to the Medical Design Excellence Awardwinner of the MedTech Industry’s Premier Award Program forTransformative Healthcare.

2014 We obtained Nadcap AC 7120 PCB assemblies accreditation.

We obtained ISO 17025 accreditation for Reliability Laboratory onEnvironmental Testing.

2015 We obtained Nadcap AC7121 electronic cable and harnessassemblies accreditation.

2018 We established product and product test development facilities inShenzhen for our R&D and business operations.

2019 We commenced our overseas business operations by establishing anew facility in Penang, Malaysia.

We established and commenced shipments from our self-ownedfactory in Dongguan, the PRC.

2022 We established and commenced shipment from our self-ownedfactory in Penang, Malaysia.

See “Business – Awards and Recognitions” in this document for details on the awards and

recognitions received by our Group.


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CORPORATE HISTORY

Our Company was incorporated in the Cayman Islands as an exempted company with

limited liability under the Companies Act on 16 August 2021, with an authorised share capital

of HK$380,000 divided into 38,000,000 Shares of nominal value of HK$0.01 each. Upon the

completion of the Reorganisation, the details of which are set out in “Reorganisation” in this

section below, our Company became the holding company of our Group.

Our Group conducts its businesses principally through operating subsidiaries. Set out

below is a brief corporate history of the subsidiaries of our Company.

Our Group Companies

As of the Latest Practicable Date, our Group was composed of the following companies

which principally affected the results, assets or liabilities of our Group:

In-Tech Electronics BVI

In-Tech Electronics BVI is a business company incorporated under the laws of the BVI

on 10 September 1997 and is authorised to issue a maximum of 40,000,000 shares of a single

class with a par value of HK$1.00 each. Upon its incorporation, (i) 18,750,000 ordinary shares

with a par value of HK$1.00 each were allotted and issued to Source Capital at a consideration

of HK$18,750,000; and (ii) 6,250,000 ordinary shares with a par value of HK$1.00 each were

allotted and issued to Ms. Lo Chui Yuk Michelle, at a consideration of HK$6,250,000. Ms. Lo

Chui Yuk Michelle’s family was a business contact of Mr. Poon. At the time when Mr. Poon

helped Mr. Albert Ho line up potential investors, details of which are set out in “Our History

and Development – Overview” above, Ms. Lo Chui Yuk Michelle was optimistic about the

prospect of our industry and thus decided to make an investment in Mr. Albert Ho’s new

business venture. On 15 July 2005, Ms. Lo Chui Yuk Michelle transferred 6,250,000 ordinary

shares of HK$1.00 each the capital of In-Tech Electronics BVI to Piggy Doggy, a company

ultimately owned by the CY Lo Family Trust at a consideration of HK$1.00. On 7 April 2017,

Piggy Doggy transferred 6,250,000 ordinary shares of HK$1.00 each in the capital of In-Tech

Electronics BVI to Dragon Focus Investments Limited, a company wholly-owned by Ms. Lo

Chui Yuk Michelle, at a consideration of HK$117,166,340.00. On 31 March 2020, Dragon

Focus Investments Limited transferred 6,250,000 ordinary shares of HK$1.00 each in the

capital of In-Tech Electronics BVI back to Piggy Doggy at a consideration of

HK$117,166,340.00. Each of the above transfers between Ms. Lo Chui Yuk Michelle, Piggy

Doggy and Dragon Focus Investments Limited were part of the family asset arrangements

relating to Ms. Lo Chui Yuk Michelle and the CY Lo Family Trust.

In connection with the preparation for the [REDACTED], on 23 September 2021, our

Company entered into a share swap agreement with Source Capital and Piggy Doggy, pursuant

to which our Company acquired 75% and 25% shareholding interests of In-Tech Electronics

BVI from Source Capital and Piggy Doggy, respectively, representing the entire issued share


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capital of In-Tech Electronics BVI. In consideration, our Company agreed to procure In-Tech

Holdings to credit the 7,711 and 2,289 nil-paid shares in its share capital held by Source

Capital and Piggy Doggy, respectively, as fully-paid.

During the Track Record Period and up to the Latest Practicable Date, In-Tech Electronics

BVI was primarily engaged in investment holding.

In-Tech Electronics HK

In-Tech Electronics HK is a limited company incorporated under the laws of Hong Kongon 19 September 1997 with a share capital of HK$10,000 divided into 10,000 shares ofHK$1.00 each. Upon incorporation, one share in the capital of In-Tech Electronics HK wasallotted and issued to each of P&B Corporate Services Limited and P&B Nominee ServicesLimited (as trustee for In-Tech Electronics BVI), at a consideration of HK$1.00 per share. Onthe same day, (i) P&B Corporate Services Limited transferred one share in the capital ofIn-Tech Electronics HK at a consideration of HK$1.00 to In-Tech Electronics BVI; and (ii)In-Tech Electronics HK allotted and issued 98 shares in its capital to In-Tech Electronics BVIat nil consideration.

On 1 April 1998, the share capital of In-Tech Electronics HK was increased fromHK$10,000 to HK$25,000,000 by the creation of an additional 24,990,000 shares of HK$1.00each. On the same day, In-Tech Electronics HK allotted and issued 24,999,900 shares in thecapital of In-Tech Electronics HK to In-Tech Electronics BVI at a consideration ofHK$24,999,900.00. On 5 September 2000, Gold Concord, as trustee for In-Tech ElectronicsBVI, acquired one share in the capital of In-Tech Electronics HK from P&B Nominee ServicesLimited at nil consideration. As part of the Reorganisation, on 23 September 2021, In-TechElectronics HK became an indirect wholly-owned subsidiary of our Company.

During the Track Record Period, In-Tech Electronics HK held ordinary shares in a privatecompany incorporated in England and Wales, which represented approximately 9.26% of theentire equity interest of that company as at 30 September 2021. On 30 September 2021, In-TechElectronics HK transferred all the shares it held to In-Tech Holdings at a consideration of£416,552, which was determined based on the fair value of the shares as at 15 September 2021as appraised by an independent valuer. Such consideration was settled by In-Tech Holdings byoffsetting the dividends declared by our Company on 26 August 2021 and payable to In-TechHoldings.

During the Track Record Period and up to the Latest Practicable Date, In-Tech ElectronicsHK was primarily engaged in the trading of electronic products.


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In-Tech Manufacturing

In-Tech Manufacturing is a business company incorporated under the laws of the BVI on19 December 1997 and is authorised to issue a maximum of 50,000 shares with a par value ofUS$1.00 each. On 7 January 1998, 50,000 shares of US$1.00 each were allotted and issued toIn-Tech Electronics BVI at par value. As part of the Reorganisation, on 23 September 2021,In-Tech Manufacturing became an indirect wholly-owned subsidiary of our Company.

During the Track Record Period and up to the Latest Practicable Date, In-TechManufacturing was primarily engaged in investment holding.

In-Tech Electronics Singapore

In-Tech Electronics Singapore is a private company limited by shares incorporated underthe laws of Singapore on 3 January 2020 with an initial issued and paid-up share capital of oneshare of US$1.00. On the date of incorporation, one share of US$1.00 in the capital of In-TechElectronics Singapore was allotted and issued to In-Tech Electronics BVI for a considerationof US$1.00. As part of the Reorganisation, on 17 September 2021, In-Tech Manufacturingacquired the entire issued share capital of In-Tech Electronics Singapore from In-TechElectronics BVI, at a nominal consideration of US$1.00 and In-Tech Electronics Singaporebecame an indirect wholly-owned subsidiary of our Company upon completion of theReorganisation.

During the Track Record Period and up to the Latest Practicable Date, In-Tech Electronics

Singapore was primarily engaged in investment holding.

In-Tech Enterprise HK

In-Tech Enterprise HK is a private company limited by shares incorporated under the laws

of Hong Kong on 10 July 2002 with a share capital of HK$10,000 divided into 10,000 shares

of HK$1.00 each. Upon incorporation, one share in the capital of In-Tech Enterprise HK was

allotted and issued to each of P&B Corporate Services Limited and P&B Nominee Services

Limited (as trustee for In-Tech Electronics BVI), at a consideration of HK$1.00 per share.

On 31 July 2002, In-Tech Electronics BVI acquired one share in the capital of In-Tech

Enterprise HK from the P&B Corporate Services Limited at a consideration of HK$1.00. On

the same day, In-Tech Enterprise HK allotted and issued 9,998 shares in its capital to In-Tech

Electronics BVI at a consideration of HK$9,998.00. As part of the Reorganisation, on 17

September 2021, In-Tech Electronics BVI transferred the 9,999 shares held by it and P&B

Nominee Services Limited transferred the one share held by it on trust for and on behalf of

In-Tech Electronics BVI, which in aggregate represent the entire issued share capital of

In-Tech Enterprise HK, to Ocean Target at a total consideration of HK$10,000.00. On 23

September 2021, In-Tech Enterprise HK became an indirect wholly-owned subsidiary of our

Company upon completion of the Reorganisation.


– 152 –


During the Track Record Period and up to the Latest Practicable Date, In-Tech Enterprise

HK was primarily engaged in investment holding.

In-Tech Investment

In-Tech Investment is a limited company incorporated under the laws of Hong Kong on

9 May 2001 with a share capital of HK$10,000 divided into 10,000 shares of HK$1.00 each.

Upon incorporation, two subscriber shares in the capital of In-Tech Investment were allotted

and issued to Gateway Secretarial Limited and Gateway Nominees Limited, respectively, at par

value. On 4 June 2001, the two subscriber shares were transferred to In-Tech Electronics BVI

and P&B Nominee Services Limited (as trustee for In-Tech Electronics BVI) at par value,

respectively. On the same day, In-Tech Investment allotted and issued 9,998 shares in its capital

to In-Tech Electronics BVI at a consideration of HK$9,998.00. As part of the Reorganisation,

on 17 September 2021, P&B Nominee Services Limited transferred the one share held by it on

trust for and on behalf of In-Tech Electronics BVI back to In-Tech Electronics BVI at par

value. On 23 September 2021, In-Tech Investment became an indirect wholly-owned

subsidiary of our Company upon completion of the Reorganisation.

During the Track Record Period and up to the Latest Practicable Date, In-Tech Investment

was primarily engaged in the provision of R&D services to our Group companies.

Gold Concord

Gold Concord is a business company incorporated under the laws of the BVI on 12 July

2000 and is authorised to issue a maximum of 50,000 shares of US$1.00 each. On 5 September

2000, one share of US$1.00 was allotted and issued to In-Tech Electronics BVI at par value.

As part of the Reorganisation, on 23 September 2021, Gold Concord became an indirect

wholly-owned subsidiary of our Company.

During the Track Record Period and up to the Latest Practicable Date, Gold Concord was

primarily engaged in investment holding.

Ocean Target

Ocean Target is a business company incorporated under the laws of the BVI on 10 July

2000 and is authorised to issue a maximum of 50,000 shares of US$1.00 each. On 5 September

2000, one share of US$1.00 was allotted and issued to In-Tech Electronics BVI at par value.

As part of the Reorganisation, on 23 September 2021, Ocean Target became an indirect

wholly-owned subsidiary of our Company.

During the Track Record Period and up to the Latest Practicable Date, Ocean Target was

primarily engaged in investment holding.


– 153 –


In-Tech Dongguan

In-Tech Dongguan was established in the PRC on 15 June 2015 with a registered capital

of US$45,000,000. Since its establishment, In-Tech Dongguan has been wholly owned by

In-Tech Electronics HK as to 100%. As part of the Reorganisation, on 23 September 2021,

In-Tech Dongguan became an indirect wholly-owned subsidiary of our Company.

During the Track Record Period and up to the Latest Practicable Date, In-Tech Dongguan

was primarily engaged in the production and sale of electronic products.

In-Tech Enterprise Malaysia

In-Tech Enterprise Malaysia is private company limited by shares incorporated under the

laws of Malaysia on 21 January 2020. Upon incorporation, one share of MYR1.00 in the capital

of In-Tech Enterprise Malaysia was allotted and issued to In-Tech Electronics Singapore for a

consideration of MYR1.00. On 7 December 2020, 9,000,000 shares of MYR1.00 each were

allotted and issued to In-Tech Electronics Singapore at a consideration of MYR9,000,000. As

part of the Reorganisation, on 23 September 2021, In-Tech Enterprise Malaysia became an

indirect wholly-owned subsidiary of our Company.

During the Track Record Period and up to the Latest Practicable Date, In-Tech Enterprise

Malaysia was primarily engaged in investment holding.

In-Tech Electronics Malaysia

In-Tech Electronics Malaysia is private company limited by shares incorporated under thelaws of Malaysia on 18 September 2018. Upon incorporation, one share of MYR1.00 in thecapital of In-Tech Electronics Malaysia was allotted and issued to In-Tech Electronics HK fora consideration of MYR1.00. On 29 March 2019, the share capital of In-Tech ElectronicsMalaysia was increased from MYR2,000,000 to MYR4,000,000 by the allotment and issuanceof 2,000,000 new shares of MYR1.00 each to In-Tech Electronics HK. On 22 June 2020, theshare capital of In-Tech Electronics Malaysia was further increased from MYR4,000,000 toMYR9,000,000 by the allotment and issuance of 5,000,000 new shares of MYR1.00 each toIn-Tech Electronics HK. On 7 December 2020, In-Tech Electronics HK transferred 9,000,000shares of MYR1.00 each in the capital of In-Tech Electronics Malaysia to In-Tech EnterpriseMalaysia at a consideration of MYR9,000,000. As part of the Reorganisation, on 23 September2021, In-Tech Electronics Malaysia became an indirect wholly-owned subsidiary of ourCompany.

During the Track Record Period and up to the Latest Practicable Date, In-Tech ElectronicsMalaysia was primarily engaged in the manufacturing and trading of electronic products.


– 154 –


In-Tech Shenzhen Science & Technology

In-Tech Shenzhen Science & Technology was established in the PRC on 5 January 2004with a registered capital of HK$6,000,000. Upon its establishment, In-Tech Shenzhen Science& Technology was wholly-owned by Bingo Technology Ltd., which is owned by In-TechElectronics BVI. On 28 September 2010, Bingo Technology Ltd. transferred its entire sharecapital in In-Tech Shenzhen Science & Technology to In-Tech Investment at a consideration ofHK$6,000,000, and subsequently dissolved on 15 April 2011. As part of the Reorganisation, on23 September 2021, In-Tech Shenzhen Science & Technology became an indirect wholly-owned subsidiary of our Company.

During the Track Record Period and up to the Latest Practicable Date, In-Tech ShenzhenScience & Technology was primarily engaged in the research and development of wireless,high-frequency and digital phone; research and development of software and hardwareapplication for computer, speaker, tablet and Bluetooth devices; sale of self-developedtechnical products and provision of technical consulting services.

In-Tech Shenzhen R&D

In-Tech Shenzhen R&D was established in the PRC on 20 January 2020 with a registeredcapital of HK$6,000,000. Since its establishment, In-Tech Shenzhen R&D has been whollyowned by In-Tech Investment. As part of the Reorganisation, on 23 September 2021, In-TechShenzhen R&D became an indirect wholly-owned subsidiary of our Company.

During the Track Record Period and up to the Latest Practicable Date, In-Tech ShenzhenR&D was primarily engaged in the design, development and sale of IoT logistics trackingsystem.


– 155 –


GROUP STRUCTURE BEFORE REORGANISATION

The corporate structure of the companies of our Group prior to the Reorganisation is set

out below:

In-Tech Electronics BVI(BVI)

75%

100%

25%

Mianma CompanyLimited(2)

(BVI)

Source Capital

(BVI)

15 shareholders(1)

The CY Lo Family Trust

Piggy Doggy(BVI)

100%(3) 100% 100%

100%

100%

100%

In-Tech Dongguan(PRC)

In-Tech EnterpriseMalaysia

(Malaysia)

In-Tech ElectronicsMalaysia

(Malaysia)

In-Tech Electronics HK(HK)

In-Tech Manufacturing(BVI)

In-Tech ElectronicsSingapore

(Singapore)

100% 100%

100%(4) 100% 100%

In-Tech ShenzhenScience & Technology

(PRC)

In-Tech Shenzhen R&D(PRC)

In-Tech Investment(HK)

Gold Concord(BVI)

Ocean Target (BVI)

In-Tech Enterprise HK(HK)

100%(4)

Notes:

(1) Source Capital was owned by (i) Mr. Albert Ho as to 37.33%; (ii) Mr. Lee Lap Fai as to 12.00%; (iii)Mr. Poon Chin Chung Philip as to 6.67%; (iv) Mr. Chan Shui Shing as to 6.66%; (v) Mr. Woo Jamesas to 6.66%; (vi) Mr. Tsui Kwan Keung Jackson as to 5.33%; (vii) Blue Avenue Holdings Ltd, asubsidiary of Accolade Investments Limited which is in turn wholly-owned by Mr. Tan Chuen Yan Paul,as to 4.00%; (viii) Mr. Cheung Wing Hung as to 4.00%; (ix) Ms. Chan Po On Ella as to 2.67%; (x) Mr.Chan Kwok Cheong as to 2.67%; (xi) Ms. Kong Hoy Wein as to 2.67%; (xii) Mr. Ho Wun Man Terenceas to 2.67%; (xiii) Mr. Law Kim Ching as to 2.67%; (xiv) Ms. So Sau San as to 2.67%; and (xv) Mr.Li Ping Chung as to 1.33%. Mr. Albert Ho, Mr. Lee Lap Fai and Mr. Cheung Wing Hung are ourexecutive Directors while Mr. Ho Wun Man Terence, the younger brother of Mr. Albert Ho, and Ms. SoSau San are the senior management members of our Group. The remaining shareholders are IndependentThird Parties.

(2) Mianma Company Limited is beneficially owned by the CY Lo Family Trust, a discretionary trustestablished by Ms. Lo Chui Yuk Michelle as the settlor and a long time acquaintance of Ms. Lo ChuiYuk Michelle as the trustee. The parents of Ms. Lo Chui Yuk Michelle are the life beneficiaries who areentitled to a monthly maintenance fee while the trustee is the final beneficiary of the CY Lo FamilyTrust.

(3) One share of In-Tech Electronics HK, representing 0.000004% of its entire issued share capital, washeld on trust by Gold Concord for and on behalf of In-Tech Electronics BVI.

(4) One share of each of In-Tech Enterprise HK and In-Tech Investment, representing 0.01% of theirrespective issued share capital, was held on trust by P&B Nominee Services Limited for and on behalfof In-Tech Electronics BVI.


– 156 –


REORGANISATION

For the purpose of the [REDACTED], we underwent the Reorganisation as a result ofwhich our Company became the holding company of our Group.

The Reorganisation involves the following major steps:

Incorporation of In-Tech Holdings

In-Tech Holdings is a BVI business company incorporated under the laws of the BVI on13 August 2021 and is authorised to issue a maximum of 50,000 shares of a single class withno par value. The business of In-Tech Holdings is investment holding.

Upon its incorporation on 13 August 2021, In-Tech Holdings allotted and issued 75nil-paid shares and 25 nil-paid shares to Source Capital and Piggy Doggy, respectively. As aresult, In-Tech Holdings became owned as to 75% by Source Capital and 25% by Piggy Doggy.

Incorporation of our Company

On 16 August 2021, our Company was incorporated in the Cayman Islands as anexempted company with limited liability. As at the date of its incorporation, the authorisedshare capital of our Company was HK$380,000 divided into 38,000,000 Shares with a parvalue of HK$0.01 each. Our Company is the vehicle for the proposed [REDACTED].

At the time of incorporation, one subscriber Share with a par value of HK$0.01 wasallotted and issued as fully-paid to an initial subscriber who is an Independent Third Party. Onthe same day, the said one fully-paid Share was transferred to In-Tech Holdings at par value.Upon completion of the said transfer, our Company became wholly-owned by In-TechHoldings.

Implementation of the Incentive Arrangement for Selected Personnel

Pursuant to the shareholders’ understanding and agreement around the time when ourGroup was established and a deed of confirmation executed by each of the Selected Personnel(as defined below) on 26 August 2021, it was agreed that each of Mr. Albert Ho, Mr. Lee LapFai, Mr. Cheung Wing Hung, Mr. Tsui Kwan Keung Jackson, Ms. So Sau San, Mr. Ho Wun ManTerence, Ms. Wong Sui Ling Karen, Mr. Wong Hop To, Mr. Tang Ching Yu, Mr. Cheung WingKin, Mr. Cheng Chit Ming, Mr. Tso Hum Ying and Mr. Yeung Wai Keung (the “SelectedPersonnel”) was given an annual management bonus (the “Management Bonuses”) which wascalculated based on 10% of our Group’s net profits after tax per audited accounts of theparticular year and after netting off any accumulated losses per audited accounts from previousyears, as part of their remuneration and upon a successful [REDACTED] of our Company, theentitlement to Management Bonus will be converted into and substituted by a pre-agreedpercentage of interest in our Company before the [REDACTED] (the “IncentiveArrangement”).


– 157 –


To implement the Incentive Arrangement, on 26 August 2021:

(a) our Company allotted and issued 9,928 Shares to In-Tech Holdings at par value;

(b) our Company allotted and issued (i) 22 new Shares to Ms. Wong Sui Ling Karen; (ii)11 new Shares to Mr. Wong Hop To; (iii) 11 new Shares to Mr. Tang Ching Yu; (iv)11 new Shares to Mr. Cheung Wing Kin; (v) 7 new Shares to Mr. Cheng Chit Ming;(vi) 4 new Shares to Mr. Tso Hum Ying; and (vii) 5 new Shares to Mr. Yeung WaiKeung, all of whom are employees of the Group (the “Individual Employees”), atpar value;

(c) Source Capital allotted and issued a total of 18,675 additional shares to itsshareholders on a pro rata basis at par value (the “Additional Allotment”). Uponcompletion of the Additional Allotment, the total issued shares of Source Capitalwere 18,750 shares; and

(d) In-Tech Holdings allotted and issued 7,636 nil-paid shares and 2,264 nil-paid sharesto Source Capital and Piggy Doggy, respectively, and Source Capital in turn furtherallotted and issued a total of 2,305 new shares to six existing shareholders, whichcomprised (i) 1,250 new shares to Mr. Albert Ho; (ii) 105 new shares to Mr. Ho WunMan Terence; (iii) 555 new shares to Mr. Lee Lap Fai; (iv) 90 new shares to Ms. SoSau San; (v) 155 new shares to Mr. Cheung Wing Hung; and (vi) 150 new shares toMr. Tsui Kwan Keung Jackson, all at par value. Mr. Albert Ho, Mr. Lee Lap Fai andMr. Cheung Wing Hung are executive Directors. Mr. Ho Wun Man Terence, theyounger brother of Mr. Albert Ho, and Ms. So Sau San are senior managementmembers of our Group. Mr. Albert Ho, Mr. Lee Lap Fai, Mr. Cheung Wing Hung,Mr. Ho Wun Man Terence and Ms. So Sau San are also regarded as a group ofControlling Shareholders of our Company.

The shareholding structure and changes of Source Capital upon completion of theaforesaid series of allotment and issuance are set out below:

Name of shareholder

Originalnumber of

shares held

Number ofshares held

after theAdditionalAllotment


after theimplementationof the Incentive

Arrangement

Approximateshareholding

before theimplementationof the Incentive

Arrangement

Approximateshareholding uponcompletion of the

implementation ofthe IncentiveArrangement

Mr. Albert Ho 28 7,000 8,250 37.33% 39.18%Mr. Lee Lap Fai 9 2,250 2,805 12.00% 13.32%Mr. Cheung Wing Hung 3 750 905 4.00% 4.30%Mr. Tsui Kwan Keung Jackson 4 1,000 1,150 5.33% 5.46%Ms. So Sau San 2 500 590 2.67% 2.80%Mr. Ho Wun Man Terence 2 500 605 2.67% 2.87%Ms. Kong Hoy Wein 2 500 500 2.67% 2.37%


– 158 –


Name of shareholder

Originalnumber of

shares held


after theAdditionalAllotment


after theimplementationof the Incentive

Arrangement

Approximateshareholding

before theimplementationof the Incentive

Arrangement

Approximateshareholding uponcompletion of the

implementation ofthe IncentiveArrangement

Mr. Law Kim Ching 2 500 500 2.67% 2.37%Mr. Li Ping Chung 1 250 250 1.33% 1.19%Mr. Poon Chin Chung Philip 5 1,250 1,250 6.67% 5.94%Mr. Chan Shui Shing 5 1,250 1,250 6.67% 5.94%Mr. Woo James 5 1,250 1,250 6.67% 5.94%Mr. Chan Kwok Cheong 2 500 500 2.67% 2.37%Ms. Chan Po On Ella 2 500 500 2.67% 2.37%Blue Avenue Holdings Limited 3 750 750 4.00% 3.56%

Total 75 18,750 21,055 100.00% 100.00%

Upon completion of the aforesaid series of allotment and issuance, our Company became

owned as to approximately 99.29% by In-Tech Holdings and 0.71% collectively by the

Individual Employees and In-Tech Holdings became owned as to 77.11% and 22.89% by

Source Capital and Piggy Doggy, respectively.

Restructuring of Subsidiaries

On 17 September 2021, In-Tech Manufacturing acquired the entire issued share capital of

In-Tech Electronics Singapore from In-Tech Electronics BVI, at a nominal consideration of

US$1.00. Upon completion of the said intra-group share transfer, In-Tech Electronics

Singapore became wholly-owned by In-Tech Manufacturing.

On 17 September 2021, In-Tech Electronics BVI transferred the 9,999 shares held by it

and P&B Nominee Services Limited transferred the one share held by it on trust for and on

behalf of In-Tech Electronics BVI, which in aggregate represent the entire issued share capital

of In-Tech Enterprise HK, to Ocean Target at a total consideration of HK$10,000.00. Upon

completion of the said intra-group share transfer, In-Tech Enterprise HK became wholly-owned

by Ocean Target.

On 17 September 2021, P&B Nominee Services Limited transferred the one share of

In-Tech Investment held by it on trust for and on behalf of In-Tech Electronics BVI back to

In-Tech Electronics BVI at par value. Upon unwinding the trust, In-Tech Investment became

100% legally and beneficially owned by In-Tech Electronics BVI.


– 159 –


Share Swap Arrangement

On 23 September 2021, our Company entered into a share swap agreement with Source

Capital and Piggy Doggy, pursuant to which our Company acquired 75% and 25% shareholding

interests of In-Tech Electronics BVI from Source Capital and Piggy Doggy, respectively,

representing the entire issued share capital of In-Tech Electronics BVI. In consideration, our

Company agreed to procure In-Tech Holdings to credit the 7,711 and 2,289 nil-paid shares in

its share capital held by Source Capital and Piggy Doggy, respectively, as fully-paid.

Upon completion of the said share swap arrangement, In-Tech Electronics BVI became a

directly wholly-owned subsidiary of our Company.

GROUP STRUCTURE AFTER REORGANISATION BUT BEFORE THE [REDACTED]

The structure of our Group immediately after completion of the Reorganisation but before

the [REDACTED] is set out below:

In-Tech Holdings(BVI)

Our Company(Cayman Islands)


Individual Employees(3)

77.11%

100%

100%(4) 100%

100%

100%

100%

100% 100%100%

100% 100% 100%

99.29% 0.71%



(Malaysia)


(PRC)



(Malaysia)




(Singapore)


Gold Concord(BVI)

Ocean Target(BVI)

100%


Source Capital

(BVI)

15 shareholders(1)

100%

22.89%


(BVI)


Piggy Doggy(BVI)


– 160 –


Notes:

(1) Source Capital is owned by (i) Mr. Albert Ho as to 39.18%; (ii) Mr. Lee Lap Fai as to 13.32%; (iii) Mr.Poon Chin Chung Philip as to 5.94%; (iv) Mr. Chan Shui Shing as to 5.94%; (v) Mr. Woo James as to5.94%; (vi) Mr. Tsui Kwan Keung Jackson as to 5.46%; (vii) Blue Avenue Holdings Ltd, a subsidiaryof Accolade Investments Limited which is in turn wholly-owned by Mr. Tan Chuen Yan Paul, as to3.56%; (viii) Mr. Cheung Wing Hung as to 4.30%; (ix) Ms. Chan Po On Ella as to 2.37%; (x) Mr. ChanKwok Cheong as to 2.37%; (xi) Ms. Kong Hoy Wein as to 2.37%; (xii) Mr. Ho Wun Man Terence asto 2.87%; (xiii) Mr. Law Kim Ching as to 2.37%; (xiv) Ms. So Sau San as to 2.80%; and (xv) Mr. LiPing Chung as to 1.19%. Mr. Albert Ho, Mr. Lee Lap Fai and Mr. Cheung Wing Hung are our executiveDirectors while Mr. Ho Wun Man Terence, the younger brother of Mr. Albert Ho, and Ms. So Sau Sanare the senior management members of our Group. The remaining shareholders are Independent ThirdParties.


(3) Individual Employees refer to (i) Ms. Wong Sui Ling Karen holding 0.22%; (ii) Mr. Wong Hop Toholding 0.11%; (iii) Mr. Tang Ching Yu holding 0.11%; (iv) Mr. Cheung Wing Kin holding 0.11%; (v)Mr. Cheng Chit Ming holding 0.07%; (vi) Mr. Tso Hum Ying holding 0.04%; and (vii) Mr. Yeung WaiKeung holding 0.05% shareholding interest in our Company. Ms. Wong Sui Ling Karen is an executiveDirector and the other six employees are Independent Third Parties.


CAPITALISATION ISSUE AND THE [REDACTED]

On [●] 2022, the authorised share capital of our Company was increased from

HK$380,000 to HK$[40,000,000]. Conditional upon the crediting of the share premium

account of our Company as a result of the allotment and issue of the [REDACTED] pursuant

to the [REDACTED], our Directors are authorised to capitalise a sum of HK$[REDACTED]

and apply such sum in paying up in full at par a total of [REDACTED] Shares for allotment

and issue to the Shareholders immediately prior to the issue of Shares under the

[REDACTED].


– 161 –


GROUP STRUCTURE UPON THE [REDACTED]

The structure of our Group immediately after the completion of the Capitalisation Issue

and the [REDACTED] (assuming the [REDACTED] is not exercised and without taking into

account any Shares which may be issued upon the exercise of any option which may be granted

under the [REDACTED] Share Option Scheme and the Share Option Scheme) is set out below:

In-Tech Holdings(BVI)

Our Company(Cayman Islands)


Individual Employees(3)

77.11%

100%

100%(4) 100%

100%

100%

100%

100% 100%100%

100% 100% 100%

[REDACTED]% [REDACTED]%

Public Shareholders

[REDACTED]%



(Malaysia)


(PRC)



(Malaysia)




(Singapore)


Gold Concord(BVI)

Ocean Target(BVI)

100%


Source Capital

(BVI)

15 shareholders(1)

100%

22.89%


(BVI)


Piggy Doggy(BVI)

Notes:

(1) Source Capital is owned by (i) Mr. Albert Ho as to 39.18%; (ii) Mr. Lee Lap Fai as to 13.32%; (iii) Mr.Poon Chin Chung Philip as to 5.94%; (iv) Mr. Chan Shui Shing as to 5.94%; (v) Mr. Woo James as to5.94%; (vi) Mr. Tsui Kwan Keung Jackson as to 5.46%; (vii) Blue Avenue Holdings Ltd, a subsidiaryof Accolade Investments Limited which is in turn wholly-owned by Mr. Tan Chuen Yan Paul, as to3.56%; (viii) Mr. Cheung Wing Hung as to 4.30%; (ix) Ms. Chan Po On Ella as to 2.37%; (x) Mr. ChanKwok Cheong as to 2.37%; (xi) Ms. Kong Hoy Wein as to 2.37%; (xii) Mr. Ho Wun Man Terence asto 2.87%; (xiii) Mr. Law Kim Ching as to 2.37%; (xiv) Ms. So Sau San as to 2.80%; and (xv) Mr. LiPing Chung as to 1.19%. Mr. Albert Ho, Mr. Lee Lap Fai and Mr. Cheung Wing Hung are our executiveDirectors while Mr. Ho Wun Man Terence, the younger brother of Mr. Albert Ho, and Ms. So Sau Sanare the senior management members of our Group. The remaining shareholders are Independent ThirdParties.


– 162 –



(3) Individual Employees refer to (i) Ms. Wong Sui Ling Karen holding [REDACTED]%; (ii) Mr. WongHop To holding [REDACTED]%; (iii) Mr. Tang Ching Yu holding [REDACTED]%; (iv) Mr. CheungWing Kin holding [REDACTED]%; (v) Mr. Cheng Chit Ming holding [REDACTED]%; (vi) Mr. TsoHum Ying holding [REDACTED]%; and (vii) Mr. Yeung Wai Keung holding [REDACTED]%shareholding interest in our Company. Ms. Wong Sui Ling Karen is an executive Director and the othersix employees are Independent Third Parties.



– 163 –


OVERVIEW


provider focused on providing customised IoT and jointly-developed products for demanding

customers across the world. As an electronic manufacturing services (“EMS”) provider, we

provide customers integrated product design and development, manufacturing and validation

solutions for electronic products and sub-assemblies. We work in close collaboration with our

customers at all stages of the product cycle to deliver customised end-to-end solutions for

complicated projects.

Our services and products. We offer a comprehensive range of services, including initial

product specification and development, hardware and mechanical product design, selection of

components, sub-supplier management, performance testing of parts and products and product

certification. In particular, our on-site accredited laboratory in Dongguan allows for real time

product and part verification and validation and environmental testing under “one roof” and

can help increase process efficiency and minimise our customers’ time to market.

Our clients typically engage us on a Joint Development or OEM basis. For Joint

Development projects, we engage in hardware, mechanical and/or software design for the

project in conjunction with the customer’s in-house design team, or take a major role in product

and component validation services. For OEM projects, the customers provide the key elements

of hardware, mechanical and software design for the project and lead the validation activities.


sub-assemblies and assembled PCBs, in response to specific customer requests for customers

in a variety of different industries. Examples of products we produced during the Track Record

Period include power management systems for commercial aircraft, marine navigational

systems, intelligent driver surveillance systems, ultra low power IoT utility meters and IoT

devices and monitoring systems for elderly persons.

Our R&D and core technical competencies. We are often actively involved in the early

stages of product conceptualisation and development for our customers. As such, research and

development capabilities are key to our success. In the context of our business model and

consistent with other EMS providers, R&D does not generally relate to the invention of new

technologies, but primarily to skilful application of the latest technologies in the pursuit of

product engineering, development and approval of new products, development of new product

concepts and other product engineering activities such as the development of specific test and

production processes. As at 31 March 2022, we had over 300 engineers carrying out our R&D

activities. These engineers cover a variety of relevant fields, including electrical hardware

engineering, software engineering, mechanical engineering and information technology.

According to the Frost & Sullivan Report, our ratio of R&D expenses to revenue (5.3%, 4.2%

and 4.4% in FY2020, FY2021 and FY2022, respectively) indicates a higher focus on R&D and

new product development capabilities than other leading EMS providers in the specialised

electronics segment, who generally have R&D expenses to revenue ratios ranging from 1% to

2%.

BUSINESS

– 164 –


We have developed particular proficiency in the development and manufacture of certain

key technologies. In particular, we believe our in-house development of IoT solutions provides

us with a competitive edge in this growing market, particularly in niche product segment areas

which require real-time and accurate information. We have the ability to develop and to

demonstrate total solutions for new innovative IoT applications to potential customers. In

FY2020, FY2021 and FY2022, revenue from IoT devices and modules represented

approximately 39.8%, 58.6% and 59.4%, respectively, of our total revenue for the year, and

revenue we derived from the smart module and smart devices industry segment, all of which

comes from IoT projects, represented 18.7%, 35.8% and 30.4%, respectively, of our total

revenue for the year. We plan to continue to invest further in our IoT capabilities to facilitate

growth of revenue from the sector. As at the Latest Practicable Date, we had already developed

and patented a smart monitoring system for industrial containers which allows for the real time

monitoring of the location, temperature, orientation and status (open/closed, full/empty) of

such containers, provides alerts when they are opened, overheated, over-chilled or expired and

facilitates automated content reordering. We have commenced discussions with potential

customers for the eventual deployment of such a system and are engaged in on-going trials with

such potential customers. Potential uses of our system by customers with whom we have

conducted trials include monitoring the opening and closing of hatches on marine vessels and

using our web portal tracking system to monitor the location and status of packages and boats.

As of the Latest Practicable Date, no commercial agreements in relation to this system had

been signed. We also possess specific experience in designing, verifying and producing rugged

products that need to be sealed from and operate reliably in harsh external environments,

including products that require waterproofing and protection from dust and other solid objects

or which will operate in conditions of extreme temperatures and/or humidity.

Our customers. We have built strong, long-term relationships with reputable multi-

national companies, including global leaders in a wide range of industries, including the

automotive, medical, aerospace, marine, insurance, banking and wireless communications

network industries. We focus on customers in industries that are highly-regulated and require

a high degree of specialised technical knowledge and target customers who are undertaking

challenging tasks that EMS companies may not have the capability, or patience, to support.

Through providing end-to-end solutions and engineering services, we have developed strong

working relations with numerous teams throughout our customers’ company structure. Our

customers also typically make significant investments in time and resources to approve our

production processes and product-specific assembly and production test solutions. As a result,

we have generally retained our customers and have continued to work with them on an

on-going basis. Over the Track Record Period, 85.3% of our total revenue came from customers

with whom we had worked for over 10 years. During the Track Record Period, we shipped our

products to customers throughout the world, primarily including North America, Europe and

Australia.

Our production facilities. As at the Latest Practicable Date, we had production plants in

two locations: one plant in Dongguan, the PRC and two plants in Penang, Malaysia. Our

production facilities in Dongguan and Penang are fully-functional and are equipped with a

wide range of advanced automated machinery and equipment for our production processes,

BUSINESS

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including SMT assembly, wave soldering and aqueous cleaning, in addition to testing and

laboratory capabilities. We also have offices and a workshop in Hong Kong providing product

refurbishment and repair services. We have office premises located in Xili, Shenzhen, the PRC,

which acts as our operations centre to carry out a range of services, including R&D services,

engineering, purchasing, sales and marketing, IT, finance and human resources management.

Our financial results. The Track Record Period was a period of challenges and change for

us, particularly FY2020 in which we migrated our operations to new production facilities in

Dongguan and Penang and in which the outbreak of COVID-19 in the last quarter caused

closures of our production facilities and delays in receipt of supplies and shipment of products.

Despite this, we managed to grow our operations over the period. Our revenue for FY2020,

FY2021 and FY2022 was HK$1,395.1 million, HK$1,801.7 million and HK$2,088.8 million,

respectively. The following table sets forth a breakdown of our revenue from IoT and non-IoT

products by our customers’ industry sector for the years indicated:


Transportation(1)

IoT 25,922 1.9 33,173 1.8 56,122 2.7Non-IoT 457,723 32.8 359,312 19.9 429,289 20.6

483,645 392,485 485,411

Medical, assisted living,and wellness

IoT 164,175 11.8 185,278 10.3 352,256 16.9Non-IoT 190,675 13.7 221,677 12.3 239,046 11.4

354,850 406,955 591,302

Smart module and smart deviceIoT 260,576 18.7 644,104 35.8 635,779 30.4Non-IoT – 0.0 – 0.0 – 0.0

260,576 644,104 635,779

Communication and postalIoT 102,761 7.4 189,786 10.5 192,539 9.2Non-IoT 112,957 8.1 103,704 5.8 125,208 6.0

215,718 293,490 317,747

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Others(2)

IoT 2,135 0.2 3,074 0.2 4,255 0.2Non-IoT 78,139 5.6 61,563 3.4 54,281 2.6

80,273 64,637 58,536

TotalIoT 555,568 39.8 1,055,415 58.6 1,240,951 59.4Non-IoT 839,493 60.2 746,255 41.4 847,824 40.6

1,395,061 1,801,670 2,088,775

Notes:

1. Primarily includes the aerospace, marine, and automotive industries.

2. Others primarily included other products, sub-assemblies and PCBAs for industrial applications not

included in the above, such as commercial X-Ray machines and audio/video streaming equipment.

The following table sets forth a breakdown of our gross profit and gross profit marginfrom IoT and non-IoT products for the years indicated:

FY2020 FY2021 FY2022

Grossprofit

Grossprofit

marginGrossprofit

Grossprofit

marginGrossprofit

Grossprofit

marginHK$’000 % HK$’000 % HK$’000 %

IoT 97,445 17.5 155,402 14.7 138,391 11.2Non-IoT 165,152 19.7 138,834 18.6 196,171 23.1

Total 262,597 18.8 294,236 16.3 334,562 16.0

The following table sets forth a breakdown of our revenue by business model for the yearsindicated:



Total 1,395,061 100.0 1,801,670 100.0 2,088,775 100.0

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OUR COMPETITIVE STRENGTHS

We believe the following competitive strengths contribute to our success and differentiate

us from our competitors:

Comprehensive solutions spanning the development, testing, verification andmanufacturing stages of complex projects for highly-regulated industries

Our business model is to work in close collaboration with our customers at all stages of

the product cycle to deliver customised end-to-end solutions for complicated projects by

offering our customers specifically tailored engineering services to meet their individual needs,

all provided under our “one roof” policy in order to minimise our customers’ time to market.

These services include:

• product design services including mechanical, electronic hardware, software, test

equipment and product packaging, which are suitable for the specialised and

demanding industries we target, where specific knowledge of the stringent

regulatory requirements is needed;

• early sub-supplier engagement and management, including tooling bring up;

• product validation and environmental testing in our on-site ISO 17025 accredited

laboratory;

• pilot production services, including production of early prototypes and proto builds

of new products in order to validate components, processes, and product designs;

and

• in-house product-specific production assembly fixture and test equipment design

and optimisation services.

The extent of the services we provide for any individual project depends on the needs of

our customer. For customers with fewer internal resources, we can play a larger role in the

project creation and design process. For more sophisticated customers with strong internal

design departments and greater in-house resources, we typically focus on providing supply

chain management services, test equipment engineering services and component or product

verification services as part of our value-added approach.

Our ability to deliver specialised electronics development and manufacturing solutions

for technically challenging projects and adapt to changing technologies is supported by our

research and development capabilities and our engineering team of over 300 engineers as at

31 March 2022. As part of our offering to our customers, our R&D team is required to adapt

and integrate various technologies, such as the latest available high speed multi-core

processors, GPS sensors and antennas, movement sensors, Bluetooth and Wifi, into bespoke

products in accordance with our customers’ market requirements and specifications. We are

often actively involved in the early stages of product conceptualisation and development for

our customers. As such, our R&D capabilities are critical to our success. In the context of our

business model and consistent with other EMS providers, R&D does not generally relate to the

invention of new technologies, but primarily to skilful application of the latest technologies in

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the pursuit of product engineering, development and approval of new products, development

of new product concepts and other product engineering activities such as the development of

specific test and production processes. Our engineers have significant experience deploying a

wide range of radio interconnectivity technologies, singularly or in combination, and

integrating a wide range of sensors into the IoT systems and devices we have produced. In

order to effectively partner with our customers to develop innovative solutions using the most

applicable technologies, our engineers are able to demonstrate total solutions for new

innovative IoT applications to potential customers. We have already designed and integrated

sensors within rugged industrial-ready devices, established the cloud capability to receive and

analyse the collected data, and provided customised end user visualisation applications that

also enable customers to set control parameters. This enables our customers to have a rapid

time to market and early proof of concept utilising field-ready demonstration devices.




electronics segment, who generally have R&D expenses to revenue ratios ranging from 1%

to 2%.

In addition to technical expertise, our multi-disciplinary engineering-led teams work

closely with customers to develop a deep understanding of the standards that underpin their

brands and are thus able to provide specifically-tailored products, manufacturing processes and

test solutions. The close proximity of our development centre, production facilities and our

local supply chain partners to our onsite test and validation facilities provides an ideal

environment to proactively deliver solutions and reduce product development cycle times.

We believe these competitive strengths, including:

• our “one roof” policy of providing a wide range of in-house services which can be

adapted and tailored to our customer’s demands;

• high spend on R&D as compared to our competitors;

• in-house product and component validation services, with solutions for any issues

found provided by our engineering team; and

• broad peer-to-peer engagement with our customers, providing high service levels

across multiple touch points, especially within our project teams;

allow us to remain competitive and take a proactive, full-service approach to providing

customers, particularly those in highly-regulated industries requiring specialised technical

knowledge, with customised solutions, freeing up their own engineering capabilities to focus

on higher-level product development.

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The above strengths are particularly important for the highly-regulated industries we

serve, which, according to the Frost & Sullivan Report, require:

• a high degree of specific knowledge;

• an awareness of relevant compliance and regulatory needs;

• patience and attention to detail to see through longer product development and

approval cycles – for which other EMS providers may not have the ability or the

willingness to provide.

We believe our significant experience in such industries and full-service approach provide

us particular advantages in competing for projects. In addition, having worked and specialised

in the design of products and productions systems for clients in such industries from many

years, our teams have developed an instructive understanding of the specific relevant

regulatory requirements and the importance of regulatory compliance.

For instance, our experience working with Customer C, a leading marine navigation

supplier, is one example of our ability and willingness to work closely with customers to

develop tailor-made solutions. While working to establish a strong partnership with this

customer, our engineers visited the customer’s test facilities and acquainted themselves with

the environment in which products we created would need to function by spending a day on

their test boat and observing conditions and requirements. We then committed to replicate the

same test capabilities in our own factory so as to reduce the validation cycle time following a

proto build. We constructed a specific building to house an IPx6 water ingress tester with

associated turntable and water management system and invested in UV material testers and salt

mist chambers and upgraded our vibration facilities to replicate the specific profile needed for

the customer’s reliability testing. All this was done so as to ensure the product produced could

survive in the wet salt environment close to the polar regions or on the equator without

degradation. For further discussion on the competing criteria we need to balance when

developing marine electronics products see “– Research and Development – Our R&D

Activities”.

Our flexible IT system, which we adopt in-house, is another example of how we are able

to customise our processes to provide individual customers the specific services and

information they need to serve their demanding business and compliance needs. This system

allows us to provide customised tracking processes, documenting key aspects of the

development and manufacturing process, from the materials, components and parts to

sub-assemblies to the final products. It can also be adapted or customised for changes in

regulations and specific customer needs. For example, the aerospace and medical industries

have rigorous tracking requirements, above and beyond those of other industries, which we can

accommodate. In other examples, the system is able to receive specific customer configurations

needed for a specific product and we then provide direct shipping to our customers’ end users.

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For some customers, the system captures product performance data during production and this

is uploaded to the customers’ systems for review, helping to facilitate efficient customer

communication and increase speed to market.

Strong long-term relationships with customers spanning multiple key specialised industrysectors

Our mission is to provide high quality and reliable products with high standards of

industrial compliance and product robustness and to be a “one-stop-shop” provider of

electronics development and engineering services for demanding industrial customers seeking

long-term partners to help accelerate their time to market for new products.

For over 20 years, we have built strong relationships with reputable multi-national

companies, including global leaders in a wide range of industries, including the automotive,

medical, aerospace, marine, insurance, banking and wireless communications network

industries. We focus on industries that are highly-regulated and require a high degree of

specialised technical knowledge in which we believe our full service approach and relevant

experience and capabilities are more valued and have resulted in longer-term relationships with

our customers. We also typically target customers who are undertaking challenging tasks that

EMS companies may not have the capability, or patience, to support. During the Track Record

Period, we shipped our products to customers throughout the world, primarily including North

America, Europe and Australia.

Through providing end-to-end solutions and engineering services, we have built strong

working relations with numerous teams throughout our customers’ company structure,

including business leaders, project leads, and supply and design teams and have developed

deep understanding of significant aspects of their business, including their brand needs,

confidentiality requirements, detailed product requirements, quality and standards, internal

processes and priorities. This intimate product knowledge paired with our strong engineering

capabilities enable our customers to shorten their time to market and help us to win repeat

business, while gaining stickiness with our customer base. Moreover, our customers typically

make significant investments in time and resources to approve our production processes and

the product-specific assembly and production test solutions. Most of these solutions have lead

times and commission periods of multiple months and are often unique and custom-built.

As a result of these factors, we have generally retained our customers and have continued

to work with them on an on-going basis. Over the Track Record Period, 85.3% of our total

revenue came from customers with whom we had worked for over 10 years. Moreover,

although our contracts with customers do not contain exclusivity terms, as is common practice

in the industry, as a matter of practice, we tend to be the sole provider for our customers of the

specific products we manufacture for them. During the Track Record Period and up to the

Latest Practicable Date, to our knowledge, none of the specific products we produced and

supplied to our customers have also been sourced by such customers from other companies.

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Our current customer base represents a healthy mix of customers from varied industries,

with no over-reliance on any single industry sector. Diversification of our customers across key

industries also serves to insulate us from down-turns in any one industry. For example, in 2020

the aerospace industry faced significant challenges due to the COVID-19 pandemic. As a

result, the total revenue of global aircraft manufacturers declined from US$173.4 billion in

2019 to US$128.1 billion in 2020, representing a year-on-year growth of -26.1%, according to

the Frost & Sullivan Report. Our revenue contribution from customers in the aerospace

industry also fell in FY2020 and FY2021. However, other industries, notably the marine

industry and some specialist telecoms products were positively impacted by the COVID-19

pandemic. Our revenue contribution from customers in the smart module/devices and assisted

living industries also rose over the period. Partially as a result of such diversification across

industries, we were able to grow our total revenue from HK$1,395.1 million in FY2020 to

HK$1,801.7 million in FY2021 and further to HK$2,088.8 million in FY2022.

We believe our stable and diverse customer base has resulted in a more sustainable

revenue stream that is less subject to fluctuations a typical consumer electronics business may

experience. This stability is reflected in our current order book. As at 31 March 2020, 2021 and

2022, our backlog of orders was approximately HK$895.1 million, HK$1,278.1 million and

HK$1,697.4 million, respectively, not including commitments through binding forecasts from

our customers of HK$277.2 million, HK$428.4 million and HK$649.1 million at the same

dates, respectively. As at the Latest Practicable Date, our backlog of orders was approximately

HK$1,799.7 million, respectively, not including commitments through binding forecasts from

our customers of HK$632.3 million.

Strategically-located, top-tier facilities

We have production facilities located in Dongguan, the PRC, and Penang, Malaysia,

housing advanced factory facilities and equipment and supporting a variety of high-end

functions.

Our primary location in the Pearl River Delta in the PRC, provides a world class,comprehensive local supply base with abundant long-term partners who are aligned to serviceour industry sectors and leaves us well positioned to benefit from the world’s best local supplychain network and a developed logistics infrastructure. Furthermore, as an internationalsupplier historically focused on customers primarily in North America, Europe and Australiabut based in the PRC, we believe our cost structure compares favourably with those of ourcompetitors, allowing us to offer cost-effective solutions to our customers.

In 2019, we leased a site and opened additional production facilities in Penang, Malaysia,and further leased a second site in 2020, primarily in reaction to increasing Sino-US tensionsand the resulting additional tariffs for our customers for whom we shipped products to theUnited States directly. In order to further expand our production facilities in Penang andconsolidate them in a single location, in January 2021, we purchased a larger third site. Thisthird site commenced operations in March 2022 and, when finished and fully-operational, willfunction as our local headquarters and sole operational location in Penang. See “– Our

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Production Facilities and Equipment”. We believe this Penang-based capacity diversifies ourmanufacturing business, providing additional security against potential worsening Sino-USrelations and helps to support our strategies of broadening our customer base, expanding saleschannels and increasing and upgrading our production capabilities.

Our facilities are certified to ISO 9001, ISO 14001, ISO 45001 and ISO 13485 standards.In addition, we have a wide set of certifications to support varied industries, includingIATF16949 (needed to support the automotive industry) and Nadcap and AS9100 (needed tosupport the aerospace industry). According to the Frost & Sullivan Report, we are one of fewerthan 10 providers of electronic manufacturing and development services in the PRC to haveboth Nadcap and AS9100 certification.

We have invested, often in partnership with our customers, in advanced tools and

equipment which are able to support leading-edge projects and covering a variety of functions

necessary for specific industries, including, among others, various wet processes, aqueous

cleaning and encapsulation capabilities. We continue to build our capabilities. For the three

years ended 31 March 2022, we invested HK$276.6 million in aggregate, representing 5.2% of

our aggregate revenue for the period, in purchases of property, plant and equipment.

Well-positioned to benefit from growth in the electronics industry, in particular withrespect to RF/IoT-related electronic applications in various industries

The electronics industry has grown rapidly in recent years and is expected to continue to

grow going forward. According to the Frost & Sullivan Report, revenue generated by EMS

providers in manufacturing plants in the PRC increased from RMB1,218.7 billion in 2016 to

RMB1,770.2 billion in 2021, representing a CAGR of 7.8%, and is expected to continue to

grow to reach RMB2,380.1 billion in 2026, representing a CAGR of 6.1% from 2022 to 2026.

This growth is largely attributable to increasing levels of outsourcing of electronics products,

with growing preference to EMS providers, and the growing global demand for electronics. See

“Industry Overview”.

We believe our focus on providing tailor-made solutions for complex projects anddemanding industries, close partnerships with our customers, competitive cost structure andproven ability to adapt to changing technologies, discussed above, leave us well-positioned tobenefit from the expected continuing growth in the sector.

In particular, we believe the increasing deployment of IoT will continue to drive demandfor electronic devices and provide a distinct advantage to specialist service providers, likeourselves, who are able to benefit from this growing demand. Our staff has decades ofexperience in RF product development, testing and approvals, allowing us to offer ourcustomers practical expertise in integrating the right radio technologies for their application.These technologies include the latest global cellular IoT standards such as LTE-NB/M1, Sigfoxand LoRa, as well as Wifi and Bluetooth, among others. Our revenue from IoT devices andservices grew over the Track Record Period from HK$555.6 million in FY2020, representing39.8% of our total revenue, to HK$1,055.4 million in FY2021, representing 58.6% of our total

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revenue and further to HK$1,241.0 million in FY2022, representing 59.4% of our totalrevenue. We plan to continue to invest in IoT capabilities to further leverage this advantagegoing forward. See “– Our Business Strategies – Increase our IoT business capabilities andmarket presence”.

Stable, experienced management team with deep industry knowledge and technicalknowhow who have established a strong corporate culture

Our management team members have extensive experience in the engineering field andthe EMS industry. Mr. Ho, our general manager, CEO and executive Director, has over 30 yearsof experience in the industrial engineering field. Our deputy CEO and executive Director, Mr.Pope, has more than 30 years of experience and held senior operational and managementpositions in leading international technology companies before joining our Group in November2016. The majority of our senior management team and our executive directors have workedwith us for over 15 years and have extensive experience in the electronics industry.

We believe our stable, experienced management team has played a key role in the successof our business. Their extensive experience in the EMS market has provided us with thecapabilities to (i) gain valuable industry insights and awareness of the market landscape anddeploy strategies accordingly; (ii) enhance our execution capability and manage our projectsefficiently; and (iii) maintain relationships with our customers and suppliers. In particular, ourmanagement has been pivotal in transitioning our focus from consumer electronics to morehigh end industrial systems and solutions in challenging industries and in building strongrelationships with key customers.

Our management team have also established a strong corporate culture, emphasisinghonesty and fairness to all of our stakeholders. We believe such commitment bolsters ourability to create and maintain partnerships and build trust with our customers and encouragesteam spirit among our staff. The positive effect of such culture was demonstrated during theTrack Record Period as our team worked closely together in the face of significant challenges,including the Sino-US trade war, the COVID-19 pandemic, the establishment of new overseasfacilities in Penang, the building of and move to our new production facilities in Dongguan,and a global electronic component shortage, and still managed to grow our revenue fromHK$1,395.1 million in FY2020 to HK$1,801.7 million in FY2021, and further to HK$2,088.8million in FY2022, and still attract new projects. We believe this culture has been similarlydemonstrated in our track record of customer retention over the last 20 years.

OUR BUSINESS STRATEGIES

We will continue to leverage the strength of our engineering-led customer-facing teams,

backed up by our research and development capabilities, to take a proactive, full-service

approach to providing customers, particularly those in highly-regulated industries requiring

specialised technical knowledge, with customised solutions, freeing up their own engineering

capabilities to focus on higher-level product development. We aim to maintain and further

expand our share in the market for providing development and manufacturing services for the

industrial electronics sector by increasing our scope, particularly in the fast-growing area of

IoT devices, both internally through organic growth and the hiring of additional personnel and

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externally through strategic acquisition of an IoT product development and marketing

company, strengthening our market presence and enhancing the quality of our services. We aim

to achieve these objectives through the following principal business strategies:

Increase our IoT business capabilities and market presence

IoT technology has been a key driver of the electronics industry in recent years and is

expected to continue to drive the market. According to the Frost & Sullivan Report,

deployment of IoT, which emphasises connectivity of devices, requires development of

advanced electronics for different vertical industries. According to the Frost & Sullivan

Report, global market size of IoT by revenue grew at a CAGR of 25.6% from 2016 to 2021 and

is expected to continue to grow at a CAGR of 23.2% over the period from 2022 to 2026.

For FY2020, FY2021 and FY2022, revenue from IoT devices and modules represented

approximately 39.8%, 58.6% and 59.4%, respectively, of our total revenue for the year. To

continue to grow our business and capture business opportunities from the rising global IoT

market, we plan to further expand our IoT capabilities through the following means:

• Investment in product development resources and equipment: In order to develop

and prepare for new potential IoT products, we plan to increase our on-going

research and development efforts. As at the Latest Practicable Date, we had already

developed and patented a smart monitoring system for industrial containers which

allows for the real time monitoring of the location, temperature, orientation and

status (open/closed, full/empty) of such containers, provides alerts when they are

opened, overheated, over-chilled or expired and facilitates automated content

reordering. As at the Latest Practicable Date, we had registered 19 patents for our

smart monitoring system, including our Container Security System, and Track and

Locate System, in China, Europe and the U.S. See “– Our Core Technological

Competencies – Our IoT/RF capabilities” and “Appendix V – Statutory and General

Information – B. Further Information about Our Business – 2. Intellectual Property

Rights of our Group”. We have commenced discussions with potential customers for

the eventual deployment of such a system and are engaged in on-going trials with

such potential customers. In particular, we intend to provide customised industrial

anti-tampering IoT solutions for the monitoring of pharmaceuticals, industrial

chemicals, agrochemicals, food and flavourings, cold-chain, volatile materials and

other high value commodities, and have also developed anti-tampering IoT solutions

for marine craft and cold chain logistics. Potential uses of our system by customers

with whom we have conducted trials include monitoring the opening and closing of

hatches on marine vessels and using our web portal tracking system to monitor the

location and status of packages and boats. As of the Latest Practicable Date, no

commercial agreements in relation to this system had been signed. In order to

expedite the development and commercialisation of this system and related

technologies and support additional IoT projects, we currently plan to hire an

additional 21 engineers, including four in FY2023, 10 in FY2024 and seven in

FY2025 to handle the additional project volume. We will primarily look for

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candidates with graduate-level engineering or equivalent education based in Xili,

Shenzhen with a minimum of five years’ experience in product development or

programming. We estimate the annual cost for each candidate, including salary,

bonus and relevant benefits will range between HK$230,000 and HK$280,000,

depending on the type of engineer and experience level. As part of this initiative, we

also plan to purchase additional tools and equipment (including software

development tools and hardware validation equipment) and fund other project

development expenses. We estimate total investment for such initiative will require

approximately HK$[REDACTED] million over the three years ending 31 March

2025, all of which will come from the net [REDACTED] of the [REDACTED]. See

“Future Plans and Use of [REDACTED] – Use of [REDACTED]” for further

details.

• Expansion of marketing capabilities: In order to enhance our B2B sales channel andglobal market presence and increase our access to potential customers of new IoTproducts, we plan to appoint sales and marketing agents with relevant industryexperience and connections and technical backgrounds to cultivate B2B sales withindesignated territories in the Americas, Europe and Asia. We believe a dedicated localsales function will be particularly important in connection with development andsale of our planned customised industrial anti-tampering IoT solutions discussedabove, for which we will be proactively identifying and approaching potentialcustomers with proposed solutions and the need to have direct contact with acustomer’s organisation will be key throughout the system trial and adoptionprocess. In addition to providing a direct sales presence in these territories, suchagents will help organise field trials to demonstrate our product to potentialcustomers, provide in-person training and other customer-support services tofacilitate trials, integration and adoption of new IoT devices and associated services,help us address language and other jurisdiction-specific issues and leverage theirown connections and technical backgrounds to help us gain access to an increasednumber of potential customers to improve engagement rates. While we haveprovided direct customer support in the past through our technical project teams, webelieve the addition of local sales and marketing employees, backed-up by existingand expanding project and IT teams, will enhance our credibility and improveadoptions rates with our target customers.

We currently plan to hire a minimum of six such sales and marketing agents,including four in FY2023 and two in FY2024, supported by our product andmarketing teams in the PRC. We estimate annual cost for each such agent will beapproximately HK$1.2 million, which will consist of (i) a base monthly fee for theirservices to engage with potential clients and related duties and (ii) a sales bonusdirectly linked to the margin generated from their sales of product and services tocustomers in their territory. We will look for candidates that have (i) a minimum offive years of sales and marketing experience including key account managementresponsibility and demonstrating a track record of successful sales growth and keyaccount development; (ii) graduate-level engineering or IT education; and (iii) goodappreciation of IoT systems and the technology involved and the ability to work

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directly with customers’ technical teams. We appointed one such agent in FY2021to serve as our sales and marketing agent primarily in Europe with respect to certainIoT tracking and anti-tampering devices in exchange for a monthly stipend andcommission fees. Such agent is a former vice president of global key accounts fora leading supplier of industrial packaging products and services and a formerclassmate at the London Business School of one of our Directors, Gordon Pope, withover 25 years of industry experience. We are in discussions with several additionalpotential sales and marketing agents in the United States, Europe, Argentina,Australia and India. Such potential agents were identified through our existing salesand marketing agent in Europe. All the persons identified have experience inchannel management in their respective fields and have assisted us with organisingfield trials for potential customers and providing feedback on our IoT products andsystem’s performance and usability. Including our existing sales and marketingagent in Europe, two of such agents were former classmates at the London BusinessSchool of one of our Directors, Gordon Pope, and one was his former colleague.Other than this, to the best knowledge of our Directors, none of such agents have anypast or present relationships (including business, family, employment, financing orotherwise) with our Company, its subsidiaries, Directors or senior management, orany of their respective associates. As at the Latest Practicable Date, we had notentered into any binding agreements with any such additional agents. We wouldexpect agreements ultimately entered into with additional agents to require suchagents to carry out the marketing and facilitation services described above for aspecific geographic jurisdiction in exchange for a monthly stipend plus commissionfees. As part of this initiative we will also increase our attendance at trade shows forrelevant industries. We estimate total cost of such initiative through FY2025 will beapproximately HK$[REDACTED] million, all of which will come from the net[REDACTED] of the [REDACTED]. See “Future Plans and Use of [REDACTED]– Use of [REDACTED]” for further details.

Given the scale of anticipated market growth, we believe the specific measures to furtherexpand our own IoT capabilities described above combined with strategic acquisition of an IoTproduct development and marketing company (see “– Expand our operations into newjurisdictions through acquisition”) will provide significant opportunity to increase our revenueand market share.

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Increase our production capacity and upgrade our production facilities

In order to continue to expand our business, we plan to expand our capacity withpurchases of additional machinery and equipment and upgrade our production facilities,particularly in Penang.

We expect total investments will be approximately HK$[REDACTED] million over thethree years ending 31 March 2025, all of which will come from the net [REDACTED] of the[REDACTED], and will consist of the following two major strategic initiatives:

1. Purchase of additional SMT lines and replacement of existing SMT lines and ancillaryproduction-related equipment

Our production facilities have been operating at high utilisation rates. In FY2021 andFY2022, our overall utilisation rates were 86.2% and 90.8%. Our utilisation rates for our PRCproduction facilities have been particularly high, operating at 94.1% in FY2021 and 99.6% inFY2022. In addition to migrating existing SMT lines and other equipment into our new facilityin Penang, we plan to invest in purchasing three SMT lines to replace existing lines in ourproduction facilities in Dongguan to increase their accuracy and output and in purchasingancillary equipment. We also plan to increase capacity with investment in three additional SMTlines and related equipment, including solder paste printers and inspection equipment tofacilitate future business growth. We expect to replace one line and add one line in each ofFY2023, FY2024 and FY2025. We will place the three additional lines either in our Dongguanfacilities or our Penang facilities, depending on our assessment at the time as to which willneed the additional capacity more going forward. Our Dongguan facility and our new facilityin Penang both have sufficient empty floor space needed to support the additional lines. Weexpect the addition of these new SMT lines and replacement of existing SMT lines willincrease our capacity (as measured in total machine hours) for FY2023, FY2024 and FY2025to levels that are approximately 5.0%, 15.0% and 27.5% higher than levels for FY2022.

We believe there is sufficient sustainable market demand and business need for ourplanned expansion of capacity. Such demand is illustrated by:

(i) strong backlog of orders: Throughout the Track Record Period our backlog of ordershas continued to grow, from HK$895.1 million as at 31 March 2020 to HK$1,278.1million as at 31 March 2021 and further to HK$1,697.4 million as at 31 March 2022.These amounts do not include commitments through binding forecasts, whichrepresented an additional HK$649.1 million as at 31 March 2022. Thus, as at 31March 2022 amounts represented from backlog of orders and binding forecastsalready represented HK$2,346.5 million, which is more than 11.0% higher than ourtotal revenue for FY2022. While some of this backlog came from constraints oncomponents supply and shipping delays, we estimate most came from an increase innew orders, as described below. This indication of increasing demand is supportedby deposits we collected from customers in relation to ongoing projects for materialsand product-specific tooling or equipment that we hold. As at 31 March 2020, 2021and 2022, we held deposits totaling HK$147.7 million, HK$223.7 million, andHK$242.5 million, respectively;

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(ii) increasing sales orders and high book-to-bill ratios: The sustained strength ofon-going demand is further illustrated by the large and growing value of new orderswe received over the Track Record Period and the resulting book-to-bill ratios ofsignificantly over 1. The value of new orders we received increased over the TrackRecord Period from HK$1,618.0 million in FY2020 to HK$2,184.7 million inFY2021 and further to HK$2,508.1 million in FY2022. Our book-to-bill ratios forFY2021 and FY2022 were 1.2 and 1.2, respectively; and

(iii) high utilisation rates: Our production facilities are already operating at relativelyhigh utilisation rates. Our overall utilisation rates were 86.2% for FY2021 and90.8% for FY2022. In particular, utilisation in our Dongguan facilities was 99.6%for FY2022. We calculate our proposed purchase of three additional lines andreplacement of three existing SMT lines will only provide incremental capacity ofapproximately 27.5% versus existing capacity as at 31 March 2022, and believe suchmodest increase in SMT line capacity is warranted and necessary.

Total cost for purchasing these new SMT lines and ancillary equipment is expected to beHK$[REDACTED] million, all of which will come from the net [REDACTED] of the[REDACTED]. See “Future Plans and Use of [REDACTED] – Use of [REDACTED]” forfurther details on the timing of such investment over the next three years.

In addition to the above investments, we also plan to invest in additional component andproduct testing facilities, including ICT and other testing stations and a new flying probe testerto increase our processing capacity to correspond with the additional SMT capacity. We expectthe total cost of such investment to be approximately HK$[REDACTED] million over thethree years ending 31 March 2025, all of which will come from the net [REDACTED] of the[REDACTED]. See “Future Plans and Use of [REDACTED] – Use of [REDACTED]” forfurther details.

2. Upgrade and expand functionality at our production facilities in Penang

In order to expand our production capacity and diversify our operations, given theunpredictable nature of recent global events, in particular growing Sino-US trade tensions andimposition of US tariffs on certain types of goods exported from the PRC, we leased a site andcommenced manufacturing operations in Penang, Malaysia in 2019, and further leased asecond site in 2020. In order to further expand our production facilities in Penang andconsolidate them in a single location, in January 2021, we purchased a larger third site. Wecommenced operations at this third site in March 2022 and we expect to complete migrationof all equipment and operations to the site by the end of 2022, at which point it will functionas our headquarters and sole operational location in Malaysia.

As of the Latest Practicable Date, our Penang facilities focused primarily on

manufacturing. Other functions, including research and product development, product

validation and vendor quality management, were largely carried out by us in our other facilities

in the PRC. Over the next several years, we plan to enhance our capabilities in Penang to be

able to manage and execute projects entirely in Penang, consistent with our “under one roof”

policy. We believe this will (i) help create the same efficiencies we currently enjoy in our PRC

facilities, where the close proximity of manufacturing, development and testing facilities and

expertise allow us to proactively deliver solutions and reduce product development cycle

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times; (ii) diversify our capabilities, allowing us to develop and manufacture products in

different locations according to customer preferences and market realities; and (iii) provide

additional flexibility to our production capabilities. Our customers have been increasingly

focused on resilience in their supply chain and we believe, based on discussions with our

customers and our understanding of the market, that a fully-functioning, independent Penang

operation will not only help us attract customers looking to manufacture products entirely

outside of the PRC, but will also increase our attractiveness to customers no matter where they

intend to produce their products. This will require an upgrade to our engineering resources and

equipment stationed in Penang, including:

• Expansion and accreditation of reliability, environmental and productverification/testing facilities;

• Purchase of laboratory equipment related to new product introduction;

• Obtaining relevant certifications (such as ISO 17025);

• Hiring additional customer-facing engineers: we currently plan to hire an additional21 engineers, including eight in FY2023, nine in FY2024 and four in FY2025. Wewill primarily look for candidates with graduate or equivalent level of educationqualification with good written and spoken English capabilities and a minimum offive years’ experience within the electronics manufacturing industry. We estimatethe annual cost for each candidate, including salary, bonus and relevant benefits willrange between HK$160,000 and HK$280,000, depending on the type of engineer,experience level and responsibilities; and

• Renovation of the new site to bring it up to EMS standards and migration ofoperations to this site. Work to be carried out to ready the site and bring it up to thestandards needed to conduct electronic assembly and production operations andstore electronic components will include, among others: (i) installing new specificflooring for the production facility to control electro-static discharge risks whichdamage electronic components; (ii) installing a new false ceiling to help controltemperature and humidity in the electronics production area; (iii) adding spacepartitioning to provide control of dust, temperature and humidity and partitioning ofproduction operations to the support areas; (iv) modifying the fire safety sprinklersystems to align with new ceiling and partitioning of the production area; (v)upgrading the air conditioning to maintain required control of the environment,including new chillers, ducting, associated wiring and facilities; (vi) upgrading theenvironmental control systems and air conditioning for the warehouse and thestorage of electrical components; and (vii) changing the lighting facilities in linewith the new false ceilings and to provide sufficient lighting to support precisionassembly operations.

We expect the cost of the above investments to be approximately HK$[REDACTED]million over the three years ending 31 March 2025, all of which will come from the net[REDACTED] of the [REDACTED]. See “Future Plans and Use of [REDACTED] – Use of[REDACTED]” for further details.

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Invest in sustainable manufacturing capabilities

We plan to be an early adaptor to invest in and deploy sustainable technologies in our

operations to reduce our carbon footprint and use the planet’s resources sparingly. During the

coming three years, we intend to invest in sustainable energy sources for our production

facilities in Dongguan and Penang. In FY2022 and the beginning of FY2023, we invested

approximately HK$4.8 million and utilised the considerable surface area of our production

facilities in Dongguan to install a large array of solar panels in order to decrease our purchased

energy usage and lower our emissions. We expect, based on discussion with independent

consultants and our initial data collections from the installed panels in Dongguan, such panels

will generate approximately 1,000 MWh of electricity per year which represents almost 10%

of our current usage there. We will look to do the same in our production facilities in Penang,

once migration to our new site is completed. We currently estimate that the purchase and

installation of these solar panels in Penang will require approximately HK$[REDACTED]

million over the three years ending 31 March 2025, all of which will come from the net

[REDACTED] of the [REDACTED]. See “Future Plans and Use of [REDACTED] – Use of

[REDACTED]” for further details.

Based on numerous discussions with our customers, many of whom are high-profile

public companies, it is becoming increasingly important to such customers that their suppliers

are, and adopt “planet friendly” policies. We believe adoption of sustainable technology is

important to our client management and marketing efforts as well as in our role as a responsible

corporate citizen. In an ongoing and expanding ESG initiative, we will be working with

consultants to provide a roadmap to reduced water consumption, energy waste and usage of

forestry and will appoint a suitably qualified senior environmental specialist in each of

Dongguan and Penang to manage and lead this initiative. In addition to the solar panel

initiatives mentioned above, we expect to spend an additional HK$[REDACTED] million on

developing and implementing these initiatives over FY2023, FY2024 and FY2025, all of which

will come from the net [REDACTED] of the [REDACTED].

Expand our operations into new jurisdictions through acquisition

We currently service customers in jurisdictions across the Americas, Europe and Asia

Pacific from our production facilities in the PRC and Malaysia and headquarters in Hong Kong.

In order to enhance our market presence and capabilities in our major markets, we plan to

acquire an electronics product development and marketing company based in one of these

markets who provide specialist IoT electronics solutions to demanding customers in similar

industry segments as we do, including the aerospace and medical and wellness industry sectors,

or for industrial applications. We believe acquiring an existing company with operations in a

market in which we are looking to expand would allow us to leverage the B2B connections and

local market knowledge of such an acquired business while accelerating and expanding their

product programs by entering into a more extensive set of joint development projects and

making use of our proven track record of product realisation, local supplier management and

reliable product ramp for sophisticated customers to further develop and expand our

consolidated businesses.

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When selecting an acquisition target, we will consider factors that include, among other

things, depth of business and industry connections, industry focus, level of experience working

with demanding regulatory or environmental requirements and R&D capabilities and

engineering team, as well as location and total acquisition cost. The target will need to

demonstrate strong existing connections and have a record of successful B2B channel

management and new business generation. One of the key capabilities for which we will be

looking is a customer-facing technical project team and strong product leads who can facilitate

the adoption and then deployment of our consolidated IoT platforms to create solutions for an

increasing customer base. We are initially targeting a company with annual revenue of between

HK$391.3 million (equivalent to US$50 million) to HK$586.9 million (equivalent to US$75

million). We believe acquiring a company of such scale with strong growth capabilities would

allow us to exploit synergies with our operations, particularly our joint development and

product qualification and test engineering capabilities which smaller companies often need to

outsource.

We intend to initially focus our search on targets in Western Europe, potentially

expanding our search to include Australia or North America. According to the Frost & Sullivan

Report, there are more than 100 potential acquisition targets in Western Europe operating in the

IoT sector meeting the revenue criteria described above. As at the Latest Practicable Date, we

had not identified any specific acquisition targets.

We expect total acquisition cost of any potential target will be between HK$117.4 million

(equivalent to US$15 million) and HK$234.8 million (equivalent to US$30 million), of which

HK$[REDACTED] million will come from the [REDACTED] of the [REDACTED]. Any

additional costs will be financed using bank loans and our internal resources. See “Future Plans

and Use of [REDACTED] – Use of [REDACTED]”.

OUR BUSINESS PHILOSOPHY

Our name, In-Tech, represents our core business philosophy of combining “Integrity”

with “Technology”. We were founded upon the core principle of doing the right thing and being

honest and fair to all of our stakeholders, including our business partners and employees. We

believe such commitment bolsters our ability to create and maintain partnerships with our

customers, suppliers and staff, and provides a solid foundation for our success. We also will

not engage in any business we deem to be harmful to human health, society or the environment.

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OUR BUSINESS MODEL

We are an integrated and specialised end-to-end electronics development and

manufacturing services company supplying a wide range of customised complete electronic

products, sub-assembled products and assembled PCBs to demanding customers, particularly

those in specialised and highly-regulated industries such as the automotive, aerospace,

medical, marine, banking, security and wireless communication network industries. Our

engineer-led teams enable us to adapt to each customer’s unique needs to create tailored

products, manufacturing processes and test solutions in a time-efficient and coordinated

manner. We also develop and manufacture industrial-grade IoT and RF devices, which is a

market that typically has a higher entry barrier given the complex and specialised skills that

we have acquired over time to make such products. Our revenue is derived from assembling

and manufacturing products for sale to our customers, as well as from the fees that we charge

for our value-added product development services. We generally price our products, inclusive

of manufacturing services, on a “cost-plus” basis agreed between us and our customers.

The majority of our revenue is recognised upon sale of the finished product to our

customers and costs related to development and production of such products are built into the

price of sale. In addition, we receive revenue for certain engineering services, such as design

and development, testing and tooling of products, which we recognise over the period that such

services are rendered. See “Financial Information – Significant Accounting Policies, Estimates

and Judgements – Revenue recognition”. The following table sets forth a breakdown of our

revenue from sales of products and provision of services for the years indicated:

FY2020 FY2021 FY2022HK$’000 % HK$’000 % HK$’000 %

Sales of Products 1,377,160 98.7 1,787,004 99.2 2,063,320 98.8Provision of

Engineering

Services 17,901 1.3 14,666 0.8 25,455 1.2

Total 1,395,061 100.0 1,801,670 100.0 2,088,775 100.0

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Our customers typically engage us on a Joint Development or OEM basis. For Joint

Development Projects, we engage in hardware, mechanical and software design for the project

in conjunction with the customer’s in-house design team, and/or take a major role in product

and component validation services. For OEM projects, our customers provide the key elements


However, even on projects for which we are not engaged to develop a product, we offer a range

of ancillary services to support the process. Many of our major OEM customers still use

our engineers to manage the design of production and test equipment as well as manage local

suppliers. Such activities include supplier sourcing and tooling bring-up and will also ask us

to carry out product and component validation work. For all projects, we will engage with our

customer’s engineering teams to carry out Design for Manufacturing, Design for Assembly and

Design for Test reviews to ensure the products are able to be produced without major yield

issues or inefficient procedures.

The following table sets forth a brief description of the roles we play in certain activities

throughout the design and production process. For engagements under the Joint Development

Model, we generally offer a combination of the product development services (mechanical,

hardware and software) set out below according to our customers’ needs and allocate the

appropriate resources to produce the associated deliverables. In some cases we provide all the

services, in other projects we may provide a subsection of these services.

Activity Description Joint Development Model OEM Model

Product Design:

Mechanical

Development

The detailed design, development

and validation of the mechanical

aspects of a product or sub-

assembly in accordance with the

industrial design brief and the

product specifications and

test/validation requirements.

This includes the detailed design

of parts and their specifications,

including the materials used,

their finishes, tolerances and the

details needed to source and tool

for such parts.

We provide these services

as part of our product

development work.

Customer takes

responsibility for

mechanical part

design work.

In some cases, our

customer may

still require

assistance with

Environmental

and Reliability

Testing of proto

and pilot

production builds.

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Product Design:

Electronic

Hardware

Development

The design of the electronic

circuits (including research into

and selection of which

components, processors and

other electromechanical parts

should be used) needed to fulfill

the functions required by our

customers and consistent with

product specifications and

test/validation requirements.

For our highly-regulated target

markets this can include testing

at extreme temperatures, and

ensuring compliance with strict

EMC or other environmental

conditions.

The hardware development work

includes the testing and

validation of the new electronic

circuit. It will also involve the

applications of a minimal set of

software commands to ensure

the hardware can function and

perform correctly.

The design files include the design

and layout of the printed circuit

board and the full list of all

components including their

tolerances and other details

needed to source and product

such assemblies.



development work.

Customer takes

responsibility for

electrical

hardware

development

work.

In some cases, our

customer may

still require

assistance with

Environmental

and Reliability

Testing of proto

and pilot

production builds.

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Product Design:

Software

development

The writing and testing of the

software required for the product

to perform the features

specified. The software can

include any and all of the

following: the “low level”

firmware that enables the

components to function, the

software needed to manage the

processors and their associated

inter-processor and memory

communications protocols and

any user interfaces (audio,

graphical or haptic) that are

required.

Software can also include cloud

services for IoT products or

other forms of off-line

monitoring.

In the deployment of our IoT

products we typically provide

the software for the devices or

products, the applications

residing on a mobile device and

the cloud services and web

interface.



development work.

Customer takes

responsibility for

the software

development and

testing of the

product.

Product Testing

and Validation

Included in the associated elements

above.



development work.

Customer takes

primary

responsibility for

testing and

validation of the

product.

Where required, we

may also assist in

the performance

of product testing

and provide

associated reports.

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Production Test

Equipment

Development

and

Commissioning

Development of the associated

production test equipment to

perform functional testing,

programming and other

parametric tests of the product

during the manufacturing

process.

Often such equipment is provided

early in the product development

program, so that it is available

for proto runs and pilot runs and

therefore both product and

process can be properly certified

ahead of production ramp.

We provide product-

specific test equipment.

Customer may take

responsibility for

this themselves,

or request that we

provide these

services.

Production

process,

including the

design and

commissioning

of production

equipment and

product specific

assembly aids

Design, development and

commissioning of the production

process including any product-

specific assembly jigs, fixtures

and other assembly machines.

We provide these services for all projects.

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Supplier

engagement

We engage with potential suppliers

to provide cost-effective

solutions. In particular, we have

strong relations with local

suppliers of electro-mechanical

parts, cables, connectors, PCBs,

displays, plastics and metal

parts, among others, who can

provide rapid customised

solutions to meet the

performance and cost criteria set

by our project team and the

design engineers.

We work with supplier

candidates to provide quotes to

our customers, align

specifications and oversee

tooling bring up activity, as well

as part qualification and PPAP

testing, when required.

We provide these services for all projects as

required.

The following table sets forth a breakdown of our revenue by business model for the years

indicated:



Total 1,395,061 100.0 1,801,670 100.0 2,088,775 100.0

We work closely with our customers throughout the development and manufacturing

process. Our ability to provide a full spectrum of electronics development and manufacturing

services, from the challenging front-end product conceptualisation stages through to final

product verification and testing, allows us to consistently deliver manufactured products

conforming to onerous standards in industries that are tightly regulated.

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The following flowchart illustrates our business model and the process for the provision

of our products and services to our customers after a project is confirmed:

OEM Joint Development

Productdevelopment:

from conceptualstage through

early prototype

Pre-production

Productionand

Supplies

After-sales

Customer provides us withproduct specifications with

design blueprints

We collaborate with ourcustomer to jointly develop,design and manufacture a

new product

During all product development stages,we provide advice to the customer on

design enhancements and production solutions,potential choices of components and sub-suppliers

Product Development and Design activities workis carried out by the customer

We provide design for assembly and test reviewsand facilitate early sub-supplier engagement

Customer engages with us during the early productconcept and product architectural choice stages.

We review product requirements and specificationsand provides the customer with options for component

and material choices, performance and costs

We provide product development services formechanical design, electronic hardware design,

software development and production testequipment design and development

We also facilitate early sub-supplier engagementand manage piece part tooling

Central production planning

PCB and product design,optimisation and prototype

Mass production

Quality control

Material and production control andlogistics management

After-sales services andrefurbishment of products

Prototype production usingtooled parts

Product Performance andReliability Testing andRegulatory Approvals

Purchase, customiseand commission

manufacturing equipment

Issue purchaseorders, procure and

inspect incoming materials

Typically3 to 6

months

Typically3 to 12months

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The following table sets forth the change in our backlog of orders for the years/periods

indicated:

FY2020 FY2021 FY2022


PracticableDate

HK$

millions

HK$

millions

HK$

millions

HK$

millions

(unaudited)

Backlog of orders at the

beginning of the year 672.2 895.1 1,278.1 1,697.4Add

Order value of new orders

awarded during the year 1,618.0 2,184.7 2,508.1 346.7Less:

Revenue recognised during

the year 1,395.1 1,801.7 2,088.8 244.4

Backlog of orders at the end

of the year 895.1 1,278.1 1,697.4 1,799.7

Project Identification and Assessment for New Business Opportunities

Our sales and marketing team is mainly responsible for identifying potential business

projects. We maintain close relationships with our previous and current customers and actively

reach out to prospective new customers to explore potential opportunities. The majority of our

new projects come from existing customers or from word-of-mouth referrals from existing

customers. See “– Sales and Marketing – Our Sales and Marketing Team” for details on how

we provide quotations for new projects. We maintain regular communications and conduct

periodic business reviews with our existing customers and continue to update them about

recent industry developments and our breadth of services, discuss new trends or solutions

specific to their business and address any issues our customers might have through an annual

customer feedback process. Depending on their business size and commercial complexity, we

have dedicated teams of up to seven sales and marketing team members to act as key contact

persons responsible for liaising with and maintaining relationships with our customers.

When we are engaged by a new customer, we will generally conduct an onboarding

process. Initial credit assessment will be conducted by our finance team. This may involve

customer site visits, customer audits and other forms of purchasing due diligence. We typically

will also engage a credit insurer to determine appropriate credit terms when preparing

quotations. Upfront deposits or progressive payments may be required for new customers. The

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amount of deposit we require from customers for materials and product-specific tooling and/or

equipment that we hold varies based on the history and the extent of the partnership between

a customer and us, and the levels of investment being made by both parties. As at 31 March

2020, 2021 and 2022, we held total customer deposits of HK$147.7 million, HK$223.7 million

and HK$242.5 million, respectively.

Upon engagement, we will enter into a purchase agreement or master manufacturing

agreement with the customer setting forth the terms of purchase, including, among other

aspects, price, quantity, specifications and date of delivery. See “– Our Customers – Key Terms

of our Agreements with Customers”.

Product Development

Once a customer engages us, they may request us to develop products according to given

specifications or to initiate product conceptualisation and development. In either case, our sales

and marketing team acts as the main point of contact to gather information about the type of

cooperation, timing for development as well as the customer’s product requirements, such as

its function, performance and design. Our engineers, who are mainly responsible for product

development, conduct a feasibility study with a list of product features and/or operation

procedures for the customer’s confirmation, if necessary. Our sales and marketing team works

closely with our engineering team to prepare a proposal setting out our product design and the

proposed product’s value proposition.

During the initial stages of a project, we will also prepare a product development schedule

with set milestones, a member list of the design team, the design plan and any risk management

plans for products to be used in regulated project reviews.

Conceptual stage: advice to the customer on design enhancement, production solutions and

other suggestions

We place particular emphasis on product design and development in order to help our

customers transform their concepts into functional designs. In the early stage of the product

development process of a new product, OEM customers generally provide us with product

specifications and design blueprints. Customers engaging us on a Joint Development basis,

however, may rely on us to initiate product conceptualisation and design based on their product

concept and requested functions and features. In other cases, we are engaged by our customer

to jointly develop product specifications with their in-house design team. In all instances, we

will form a dedicated engineer-led team with cross-functional participation, consisting

generally of hardware, software and mechanical engineers, to undertake an R&D assessment

of the proposed product. The composition and size of such team will be tailored to match the

requirements of our customer. Our team will use the information gathered to define the scope

and parameters of the project and assist our customer in identifying suitable components and

parts to fulfil their design concept needs and the intended function of the proposed product.

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Our design results will be reviewed and documented at appropriate stages to ensure that the

product design continues to meet target requirements. Project meetings are held internally

between our team members periodically to review the status of the product design and to report

to our management.

Product design, optimisation and prototype development

Once the key specifications have been confirmed by our customer, our engineering team

develops prototypes of the proposed product and presents it to the customer. We also undertake

design verification at appropriate stages which consists of (i) reviewing drawings, documents

and technical specifications; (ii) ensuring conformity to appropriate regulatory requirements;

(iii) preparing instructions or procedures to describe critical characteristics, testing and tooling

of the product; (iv) ensuring clear and comprehensive technical data is recorded; (v) preparing

sample evaluation reports in relation to selected components and parts; and (vi) preparing a

parts list for the designed product.

Subsequently, our engineering team collaborates with the relevant customer teams to fine

tune the prototype design and make appropriate modifications as needed to ensure

manufacturability and quality of the product. This includes any necessary adjustment of the

product design and the production process, taking into account factors such as manufacturing

cost, product performance and any other regulatory requirements. Throughout this stage, our

engineers provide technical advice and engineering solutions to our customer in order to ensure

seamless production. Our engineers will also undertake design validation by testing samples in

our reliability laboratory and working with our customers to carry out design verification.

We will sometimes also conduct pre-production proto runs and analyse the results of the

samples and data to further refine our products. This helps us better analyse the manufacturing

process and enhance manufacturing efficiencies.

The product design and development process can vary significantly from project to

project, depending on a number of factors, including the complexity of the product and its

technological attributes. With reference to our past experience, the process generally takes

between three to six months prior to commencement of the pre-production process, depending

on the complexity of the product, the regulatory requirements involved and whether we are able

to re-use any pre-existing technology.

Pre-production

Central production planning

Our production flow is carefully planned with an aim to increase production efficiency.

During the pre-production stage, manufacturing arrangements such as master production

scheduling (MPS) and manufacturing resources planning (MRP) will be arranged and

coordinated internally upon receiving a confirmed purchase order from the customer. Our

engineering teams will generate a bill of material as the design of a project is being fixed. The

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bill of material will include details such as the batch size, minimum order size and other

commercial conditions associated with an order. Usually our customers provide us with rolling

forecasts to facilitate the procurement of components. Our MRP system allows us to use the

lead times for specific components to plan our production timetables and links the MPS to

materials purchases and inventory, and centrally manages the order fulfilment process from the

receipt of a customer’s purchase order to the final shipment of goods including material

purchase and receipt, quality control, production and inventory management.

During the product development and pre-production stages, our engineers and production

departments will discuss ways to optimise the production processes to achieve a reduction in

production time and wastage and make recommendations to our customers about suitable

alternatives for materials, components and parts and supplies to enhance the efficiency,

effectiveness and/or durability of their products.

Once a particular vendor or component has been confirmed, we typically do not deviate

from the selected vendor or the specification of the components. This is particularly important

for our customers operating in highly-regulated industries, such as healthcare and aerospace,

in which any proposed change in supplier typically must be pre-approved and meet stringent

standards, and may require that the new supplier first go through a certification process, which

could require several additional months to prepare for and pass the audit process. Where

required, we assist our customers in sourcing and supplier management. In addition to

identification of the relevant suppliers and materials, components and parts, this may include

assisting our customers in negotiation with vendors, procurement and testing of samples,

tooling bring-up and taking vendors through the Production Part Approval Process (PPAP).

Create purchase order and procure and inspect supplies

Our purchasing team works alongside our engineers and production teams to procure

materials, components and/or parts based on any suppliers designated by our customers or

those that are chosen from our list of suppliers. If required, we will negotiate terms of purchase

with a supplier on behalf of our customer. Prior to ordering any materials, we confirm the

purchase order with our customers in line with the agreed terms set out in the initial quotation.

The manufacturing process is only finalised once the suppliers’ and our own processes go

through an approved validation process. Our purchasing and quality control teams ensure the

materials used satisfy our customers’ quality specifications before, during and after the

production process. Please see “– Quality Control” for further details.

Purchase and customisation of manufacturing equipment

As we produce highly customised products for our customers, purchase of new equipment

and integration of such equipment into a new manufacturing line to be used for specific

production of these unique products typically requires three to four months’ lead time.

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Prototype build, component and product testing and approval and design lockdown

After confirming the initial design of the product, the materials, components and/or parts

to be used in the product and the list of suppliers from which to purchase them, we will begin

performing prototype production runs and product testing.

Prior to design lockdown and receiving approval to start mass production, we will

conduct comprehensive reliability testing, compliance and type approval. For details of our

expertise in testing, compliance and type approval, please see “– Our Services and Products –

Other Services – Product validation”.

The manufacturing process and product design are only considered finished once all

suppliers’ and our own processes are able to produce products which consistently meet our

customers’ requirements.

Production and Logistics

Mass Production

Mass production of our products takes place in either our Dongguan production facilities

or our Penang production facilities, depending on the requirements of our customers. Please

see “– Our Production Facilities and Equipment” for further discussion of our capabilities and

equipment in each of our production locations. The production cycle, from launch of a specific

production batch to shipping of the products, varies depending on the complexity of the

product being produced, the batch size and specific customer requirements, and typically

ranges from approximately a few days to two weeks. Our conveyer and smaller, more flexible

U-shaped cell production lines allow for fast mass production of large volumes of products as

well as provide efficient and flexible assembly of smaller batch production.

For details of our production process, please see “– Our Services and Products – Product

Manufacturing Services”.

Quality control

We have implemented a series of quality control procedures on components and parts,

assembly processes and finished products to ensure the quality of our deliverables. For details,

please see “– Quality Control”. All products are tested for function and performance during

their production process. Depending on the product’s complexity, this may take multiple steps

to ensure there is sufficient functional coverage. Such tests require specific test equipment and

customised test procedures and software. Throughout the development process all the way

through to mass production of a product, we conduct quality control inspections to ensure

conformance of our processes and those of our suppliers.

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Given the requirements of the markets we serve, our quality control standards andprocedures are paramount to our continued success and reputation. Throughout thedevelopment and subsequent manufacturing of our products, we engage and develop acomprehensive suite of stringent quality control measures which may include the detailedanalysis of development margins in hardware and mechanical designs through thoroughtolerance stack up analysis, PPAP, process and design capability studies, Cpk, HALT and HASSproduct performance, ELP testing of finished products and ongoing endurance testing.

Logistics management

Depending on the requirements of our customers, we arrange delivery of products fromour production facilities in Dongguan or Penang or our premises in Hong Kong to theforwarders at the designated ports of shipment of our customers using third party logisticscompanies according to the agreed Incoterms.

Our products are mainly sold to our customers on an FOB or FCA basis in the PRC, HongKong or Malaysia. Under FOB, we are responsible for the delivery of our products on boarda vessel at the port designated by the customer. Under FCA, we deliver our products to aforwarder nominated by the customers.

Over the Track Record Period, we also sold our products on a DDP basis for two of ourmajor customers based in the United States. Under DDP, we assume responsibility for shippingcost and duties. Pursuant to a separate understanding with these customers, we aresubsequently reimbursed by them for the import duties associated with these shipments.

We also provide late product configuration and order fulfilment programs, pursuant towhich we can ship “ready to use” or “plug and play” products in rapid response to newincoming orders directly to our customer’s customer. See “– Our Services and Products – OtherServices – Direct order fulfilment and late configuration”.

After-sales Services

Our customers have certain products which have long life-cycles, and they strive tofollow the “circular economy” model of production and consumption, which involves sharing,leasing, reusing, repairing, refurbishing and recycling existing materials and products,extending the life cycle of such products and reducing waste. We support such initiatives byoffering repair and refurbishment services in our workshop located in Hong Kong as well asin each of our production facilities. Please see “– Our Services and Products – Other Services– Product refurbishment and repair” for further details.

OUR SERVICES AND PRODUCTS

We provide a comprehensive range of services which includes manufacturing the productswe help to design and validate. Our end-to-end solutions provide our customers with integratedproduct development and manufacturing services, which can assist our customers to free uptheir resources to focus on their other business endeavours.

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Product Manufacturing Services

We have a broad range of product manufacturing capabilities ranging from PCB assembly

and sub-assembly to complete electronic product manufacturing.

Set forth below is a brief description of the major steps involved in the manufacturing of

our products.

Sourcing and procuringmaterials, components

and parts

SMT Mounting

PCB AssemblyWave Soldering/Robotic

Soldering (if required)

Aqueous Cleaning(if required)

Conformal Coating – or – encapsulation (if required)

Assembly and PCBAtesting

Product Assembly

Product packaging

Functional Testingand programmingof finished product

Outgoing Quality Control

Shipment to appointedforwarder, customer orcustomer’s customer

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PCB assembly

PCB assembly, the first step in manufacturing one of our products, is the process of

assembling, populating and placing various electronic components (such as capacitors,

resistors, integrated circuits, transistors and diodes, among many others) onto PCBs using

Surface Mount Technology (“SMT”), wave soldering or robotic soldering depending on the

technology and application. These PCBAs are then tested and either shipped to our customers

for integration into their products or used by us to embed into the products we assemble on

behalf of our customers. Our PCBAs undergo rigorous testing and inspection testing processes

which may include ICT, functional testing, AOI and 3D x-ray inspection.

1. Sourcing of materials, components and parts

We procure all or part of the materials, components and parts required for assembly such

as (i) electronic components and ancillary materials (including PCBs, semiconductors, ICs,

batteries and magnetic heads); and (ii) casing (plastic and metal parts), packaging materials,

LCD screens and consumables, from suppliers designated by our customers or identified and

selected by us. Selection of suppliers and materials, components and parts, is typically subject

to stringent testing and validation requirements set by our customers. See “– Our Suppliers –

Selection of Suppliers” for further details.

2. SMT mounting

SMT mounting is a method by which

electronic components are mounted directly

onto the surface of a PCB. Automated

mounters pick up components including

chips, ICs and connectors by vacuum or

customised placement heads and place them

on the PCB.

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3. Wave soldering or robotic soldering

After SMT mounting, the PCB is transferred

for wave and/or robotic soldering (if needed).

Where wave soldering is used, the PCB is

passed over a molten solder bath to solder

multiple components to a PCB. Robotic

soldering involves using a programmable

machine to solder components to a PCB.

4. Aqueous cleaning

We also conduct aqueous cleaning, which is a

process using de-ionised water to wash away

flux residues and/or other residues following

SMT mounting or wave/robotic soldering.

The elimination of flux residues and other

chemicals is important for specific industries

such as the aerospace industry.

5. Conformal coating

We apply a thin polymeric film which

conforms to the contours of a PCB and its

components to protect the PCBA against

moisture, dust, chemicals and extreme

temperatures. This process is used for

products which have demanding

environmental or safety requirements such as

utility meters and products used by the

aerospace and communications industries.

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6. Encapsulation

We prepare a resin which is mixed with ahardener, creating a chemical reaction leadingto a cross-linked polymer. We dispense a layerof resin over the PCBs, which becomeencapsulated for protection againstmechanical shock and environmental andchemical exposure. This is sometimes doneunder vacuum to eliminate trapped airbubbles. This high degree of environmentalprotection provided by such process is usedfor products such as those used in theautomotive industry and smart IoT utilitymeters.

Following the completion of PCB assembly, completed PCBAs are either shipped to ourcustomers or used internally to produce sub-assemblies or complete products. While PCBassembly is an important step in the manufacture of our products, most of the PCBAs weproduce are incorporated by us into sub-assemblies or completed products before being sent toour customers. Over the Track Record Period, only approximately 9% of our revenue camefrom sales of PCBAs, with the other 91% coming from sales of sub-assemblies and completedproducts.

Manufacturing process of sub-assemblies and complete products

Sub-assemblies and completed products produced by us are customised pursuant to thespecifications of our customers, and the manufacturing processes will vary significantly fromproduct to product and may use specialised tools and machinery. Set forth below is a briefdescription of major general steps that are common to most of the products we produce:

7. Product assembly

Products are assembled using tested PCBAs towhich other components are added to makethe final product. This stage can also includethe attachment of displays as well asencasement of the PCBA into a producthousing. Some products require ultrasonicwelding, gluing and/or encapsulation.

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8. Functional testing and programming of finished product

A finished product will be programmed withits functional software and tested to ensure allfunctions are working according to theirdesired specifications. At this stage a productmay also undergo safety tests or leak testing.

Other Services

Product development and engineering services

In addition to manufacturing services, we provide a wide and comprehensive range ofengineering services, including design, product hardware, mechanical and software design,verification and certification, supplier management and product assembly. Our suppliermanagement capabilities include sourcing, obtaining quotations, sample procurement andtesting, tooling bring-up and production part approval processes. In terms of our productassembly expertise, we are able to also conduct sub-assembly and individual part testing(performance and verification), including environmental testing and certification using internalor third-party certification houses.

Product refurbishment and repair

Some of the products that we manufacture for our customers have long life-cycles andmany of our customers strive to follow the “circular economy” model of production andconsumption, and are increasingly interested in extending the life cycle of such products andreducing waste by repairing, reusing, refurbishing and recycling existing products. OurDongguan production facilities and our workshop located in Hong Kong therefore offerproduct refurbishment and repair services. We began to offer such services at our Penangproduction facilities as well, beginning in FY2022. These locations allow us to use the samelocal supply base and replacement part inventory to perform post-sales refurbishment. Thus,we often are able to use the original parts used in the manufacturing process of that particularproduct when conducting repairs or refurbishment. Our IT systems allow us to provide logisticsand stock management services to our customers during the provision of such productrefurbishment and repair services.

Direct order fulfilment and late configuration

We also provide late product configuration and order fulfilment programs, pursuant towhich we can ship “ready to use” or “plug and play” products in rapid response to newlyreceived orders directly to our customer’s customer. For example, we are able to receive orderand product configuration details directly from our customer’s ERP system and re-programstandard products held on stock into specifically configured phones that are ready fordeployment within a customer’s specific privately operated phone system. We then test and

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package the phones and send them directly to our customer’s premises. The pre-configurationof products according to the specific requirements of an end-user is very important for certainnew IoT products. Such capabilities provide additional flexibility to our customers and extendour service engagement with our customer base.

Product validation

Testing capabilities

Our laboratory, initially established in Shenzhen and subsequently relocated toDongguan, became ISO 17025 accredited as a reliability laboratory in 2014 and we offer a widevariety of testing, including thermal shock temperature, humidity cycling, sand and dust, saltfog, 3D vibration and drop testing. We are able to provide customised reliability test equipmentand processes to test our customers’ products along parameters and conditions specified bythem. During the Track Record Period, this has included ionic contamination tests waterprooftests, cable bending tests, abrasive wear tests, infrared and UV chamber tests, battery capacitytests, touchscreen reliability tests and impact tests. Our reliability test equipment, located inour production facilities in Dongguan and in Penang, includes HALT and HASS testingchambers to reveal product failure modes within hours to ensure the quality and time to marketof our products. For details of our laboratory equipment, see “– Our Production Facilities andEquipment – Our machinery and equipment”.

The following pictures illustrate some of the test equipment we use to conduct reliabilitytesting:

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For our manufacturing processes we use functional test equipment that has beendeveloped and commissioned in-house to automatically test our production output, including(i) information and communication technology and boundary scanning; (ii) functional boardassembly and product testing; (iii) GPS and RF testing; (iv) leak and product integrity testing;and (v) customised accelerated life testing, early life performance testing and burn-in testing.

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As at 31 March 2022, we had 12 dedicated automated test engineers supporting our

customers by making customised automated test equipment. Our test solutions allow statistical

analysis of test results to spot trends including process or component drift. They also provide

an automatic auditable data trail of our quality performance.

Examples of the automated test systems are shown below:

Compliance and type approval

We also have experience in obtaining and helping our customers to obtain product

approvals and type approvals in countries across Europe, North America, Asia and Africa,

including, among many others, FCC marks in the United States, UL certification for the United

States, IC/ISED certification for Canada, cellular carrier approvals for IoT LTE products,

China Compulsory certification, IDA certification in Singapore, C-TICK certification in

Australia, SIRIM certification in Malaysia, KC certification in South Korea, TELEC

certification in Japan, ICASA certification in South Africa, wi-fi certification, bluetooth

certification, CE marking for the European Economic Area. We have longstanding

relationships and experience working closely with a number of leading test laboratories, such

as TÜV, Intertek (ITS), Morlab, SMQ, our experience working with all of whom was more than

10 years as at the Latest Practicable Date.

Our Products


sub-assembled products and assembled PCBs, for our customers who are from a large number

of distinct industries. Our products are produced in response to specific customer requests.

The following table sets forth our sales volume for the years indicated:

FY2020 FY2021 FY2022Units, in millions

7.7 11.3 12.6

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The following table sets forth a description of our major product types (completeproducts, sub-assembled products and assembled PCBs):

Product Type Description Examples

PCBAs A populated Printed Circuit Boardwhich is assembled with componentsand tested according to the PCBassembly process described above inthe paragraph headed “– Productmanufacturing services”.

Aerospace power supply PCBAsproduced for Customer F

Sub-assemblies These consist of one or more PCBAswhich we then assemble together withvarious combinations of mechanicalparts, cables, or other electro-mechanical parts to form a largerassembly.

These sub-assemblies are thenfunctional tested before beingpackaged and shipped to the customer.

They differ from complete products asthey require further integration withother assemblies or parts to be able tofunction in their final place of usage.As an example, the pneumatics brakecontroller unit (pictured to the right),is assembled and tested by us, but isthen assembled into a brake system atthe customer’s vehicle assembly line.

Power supply for commercial x-raymachines:

Brake controllers within theTransportation section:

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Product Type Description Examples

Complete Products Complete products follow the same

process as sub-assemblies, but are

fully functional products which do not

need to be integrated with other

products to perform their intended

function.

Examples of complete products

include:

– marine navigational systems which

include processors and GPS and can

function as a standalone product;

– 5G base stations for high speed

wireless connectivity to broadband

infrastructure; and

– commercial grade mass printing and

paper management products.

These and certain other complete

products we produced during the

Track Record Period are further

described in the table below.

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The following table sets forth examples of products we built during the Track RecordPeriod for our customers in different industries:

Industry Product Examples Descriptions

Aerospace

Power management systems forcommercial aircraft

In-cabin power management systemsfor commercial aircraft to supportentertainment and passenger seatingpower solutions

Marine

Marine navigational systems

Rugged products elements and displaysthat form part of an integrated navigationand boat control system for leisuremarine craft and smaller commercialboats

Automotive Electronic braking managementsystems

Braking system sub-assemblies for trucksand heavy vehicles

Intelligent driver surveillance systems Online remote driver monitoring andalert systems for commercial vehicles

Around vehicle proximity awarenesssensors

Sub-assemblies which form part of avehicle’s surround monitoring and safetysystems, including proximity sensors orvision elements

Smart Modules/Smart Devices

Ultra low power IoT utility meters

Connected IoT utility meters for water,gas and electricity enabling up to 10years of autonomy once deployed

IoT trackers for food and beverageindustry

IoT trackers used to monitor the real timelocation and status of returnablebeverage containers and their contents

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Industry Product Examples Descriptions

Agricultural IoT sensors Connected smart sensors which form part

of an IoT monitoring system for the

control and growth management used in

livestock agricultureCommunications/Postal

5G network systems

Local 5G base stations for high speedwireless connectivity to broadbandinfrastructure

High speed communicationsequipment for the transportationindustry

Ultra-High bandwidth connectivitysystems for passenger internet serviceson high speed transport infrastructureand vehicles

Commercial grade mass printing andpaper management products

Smart bulk printing and postalpreparation products to supportcommercial mass mailing and postalactivities. We also provide thecustomised smart ink consumables usedin these products

Smart connected IoT sub assembliesfor postal parcel delivery and depositsystems

Sub-assemblies which form theintelligent connected network used tocontrol access for community basedparcel deposit and collection systems foronline deliveries

Medical/AssistedLiving/Wellness

Remote controls and charging systemsfor hearing implant devices

A range of wirelessly connected remotecontrol units for hearing implant devices,plus charging devices for their dedicatedpower management systems

IoT devices and monitoring systemsfor elderly persons “in and away”from their home

Ultra low power wearable trackers withmotion and fall detection for elderly careproviders with associated base stationsand communications portals

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The following table sets forth a breakdown of revenue and gross profit margin for our

major product types (complete electronic products, sub-assembled products and assembled

PCBs) for the years indicated:

FY2020 FY2021 FY2022Product types Revenue GP GPM Revenue GP GPM Revenue GP GPM

HK$’000 HK$’000 % HK$’000 HK$’000 % HK$’000 HK$’000 %

Completed products 852,007 144,038 16.9 1,377,621 210,213 15.3 1,575,683 209,741 13.3Sub-assemblies 357,640 83,297 23.3 317,783 65,576 20.6 344,804 70,051 20.3PCBAs 185,414 35,262 19.0 106,266 18,447 17.4 168,288 54,770 32.5

1,395,061 262,597 18.8 1,801,670 294,236 16.3 2,088,775 334,562 16.0

OUR CORE TECHNOLOGICAL COMPETENCIES

Our IoT/RF capabilities

IoT involves the inter-networking of devices embedded with electronics, sensors,

actuators and network connectivity which enable these objects to collect and exchange data.

According to the Frost & Sullivan Report, the global market size of IoT by revenue witnessed

a significant growth from approximately US$157.1 billion in 2016 to US$491.3 billion in 2021,

representing a CAGR of 25.6%, and is expected to continue to grow at a CAGR of 23.2% to

reach US$1,424.3 billion in 2026. With the expansion of the size and application scope of IoT

globally, the market demand for development and manufacturing services for IoT devices has

therefore been growing. We believe our in-house development of IoT solutions provides us

with a competitive edge in the market, particularly in niche product segment areas which

require real-time and accurate information. In FY2020, FY2021 and FY2022, revenue from IoT

devices and modules represented approximately 39.8%, 58.6% and 59.4%, respectively, of our

total revenue for the year. We plan to invest further in our IoT capabilities to facilitate growth

of revenue from the sector. See “– Our Business Strategies – Increase our IoT business

capabilities and market presence”.

Our experience and expertise in electronic development and manufacturing processes

have empowered us to establish a strong and flexible engineering platform to study various

energy efficient wireless network solutions. We have experience developing a wide range of

radio interconnectivity technologies, singularly or in combination, which is key to creating

customised IoT devices, and integrating a wide range of sensors into the systems and devices

we have produced.

We have over 20 years of experience in RF design. Our background in designing cordless

phones subsequent to our founding in 1997, followed by our transition into the Bluetooth

market, has allowed us to develop specialised insight and knowledge of RF functions, features,

and how to test them. For example, when producing LoRa smart meters for one of our

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customers, we were able to apply our process and testing know-how to ensure that their smart

meters had low current consumption so that the encased battery could be sustainably used for

the full ten-year lifetime in accordance with its intended use and specifications. We produce

and test products which include marine navigators with integrated GPS, WiFi and Bluetooth,

commercial vehicle driver monitoring systems with cellular connectivity. We also produce IoT

devices which have LTE-M, Sigfox, LoRa, Bluetooth and Wifi RF connectivity, as well as 4G

and 5G network devices, LoRa smart water meters, DECT, 3G and wi-fi phones, Zigbee-based

home security systems, amongst others.

The following table sets out a list of some of the radio interconnectivity technologies we

have deployed into our systems and devices.

Radio CommunicationProtocol Description

LoRa Wide area low power, low data rate IoT wireless network

Sigfox National wide area low power, low data rate IoT wireless network

GPS Satellite positioning technology

BLE Bluetooth low energy wireless protocol

IEEE 802.15.4

proprietary RF

Low energy, low data rate personal and local area network RF protocol

WiFi 4 Local area network for multi-in, multi-out data transmission

LTE-NB/M1 Narrow band, low data rate IoT protocol using the LTE cellular network

We have the ability to develop and to demonstrate total solutions for new innovative IoT

applications to potential customers. We have designed and integrated sensors within rugged

industrial-ready devices, established the cloud capability to receive and analyse the collected

data, and provided customised end user visualisation applications and set control parameters.

This enables our customers to have a rapid time to market and early proof of concept utilising

field-ready demonstration devices.

One current example of our ability to turn our IoT expertise into an innovative technology

solution is our smart monitoring system for industrial containers using re-usable IoT trackers,

which as of the Latest Practicable Date we had developed and were in the process of

conducting testing and trials with potential customers. The solution involves attaching

application-specific devices and sensors to a range of industrial containers The devices utilise

a combination of LTE-NB/M1, GPS, BLE and WiFi to collect and communicate data to the IoT

cloud platform. The system allows for the real time monitoring of the location, temperature,

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orientation and status (open/closed, full/empty) of such industrial containers, provides alerts to

users through web applications when and where a container is opened, the temperature of its

contents, whether it has been subject to any severe vibration or shock, while also tracking its

location and alerting the user when a fill cap is unscrewed or removed. If the contents are

overheated or over-chilled, have expired or have been depleted, alerts will also be sent to the

user. Such smart monitoring system is designed to meet the growing demand for verifiable,

real-time and data-driven audit trails for our customers’ products. Our cloud-based user

interface optimises efficiency and creates metrics for our customers so that there will be

customisable, sortable and automated reporting of all tracked data.

The following diagrams illustrate our smart industrial container monitoring solution:

NetworkRoaming IoT

connection through LTE

Cloud Services

Applications

Opening or Tampering Detection

Location

Temperature + Shock

Filled or Emptied

Communications

Storage / Database

Device Management

Event Processing

Analytics

Alerts

Visualization

Business SystemIntegration

Container Tamper MonitoringDevices

Real Time Monitoring of Industrial Containers for use in theAgrochemicals, Food and Beverage, Chemical and

Pharmaceutical Industries

C t i T

As at the Latest Practicable Date, we had yet to produce any such units for sale to a

customer, but were in discussions with several customers with respect to providing them a

solution based on our smart monitoring system for industrial containers and were engaged in

on-going trials with potential customers across a number of countries. Potential uses of our

system by customers with whom we have conducted trials include monitoring the opening and

closing of hatches on marine vessels and using our web portal tracking system to monitor the

location and status of packages and boats. As at the Latest Practicable Date, no commercial

agreements in relation to this system has been signed.

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As at the Latest Practicable Date, we had a number of on-going projects in relation to our

IoT-related know-how for renowned brand owners based in South America, Europe, Asia and

Australia, including projects relating to radar for intrusion detection, environmental monitoring

and tracking systems. Such brand owners engage in a wide range of industries, including

communications, healthcare, beverage distribution and production of education and leisure

products.

Our capabilities to develop products for robust environments

We are able to undertake product assembly processes for sealed products, including

automated vacuum potting, automated gluing and ultra-sonic welding. We have over ten years

of experience designing, verifying and producing rugged products that need to be sealed from

and operate reliably in harsh external environments. Our product casing expertise includes

robotic assembly, potting and gluing processes.

In particular, we have over ten years of experience in designing, verifying and producing

products that require waterproofing and protection from dust and other solid objects or which

will operate in conditions of extreme temperatures and/or humidity. We have designed products

which require IP66, IP67 and IP68 certifications. By way of example, a rating of IP67 would

require that the product be dust-tight, allowing no ingress of dust for two to eight hours, and

be protected against the effects of full immersion in water between 15 cm and 1m for 30

minutes. We have on-site product verification facilities to test dust and solid ingress to IP6x,

and water ingress to IPx6 and IPx7. Due to our specialised expertise in protection against

environmental factors, we have been engaged in the development and manufacture of products

including complex multi-functional displays, instrument ranges, broadband communications,

smart utility meters and automotive systems for clients engaging in the aerospace, marine,

communications, utility and automotive industries, which require compliance with heightened

regulatory requirements.

One important aspect of designing products to operate in harsh environments is our

experience in working with materials able to withstand such harsh conditions. We have

extensive experience selecting appropriate materials, and the validation of such, along with the

processes needed to ensure they perform well under harsh environmental conditions such as

intensive UV and IR, dust and salt mist, extreme temperatures and humidity. Our practical

familiarity with such materials under harsh conditions allows us to help our clients achieve the

required performance in the early-planning stages and hastens their time to market. Our team

also has experience in the design and manufacture of products for explosive environments.

RESEARCH AND DEVELOPMENT

We consider our R&D capabilities as one of our core competitive strengths which allow

us to continue to improve our core competencies, adapt to changing technologies in our

customers’ industries and expand the range of services we can offer to our customers.

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In the context of our business model and consistent with other EMS providers, R&D does

not generally relate to the invention of new technologies, but primarily to skilful application

of the latest technologies in the pursuit of product engineering, development and approval of

new products, development of new product concepts and other product engineering activities

such as the development of specific test and production processes.

Our R&D Activities

We believe our research and development capabilities are a critical aspect of our success,underpinning our “under one roof” policy for project prototyping and testing and helping tomake sure that our long-term partners are satisfied, and return to demand further projectservices. As part of our offering to our customers, our R&D team is required to adapt andintegrate various technologies, such as the latest available high speed multi-core processors,GPS sensors and antennas, movement sensors, Bluetooth and Wifi, into bespoke products inaccordance with our customer’s market requirements and specifications. Where possible, weare actively involved in the early stages of product conceptualisation and development for ourcustomers. Complex projects on which we are highly involved in product development at theinitial product conceptualisation stage can include architectural product design work andrealisation for new product concepts or for products which need to be developed from ourcustomer’s product specification to meet specific performance criteria.

For these new product projects our customers normally require “better than beforeperformance” upgrades and enhancements of existing product models and the integration ofnew features and new capabilities. Our customers demand that these complex solutions aredelivered according to an agreed timeline to meet their market window and not to exceedproject budgets. Product cost targets will also need to be forecasted and met.

During the “architectural” phase of these projects our R&D team will need to select andjustify the choice of materials, components and sub-suppliers, complete product developmentand then produce the product consistently, in accordance with stipulated performance criteria,as well as meeting the project timescales and cost targets. Such decisions must take intoaccount a range of factors including technical project risk, cost pressures for the project andthe product itself, as well as the long-term durability of the product to continue to performduring its intended working life. In tailoring solutions to customer specifications, we mustoften balance and optimise conflicting requirements with regard to, for example, product size(which customers may prefer to keep minimal) versus long battery life, good radio frequencysensitivity or heat management, all of which require space and additional components. By wayof specific example, when developing products for our maritime customers, our R&D teammust also consider ways of embedding the latest GPS solutions for reliable marine navigation,while ensuring other technologies embedded into the product do not interfere with its primefunction (as GPS is sensitive to radio interference), nor other mission critical communicationdevices on a boat, in accordance with the industrial standards governing the safety of boatnavigation systems (EN60945). The development work will therefore involve detailedmanagement/suppression of all radio emissions, as too much noise could result in intermittentGPS performance and potential noncompliance with the industry’s safety standards.

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Other examples of successful R&D projects in which we engaged over the Track RecordPeriod include our formulation of a 12-layer high-speed PCBA layout for a warehouse roboticscustomer, creation of an IoT tracker for intrinsically safe gas bottles, and our carrying out ofhardware product modification design work and certification for health care products to bringthe products up to date with new safety regulations and customer requirements.

While any such development activities, either on our own or through collaboration with

our customers, are typically project-specific, they often result in increases in our capabilities

which we can carry over to our other projects. Through participating in product development

collaborations with our customers which include internationally renowned brand owners, we

have continued to develop our ability to improve product designs, specifications and

technologies, which helps us to (i) reduce our production costs and enhance our on-site work

efficiency, (ii) launch new production technologies and designs, and (iii) strengthen our

relationships with our customers by improving the quality of our work and enhancing our

familiarity with their commercial needs, strategic directors and new generation of products,

granting us competitive advantages over our peers.

In addition to carrying out R&D projects with respect to existing projects on which we

are working, we also carry out our own projects to research new technologies we expect will

be relevant to the market and help us expand our customer base. Such preparation can be

critical in allowing us to prepare potential solutions and have field-ready demonstration

devices available to provide early proof of concept to our customers. Examples of successful

R&D projects in which we engaged over the Track Record Period for our own future use

towards our business development initiatives included our developing an IoT tracker for boats

(with LTE-M1, wi-fi, BLE, anti-theft alert and alarm features), an IoT tracker for industrial

containers for liquids, oil and chemicals (with LTE-NB, wi-fi, GPS, level and anti-tampering

features) and an IoT tracker for cold chain and medical products (with LTE-NB, wi-fi, GPS,

temperature excursion and container opening detection for food/medicine quality control and

anti-tampering features). We will continue to engage in such activities to deepen our expertise

in technologies we expect to be increasingly relevant, including IoT, RF protocols and evolving

sensor technologies. Our expected major pipeline R&D projects include creating an IoT

gateway with an LTE modem and a radar and weigh sensor detecting the amount of liquid

contents in industrial containers.

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Our R&D expenses have grown steadily over the Track Record Period, and for FY2020,

FY2021 and FY2022, as measured by the total salaries, benefits and other direct costs of our

R&D team, were HK$73.5 million, HK$75.0 million and HK$91.3 million, respectively.




electronics segment, who generally have R&D expenses to revenue ratios ranging from 1%

to 2%. We expense all of our R&D expenses as staff costs and they are recognised in our

consolidated income statement under cost of sales or administrative expenses. The following

table sets out the R&D expenses recognised in our consolidated income statement for the years

presented:

FY2020 FY2021 FY2022HK$

millions

HK$

millions

HK$

millions

Cost of sales– Staff costs 22.0 21.8 24.7

Administrative expenses– Staff costs 51.5 53.2 66.6

Total 73.5 75.0 91.3

Our R&D Team

As at 31 March 2022, we had over 300 engineers with expertise in various fields,

including information technology, manufacturing engineering, production, quality and

production testing, electrical engineering, software engineering and mechanical engineering,

who together were responsible for our R&D activities.

Our R&D team keeps abreast of technological advancements in relevant industries to

keep our knowledge up-to-date and relevant to our customers’ next generation products. In

addition, we maintain close relationships with our strategic suppliers and partners to ensure

that we are aware of and can react to the latest technological developments in areas such as ICs,

chipsets, RF protocols and evolving sensor technologies.

We enter into agreements with our employees in the product design and development team

which provide that all relevant intellectual property rights from R&D efforts during their terms

of employment do not belong to them, and that they are bound by confidentiality obligations

with respect to R&D activities. The confidentiality obligations of our employees survive until

two years after the termination of employment.

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SALES AND MARKETING

We sell our services to customers in a wide range of industries. In order to leverage ourstrong engineering capabilities and accumulated know-how, we target projects in demanding,highly-regulated industries, such as the automotive, aerospace, medical, marine, banking,home security and wireless communication network industries, where we believe the value wecan add will be greater and we will be able to build stronger, more resilient relationships withour customers. The following table sets out a breakdown of our revenue by our customers’industry sector for the years indicated:


Transportation(1) 483,645 34.7 392,485 21.8 485,411 23.2Medical/Assisted Living/Wellness 354,850 25.4 406,954 22.5 591,302 28.3Smart Module/Smart Device 260,576 18.7 644,104 35.8 635,779 30.4Communication/Postal 215,718 15.5 293,490 16.3 317,747 15.2Others(2) 80,272 5.7 64,637 3.6 58,536 2.8

Total 1,395,061 100.0 1,801,670 100.0 2,088,775 100.0

Note:


2. Others primarily included other products, sub-assemblies and PCBAs for industrial applications notincluded in the above, such as commercial X-Ray machines and audio/video streaming equipment.

Geographical Coverage

Our products are sold to customers throughout the world, primarily in the Americas,Europe and Australia. The following table sets out a breakdown of our revenue by geographicallocation for the years indicated:

FY2020 FY2021 FY2022Geographic Region(1) HK$’000 % HK$’000 % HK$’000 %


Grand Total 1,395,061 100.0 1,801,670 100.0 2,088,775 100.0

Notes:



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Pricing Policy

We base our pricing strategy according to a range of factors, including, but not limited to,the complexity of the project, whether and to what extent there are any design or mechanical,software or hardware engineering requirements in the project, the cost of the materials,components and parts, the purchase volume of our customer, technical requirements of theapplication solutions, the resources involved and other strategic considerations related tocustomer development, as relevant. We generally price our manufacturing services on a“cost-plus” basis for both joint development and OEM products. Where possible, we prefer tocommit the engineering resources needed to engage in joint development projects on largerscale projects which are able to generate more revenue, and which, due to their overall size andbatch size, justify lower margins. As a result, gross profit margins from joint developmentprojects tended to be lower than those for OEM projects over the Track Record Period. Pricesor pricing mechanisms are negotiated and agreed with individual customers at thecommencement of a project based largely on the considerations listed above. For some of ourmajor customers, the calculation of the price of our manufacturing services are based on “opencosting” and reflect the expected manufacturing costs, and include parameters such as the costof materials (as set out in a bill of materials), wastage, labour costs, overhead costs and profit.Our contracts with customer typically contain terms allowing for price review and adjustmenton an ongoing basis at specific times and/or upon request of either of the parties. As such, weare typically able to adjust our prices to match any variation in prices of materials, componentsor parts. Our tooling, R&D, design, testing and certification services are normally chargedseparately as development costs to our customers at an agreed rate. Depending on the terms ofthe specific development contract, our customers typically reimburse us for out-of-pocketexpenses such as the costs of the materials for prototype runs, production test equipment,product jigs and fixtures and freight. Where there is a significant volume increase or decreasecompared to the initial agreed terms quoted, we will also review the prices charged ifassociated economies of scale affect the average unit cost. In other instances, our customersmay request for changes to the specifications of a product which may increase or decrease costsin relation to testing, materials or production. We or our customers may also request a reviewof pricing if there are changes to specifications, material, component or part prices, exchangerates, quantity of products, assembly time and other direct or indirect costs.

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We produce a wide range of tailor-made complete electronic products, sub-assemblies and

assembled PCBs for customers in different industries and prices of such products vary

significantly based on the nature and complexity of the product and the nature of the customer.

Over the Track Record Period, prices of our products ranged from less than HK$7 per unit to

more than HK$30,000 per unit. The following table sets out a breakdown of our maximum,

minimum and average selling prices by product type for the years indicated:

HK$ PricesPer Unit Sold

FY2020 FY2021 FY2022Maximum Minimum Average(1) Maximum Minimum Average(1) Maximum Minimum Average(1)

Completed products 12,855.5 8.3 137.9 15,908.1 6.6 137.7 18,310.4 9.0 135.4Sub-assemblies 13,649.8 8.1 328.3 12,581.9 24.9 347.6 9,315.8 36.0 310.1PCBAs 2,936.9 12.9 504.9 30,716.9 38.7 299.2 8,772.4 38.9 328.0

Notes:

1. Average selling prices for a year are based on total sales of the relevant product type for such year divided bytotal quantity of the relevant product type sold in the year.

2. Ancillary sales of spare parts are not included.

We continuously keep abreast of changes to market prices, conduct regular reviews of our

pricing policy and pay close attention to responses from customers during the

negotiations/quotations stage. We may adjust our pricing policy to ensure we remain

responsive to changes in market price in a timely manner to avoid any material adverse impact

on our market position, competitiveness, performance and financial conditions.

Our Sales and Marketing Team

Our ability to manage and build long-term, close partnerships with our customers is

critical to our success.

Our sales and marketing team helps ensure proper management of customers throughout

the life of individual projects and from project to project. As at 31 March 2022, our sales and

marketing team comprised over 30 staff members who are responsible for our sales and

marketing activities and formulating our overall sales strategies, collecting and analysing

market data, general business development, account management and updated market

information. Our sales and marketing team’s account management responsibilities encompass

assisting with a project’s new product introduction through to mass production, launch,

on-going sales and after-sales services. They also are responsible for providing quotations by

working with our purchasing and production teams to determine the cost of certain components

and manufacturing. Certain members of our sales and marketing team are dedicated to the

Group’s IoT portfolio, with in-depth product knowledge to generate leads for our IoT business.

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When we receive a request for quotation from a new or existing customer, our marketingmanagers will come up with an internal quote by working with our purchasing team oncomponent costs and associated manufacturing costs from our production team. After ourmarketing manager prepares a formal proposal containing the relevant details, it will bereviewed by the head of the sales and marketing team, followed by either our CEO or deputyCEO to finalise the proposed quotation. Once a quotation has been accepted, for each projector new customer, we will form a multi-functional team consisting generally of development,quality and manufacturing engineers. The size and composition of the team will depend on therequirements of our customers and the commercial complexity of the project.

While the majority of new projects come from existing customers or from word-of-mouthreferrals from existing customers, for which referrals we may pay a commission, we also aimto increase our market recognition and attract potential new customers by exhibiting andattending trade fairs and exhibitions related to the growing IoT industry, including theConsumer Electronics Show, the Mobile World Congress and other industrial shows associatedwith our target customer industries. Going forward, we intend to increase our participation insuch activities.

In addition, in order to enhance our B2B sales channel and global market presence andincrease our access to potential customers, particularly with respect to new IoT products, weplan to appoint sales and marketing agents with relevant industry experience and technicalbackgrounds to cultivate B2B sales within designated territories in the Americas, Europe andAsia. In addition to providing a sales presence, such agents would be able to provide trainingand other customer support services to customers. We currently plan to hire a minimum of sixsuch sales and marketing agents, including four in FY2023 and two in FY2024, supported byour product and marketing teams in the PRC. We appointed one such agent in FY2021 to serveas our sales and marketing agent primarily in Europe with respect to certain IoT tracking andanti-tampering devices in exchange for a monthly stipend and commission fees. Such agent isa former vice president of global key accounts for a leading supplier of industrial packagingproducts and services and a former classmate at the London Business School of one of ourDirectors, Gordon Pope, with over 25 years of industry experience. We are in discussions withseveral additional potential sales and marketing agents. As at the Latest Practicable Date, wehad not entered into any binding agreements with any such additional agents. See “– OurBusiness Strategies – Increase our IoT business capabilities and market presence”.

OUR CUSTOMERS

Operating in sectors such as the automotive, aerospace, medical, marine, banking, homesecurity and wireless communication network industries, we had an aggregate of over 80customers during the Track Record Period. The vast majority of our customers have hadrelationships with us for more than 10 years.

Major Customers

For FY2020, FY2021 and FY2022, the revenue attributable to our five largest customersamounted to HK$699.2 million, HK$1,211.1 million and HK$1,354.1 million, representing50.2%, 67.2% and 64.7% of our total revenue, respectively. The revenue attributable to ourlargest customer amounted to HK$185.9 million, HK$575.9 million and HK$548.0 million,representing 13.3%, 32.0% and 26.2% of our total revenue for the same years, respectively.

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The following tables set out information on our five largest customers for each of theyears indicated:

For FY2022

Ranking Customer Principal business

Types ofproducts/servicesprovided

Approximateyears of businessrelationship with

us as at theLatest

Practicable DatePaymentmethod

Ourrevenueamount

Approximate% of our

total revenueHK$’000 %

1. Customer A Educational products Smart devices 16 years bankremittance

547,981 26.2

2. Customer B IoT solutions forpeople andproperties

Smart devices forassisted living

19 years bankremittance

351,841 16.8

3. Customer C Electronicsnavigationsolutions

Marineelectronics


204,477 9.8

4. Customer D Wellness products Control systemsand pumpelectronics forthe wellnessindustry


140,724 6.7

5. Customer E Communication andnetwork devices

Wireless networkdevices


109,102 5.2

For FY2021


Type ofproducts/servicesprovided

Approximateyears of business

relationshipwith us as at the

LatestPracticable Date

Paymentmethod

Ourrevenueamount

Approximate% of our



575,860 32.0


Marineelectronics


186,084 10.3




183,091 10.2



140,994 7.8

5. Customer E Communication andnetwork devices

Wireless networkdevices


125,103 6.9

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For FY2020


Type ofproducts/servicesprovided

Approximateyears of businessrelationship with

us as at theLatest

Practicable DatePaymentmethod

Ourrevenueamount

Approximate% of our



185,854 13.3




157,358 11.3


Marineelectronics


140,401 10.1

4. Customer F Aerospace Power solutionsfor aerospaceindustry


110,931 8.0



104,703 7.5

For the typical credit terms granted to our customers, see “– Credit control”.

To the best information, knowledge and belief of our Directors, after making due and

careful enquiry, none of our Directors or their close associates or Shareholders who owned

more than 5% of our issued share capital had any interest in any of our five largest customers

during the Track Record Period, and the five largest customers during the Track Record Period

are Independent Third Parties.

Major Customers who were also our Suppliers

During the Track Record Period, to the best knowledge and belief of our Directors, four

of our major customers, including Customer B, Customer C, Customer E and Customer F, were

also our suppliers with respect to certain products we made and subsequently sold to them. The

reasons for these purchases generally related to situations in which the customer was better

able to procure needed materials, such as in cases of material shortages. Based on their

experience in the electronics manufacturing and development services market in the PRC, our

Directors note that the practice of purchasing materials, components and parts from customers

is commonly adopted in this market in the PRC where circumstances such as those listed above

arise.

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The following table sets forth the percentage of our revenue, and total purchases, from our

four major customers who were also our suppliers for the years indicated:

FY2020 FY2021 FY2022

Percentage of our total revenue (%) 31.7% 29.9% 35.3%Percentage of our total purchases (%) 0.3% 0.2% 1.4%

To the best knowledge and belief of our Directors, these customers and their ultimate

beneficial owners are all Independent Third Parties.

Our Directors confirm that the terms of transactions with these customers are similar to

those transactions with our other customers and suppliers, except that our payment for purchase

of materials from such customers are normally deducted from our receivables from such

customers. We generally granted a credit period of 30 to 90 days to these customers, which was

in line with the credit period we granted to our other customers.

United States Tariffs

In March 2018, the Office of the U.S. Trade Representative (“USTR”) released its Section

301 report, which found that the PRC’s policies result in harm to the U.S. economy. President

Trump signed a presidential memorandum outlining a series of remedies that his administration

would implement in response to these findings, including plans to:

• take action against the PRC at the World Trade Organisation (WTO);

• increase restrictions on Chinese investment in sensitive U.S. technology; and

• increase tariffs on certain Chinese imports.

With regard to tariffs, the United States implemented a series of duties detailed in four

different lists. The first list (“List 1”) went into effect in July 2018 and imposed 25% tariffs

on $34 billion worth of goods from the PRC. The second list (“List 2”) imposed 25% tariffs

on $16 billion worth of Chinese products and went into effect in August 2018. The third list

(“List 3”) went into effect in September 2018 and originally imposed a 10% tariff on $200

billion worth of goods from the PRC. The List 3 tariffs were increased to 25% in May 2019.

The fourth list (“List 4A”) went into effect in September 2019 and originally imposed a 15%

tariff on $112 billion worth of goods from the PRC. Another list (“List 4B”) was announced

by the Trump Administration and would have imposed a 15% tariff on $160 billion worth of

goods from the PRC. As a result of the Phase One trade deal signed by the United States and

the PRC in January 2020, the plans to increase tariffs on Lists 1-3 to 30% did not proceed, the

List 4A tariffs were reduced from 15% to 7.5%, and plans to implement the List 4B tariffs were

BUSINESS

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tabled indefinitely. As at the Latest Practicable Date, the Biden Administration had announced

that it was reviewing the Section 301 tariffs and the Phase One trade deal, but had not taken

definitive action. The outcome of this review will determine if these policies will be continued,

modified, or eliminated.

During the Track Record Period, a portion of our revenue was derived from the sale and

export of our products to the U.S., whereas most of our products were manufactured in the

PRC. Certain of our products, to the extent exported from the PRC to the U.S., were subject

to a tariff rate of 10% from 1 August 2018 to 10 May 2019, and a tariff rate of 25% from 11

May 2019 to the Latest Practicable Date. In FY2020, FY2021 and FY2022, we had two, two

and two customers, respectively, located in the United States and for whom we arranged

shipment into the United States and paid relevant duties, subject to subsequent reimbursement

of those duties, including the section 301 duties. The revenue generated from the sales of our

products to such customers amounted to approximately HK$211.9 million, HK$84.1 million

and HK$127.0 million for FY2020, FY2021 and FY2022, respectively, accounting for 15.2%,

4.7% and 6.1%, respectively, of our total revenue for those years. Both of these customers

service the commercial aerospace industry. As a result of the impact of the COVID-19

pandemic on this industry, our revenue from these two customers dropped significantly during

the Track Record Period, only beginning to recover in FY2022. To avoid the imposition of such

tariffs, we ramped up our Penang production facilities during the Track Record Period to serve

customers affected by these new tariffs. As a result, among these products delivered to

customers in the United States, the percentage of revenue derived from these products exported

from the PRC decreased from 75.7% in FY2020 to only 3.2% in FY2021 and further to 2.9%

in FY2022. To the extent that there were any U.S. government tariffs imposed upon us during

the Track Record Period, all such amounts were reimbursed by our customers and as such, our

Directors are of the view that the imposition of tariffs by the U.S. government on our products

will not have a material impact on our operations.

In September 2020, numerous parties instituted legal proceedings in the U.S. asserting

that the List 3 and List 4 section 301 duties were improperly implemented, and asking the U.S.

Court of International Trade (CIT) to invalidate and order a refund of the duties collected

pursuant to those increased tariffs. At the request of our two US customers for whom we import

products under the aforementioned DDP Incoterms, in September 2020 we (a) agreed to assign,

and assigned, any duties recovered for those imports as a result of that litigation, to the US

customers who had reimbursed us for those duties, and (b) filed an action at the CIT to ensure

that the duties we paid could be collected in the event that the litigation is successful. Since,

as noted above, we are reimbursed for those duties by the customers and any refund of those

duties have been assigned to those customers, our Directors are of the view that the litigation

will not have a material impact on our operations, regardless of the outcome.

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Credit Control

The credit quality of our customers is assessed based on their financial position, past

history and other factors. We have policies in place to ensure that sales are made to customers

with appropriate credit histories. We perform periodic credit evaluation of our customers and

have controls to monitor settlements by customers. We review the recoverable amount of each

individual trade receivable at each reporting date to ensure that adequate provision is made for

irrecoverable balances. We may request a deposit from customers who are of higher risk, such

as those who are unable to obtain credit insurance or those for which our annual credit

assessment raises concerns. We sometimes request prepayment from customers before large

purchases of materials and components to cover any minimum order quantity or minimum

batch sizes of components ordered for their specific products.

We extend credit terms to certain customers on a case by case basis. Depending on our

history and relationship with relevant customers, credit terms typically range from 30 to 90

days. Our customers generally settle their payment to us by wire transfer.

Key Terms of our Agreements with Customers

Upon engagement, we negotiate and agree key terms with our customers. We have also

entered into master manufacturing agreements with some of our major customers, with typical

terms contained in such agreements set out below. The customers with whom we have entered

into such agreements then purchase our products by placing separate purchase orders with us

which state, among others, the quantity, price, specifications and date of delivery of the

product.

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Principal terms of master manufacturing agreements entered into with our customers

Principal Terms Summary

Term : Generally for three to five years, or without a specific

term and valid until breach or termination

Termination : Our notice period for termination for convenience

typically ranges from 6 to 12 months, but may vary if

mutually agreed upon between the parties. Termination

may also occur upon certain events taking place as

agreed upon by the parties, which may include failure to

remedy breaches of the agreement by a certain time,

force majeure continuing for a certain consecutive

period, or in the case of a party’s insolvency.

Price : The unit price of products may either be set out in the

quotation, the agreement itself or stipulated in the

individual purchase order or statement of work. The

agreements contain specific provisions for price review

and adjustment at pre-agreed intervals or at discretion of

the parties from time to time due to material shortages,

poor yield due to failed testing processes specified by

our customer, expedited delivery or product rework not

due to the actions of the group, and based on good faith

negotiations between the parties.

Payment Terms : Our customers are typically required to make payment

in US$ to us between 30 to 90 days after the date of the

invoice.

Ordering process : Customers place written purchase orders containing the

quantity and other relevant product information.

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Intellectual property rights : Intellectual property rights for the products we produceare typically set out in the agreements between us andour customers and can vary according to which partywas the design authority, and which party developed themanufacturing process, among other factors. Typicallysuch rights are owned and retained by the customer tothe extent that the rights arise from specifications andequipment provided by the customer, are derived froman improvement upon our customers’ intellectualproperty rights, or are jointly developed by the relevantcustomer and us. The customer agrees to authorise us touse their intellectual property rights to the extent thatwe need in order to perform our obligations under theagreement. Intellectual property rights we solelydevelop or create in connection with the production ofthe products are typically owned and retained by us.According to the Frost & Sullivan Report, this treatmentof intellectual property rights is common in the EMSindustry. Transfer of intellectual property rights istypically contingent on the customer having completedstage payments.

Product warranty : We provide a warranty covering any defects due toworkmanship and other duties under our direct controlgenerally for up to two years following productshipments. In certain instances, we may provide alonger warranty period as discussed and agreed with ourcustomer.

Confidentiality : Both the customer and we are subject to confidentialityobligations and neither shall disclose any confidentialinformation except according to the terms of theconfidentiality agreements in place between the parties.

Quantity : There are no minimum spend obligations on ourcustomers. However, our agreed pricing is linked to aminimum batch size and annual volume considerations.The purchase or service is initiated by the issuance ofthe purchase order or statement of work, subject to theterms and conditions of the agreements. Our customermay provide us with either binding or non-bindingforecasts to facilitate our production planning.

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Quality and acceptance : We are required to comply with various quality and

acceptance standards. Such standards, which are agreed

between the parties before production commences, may

include (i) satisfactory customer inspection and testing

of the products; (ii) compliance with the international

certification standards; (iii) compliance with the

internal quality control standards and product safety

standards set out by our customers; or (iv) compliance

with performance standards and key performance

indicators stipulated in the agreement.

Compliance : Our agreements often contain provisions regarding

compliance with laws and certain other industry

standards or ethical guidelines. These provisions vary

from customer to customer and can include compliance

with export laws, anti-terrorism regulations,

environmental protection laws, and ethical sourcing

guidelines, among others.

We are generally engaged by our customers on an order-by-order basis by placing

purchase orders. Our Directors consider that such arrangement is in line with the common

industry practice. The terms of each purchase order may be different and are based on

negotiations with respective customers.

PROCUREMENT OF MATERIALS AND INVENTORY MANAGEMENT

Materials, Components and Parts used to Produce our Products

During the Track Record Period, we purchased materials, components and parts

predominantly from the PRC, the United States, Europe, Hong Kong, Australia, Japan and

Taiwan. We had over 700 suppliers in each of FY2020, FY2021 and FY2022. Dongguan and

other cities in the Pearl River Delta in the PRC have a very high concentration of suppliers of

materials, components and parts and our geographical proximity to such suppliers allows us to

source quality materials, components and parts from a wide range of suppliers at stable and

competitive prices with high logistical efficiency. Our Penang production facilities have also

benefitted from close proximity to an increasing range of suppliers. Hence, we do not have to

rely solely on a small number of suppliers. We request our chosen suppliers to comply with

relevant international quality control standards, quality, transportation and packaging

requirements.

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We do not produce the components or parts that we use for our production and we sourcethem from independent third-party suppliers. We only procure from original electroniccomponent manufacturers or their authorised distributors, unless otherwise approved by ourcustomers, to ensure the quality of the materials, components and parts used. The materials weuse to manufacture our PCBAs or finished products include semiconductors, passive electroniccomponents, PCBs, metal and plastic parts and other electro-mechanical parts/displays andconsumables. We also perform quality tests on the supplied materials.

Starting at the end of 2020 and continuing through 2021 and into 2022, electroniccomponents, along with certain other commodities such as metals, steel, resin and fibreglass,were trading at high prices. In addition, the operations of our suppliers were adversely affecteddue to the global spread of COVID-19 and we have experienced shortages, continuing as at theLatest Practicable Date, of certain electronic components, including chip components LCDsand PCBs, which have also become acutely challenging to obtain due to demand exceedingsupply. Such shortages have led to increased lead times, delayed deliveries and, in some cases,delays in orders, which did adversely affect our revenue. According to the Frost & SullivanReport, the average lead delivery time of chips has increased from 12.7 weeks in January 2020to 15.0 weeks in January 2021, and subsequently further escalated to 26.2 weeks in January2022. The delivery times of high demand components such as microcontroller and power-management components applied in industries such as consumer electronics, smart module andautomotive industries have been recorded with even longer duration. Such delays in componentsupplies are expected to continue to affect lead times through 2022 and potentially into 2023.Partially as a result of such shortages, our delivery of products accounting for approximatelyHK$106.1 million of revenue originally scheduled to be made in FY2020 was postponed toFY2021 (of which approximately HK$58.8 million was due to component shortages) anddelivery of products representing HK$266.3 million in revenue originally scheduled to be madein FY2022 was delayed to FY2023 due to material shortages (of which approximatelyHK$260.6 million was due to component shortages). However, we did not experience anycancellations as a result. In addition, delivery of products representing HK$125.2 million inrevenue originally scheduled to be made in FY2021 was delayed to FY2022 due to materialshortages (of which approximately HK$72.5 million was due to component shortages). In orderto mitigate the impact of such shortages on our and our customers’ operations, we haveestablished a spot-buy team to procure components from alternate sources where possible uponpre-approval by our customers, increased on-going discussions with suppliers and have workedwith our customers to expand the list of approved suppliers and, in some cases, consider theuse of alternate components. Where needed, spot-buys are made from component tradersknown to our procurement team. In certain cases, our customers will help identify alternatesuppliers from which spot-buys can be made. Such spot-buys are only made after our customerauthorises such purchases and agrees that any increase in cost is added to the price of theproduct. Additional revenue and costs of sales from spot-buys increased from HK$2.4 millionin FY2020 to HK$6.2 million in FY2021, and further to HK$87.8 million in FY2022. Whenthere were any shortages in the supply of any materials, components or parts, we identifiedthem at an early stage and cooperated with our customers to identify alternative sources, withour customers covering any resulting increase in cost. For details of the relevant risk, see “RiskFactors – Risks relating to our business and our industry – We may be negatively affected byprice increases or a shortage or delay in supply of materials, components and parts required forour business operations”.

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Procurement Planning

As at 31 March 2022, our production and material control team comprised over 100 staffmembers. During the Track Record Period, we purchased materials, components and parts frommore than 700 suppliers. We have not entered into any long-term procurement agreements withour suppliers, which is common in our industry.

Since we did not engage in any hedging activity nor enter into any futures contracts orprice-lock arrangements to manage any price fluctuation of the materials, components andparts during the Track Record Period, and do not plan to engage in any hedging activity in theforeseeable future, our purchasing team closely monitors the price of such materials. When weanticipate any increase in the price of materials and components and any shortage of supplythereof, we will adjust our procurement plans accordingly in order to minimise our exposureto fluctuations in prices and supply.

Inventory Management

To maintain our inventory at a minimum level, we typically procure materials,components and parts upon receipt of purchase orders from our customers based on the volumeof purchase orders and our production planning on a “back-to-back” basis and only arrange fordelivery in accordance with the production schedule, such that the materials only arrive as theyare required. Any inventory is held against customers’ commitment and is entirely demanddriven. If our customers require us to hold any buffer stock or if there are any excessinventories of materials, components or parts, we will enter into an agreement with them togovern the arrangements. We have warehouses at all our production locations and we conductrandom stocktakes in addition to annual audits. Our average inventory turnover days forFY2020 and FY2021 and FY2022 were 95, 79 and 97 days, respectively. The higher in averageinventory turnover days during FY2020 was mainly due to COVID-19 and the resultingtemporary closure of our production facilities. Average inventory turnover days were relativelyhigh in FY2022 due to increased early purchases of certain materials and components tomitigate the effect of any potential shortages or increase in delivery lead times and delays indelivery of certain components, resulting in higher levels of other components from the sameproducts remaining in inventory.

OUR SUPPLIERS

Selection of Suppliers

We select our suppliers based on a number of criteria including whether they pass oursample evaluation test and their requisite vendor rating as assessed by us, their quality controlprocesses, their compliance with environmental laws, pricing, product quality, supplycapability and business track record with our Group. If a supplier passes our sample evaluationtest and is approved by our quality control team, the new vendor will be placed on our list ofapproved suppliers. Our list of suppliers is reviewed on an annual basis. In selecting from pricequotations provided by our suppliers, we take into account the terms and offers from each ofthe suppliers during vendor selection. Such practice allows us to enhance our bargaining poweron price and to avoid over-reliance on any single supplier. Following selection of a supplier,our materials team will then issue purchase requisitions and purchase orders.

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For tailor-made components, we generally only use one approved supplier due to the

investment required in tooling and validating the supplier’s processes. For general purpose

components, we generally approve the use of two to three suppliers to provide more flexibility.

We believe that this practice minimises the risk of default and allows us to compare and

negotiate terms of quotations with suppliers for better cost control.

When working with customers in specialised and/or highly regulated industries, we only

select suppliers who possess the requisite qualifications to ensure that our products meet the

standards demanded by our customers and the relevant regulatory bodies. Our quality control

team oversees supplier development activities to help achieve product conformity to relevant

regulatory and customer standards. Our supplier base for such industries may need to be

certified according to customer and industry requirements and which might involve a right of

access so that we, our customer and any regulatory authorities can visit their facilities to ensure

compliance with the appropriate standards.

We are able to exercise considerable control over our sourcing activities, including

approval processes for suppliers and parts, as there are many highly capable suppliers

operating in the proximity of our Dongguan and Penang production facilities providing us with

quick access to conduct regular on-site visits and reviews.

For FY2020, FY2021 and FY2022, purchases from our five largest suppliers amounted toHK$236.6 million, HK$455.2 million and HK$499.5 million, representing 26.1%, 37.2% and30.5% of our total purchases, respectively. In the same years, purchases from our largestsupplier amounted HK$105.1 million, HK$174.0 million and HK$198.2 million, representing11.6%, 14.2% and 12.1% of our total purchases for the same years, respectively.

To the best information, knowledge and belief of our Directors, after making due andcareful enquiry, none of our Directors or their close associates or Shareholders who ownedmore than 5% of our issued share capital had any interest in any of our five largest suppliersduring the Track Record Period, and our five largest suppliers during the Track Record Periodare Independent Third Parties.

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The following table sets forth our five largest suppliers and the amount of purchases forthe years indicated:

For FY2022

Ranking Supplier Principal business

Products/items purchasedby us


relationshipwith us as at

the LatestPracticable Date

Paymentmethod

Ourpurchasefrom the

supplier inthe year

Approximate% of our

totalpurchases

HK$’000 %

1. Supplier A Global electronicscomponentdistributor andservice provider

ICs, electro-mechanicalcomponents

23 years Bankremittance

198,223 12.1

2. Supplier B Global electronicscomponentdistributor andservice provider



95,510 5.8

3. Supplier C Electronics modulesand assembliesmanufacturer

Electronicmodules andassemblies


80,420 4.9

4. Supplier D TFT-LCD solutionsmanufacturer

LCD displaymodules


68,143 4.2

5. Supplier E Electroniccomponent andmodule distributor

Electronicmodules


57,241 3.5

For FY2021

Ranking Supplier Principal business

Products/items purchasedby us



the LatestPracticable Date

Paymentmethod

Ourpurchasefrom the

supplier inthe year

Approximate% of our

totalpurchases

HK$’000 %

1. Supplier A Global electronicscomponentdistributor andservice provider



173,979 14.2

2. Supplier E Electroniccomponent andmodule distributor

Electronicmodules


86,837 7.1

3. Supplier B Global electronicscomponentdistributor andservice provider



79,906 6.5

4. Supplier D TFT-LCD solutionsmanufacturer

LCD displaymodules


70,711 5.8

5. Supplier F Japanese globalelectroniccomponentsmanufacturer

Electroniccomponents


43,744 3.6

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For FY2020

Ranking SupplierPrincipalbusiness

Products/itemspurchased by us

Approximateyears ofbusiness


the LatestPracticable

DatePaymentmethod

Our purchasefrom the

supplier in theyear

Approximate% of our total

purchasesHK$’000 %

1. SupplierB

Global electronicscomponentdistributor andservice provider


24 years Bank remittance 105,056 11.6

2. SupplierA

Global electronicscomponentdistributor andservice provider



3. SupplierG

Part of a globalelectronicscomponentdistributor andservice provider



4. SupplierH

TFT-LCDsolutionsmanufacturer

LCD displaymodules


5. SupplierF

Japanese globalelectroniccomponentsmanufacturer



PRODUCT WARRANTY

Where any products manufactured by us are returned to us from our customers, we havea return material approval (“RMA”) process to record and report information relating to thereturned unit. This includes details of which customer reported this defect, an explanation ofthe defect and any analysis done. Our quality team will coordinate activities across amulti-functional engineering team to troubleshoot the returned units and determine the causesof any such defects. Typically, our framework manufacturing agreements will also containdetails of such RMA mechanisms and the timeframes within which products are to be repairedor replaced and which party is liable for any costs incurred. Our quality team will liaise withthe customer and our sales and marketing team and production team to carry out thereplacement or refurbishment of the returned product, with the costs to be borne by either thecustomer or by us depending on the nature of the defect and the findings of our analysis. Ininstances where the root cause of a defect is determined to be due to the materials, componentsor parts provided by or consigned by a customer or due to a design provided by the customerwhich results in a defective product, we generally will not be liable for any performance orquality issues. During the Track Record Period we did not make any provision for the potentialcost of replacement or refurbishment of returned products that might be borne by the Companyrelated to product warranties.

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The following table sets forth the total number of products shipped by us and the numberof products returned by our customers for the years indicated:

FY2020 FY2021 FY2022

Total units shipped (units) 7,668,613 11,336,796 12,647,940Customer returns (units) 294 4,356 344Percentage of units returned (%) 0.004 0.04 0.003

OUR PRODUCTION FACILITIES AND EQUIPMENT

Production Facilities

As at the Latest Practicable Date, we had production plants in two locations: one plant inDongguan, the PRC and two plants in Penang, Malaysia.

In addition, our workshop in Hong Kong provides product refurbishment and repairservices and our Shenzhen-based operations centre provides a wide range of services, includingR&D and engineering services and various administrative and support services, among others.

The following chart sets forth a breakdown of our revenue by location from which weshipped our products:

FY2020 FY2021 FY2022(HK$ million)

PRC production facilities(1) (supportedby Shenzhen operations centre) 1,211.5 1,454.3 1,676.1

Penang production facilities 150.2 308.1 356.8Hong Kong workshop 15.5 24.6 30.4Total(2) 1,377.2 1,787.0 2,063.3

Notes:

1. In FY2020 we relocated our PRC production facilities from a leased premises in Shenzhen to a new,larger premises we constructed in Dongguan. We commenced production in the new Dongguan premisesin December 2019, and shifted all PRC production to this site by the end of March 2020.

2. The revenue figures above only include revenue for product sales and excludes revenue generated fromseparately charged development services, and any sales of equipment, tools or components back to ourcustomers due to excess or obsolete materials.

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We have had production facilities in the Pearl River Delta in the PRC since 1998. At the

start of the Track Record Period, such facilities were located in Shenzhen, the PRC. In FY2020

we relocated our PRC production facilities from a leased premises in Shenzhen to a new, larger

premises we constructed in Dongguan, the PRC, also located in the Pearl River Delta. We

acquired the land for our Dongguan site in May 2018 at a purchase price of RMB66.1 million

(equivalent to HK$81.9 million). We began setting up production lines there in October 2019

to November 2019. We commenced production in the new Dongguan premises in December

2019, and shifted all PRC production to this site by the end of March 2020. This migration did

not result in any suspension of operation and thus did not adversely affect our revenue. Since

that time, our production facilities in Dongguan have served as our main production facilities.

Over the Track Record Period, we incurred capital expenditure of RMB123.3 million

(equivalent to HK$139.2 million) for construction of our Dongguan production facilities. As

at 31 March 2022, our Dongguan production facilities had a total gross floor area of

approximately 119,484.91 sq.m. and was staffed by over 1,500 employees. Our production

facilities in the PRC have been our main production facilities and accounted for 86.8%, 80.7%

and 81.2% of our total revenue from product sales in FY2020, FY2021 and FY2022,

respectively. We believe our location in the Pearl River Delta in the PRC provides us

convenient access to a world class, comprehensive local supply base, with abundant long-term

partners who are aligned to service the same industry sectors we service, and leaves us

well-positioned to benefit from the world’s best local supply chain network and a developed

logistics infrastructure and provides us with a cost-structure advantage over many of our

competitors who provide similar solutions to customers in the United States, Europe and

Australia but who are not based in the PRC. Our close proximity to local supply bases also

allow us to provide a rapid turnaround time for product improvement purposes and verification

during the product development process. Our production facility in the PRC is owned by us.





leased a site with GFA of 6,038 sq.m. to open our Penang production facilities. In September

2020, as a result of increased demand for our Malaysian based services, we further leased a

second factory site with GFA of 5,888 sq.m. to further expand the scope of our business

operations in Penang. In order to further expand our production facilities in Penang and

consolidate them in a single location, in January 2021, we purchased a larger third site with a

GFA of 32,702 sq.m. at consideration of MYR31.8 million (equivalent to HK$59.6 million). As

of the Latest Practicable Date, we had commenced operations at our third site in March 2022

and expect to complete migration of all equipment and operations to the site by the end of

2022, at which point it will function as our sole operational location in Penang. This third site

will provide enough space to absorb the operations of our first two Penang sites as well as

provide significant room for future expansion. We ceased operations in our first Penang

production site, following the commencement of our new third Penang production site in

March 2022. We thus did not renew the lease for the property on which our first production

facility was based, and do not intend to renew the lease on which our second production facility

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is based after we complete the migration to the third site. As at 31 March 2022, our Penang

production facilities had a cumulative total gross floor area of approximately 38,590 sq.m. and

was staffed by over 490 employees.

Our production facilities in Dongguan and Penang are fully-functional, are equipped with

a wide range of automated machinery and equipment for our production processes, including

SMT assembly lines, wave soldering and aqueous cleaning, in addition to testing and

laboratory capabilities and are able to provide a similar set of services, with the one exception

that as of the Latest Practicable Date, our Penang production facilities did not undertake R&D

activities. As of the Latest Practicable Date, our Penang facilities focused primarily on

manufacturing. Other functions, including research and product development, product

validation and vendor quality management, were largely carried out by us in our other facilities

in the PRC. Over the next several years, we plan to enhance our capabilities in Penang to better

manage and execute projects entirely in Penang, consistent with our “under one roof” policy.

See “– Our Strategies – Increase our production capacity and upgrade our production

facilities”.

While many projects use core machines such as SMT machines which are common to

most of the products we produce and can be programmed as needed and used from project to

project, every project requires some degree of customer-specific assembly instruction and their

production processes will be unique at a detailed level, requiring project-specific assembly aids

and fixtures of appropriate types and dimensions, as well as project-specific tooling and test

equipment. For the testing and assembling of products, therefore, our customers will need to

invest in some product-specific test fixtures and other process tools. These can be ordered in

advance to provide the additional capacity required with the agreement of the customer who

will need to pay for such investments.

We have the capabilities and resources to house any project we take on from customers

in any of the industries we service in either our Dongguan production facilities or our Penang

production facilities. However, given the need to build project-specific processes and tools,

once a location is chosen it remains fixed and we typically only produce products for any

specific project in one or the other of our production facilities. We typically allocate projects

and resources between our production facilities based on customer preference and general

market demand. For example, projects and products for which there is potential exposure to US

tariffs or restrictions, for example those for our customers in the aerospace industry, will

typically be housed in our Penang facilities. In the absence of such potential tariff exposure or

specific customer requests, we will typically base projects out of our Dongguan facilities.

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FY2020 FY2021 FY2022 FY2023 FY2024 FY2025

PRC Production 8.5 lines(3)(4) 8 lines(4) 8 linesTotal actual SMT run hours 31,479 42,526 45,027Maximum potential SMT run

hours(1) 48,017(4) 45,192(4) 45,192Utilisation rate(2) 65.6% 94.1%(5) 99.6%

Penang Production 0.5 lines(3) 1.75 lines(3) 2 linesTotal actual SMT run hours 1,257 4,929 6,265Maximum potential SMT run

hours(1) 2,825 9,886 11,298Utilisation rate(2) 44.5% 49.9%(5) 55.5%

Total across PRC and PenangProduction 9 lines 9.75 lines(3) 10 lines 10.5 lines(3) 11.5 lines(3) 12.75 lines(3)

Total actual SMT run hours 32,736 47,455 51,292Maximum potential SMT run

hours(1) 50,841 55,078 56,490 59,315 64,964 72,025Utilisation rate(2) 64.4% 86.2%(5) 90.8%

Notes:

1. Assuming maximum operating time of 21 hours a day and 22 days a month across our PRC and Penang sites.



4. The decrease in the number of SMT lines in the PRC and the resulting decrease in maximum potential SMTrun hours in the PRC related to the retirement of one older SMT production line during FY2020.

5. The increase in utilisation rate in the PRC from 65.6% in FY2020 to 94.1% in FY2021 was due to increasedproduction in FY2021, in-line with total increase in our revenue from HK$1,395.1 million in FY2020 toHK$1,801.7 million in FY2021, on 0.5 fewer lines, as one older SMT production line was retired duringFY2020. Production increases in Penang were largely offset by introduction of one additional SMT line in thefirst half of FY2021.

The relatively lower utilisation rates in our Penang production facilities over the TrackRecord Period were largely the result of our Penang operations being in the initial set-up stage.Over such period we needed to hire significant numbers of relevant staff and train them to carryout our processes and procedures. In addition, all projects begun in, or moved to, our Penangproduction facilities over the period and equipment installed needed to go through extensivevalidation and acceptance tests before mass production of any product could begin. As a resultof the foregoing factors, the production process in Penang over the period was somewhatslower and less streamlined than that of our more mature operations in the PRC. In addition,similar to the situation at our Dongguan production facilities, utilisation rates in Penang were

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further affected by closures and restrictions on operating headcount, as well as shortages inelectronic components as a result of the COVID-19 pandemic. See “– Recent Developments –Measures Taken in Response to the Coronavirus Outbreak,” for further details.

As at the Latest Practicable Date, we had extra floor space in our Dongguan productionfacilities and will have extra floor space in our Penang production facilities upon completionof migration to our new site, which can be readily utilised should the services we provideexpand and we require extra capacity for additional projects.

Hong Kong Workshop

We have had a workshop in Hong Kong providing product refurbishment and repairservices since moving to our current location in 2015. Our Hong Kong workshop resides on thesame premises as our corporate headquarters and office in Hong Kong which as of the LatestPracticable Date had a GFA of 1,567.1 sq.m.. As of the Latest Practicable Date, our Hong Kongworkshop was staffed by 20 operators and technicians. Our Hong Kong workshop has testequipment and production fixtures that are common to our Dongguan factory, which can alsoprovide product refurbishment and repair services. In addition, we also provide productassembly services to our customers at our workshop in Hong Kong to the extent that theproduct needs to comply with non-PRC country of origin restrictions. Our workshop in HongKong accounted for 1.1%, 1.4% and 1.5% of our total revenue from product sales in FY2020,FY2021 and FY2022, respectively. For further details about the services provided at ourworkshop in Hong Kong, please see “– Our Services and Products – Other Services – Productrefurbishment and repair”.

In-house Laboratories

The table below sets out a summary of the laboratories we operated as at the LatestPracticable Date:

Laboratory FunctionApproximate

GFA

Number oflaboratory

staff

Dongguan Product, component and materials:environmental, reliability andperformance testing

572 sq.m. 23

Penang Product, component and materials:environmental, reliability andperformance testing

170 sq.m. 8

We have a fully ISO 17025 accredited reliability laboratory located at our facilities inDongguan, allowing us to carry out a wide range of testing and validation to ensure ourproducts perform according to customer specifications and internal customer reliabilitystandards and comply with standards set by relevant regulatory agencies and, where relevant,other parties (such as, for example, telecommunication networks). As of the Latest PracticableDate, we also had testing equipment and capabilities located at our facilities in Penang,

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allowing us to carry out reliability and performance testing and certain aspects ofenvironmental testing. As of the Latest Practicable Date, we did not have an accreditedlaboratory in Penang. We plan to further invest in our testing and validation facilities in Penangonce we have fully moved into our own new, larger facility, with the aim of increasing the grossfloor area of testing facilities to 310 sq.m. and setting up a fully-accredited laboratory. Thetesting of a new proto batch of products is an essential part of the product creation process. Itoccurs after each proto run, of which there can be many iterations, and provides the projectengineers a qualified gap analysis on how the product is performing against its design goalsand whether this performance has improved since the last proto run. Lack of an accreditedlaboratory in Penang has not resulted in any limitations on our product or services offerings,as product validation tests can be undertaken in our facilities in Dongguan or using outsidelaboratories, as needed. We have made use of both our facilities in Dongguan and outsidelaboratories over the Track Record Period. However, our Directors believe enhancing ourcapabilities with an accredited laboratory in Penang to be able to manage and execute projectsentirely in Penang, consistent with our “under one roof” policy will:

(i) help create the same efficiencies we currently enjoy in our PRC facilities, where theclose proximity of manufacturing, development and testing facilities and expertiseallow us to proactively deliver solutions and reduce product development cycletimes:

• Use of external labs adds additional lead time to problem solving andproviding solutions as there are often delays in outsourcing tests, securing labcapacity at an agreeable cost and then receiving a third party report, discussingits findings and then moving on to recommendations. Under one roof thishappens quickly and pro-actively; and

• Some customers, such as those in the marine industry, require additional

sample tests which subject the products to Accelerated Life Testing. Without

these facilities in-house there are additional costs and delays in providing such

services, and delays in potentially discovering issues add unnecessary risk;

(ii) diversify our capabilities, allowing us to develop and manufacture products in

different locations according to customer preferences and market realities:

• For example, when engaging in a joint development project, we carry out rapid

testing of parts and products during the prototyping phase. By doing so under

one roof there is a demonstrable reduction in the cycle time of performing a

test, allowing us to provide documented feedback and implement corrective

actions, which is valued by our customer base; and

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(iii) provide additional flexibility to our production capabilities:

• By having the same level of service at both sites, our customers are free to

choose whether they produce their products in Penang or Dongguan, without

differentiation in service level, and we have the ability to move production

from one site to the other if required. We believe our ability to provide

dual-source options has become increasingly important to our customers in

light of the issues seen in the global supply chain as a result of the COVID-19

pandemic and Sino-US trade tensions, and we have received positive feedback

from our customer base.

See “– Our Business Strategies – Increase our production capacity and upgrade our

production facilities – 2. Upgrade and expand functionality at our production facilities in

Penang” and “Future Plans and Use of [REDACTED] – Use of [REDACTED]”.

Shenzhen R&D Operations Centre and Office

We have office premises located in Xili, Shenzhen, the PRC. As of the Latest Practicable

Date, our Shenzhen R&D and operations centre had a total gross floor area of approximately

5,349.43 sq.m. and had over 170 staff. Our Shenzhen operations offer a wide range of services,

including R&D services, engineering, purchasing, sales and marketing, IT, finance and human

resources management. In order to develop products effectively, a diverse cross-functional

team is needed and as at 31 March 2022 our offices in Xili housed such a team of 76 engineers

to physically develop the devices and products, over 30 purchasing staff to support the supplier

integration and negotiations and co-development work with suppliers, 10 IT engineers to create

and help manage any specific controls needed in the flow of products through our production

facilities and to develop cloud based services for our IoT programs when needed, 28

customer-facing members of our sales and marketing team to ensure what we develop meets

our customers’ needs in terms of timing, cost and delivery.

Our Xili-based team works closely on a daily basis with the engineers in the factory at

Dongguan, where our quality/reliability and materials (IQC) engineers, and the production/test

and manufacturing engineers are stationed. There are shuttles that run twice daily between Xili

and our Dongguan factory to facilitate collaborative testing and activities across the sites and

teams of engineers.

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Our Machinery and Equipment

Our Dongguan and Penang production facilities are equipped with a variety of automated

machinery and equipment for different stages of PCB assembling and production services,

including SMT equipment, testing equipment, casing equipment and laboratory equipment,

among others. We adopt a straight-line depreciation policy on our machinery over the estimated

useful life thereof after taking into account the estimated residual values, which our Directors

believe is in line with industry norms. The table below sets out a summary of the types of

principal machinery and equipment we owned for the provision of assembling services as at 31

March 2022:

Dongguan Penang

Principal Function QuantityAverage Age(1)

(approximately)

RemainingUseful Life(2)

(estimated) QuantityAverage Age(1)

(approximately)

RemainingUseful Life(2)

(estimated)

SMT Machines for PCB

assembly

10 7.7 years 2.3 years 2 2.2 years 7.8 years

Solder paste printing for

fine pitch PCB assembly

process


Inspection of solder paste

printing for fine pitch

PCB assembly process


SMT Reflow Oven for PCB

Assembly


Automatic Optical

Inspection – AOI

machines for surface

mount PCBA assembly

inspection

3 7.4 years 2.6 years 2 1.9 Years 8.1 years

Wave Soldering 2 6.0 years 4.0 years 2 2.6 years 7.4 yearsSelective soldering 2 6.9 years 3.1 years 2 2.6 years 7.4 yearsIn-Circuit Tester for PCBA

verification


XRF Non-destructive

analysis of materials


Notes:

1. The average age of the machinery and equipment is calculated based on the aggregated age of themachinery divided by the number of units of the machinery and equipment.

2. The remaining useful life of the machinery and equipment is calculated based on the estimated usefullife taking into account maintenance and repair activities during the lifetime of the machines, minus theaverage age of the machinery and equipment.

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We also have extensive testing facilities in our laboratories which allow us to conduct a

wide range of testing on our products. The table below sets out a summary of the principal

machinery and equipment we owned for the provision of testing services as at 31 March 2022:

Name of the machinery andequipment Location Quantity Principal functions Average age(1)

Remaininguseful life(2)

(approximately) (estimated)

HASS/HALT chamber HASS/HALT

test room,

Dongguan

1 Accelerated stress

testing chamber for

electrics and

electronic products

8.4 years 1.6 years

Vibration tester Vibration test

room,

Dongguan

1 Vibration and shock

testing

6.7 years 3.3 years

Reliability test

lab, Penang

1 Vibration and shock

testing

2.2 years 7.8 years

IPX3-6+7 Waterproof Tester Waterproof

test room,

Dongguan

1 Waterproof testing of

products under water

flow

4.0 years 6.0 years

Ionic Contamination Tester Reliability test

lab, Penang

1 Testing of ionic

cleanliness

2.7 years 7.3 years

Notes:

1. The average age of the machinery and equipment is calculated based on the aggregate age of themachinery divided by the number of units of the machinery and equipment.

2. The remaining useful life of the machinery and equipment is calculated based on the estimated usefullife deducted by the average age of the machinery and equipment and takes into account ongoingcalibration and maintenance.

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QUALITY CONTROL

We are committed to ensuring the quality of our products and satisfying customers by

providing excellent services. To that end, we strive to control the quality of incoming materials,

components and parts, monitoring the quality of products which are in the process of being

manufactured and carefully checking final products, to ensure each element of our product

meets our quality standards at every stage throughout the production process.

To help us to achieve consistently high-quality control standards, we had a quality control

and qualify engineering team comprising over 200 members in Dongguan who support our

production facilities in Dongguan and over 50 members in Penang who support our production

facilities in Penang as at 31 March 2022. The team is headed by our quality control senior

manager with over 15 years of relevant experience in quality control, who oversees our

Dongguan production facilities and supports our production facilities in Penang.

Our quality control team handles audits, quality standards certifications, mechanical

evaluation and validation and supplier quality management. They implement quality plans,

quality procedures and quality goals and will handle interaction with our customers on quality,

product reliability, audit and certification matters. Our quality control team also works closely

with our engineers, production material control team and our production engineering team to

design the packaging for delivery of the finished products, spare parts and semi-finished

products. We have implemented and put in place the following quality control procedures

throughout the process from our procurement stage to completion of production to ensure the

quality of our products can satisfy the standards and specifications required by our customers.

Inspection of Incoming Materials

Before our materials are accepted, our incoming quality control personnel will inspect,

evaluate, determine and identify incoming materials in accordance with the prescribed

incoming materials inspection procedure, including the inspection, testing and labelling of

such materials against our quality requirements and standards to prevent non-inspected or

nonconforming products from being installed and used. Our incoming quality control personnel

will also check the incoming materials against the relevant inspection report, the work

instruction and the stamp on the materials label. The supplies can only be stored in our

warehouse for future production after such quality inspection is completed. Any materials

supplied which fail to meet the standard specified in our purchase orders or are defective will

be returned to our suppliers for replacement.

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Inspection and Testing of In-process Products

All products are tested for functionality and performance during their production process.

Depending on the product’s complexity this may take multiple steps to ensure there is

sufficient functional coverage. Such tests require specific test equipment and customised test

procedures and software. In additional to these functional tests, our in-process quality control

personnel will inspect, evaluate, determine and identify semi-finished products to ensure they

meet the relevant quality requirements. The in-process quality control team checks whether

each station in the production line has been operating according to the work instruction,

whether the production equipment and production tools are operating normally, whether there

are any non-conforming products on the production line and checking against statistical

process control charts. The in-process quality control personnel will also conduct SMT and

PCB sampling inspections. Any nonconforming batches shall be returned to the production line

to be reworked and sampling inspection will be conducted again.

Inspection of Outgoing Products

At the end of the production stage, our outgoing quality control team will conduct tests

on the finished products on a sampling basis according to international sampling standards

commonly adopted in the industry for acceptance of products or according to customers’

requirements. They also inspect the appearance, function and/or packaging of products and fill

out a warehouse receipt for shipment. The outgoing quality control personnel will carry out

sampling inspections, after which they shall inform the customer’s inspection team (if any) and

arrange for the products to be transported to the designated destination upon notification by the

customer.

INFORMATION TECHNOLOGY

We support our operations with a flexible IT system adapted and managed in-house. Our

MRP system links our MPS system to the purchasing and inventory of materials and allows us

to access a full spectrum of information about our products, in addition to monitoring order

receipt, shipment, invoicing and cash collection. Should we need to track components, finished

goods inventory, customer orders or visualise process results, our systems can be adapted to

meet such needs. Our IT systems have also been adapted for various purposes, including to

provide real-time management of reverse logistics operations in both Hong Kong and the PRC,

management of customer order fulfilment and finished good stocks and providing traceability

for supplies in the medical and aerospace industries. Our MRP system, which is highly

adaptive, can be customised for specific customers and industries. For example, the aerospace

and medical industries have rigorous tracking requirements, above and beyond those of other

industries. Our system is also able to capture product configuration during production and

upload such information directly to customers for them to review, helping to facilitate efficient

customer communication and increase speed to market.

Our systems were adapted and are supported by our internal IT team, consisting of 24 IT

professionals as at 31 March 2022.

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PROPERTIES

As of the Latest Practicable Date, we owned (i) in the PRC, one parcel of land with a total

gross site area of approximately 88,163.1 sq.m., buildings with a total gross floor area of

approximately 119,484.91 sq.m. and ancillary facilities with a total gross floor area of

approximately 839.2 sq.m. and (ii) in Penang, Malaysia, two parcels of land with a total gross

site area of approximately 41,261.7 sq.m. and buildings with a total gross floor area of

approximately 32,702 sq.m. As of the Latest Practicable Date, we also leased four properties.

As of the Latest Practicable Date, one rented property in Penang was charged to Alliance

Islamic Bank Berhad by the landlord, our owned properties in Penang were charged to Malayan

Banking Berhad and, except for a refuse room, all of our owned buildings in Dongguan, the

PRC, (with the exception of a refuse room) were pledged to HSBC Bank (China) Co., Ltd

(Dongguan Branch). As at the Latest Practicable Date, none of the other properties we owned

or occupied were pledged.

Owned Property

Land

As at the Latest Practicable Date, we owned one parcel of land in the PRC and two parcels

of land in Malaysia, details of which are set out below:

No. Location OwnerGrossSite Area Use of the property

1. Dongguan,

the PRC

In-Tech Dongguan 88,163.1

sq.m.

Factory buildings,

dormitories2. Penang, Malaysia In-Tech Enterprise

Malaysia

20,311.4

sq.m.

Factory buildings

3. Penang, Malaysia In-Tech Enterprise

Malaysia

20,950.3

sq.m.

Factory buildings

Buildings

No. Location Owner GFA Use of the property

1. Dongguan, the

PRC

In-Tech Dongguan 120,324.1

sq.m.

Factory buildings,

dormitories,

walkway structure2. Penang, Malaysia In-Tech Enterprise

Malaysia

32,702 sq.m. Factory buildings

All of the above properties are used for non-property activities as defined under Rule

5.01(2) of the Listing Rules.

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Save for our owned property in Dongguan, the PRC, the valuation report of which is

contained in Appendix III to this document, no single property interest forming part of our

non-property activities had a carrying amount of 15% or more of our total assets. Accordingly,

pursuant to section 6(2) of the Companies (Exemption of Companies and Prospectuses from

Compliance with Provisions) Notice (Chapter 32L of the Laws of Hong Kong), our owned

property in Penang, Malaysia, is exempted from compliance with the requirements of section

342(1)(b) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance in relation

to paragraph 34(2) of the Third Schedule to the Companies (Winding Up and Miscellaneous

Provisions) Ordinance, which requires a valuation report with respect to our interests in land

or buildings.

Leased Property

For our operations, we entered into several lease agreements for a total of four properties

located in Malaysia, the PRC and Hong Kong. The terms of each lease agreement were entered

into by us and the respective lessors on an arm’s length basis. As at the Latest Practicable Date,

other than the lease for the property on which our current Penang facilities are based which we

do not intend to renew after we complete the migration of our equipment and operations to the

property we own in Penang, we intended to renew all the existing leases upon expiry. Our

Directors confirm that, as of the Latest Practicable Date, we had not received any indication

from the lessors that any of the leases may not be renewed upon expiry. A summary of our

leased properties as of the Latest Practicable Date is set out below:

No. Location Term GFA Use of the property Rent

1. Penang, Malaysia September 2020 to

September 2022

5,888.0 sq.m. Factory building MYR63,000.0 per

month

2. Hong Kong September 2019 toAugust 2024

1,567.1 sq.m. Office premises,workshop andlogistics centre

HK$210,225.0per month

3. Hong Kong January 2020 toJanuary 2024

221.9 sq.m. Accommodation formanagement

HK$92,000.0 permonth

4. Shenzhen,the PRC

March 2018 toJune 2023

5,349.43 sq.m. Office premises RMB551,152.0per month

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Title Defects in relation to In-Tech Shenzhen Science & Technology and In-Tech ShenzhenR&D’s office premises

As at the Latest Practicable Date, Shenzhen TCL Optoelectronics Technology Co., Ltd.

(深圳TCL光電科技有限公司) (“SZ TCL”) authorized TCL Technology Industrial Park

(Shenzhen) Co., Ltd. (TCL科技產業園(深圳)有限公司) (“TCL”) to lease office premises of

gross floor area of approximately 5,349.43 sq.m. to In-Tech Shenzhen Science & Technology,

with the term of the lease commencing on 10 March 2018 and ending on 30 June 2023.

According to the Land Occupancy Certificate issued by TCL on 31 May 2021, while the office

premises leased by In-Tech Shenzhen Science & Technology were fully constructed, SZ TCL

had unfinished construction work on other parts of the land and as a result, SZ TCL had not

completed the inspection and acceptance of completion of the whole construction project and

thus was unable to obtain the relevant Property Ownership Certificate. In addition, as at the

Latest Practicable Date, In-Tech Shenzhen Science & Technology had not yet completed the

relevant registration filings of the lease contract in respect of the aforesaid premises due to SZ

TCL having not yet possessed the relevant Property Ownership Certificate. In addition,

according to the certificate of authorisation issued by TCL on 12 August 2021 and the Free Use

Certificate issued by In-Tech Shenzhen Science & Technology, In-Tech Shenzhen R&D is

using part of the above office premises free of charge. We use the office premises as our

operations centre to carry out a range of services, including R&D services, engineering,

purchasing, sales and marketing, IT, finance and human resources management. As advised by

our PRC Legal Advisers, the consequences of the abovementioned circumstances are as

follows:

• SZ TCL had not completed the inspection and acceptance of completion of

construction of the premises leased to In-Tech Shenzhen Science & Technology,

which might render In-Tech Shenzhen Science & Technology unable to use the

leased office premises in accordance with the lease entered into with TCL and render

In-Tech Shenzhen R&D unable to continue to use the part of the above office

premises.

• In-Tech Shenzhen Science & Technology, having not yet completed the registration

filing of the lease contract, may be liable to rectification orders issued by the

relevant PRC government authorities. If In-Tech Shenzhen Science & Technology

fails to comply with any such orders in time, it may be liable to a fine between

RMB1,000 to RMB10,000.

Our PRC Legal Advisers, acting on our behalf, conducted an interview with the Housing

and Construction Bureau of Shenzhen Nanshan District (深圳市南山區住房和建設局) (“the

Bureau”) on 3 September 2021 and the interviewed officer confirmed that (i) the Bureau has

no objection to the use of the office premises by In-Tech Shenzhen Science & Technology and

In-Tech Shenzhen R&D and it agrees that In-Tech Shenzhen Science & Technology and

In-Tech Shenzhen R&D can continue to use the above office premises within the validity of the

lease contract; (ii) within the supervision scope of the Bureau, it has not imposed any

punishment or investigated any responsibility for the use of the above office premises to

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In-Tech Shenzhen Science & Technology and In-Tech Shenzhen R&D, and will not impose any

punishment or investigate any responsibility in the future; and (iii) In-Tech Shenzhen Science

& Technology and In-Tech Shenzhen R&D have not been involved in any violation of laws,

regulations, rules and other normative documents on housing construction and construction

project management, have not been subject to any investigation and punishment related to

housing construction and construction project management, and there are no relevant disputes

or complaints. As advised by our PRC Legal Advisers, (i) the Housing and Construction

Bureau of Shenzhen Nanshan District is the competent government authority to provide the

above confirmations; and (ii) based on the confirmation of the Housing and Construction

Bureau of Shenzhen Nanshan District, the risk of In-Tech Shenzhen Science & Technology and

In-Tech Shenzhen R&D being unable to use the leased office premises is low.

LICENCES AND PERMITS

We are required to obtain a variety of licences, permits, approvals and certifications in

order to operate our business.

The following table sets forth details of our material licences and permits:

Licence/Permit Holder Granting authority Grant date Expiry date

PRCRegistration Form for

Recordation of a ForeignTrade Business (對外貿易經營者備案登記表)

In-Tech ShenzhenScience &Technology

Commerce Bureau ofShenzhenMunicipalityNanshan District(深圳市南山區商務局)

18 December 2018 Remains valid as long asauthorised registrationform is held (有效期為長期)

Registration Certificate for aCustoms Declaration Entity(中華人民共和國海關報關單位註冊登記證書)

In-Tech Dongguan Huangpu Customs ofthe People’sRepublic of China(中華人民共和國黃埔海關)

19 July 2019 Remains valid as long asauthorised registrationcertificate is held (有效期為長期)

Registration Form forRecordation of a ForeignTrade Business (對外貿易經營者備案登記表)

In-Tech Dongguan Bureau of Commerceof Dongguan City(東莞市商務局)

26 May 2022 Remains valid as long asauthorised registrationform is held (有效期為長期)

Food Distribution Licence (食品經營許可證)

In-Tech Dongguan Market SupervisionAdministrations ofDongguan City(東莞市市場監督管理局)

22 January 2020 21 January 2025

Discharge of Urban SewageLicence into the DrainageNetwork (城鎮污水排入排水管網許可證)

In-Tech Dongguan Dongguan City Bureauof Ecology andEnvironment (東莞市生態環境局)

2 November 2020 1 November 2025

Pollutant DischargeRegistration for StationaryPollution Sources (固定污染源排污登記)

In-Tech Dongguan Ministry of Ecologyand Environment ofthe People’sRepublic of China(中華人民共和國生態環境部)

29 June 2020 28 June 2025

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Licence/Permit Holder Granting authority Grant date Expiry date

Registration Certificate fora Customs Declaration Entity(中華人民共和國海關報關單位註冊登記證書)

In-Tech ShenzhenScience &Technology

Shenzhen Customs(中華人民共和國深圳海關)

3 July 2018 Remains valid as long asauthorised registrationcertificate is held (有效期為長期)

MalaysiaManufacturing

Warehouse LicenceNo. P78G6201900000006


The Royal MalaysianCustoms Department

30 March 2022 31 March 2024

Manufacturing LicenceNo. A022603(Serial No. A038212)


The Ministry ofInternational Tradeand Industry ofMalaysia

10 November 2020 Remains valid as long asManufacturing Licenceis held




5 February 2021 Remains valid as long asManufacturing Licenceis held




7 April 2022 Remains valid as long asManufacturing Licenceis held

Approval to Operate WithinFree Zones



29 December 2022 N/A

Business Premises LicenceBill No. LC2022021026


Penang Island CityCounsel

22 March 2022 31 December 2022

Business Premises LicenceBill No. 06/21/00827


Seberang Perai CityCouncil

3 November 2021 31 December 2022

Hong KongFactory Registration In-Tech Electronics

LimitedTrade and Industry

Department3 December 2021 2 December 2022

Radio Dealer Licence In-Tech ElectronicsLimited

Office of theCommunicationsAuthority

1 May 2021 30 April 2023

As at the Latest Practicable Date, we had obtained all material requisite licences, permits,

approvals and certificates necessary for the operation of our business in the jurisdictions in

which we operate, and such licences and permits were still valid and in force. Based on the

advice of the PRC Legal Advisers, the Malaysian Legal Advisers and our Hong Kong Legal

Advisers, we have obtained all necessary licences, approvals and permits from the relevant

governmental authorities for our business operations in all material aspects in the PRC,

Malaysia and Hong Kong. We have not experienced any refusal of renewal applications of any

material licences or permits necessary for the operation of our business during the Track

Record Period.

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CERTIFICATIONS

We are obliged to ensure that our products comply with all applicable legal requirementsand industry standards. The following table sets out the major certifications we hold in respectof our services:

Facilities coveredNo. Standard Validity Period Hong Kong Shenzhen Dongguan Penang

1 ISO9001 21 November 2020 –13 January 2023

� � �

28 October 2019 –27 October 2022

�

2 ISO14001 22 November 2020 –21 November 2023

�

11 March 2020 –10 March 2023

�

3 ISO45001 11 March 2020 –10 March 2023

�

4 ISO13485 8 April 2020 –11 May 2025

� � �

5 ISO17025 11 December 2019 –7 October 2023

�

6 IATF16949 14 January 2020 –13 January 2023

� � �

7 AS9100 4 August 2021 –3 August 2024

� � � �

8 Atex 3 March 2020 –29 November 2022

�

9 Nadcap AC7120 1 November 2019 –31 October 2021(extended to31 August 2022)1

�

10 Nadcap AC7121 1 August 2019 –31 January 2021(extended to31 July 2022)1

�

11 C-TPAT 25 January 2021 –24 January 2024

�

Note:

1. Due to COVID-19, accreditation was extended by email notice.

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TRANSFER PRICING

Our operations are based in Hong Kong, the PRC and Malaysia, though we conduct

business with customers worldwide. During the Track Record Period, components and other

materials were purchased primarily from third party vendors by In-Tech Electronics HK, and

to a lesser extent directly by our production facilities in the PRC and Malaysia (the “In-Tech

Production Facilities”).

The materials purchased by In-Tech Electronics HK were then sold at cost to our In-Tech

Production Facilities via an intra-group transaction. Once the components and materials had

been assembled into the finished products and were ready to be shipped to our customers, such

products were then sold to In-Tech Electronics HK via an intra-group transaction. In-Tech

Electronics HK then sold and arranged delivery of these goods to our customers according to

the agreed delivery terms.

In addition, during the Track Record Period there were intra-group transactions for the

provision of back office and software services which were provided by the staff and engineers

of In-Tech Investment (HK) and its subsidiaries In-Tech Shenzhen Science & Technology

(PRC) and In-Tech Shenzhen R&D (PRC) (the “In-Tech Back-office & Software Services

Providers”) to our manufacturing facilities in the PRC pursuant to the instructions of In-Tech

Electronics HK.

The following diagram illustrates the flow of materials and products within our Group

during the Track Record Period:

Customers Our GroupThird Party

Sub-Suppliers

CustomersIn-Tech

Electronics HK(HK)

Third PartyVendors

Sales ofFinished goods

Sales ofMaterials

Third PartyTransactions

Sales ofFinished goods

Sales ofMaterialsIn-Tech

ProductionFacilities

(PRC/Malaysia)

Sales ofMaterials

Back-officeand Software

Services

Back-officeand Software

Services

Intra-GroupTransactions

In-TechBack-office &

Software ServicesProviders

(HK/PRC)

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With respect to the transactions described and diagramed above, In-Tech Electronics HK

functions as a residual taker, In-Tech Investment and In-Tech Shenzhen Science & Technology

act as limited risk service providers, and the In-Tech Production Facilities act as contract

manufacturers.

We have engaged PricewaterhouseCoopers Limited as independent transfer pricing expert

(the “Independent Transfer Pricing Expert”) to conduct a transfer pricing review, including

benchmarking studies (for contract manufacturing services and intra-group service

transactions), to evaluate the transfer pricing arrangement in relation to the above-mentioned

intra-group transactions. By employing the prescribed third party database, comparable

searches were conducted where quantitative and qualitative screening criteria were used to

come up with three sets of comparable independent companies and construct arm’s length

profit ranges based on the latest three year financials of the comparable companies accordingly.

For In-Tech Enterprise Malaysia, a comparable search was conducted by extracting companies

accounts from the Malaysian Company Registrar. The studies also took into account internal

and external factors. The two In-Tech Production Facilities in Dongguan and Malaysia (In-Tech

Dongguan and In-Tech Enterprise Malaysia) commenced operations between 2019-2020 and

incurred significant one-off expenses and start-up costs. During the start-up phase of business,

the In-Tech Production Facilities had yet to achieve the necessary scale of production to allow

them to fully utilise their installed manufacturing capacity. Also, with the impact of the

COVID-19 pandemic, the In-Tech Production Facilities were forced to stop operation for a

period and operate with constrained headcount for a period during which limited production

took place while fixed costs were incurred. The Organisation for Economic Co-operation and

Development has published Transfer Pricing Guidance, and Guidance on Transfer Pricing

Implications of the COVID-19 Pandemic, for tax authorities and multinational enterprises to

find solutions to transfer pricing cases under the circumstances in COVID-19 pandemic. After

eliminating the COVID-19 and start-up cost impacts, the three-year weighted average full cost

markup generated by the In-Tech Dongguan from its cross-border intra-group transactions

during the Track Record Period were within the arm’s length profit ranges. Our Production

Facility in Malaysia (In-Tech Enterprise Malaysia) made a voluntary disclosure to the local tax

authority to voluntarily adjust its transfer pricing position taking into account start-up costs and

idle capacity. In-Tech Enterprise Malaysia has taken the necessary action to obtain

endorsement from the local tax authority under the local transfer pricing framework to comply

with the arm’s length principle. Based on the transfer pricing review conducted with reference

to the descriptions our management provided above, the Independent Transfer Pricing Expert

is of the view that we have been in compliance with the relevant transfer pricing laws and

regulations in Hong Kong, the PRC and Malaysia during the Track Record Period.

We adopted the arm’s length principle to determine the selling prices of the intra-group

transactions among our Group after taking into account their respective responsibilities for

driving the economic activity to apportion reasonable profits among these entities according to

their roles and functions within our Group and the costs involved. Based on the aforementioned

transfer pricing review and after consultation with the Independent Transfer Pricing Expert, our

Directors are of the view that the intra-group transactions conducted between In-Tech group

entities during the Track Record Period satisfied the arm’s length principle from Hong Kong,

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PRC and Malaysian transfer pricing perspectives, and potential additional tax liability in

relation to transfer pricing for our Group, if any, should not be material. In addition, In-Tech

Electronics HK, In-Tech Dongguan, In-Tech Shenzhen Science & Technology and In-Tech

Enterprise Malaysia have prepared contemporaneous transfer pricing documentation for each

year for which the intra-group transactions conducted during the Track Record Period have

exceeded the relevant transfer pricing documentation thresholds, of which our management

(after consultation with our Independent Transfer Pricing Expert) confirms that our Group are

in compliance with the applicable transfer pricing regulations in Hong Kong, the PRC, and

Malaysia. Based on the foregoing, our Directors are of the view, and the Sponsor has

concurred, that our Group is in compliance with the applicable transfer pricing laws and

regulations in Hong Kong, the PRC and Malaysia including the transfer pricing documentation

requirements according to the applicable regulations. As confirmed by our Directors, our

Group’s transfer pricing arrangements have not been challenged or investigated by any relevant

tax authority in Hong Kong, the PRC, or Malaysia during the Track Record Period and up to

the Latest Practicable Date.

We have taken various measures to ensure our ongoing compliance with relevant transfer

pricing laws and regulations in jurisdictions where we operate, including: (i) identification of

updates on transfer pricing laws and regulations and assessment of related risks on our Group;

(ii) regular review on transfer pricing policy and exposure; (iii) monitoring the implementation

of internal control policy on tax-related matters, including ensuring the intra-group

transactions are properly recorded, filed and maintained for inspection to avoid any

discrepancy before any filing to the relevant tax authorities; and (iv) designating our

accounting manager to regularly monitor intra-group transactions and report to our Executive

Director overseeing financial management of our Group to ensure such transactions can satisfy

with the arm’s length principle. Given that the relevant intra-group related party transactions

have been in compliance with the relevant transfer pricing laws and regulations in Hong Kong,

the PRC and Malaysia during the Track Record Period based on our Independent Transfer

Pricing Expert’s review mentioned above, our Independent Transfer Pricing Expert is of the

view that the above transfer pricing measures are sufficient to ensure future compliance from

the transfer pricing perspective if the management continue to fully implement those measures.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE

Governance on environmental-related risks, climate-related risks and opportunities, andsocial responsibilities, including the respective roles and extent of involvement of ourDirectors and senior management

We acknowledge our environmental and social responsibilities and are aware of the

climate-related issues that may have an impact on our business. We are committed to

environmental, social and governance (“ESG”) reporting requirements upon [REDACTED].

We have established an ESG policy (the “ESG Policy”) in accordance with the standards of

Appendix 27 to the Listing Rules which outlined, among others, (i) the appropriate risk

identification on environmental, social and climate-related risks and opportunities; (ii)

Establishment of communication channels with key stakeholders for our ESG related risk

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assessment; (iii) ESG target setting and strategy formation procedures; (iv) ESG risk

management and monitoring; and (v) the identification and disclosure of key performance

indicators (“KPIs”), the relevant measurements and mitigating measures.

Our ESG Policy also sets out the respective responsibility and authority of different

parties in the above processes. Our Board is responsible for overseeing and determining our

ESG-related, climate-related and social-related risks and opportunities, establishing our ESG

Policy, setting our ESG-related goals and targets on climate-related issues such as Greenhouse

Gas (“GHG”) emissions and air emissions, ensuring the appropriate and effective ESG risk

management and internal control mechanisms in place and reviewing our performance

regularly against ESG-related targets and revising the ESG strategies as appropriate if

significant variance from the target is identified. Our Board has established an ESG committee

(the “ESG Committee”) that is comprised of four members from management, which include

Cheung Wing Kin, Ho Wun Man Terence, Chen Xue Fen and Ng Beng Hooi and is chaired by

Cheung Wing Kin. Our ESG Committee serves a supportive role to our Board in implementing

the agreed ESG policy, targets and strategies, conducting materiality assessments of

environmental-related, climate-related, social-related risks and assessing how we adapts our

business in light of climate change, collecting ESG data from different parties while preparing

for the ESG report, and continuous monitoring of the implementation of measures to address

our ESG-related risks and responsibilities. Our ESG Committee is also responsible for the

investigation of deviation from targets and liaising with the responsible party or functional

department to take prompt rectification actions. Our ESG Committee reports to our Board on

an annual basis via board meeting on our ESG performance and the effectiveness of these ESG

systems and our Audit Committee assists our Board to review our ESG-related risk

management systems, including climate-related risks.

The actual and potential impact of environmental-related and social-related risks andclimate-related issues on our business, strategy and financial performance

Our operations at production facilities are subject to certain environmental requirements,

including primarily those in relation to air, water, noise and solid waste pollutions, as well as

production safety and labour protection requirements pursuant to the laws of the PRC. See

“Regulatory Overview” for a description of the key relevant laws and regulations that we

should abide by.

If we breach any environmental-related and social-related law or regulation, or face any

accusation of negligence in environmental, labour protection or product quality, in addition to

the potential fines and penalties, such incidents may also adversely affect our reputation and

creditability. Our business opportunities may be negatively impacted, for instance, when

engaging with existing and potential customers, as they may be less willing to purchase from

us because of our reputational damage and loss of creditability.

During the Track Record Period and up to the Latest Practicable Date, we were not aware

of any materials actual environmental-related or social-related risks that negatively impacted

our business and financial performance. To the best knowledge and belief of our Directors,

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there were no material non-compliance or violations of environmental protection, production

safety, and labour protection laws and no regulations currently existing or persisting that could

materially and adversely affect our business operations and financial conditions. Our PRC

Legal Advisors and our Malaysian Legal Advisors have advised that during the Track Record

Period and up to the Latest Practicable Date, we have complied with applicable environmental

laws and regulations in all material aspects.

Apart from the environmental-related and social-related risks, we have also identified the

potential acute and chronic physical risks from climate change, such as extreme weather

conditions like flooding and storms for the former and sustained higher temperature for the

latter, which may lead to potential adverse financial implication for us. Our production

facilities are located in Dongguan City of Guangdong Province in the PRC, and Bayan Lepas

and Batu Kawan of Penang in Malaysia. Our production facilities in Malaysia are located near

the coast area, hence it may be subject to the risk of flooding and storms that could result in

direct damage to our assets. Upon evaluation of the above potential implication that could

cause disruption to our manufacturing and production, our Dongguan production facilities are

not located along the river or coast area. Moreover, our production facilities have not been

impacted and there has been no cases of damage to our assets due to extreme weather

conditions such as flooding and storms.

We have established and implemented various internal control measures regarding

environmental compliance and pollution controls. We have (i) engaged four qualified waste

disposal companies in our PRC production facilities for the disposal of the solid waste and the

wastewater generated during our production process and (ii) completed environmental

approval procedures as required. Based on the past experience of our management team, the

nature of the industry and future developments of the industry, our Directors believe that our

current environmental measures are adequate to satisfy the relevant laws and regulations and

do not expect any major or significant expenditure to be incurred in the future.

The transition to a lower carbon economy governed by new and tightened environmental

regulations, and the associated innovations in energy efficient materials, processes and

operations, may contribute to increased cost of goods and services. This transition risk could

affect the costs and lead-times of the materials used by the company such as printed circuit

boards, displays and plastics amongst others. In addition, the tightening environmental

regulations from different governments, such as the PRC government, has drawn attention to

the need to protect the environment and implement measures to minimise harmful practices.

Such measures will require for example the smart real-time monitoring of utilities, local energy

storage and generation, and this in turn could provide opportunities for the IoT products we

produce such as smart utility meters and trackers.

During the Track Record Period and up to the Latest Practicable Date, we had not

received any notifications or warnings from governments (including the PRC government and

Malaysian government) and were not subject to any fines or penalties in relation to any breach

of any applicable environmental laws, regulations and policies which had materially and

adversely affected our financial condition or business operations.

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How we identify, assess and manage environmental-related risks, social-related risks andclimate-related issues

We will conduct enterprise risk assessment on ESG related aspects at least once a year to

cover the current and potential risks arising during our operation, including, but not limited to,

the risks and impacts arising from the ESG aspects, including environmental-related risk,

social-related risk and potential acute and chronic physical risks from climate change. Our

Board and ESG Committee will access or engage Independent Third Parties to evaluate the

risks and review our existing strategy, target and internal controls, and necessary improvement

will be implemented to mitigate the risks.

Our Board and ESG Committee will also identify the material environmental, social and

climate-related issues highly related to our business and operation, with reference to the

materiality maps provided by well-known external institutions including the ESG Industry

Materiality Map by MSCI and SASB Materiality Map by Sustainability Accounting Standards

Board (SASB) through our internal materiality assessment, which includes the overall mission

and competitive strategy, corporate values, policies, strategies, operational management

systems, impact assessments, goals and targets; laws, regulations, international agreements, or

voluntary agreements of strategic significance to the issuer; main topics and future challenges

to our sector, particularly taking into account relevant guidance and resources that are

available. We will also establish communication channels with different stakeholders, so that

we can review the issues material to each stakeholder and monitor how our environmental,

social and climate-related performance has impacted different stakeholders. Stakeholders are

the entities or individuals depending on our business, industry and other factors, including but

not limited to, customers and potential customers, employees, government and regulators, local

communities and suppliers.

Material Issues Potential Risks, Opportunities and Impact

Air emission and Greenhouse Gasemissions arising from dailyoperation such as the use ofelectricity, water resources,consumption of gaseous fuels etc.

Ineffective management of usage of electricity, water resources andconsumption of gaseous fuels may put us at risk of violating airemission, Greenhouse gas emission and pollutants regulations set bydifferent governments, and we may receive warnings and fines.

Water & wastewater management Inefficient water and wastewater management may put us at risk ofbeing non-compliant with relevant laws and regulations, which mayin turn lead to potential increase of compliance costs and costs toupgrade current water and wastewater treatment facilities.

Product quality control We have been awarded several ISO certificates such as ISO 9000,ISO 9001, ISO 13485 which set out the standards of qualitymanagement systems. We have also sent our product for testing toensure product quality as well as quality control. Failure to fulfill theISO requirements may affect the reputation of our product quality.

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Material Issues Potential Risks, Opportunities and Impact

Occupational health and safety The health and safety of employees may be put at risk due toclimate-related issues such as increasingly frequent extreme weatherconditions. We have purchased Group Personal Accident Insurancefor additional coverage for our employees for the sake of protectingtheir occupational health and safety, and our Safety ProductionCommittee also monitors the occupational health and safety in thearea of our production facilities.

Community investment We are actively involved in community investment and services. Wehave donated and intend to continue to donate to “In-Tech CharitableFund”, a charity founded by Mr. Albert Ho, the chairman of ourBoard, our chief executive officer and executive Director, and someshareholders of Source Capital, to support different non-governmental organisations and the needy.

Our ESG strategy, climate-related risks and opportunities identified over the short,medium, and long term, and their impact on our business, strategy and financial planning

In response to the climate-related risks and opportunities as mentioned in the above

subsection “- The actual and potential impact of environmental-related and social-related risks

and climate-related issues on our business, strategy and financial performance”, which is the

physical risk and transition risk our Board and ESG Committee will evaluate the likelihood of

occurrence and the estimated resulting impacts over short-term (current annual reporting

period), medium term (1-4 years) and long-term (5-10 years) horizons. The decision to

mitigate, transfer, accept or control a risk is influenced by various factors such as the

production facilities location, development of business operation, and environmental

regulations and policy published by the governments. We will incorporate physical and

transition risk analysis into our risk assessment and materiality assessment process. If the risks

or opportunities are considered to be material, we will incorporate it into our strategy and

financial planning process. We expect the extreme weather condition for potential physical

risks and change in environmental regulations and policy for potential transition risks, do not

have a material impact on our operation in the short term and medium term. We have set targets

and implemented relevant measures for reduction in GHG emissions and other gas emissions.

We aim to minimise the transition risk in the long-term by installing environmentally friendly

and energy efficient machineries for production and waste disposal processing as we are

striving through to reach our emission reduction targets while also striving for improvement for

our financial performance. Upon our annual assessment of our Board and ESG Committee on

our preset targets and the short-term, medium term and long-term impact for our business

operation and changes of environmental-related issues and regulations, our ESG strategies and

financial planning may be revised.

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The metrics and targets used to assess and manage such risks and issues

Our Board will set targets for each material KPI at the beginning of each financial year

in accordance with the disclosure requirements of Appendix 27 to the Listing Rules and other

relevant rules and regulations upon [REDACTED]. The relevant ESG targets on material KPIs

will be reviewed on an annual basis to ensure that they remain appropriate to our needs.

Emissions and consumption

The table below sets forth a breakdown of our air emission:

Types of Emission Datato be disclosed FY2020 FY2021 FY2022

Nitrogen Oxides (“NOx”)(1) (kilogram) 85.4 46.8 699.6Sulphur Oxides (“SOx”)(1) (kilogram) 0.7 0.1 0.04Total air emission (kilogram) 86.0 46.9 699.6Emission intensity(1)

(kilogram per HK$1,000,000 of revenue) 0.1 0.03 0.3

Notes:

1. Refers to the air emissions resulting from the consumption of fuel in our operations

2. Refers to the emission of gas in kilogram per HK$1 million of revenue.

We emit gas in our daily operations from the consumption of gaseous fuels, such as wastegas including NOx and SOx. We had emitted a total of approximately 86.0 kilogram, 46.9kilogram and 699.6 kilogram of air emission for FY2020, FY2021 and FY2022 respectively.Our emission intensity was 0.1 kilogram, 0.03 kilogram and 0.3 kilogram per HK$1 million ofrevenue for FY2020, FY2021 and FY2022, respectively. The increase in NOx emissions inFY2022 was mainly due to the consumption of diesel oil by using our backup generators tosupport our PRC production facilities during the power shortages in the PRC.

We plan to set a target to maintain the emission intensity level of gas emissions notexceeding the level of FY2022 for FY2025 as we expect to reduce reliance on our backupgenerators in the event of a power shortage in the PRC, due to the recent installations of solarpanels in our PRC production facilities.

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The table below sets forth a breakdown of our greenhouse gas emission:

Types of Emission Datato be disclosed FY2020 FY2021 FY2022

Direct emission (Scope 1)(1) (tonnes) 348.1 156.7 181.3Indirect emission (Scope 2)(2) (tonnes) 9,729.2 11,246.5 10,920.3Other indirect emissions

(Scope 3)(3) (tonnes) 208.9 114.4 116.9Total emission (tonnes) 10,286.1 11,517.5 11,218.5Emission intensity(4) (tonnes per HK$1,000,000

of revenue) 7.4 6.4 5.4

Notes:

1. Refers to the GHG emissions which include carbon dioxide, methane and nitrous oxide emissionattributed to the consumption of fuel in our Group’s daily operations including emission during the useof refrigeration and air conditioning equipment.

2. Refers to GHG emissions which include carbon dioxide emission attributed to the electricity purchased,taking into account the relevant emission rates, which exclude external service providers.

3. Refers to GHG emissions which include carbon dioxide emission attributed to the paper waste disposedat landfills, electricity used for processing fresh water and sewage by government departments andbusiness air travel by employees, taking into account the relevant emission rates, which exclude externalservice providers. We assumed the purchased electricity consumption per unit volume of sewage treatedrefers to the Sustainability Report of Drainage Services Department in Hong Kong for all the PRC andMalaysia operating units.

4. Refers to the emission of gas in tonnes per HK$1 million of revenue.

We generate direct, indirect and other emissions of GHG mainly due to consumption offuel and electricity. During the Track Record Period, our total GHG emission was 10,286.1tonnes, 11,518.5 tonnes and 11,212.9 tonnes for FY2020, FY2021 and FY2022 respectively.Our emission intensity was 7.4, 6.4 and 5.4 tonnes per HK$1 million of revenue for FY2020,FY2021 and FY2022 respectively.

BUSINESS

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We plan to set a target to reduce the emission intensity level of GHG emissions by 2%to the level of FY2022 for FY2025.

The table below sets forth a breakdown of our resource consumption:

Type of consumption FY2020 FY2021 FY2022

Electricity consumption(megawatt hour, mWh) 12,489.0 14,740.2 14,691.9

Electricity consumption intensity(1) (megawatthour, mWh per HK$1,000,000 of revenue) 9.0 8.2 7.0

Water consumption (m3) 214,249.4 158,411.1 137,940.8Water consumption intensity(1)

(m3/per HK$1,000,000 of revenue)) 153.6 87.9 66.0

Note:

1. Refers to the emission of gas in tonnes per HK$1 million of revenue.

We consume approximately 12,489.0 mWh, 14,740.2 mWh and 14,691.9 mWh of

electricity for FY2020, FY2021 and FY2022. We had consumed approximately 214,249.4 m3,

158,411.1 m3 and 137,940.8 m3 of water resources for FY2020, FY2021 and FY2022.

We have set up our goal to avoid or reduce the adverse impact to the environment caused

by our operations, products, and services; formulated environmental management plans to

continuously improve and prevent pollution from daily operations and ensure all of our

operations comply with governmental environment related regulations and requirements.

Moreover, we encourage all staff to reduce the production of paper waste, reduce consumption

of water resources and electrical appliances by posting environmental reminder labels on our

electrical appliances and in our office area.

We regularly review our electricity and water consumption level and consider different

methods to reduce energy consumption. We have set a target to reduce both our electricity

consumption intensity and water consumption intensity by 2% respectively for FY2025.

We have adopted measures to mitigate the aforementioned physical risks and transition

risk for environmental-related and climate-related issues. During our production process,

sewage is released and different greenhouse gasses are emitted, therefore, over the Track

Record Period, we have invested approximately RMB0.6 million (equivalent to HK$0.7

million) in a variety of environmental protection equipment, such as an environmental waste

gas system, water reuse system and flue gas purification equipment etc. to reduce and prevent

further emission of greenhouse gas and sewage to the environment during production. Apart

from investing in environmental equipment, we have also adopted several measures to mitigate

the emissions and greenhouse gas produced, including, but not limited to, spraying water on

the surface of dusty material before, during and after production, proper and regular

maintenance of equipment to keep their efficiency and reduce energy consumption, switch off

BUSINESS

– 258 –


all electronic equipment when it is not in operation, and turn off lighting facilities during lunch

time. We have also adopted several measures to reduce wastage including reusing and

recycling materials whenever applicable, establishment of a paperless working environment

and categorising waste to identify reusable and recyclable materials.

Product quality control

We put much emphasis on product quality control and are dedicated to continuously

improving our products and services to satisfy our customers’ needs and comply with

applicable regulatory requirements. For details of our certifications, please see “Business –

Certifications”. We are accredited with ISO 9000, ISO 9001, ISO 13485, ISO 14000, ISO

14001, ISO 45000, and ISO 45001 for our production facilities. We also have a wide set of

certifications to support varied industries, including IATF16949 (needed to support the

automotive industry) and Nadcap and AS9100 (needed to support the aerospace industry). We

have a fully ISO 17025 accredited reliability testing laboratory located at our facilities in our

PRC production facility, allowing us to carry out a wide range of testing and validation to

ensure our products perform according to customer specifications and internal customer

reliability standard, and comply with standards set by relevant agencies. During the Track

Record Period and up to the Last Practicable Date, there is no product sold or shipped that had

been recalled for safety and health reasons. We aim to provide prompt response to our

customers through our Quality Assurance Department upon receiving customer’s complaint.

An improvement plan is provided to the customer after investigation. We target to continuously

sustain our accreditation by the external authoritative regulatory agencies and maintain a low

amount of product related complaints and product recall incidents arising from safety and

health reasons.

Occupational health and safety

Ensuring a safe occupational environment is vital to us and we have adopted various

internal policies and preventive measures, including but not limited to:

• providing regular fire and safety drills;

• providing regular health and safety training;

• equipping our production plants and facilities with fire service equipment;

• providing personal protective gear (such as protective mask, safety goggles, gloves,

shoes etc.) for our production staff in the PRC and Malaysia production facilities as

well as our workshop in Hong Kong;

• displaying the relevant safety and operation guidelines for hazardous chemicals atour production facilities;

BUSINESS

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• preparing contingency plans and guidelines for work safety and hazardous incidents;and

• displaying the relevant safety guidelines for production workers inside ourproduction facilities.

During the Track Record Period, we did not have any work-related fatalities, but had 10work-related injury cases and had a total of 195 days lost due to work injury. We target tocontinuously provide a safe working environment and maintain a clean record of work-relatedfatality case and maintain a record of low injury cases in the future.

Community Investment

A charitable fund “In-Tech Charitable Fund” was founded on 16 February 2004 by Mr.Albert Ho, the Chairman of our Board, our chief executive officer and executive Director, andsome shareholders of Source Capital as a charitable institution or trust of a public character inHong Kong for supporting different non-governmental organisations and the needy. During theTrack Record Period, such charitable fund donated approximately HK$11,103,000,HK$8,869,000 and HK$3,755,000 for FY2020, FY2021 and FY2022, respectively to supportdifferent non-governmental organisations and the needy. Apart from such charitable fund, wehad also donated a total of RMB85,200 and MYR39,000 to different charity organisations.Besides donations, we and our employees have also participated in various charity activities toserve the community, promote corporate social responsibility and bring positive impact to thesociety. During the Track Record Period, we had spent in total of 2,245 hours participating inthe different charitable activities to serve the community. We will continue to serve thecommunity, bring positive impact to society through participating in charity activities, andmake donations through our charitable fund to help the community and the needy.

Our Board, ESG Committee and Audit Committee will oversee our performance inachieving ESG targets and objectives, investigate the reason for deviation and revise our ESGstrategy as appropriate significant variance from the target is identified.

SOCIAL, HEALTH AND SAFETY MATTERS

We are required to comply with various occupational health and safety laws andregulations in Hong Kong, the PRC and Malaysia. Our Group has implemented measures topromote occupational health and safety and to ensure compliance with applicable laws andregulations. As disclosed in “– Licences and Permits” and “– Certifications”, we have licencesand certifications to comply with health and safety issues, including ISO 45001 and 14001certifications for our health and safety management system and for our environmentalmanagement system, respectively, ICTI certification for ethical and sustainability standards inthe global toy industry supply chain.

BUSINESS

– 260 –


Our human resources team will, if necessary, adjust our human resources policies to

accommodate material changes to relevant labour and work safety laws and regulations. We

published booklets with occupational health and safety for circulation to our employees to raise

awareness of occupational health and safety among our employees. We have established a

series of safety guidelines, rules and procedures for different aspects of our production

activities, including fire safety, warehouse safety, work-related injuries and emergency and

evacuation procedures.

During the Track Record Period, we did not experience any accidents or claims for

personal or property damage that, individually or in aggregate, had a material effect on our

financial condition and results of operations. As confirmed by our Directors, we had complied

with all applicable national and local safety laws and regulations in all material respects during

the Track Record Period and up to the Latest Practicable Date, and the relevant PRC

authorities, Hong Kong authorities and Malaysian authorities have not imposed any material

sanctions or penalty on us for incidents of non-compliance of any safety laws or regulations

in the PRC and Malaysia.

EMPLOYEES

As at 31 March 2022, we employed 2,309 full-time employees. The following table sets

out the number of employees by function as at 31 March 2022.

Function Employees

Engineering 326G&A 165Information Technology 24Manufacturing 1,255Materials and Logistics 242Sales and Marketing 36Quality Control and Quality Engineering 261

Total Headcount 2,309

Of our 2,309 employees as at 31 March 2022, 79 were based in Hong Kong, 175 were

based in Shenzhen, 1,561 were based in Dongguan and 494 were based in Penang.

We generally remunerate our employees with basic salaries as well as performance-based

bonuses. We determine employee compensation based on each employee’s performance and

relevant qualifications and experience. Employee compensation will be reviewed on an annual

basis and any increases will be determined with reference to employee appraisals and our

overall profitability. Certain of our sales and marketing personnel also receive commissions on

a quarterly basis based on the gross margins generated by the key accounts they manage.

BUSINESS

– 261 –


We recruit our employees through various means, including online channels, internal

referrals and recruitment agencies. We enter into individual employment contracts with all our

employees. Such employment contracts are generally in standard form, and contain terms

covering their positions, job duties, salaries and other employee benefits.

We provide distinct training programmes for employees at different positions. We offer

both introductory and on-going training for our staff, depending on the type of skillset required

for their job. Our introductory programmes offered to our staff start with an introduction to our

internal regulations and company rules, followed by teamwork training, technical training and

safety training. We support our staff with regular, customised training aimed at enhancing the

technical skills and/or business efficiency skills of our staff and enhancing their role as part of

a team and/or part of society. Our comprehensive roadmap of internal training includes training

in IPC, 6-Sigma, KT and MBTI and training delivered by accredited/certified in-house trainers

or external parties. Most of our teams offer training tailored towards the skill set required in

a particular team and we also train staff so that they themselves become accredited trainers.

Our Directors believe that our corporate culture, working environment and employee

benefits have together contributed to good employer-employee relations and successful

employee retention. During the Track Record Period and up to the Latest Practicable Date, we

did not experience any disruption to our operations due to any labour disputes or experienced

any difficulty in the recruitment and retention of employees.

Dispatched workers

During the Track Record Period, we engaged labour dispatching agents to provide us with

dispatched workers to fill certain non-essential positions, such as general labourers, warehouse

staff, and janitorial and groundskeeping staff. Given the relatively high turnover rate of labour

in the manufacturing industry, we believe that our engagement of dispatched workers for

temporary, auxiliary, and substitutable positions can help us enhance our operational efficiency

and flexibility, and improve our labour and recruitment costs.

INTELLECTUAL PROPERTY

The management of and respect for intellectual property rights are fundamental to our

business, and we devote significant time and resources to their development and protection

both with regard to ourselves and our customers. We rely on our patents and trademarks as well

as confidentiality agreements and contractual provisions, to maintain and protect our

proprietary technology and that of our customers without infringing upon the proprietary rights

of others. Thus, we have engaged an agent in the U.S. to manage our portfolio of intellectual

property rights.

Intellectual property rights for the products we produce are typically set out in the

agreements between us and our customers and can vary according to which party was the

design authority, and which party developed the manufacturing process, among other factors.

Typically such rights are owned and retained by the customer to the extent that the rights arise

BUSINESS

– 262 –


from specifications and equipment provided by the customer, are derived from an improvement

upon our customers’ intellectual property rights, or are jointly developed by the relevant

customer and us. The customer agrees to authorise us to use their intellectual property rights

to the extent that we need in order to perform our obligations under the agreement. Intellectual

property rights we solely develop or create in connection with the production of the products

are typically owned and retained by us. We safeguard our customers’ intellectual property

rights by ensuring that only project members working on that project will have access to a

customer’s intellectual property when needed, and work with our customers on any specific

requirements they have on managing and protect their intellectual property rights.

As at the Latest Practicable Date, we had registered one patent in the PRC, one patent in

Hong Kong, nine patents in Europe and eight patents in the U.S. We had also submitted five

patent applications in the PRC, four patent applications in Europe and three patent applications

in the U.S. As at the Latest Practicable Date, we had successfully registered our trademark in

Hong Kong and had submitted seven trademark application in the U.S.. As at the Latest

Practicable Date, we were the registered owner of one domain name which we believe is

material to our business. For details, see “Statutory and General Information – B. Further

Information about Our Business – 2. Intellectual Property Rights of Our Group” in Appendix

V to this document.

To the best of our Directors’ knowledge after due enquiry, during the Track Record Period

and up to the Latest Practicable Date, there had been no material dispute or infringement of our

trademarks by third parties, nor had we infringed any trademarks and patents owned by third

parties.

LEGAL PROCEEDINGS AND COMPLIANCE

We are subject to legal proceedings, investigations and claims arising in the ordinarycourse of our business from time to time. To the best of our Directors’ knowledge after dueenquiry, as at the Latest Practicable Date, we were not involved in any material litigation orarbitration proceedings, nor were any such litigation or arbitration proceedings pending or, toour knowledge, threatened against us or any of our Directors that could have a material andadverse effect on our business, financial condition or results of operations.

In September 2020, In-Tech Electronics HK filed a lawsuit at the United States Court ofInternational Trade against, among others, the United States Trade Representative to seek arefund of supplemental duties we paid resulting from a series of additional tariffs imposed bythe United States Trade Representative on selected Chinese-origin products in 2018 and 2019.The supplemental duties in question exclusively related to products which In-Tech ElectronicsHK had imported into the U.S. and ultimately sold to Customer F and while they had been paidby us as the importer of record, the cost of such supplemental duties had been reimbursed tous by Customer F. While In-Tech Electronics HK was the named plaintiff, pursuant to aseparate agreement with Customer F the lawsuit is being conducted under the direction and atthe cost of Customer F, and any eventual recovery has been assigned to Customer F.Customer F is covering all legal and other costs associated with this lawsuit, and as of the

BUSINESS

– 263 –


Latest Practicable Date we had not incurred any costs in connection with the lawsuit. CustomerF has also agreed to indemnify us against any liability, damage, and loss arising out of thelawsuit. As of the Latest Practicable Date, this matter had not been resolved. Our Directors areof the view that our involvement in this lawsuit is limited in nature and that this lawsuit, andits eventual outcome, is unlikely to materially and adversely affect our Group. Although wemay be entitled to recover substantial duties paid on behalf of our customers should the lawsuitultimately be successful (the filing relates to supplemental duties paid of approximatelyUS$6.0 million), since we have already been reimbursed for these duties and have assigned anyproceeds from the litigation to the Customers involved, our Directors are of the view that thelitigation will not have a material impact on our operations, whichever result occurs. Further,while we cannot predict when a result might occur, no resolution of the legal actions relatingto these tariffs is expected in the near future. Currently, In-Tech Electronics HK’s lawsuit hasbeen temporarily suspended, like the other similar lawsuits by plaintiffs seeking refunds of theadditional tariffs on Chinese-origin products under section 301 of the Trade Act of 1974, whilea sample case is being litigated for purposes of the Court’s initial consideration and resolutionof the broad class of plaintiffs’ claims. The sample case is pending a final determination by theCourt.

Save as disclosed in this section below, as confirmed by our Directors and as advised byour PRC Legal Advisers, Malaysian Legal Advisers and Hong Kong Legal Advisers, during theTrack Record Period and up to the Latest Practicable Date, we were in compliance with allapplicable PRC, Malaysia, and Hong Kong laws and regulations relating to our businessoperations in material respects.

Set forth below is a summary of incidents of our non-compliance with applicable laws andregulations during the Track Record Period. Our Directors are of the view that none of suchincidents are material in nature, and that such incidents do not reflect negatively on the abilityor tendency of our Company, the Directors or our senior management, to operate our businessin a compliant manner. Having considered the facts and circumstances leading to thenon-compliance incidents as disclosed in this section, and our enhanced internal controlmeasures to minimise the risk of recurrence of any such non-compliance incidents, ourDirectors are of the view, and the Sole Sponsor concurs, that the enhanced measures aresufficient and effective and we now have adequate and effective internal control procedures inplace, and that our past non-compliance incidents will not affect the suitability of the Directorsto act as directors of a [REDACTED] issuer under Rules 3.08, 3.09, and 8.15 of the ListingRules, and the suitability for [REDACTED] of our Company under Rule 8.04.

BUSINESS

– 264 –


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BUSINESS

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BUSINESS

– 266 –


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In-Te

chDo

nggu

anwa

ssu

bject

toa

fine

ofRM

B15,0

00.

In-Te

chDo

nggu

anpa

idthe

fineo

fRM

B15,0

00in

July

2020

.We

have

review

edou

rinte

rnalc

ontro

lpoli

ciesa

ndha

veen

hanc

edint

ernal

contr

olme

asures

toen

sure

comp

lianc

ewith

custo

mslaw

san

dto

ensu

resu

chcle

rical

errors

dono

tocc

urag

ain.T

hese

measu

resinc

lude:

(i)we

have

,and

will

conti

nuet

o,co

mmun

icate

toou

rstaf

fthe

impo

rtanc

eof

filing

accu

rate

custo

msde

clarat

ionfor

ms;a

nd

(ii)

ourq

ualit

yassu

rance

depa

rtmen

tand

ours

ecuri

tygu

ards

cross-

chec

kthe

pack

edpro

ducts

with

thepa

cking

lista

ndthe

custo

msde

clarat

ionfor

mpri

orto

subm

ission

.

BUSINESS

– 267 –


No.

Non-

comp

lianc

einc

ident

Lega

lcon

seque

nces

and

poten

tialm

axim

umpe

nalty

Reme

diala

ction

sand

their

statu

saso

fthe

Lates

tPr

actic

able

Date

Enha

nced

inter

nalc

ontro

lmea

sures

topr

even

trec

urren

ceof

non-

comp

lianc

e

3.In-

Tech

Shen

zhen

Scien

ce&

Tech

nolog

yha

dno

tcom

pleted

thereg

istrat

ionfil

ingof

thelea

seco

ntrac

tin

relati

onits

sole

leased

premi

ses.

Inad

dition

,the

cons

tructi

onun

itof

thepre

mises

inqu

estion

,SZ

TCL,

had

not

comp

leted

theins

pecti

onan

dac

cepta

nce

ofco

mplet

ionof

cons

tructi

onof

thepre

mises

while

In-Te

chSh

enzh

enSc

ience

&Te

chno

logy

and

In-Te

chSh

enzh

enR&

Dha

dused

thepre

mises

.

Asthe

cons

tructi

onun

it,SZ

TCL,

had

not

comp

leted

theins

pecti

onan

dac

cepta

nce

ofco

mplet

ionof

cons

tructi

onof

thepre

mises

leased

toIn-

Tech

Shen

zhen

Scien

ce&

Tech

nolog

y,thi

smi

ght

rende

rIn-

Tech

Shen

zhen

Scien

ce&

Tech

nolog

yun

able

tous

ethe

leased

office

premi

sesin

acco

rdanc

ewi

ththe

lease

enter

edint

owith

theles

sora

ndren

derI

n-Tec

hShe

nzhe

nR&

Dun

able

toco

ntinu

eto

use

thepa

rtof

theab

ove

office

premi

ses.

Inad

dition

,In-

Tech

Shen

zhen

Scien

cean

dTe

chno

logy,

havin

gno

tye

tcom

pleted

thereg

istrat

ionfil

ingof

thelea

seco

ntrac

tma

ybe

liable

torec

tifica

tion

orders

issue

d,by

therel

evan

tgov

ernme

ntau

thorit

ies.

Shou

ldIn-

Tech

Shen

zhen

Scien

cean

dTe

chno

logy

failt

oco

mply

with

any

such

orders

intim

e,it

may

befur

thers

ubjec

tto

afin

eof

RMB1

,000t

oRM

B10,0

00.

Asof

theLa

testP

ractic

able

Date,

wewe

reno

tawa

reof

any

actua

lofc

ontem

plated

actio

ns,c

laims

orinv

estiga

tions

byan

ygo

vernm

ental

autho

rities

again

stus

with

respe

ctto

thelea

sedpre

mises

.

Our

PRC

legal

advis

er,ac

ting

onou

rbe

half,

cond

ucted

anint

erview

with

theHo

using

and

Cons

tructi

onBu

reau

ofSh

enzh

enNa

nsha

nDi

strict

(深圳市

南山區住

房和建設

局)(“t

heBu

reau”

)on

3Se

ptemb

er20

21an

dthe

interv

iewed

office

rcon

firme

dtha

t(i)

theBu

reau

hasn

oob

jectio

nto

theus

eof

theoff

icepre

mises

byIn-

Tech

Shen

zhen

Scien

ce&

Tech

nolog

yan

dIn-

Tech

Shen

zhen

R&D

and

itag

rees

that

In-Te

chSh

enzh

enSc

ience

&Te

chno

logy

and

In-Te

chSh

enzh

enR&

Dca

ncon

tinue

tous

ethe

abov

eoffi

cepre

mises

withi

nthe

valid

ityof

thelea

seco

ntrac

t;(ii

)wi

thin

thesu

pervi

sion

scope

ofthe

Burea

u,it

has

noti

mpos

edan

ypu

nishm

ento

rinv

estiga

tedan

yres

pons

ibilit

yfor

theus

eof

theab

ove

office

premi

sesto

In-Te

chSh

enzh

enSc

ience

&Te

chno

logya

ndIn-

Tech

Shen

zhen

R&D,

andw

illno

timp

ose

anyp

unish

ment

orinv

estiga

tean

yresp

onsib

ility

inthe

future

;an

d(iii

)In-T

echS

henz

henS

cienc

e&Te

chno

logya

ndIn-

Tech

Shen

zhen

R&D

have

notb

een

involv

edin

any

violat

ionof

laws,

regula

tions

,rule

san

doth

erno

rmati

vedo

cume

ntson

hous

ingco

nstru

ction

and

cons

tructi

onpro

jectm

anag

emen

t,ha

veno

tbee

nsu

bject

toan

yinv

estiga

tion,

orpu

nishm

ent

relate

dto

hous

ingco

nstru

ction

orco

nstru

ction

projec

tma

nage

ment,

andt

here

areno

relev

antd

ispute

sorc

ompla

ints.

Asad

vised

byou

rPRC

Lega

lAdv

isers,

(i)the

Hous

ingan

dCo

nstru

ction

Burea

uof

Shen

zhen

Nans

han

Distr

ictis

theco

mpete

ntgo

vernm

ent

autho

rity

topro

vide

theab

ove

confi

rmati

ons;

and

(ii)

based

onthe

confi

rmati

onof

theHo

using

and

Cons

tructi

onBu

reau

ofSh

enzh

enNa

nsha

nDi

strict

,the

risko

fIn-T

echS

henz

henS

cienc

e&Te

chno

logy

and

In-Te

chSh

enzh

enR&

Dbe

ingun

able

tous

ethe

leased

premi

sesis

low.

Weha

verev

iewed

ouri

nterna

lcon

trolp

olicie

sand

measu

resan

dha

veen

hanc

edint

ernal

contr

olme

asures

toen

sure

fullc

ompli

ance

with

therel

evan

tlaw

sand

regula

tions

onlea

sing.

These

measu

resinc

lude:

(i)ou

rup

dated

intern

alco

ntrol

polic

iesan

dme

asures

inrel

ation

tolea

sing

ofpre

mises

,set

outt

hat:

(a)be

fore

enter

ingan

yne

wlea

sing

contr

act,

theins

pecti

onan

dac

cepta

nceo

fcom

pletio

nofc

onstr

uctio

nrec

ordsh

ould

beob

taine

dfrom

thelan

dlord

andw

ewill

note

ntera

nyne

wlea

sing

contr

actw

ithlan

dlord

who

does

noth

ave

theins

pecti

onan

dac

cepta

nceo

fcom

pletio

nof

cons

tructi

onrec

ord;a

nd(b)

when

enter

ingan

yne

wlea

sing

contr

act,

thelea

singc

ontra

cttog

ether

with

anyr

equir

eddo

cume

ntssh

ould

besu

bmitt

edto

theloc

alHo

using

andU

rban-R

ural

Cons

tructi

onBu

reau

withi

n30

days

from

theda

teof

enter

ingthe

leasin

gco

ntrac

tfor

regist

ration

filing

purpo

se;

BUSINESS

– 268 –


No.

Non-

comp

lianc

einc

ident

Lega

lcon

seque

nces

and

poten

tialm

axim

umpe

nalty

Reme

diala

ction

sand

their

statu

saso

fthe

Lates

tPr

actic

able

Date

Enha

nced

inter

nalc

ontro

lmea

sures

topr

even

trec

urren

ceof

non-

comp

lianc

e

(ii)

weha

veest

ablis

heda

comp

lianc

eche

cklis

t,co

verin

gthe

proce

dures

menti

oned

in(i)

abov

ean

doth

errel

evan

tpro

cedu

res,f

orus

eon

any

future

premi

selea

sing,

toen

sure

full

comp

lianc

ewi

ththe

relev

ant

laws

and

regula

tions

;

(iii)

wewi

llen

gage

PRC

profes

siona

lsto

provid

etrai

ning

toou

rem

ploye

eson

leasin

g-rela

tedlaw

san

dreg

ulatio

nswh

enne

eded

;

(iv)

wewi

llco

mmun

icate

with

theloc

alHo

using

andU

rban-

Rural

Cons

tructi

onBu

reau

regula

rly,t

oob

tain

regula

rup

dates

relate

dtol

awsa

ndreg

ulatio

nson

leasin

g;an

d

(v)we

have

assign

edou

rris

kma

nage

ment

contr

oller,

curre

ntlyM

r.Che

ungW

ingKi

n,wh

ohas

over

20ye

arsof

expe

rienc

einm

echa

nical

engin

eerin

gand

comp

lianc

e,to

closel

ymo

nitor

and

beres

pons

ible

foron

going

comp

lianc

einr

elatio

ntop

ropert

ymatt

ersan

dtoo

verse

ean

den

sure

theeff

ectiv

eim

pleme

ntatio

nof

ouri

nterna

lco

ntrol

polic

iesan

dmea

sures

.

BUSINESS

– 269 –


No.

Non-

comp

lianc

einc

ident

Lega

lcon

seque

nces

and

poten

tialm

axim

umpe

nalty

Reme

diala

ction

sand

their

statu

saso

fthe

Lates

tPr

actic

able

Date

Enha

nced

inter

nalc

ontro

lmea

sures

topr

even

trec

urren

ceof

non-

comp

lianc

e

4.Pu

rsuan

tto

subs

ectio

n49

A(1)

ofEn

viron

menta

lQua

lityA

ct19

74,a

now

nero

rocc

upier

ofap

remise

shall

emplo

ya

perso

nwh

oha

sbe

ence

rtifie

dbyt

heDi

rector

Gene

ralof

Envir

onme

ntal

Quali

tyas

aco

mpete

ntpe

rson

toco

nduc

tthe

mana

geme

ntof

sched

uledw

astes.

InJu

ly20

19,

theM

alays

ianDe

partm

ento

fEnv

ironm

entc

arried

outa

nins

pecti

onof

thepre

mises

ofIn-

Tech

Elec

tronic

sM

alays

iaan

dind

icated

that

In-Te

chEl

ectro

nics

Mala

ysia

didpro

duce

waste

categ

orised

assch

edule

dwa

ste,t

hedis

posal

ofwh

ichmu

stbe

hand

ledby

acom

peten

tpers

once

rtifie

dby

theDi

rector

Gene

ralof

Envir

onme

ntal

Quali

ty.In-

Tech

Elec

tronic

sMala

ysia

failed

toha

vesu

cha

comp

etent

perso

nin

itsem

ploym

ent

asthe

comp

etent

perso

npre

vious

lyem

ploye

dha

djus

tlef

tthe

comp

any

befor

ethe

inspe

ction

.

Subs

eque

ntly,

theDi

rector

Gene

ralof

Envir

onme

ntal

Quali

tyiss

ued

ano

ticer

equir

ingIn-

Tech

Mala

ysia

toap

point

such

comp

etent

perso

n.

Failu

reto

appo

intac

ompe

tentp

erson

whoh

asbe

ence

rtifie

dby

theDi

rector

Gene

ralof

Envir

onme

ntal

Quali

tyto

cond

uct

thema

nage

ment

ofsch

edule

dwa

stes,

may

result

inim

posit

iona

fine

not

exce

eding

MYR

10,00

0an

d/ori

mpris

onme

ntfor

aperi

odno

texc

eedin

gtw

oyea

rs.

Pursu

ant

tosu

bsec

tion

31(g)

ofEn

viron

menta

lQu

ality

Act1

974,

where

any

envir

onme

ntally

haza

rdous

subs

tance

s,po

llutan

tsor

waste

sare

being

orare

likely

tobe

emitt

ed,d

ischa

rged

orde

posit

edfro

man

ypre

mises

,the

Direc

torGe

neral

ofEn

viron

menta

lQua

litym

ayby

notic

ein

writi

ngreq

uiret

heow

nero

fprem

ises,

adop

tan

yme

asure

tored

uce,

mitig

ate,

dispe

rse,

remov

e,eli

mina

te,de

stroy

ordis

pose

ofpo

llutio

n,wi

thins

ucht

imea

ndin

such

mann

eras

may

besp

ecifi

edin

theno

tice.

Shou

ldIn-

Tech

Elec

tronic

sM

alays

iaco

ntrav

ene

such

notic

e,In-

Tech

Elec

tronic

sM

alays

iama

ybe

found

guilt

yof

anoff

ence

and

may

belia

bleto

afine

note

xcee

ding

MYR

25,00

0or

toim

priso

nmen

tfor

aperi

odno

texc

eedin

gtwo

years

orbo

than

dto

afurt

herf

ineno

texc

eedin

gMYR

1,000

aday

forev

eryda

ytha

tthe

offen

ceis

conti

nued

after

servic

eoft

heno

tice.

InSe

ptemb

er20

19,o

neof

oure

mploy

ees

atten

ded

aco

urse

titled

“Cert

ified

Envir

onme

ntal

Profe

ssion

alIn

Sche

duled

Waste

Man

agem

ent”

andr

eceiv

edaC

ertifi

cate

ofCo

mpete

ncy

from

theDi

rector

Gene

ralof

Envir

onme

ntalQ

ualit

y.As

ofsu

chda

te,In-

Tech

Elec

tronic

sM

alays

iaha

sbe

enin

comp

lianc

ebo

thwi

ththe

requir

emen

tsof

appo

inting

said

comp

etent

perso

nan

dwi

ththe

notic

eissu

edby

theDi

rector

Gene

ralof

Envir

onme

ntalQ

ualit

y.

Asof

theLa

testP

ractic

able

Date,

wewe

reno

tawa

reof

any

actua

lofc

ontem

plated

actio

ns,c

laims

orinv

estiga

tions

byan

ygo

vernm

ental

autho

rities

again

stus

with

respe

ctto

theap

point

ment

ofac

ompe

tentp

erson

certi

fied

bythe

Direc

torGe

neral

ofEn

viron

menta

lQua

lityt

ohan

dlesch

edule

dwast

e.As

advis

edby

ourM

alays

ianLe

galA

dvise

rs,ba

sedon

lacko

fan

yacti

ontak

ento

date

ando

urcu

rrent

comp

lianc

e,the

risk

ofIn-

Tech

Elec

tronic

sMala

ysia

receiv

ingan

yfine

relati

ngto

thism

atter

isrel

ative

lylow

.

Weha

verev

iewed

ouri

nterna

lcon

trolp

olicie

sand

have

enha

nced

intern

alco

ntrol

measu

resto

ensu

reful

lco

mplia

nce

with

therel

evan

tlaw

sand

regula

tions

regard

ingthe

hand

lingo

fsch

edule

dwa

ste,

includ

ingco

ntinu

ingto

ensu

rethe

emplo

ymen

tof

aco

mpete

ntpe

rson.

BUSINESS

– 270 –


MARKET AND COMPETITION

The electronics manufacturing services industry has grown rapidly in recent years and isexpected to continue to grow going forward. According to the Frost & Sullivan Report, revenueproduced by EMS providers in manufacturing plants in the PRC increased from RMB1,218.7billion in 2016 to RMB1,770.2 billion in 2021, representing a CAGR of 7.8%, and is expectedto continue to grow to reach RMB2,380.1 billion in 2026, representing a CAGR of 6.1% from2022 to 2026. According to the Frost & Sullivan Report, key drivers of this growth includesustained global demand for electronics and increasing levels of outsourcing of electronicsproducts, with growing preference for EMS providers over contract manufacturers. See“Industry Overview”.

According to the Frost & Sullivan Report, the overall EMS market in the PRC isconcentrated with the top 10 players (of the more than 1,000 industry players) accounting forapproximately 74.8% of the market share by revenue in 2021 whereas we had a market shareof approximately 0.1%.

According to the Frost & Sullivan Report, the majority of large EMS providers in the PRCfocus on the consumer electronics segment. However, we primarily focus on providingend-to-end electronics manufacturing and development services for specialised electronics andcomplex projects for demanding industries, including the medical, aerospace, maritime,communications infrastructure and automotive industries. Such solutions require sophisticatedand longer product development cycles, extensive technical knowhow and certification.According to the Frost & Sullivan Report, the EMS market for the specialised electronicssector in the PRC is somewhat more fragmented, with the top 10 players (of the more than1,000 industry players) accounting for approximately 59.5% of the market share by revenue in2021 whereas we had a market share of approximately 0.2%.

We believe the principal competitive factors within the industries we serve primarilyinclude:

• comprehensive scope of services;

• technical expertise;

• research and development capabilities;

• production speed and reliability;

• proven design, development and manufacturing capabilities;

• quality of production facilities; and

• familiarity with customers’ industries.

BUSINESS

– 271 –


Major barriers to entry into the EMS industry include certification requirements for brandowners, technology and personnel requirements, demonstrable design, manufacturing andsupply chain management capabilities and sizable investments in facilities and equipment.

Our Directors believe that we will maintain our competitiveness over other competitorsand our market position by strengthening and developing our competitive strengths. For furtheranalysis of our industry and details of our competitive strengths, see “Industry Overview” and“– Our Competitive Strengths”.

INSURANCE

We maintain insurance to protect our assets and resources against specific losses anddamages. We also maintain insurance to protect employees and third parties to ensure that weare in compliance with laws and regulations.

We maintain fire insurance, burglary insurance, all-risks insurance, employers’ liabilityinsurance and public liability insurance, on our Dongguan production facilities and our Penangproduction facilities, including land and buildings, furniture and fixtures, machinery andequipment as well as products, semi-finished and finished products against damages arisingfrom fire, flood, strike, riot and malicious damage.

We are of the view that our insurance policies are in line with common industry practicein the PRC, Hong Kong and Malaysia. As at the Latest Practicable Date, we had not been madethe subject of any material insurance claims, nor had we made any material insurance claimsagainst any parties.

INTERNAL CONTROL AND RISK MANAGEMENT

Risk Management

We are exposed to various risks in the operations of our business and we believe that riskmanagement is important to our success. For more details, see the sections headed “RiskFactors” and “Financial Information” in this document. Key operational risks faced by usinclude, among others, changes in the general market conditions, changes in the regulatoryenvironment in the jurisdictions we operate in, our ability to offer quality products andservices, our ability to expand our customers base, our potential expansion as described in “–Our Business Strategies” in this section, availability of financing to fund our expansion andbusiness operations, and competition from our competitors of businesses.

To properly manage these risks, we have established the following risk managementstructures and measures:

• our Board is responsible and has the general power to manage the operations of ourbusinesses, and is in charge of managing our overall risks. It is responsible forconsidering, reviewing and approving any significant business decision involvingmarket risk exposures, changes in interest rates and currency exchange rates,expansion into new geographical region, and to enter into any major contracts withany parties; and

BUSINESS

– 272 –


• we maintain insurance coverage, which we believe is consistent with the customarypractice of businesses of our size and type, and in line with the standard commercialpractice in the relevant jurisdiction.

Internal Control

We have established an internal control system and risk management procedures for ouroperations, including but not limited to:

• a number of company operating procedures developed in-house by our Group togovern and standardise certain processes, including but not limited to sales andorder processing, vendor management, the purchase of materials, components orparts, quality control procedures, management of our warehouses and the return ofproducts from customers;

• our Board has established the Audit Committee and the members include our three

independent non-executive Directors, namely, Dr. PANG Kwok Hung (彭國雄), Mr.

CHU, Howard Ho Hwa (朱賀華) and Mr. CHEUNG Shi Yeung (張仕揚). The Audit

Committee, on behalf of the Board, reviews the internal control systems, including

financial, operation, compliance and information technology controls, and to

safeguard and maintain accountability of assets. See “Directors and Senior

Management – Board Committees – Audit Committee” in this document for a

summary of the scope of work of our Audit Committee;

• our Board has established the Remuneration Committee and the members include

our three Directors, namely, Mr. CHU, Howard Ho Hwa (朱賀華), Mr. HO Woon

Wah Albert (何煥華), and Mr. CHEUNG Shi Yeung (張仕揚). See “Directors and

Senior Management – Board Committees – Remuneration Committee” in this

document for a summary of the scope of work of our Remuneration Committee;

• our Board has established the Nomination Committee and the members include our

three Directors, namely, Mr. HO Woon Wah Albert (何煥華), Mr. CHU, Howard Ho

Hwa (朱賀華), and Dr. PANG Kwok Hung (彭國雄). See “Directors and Senior

Management – Board Committees – Nomination Committee” in this document for

a summary of the scope of work of our Nomination Committee;

• we have adopted the code provisions of Appendix 14 to the Listing Rules as our

corporate governance guidelines;

• our Directors have attended trainings conducted by our Hong Kong legal advisers on

the ongoing obligations, duties and responsibilities of directors of publicly listed

companies under the Companies Ordinance, the SFO and the Listing Rules and our

Directors are fully aware of their duties and responsibilities as directors of a listed

company in Hong Kong;

BUSINESS

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• we have appointed Dongxing Securities (Hong Kong) Company Limited as our

compliance adviser pursuant to Rule 3A.19 of the Listing Rules to ensure that,

among other things, we are properly guided and advised as to compliance with the

Listing Rules and all other applicable laws, rules, codes and guidelines; and

• we will from time to time, appoint external legal advisers, where applicable, to

advise on compliance with and provide us with updates on the changes in the Listing

Rules and the applicable laws, regulations and rules from time to time to see if any

change is required to be made with our operations and/or internal control policy.

We have also engaged an independent consulting firm as the Company’s internal control

consultant (the “Internal Control Consultant”) to review our internal control system in

connection to the [REDACTED] and provide recommendations to assist us in improving

internal control, risk management and corporate governance. The Internal Control Consultant

conducted review procedures on aspects of the internal control system of five business units

of our group (including In-Tech Electronics HK, In-Tech Dongguan, In-Tech Shenzhen Science

& Technology, Jingyanda R&D (Shenzhen) Co. Ltd and In-Tech Electronics Malaysia),

including corporate governance, purchases and payments, financial reporting, general

compliance, quality control management and assets management. The Internal Control

Consultant conducted its work in June 2021 and provided a number of findings and

recommendations in its report.

We have subsequently taken remedial actions in response to such findings and

recommendations. The Internal Control Consultant performed follow-up reviews on our

Company’s system of internal control with regard to those actions taken by our Company and

reported further commentary in August 2021, in November 2021 and in April 2022. In its

follow-up reviews, the Internal Control Consultant noted that we had followed its major

recommendations and accordingly taken corrective actions to address the internal control

deficiencies and weaknesses it had identified.

Corporate Governance

We continuously strive to strengthen the role of our Board as a body responsible for

decision-making concerning our fundamental policies and upper-level management issues, and

supervising the execution of our operations. Our Board includes independent non-executive

Directors to ensure transparency in management and fairness in business decisions and

operations. The independent non-executive Directors contribute to the enhancement of

corporate value by providing advice and oversight based on their extensive administrative

experience and specialised knowledge.

We have strengthened our auditing system to ensure the appropriate functioning of the

risk management and operation oversight systems. We have established the audit committee

which comprises independent non-executive Directors to review and monitor the effectiveness

of our financial controls, internal control and risk management systems.

BUSINESS

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RECENT DEVELOPMENTS

Measures Taken in Response to the Coronavirus Outbreak

An outbreak of respiratory illness caused by a novel coronavirus (COVID-19) in late 2019

continues to affect populations globally. In March 2020, the World Health Organisation

characterised the COVID-19 outbreak as a pandemic. In response to the COVID-19 pandemic,

(i) starting in January 2020, the PRC government imposed measures across the PRC including,

but not limited to, travel restrictions and mandatory quarantine measures across various cities,

the extended shutdown of business operations and mandatory quarantine requirements; (ii) the

Malaysian government has (a) imposed various movement control orders (MCOs) since March

2020 which include travel restrictions, restrictions on social gatherings and stay-at-home

orders, among others; and (b) declared a state of emergency order in January 2021 that was

effective up until 1 August 2021, which permitted the discretionary imposition of a total

lockdown and/or restrictions on all, or part of, economic activities at any time; and (iii) the

Hong Kong government has taken, since February 2020, a number of actions such as

temporarily closing government offices and public facilities, restricting travel internationally,

including between Hong Kong and Mainland China, mandatory quarantine requirements and

ordering compulsory testing of certain persons. Despite such government measures to contain

the spread of the pandemic, and even though vaccines have been developed, the pandemic has

continued, especially with the emergence of new variants such as the Delta and Omicron

strains. Countries around the world are continuing to be impacted by fluctuations in infection

rates, making it difficult to fully lift existing containment measures and reopen economies.

As a result of measures taken in response to the COVID-19 pandemic, our production

facilities in the PRC, which closed for the Chinese New Year holiday starting on 18 January

2020, remained fully closed until 9 February 2020. Moreover, once production recommenced,

it gradually ramped back up over the course of February and March 2020 as our workers, many

of whom had returned home for the Chinese New Year, gradually returned back to work.

Largely as a result of these closures and subsequent operation with limited headcount, our

production during these periods was negatively impacted. Total SMT run hours at our

Dongguan production facilities during the eight week period from 22 February 2021 to 18th

March 2021 was 4,492 hours, only approximately 54.8% of the total SMT run hours run for the

subsequent eight weeks of 8,188 hours, despite a backlog of orders at that time.

In addition, our production facilities in Penang were closed from 18 March 2020 through

8 April 2020, at which point we were able to resume operations with a skeleton crew. We were

able to ramp up to operating at 50% headcount on 20 April 2020 which we largely focused on

operations headcount, especially direct labour and technical support functions, to minimise any

impact on our capacity. On 15 September 2021, our Penang facilities exceeded the relevant

threshold of at least 80% of its employees having completed two doses of vaccines and we were

permitted to return to full operation at 100% headcount. Our Penang production facilities were

further closed from 19 October 2021 to 27 October 2021 in order to prevent spreading of

COVID-19 as stipulated by the Malaysian government.

BUSINESS

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Our production during these periods was lower than that in the surrounding periods. Total

average monthly SMT run hours at our Penang production facilities during the period of

limitations on manpower in April 2020 through August 2020 was 374.0 hours, compared with

average monthly SMT run hours for the subsequent period of September 2020 through

December 2020 of 559.6 hours. Similarly, during October 2021, in which we experienced a

period of further closure of our production facilities, total SMT run hours at our Penang

production facilities was 574.7 hours, compared with 809.7 SMT hours in September 2021 and

794.4 SMT hours in November 2021. However, given the fact that our Penang production

facilities were in initial ramp-up during much of this period with lower overall utilisation

levels than our Dongguan production facilities and the need for ramp-up of individual projects,

each of which needed to go through their individual project pilot runs and release processes in

relation to these new facilities, monthly shifts in utilisation are not unexpected and the effect

of any particular single factor, including closures and limitations on manpower, is more

difficult to isolate.

Other than these periods, as of the Latest Practicable Date, we have been able to operate

our business premises as usual and there have been no extended closures or disruptions to our

production facilities due to COVID-19, including the more recent Delta and Omicron variants,

or for any other reasons.

Starting in January 2020, we introduced a number of measures aimed at mitigating the

effects of the COVID-19 outbreak on our business operations during this period:

(a) We have implemented a work from home policy for employees, should any office

employees become infected with COVID-19 or come into contact with someone who

does.

(b) We have implemented enhanced hygiene measures at all our facilities, including

mask-wearing, taking temperatures of our staff and visitors, restricted access to our

facilities, UV cleaning of deliveries prior to handling and preventative measures in

our canteen.

(c) We provide segregated dormitories for any employees infected with COVID-19 or

any employees who have come into close contact with any individuals infected with

COVID-19 at our Penang production facilities.

(d) We have provided office space in our Hong Kong premises for employees resident

in Hong Kong who, under normal circumstances, would travel between Hong Kong

and mainland China for their work.

(e) We have implemented a vaccination program for our employees as a measure to

mitigate the effect of the COVID-19 outbreak.

BUSINESS

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Various government measures to control COVID-19 have resulted and may continue to

result in limitations on our ability to travel, delays in transportation, shortage of manpower and

has affected our discussing of new opportunities with existing and potential clients, the results

of which may materially and adversely affect our business and results of operations. See “Risk

Factors – Risks relating to our business and industry in which we operate – Risks relating to

our Business and our Industry – Our business has been and may continue to be interrupted by

the outbreak of COVID-19” for further details. Moreover, we have experienced a continuing

shortage of electronic components, including chip components, due to COVID-19, among other

factors. See “– Procurement of Materials and Inventory Management – Materials, Components

and Parts used to Produce our Products” and “Risk Factors – Risks relating to our Business and

our Industry – We may be negatively affected by price increases or a shortage or delay in

supply of materials, components and parts required for our business operations” in this

document for further details. Furthermore, where we were responsible for the delivery of

products to our customers, we were impacted by the delay in transportation of our finished

products as a result of COVID-19 due to the decreased frequency of freight. These issues

continued as of the Latest Practicable Date. The delivery of products accounting for





million was due to component shortages) and delivery of products representing HK$266.3

million in revenue originally scheduled to be made in FY2022 was delayed to FY2023 (of

which approximately HK$260.6 million was due to component shortages).

The COVID-19 pandemic has also affected our customers and the industries in which they

operate. For example, due to the quarantine requirements imposed on travellers and

international travel restrictions, our aerospace customers were disproportionately affected by

COVID-19. This, in turn, affected their ability and willingness to engage the services of their

suppliers, such as our Company.




in FY2021, in particular as (a) revenue and gross profit margin for customers in the

transportation industry sector decreased as demand from aerospace, which was particularly hit

by COVID-related travel restrictions, decreased; and (b) revenue contribution from customers

in the smart module and smart device industry sector increased significantly while gross profit

margins decreased, largely due to execution of large volume projects, as well as increased

depreciation expenses related to increased purchases of property, plant and equipment in

connection with the opening of, and relocation of our operations to, our

BUSINESS

– 277 –



– Year to Year Comparison of Results of Operations” for further details. Due to the diverse

range of industries we serve, we were able to mitigate the impact of COVID-19 on our

operations and revenues due to increased orders from our customers operating in the education

and leisure and marine industries. We also benefited from government subsidies in Hong Kong

in the amount of HK$4.0 million under the employment support scheme of the Hong Kong

government’s anti-epidemic fund in FY2020 and had certain social insurance obligation waived

by the government in the PRC in FY2020, FY2021 and FY2022 in the amount of HK$2.6

million, HK$15.1 million and nil, respectively. We believe our ability to respond to the

COVID-19 pandemic highlights the flexibility provided by our extensive and diverse product

and service offerings and the resilience it provides to our business and financial results in

unexpected and changing circumstances.

On the basis of actions taken to date and the continuing success of most of our business

segments even during periods of restriction, our Directors believe that we have demonstrated

our ability to respond swiftly in these emergency circumstances and that the overall impact of

COVID-19 on us will be limited. However, there can be no assurance that these measures will

continue to prove effective or that our business and financial condition will not be adversely

affected, particularly if the epidemic continues for an extended period or worsens in the PRC,

Malaysia, Hong Kong and worldwide. See “Risk Factors – Risks relating to our business and

our industry – Risks relating to our Business and our Industry – Our production and operations

may be affected by factors beyond our control” for further details.

BUSINESS

– 278 –


CONTROLLING SHAREHOLDERS

Immediately following the completion of the Capitalisation Issue and the [REDACTED]

(assuming that the [REDACTED] is not exercised and without taking into account any Shares

to be issued upon exercise of any options which may be granted under the [REDACTED]

Share Option Scheme and the Share Option Scheme), In-Tech Holdings will be beneficially

interested in approximately [REDACTED]% of the issued share capital of our Company and

is accordingly entitled to exercise or control the exercise of 30% or more of the voting power

at general meetings of our Company. In-Tech Holdings is an investment holding company

owned as to 77.11% by Source Capital and 22.89% by Piggy Doggy. Source Capital is in turn

held by 15 shareholders, namely (i) Mr. Albert Ho, the chairman of our Board, the chief

executive officer and an executive Director; (ii) Mr. Lee Lap Fai, an executive Director; (iii)

Mr. Cheung Wing Hung, an executive Director; (iv) Mr. Ho Wun Man Terence, a senior

management of our Group and the younger brother of Mr. Albert Ho; (v) Ms. So Sau San, a

senior management of our Group; (vi) Mr. Poon Chin Chung Philip; (vii) Mr. Chan Shui Shing;

(viii) Mr. Woo James; (ix) Mr. Tsui Kwan Keung Jackson; (x) Blue Avenue Holdings Ltd, a

subsidiary of Accolade Investments Limited which is in turn wholly-owned by Mr. Tan Chuen

Yan Paul; (xi) Ms. Chan Po On Ella; (xii) Mr. Chan Kwok Cheong; (xiii) Ms. Kong Hoy Wein;

(xiv) Mr. Law Kim Ching; and (xv) Mr. Li Ping Chung (the “Source Capital Shareholders”).

Other than Mr. Albert Ho, Mr. Lee Lap Fai and Mr. Cheung Wing Hung who are executive

Directors, Mr. Ho Wun Man Terence and Ms. So Sau San who are senior management

members, and Mr. Tsui Kwan Keung Jackson who is an employee of our Group, the other

shareholders of Source Capital have no position in our Group and are either retired or engaged

in other industries. In particular, Mr. Poon Chin Chung Philip is a certified public accountant

and P&B Services Limited, a company owned as to 50% by him, has been engaged by our

Group to provide company secretarial services to our subsidiaries incorporated in Hong Kong

and BVI, Mr. Chan Shui Shing was engaged in the accounting industry before his retirement,

Mr. Woo James is a dentist and a member of the Hong Kong Dental Association, Mr. Tan Chuen

Yan Paul was a practicing solicitor before his retirement, Ms. Chan Po On Ella is engaged in

the education industry, Mr. Chan Kwok Cheong operates his own IT business, Ms. Kong Hoy

Wein is engaged in the outdoor media industry, Mr. Law Kim Ching worked for an NGO before

his retirement and Mr. Li Ping Chung was engaged in the shipping industry before his

retirement and is a fellow of The Institute of Chartered Shipbrokers. Other than Mr. Tsui Kwan

Keung Jackson who was an acquaintance of Mr. Albert Ho engaging in the same industry and

Mr. Tan Chuen Yan Paul who was introduced to Mr. Albert Ho by Mr. Chan Shui Shing, each

of Mr. Poon Chin Chung Philip, Mr. Chan Shui Shing, Mr. Woo James, Ms. Chan Po On Ella,

Mr. Chan Kwok Cheong, Ms. Kong Hoy Wein, Mr. Law Kim Ching and Mr. Li Ping Chung are

long-term acquaintances of Mr. Albert Ho from the same church. Other than Ms. Kong Hoy

Wein who acquired the shares of Source Capital from her father due to family arrangement in

May 2021, all other shareholders have invested in Source Capital since March 1998. For more

details of the investment of the Source Capital Shareholders in Source Capital, please refer to

“History, Reorganisation and Corporate Structure” in this document. As the Source Capital

Shareholders have decided to restrict their ability to exercise control over In-Tech Holdings

and thus our Company by holding their interests through a common investment holding

RELATIONSHIP WITH CONTROLLING SHAREHOLDERS

– 279 –


company, namely Source Capital, they are all presumed to be a group of Controlling

Shareholders pursuant to the Guidance Letter HKEX-GL89-16 (November 2016) (updated in

October 2017, February 2018 and February 2020).

Piggy Doggy is wholly-owned by Mianma Company Limited which is in turn wholly-

owned by the CY Lo Family Trust. Despite the fact that the interests of Source Capital and

Piggy Doggy were held through In-Tech Electronics BVI prior to the Reorganisation and

through In-Tech Holdings after completion of the Reorganisation, we do not consider Piggy

Doggy as a group of Controlling Shareholders with Source Capital pursuant to presumption set

out in the Guidance Letter HKEX-GL89-16 (November 2016) (updated in October 2017,

February 2018 and February 2020) based on the following factors and circumstances:

(a) The investment of Piggy Doggy in our Group is passive in nature. Piggy Doggy is

ultimately owned by the CY Lo Family Trust. The settlor, the trustee and the

beneficiaries of the CY Lo Family Trust have never been and are not a director or

senior management of any member of our Group. None of them were ever involved

in or are currently involved in the management and day-to-day operations of our

Group since our establishment in 1997;

(b) The investment of Ms. Lo Chui Yuk Michelle (“Ms. Lo”) in In-Tech Electronics BVI

in 1997 was made based on Ms. Lo’s own assessment and investment decision as she

was familiar with investment in manufacturing industries, and was independent from

Source Capital and its then shareholders;

(c) As confirmed by Ms. Lo, her investment in In-Tech Electronics BVI in 1997 was

funded from her personal financial resources;

(d) Prior to the Reorganisation, Piggy Doggy held 25% shareholding interest in In-Tech

Electronics BVI and upon completion of the Reorganisation and the [REDACTED],

Piggy Doggy continues to hold and is expected to continue to hold 22.89%

shareholding interest in In-Tech Holdings without merging its shareholding and

voting rights with that of Source Capital;

(e) Ms. Lo has all along been attending the shareholders’ meetings of In-Tech

Electronics BVI before the Reorganisation and In-Tech Holdings after the

completion of the Reorganisation, and voting for and on behalf of Piggy Doggy

without delegating its voting rights to Source Capital or any of its shareholders;

(f) Piggy Doggy has confirmed that it has been exercising its voting right at the general

meeting of In-Tech Electronics BVI and will continue exercising its voting right at

the general meeting of In-Tech Holdings independently from Source Capital, and it

has no intention to follow any voting instructions of Source Capital;


– 280 –


(g) There is no arrangement, agreement or understanding (whether formal or informal)

between Source Capital and Piggy Doggy on the management of our Group and the

exercise of their voting rights on shareholders’ resolutions in any coordinated

manner. As such, Piggy Doggy has control of only 22.89% of the voting power at

the general meeting of In-Tech Holdings; and

(h) Our Group has not undergone any material change in influence of management since

our establishment. Mr. Albert Ho has been the chief executive officer and general

manager of our Group since November 1997 and has been with our Group for

approximately 23 years. He has been in charge of the strategic planning and major

decision-making of our Group. Taking into consideration of the above, Mr. Albert

Ho was and is able to exert substantial influence on the Directors and in the actual

management of our Group.

In view of the above, In-Tech Holdings, Source Capital and the Source Capital

Shareholders shall be regarded as a group of Controlling Shareholders of our Company.

INDEPENDENCE FROM OUR CONTROLLING SHAREHOLDERS

Our Directors believe that our Group is capable of carrying on our businesses

independently of, and does not place undue reliance on, our Controlling Shareholders and their

respective close associates (other than members of our Group) taking into account the

following factors:

Management Independence

Our management and operational decisions are made by our Board and our senior

management personnel. Our Board has eight Directors comprising five executive Directors and

three independent non-executive Directors. Save for Mr. Albert Ho, Mr. Lee Lap Fai and Mr.

Cheung Wing Hung, no other Controlling Shareholder holds any directorship in our Company.

Each of our Directors is aware of his or her fiduciary duties as a director of our Company which

requires, among other things, that he or she acts for the benefit and in the best interests of our

Company and does not allow any conflict between his or her duties as a Director and his or her

personal interest. In the event that there is a potential conflict of interest arising out of any

transaction to be entered into between our Group and our Directors or their respective

associates, the interested Director(s) shall abstain from voting at the relevant Board meetings

of our Company in respect of such transactions and shall not be counted in the quorum.

Having considered the above factors, our Directors are satisfied that they are able to

perform their roles in our Company independently, and our Directors are of the view that we

are capable of managing our business independently from our Controlling Shareholders

following the completion of the [REDACTED].


– 281 –


Operational Independence

We believe that we are capable of carrying on our business independently of ourControlling Shareholders and their associates upon [REDACTED] as (i) we have establisheda set of internal control procedures independent from our Controlling Shareholders to facilitatethe effective operation of our business; (ii) our organisational structure is made up of a numberof operational teams and functional departments, each with specific areas of duties andresponsibilities under the leadership of the management team of our Group; and (iii) our majorcustomers and suppliers are all independent from our Controlling Shareholders.

Financial Independence

Our Group has an independent financial system and makes financial decisions accordingto our Group’s own business needs.

COMPETITION UNDER RULE 8.10 OF THE LISTING RULES

Each of our Controlling Shareholders has confirmed that he and his respective closeassociates (other than members of our Group) does not have any interest in a business apartfrom our business which competes or is likely to compete, either directly or indirectly, with ourbusiness. Furthermore, each of our Directors has confirmed that he is not interested in anybusiness apart from our business (where relevant), which competes or is likely to compete,either directly or indirectly, with our business.

CORPORATE GOVERNANCE

Our Company will adopt the following measures to avoid any conflict of interests arisingfrom competing business and to safeguard the interests of our Shareholders:

(a) in the event that there is a material potential conflict of interest arising out of anytransaction to be entered into between our Group and our Directors or theirrespective associates, the interested Director(s) shall abstain from voting at therelevant Board meetings in respect of such transactions and shall not be counted inthe quorum except permitted under the Articles and/or the Listing Rules;

(b) we have appointed Dongxing Securities (Hong Kong) Company Limited as ourcompliance adviser, which will provide advice and guidance to us in respect ofcompliance with the applicable laws and the Listing Rules; and

(c) pursuant to the Corporate Governance Code in Appendix 14 to the Listing Rules,which our Company has adopted as its corporate governance code, our Directorswill be able to seek independent professional advice from external parties inappropriate circumstances at our Company’s cost.

Our Directors consider that the above corporate governance measures are sufficient tomanage any potential conflict of interests between our Controlling Shareholders and theirrespective associates and our Group, and to protect the interests of our Shareholders.


– 282 –


OUR DIRECTORS AND SENIOR MANAGEMENT

Our Board is responsible for and has general power over the management and conduct of

our business. As at the Latest Practicable Date, our Board comprised eight Directors, including

five executive Directors and three independent non-executive Directors. The table below sets

forth certain information regarding members of our Board:

Name Age

Date ofjoiningourGroup

Date ofappointmentas Director Position

Roles andresponsibilities

Relationship withother Director(s)and seniormanagement

Mr. HO Woon

Wah Albert

(何煥華)

66 November

1997

16 August

2021

Chairman of our

Board, chief

executive

officer, general

manager and

executive

Director

Responsible for

leadership of the

Board, strategic

planning and

major decision-

making of

our Group

Mr. Albert Ho is

the elder brother

of Mr. Terence

Ho

Mr. Gordon

Christopher

POPE (“Mr.Pope”)

57 November

2016

16 August

2021

Executive Director

and deputy chief

executive officer

Responsible for

strategic

planning, and

major decision-

making of

our Group

Nil

Mr. LEE Lap

Fai

(李立輝)

(“Mr. Lee”)

67 March

1998

16 August

2021

Executive Director Overseeing our

Group’s

purchasing and

procurement

Nil

Ms. WONG

Sui Ling

Karen

(王瑞玲)

(“Ms.Wong”)

47 March

2007

16 August

2021

Executive Director Overseeing our

Group’s

financial

management

Nil

DIRECTORS AND SENIOR MANAGEMENT

– 283 –


Name Age


Date ofappointmentas Director Position



Mr. CHEUNG

Wing Hung

(張永雄)

(“Mr.Cheung”)

56 October

1997

16 August

2021

Executive Director Overseeing

research and

development,

technical

support and

industry know-

how

Nil

Dr. PANG

Kwok Hung

(彭國雄)

(“Dr. Pang”)

62 [●] [●] Independent non-

executive

Director

Providing

independent

opinion and

judgement to

our Board

Nil

Mr. CHU,

Howard Ho

Hwa, (朱賀華) (“Mr.Chu”)


executive

Director

Providing

independent

opinion and

judgement to

our Board

Nil

Mr. CHEUNG

Shi Yeung

(張仕揚)

(“Mr.Cheung ShiYeung”)


executive

Director

Providing

independent

opinion and

judgement to

our Board

Nil


– 284 –


Our senior management is responsible for the day-to-day management and operation of

our business. The table below sets forth certain information regarding senior management of

our Company:

Name Age


Date ofappointmentas seniormanagement Position



Mr. HO Wun

Man Terence

(何煥民)

(“Mr.TerenceHo”)

61 July 2003 July 2003 Operations and IT

director

Overseeing the

PRC operations

and IT affairs of

our Group

Mr. Terence Ho is

the younger

brother of

Mr. Albert Ho

Mr. LIEW

Seng Keong

(“Mr.Liew”)

50 January

2019

January

2019

Human resources

and training

director

Overseeing the

human resources

affairs and

administration

services of our

Group in

Malaysia

Nil

Ms. SO Sau

San

(蘇秀珊)

(“Ms. So”)

58 February

1998

February

1998

Director of sales

and marketing

Overseeing the

sales and

marketing

affairs of our

Group

Nil

Mr. NG Beng

Hooi (“Mr.Ng”)

45 March

2019

March 2019 Operations director Overseeing the

Malaysia

operations of

our Group

Nil


– 285 –


BOARD OF DIRECTORS

Executive Directors

Mr. HO Woon Wah Albert (何煥華), aged 66, is the chairman of our Board, chief

executive officer and general manager of our Group. He was appointed as a Director on 16

August 2021 and was re-designated as an executive Director on 17 September 2021. Mr. Albert

Ho is in charge of the leadership of the Board, strategic planning and major decision-making

of our Group. He has been the chief executive officer and general manager of our Group since

November 1997 and has been with the Group for approximately 23 years. He is also a director

of In-Tech Electronics HK, In-Tech Electronics Singapore, In-Tech Enterprise HK, In-Tech

Investment, Gold Concord, Ocean Target, In-Tech Dongguan, In-Tech Enterprise Malaysia,

In-Tech Electronics Malaysia, In-Tech Shenzhen Science & Technology and In-Tech Shenzhen

R&D. Mr. Albert Ho is a Controlling Shareholder and is the elder brother of Mr. Terence Ho,

a member of our senior management team.

Mr. Albert Ho has approximately 32 years of experience in the electronics industry. Prior

to joining our Group, Mr. Albert Ho was employed at Mattel Electronics (HK) Ltd., a company

primarily engaged in toys and electronics manufacturing where his last position was an

industrial engineering supervisor from June 1979 to September 1981. Mr. Albert Ho was the

general manager and a director of Giant Electronics Ltd. (“Giant Electronics”), a company

primarily engaged in ODM and OEM electronics manufacturing, from November 1992 to

November 1997.

Mr. Albert Ho received a higher diploma in production and industrial engineering from

Hong Kong Polytechnic in November 1978. He then received a certificate in industrial

management from Hong Kong Polytechnic in November 1981 and the Institution of Industrial

Managers in September 1981. In July 1982, Mr. Albert Ho received a diploma in industrial

management from the Institution of Industrial Managers. He received a certified diploma in

accounting and finance from The Chartered Association of Certified Accountants in April 1987.

Mr. Albert Ho became a member of the British Institute of Management in March 1983, an

associate of the Institution of Industrial Managers in November 1981 and a member of the

Institution of Industrial Managers in November 1982.

Mr. Gordon Christopher POPE, aged 57, joined our Group in November 2016. He was

appointed as a Director on 16 August 2021. He was re-designated as an executive Director on

17 September 2021. He is primarily responsible for overseeing our Group’s engineering

operations and business development projects and strengthening our Group’s capabilities to

work with demanding industrial clients. Mr. Pope is also a director of In-Tech Electronics HK,

In-Tech Enterprise HK, In-Tech Investment, In-Tech Manufacturing, In-Tech Electronics

Singapore, In-Tech Electronics Malaysia and In-Tech Enterprise Malaysia.


– 286 –


Prior to joining our Group, Mr. Pope was employed by various subsidiaries of Koninklijke

Philips N.V. (“Philips”), a leading European electronics technology company listed on

Euronext Amsterdam (stock code: PHIA) and the New York Stock Exchange (stock code:

PHG), from September 1988 to February 2004. His last role at Philips was as the vice president

and general manager of the Digital Enhanced Cordless Telecommunications (“DECT”) and

Home Telephony businesses in Le Mans, France, where he was responsible for the businesses’

results and strategies. His direct team had responsibility for global supplies, product

management, research and development and after sales service activities. Prior to this, he was

the general manager of Philips Consumer Communications & SED Co., Ltd., a Chinese joint

venture in Shenzhen, China producing and selling mobile phones.

On returning to the UK, from March 2004 to June 2005, Mr. Pope was the industrial

operations director at Sendo Limited, a mobile phone design and manufacturing company

based in Birmingham, UK. After the acquisition of Sendo Limited by Motorola Limited

(“Motorola”) in 2005, Mr. Pope was appointed as the director for their new Birmingham

regional solutions centre until November 2006, responsible for managing Motorola’s

Birmingham site and the post-merger integration of Sendo Limited. From November 2006 to

November 2016, Mr. Pope was the vice president of engineering for Raymarine Limited

(currently known as Raymarine UK Limited) in Portsmouth, UK, a company primarily engaged

in the development and supplying of electric navigation equipment and systems for marine use.

During this time, Mr. Pope was responsible for research and development and product creation

activities. Raymarine Limited (currently known as Raymarine UK Limited) was a subsidiary

of Raymarine plc which was then listed on the London Stock Exchange in December 2004

(stock code: RAY).

Mr. Pope studied production engineering at the University of Cambridge, United

Kingdom, and received his bachelor’s degree in June 1987. He later received a post graduate

certificate of Advanced Study in Manufacturing Technology from the University of Cambridge

in June 1988, and his degree of master of arts from the University of Cambridge in January

1991. In September 2014, Mr. Pope completed a senior executive programme at the London

Business School.

Mr. LEE Lap Fai (李立輝), aged 67, joined our Group in March 1998 and has over 45

years of experience in electronic engineering. He was appointed as a Director on 16 August

2021 and was re-designated as an executive Director on 17 September 2021. He is primarily

responsible for overseeing our Group’s purchasing and procurement.

Prior to joining our Group, Mr. Lee was an electrical engineer at GP Electronics Limited

(currently known as GP Electronics (HK) Limited), a company primarily engaged in the

manufacturing of audio and telecommunication products and a subsidiary of Gold Peak

Industries (Holdings) Limited, a company listed on the Main Board of the Stock Exchange

(stock code: 0040), from April 1975 to January 1982. From November 1982 to February 1995,

Mr. Lee was an electronic engineer at S. Megga Telecommunications Limited (“S. Megga”),

a company primarily engaged in ODM and OEM electronics manufacturing. He served as an

assistant general manager at Giant Electronics from March 1995 to March 1998.


– 287 –


Mr. Lee obtained his higher certificate in electrical engineering from Hong Kong

Polytechnic in November 1980.

Ms. WONG Sui Ling Karen (王瑞玲), aged 47, joined our Group in March 2007. She

was appointed as a Director on 16 August 2021 and was re-designated as an executive Director

on 17 September 2021. She is primarily responsible for overseeing our Group’s financial

management and has approximately 24 years of experience in financial reporting, management

accounting and administrative oversight.

Prior to joining our Group, Ms. Wong was an accountant at Horspath Limited (trading as

Prescription Plus Clinical Skin Care), a company primarily engaged in beauty supplies export,

from January 1997 to November 1997. Between January 1998 to August 2006, Ms. Wong was

employed by Catalina Asia Limited where her last position was financial controller and was

responsible for overseeing daily financial and accounting matters, respectively.

Ms. Wong obtained her bachelor’s degree in business administration in December 1996

from The Chinese University of Hong Kong. She became a member of the Association of

Chartered Certified Accountants in March 2006 and the Hong Kong Institute of Certified

Public Accountants in January 2008.

Mr. CHEUNG Wing Hung (張永雄), aged 56, joined our Group in October 1997. He was

appointed as a Director on 16 August 2021 and was re-designated as an executive Director on

17 September 2021. He is primarily responsible for overseeing research and development

resource planning for our Group, providing technical support to ongoing projects and

engineering issues and helping our Group keep abreast of the latest industry trends. Mr. Cheung

has approximately 32 years of experience in research and development of EMS products and

is highly familiar with the regulatory requirements of electronic products.

Mr. Cheung was employed by S. Megga between August 1989 to June 1996, with his last

position being design engineering manager within the research and design group. He was a

research and development manager at Giant Electronics between July 1996 to October 1997,

where he led and managed a team of engineers in completing customer projects.

Mr. Cheung obtained a higher diploma in marine electronics from Hong Kong Polytechnic

in November 1987. In December 1997, he was awarded the post-graduate certificate in

business administration from The Open University of Hong Kong (currently known as Hong

Kong Metropolitan University). Mr. Cheung obtained his master’s degree in business

administration from The Open University of Hong Kong in June 2001.


– 288 –


Independent non-executive Directors

Dr. PANG Kwok Hung (彭國雄), aged 62, was appointed as an independent non-

executive Director on [●] 2022. He is primarily responsible for providing independent advice

to our Board.

Dr. Pang is currently an honorary associate professor in the Department of Electrical and

Electronic Engineering at The University of Hong Kong. From November 1986 to April 1996,

Dr. Pang was teaching at the Department of Electrical and Computer Engineering at the

University of Waterloo in Canada, with his last position as an associate professor. Dr. Pang was

a full-time consultant engaging in industrial electronics and systems laboratory at the Factory

Automation Systems Department of the Industrial Electronics and Systems Laboratory at

Mitsubishi Electric Corporation in Japan from May 1996 to July 1996. Dr. Pang was a visiting

senior researcher engaging in fuzzy expert systems for traffic control at the Hitachi Research

Laboratory in Japan at Hitachi, Ltd., a Japanese multinational conglomerate listed on the Tokyo

Stock Exchange (stock code: 6501), from April 1994 to December 1994 and his work involved

vehicle navigation systems. From August 1996 to June 2020, Dr. Pang was an associate

professor (research and teaching) at the Department of Electrical and Electronic Engineering

at The University of Hong Kong.

Dr. Pang has published more than 200 technical papers, co-authored many books and

invented US, European and Chinese patents. He has received numerous awards and

distinctions, including the ICI Prize for authorship of the best paper on the application of the

theory of control published in the Transactions of The Institute of Measurement and Control.

Dr. Pang obtained his bachelor’s degree of science in control, instrumentation and

systems engineering from The City University, United Kingdom, in October 1982. In July

1987, he obtained his Ph.D. in the area of linear control theory, computer-aided design and

intelligent knowledge-based systems from the University of Cambridge, United Kingdom. He

is also a Scholar and Fellow of the Croucher Foundation, Hong Kong. Mr. Pang became a

chartered electrical engineer with the Institution of Electrical Engineers in March 1992. He has

been a member of the Engineering Council since January 1996, a member of the Hong Kong

Institution of Engineers (HKIE) since February 1997, and a senior member of the Institute of

Electrical and Electronics Engineers since June 2001.

Mr. CHU, Howard Ho Hwa (朱賀華), aged 58, was appointed as an independent

non-executive Director on [●] 2022. He is primarily responsible for providing independent

advice to our Board.

Mr. Chu has been a partner of Go Capital Limited since January 2014. He has also been

an independent non-executive director of (i) BOE Varitronix Limited, a company listed on the

Main Board of the Stock Exchange (stock code: 710) since June 2016; and (ii) Guolian

Securities Co., Ltd., a company listed on the Main Board of the Stock Exchange (stock code:

1456) and the Shanghai Stock Exchange (stock code: 601456), since June 2019.


– 289 –


Mr. Chu was with ABN AMRO Asia Corporate Finance Ltd. from September 1992 to

August 1999 where his last position was Head of Hong Kong Origination. Subsequently, he

served as a corporate finance director of HSBC Markets (Asia) Limited from February 2001

to February 2006, and the consultant of Shanghai Century Acquisition Corporation from June

2006 to April 2008, and the assistant to chairman of United Energy Group Limited, a company

listed on the Main Board of the Stock Exchange (stock code: 0467) from September 2008 to

June 2009. Mr. Chu was also the chief financial officer of Trony Solar Holdings Company

Limited, a company formerly listed on the Stock Exchange (stock code: 2468), from July 2009

to October 2011. He was an independent non-executive director of (i) Directel Holdings

Limited, a company listed on GEM of the Stock Exchange (stock code: 8337), from May 2010

to June 2016; (ii) China Kingstone Mining Holdings Limited, a company listed on the Main

Board of the Stock Exchange (stock code: 1380), from September 2010 to May 2012; and (iii)

Weichai Power Co., Ltd., a company listed on the Main Board of the Stock Exchange (stock

code: 2338), from June 2012 to June 2015. Between March 2012 to June 2012, Mr. Chu was

the chief financial officer of China Smart Electric Group Limited* (中國智能電氣集團有限公司). He was the chief executive officer of mReferral Corporation (HK) Limited, a mortgage

referral company and a joint venture of Midland Holdings Limited and Cheung Kong

(Holdings) Limited, from September 2012 to February 2018.

Mr. Chu obtained his bachelor’s degree in electrical engineering from University of

Rochester, United States, in May 1986. In May 1990, he obtained his master’s in business

administration from Columbia University, United States.

Mr. CHEUNG, Shi Yeung (張仕揚), aged 38, was appointed as an independent

non-executive Director on [●] 2022. He is primarily responsible for providing independent

advice to our Board.

Mr. Cheung Shi Yeung has been the chief financial officer and a joint company secretary

of PAX Global Technology Limited, a company listed on the Main Board of the Stock

Exchange (stock code: 327) and primarily engaged in electronic payment solutions, since

October 2016 and January 2018, respectively. In his roles, he oversees compliance, finance and

accounting functions in addition to providing business advice and formulating financial

strategies. Mr. Cheung Shi Yeung began his career with PricewaterhouseCoopers, an

international accountancy firm, where he worked from September 2006 to October 2016, with

the last position he held as a senior manager. His role at PricewaterhouseCoopers involved a

number of audit and assurance projects.

Mr. Cheung Shi Yeung obtained his bachelor’s degree in business administration from

The Chinese University of Hong Kong in December 2006. In June 2021, he obtained his degree

of master of business administration jointly from Columbia University, United States, London

Business School, United Kingdom and The University of Hong Kong. He became a certified

public accountant with the Hong Kong Institute of Certified Public Accountants in January

2010 and an associate of The Chartered Institute of Management Accountants in May 2019.


– 290 –


Except as disclosed above, each Director had not held any other directorships in listed

companies during the three years immediately prior to the Latest Practicable Date. Except as

disclosed above, there are no other matters in respect of each of our Directors that is required

to be disclosed pursuant to Rule 13.51(2) of the Listing Rules and there is no other material

matters relating to our Directors that need to be brought to the attention of our Shareholders.

SENIOR MANAGEMENT

Mr. HO Wun Man Terence (何煥民), aged 61, joined our Group in July 2003 as an IT

manager and was promoted to operations and IT director of our Group in April 2008, primarily

responsible for overseeing the PRC operations and IT affairs of our Group. He is also a director

of In-Tech Electronics Malaysia.

Prior to joining our Group, Mr. Terence Ho was a programmer at Instant Systems Limited,

a company primarily engaged in software consultancy, from June 1985 to August 1986. He was

employed by Armitage Technologies Group, a group of entities primarily engaged in software

consultancy, from September 1986 to December 1993, where his last position was project

manager. From January 1994 to January 2003, Mr. Terence Ho was an IT manager at Kader

Industrial Co. Ltd., a company primarily engaged in toy manufacturing and whose parent

company, Kader Holdings Company Limited is listed on the Main Board Stock Exchange

(stock code: 180).

Mr. Terence Ho is the younger brother of Mr. Albert Ho.

Mr. Terence Ho obtained his higher diploma in mathematics, statistics and computing

from Hong Kong Polytechnic in November 1985.

Mr. LIEW Seng Keong, aged 50, joined our Group in January 2019 as the human

resources and training director. Mr. Liew is also a director of In-Tech Enterprise Malaysia and

In-Tech Electronics Malaysia. He is primarily responsible for overseeing human resources

affairs and administration services of our Group in Malaysia.

Prior to joining our Group, Mr. Liew served at Globetronics Sdn Bhd, a company engaged

in the assembly and testing of ICs, optoelectronic products and technical plating services, from

August 1996 to June 2003, with his last position as senior training officer. From June 2003 to

April 2006, he served as a human resources manager at Esquel Malaysia Sdn. Bhd., a company

primarily engaged in textile manufacturing in Malaysia. Mr. Liew was the group human

resources manager for Precico Electronics Sdn Bhd and Precico Sdn Bhd, a company primarily

engaged in providing diversified integrated manufacturing solutions and whose parent

company, Frencken Group Limited, is listed on the Singapore Stock Exchange (stock code:

E28), between May 2006 and March 2008. From March 2008 to May 2012, he was the senior

human resources manager at Fairchild Semiconductor (Malaysia) Sdn Bhd, a company

primarily engaged in OEM semiconductor manufacturing in Malaysia. Mr. Liew served as the

country human resources head for Motorola Solutions Malaysia Sdn. Bhd., a company

primarily engaged in communications and analytics, from May 2012 to July 2016. From July


– 291 –


2016 to January 2019, he was the human resources director for Flextronics Technology

(Penang) Sdn. Bhd., a company primarily engaged in the EMS industry, and a subsidiary of

Flex Ltd., a company listed on Nasdaq (stock code: FLEX).

Mr. Liew obtained a bachelor’s degree of science in economics majoring in management

studies from the University of London, United Kingdom which was completed through an

external degree program, in August 1997.

Ms. SO Sau San (蘇秀珊), aged 58, joined our group in February 1998 as the director of

sales and marketing. She is primarily responsible for overseeing the sales and marketing affairs

of our Group.

Prior to joining our Group, Ms. So was employed by Barney Hongkong Limited, a

company primarily engaged in ODM and OEM electronics manufacturing, from September

1989 to June 1990, where her last position was an officer in the sales department. From July

1990 to August 1991, Ms. So was a marketing executive at Elec & Eltek Computers Ltd., a

company primarily engaged in OEM electronics manufacturing and a member of the Elec &

Eltek International Company Limited (“Elec & Eltek”), which was formerly listed on the Main

Board of the Stock Exchange (stock code: 1151) and on the Singapore Stock Exchange (stock

code: E16). From September 1991 to July 1992, she was a sales executive at Avatex Equipment

Limited, a company primarily engaged in office equipment design and marketing is also a

member of the Elec & Eltek Group. Ms. So served as a marketing manager for S. Megga from

August 1992 to June 1996. From July 1996 to January 1998, Ms. So was a marketing manager

at Giant Electronics Ltd..

Ms. So obtained a diploma in business administration from Hong Kong Shue Yan College

in July 1989.

Mr. NG Beng Hooi, aged 45, joined our Group in March 2019 as the operations director.

He is primarily responsible for overseeing the Malaysia operations of our Group.

Prior to joining our Group, Mr. Ng was employed by Solectron Technology Sdn. Bhd., a

company primarily engaged in the EMS industry, as an engineer from February 2000 to

February 2002. From February 2002 to October 2003, he was an engineer at Flextronics

Industry (M) Sdn. Bhd., a company primarily engaged in the EMS industry. Mr. Ng was an

engineer at Seagate Penang Industries Berhad, a company primarily engaged in the

manufacturing of hard disk drives, from October 2003 to February 2008. From February 2008

to February 2019, Mr. Ng was employed by Jabil Circuit Sdn. Bhd., a company primarily

engaged in the EMS industry as a technical program manager and thereafter business unit

manager.

Mr. Ng obtained his bachelor’s degree in mechanical engineering from the University

Technology of Malaysia in April 2000.


– 292 –


COMPANY SECRETARY

Ms. Wong was appointed as the secretary of our Company on 17 September 2021. For

details of her biography, please refer to “Executive Directors” in this section.

BOARD COMMITTEES

Audit Committee

We established an Audit Committee with written terms of reference in compliance with

the Corporate Governance Code and Corporate Governance Report as set out in Appendix 14

to the Listing Rules. The primary duties of the Audit Committee are to review and supervise

our financial reporting process and internal control system of the Group, oversee the audit

process, risk management process and external audit functions. The Audit Committee consists

of three members, namely, Mr. Cheung Shi Yeung, Dr. Pang and Mr. Chu. Mr. Cheung Shi

Yeung, being the chairperson of the Audit Committee, is appropriately qualified as required

under Rules 3.10(2) and 3.21 of the Listing Rules.

Remuneration Committee

We established a Remuneration Committee with written terms of reference in compliance

with the Corporate Governance Code and Corporate Governance Report as set out in Appendix

14 to the Listing Rules. The primary duties of the Remuneration Committee are to make

recommendations to the Board on our Company’s policy and structure concerning the

remuneration of our Directors and senior management and on the establishment of a formal and

transparent procedure for developing remuneration policy, review and approve performance

based remuneration by reference to corporate goals and objectives, to determine the terms of

the specific remuneration package of each executive Director and senior management and to

ensure none of our Directors determine their own remuneration. The Remuneration Committee

consists of three members, namely Mr. Chu, Mr. Albert Ho and Mr. Cheung Shi Yeung. The

chairman of the Remuneration Committee is Mr. Chu.

Nomination Committee

We established a Nomination Committee with written terms of reference in compliance

with the Corporate Governance Code and Corporate Governance Report as set out in Appendix

14 to the Listing Rules. The primary duties of the Nomination Committee are to make

recommendations to our Board on the appointment of members of the Board. The Nomination

Committee consists of three members, namely, Mr. Albert Ho, Dr. Pang and Mr. Chu. The

chairman of the Nomination Committee is Mr. Albert Ho.


– 293 –


REMUNERATION POLICY

For the three years ended 31 March 2020, 2021 and 2022, the aggregate of the

remuneration paid and benefits in kind granted to our Directors by us and our subsidiaries was

HK$19.8 million, HK$19.8 million and HK$16.2 million, respectively.


remuneration paid and benefits in kind granted to the five highest paid individuals who are

neither a director nor chief executive of our Group was HK$2.5 million, HK$2.5 million and

HK$3.0 million, respectively.

During the Track Record Period, no emoluments were paid by the Group to any Director

or any of the five highest paid individuals as an inducement to join or upon joining the Group

or as a compensation for loss of office. None of our Directors had waived any remuneration

during the Track Record Period.

Under the arrangements currently in force, we estimate that the aggregate remuneration

payable to, and benefits in kind receivable by, our Directors (excluding discretionary bonus)

for the year ending 31 March 2023 will be approximately HK$14.0 million.

In order to incentivise our Directors, senior management and other employees for their

contribution to the Group and to retain suitable personnel in our Group, we adopted the

[REDACTED] Share Option Scheme and the Share Option Scheme on [●] 2022. For further

details, see “E. [REDACTED] Share Option Scheme and Share Option Scheme” in Appendix

V to this document.

Save as disclosed above, no other payments had been made, or are payable, by any

member of the Group to the Directors during the Track Record Period.

CORPORATE GOVERNANCE

Our Directors recognise the importance of good corporate governance in management and

internal procedures so as to achieve effective accountability. Our Company complies or intends

to comply with the Corporate Governance Code set out in Appendix 14 to the Listing Rules,

save for Code A.2.1 which requires that the roles of chairman and chief executive officer be

separated and performed by different individuals.

Mr. Albert Ho is both our chief executive officer and the chairman of our Board. Our

Board believes that vesting the roles of both chief executive officer and chairman of our Board

in the same person has the benefit of ensuring consistent leadership and efficient discharge of

executive functions within our Group. Our Group considers that the balance of power and

authority of the present arrangement will not be impaired as our Board comprises seven other

experienced and high-calibre individuals including four other executive Directors and three

independent non-executive Directors who would be able to offer advice from various

perspectives. In addition, for major decisions of our Group, our Board will make consultations


– 294 –


with appropriate Board committees and senior management. Therefore, our Directors consider

that the present arrangement is beneficial to and in the interest of our Company and our

Shareholders as a whole and the deviation from Code A.2.1 of the Corporate Governance Code

is appropriate in such circumstance.

Our Directors will review our corporate governance policies and compliance with the

Corporate Governance Code in each financial year and comply with the “comply or explain”

principle in our corporate governance report which will be included in our annual reports after

the [REDACTED].

Board Diversity

We have adopted a board diversity policy (the “Board Diversity Policy”) which sets out

the objective and approach to achieve and maintain diversity on our Board in order to enhance

the effectiveness of our Board. The Board Diversity Policy provides that our Company should

endeavour to ensure that our Board members have the appropriate balance of skills, experience

and diversity of perspectives that are required to support the execution of our business strategy.

Pursuant to the Board Diversity Policy, selection of candidates for Directors will be based in

a range of diversity perspectives, including but not limited to professional experience, gender,

age, culture, independence, educational background, knowledge, expertise and length of

service. The ultimate decision of the appointment will be based on merit and the contribution

which the selected candidates will bring to our Board. Our Board believes that such

merit-based appointments will best enable our Company to serve the Shareholders and other

stakeholders going forward.

Our Board comprises eight members, including five executive Directors and three

independent non-executive Directors. Our Directors have a balanced mix of experiences,

including management and strategic development, finance and investment and accounting

experiences in addition to experience in industrial engineering, the EMS industry and product

design. Furthermore, our Board has a wide range of age and gender. We also have a good mix

of new and experienced Directors who have valuable knowledge and insights of our Group’s

business over the years, while the other Directors are expected to bring in fresh ideas and new

perspectives to our Group.

With regards to gender diversity on the Board, we recognise the particular importance of

gender diversity. Our Board currently comprises eight Directors, including one female Director

and seven male Directors. We have taken and will continue to take steps to promote and

enhance gender diversity at all levels of our Company, including at our Board and senior

management levels. While we do not currently have any specified gender ratio, based on our

Board Diversity Policy, our Board shall take opportunities when selecting and making

recommendations on suitable candidates for Board appointments with the aim to increase the

proportion of female members over time after [REDACTED]. We will also ensure that there

is gender diversity when recruiting staff at mid to senior level so that we will have a pipeline


– 295 –


of female senior management and potential successors to our Board going forward. It is our

objective to maintain an appropriate balance of gender diversity with reference to the

stakeholders’ expectation and international and local recommended best practices.

Our Nomination Committee will: (i) report annually, in the corporate governance report

contained in our annual report, on the Board’s composition under diversified perspectives, and

monitor the implementation of our Board Diversity Policy; and (ii) review our Board Diversity

Policy, as appropriate, to ensure effectiveness of the policy and discuss any revisions that may

be required, and recommend any such revisions to the Board for consideration and approval.

COMPLIANCE ADVISER

Our Company has appointed Dongxing Securities (Hong Kong) Company Limited as our

compliance adviser pursuant to Rule 3A.19 of the Listing Rules. Pursuant to Rule 3A.23 of the

Listing Rules, the compliance adviser will advise our Company on the following matters:

(i) before the publication of any regulatory announcement, circular or financial report;

(ii) where a transaction, which might be a notifiable or connected transaction, is

contemplated, including share issues and share repurchases;

(iii) where we propose to use the [REDACTED] of the [REDACTED] in a manner

different from that detailed in this document or where our business activities,

developments or results materially deviate from any forecast, estimate, or other

information in this document; and

(iv) where the Stock Exchange makes an inquiry of our Company regarding unusual

movements in the price or trading volume of our Shares.

The term of the appointment of Dongxing Securities (Hong Kong) Company Limited will

commence from (and including) the [REDACTED] and end on (and including) the date on

which we comply with Rule 13.46 of the Listing Rules in respect of our financial results for

the first full financial year commencing after the [REDACTED].


– 296 –


So far as is known to our Directors, immediately following completion of the

Capitalisation Issue and the [REDACTED] (assuming the [REDACTED] is not exercised and

without taking into account any Shares which may be issued upon the exercise of options which

may be granted under the [REDACTED] Share Option Scheme and the Share Option Scheme),

the following persons will have an interest or short position in our Shares or underlying Shares

which would be required to be disclosed to us and the Stock Exchange under the provisions of

Divisions 2 and 3 of Part XV of the SFO, or, directly or indirectly, be interested in 10% or more

of the nominal value of any class of share capital carrying rights to vote in all circumstances

at general meetings of any other member of our Group:

Immediately after theCapitalisation Issue and the

[REDACTED](1)

NameCapacity/Natureof Interest

Number ofShares

ApproximatePercentage ofShareholding

In-Tech Holdings Beneficial owner [REDACTED] [REDACTED]%

Source Capital Interest in a

controlled

corporation(2)

[REDACTED] [REDACTED]%

Mr. Albert Ho Interest in a

controlled

corporation(2)


Ms. Lee Sau Har Irene Interest of spouse(3) [REDACTED] [REDACTED]%

Notes:

(1) Assuming the [REDACTED] is not exercised and without taking into account any Shares which maybe issued upon the exercise of any options which may be granted under the [REDACTED] Share OptionScheme and the Share Option Scheme.

(2) In-Tech Holdings is owned as to 77.11% by Source Capital which is in turn owned by Mr. Albert Hoas to 39.18%. Accordingly, each of Source Capital and Mr. Albert Ho is deemed to be interested in allthe Shares held by In-Tech Holdings upon the [REDACTED].

(3) Ms. Lee Sau Har Irene is the spouse of Mr. Albert Ho and she is thus deemed to be interested in all theShares held by Mr. Albert Ho under the SFO.

Except as disclosed above, our Directors are not aware of any person who will,

immediately following the Capitalisation Issue and the [REDACTED], have an interest or

short position in Shares or underlying Shares which would be required to be disclosed to us and

the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or,

directly or indirectly, be interested in 10% or more of the nominal value of any class of share

capital carrying rights to vote in all circumstances at general meetings of our Company.

SUBSTANTIAL SHAREHOLDERS

– 297 –


SHARE CAPITAL

The authorised and issued share capital of our Company is as follows:

Authorised Share Capital

As at the date of this document:

HK$

38,000,000 Shares 380,000

Issued Share Capital

Assuming the [REDACTED] is not exercised at all, and without taking into account any

Shares which may be issued upon the exercise of any options that may be granted under the

[REDACTED] Share Option Scheme and the Share Option Scheme, the issued share capital

of our Company immediately following the completion of the Capitalisation Issue and the

[REDACTED] will be as follows:

Approximatepercentage of

issued sharecapital

HK$ (%)

10,000 Shares in issue as at the date of this

document

100.00 0.001

[REDACTED] Shares to be issued under the

Capitalisation Issue

[REDACTED] [REDACTED]


[REDACTED]


[REDACTED] Shares in total [REDACTED] 100.000

SHARE CAPITAL

– 298 –


Assuming the [REDACTED] is exercised in full, and without taking into account any

Shares which may be issued upon the exercise of any options that may be granted under the

[REDACTED] Share Option Scheme and the Share Option Scheme, the issued share capital

of our Company immediately following the completion of the Capitalisation Issue and the

[REDACTED] will be as follows:


issued sharecapital

HK$ (%)

10,000 Shares in issue as at the date of this

document

100.00 0.001


Capitalisation Issue



[REDACTED]


[REDACTED] Shares in total [REDACTED] 100.000

RANKING

The [REDACTED] are ordinary Shares in the share capital of our Company and will rank

pari passu in all respects with all other Shares in issue or to be issued as mentioned in this

document, and will qualify and rank equally for all dividends or other distributions declared,

made or paid after the date of this document.

[REDACTED] SHARE OPTION SCHEME

Our Company has adopted the [REDACTED] Share Option Scheme on [●] 2022.

Assuming full exercise of the outstanding options granted under the [REDACTED] Share

Option Scheme, the shareholding of the Shareholders immediately following completion of the

Capitalisation Issue and the [REDACTED] (assuming no exercise of the [REDACTED] or

any options that may be granted under the Share Option Scheme) will be diluted by

approximately [REDACTED]% as calculated based on [REDACTED] Shares then in issue.

Please see “E. [REDACTED] Share Option Scheme and Share Option Scheme – 1.

[REDACTED] Share Option Scheme” in Appendix V to this document for further details.

SHARE OPTION SCHEME

Our Company has conditionally adopted the Share Option Scheme on [●]. The principal

terms of the Share Option Scheme is set out in “E. [REDACTED] Share Option Scheme and

Share Option Scheme – 2. Share Option Scheme” in Appendix V to this document.

SHARE CAPITAL

– 299 –


GENERAL MANDATE TO ISSUE SHARES

Our Directors have been granted a general unconditional mandate to allot, issue and deal

with Shares with an aggregate number of not more than the sum of:

(i) 20% of the total number of Shares in issue immediately following the completion of

the Capitalisation Issue and the [REDACTED] (excluding any Shares which may be

sold pursuant to the [REDACTED]); and

(ii) the total number of Shares repurchased by our Company (if any) under the general

mandate to repurchase Shares referred to below.

This mandate will expire at the earliest of:

(i) the conclusion of our Company’s next annual general meeting unless renewed by an

ordinary resolution of our Shareholders in a general meeting, either unconditionally

or subject to conditions; or

(ii) the expiration of the period within which our Company is required by law or the

Articles of Association to hold its next annual general meeting; or

(iii) the time when such mandate is varied, revoked or renewed by an ordinary resolution

of our Shareholders in a general meeting.

For further details of this general mandate, please refer to “A. Further Information about

our Company – 4. Written resolutions of the then Shareholders of our Company passed on [●]”

in Appendix V to this document.

GENERAL MANDATE TO REPURCHASE SHARES

Subject to the [REDACTED] becoming unconditional, our Directors have been granted

a general unconditional mandate to exercise all the powers of our Company to repurchase

Shares with an aggregate value of up to 10% of the number of Shares in issue immediately

following the completion of the Capitalisation Issue and the [REDACTED] (excluding any

Shares which may fall to be issued pursuant to the exercise of the [REDACTED] and any

options which may be granted under the [REDACTED] Share Option Scheme and the Share

Option Scheme).

This mandate relates only to repurchases made on the Stock Exchange or any other stock

exchange on which the Shares may be listed and which is recognised by the SFC and the Stock

Exchange for this purpose, and which are made in accordance with the Listing Rules.

SHARE CAPITAL

– 300 –


This mandate will expire at the earliest of:

(i) the conclusion of our Company’s next annual general meeting unless renewed by an

ordinary resolution of our Shareholders in a general meeting, either unconditionally

or subject to conditions; or

(ii) the expiration of the period within which our Company is required by law or the

Articles of Association to hold its next annual general meeting; or

(iii) the time when such mandate is varied, revoked or renewed by an ordinary resolution

of our Shareholders in a general meeting.

For further information about this repurchase mandate, please refer to “A. Further

Information about our Company – 4. Written resolutions of the then Shareholders of our

Company passed on [●]” in Appendix V to this document.

SHARE CAPITAL

– 301 –


The following discussion and analysis of our Group’s financial condition and results

of operations should be read in conjunction with our consolidated financial information

as of and for each of the years ended 31 March 2020, 2021 and 2022, as set out in

“Appendix I – Accountant’s Report” to this document. Our Group’s consolidated

financial information has been prepared in accordance with Hong Kong Financial

Reporting Standards (“HKFRS”). You should read the entire Accountant’s Report and

not merely rely on the information contained in this section.

The following discussion and analysis contain certain forward-looking statements

that reflect our current views with respect to future events and financial performance.

These statements are based on assumptions and analysis in light of our experience and

perception of historical trends, current conditions and expected future developments, as

well as other factors our Group believe are appropriate under the circumstances.

However, whether actual outcomes and developments will meet our Group’s expectations

and projects depends on a number of risks and uncertainties over which our Group does

not have control. For further information, you should refer to the section headed “Risk

Factors” in this document.

The following discussion and analysis also contain certain amounts and percentage

figures that have been subject to rounding adjustments. Accordingly, figures shown as

totals in certain tables may not be an arithmetic aggregation of the figures preceding

them and all monetary amounts shown are approximate amounts only.

For the purpose of this section, unless the context otherwise requires, references to

FY2020, FY2021 and FY2022 refer to our financial years ended 31 March of such years

and references to 2020, 2021 and 2022 refer to the calendar years ended 31 December

of such years. Unless the context otherwise requires, financial information described in

this section is described on a consolidated basis.

OVERVIEW


provider focused on providing customised IoT and jointly-developed products for demanding

customers across the world. We work in close collaboration with our customers at all stages of

the product cycle to deliver customised end-to-end solutions for complicated projects.

We offer a comprehensive range of services to provide our customers integrated product

design and development, manufacturing and validation solutions. Such services include initial

product specification and development, hardware and mechanical product design, selection of

components, sub-supplier management, performance testing of parts and products and product

certification. In particular, our on-site accredited laboratory in Dongguan allows for real time

product and part verification and validation and environmental testing under “one roof” can

help increase process efficiency and minimise our customers’ time to market.

FINANCIAL INFORMATION

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Our clients typically engage us on a Joint Development or OEM basis. For Joint

Development Projects, we engage in hardware, mechanical and/or software design for the

project in conjunction with the customer’s in-house design team, or take a major role in product

and component validation services. For OEM projects, the customers provide the key elements


We develop and produce electronics products in response to specific customer requests

for customers in a variety of different industries. Examples of products we produced during the

Track Record Period include power management systems for commercial aircraft, marine

navigational systems, intelligent driver surveillance systems, ultra low power IoT utility meters

and IoT devices and monitoring systems for elderly persons.

As at the Latest Practicable Date, we had production plants in two locations: one plant in

Dongguan, the PRC and two plants in Penang, Malaysia. Our production facilities in Dongguan

and Penang are fully-functional and are equipped with a wide range of advanced automated

machinery and equipment for our production processes, including SMT assembly, wave

soldering and aqueous cleaning, in addition to testing and laboratory capabilities. We also have

offices and a workshop in Hong Kong providing product refurbishment and repair services. We

have office premises located in Xili, Shenzhen, the PRC, which act as our operations centre to

carry out a range of services, including R&D services, engineering, purchasing, sales and

marketing, IT, finance and human resources management.

The Track Record Period was a period of challenges and change for us, particularly

FY2020 in which we migrated our operations to new production facilities in Dongguan and

Penang and in which the outbreak of COVID-19 in the last quarter caused closures of our

production facilities and delays in receipt of supplies and shipment of products. Despite this,

we managed to grow our operations over the period. Our revenue for FY2020, FY2021 and

FY2022 was HK$1,395.1 million, HK$1,801.7 million and HK$2,088.8 million, respectively.

Our profit for the year for FY2020, FY2021 and FY2022 was HK$32.6 million, HK$89.6

million and HK$94.8 million, respectively. We also make use of a non-HKFRS measure of

adjusted profit, which eliminates the effects of (i) [REDACTED] expenses and (ii) government

grants received. Such non-HKFRS measure of adjusted profit for FY2020, FY2021 and

FY2022 was HK$24.4 million, HK$83.1 million and HK$105.9 million, respectively.

BASIS OF PRESENTATION

Our Company was incorporated in the Cayman Islands as an exempted company with

limited liability under the Companies Act on 16 August 2021, and is principally engaged in

development, manufacturing and sales of electronic products to customers in different

industries (the “[REDACTED] Business”). Pursuant to the Reorganisation, our Company

became the holding company of the companies now comprising the Group, which include the

In-Tech Electronics HK, In-Tech Electronics Singapore and In-Tech Investment (the

“Operating Entities”). Details of the Reorganisation are set out in the section headed “History,

Reorganisation and Group Structure” in this document.


– 303 –


Immediately prior to and after the Reorganisation, the [REDACTED] Business wascarried out by the Operating Entities. Our Company was newly set up during theReorganisation and has not been involved in any other business prior to the Reorganisation.The Reorganisation was merely a recapitalisation of the [REDACTED] Business and did notresult in any changes in the business substance, nor in any management or the ControllingShareholders of the [REDACTED] Business. Accordingly, the Group resulting from theReorganisation is regarded as a continuation of the [REDACTED] Business as conducted bythe Operating Entities and Inter-company transactions, balances and unrealised gains/losses ontransactions between the companies now comprising the Group have been eliminated oncombination.

FACTORS AFFECTING OUR FINANCIAL RESULTS

Our results of operations and financial condition have been, and are expected to be,affected by a number of factors, many of which may be beyond our control, including thefollowing:

Number, size and timing of orders

The amount of revenue that we recognise is generally driven by (i) the size and value ofthe projects on which we are engaged, including the number of orders generated under eachproject and the value of such orders, which varies from customer to customer and from projectto project and (ii) the status and timing of the orders generated from such projects.

We use a book-to-bill ratio (the ratio of orders received to revenue for a specified period)to measure ongoing demand for our products and indicate potential future growth. A ratioabove one indicates we were receiving more orders than we were filling, implying strongdemand. A ratio below one indicates we were receiving fewer new orders than we were filling,implying potentially weaker demand. Bookings and book-to-bill ratio are not prepared inaccordance with HKFRS.

The following table sets forth the change in our backlog of orders for the years/periodsindicated:

FY2020 FY2021 FY2022


PracticableDate

HK$millions

HK$millions

HK$millions

HK$millions

(unaudited)

Backlog of orders at thebeginning ofthe year 672.2 895.1 1,278.1 1,697.4

AddOrder value of new orders

awarded during the year 1,618.0 2,184.7 2,508.1 346.7


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FY2020 FY2021 FY2022


PracticableDate

HK$millions

HK$millions

HK$millions

HK$millions

(unaudited)

Less:Revenue recognised during

the year 1,395.1 1,801.7 2,088.8 244.4

Backlog of orders at the endof the year 895.1 1,278.1 1,697.4 1,799.7

The following table sets forth our book-to-bill ratio for the years/periods indicated:

FY2020 FY2021 FY2022


PracticableDate

(unaudited)

Book-to-bill ratio(1) 1.2 1.2 1.2 1.4

Note:

1. Equivalent to the value of new orders received in a period divided by revenue for the year.

We maintained a high book-to bill ratio of 1.2 (indicating new orders were coming in at

a faster pace than we were fulfilling existing orders) in each of FY2020, FY2021 and FY2022

notwithstanding a 29.1% growth in revenue year on year in FY2021 and 15.9% growth in

revenue year on year in FY2022. This high ratio has continued, with the period from 1 April

2022 to the Latest Practicable Date having a book-to-bill ratio of 1.4. As at the Latest

Practicable Date, we had backlog of orders of HK$1,799.7 million. This indication of ongoing

demand is supported by deposits we collected from customers in relation to ongoing projects

for materials and product-specific tooling or equipment that we hold. As at 31 March 2020,

2021 and 2022, we held deposits totalling of HK$147.7 million, HK$223.7 million, and

HK$242.5 million, respectively. While some of this increase in deposits might partially reflect

customers placing early orders for electrical components to ensure timely supply given recent

shortages, it is also an indication of further orders to come and reflect our customers’

commitment to working with us to alleviate the risk of future electronic component shortages

by placing their orders early.


– 305 –


In relation to status and timing of orders, we generally go through three stages when a

new project is launched: The first stage is the development period where we receive little to

no revenue. The second stage is the ramp-up period which normally lasts for around six to

seven months. This typically happens once a new product design has been approved and the

customer gives the go-signal to commence production. As customers usually demand a large

quantity of products to flood the market at the initial launch, this would result in increased

sales for our Company as well an increase in revenue. The third stage is the sustaining period

during which we typically receive orders at approximately one-third to half of the volume

ordered during the ramp-up period. This stage typically lasts three to five years. Thus the

amount of revenue we can expect from a project in any specific year varies based on what stage

that project is in. For example, in FY2020 certain products originally expected to launch were

delayed until FY2021, shifting recognition of revenue from such projects to FY2021.

Expansion and relocation of our production facilities

Owing to our growing business and operational needs, as well as certain circumstances

beyond our control, we relocated and expanded our production facilities during the Track

Record Period.

Our Dongguan production facilities

In FY2020 we relocated our PRC production facilities from leased premises in Shenzhen

to new, larger premises we constructed in Dongguan. We acquired the land for our Dongguan

site in May 2018 at a purchase price of RMB66.1 million (equivalent to HK$81.9 million). We

began setting up production lines there in October 2019 to November 2019. We commenced

production in our new Dongguan facilities in December 2019 and continued to gradually

relocate our production and equipment there through March 2020, at which time we vacated the

premises and the land upon which the Shenzhen production facilities were located was returned

to the landlord. Since that time, our production facilities in Dongguan have served as our main

production facilities. Over the Track Record Period, we incurred capital expenditure of

RMB123.3 million (equivalent to HK$139.2 million) for construction of our Dongguan

production facilities.

Our Penang production facilities

In February 2019, we leased a site with GFA of 6,038 sq.m. to open production facilities

in Penang, Malaysia, primarily in reaction to increasing Sino-US tensions and the resulting

potential additional tariffs for certain of our customers. In September 2020, as a result of

increased demand for our Malaysian based services, we further leased a second factory site

with GFA of 5,888 sq.m. to further expand the scope of our business operations in Penang. In

order to further expand our production facilities in Penang and consolidate them in a single

location, in January 2021, we purchased a larger third site with a GFA of 32,702 sq.m. at

consideration of MYR31.8 million (equivalent to HK$59.6 million). We commenced

operations at this third site in March 2022 and expect to complete migration of all equipment

and operations to the site by the end of 2022, at which point it will function as our sole


– 306 –


operational location in Penang. This third site will provide enough space to absorb the

operations of our first two Penang sites as well as provide significant room for future

expansion. We ceased operations at our first Penang production site following commencement

of operations at our new third Penang site in March 2022. From January 2021 through March

2022, we incurred capital expenditure of MYR19.6 million (equivalent to HK$36.6 million) for

leasehold improvement on our new site in Penang.

The expansion and relocation of our production facilities have impacted our consolidated

income statements, consolidated statements of financial position, and consolidated statements

of cash flows for the Track Record Period in a number of ways, including:

• Over the Track Record Period, we had significant cash outflows for purchases of

property, plant and equipment, much of which was in connection with the expansion

and relocation of our production facilities. In FY2020, FY2021 and FY2022, we

made purchases of property, plant and equipment amounting to approximately

HK$144.2 million, HK$118.3 million and HK$46.1 million, respectively, most of

which related to our new production facilities in Dongguan and Penang.

• In respect of our closure of our previous site in Shenzhen and relocation of our

production facilities to Dongguan in 2019, we made provision amounting to

HK$76.9 million as at 31 March 2019 in relation to the payment of severance

compensation to redundant employees pursuant to such restructuring measures.

Such provisions were paid in FY2020, which contributed to net operating cash

outflow of approximately HK$17.6 million for FY2020.

• Such expansion and relocation was financed primarily through bank borrowings, the

level of which substantially increased over the Track Record Period, rising from

HK$149.9 million as at 31 March 2020 to HK$192.9 million as at 31 March 2021

and further to HK$359.7 million as at 31 March 2022.

• Our depreciation expenses relating to our property, plant and equipment and

right-of-use assets substantially increased over the Track Record Period, rising from

HK$43.5 million in FY2020 to HK$46.7 million in FY2021 and further to HK$57.0

million in FY2022, primarily as we increased our property, plant and equipment in

connection with the abovementioned expansion and relocation. We expect to incur

additional depreciation costs moving forward, particularly in relation to our third

site in Penang, including the production machinery and equipment to be installed

and utilised at this site. See “Risk Factors – Risks relating to our business and our

industry – Our recent and future capital expenditure on expansion of and

improvements to our production facilities and the purchase of property, plant and

equipment may result in an increase in our depreciation expenses”.


– 307 –


Cost and supply of materials, components and parts

During the Track Record Period, the cost of materials, components and parts which we

sourced externally for our production accounted for 78.6%, 82.9% and 82.9% of our total costs

of sales for FY2020, FY2021 and FY2022, respectively.

We typically price our products and services on a cost plus margin basis and our contracts

with customers typically contain terms allowing for price review and adjustment on an ongoing

basis at specific times and/or upon request of either of the parties. As such, we are typically

able to adjust our prices to match any variation in prices of materials, components or parts.

However, there can be no assurance that we will be able to adjust or prices to negate the impact

of all such increases in costs in the future, in a timely manner or at all to avoid any adverse

impacts in our profitability.

Starting at the end of 2020 and continuing through 2021 and into 2022, certain

commodities such as metals, steel, resin and fibreglass were trading at relatively high prices.

In addition, the operations of our suppliers were adversely affected due to the global spread of

COVID-19 and we experienced shortages of certain electronic components, including chip

components, LCDs and PCBs, which have also become acutely challenging to obtain due to

demand exceeding supply. There can be no assurance that fluctuations in the market price and

shortages of these major types of materials, or similar price fluctuations and/or shortages, will

not materially affect us going forward. See “Risk Factors – We may be negatively affected by

price increases or a shortage or delay in supply of materials, components and parts required for

our business operations”.

For illustrative purposes only, the following sensitivity analysis illustrates how

hypothetical fluctuations in the cost of materials, components and parts used in the course of

our business operations would impact upon our profit before tax for the years indicated

assuming no corresponding increase in price we charge our customers. The sensitivity analysis

adopts hypothetical fluctuations of 3% and 5%, with all other variables remaining constant.

Hypothetical fluctuation in the cost ofcomponents and raw materials used +/- 3% +/- 5%

Change in profit before tax

(HK$’000)

FY2020 26,704.7 44,507.8FY2021 37,474.7 62,457.9FY2022 43,605.3 72,675.5


– 308 –


Costs and supply of labour

During the Track Record Period, total employee benefit expenses amounted to 20.2%,

17.0% and 16.2% of our revenue for FY2020, FY2021 and FY2022, respectively. Our

production facilities are located in Dongguan, the PRC and Penang, Malaysia, where the cost

of labour has been increasing over the past several years. There can be no assurance that our

labour costs will be stable. We may experience labour shortages and/or significant increases in

labour costs because of relevant labour laws and regulations, increasing competition for

employees, higher employee turnover rates, increase in wages and/or other employee benefits

costs, which in turn will increase our operating expenses, and materially and adversely affect

our growth.

For illustrative purposes only, the following sensitivity analysis illustrates how

hypothetical fluctuations in the cost of labour would impact upon our profit before tax for the

years indicated. The sensitivity analysis adopts hypothetical fluctuations of 5% and 10%, with

all other variables remaining constant.

Hypothetical fluctuation in the cost of labour +/- 5% +/- 10%Change in profit before tax

(HK$’000)

FY2020 14,061.8 28,123.6FY2021 15,273.5 30,547.0FY2022 16,869.1 33,738.2

Production capacity/utilisation rate

Our ability to maintain a steady production output and, by extension, our profitability

depends partly on our ability to maintain a high utilisation rate for our production machinery

and equipment in our Dongguan production facilities and our Penang production facilities. As

a certain portion of our costs of sales, such as direct labour and overhead costs related to our

production facilities, are relatively fixed in nature, the extent to which our production

machinery and equipment are efficiently and effectively utilised therefore directly impacts

upon our operating results. Having a high utilisation rate allows us to spread our fixed costs

over a larger quantity of our products, resulting in a higher profit margin. However, if we are

unable to continuously maintain such a high utilisation rate, our profit margin will be adversely

affected.

All of our projects require some form of customer-specific assembly instruction,

assembly aid, tooling or test equipment and their production processes will be unique at a

detailed level.


– 309 –


During the Track Record Period, the respective utilisation rates of SMT production lines

in our Dongguan production facilities and Penang production facilities are set forth below. See

“Business – Our Production Facilities and Equipment – Our Machinery and Equipment” for

more details of the Group’s principal machinery and equipment.

In order to provide meaningful numbers that are comparable across projects and location

sites, we measure our capacity and utilisation rate using SMT production lines which are

common to most of our products and which operate as the limiting factor in the amounts of

different products we can produce.




FY2020 FY2021 FY2022 FY2023 FY2024 FY2025

PRC Production 8.5 lines(4)(5) 8 lines(5) 8 linesTotal actual SMT run


run hours(1) 48,017(5) 45,192(5) 45,192Utilisation rate(2) 65.6% 94.1%(6) 99.6%

Penang Production 0.5 lines(4) 1.75 lines(4) 2 linesTotal actual SMT run




Total actual SMT run


run hours(1) 50,841 55,078 56,490 59,315 64,964 72,025Utilisation rate(2) 64.4% 86.2%(6) 90.8%

Notes:

1. Assuming maximum operating time of 21 hours a day and 22 days a month across our PRC and Penangsites.



– 310 –


3. The relatively low utilisation rates in our Penang production facilities over the Track Record Periodwere largely the result of our Penang operations being in the initial set-up stage. See “Business – OurBusiness Strategies – Increase our production capacity and upgrade our production facilities – 2.Upgrade and expand functionality at our production facilities in Penang” for further details.


5. The decrease in the number of SMT lines in the PRC and the resulting decrease in maximum potentialSMT run hours in the PRC related to the retirement of one older SMT production line during FY2020.

6. The increase in utilisation rate in the PRC from 65.6% in FY2020 to 94.1% in FY2021 was due toincreased production in FY2021, in-line with total increase in our revenue from HK$1,395.1 million inFY2020 to HK$1,801.7 million in FY2021, on 0.5 fewer lines, as one older SMT production line wasretired during FY2020. Production increases in Penang were largely offset by introduction of oneadditional SMT line in the first half of FY2021.

Fluctuations in foreign exchange rates

We mainly operate in Hong Kong, the PRC and Malaysia. While most of our sales and

most of our purchases are denominated and settled in HK$ and US$, certain other

manufacturing costs are denominated in MYR, and RMB. Foreign exchange risk arises from

future commercial transactions and recognised assets and liabilities that are denominated in a

currency that is not in HK$, MYR or RMB, which are the functional currencies of the major

operating companies within our Group. Fluctuations in exchange rates between US$, HK$,

RMB and MYR, could materially impact our profit margin and overall results of operations.

Our management closely monitors foreign currency exchange exposure and will take

measures to minimise the currency translation risk, primarily including managing exposure

arising from purchases made by group entities in currencies other than their own functional

currencies. We also manage our foreign exchange risk by performing regular reviews of our net

foreign exchange exposure. During the Track Record Period we did not use forward contracts

or other derivative instruments to hedge our foreign exchange risks as there is a natural offset

of foreign currency receivables against foreign currency payables. However, as we do not have

a foreign currency hedging policy, we cannot assure you we will be able to effectively reduce

our foreign currency risk exposure relating to our operations in the PRC and Malaysia. In

FY2020, FY2021 and FY2022, we recorded net exchange losses of HK$26.2 million, net

exchange gains of HK$23.6 million and net exchange gains of HK$16.0 million, respectively.

In addition, for FY2020, FY2021 and FY2022, exchange differences on translation of foreign

operations resulted in other comprehensive loss of HK$32.6 million, other comprehensive

income of HK$38.1 million and other comprehensive income of HK$11.8 million, respectively.

These currency translation differences relate to the results and financial position of our

foreign operations that have a functional currency different from our presentation currency.

Such results and financial positions are translated into the presentation currency as follows:

• assets and liabilities for each balance sheet presented are translated at the closing

rate at the date of that balance sheet,


– 311 –


• income and expenses for each statement of profit or loss and income statement are

translated at average exchange rates (unless this 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 dates of the transactions), and

• all resulting exchange differences are recognised in other comprehensive income.

On consolidation, exchange differences arising from the translation of any net investment

in foreign entities are recognised in other comprehensive income. Given the significant levels

of our financial positions with a functional currency of RMB and our presentation currency of

HK$, the amount of other comprehensive income/loss we recognised over the Track Record

Period was largely driven by weakening of the RMB against the HK$ in FY2020 and

subsequent strengthening of the RMB in FY2021 and FY2022.

SIGNIFICANT ACCOUNTING POLICIES, ESTIMATES AND JUDGEMENTS

We have identified certain accounting policies that are significant to the preparation of

our consolidated financial statements. See “Appendix I – Accountant’s Report – 2. Summary

of Significant Accounting Policies” for the significant accounting policies which are important

for an understanding of our financial condition and results of operation. Some of these

accounting policies involve our subjective assumptions and estimates, as well as our

judgements in relation to certain accounting items. See “Appendix I – Accountant’s Report –

2. Summary of Significant Accounting Policies” for critical accounting estimates and

judgements. Such estimates and judgements are continually evaluated and are based on

historical experience and other factors, including expectations of future events that are

believed to be reasonable under the circumstances.

We believe the following accounting policies, estimates and judgements are of critical

importance to us in the preparation of our consolidated financial statements.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable, and

represents amounts for the sale of goods in the ordinary course of our activity. Revenue is

shown net of returns and after eliminating sales within our Group.

We do not expect to have any contracts where the period between the transfer of the

promised goods to the customers and the payment by the customers exceeds one year. As a

consequence, we do not adjust any of the transaction prices for the time value of money.


– 312 –


Sales of Goods

Sales are recognised when control of the products has transferred, being when the

products are delivered to the customers, the customers have accepted the product and have full

discretion over the products, the collection of the related consideration is probable and there

is no unfulfilled obligation that could affect the customers’ acceptance of the products.

A receivable is recognised when the goods are delivered as this is the point in time that

the consideration is unconditional because only the passage of time is required before the

payment is due.

A contract liability is recognised when a customer pays consideration, or is contractually

required to pay consideration and the amount is already due, before we recognise the related

revenue. We recognise contract liabilities under other payables and accruals and as receipts in

advance from customers in our consolidated statements of financial position.

Provision of services

We provide other engineering services, such as design and development, testing and

tooling of products. Revenue is recognised over the period that services we render, as an asset

created, have no alternative use to us and we have a right to payment for performance to date.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is assigned to

individual items of inventory on the basis of first-in-first-out method. The cost of finished

goods and work in progress comprises raw materials, direct labour, other direct costs and

related production overheads based on normal operating capacity. Net realisable value is the

estimated selling price in the ordinary course of business, less applicable variable selling and

distribution costs necessary to make the sale.

Property, plant and equipment

During the Track Record Period, our properties, plant and equipment consisted of

buildings, motor vehicles, furniture and fixtures, leasehold improvements, plants and

machineries, and construction in process. Property, plant and equipment is stated at historical

cost less depreciation. Historical cost includes expenditure that is directly attributable to the

acquisition of the items.

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 us and the cost of the item can be measured reliably. The carrying amount

of the replaced part is derecognised. All other repairs and maintenance costs are charged in the

consolidated income statement during the reporting period in which they are incurred.


– 313 –


Depreciation on property, plant and equipment, other than construction in progress, is

calculated using the straight-line method to allocate their cost, net of their residual values, over

their estimated useful lives. The principal annual rates used for such purpose are as follows:

Building 12 to 25 yearsPlants and machineries 5 to 10 yearsFurniture and fixtures 5 yearsLeasehold improvements Shorter of lease terms or estimated useful lifeMotor vehicles 5 years

The asset’s residual values and useful lives are reviewed and, if appropriate, adjusted at

the end of each reporting period. An asset’s carrying amount is written down immediately to

its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable

amount.

Construction in progress represents property, plant and equipment under construction or

pending installation. Construction in progress is stated at cost less impairment losses. Cost

comprises direct costs of construction including borrowing costs attributable to the

construction during the period of construction. No provision for depreciation is made on

construction in progress until such time as the relevant assets are completed and ready for

intended use.

Trade receivables

Trade receivables are amounts due from customers for goods sold or services performed

in the ordinary course of business. If collection of trade receivables is expected in one year or

less, they are classified as current assets. If not, they are presented as non-current assets.

RESULTS OF OPERATIONS

The following table sets forth our consolidated income statements for the years indicated,

the details of which are set out in the Accountant’s Report in Appendix I to this document.

FY2020 FY2021 FY2022HK$’000 HK$’000 HK$’000

Revenue 1,395,061 1,801,670 2,088,775Cost of sales (1,132,464) (1,507,434) (1,754,213)

Gross profit 262,597 294,236 334,562Administrative expenses (190,852) (189,133) (217,609)Distribution costs (5,783) (5,689) (5,830)Reversal of impairment loss on

financial assets, net 239 52 169Other income 9,688 7,631 3,574Other (losses)/gains, net (26,223) 23,371 16,023


– 314 –


FY2020 FY2021 FY2022HK$’000 HK$’000 HK$’000

Operating profit 49,666 130,468 130,889- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Finance income 1,007 509 2,576Finance costs (4,199) (10,883) (9,857)

Finance costs, net (3,192) (10,374) (7,281)- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Profit before income tax 46,474 120,094 123,608Income tax expense (13,888) (30,455) (28,828)


Non-HKFRS measure

To supplement our consolidated income statements which are presented in accordance

with HKFRS, we also use adjusted profit as an additional financial measure. We present this

financial measure because it is used by our management to evaluate our operating performance

as it excludes charges and gains our management do not expect to recur and thus provides

useful information on our on-going business. We believe that such non-HKFRS measure

provides useful information to investors in understanding and evaluating our results of

operations in the same manner as it helps our management and in comparing financial results

across accounting periods and to those of our peer companies.

Adjusted profit eliminates the effects of (i) [REDACTED] expenses and (ii) government

grants received. The term of adjusted profit is not defined under HKFRS. The use of adjusted

profit has material limitations as an analytical tool, as adjusted profit does not include all items

that impact our profit for the year. We compensate for these limitations by reconciling this

financial measure to the nearest HKFRS performance measure, which should be considered

when evaluating our performance. The following table reconciles our adjusted profit for the

year presented to profit for the year, the most directly comparable financial measure calculated

and presented in accordance with HKFRS:

FY2020 FY2021 FY2022HK$’000 HK$’000 HK$’000

Profit for the year 32,586 89,639 94,780Add:[REDACTED] expenses 885 825 14,430

Less:Government grants (9,045) (7,386) (3,341)

Adjusted profit (Non-HKFRS measure) 24,426 83,078 105,869


– 315 –


PRINCIPAL ITEMS IN THE CONSOLIDATED INCOME STATEMENTS

Revenue

We primarily generate revenue from selling products to customers to which we provide

electronics development and manufacturing services. Our revenue for FY2020, FY2021 and

FY2022 was HK$1,395.1 million, HK$1,801.7 million and HK$2,088.8 million, respectively.

The following table sets forth a breakdown of our revenue by our customers’ industry

sector for the years indicated:

FY2020 FY2021 FY2022HK$’000 % HK$’000 % HK$’000 %

Industry sectorTransportation(1) 483,645 34.7 392,485 21.8 485,411 23.2Medical, assisted living,

and wellness 354,850 25.4 406,954 22.5 591,302 28.3Smart module and smart

device 260,576 18.7 644,104 35.8 635,779 30.4Communication and postal 215,718 15.5 293,490 16.3 317,747 15.2Others(2) 80,272 5.7 64,637 3.6 58,536 2.8

Total 1,395,061 100.0 1,801,670 100.0 2,088,775 100.0

Notes:

1. Primarily includes the aerospace, marine, and automotive industries.


The following table sets forth a breakdown of our revenue by geographical location

during the Track Record Period:

FY2020 FY2021 FY2022HK$’000 % HK$’000 % HK$’000 %

Geographic Region(1)


Total 1,395,061 100.0 1,801,670 100.0 2,088,775 100.0


– 316 –


Notes:

1. The breakdown is based on the location the contracting party of our customers. Our customers, inparticular multinational corporations, may place purchase orders from various regional offices. Thelocations where our products are ultimately used may be different from the location of the contractingentity. We also generate revenue from provision of certain services recognised over time, includingproduct development activities, creation of tools and test products and testing services.

2. Others primarily includes locations in South America.

The following table sets forth a breakdown of our revenue by business model for the years

indicated:



Total 1,395,061 100.0 1,801,670 100.0 2,088,775 100.0

Our revenue was relatively low in FY2020. This was primarily attributable to the

outbreak of the COVID-19 pandemic and measures taken in response to the pandemic which

resulted in the closure of our production facilities in the PRC from 18 January 2020 to 9

February 2020, and in Penang from 18 March 2020 through 8 April 2020. Moreover, production

in our PRC production facilities ramped up gradually over the course of February 2020 and

March 2020 as our workers, many who had returned home for the Chinese New Year, gradually

returned back to work. Certain products originally expected to launch in FY2020 were delayed

until FY2021. For FY2021, our revenue increased approximately 29.1% as compared to

FY2020, primarily attributable to full operation of our production facilities and increased

orders in FY2021. Revenue growth in FY2021 was underpinned by increases in demand across

all industrial sectors (medical, assisted living and wellness, smart module/smart devices and

communications/postal) with the exception of transportation, which was adversely affected by

the COVID-19 pandemic during this period. As widely reported, travel restrictions imposed by

governments to limit the spread of COVID-19 severely impacted the commercial aerospace

industry. This has impacted the patterns of spend for airlines and their sub-suppliers. Two of

our top customers in FY2019, including Customer F, service the commercial aerospace

industry. As a result of the impact on the industry, our revenue from these two customers

dropped significantly in FY2020 and FY2021. Within the other industrial sectors, a few

products saw particular growth which was driven by their strong customer proposition and in

some cases were assisted by the imposition of COVID-19 lockdown regulations and travel

restrictions. Projects of note in FY2021 included a project to produce an educational product

within the smart devices industrial sector for Customer A, increase in marine navigation

products for Customer C and a high speed wireless network hub product we produced for

Customer E. Of these, we understand that the educational products and marine products were

being positively impacted during the COVID-19 pandemic by widespread home-schooling and


– 317 –


social distancing/restrictions on air travel, respectively. Revenue from these three customers

increased HK$530.5 million in FY2021 as compared to FY2020. For FY2022, our revenue

increased approximately 15.9% as compared with the previous year, driven primarily by

increased sales and revenue from customers in the medical, assisted living and wellness and

transportation industry sectors. To a lesser extent, the increase in revenue tracked increases in

prices due to spot-buying of materials and components from alternative sources due to supply

constraints stemming from the global shortages of IC components. Such spot-buys are only

made after our customer authorises such purchases and agrees that any increase in cost is added

to the price of the product. Additional revenue and costs of sales from spot-buys increased from

HK$6.2 million for FY2021 to HK$87.8 million for FY2022.

Revenue derived from services provided on a Joint Development basis increased

significantly over the Track Record Period from HK$594.7 million for FY2020 to HK$995.0

million for FY2022, largely driven by a series of joint development projects for Customer A

in FY2021 and FY2022. Revenue derived from services provided on an OEM basis increased

from HK$811.9 million for FY2021 to HK$1,093.7 million for FY2022, largely driven by

increases in revenue contribution from customers in the assisted living and aerospace sectors

for whom we provide services on an OEM basis.

Cost of sales

Cost of sales represents costs and expenses directly attributable to our revenue-generating

activities. Our cost of sales primarily includes cost of inventory sold and staff costs. For

FY2020, FY2021 and FY2022, our cost of sales was HK$1,132.5 million, HK$1,507.4 million

and HK$1,754.2 million, respectively, representing 81.2%, 83.7% and 84.0% of our total

revenue, respectively. Set out below is a breakdown of the cost of sales by nature of expense


FY2020 FY2021 FY2022HK$’000 HK$’000 HK$’000

Cost of salesCost of inventory sold 890,155 1,249,157 1,453,509Staff costs 150,019 164,846 189,994Consumables 14,948 16,418 18,559Depreciation 26,133 32,335 35,956Electricity and water supply 8,534 7,496 7,674Logistics costs 12,663 9,643 11,718Others1 30,012 27,539 36,803

Total 1,132,464 1,507,434 1,754,213

Note:

1. Others primarily includes service fees related to contract labour and repair and maintenance costs,among others.


– 318 –


Our cost of sales increased from HK$1,132.5 million in FY2020 to HK$1,507.4 million

in FY2021 and further to HK$1,754.2 million in FY2022, primarily due to increases in the cost

of inventory sold primarily driven by the increases in revenue.

Cost of inventory sold

Our cost of inventory sold represented the largest component of our cost of sales. For

FY2020, FY2021 and FY2022, our cost of inventory sold amounted to HK$890.2 million,

HK$1,249.2 million and HK$1,453.5 million, respectively, accounting for 78.6%, 82.9% and

82.9% of our total cost of sales for the respective years.

Staff costs

For FY2020, FY2021 and FY2022, our staff costs under cost of sales amounted to

HK$150.0 million, HK$164.8 million and HK$190.0 million, respectively, representing 13.2%,

10.9% and 10.8% of our total cost of sales for the corresponding years. Staff costs primarily

comprised wages, salaries, bonuses and allowances, pension costs, and other employee benefits

of staff directly involved in our product development and manufacturing activities.

Depreciation

For FY2020, FY2021 and FY2022, our depreciation expenses under cost of sales

amounted to HK$26.1 million, HK$32.3 million and HK$36.0 million, respectively,

representing 2.3%, 2.1% and 2.0% of our total cost of sales for the corresponding years.

Depreciation increased over the Track Record Period primarily due to an increase in property,

plant and equipment from HK$399.4 million as at 31 March 2020 to HK$472.1 million as at

31 March 2022 driven by our newly-built production facility in Dongguan and new production

lines in our Penang production facilities, partially offset by the ending of the lease with respect

to our former production facilities in Shenzhen.

Gross profit and gross profit margin

For FY2020, FY2021 and FY2022, we generated gross profit of HK$262.6 million,

HK$294.2 million and HK$334.6 million, respectively, representing gross profit margins of

approximately 18.8%, 16.3% and 16.0% for the corresponding years.

The decrease of gross profit margin decreased from 18.8% for FY2020 to 16.3% for

FY2021 was primarily due to (i) increased depreciation expenses related to increased purchases

of property, plant and equipment in connection with the opening of, and relocation of our

operations to, our production facilities in Dongguan, the PRC, and Penang, Malaysia, and (ii)

a shift in product mix in FY2021, in particular as (a) revenue contribution and gross profit

margin from customers in the transportation industry sector decreased as demand from

aerospace, which was particularly hit by COVID-related travel restrictions, decreased; and (b)

revenue contribution from customers in the smart module and smart device industry sector

increased significantly while gross profit margins decreased, largely due to execution of large


– 319 –


volume projects, as further discussed below. Gross profit margin remained relatively stable at

16.3% for FY2021 and 16.0% for FY2022. There was an increase in spot-buys resulting in an

additional HK$87.8 million being added to both revenue and cost of sales in FY2022

(compared to HK$6.2 million in FY2021). Due to our customers agreeing to increase price to

cover any increase in costs, this adjustment had no effect on our gross profit but lowered gross

profit margin for the year.

The following table sets out a breakdown of our gross profit margin by our customers’

industry sector for the years indicated:

Industry Sector FY2020 FY2021 FY2022% % %

Transportation(1) 20.5 17.6 25.7Medical, assisted living, and wellness 16.9 17.7 10.0Smart module and smart device 16.3 12.3 11.2Communication and postal 20.5 20.4 20.1Others(2) 20.7 22.0 26.2


Notes:



Gross profit margin by industry sector generally reflected the decreases exhibited by our

overall gross profit margin over the Track Record Period.

In particular, gross profit margin for customers in the transportation industry sector

decreased from 20.5% in FY2020 to 17.6% in FY2021 as demand from aerospace, which was

particularly hit by COVID-related travel restrictions, decreased. As demand from customers in

the aerospace sector recovered in FY2022, gross profit margins from customers in the

transportation sector also increased to 25.7%.

Revenue contribution from customers in the smart module and smart device industry

sector increased significantly over the Track Record Period, from HK$260.6 million in FY2020

to HK$635.8 million in FY2022. Gross profit margins over the same period decreased, largely

due to the execution of large volume projects for Customer A, which due to their overall size

and batch size contributed to an increase in the revenue and gross profit generated from the

smart modules/smart devices industry from FY2020 to FY2022 and justified lower margins.


– 320 –


Gross profit margin from customers in the medical, assisted living and wellness industry

sector increased from 16.9% in FY2020 to 17.7% in FY2021. Gross profit margin from

customers in this sector decreased to 10.0% in FY2022, largely due to product mix, as we sold

a large amount of a lower-margin product to a customer in this sector over the year.

Gross profit margin from customers in the communications and postal industry sector

remained relatively stable at 20.5% in FY2020, 20.4% in FY2021 and 20.1% in FY2022.

The following table sets out a breakdown of our gross profit margin by geographical

location for the years indicated:

Geographic Region(1) FY2020 FY2021 FY2022% % %

Europe 15.6 14.0 12.4North America 22.2 20.3 23.8Asia-Pacific 23.0 19.3 18.8Others(2) 20.7 15.1 15.3


Notes:



Gross profit margin by geographic location generally reflected the decreases exhibited by

our overall gross profit margin over the Track Record Period.

Revenue contribution from orders placed by customers in Europe increased significantly

over the Track Record Period, representing 59.6% of total revenue in FY2021 and 62.3% of

total revenue in FY2022. Much of this growth was driven by customers in the smart modules

and devices industry sector. As a result gross profit margins for Europe decreased over the


Gross profit margin from orders placed by customers in North America decreased from

22.2% in FY2020 to 20.3% in FY2021, largely reflecting downturns in the aerospace and

commercial postal and printing industries. As demand, particularly from customers in the

aerospace industry, recovered in FY2022, gross profit margins from customers in North

America also recovered to 23.8%.


– 321 –


Gross profit margin from orders placed by customers in Asia-Pacific decreased from

23.0% in FY2020 to 18.8% in FY2022, primarily due to the execution of a large scale project

for Customer E, which resulted in them being one of our five largest customers in FY2021 and

FY2022.

Gross profit margins generally varied across different geographic locations based

primarily on the nature of the individual projects and products and the industries in which

customers booking such products out of those locations were typically engaged. Gross profit

margins related to sales for parties in Europe were lower over the Track Record Period than

those in other regions due to the growing presence of more lower-margin smart module and

smart device projects based in this region. While margin was lower, our success in growing our

presence in this sector resulted in sales for parties in Europe growing to represent 59.6% and

62.3% of our total revenue for FY2021 and FY2022, respectively. Conversely, gross profit

margins related to sales for parties in North America were generally higher over the Track

Record Period than those in other regions due to contribution from customers in the

transportation (primarily aerospace) and communication and postal industry. This trend was

less apparent in FY2020 and FY2021 when these industries were adversely affected by external

factors, including COVID-related travel restrictions. Within Asia-Pacific we have a diverse

range of customers and their contribution to our revenue and associated gross margins varies

from year to year. While the gross profit margin in for the Asia-Pacific region remained higher

than our overall average in each of FY2020, FY2021 and FY2022, the dip in gross profit

margin for the region from FY2020 to FY2021 and again from FY2021 to FY2022 was due to

the execution of a large project for Customer E, as discussed above.

The following table sets forth a breakdown of our gross profit margin by business model


Business Model FY2020 FY2021 FY2022% % %

Joint Development 16.3 14.0 14.8OEM 20.7 19.2 17.1


Average gross profit margins for projects completed on both a joint development basis

and an OEM basis generally exhibited a decreasing trend over the Track Record Period, largely

consistent with the overall decrease in our gross profit margin. Gross profit margins for

projects completed on an OEM basis decreased from 19.2% in FY2021 to 17.1% in FY2022,

which was greater than the decrease in our overall gross profit margin, largely driven by

decreasing gross profit margins from the assisted living industry. Gross profit margin for joint

development projects increased to 14.8% for FY2022 as compared to 14.0% for FY2021,

largely due to shifts in product mix, as gross profit and gross profit margins from the

transportation industry, particularly the marine segment, increased. Where possible, we prefer


– 322 –


to commit the engineering resources needed to engage in joint development projects on larger

scale projects which are able to generate more revenue, and which, due to their overall size and

batch size, justify lower margins. As a result, gross profit margins from joint development

projects tended to be lower that those for OEM projects over the Track Record Period. Pricing

for both joint development projects and OEM projects is generally on a cost-plus basis. See

“Business – Sales and Marketing – Pricing Policy”.

Administrative expenses

During the Track Record Period, administrative expenses primarily consisted of staff

costs, legal and professional expenses, depreciation expenses in relation to property, plant and

equipment and right-of-use assets, insurance expenses and postage and courier expenses. The

amount of our administrative expenses remained relatively stable throughout the Track Record

Period.

For FY2020, FY2021 and FY2022, we recorded administrative expenses of HK$190.9

million, HK$189.1 million and HK$217.6 million, respectively, representing 13.7%, 10.5%

and 10.4%, respectively, of our total revenue for the corresponding years.

The table below sets forth a breakdown of our administrative expenses for the years

indicated:

FY2020 FY2021 FY2022HK$’000 HK$’000 HK$’000

Administrative expensesStaff costs 125,930 134,959 141,611Security fees 1,187 734 917Legal and professional expenses(1) 14,865 11,670 19,758Insurance expenses 3,595 3,776 4,112Postage and courier expenses 2,567 1,084 1,390Depreciation expenses 17,343 14,325 20,998Bank charges 1,040 722 1,020Motor vehicle expenses 2,259 1,768 1,594Other taxes 4,504 5,669 8,880Sundry expenses(2) 17,562 14,426 17,329

Total 190,852 189,133 217,609

Notes:

1 Legal and professional expenses primarily includes consultancy fees, legal and professional fees, and[REDACTED] expenses. For FY2020, FY2021 and FY2022, we recorded consultancy fees of $11.4million, HK$8.5 million and HK$1.9 million, respectively. Such consultancy fees primarily related tocompliance with environmental, labour and customs regulatory matters.

2 Sundry expenses primarily includes utilities, telephone, training and office expenses.


– 323 –


Distribution costs

For FY2020, FY2021 and FY2022, we recorded distribution costs of HK$5.8 million,

HK$5.7 million and HK$5.8 million, respectively, representing 0.4%, 0.3% and 0.3% of our

total revenue for the corresponding years. Distribution costs comprised advertising and

promotion expenses and staff costs, and third-party logistics expenses.

The table below sets forth a breakdown of our distribution costs for the years indicated:

FY2020 FY2021 FY2022HK$’000 HK$’000 HK$’000

Distribution costsAdvertising and promotion expenses 496 24 53Staff costs 5,287 5,665 5,777

Total 5,783 5,689 5,830

Other income

Other income for FY2020, FY2021 and FY2022 amounted to HK$9.7 million, HK$7.6

million and HK$3.6 million, respectively and consisted of government grants we received. The

government grants we received during the Track Record Period primarily included (i) grants

relating to our capital investments in equipment/machinery in Shenzhen, (ii) subsidies from the

Hong Kong Government’s Anti-epidemic Fund and (iii) subsidies for stable growth in foreign

trade from the PRC Government. Such grants and subsidies were one-off in nature. Conditions

for obtaining such grants included:

(i) with respect to the grants relating to our capital investments in equipment/machinery

in Shenzhen, that we were located in the city of Shenzhen and/or Bao An district of

that city, that we were purchasing or improving production/technical equipment of

sufficient amount, and that we had industrial output value(1) exceeding RMB500

million and value-added growth rate(2) above 15%; and

(ii) with respect to subsidies from the Hong Kong Government’s Anti-Epidemic Fund,

that we had been making regular payments to the Mandatory Provident Fund or had

set up an Occupational Retirement Scheme in Hong Kong and undertook not to lay

off any staff covered in the application during the period we received such grant.

(iii) with respect to the subsidies from the PRC government for stable growth in foreign

trade, that we were engaged in foreign trade, subject to review by the Dongguan

Economic Operation Monitoring and Dispatching Headquarters and decision on a

case-by-case basis whether to grant such subsidy.


– 324 –


Notes:

1. Industrial output value (工業產值), according to the National Bureau of Statistics of the PRC, refers tothe final results of industrial production activities of industrial enterprises, expressed in monetary terms,in a specified reporting period. It is the balance of the total results of all production activities of theenterprise, after deducting the value of material and labor consumed or transferred in the productionprocess. It is calculated as the sum of fixed assets depreciation plus labour compensation plus netproduction tax plus operating profit. Alternatively, it is calculated as total production sales value atex-factory price minus operating expenditure and cost of goods sold, plus value-added tax payable.

2. Value-added growth rate (增加值增速) refers to the year-on-year growth rate of industrial output value.

There were no unfulfilled conditions or other contingencies attached to the receipts of

these grants.

The table below sets forth a breakdown of our other income for the years indicated:

FY2020 FY2021 FY2022HK$’000 HK$’000 HK$’000

Other incomeGovernment grants 9,045 7,386 3,341Sundry income 643 245 233

Total 9,688 7,631 3,574

Other (losses)/gains, net

Other (losses)/gains, net mainly comprised foreign exchange differences, gains on

deregistration of a subsidiary, and losses on disposal of property, plant and equipment. We

recorded net other losses of HK$26.2 million in FY2020, net other gains of HK$23.4 million

in FY2021 and net other gains of HK$16.0 million in FY2022. We recorded net other losses

in FY2020 primarily due to fluctuation of US$ against the RMB and HK$. We recorded net

other gains in FY2021 and FY2022 mainly due to the depreciation of the US$ against the RMB.

The table below sets forth a breakdown of our other (losses)/gains, net for the years

indicated:

FY2020 FY2021 FY2022HK$’000 HK$’000 HK$’000

Other (losses)/gains, netForeign exchange differences, net (26,219) 23,558 15,982Gain on deregistration of a subsidiary(1) – 158 –Losses on disposal of property, plant

and equipment (6) (39) (221)Others 2 (306) 262

Total (26,223) 23,371 16,023


– 325 –


Note:

1. During FY2021, Jingyanda R&D (Shenzhen) Co. Ltd, a wholly-owned subsidiary of our Group, wasderegistered and a gain of HK$158,000, including the realisation of exchange reserves ofHK$2,335,000, was recognised in the consolidated income statements. The deregistration of JingyandaR&D (Shenzhen) Co. Ltd was undertaken as part of the process of moving our PRC production facilitiesfrom Shenzhen to Dongguan. To the best knowledge of the Directors, Jingyanda R&D (Shenzhen) Co.Ltd had not been involved in any material non-compliance incident or been the subject of any regulatoryactions, regulatory enquiries, investigations or legal claims or proceedings during the Track RecordPeriod up to the date of its deregistration.

Finance costs, net

For FY2020, FY2021 and FY2022, our net finance costs amounted to HK$3.2 million,

HK$10.4 million and HK$7.3 million, respectively. Our finance costs mainly represent interest

expenses on lease liabilities and interest expenses on bank borrowings and our finance income

represents interest income from bank deposits. For details of our bank borrowings, see “–

Indebtedness”.

The following table sets forth a breakdown of our net finance costs for the years

indicated:

FY2020 FY2021 FY2022HK$’000 HK$’000 HK$’000

Finance incomeInterest income from bank deposits 1,007 509 2,576

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Finance costsInterest expenses on lease liabilities (2,136) (1,544)1 (1,109)1

Interest expenses on bank borrowings (4,781) (6,367) (6,667)Interest expenses on asset factoring(2) (498) (2,972) (2,081)

(7,415) (10,883) (9,857)Less: amounts capitalised

on qualifying assets 3,216 – –

(4,199) (10,883) (9,857)- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Finance costs, net (3,192) (10,374) (7,281)

Note:

1. Interest expenses on lease liabilities decreased in FY2021 and again in FY2022 primarily due to therelocation of our PRC production facilities from Shenzhen (where we leased the relevant premises) toDongguan (where we purchased the land and constructed our own facilities) and then our exiting oneof our lease production sites in the last quarter of FY2022.


– 326 –


2. Interest expenses on asset factoring relate to the factoring of trade receivable from major customersprovided by our banks. We have factoring arrangements with certain of our banks, pursuant to which ourbank will prepay to us up to 85% of our invoices to certain customers upon receiving our drawn-downapplication. We recognise the cash received from factoring customer invoices as a loan and the factoredinvoices remain outstanding in our accounts receivable until the customer pays us. Outstandingfactoring loans as at 31 March 2020, 2021 and 2022 amounted to HK$3.2 million, nil and nil,respectively. Such factoring loans are recourse in nature.

Income tax expenses

During the Track Record Period, our subsidiaries in the PRC and Malaysia were subject

to corporate income tax (“CIT”) at a standard rate of 25% and 24%, respectively. Our

subsidiaries in Hong Kong were subject to Hong Kong profits tax at the rate of 16.5% on the

estimated assessable profit for each of FY2020, FY2021 and FY2022.

The table below sets forth a breakdown of our income tax expenses for the years

indicated:

FY2020 FY2021 FY2022HK$’000 HK$’000 HK$’000

Current income taxHong Kong profits tax 9,043 8,124 3,984PRC CIT 211 5,230 20,566Malaysia CIT 131 1 –Withholding tax on dividends – 4,849 –Deferred

income tax expenses 4,503 12,251 4,278

Total 13,888 30,455 28,828

For FY2020, FY2021 and FY2022, our effective tax rate (defined as income tax expense

divided by profit before income tax) was 29.9%, 25.4% and 23.3%, respectively.

Profit for the year

For FY2020, FY2021 and FY2022, our profit for the year was HK$32.6 million, HK$89.6

million and HK$94.8 million, respectively.


– 327 –


YEAR TO YEAR COMPARISON OF RESULTS OF OPERATIONS

Comparison of FY2022 to FY2021

Revenue

Our revenue increased by HK$287.1 million, or 15.9%, from HK$1,801.7 million in

FY2021 to HK$2,088.8 million in FY2022. This increase was primarily driven by increased

orders in FY2022, particularly from customers in the (i) medical, assisted living and wellness

and (ii) transportation industry sectors. Revenue from customers in the medical, assisted living

and wellness industry sector increased from HK$407.0 million in FY2021 to HK$591.3 million

in FY2022. Revenue from customers in the transportation industry sector increased from

HK$392.5 million in FY2021 to HK$485.4 million in FY2022. The increase in revenues also

reflected increases in prices of our products to our clients due to spot-buying of materials and

components. In certain cases in which global shortages of IC components was affecting the

availability or timely delivery of components needed to produce products for our customers,

we would receive authorisation from our customers to procure such components from

alternative sources. Such spot-buys were always made only after our customer authorised such

purchases and agreed that any increase in cost would be added to the price of the product. The

amount of additional cost and the corresponding amount of additional revenue from spot-buys

increased from HK$6.2 million for FY2021 to HK$87.8 million for FY2022.

Cost of sales

Our cost of sales increased by HK$246.8 million, or 16.4%, from HK$1,507.4 million in

FY2021 to HK$1,754.2 million in FY2022, primarily due to (i) an increase of HK$204.4

million in cost of inventory sold largely reflecting the increase in revenue and, to a lesser

extent, an increase in spot-buying, as discussed above, (ii) an increase of HK$25.1 million in

staff costs, reflecting the additional manpower needed to produce the increased revenue, and

(iii) an increase of HK$16.2 million in service fees related to the hiring of contract labour to

supplement our workforce when needed during FY2022.


As a result of the above factors, our gross profit increased by HK$40.4 million, or 13.7%,

from HK$294.2 million in FY2021 to HK$334.6 million in FY2022, largely driven by the

increase in our revenue. Our gross profit margin remained relatively stable at 16.3% in FY2021

and 16.0% in FY2022. There was an increase in spot-buys in FY2022, which resulted in an

additional HK$87.8 million in spot-buy premiums being added to both revenue and cost of

sales for FY2022 (compared to HK$6.2 million for FY2021).


– 328 –



Our administrative expenses increased by HK$28.5 million, or 15.1%, from HK$189.1

million in FY2021 to HK$217.6 million in FY2022, primarily due to an increase in legal and

professional expenses of HK$8.1 million, driven by an increase in [REDACTED] expenses

from HK$0.8 million in FY2021 to HK$14.4 million in FY2022, an increase in depreciation

expenses of HK$6.7 million and an increase in staff costs of HK$6.6 million.

Distribution costs

Our distribution costs remained relatively stable at HK$5.7 million in FY2021 and to

HK$5.8 million in FY2022.

Other income

Our other income decreased by HK$4.0 million, or 52.6%, from HK$7.6 million in

FY2021 to HK$3.6 million in FY2022, which was primarily attributable to a decrease in

government grants from HK$7.4 million in FY2021 to HK$3.3 million in FY2022.


We recognised net other gains of HK$23.4 million in FY2021, compared to net other

gains of HK$16.0 million in FY2022. Such decrease was primarily attributable to foreign

exchange differences.

Finance costs, net

Our net finance costs decreased by HK$3.1 million, or 29.8%, from HK$10.4 million in

FY2021 to HK$7.3 million in FY2022, which was primarily attributable to an increase in

interest income from bank deposits.

Income tax expenses

Our income tax expenses decreased by HK$1.7 million, or 5.6%, from HK$30.5 million

in FY2021 to HK$28.8 million in FY2022. Such decrease was primarily attributable to an

increase in utilisation of previously unrecognised tax losses in FY2022 and a decrease of

withholding tax on dividends in FY2021 of HK$4.8 million. As a result, our effective tax rate

decreased from 25.4% in FY2021 to 23.3% in FY2022.

Profit for the year

As a result of the above factors, our profit for the year increased by HK$5.2 million, or

5.8%, from HK$89.6 million in FY2021 to HK$94.8 million in FY2022. Our net profit margin

decreased from 5.0% for FY2021 to 4.5% for FY2022.


– 329 –


Adjusted profit (Non-HKFRS measure)

Our adjusted profit increased by HK$22.8 million, or 27.4%, from HK$83.1 million in

FY2021 to HK$105.9 million in FY2022. This increase was primarily driven by the increase

in revenue over the periods.

Comparison of FY2021 to FY2020

Revenue

Our revenue increased by HK$406.6 million, or 29.1%, from HK$1,395.1 million in

FY2020 to HK$1,801.7 million in FY2021. This increase was primarily driven by increased

orders in FY2021, particularly in relation to several major projects. In the end of FY2020 our

revenue was adversely affected by closure of our production facilities in the PRC from 18

January 2020 to 9 February 2020. Moreover, once production recommenced in our PRC

production facilities, it gradually ramped back up over the course of February and March 2020

as our workers, many who had returned home for the Chinese New Year, gradually returned

back to work. Certain products originally expected to launch in FY2020 were delayed until

FY2021. The increase in revenue in FY2021 was primarily led by increased sales to customers

focused on producing smart modules/smart devices. Revenue from customers in the (i)

medical, assisted living and wellness and (ii) communications and postal industry sectors also

increased over the period. Revenue from customers in the medical, assisted living and wellness

industry sector increased from HK$354.9 million in FY2020 to HK$407.0 million in FY2021.

Revenue from customers in the communications and postal industry sector increased from

HK$215.7 million in FY2020 to HK$293.5 million in FY2021. These increases were partially

offset by decreased revenue from customers in the transportation sector as the aerospace and

automotive industries continued to face challenges from ongoing restrictions related to the

COVID-19 pandemic.

Cost of sales

Our cost of sales increased by HK$374.9 million, or 33.1%, from HK$1,132.5 million in

FY2020 to HK$1,507.4 million in FY2021, primarily due to (i) an increase of HK$359.0

million in cost of inventory sold largely reflecting the increase in revenue and (ii) to a lesser

extent an increase of HK$14.8 million in staff costs, reflecting increased headcount and higher

employee bonuses which are based on our financial performance for the year. The increase in

our employee headcount largely took place at our production facilities in Penang, where the

number of staff rose from 301 as at 31 March 2020 to 505 as at 31 March 2021 as we increased

our production in Penang.


As a result of the above factors, our gross profit increased by HK$31.6 million, or 12.0%,

from HK$262.6 million in FY2020 to HK$294.2 million in FY2021 largely driven by the

increase in our revenue. Our gross profit margin decreased from 18.8% in FY2020 to 16.3%


– 330 –


in FY2021, primarily due to (i) increased depreciation expenses related to increased purchases

of property, plant and equipment in connection with the opening of, and relocation of our

operations to, our production facilities in Dongguan, the PRC, and Penang, Malaysia; and (ii)

a shift in product mix in FY2021, in particular as (a) revenue contribution and gross profit

margin from customers in the transportation industry sector decreased as demand from

aerospace, which was particularly hit by COVID-related travel restrictions, decreased; and (b)

revenue contribution from customers in the smart module and smart device industry sector

increased significantly while gross profit margins decreased, largely due to execution of large

volume projects.


Our administrative expenses remained relatively stable decreasing by HK$1.8 million, or

0.9%, from HK$190.9 million in FY2020 to HK$189.1 million in FY2021.

Distribution costs

Our distribution costs remained relatively stable at HK$5.8 million in FY2020 to HK$5.7

million in FY2021.

Other income

Our other income decreased by HK$2.1 million, or 21.6%, from HK$9.7 million in

FY2020 to HK$7.6 million in FY2021, which was primarily attributable to a decrease of

HK$1.7 million in government grants.


We recognised net other gains of HK$23.4 million in FY2021, compared to net other

losses of HK$26.2 million in FY2020. Such increase was primarily attributable to the

depreciation of the US$ against the RMB as at 31 March 2021.

Finance costs, net

Our net finance costs increased by HK$7.2 million, or 225.0%, from HK$3.2 million in

FY2020 to HK$10.4 million in FY2021. Such increase was primarily due to an increase in

interest expenses on bank borrowings as we increased bank borrowings throughout FY2020

and FY2021 to fund expanding our production facilities in the PRC and Malaysia.

Income tax expenses

Our income tax expenses increased by HK$16.6 million, or 119.4%, from HK$13.9

million in FY2020 to HK$30.5 million in FY2021. Such increase was primarily attributable to

an increase in profit before income tax. Our effective tax rate decreased from 29.9% in FY2020


– 331 –


to 25.4% in FY2021 primarily due to a decrease of tax effect of HK$1.2 million in expenses

not deductible for taxation purposes and a decrease of tax effect of tax losses not recognised

of HK$4.4 million, partially offset by withholding tax on dividends of HK$4.8 million in

FY2021.

Profit for the year

As a result of the above factors, our profit for the year increased by HK$57.0 million, or

174.8%, from HK$32.6 million in FY2020 to HK$89.6 million in FY2021. Our net profit

margin increased from 2.3% for FY2020 to 5.0% for FY2021.

Adjusted profit (Non-HKFRS measure)

Our adjusted profit increased by HK$58.7 million, or 240.6%, from HK$24.4 million in

FY2020 to HK$83.1 million in FY2021. This increase was primarily driven by the increase in

revenue described above.


– 332 –


ANALYSIS ON MAJOR COMPONENTS OF THE CONSOLIDATED STATEMENTS OFFINANCIAL POSITION

Net Current Assets

The table below sets out our current assets, current liabilities and net current assets as at

the dates indicated:

As at 31 MarchAs at

30 April2020 2021 2022 2022

HK$’000 HK$’000 HK$’000 HK$’000

(unaudited)

Current assetsInventories 300,613 351,475 583,620 613,723Trade receivables 183,519 275,915 355,006 372,909Deposits, prepayments and

other receivables 70,729 56,657 51,896 52,485Tax recoverables 540 2,556 4,447 5,802Amount due from a related

company 783 1,045 – –Amount due from the ultimate

holding company 30 30 – –Pledged deposits 9,316 70,735 9,070 9,060Cash and cash equivalents 198,640 206,285 204,839 181,983

Total current assets 764,170 964,698 1,208,878 1,235,962- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Current liabilitiesTrade payables 221,689 310,862 401,606 381,841Other payables and accruals 255,417 326,817 335,701 349,088Income tax liabilities 8,508 899 14,083 14,502Bank borrowings 149,905 192,859 359,659 387,991Lease liabilities 9,991 12,117 12,131 12,038Provisions – – 533 532

Total current liabilities 645,510 843,554 1,123,713 1,145,992- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Net current assets 118,660 121,144 85,165 89,970


– 333 –


Our net current assets increased from HK$118.7 million as at 31 March 2020 to


trade receivables, (ii) an increase of HK$61.4 million in pledged deposits, and (iii) an increase

of HK$50.9 million in inventories. These increases in current assets in FY2021 were partly

offset by (i) an increase of HK$89.2 million in trade payables, (ii) an increase of HK$71.4

million in other payables and accruals, and (iii) an increase of HK$43.0 million in bank

borrowings, which were primarily used to fund our new production facilities in Dongguan and

Penang.

Our net current assets decreased from HK$121.1 million as at 31 March 2021 to HK$85.2

million as at 31 March 2022 primarily due to (i) an increase of HK$90.7 million in trade

payables, (ii) an increase of HK$166.8 million in bank borrowings, (iii) an increase of

HK$13.2 million in income tax liabilities and (iv) a decrease of HK$61.7 million in pledged

deposits, largely offset by (i) an increase of HK$79.1 million in trade receivables, and (ii) an

increase of HK$232.1 million in inventories.

Our net current assets increased from HK$85.2 million as at 31 March 2022 to HK$90.0

million as at 30 April 2022, primarily due to (i) an increase of HK$30.1 million in inventories,

(ii) an increase of HK$17.9 million in trade receivables, and (iii) a decrease of HK$19.8

million in trade payables, partially offset by (i) a decrease of HK$22.9 million in cash and cash

equivalents, (ii) an increase of HK$13.4 million in other payables and accruals, and (iii) an

increase of HK$28.3 million in bank borrowings used to finance an increase in inventories

caused by component shortages.

Inventories

Our inventories comprised raw materials, work-in-progress, and finished goods. As at 31

March 2020, 2021 and 2022, our inventory levels accounted for approximately 39.3%, 36.4%

and 48.3% of our total current assets as at the respective dates. Inventories are stated at the

lower of cost and net realisable value. Cost is assigned to individual items of inventory on the

basis of first-in-first-out method. The cost of finished goods and work in progress comprises

raw materials, direct labour, other direct costs and related production overheads based on

normal operating capacity. Net realisable value is the estimated selling price in the ordinary

course of business, less applicable variable selling and distribution costs necessary to make the

sale.


– 334 –


As at 31 March 2020, 2021 and 2022, our inventory balance was HK$300.6 million,

HK$351.5 million and HK$583.6 million, respectively. The following table sets out the details

of our inventories as at the dates indicated:

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

InventoriesRaw materials 241,532 270,562 486,641Work-in-progress 63,481 87,735 89,444Finished goods 9,837 7,019 10,725

314,850 365,316 586,810

Less: impairment of inventories (14,237) (13,841) (3,190)

300,613 351,475 583,620

Our inventories increased by HK$50.9 million, from HK$300.6 million as at 31 March

2020 to HK$351.5 million as at 31 March 2021, primarily due to increase in production

activities and orders, particularly at the end of the fiscal year. In addition, due to concerns

regarding shortages in certain electronic components causing longer lead times, some of our

customers began giving us orders in advance so that we could commence purchase of electronic

components earlier on in preparation of potential upcoming shortages. Our inventories

increased by HK$232.1 million, from HK$351.5 million as at 31 March 2021 to HK$583.6

million as at 31 March 2022, primarily due to (i) an increase in production activities and

orders, (ii) shortages in certain electronic components causing longer lead times and increased

raw materials inventories while we waited for delivery of electronics components, and (iii)

some of our customers giving us binding commitments so that we could commence purchase

of electronic components earlier and stockpile such components to mitigate the effect of any

potential shortages or increase in delivery lead times.

The following table sets out our average inventory turnover days for the years indicated:

FY2020 FY2021 FY2022

Average inventory turnover days(1) 95 79 97

Note:

(1) Inventory turnover days are calculated based on the average of the opening and closing inventorybalances in a year divided by cost of sales for the same year multiplied by 365 days.


– 335 –


For FY2020, FY2021 and FY2022, our average inventory turnover days was 95 days, 79

days and 97 days, respectively. The reason average inventory turnover days was relatively high

in FY2020 was primarily due to the increase in inventory levels as at 31 March 2020 due to

the impact of COVID-19, as discussed above. Average inventory turnover days were relatively

high in FY2022 due to increased early purchases of certain materials and components to

mitigate the effect of any potential shortages or increase in delivery lead times and delays in

delivery of certain components, resulting in higher levels of other components from the same

products remaining in inventory.

As at the Latest Practicable Date, we had subsequently utilised or sold inventories with

the carrying amounts of approximately HK$182.5 million, or 31.1%, of our inventories as at

31 March 2022.

Trade receivables

As at 31 March 2020, 2021 and 2022, our trade receivables were HK$183.5 million,

HK$275.9 million and HK$355.0 million, respectively, representing 24.0%, 28.6% and 29.4%

of our total current assets as at the respective dates.

The following table sets out our trade receivables as at the dates indicated:

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

Gross trade receivables 183,772 276,116 355,038Loss allowance (253) (201) (32)

183,519 275,915 355,006

Our trade receivables increased by HK$92.4 million, from HK$183.5 million as at 31

March 2020 to HK$275.9 million as at 31 March 2021, primarily due to increased orders and

revenue in FY2021, particularly at the end of the year. Increased orders further in advance of

production in order to ensure timely delivery of electronic components also had the effect of

increasing trade receivables somewhat as at 31 March 2021. Our trade receivables increased by

HK$79.1 million, from HK$275.9 million as at 31 March 2021 to HK$355.0 million as at

31 March 2022, primarily due to increased sales.

We generally grant credit periods ranging from 30 to 90 days to our customers. We may,

at our discretion, grant a longer credit period to specific customers after considering various

factors, including the business relationship we have with the customer in question and the

credit quality of the customer.


– 336 –


The following table sets out an ageing analysis of our gross trade receivables based on

invoice date, as at the dates indicated:

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

0 – 30 days 129,797 169,809 264,31331 – 60 days 48,641 75,176 63,33861 – 90 days 5,249 30,964 26,55491 – 120 days 85 167 833

183,772 276,116 355,038

The following table sets out our average trade receivables turnover days for the years

indicated:

FY2020 FY2021 FY2022

Average trade receivables turnover

days(1) 49 47 55

Note:

(1) Average trade receivables turnover days are calculated based on the average of the opening and closingtrade receivables balances for a year divided by revenue for the same year multiplied by 365 days.

For FY2020, FY2021 and FY2022, our average trade receivables turnover days was 49

days, 47 days and 55 days, respectively. Our average trade receivable turnover days remained

relatively stable during the Track Record Period.

As at the Latest Practicable Date, we had subsequently collected HK$255.6 million, or

72.0%, of our gross trade receivables as at 31 March 2022.

Deposits, prepayments and other receivables

Our current deposits, prepayments and other receivables mainly comprised deposits and

other receivables, value-added tax recoverables, and prepayments for raw materials. As at 31

March 2020, 2021 and 2022, the current portion of our deposits, prepayments and other

receivables were HK$70.7 million, HK$56.7 million and HK$51.9 million, respectively.


– 337 –


The following table sets out a breakdown of our deposits, prepayments and other

receivables as at the dates indicated:

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

CurrentDeposits and other receivables 20,206 21,686 31,954Deferred [REDACTED] expenses 345 620 4,904Value-added tax recoverables 39,492 4,118 4,448Prepayments for raw materials 832 20,327 2,050Other prepayments 9,854 9,906 8,540

70,729 56,657 51,896

Our current deposits, prepayments and other receivables decreased by HK$14.0 million,

from HK$70.7 million as at 31 March 2020 to HK$56.7 million as at 31 March 2021, primarily

due to a decrease in value-added tax recoverable relating to construction of our production

facilities in Dongguan. In FY2021, there was value-added tax payable from the Dongguan

production facilities arising from sales and we were able to utilise the value-added tax. This

decrease was partly offset by an increase in prepayments for raw materials as at 31 March 2021

primarily relating to a deposit we made with a new supplier for a major ongoing project. Our

current deposits, prepayments and other receivables decreased by HK$4.8 million, from

HK$56.7 million as at 31 March 2021 to HK$51.9 million as at 31 March 2022, primarily due

to a decrease in prepayments for raw materials as we had made prepayments in FY2021 which

we utilised over the course of FY2022, partially offset by an increase in other receivables from

customers for sourcing tooling and testing equipment on their behalf from HK$17.4 million as

at 31 March 2021 to HK$26.4 million as at 31 March 2022 in relation to an increase in sourcing

tooling and equipment activities and an increase in deferred [REDACTED] expenses.

Trade payables

As at 31 March 2020, 2021 and 2022, our trade payables were HK$221.7 million,

HK$310.9 million and HK$401.6 million, respectively, representing 34.3%, 36.9% and 35.7%

of our total current liabilities as at the respective dates. Our trade payables mainly related to

the purchase of materials, components and parts used in our products. See “Business –

Procurement of Materials and Inventory Management – Raw Materials and Components” for

details on the materials, components and parts that we purchased over the Track Record Period.

Our trade payables increased from HK$221.7 million as at 31 March 2020 to HK$310.9

million as at 31 March 2021, primarily due to increased orders and revenue in FY2021,

particularly in the end of the year, as well as to increased purchases of materials in advance

upon request of certain customers with respect to electronic components in the second half of


– 338 –


FY2021. Our trade payables increased from HK$310.9 million as at 31 March 2021 to

HK$401.6 million as at 31 March 2022, primarily due to increased orders and revenue as well

as to increased inventory levels for raw materials stemming from increased purchases of

electronic components in advance upon request of certain customers.

The following table sets out details of the ageing analysis of our trade payables based on

invoice dates as at the dates indicated:

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

0 – 30 days 92,554 129,787 139,05531 – 60 days 67,482 75,813 122,77661 – 90 days 32,918 62,830 76,628Over 90 days 28,735 42,432 63,147

221,689 310,862 401,606

The following table sets out our average trade payables turnover days for the years

indicated:

FY2020 FY2021 FY2022

Average trade payables turnover days(1) 73 64 74

Note:

(1) Average trade payables turnover days are calculated based on the average of the opening and closingtrade payables balances for a year divided by cost of sales for the same year multiplied by 365 days.

For FY2020, FY2021 and FY2022, our average trade payables turnover days were 73

days, 64 days and 74 days, respectively. The reason average trade payables turnover days in

FY2020 was relatively high was primarily due to the decrease in cost of sales in FY2020.

Average trade payables turnover days were relatively high in FY2022 due to increased early

purchases of certain materials and components, as discussed above.

As at the Latest Practicable Date, we had subsequently settled HK$260.0 million, or

64.7%, of our trade payables as at 31 March 2022.


– 339 –


Other payables and accruals

Our other payables and accruals primarily comprised accrued staff costs, contract

liabilities and deposits from customers. As at 31 March 2020, 2021 and 2022, our other

payables and accruals were HK$255.4 million, HK$326.8 million and HK$335.7 million,

respectively, representing 39.6%, 38.7% and 29.9% of our total current liabilities as at the

respective dates.

The following table sets out a breakdown of our other payables and accruals as at the

dates indicated:

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

CurrentAccrued staff costs 57,073 66,533 46,841Accrued [REDACTED] expenses 300 1,100 1,728Contract liabilities 116,447 129,595 141,485Deferred government grants 1,270 – –Deposits from customers 31,278 94,149 101,040Payables for acquisition of property

plant and equipment 20,717 11,218 16,170Other accrued operating expenses 25,343 22,131 22,752Other payables 2,989 2,091 5,685

255,417 326,817 335,701

Our other payables and accruals increased significantly, from HK$255.4 million as at

31 March 2020 to HK$326.8 million as at 31 March 2021, primarily due to increased deposits

from customers for purchasing materials. This increase in deposits primarily related to

purchase of materials for certain projects that were delayed but for which customers placed

deposits to us in preparation for resumption of the project. Our other payables and accruals

continued to increase from HK$326.8 million as at 31 March 2021 to HK$335.7 million as at

31 March 2022 primarily due to (i) an increase in payables for acquisition of property, plant

and equipment relating to purchases of machinery for our production facilities in Dongguan

and capital expenditure for leasehold improvements for our new production facilities in

Penang, (ii) an increase in deposits from customers for purchasing materials, and (iii) an

increase in contract liabilities, partially offset by a decrease in accrued staff cost from HK$66.5

million as at 31 March 2021 to HK$46.8 million as at 31 March 2022 as bonuses were paid

down in FY2022.


– 340 –


During the Track Record Period, our contract liabilities largely related to non-refundable

(i) deposits received for providing product specific “tailor-made” component tooling for

production assembly and testing to our customers (such deposits are utilised and recognised as

revenue upon the majority of the engineering requirement having been completed and fully

tested, where there are no unfulfilled obligations of service and no potential engineering

changes expected); and (ii) deposits received from our customers associated with the materials

we purchase ahead of a project to mitigate our exposure to the risk of a project failing,

including the materials in relation to “spot buys” which are under supply constraints and are

being sold at elevated market prices, and received from customers to enhance their future credit

worthiness (such deposits are utilised and recognised as revenue when the control of the

associated products have been transferred, meaning that the products have been delivered to the

customer, the customer has accepted the products and has full discretion over the products, and

there is no unfulfilled obligation that could affect the customer’s acceptance of the products).

During the Track Record Period our contract liabilities continued to grow due to the

continued investment of our customers as they introduced new programs which needed specific

“tailor-made” component tooling to realise their programs and our ability to negotiate large

prepayments on overall contract activities. The product life cycle of the products supplied to

our customers means that many of the programs continue to be on-going over the Track Record

and therefore we maintain certain contract liabilities.

The following table sets forth an ageing analysis of our contract liabilities as at the dates

indicated:

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

Current (aged one year or less) 61,706 37,582 60,414Aged over one year 54,741 92,013 81,071

Total 116,447 129,595 141,485

The amount of our contract liabilities aged over one year increased along with the general

increase in contract liabilities FY2020. Contract liabilities aged over one year increased from

HK$54.7 million as at 31 March 2020 to HK$92.0 million as at 31 March 2021, representing

71.0% of our total contract liabilities as at 31 March 2021, due to amounts we received in

FY2020 for on-going products with long life cycles, particularly related to product-specific

tooling. The total amount of contract liabilities aged over one year decreased from HK$92.0

million as at FY2021 to HK$81.1 million as at 31 March 2022. As at such date, our current

contract liabilities grew, driven primarily by increased spot-buys as several of our customers

authorised spot-buying of materials and components from alternative sources due to supply

constraints stemming from the global shortages of IC components. As a result, the percentage

of our total contract liabilities aged over one year decreased to 57.3%.


– 341 –


The following table sets forth the movement in our contract liabilities balances over the

years indicated:

FY2020 FY2021 FY2022HK$’000 HK$’000 HK$’000

Opening balance 96,845 116,447 129,595

Add:Additional amounts received from

customers 110,455 76,124 97,934

Less:Amounts recognised as revenue from

opening balance (42,104)1 (24,434)2 (48,524)3

Amounts recognised as revenue from

additional amounts received during

the year (48,749)1 (38,542)2 (37,520)3

Closing balance 116,447 129,595 141,485

Notes:

1. Of the HK$90.9 million of contract liabilities utilised in FY2020, (i) HK$40.2 million were depositsreceived for providing product specific “tailor-made” component tooling for production assembly andtesting to our customers and (ii) HK$50.7 million were deposits received from our customers associatedwith the materials we purchase ahead of a project to mitigate our exposure to the risk of a project failing,including the materials in relation to “spot buys” which are under supply constraints and are being soldat elevated market prices, and received from customers to enhance their future credit worthiness.




– 342 –


Of the HK$141.5 million in contract liabilities as at 31 March 2022, HK$2.4 million or

1.7%, had been recognised as revenue in the period from 1 April 2022 to the Latest Practicable

Date, including (i) HK$0.1 million which were deposits received for providing product specific

“tailor-made” component tooling for production assembly and testing to our customers and (ii)

HK$2.3 million which were deposits received from our customers associated with the materials

we purchased ahead of a project to mitigate our exposure to the risk of a project failing,

including the materials in relation to “spot buys” which are under supply constraints and are

being sold at elevated market prices, and received from customers to enhance their future credit

worthiness.

LIQUIDITY AND CAPITAL RESOURCES

During the Track Record Period, our operation and capital requirements were financed

principally through a combination of internal resources and bank borrowings. As at 31 March

2020, 2021 and 2022, we had cash and cash equivalents of HK$198.6 million, HK$206.3

million and HK$204.8 million, respectively. As at 30 April 2022, being the latest practicable

date for the purpose of determining our indebtedness, we had cash and cash equivalents of

HK$182.0 million. The decrease in cash and cash equivalents as at 30 April 2022 was primarily

due to settlement of trade payables of HK$19.8 million.

During the Track Record Period, we were able to repay our obligations under bank

borrowings when they became due. We expect that there will not be any material change in the

sources and uses of our cash upon completion of the [REDACTED] and in the future, except

that we will have additional funds from the [REDACTED] of the [REDACTED] for

implementing our future plans as detailed in “Future Plans and Use of [REDACTED]”.


– 343 –


Cash flows

The following table sets forth a summary of our consolidated statements of cash flows as

at the dates indicated:

FY2020 FY2021 FY2022HK$’000 HK$’000 HK$’000

Cash flows from operating activitiesOperating cashflows before movement

in working capital 103,222 170,011 160,718Changes in working capital (100,961) 45,420 (190,879)Income tax paid (19,890) (27,796) (12,356)

Net cash (used in)/generated from

operating activities (17,629) 187,635 (42,517)

Cash flows from investing activitiesPurchases of property, plant and

equipment (144,244) (118,272) (46,110)Proceeds from sales of property,

plant and equipment 39 – –Decrease in time deposits 1,259 – –Interest received 1,007 509 1,999

Net cash used in investing activities (141,939) (117,763) (44,111)

Cash flows from financing activitiesProceeds from borrowings 289,887 231,103 402,126Repayments of borrowings (149,416) (196,802) (239,186)Principal elements of lease payments (19,278) (11,076) (12,521)(Increase)/decrease in pledged deposits (1,098) (61,419) 39,059Dividends paid (30,000) (20,000) (95,541)Interest paid (7,415) (10,883) (8,918)[REDACTED] expense paid (220) (75) (4,135)

Net cash generated from/(used in)

financing activities 82,460 (69,152) 80,884

Net (decrease)/increase in cash andcash equivalents (77,108) 720 (5,744)

Cash and cash equivalents at beginning

of the year 282,093 198,640 206,285Effect of foreign exchange rate changes (6,345) 6,925 4,298

Cash and cash equivalents at end of

the year 198,640 206,285 204,839


– 344 –


Net cash (used in)/generated from operating activities

During the Track Record Period, cash inflow from operating activities was primarily

generated from receipts of payments for the sales of our products and provision of our services.

Our cash used in operating activities mainly comprised payment for our purchase of materials

and components, employee benefit expenses, income taxes, and other operating expenses.

For FY2020, we had net cash used in operating activities of HK$17.6 million, primarily

reflecting (i) profit before income tax of HK$46.5 million; (ii) positive adjustments before

movements in working capital of HK$56.7 million mainly as a result of HK$22.9 million in

depreciation of property, plant and equipment and HK$20.6 million in depreciation of

right-of-use assets; and (iii) negative movements in working capital of HK$101.0 million

primarily due to a decrease of HK$74.5 million in provisions, as well as an increase of

HK$16.6 million in deposits, prepayments and other receivables and an increase of HK$16.9

million in inventories. The decrease in provisions related to the payment of severance

compensation to redundant employees in connection with our relocation of our production

facilities to Dongguan. In respect of such restructuring measures, we had made provisions

amounting to HK$76.9 million as at 31 March 2019 and all such provisions were fully paid in

FY2020.

For FY2021, we had net cash generated from operating activities of HK$187.6 million,

primarily reflecting (i) profit before income tax of HK$120.1 million; (ii) positive adjustments

before movements in working capital of HK$49.9 million mainly as a result of HK$34.2

million in depreciation of property, plant and equipment, HK$12.5 million in depreciation of

right-of-use assets and HK$10.9 million in finance costs; and (iii) positive movements in

working capital of HK$45.4 million primarily due to an increase of HK$90.9 million in trade

payables and an increase of HK$82.0 million in other payables and accruals, partially offset by

an increase of HK$91.6 million in trade receivables and an increase of HK$50.5 million in

inventories.

For FY2022, we had net cash used in operating activities of HK$42.5 million, primarily

reflecting (i) profit before income tax of HK$123.6 million; (ii) positive adjustments before

movements in working capital of HK$37.1 million mainly as a result of HK$39.9 million in

depreciation of property, plant and equipment, HK$17.1 million in depreciation of right-of-use

assets and HK$9.9 million in finance costs; and (iii) negative movements in working capital

of HK$190.9 million primarily due to an increase of HK$221.5 million in inventories and an

increase of HK$76.6 million in trade receivables, partially offset by an increase of HK$93.5

million in trade payables.

Net cash used in investing activities

During the Track Record Period, our cash inflow from investing activities were primarily

from interest received on bank deposits. Our cash outflows used in investing activities were

mainly for purchases of property, plant and equipment.


– 345 –


For FY2020, we had net cash used in investing activities of HK$141.9 million, which was

primarily attributable to purchase of property, plant and equipment of HK$144.2 million,

primarily related to our production facilities in Dongguan, partially offset by proceeds from

sales of property, plant and equipment of HK$0.04 million, a receipt of interest income of HK$

1.0 million and a decrease of HK$1.3 million in time deposits.


primarily attributable to purchase of property, plant and equipment of HK$118.3 million,

primarily related to our production facilities in Dongguan, partially offset by a receipt of

interest income of HK$0.5 million.


primarily attributable to purchases of property, plant and equipment of HK$46.1 million,

primarily related to our production facilities in Penang, partially offset by a receipt of interest

income of HK$2.0 million.

Net cash generated from/(used in) financing activities

During the Track Record Period, our cash inflows from financing activities primarily

consisted of proceeds from borrowings. Our cash outflows used in financing activities

comprised repayments of borrowings and payment of dividends.

For FY2020, we had net cash generated from financing activities of HK$82.5 million,

which was primarily attributable to proceeds from borrowings of HK$289.9 million, partially

offset by repayments of borrowings of HK$149.4 million, principal elements of lease payments

of HK$19.3 million, increase in pledged deposits of HK$1.1 million, dividends paid to owners

of the Company of HK$30.0 million and paid interest of HK$7.4 million.

For FY2021, we had net cash used in financing activities of HK$69.2 million, which was

primarily attributable to repayments of borrowings of HK$196.8 million, principal elements of

lease payments of HK$11.1 million, increase in pledged deposits of HK$61.4 million,

dividends paid to owners of the Company of HK$20.0 million and paid interest of HK$10.9

million, partially offset by proceeds from borrowings of HK$231.1 million.

For FY2022, we had net cash generated from financing activities of HK$80.9 million,

which was primarily attributable to decrease in pledged deposits of HK$39.0 million and

proceeds from borrowings of HK$402.1 million, partially offset by repayments of borrowings

of HK$239.2 million, principal elements of lease payments of HK$12.5 million, dividends paid

to owners of the Company of HK$95.5 million and paid interest of HK$8.9 million.


– 346 –


CAPITAL EXPENDITURES AND COMMITMENTS

Capital expenditures

Our capital expenditures primarily related to additions to property, plant and equipment.

For FY2020, FY2021 and FY2022, we had capital expenditures of HK$176.9 million, HK$43.6

million and HK$56.1 million, respectively.

Capital commitments

Our capital commitments primarily related to the acquisition of property, plant and

equipment. As at 31 March 2020, 2021 and 2022, we had capital commitments of HK$0.1

million, HK$24.7 million and HK$4.4 million, respectively.

INDEBTEDNESS

Our bank borrowings consisted of short-term working capital loans, primarily for the

expansion and relocation of our production facilities over the Track Record Period. See Note

24 to the Accountant’s Report in Appendix I to this document. Our bank borrowings as at 31

March 2020, 2021, 2022 and 30 April 2022 (being the latest practicable date for the purposes

of our indebtedness statement) were as follows:

As at 31 MarchAs at

30 April2020 2021 2022 2022

HK$’000 HK$’000 HK$’000 HK$’000

(unaudited)

Bank borrowingsCurrent

– Secured term loans with

repayment on demand clauses 123,098 161,689 275,643 295,341– Secured trade loans with

repayment on demand clauses 26,807 30,664 84,016 92,650– Bank overdrafts – 506 – –

Total bank borrowings 149,905 192,859 359,659 387,991

As at 31 March 2020, 2021, 2022 and 30 April 2022, our bank borrowings were

approximately HK$149.9 million, HK$192.9 million, HK$359.7 million and HK$388.0

million, respectively. Included in the bank borrowings, HK$63.6 million, HK$31.4 million,

HK$45.2 million and HK$45.0 million were contractually repayable between 2 and 5 years as

at 31 March 2020, 31 March 2021, 31 March 2022 and 30 April 2022, respectively, and

HK$11.9 million and HK$11.5 million were contractually repayable over 5 years as at 31


– 347 –


March 2022 and 30 April 2022, respectively. We primarily borrowed loans from banks and

financial institutions to supplement our working capital and finance our capital expenditure.

Our bank borrowings were guaranteed/secured by our property, plant and equipment, our

right-of-use assets, and our pledged deposits. As at 30 April 2022, our total unused facilities

amounted to approximately HK$351.8 million.

The table below sets forth the weighted effective interest rates of our bank borrowings as

at 31 March 2020, 2021, 2022 and 30 April 2022.

As at 31 MarchAs at

30 April2020 2021 2022 2022

(unaudited)

Term loans 5.04% 4.16% 2.22% 2.33%Trade loans 3.58% 3.73% 1.41% 1.47%Bank overdrafts N/A 1.47% N/A N/A

As at 31 March 2020, 2021, 2022 and 30 April 2022, our bank borrowings were primarily

denominated in RMB and US$, and also had limited amounts of bank overdrafts denominated

in HK$. The table below sets forth the carrying amounts of our bank borrowings by currency:

As at 31 MarchAs at

30 April2020 2021 2022 2022

HK$’000 HK$’000 HK$’000 HK$’000

(unaudited)

HK$ – 506 – –RMB 109,092 86,157 22,785 17,167US$ 40,813 106,196 336,874 370,824

Total bank borrowings 149,905 192,859 359,659 387,991

Our Directors confirm that as at 30 April 2022, there was no material covenant on any of

our outstanding debt and there was no breach of any covenants during the Track Record Period

and up to the Latest Practicable Date. Our Directors further confirm that we did not experience

any difficulty in obtaining bank borrowings or default in payment of bank borrowings during

the Track Record Period and up to the Latest Practicable Date.


– 348 –


Lease liabilities

Our leases are recognised as a right-of-use asset and a corresponding liability at the date

at which the leased asset is available for our use. The table below sets forth a summary of our

lease liabilities over the Track Record Period and as at 30 April 2022:

As at 31 MarchAs at

30 April2020 2021 2022 2022

HK$’000 HK$’000 HK$’000 HK$’000

(unaudited)

Lease liabilitiesCurrent 9,991 12,117 12,131 12,038Non-current 25,034 16,263 6,374 5,382

Total 35,025 28,380 18,505 17,420

As at 31 March 2020, 2021, 2022 and 30 April 2022, our non-current portion of lease

liabilities amounted to approximately HK$25.0 million, HK$16.3 million, HK$6.4 million and

HK$5.4 million, respectively, and our current portion of lease liabilities amounted to

approximately HK$10.0 million, HK$12.1 million, HK$12.1 million and HK$12.0 million,

respectively. See Note 16(a) to the Accountant’s Report in Appendix I to this document.

Contingent liabilities

As at the Latest Practicable Date, we did not have any significant contingent liabilities,

guarantees, and material litigation threatened against us.

Except as disclosed in this section, as of 30 April 2022, being the latest practicable date

for determining our indebtedness, we did not have outstanding indebtedness or any loan capital

issued and outstanding or agreed to be issued, bank overdrafts, loans or other similar

indebtedness, liabilities under acceptances or acceptance credits, debentures, mortgages,

charges, hire purchases commitments, guarantees or other material contingent liabilities.

Our Directors confirm that there has not been any material change in our indebtedness or

contingent liabilities since 30 April 2022.

OFF-BALANCE SHEET ARRANGEMENTS

During the Track Record Period and up to the Latest Practicable Date, we had no other

material off-balance sheet arrangements.


– 349 –


FINANCIAL RISK MANAGEMENT

Please refer to Note 3 to the Accountant’s Report set out in Appendix I to this document

for details of our financial risk management.

KEY FINANCIAL RATIOS

FY2020 FY2021 FY2022

Gross profit margin(1) 18.8% 16.3% 16.0%Net profit margin(2) 2.3% 5.0% 4.5%Adjusted net profit margin

(Non-HKFRS measure) (3) 1.8% 4.6% 5.1%Return on equity(4) 5.2% 13.4% 13.1%Return on total assets(5) 2.6% 6.2% 5.5%Interest coverage ratio(6) 12.1 12.0 13.5Current ratio(7) 1.2 1.1 1.1Quick ratio(8) 0.7 0.7 0.6Gearing ratio(9) 30.0% 30.7% 52.0%Net debt-to-equity ratio(10) N/A 2.1% 23.9%

Notes

(1) The calculation of gross profit margin is based on gross profit for the year divided by revenue and multipliedby 100%.

(2) The calculation of net profit margin is based on profit for the year divided by revenue and multiplied by 100%.

(3) Adjusted net profit margin (Non-HKFRS measure) is calculated based on our non-HKFRS measure of adjustedprofit for the relevant year divided by our revenue for the corresponding year and multiplied by 100%. Wedefine adjusted profit as profit for the year excluding [REDACTED] expenses and government grants. Theterm adjusted profit is not defined under HKFRS. Our adjusted profit is solely for reference and does notinclude the abovementioned items that impact our profit for the relevant years.

(4) The calculation of return on equity is based on profit for the year divided by average balance of total equityand multiplied by 100%.

(5) The calculation of return on total assets is based on profit for the year divided by average balance of total assetsand multiplied by 100%.

(6) The calculation of interest coverage ratio is based on profit before interest and tax divided by finance costs.

(7) The calculation of current ratio is calculated as current assets divided by current liabilities.

(8) The calculation of quick ratio is calculated as current assets less inventories divided by current liabilities.

(9) The calculation of gearing ratio is calculated as total debt (being total borrowings plus lease liabilities) dividedby total equity and multiplied by 100%

(10) The calculation of net debt to equity ratio is based on net debt (being total borrowings plus lease liabilities lesscash and cash equivalents) divided by total equity and multiplied by 100%. For FY2020 we had a net cashposition.


– 350 –


Analysis of Key Financial Ratios

Gross profit margin

For further information, see “– Principal items in the consolidated income statements –

Gross profit and gross profit margin”.

Net profit margin

For further information, see “– Year to year comparison of results of operations – Profit

for the year”.

Adjusted net profit margin (Non-HKFRS measure)

Adjusted net profit margin increased from 1.8% in FY2020 to 4.6% in FY2021, primarily

due to increased revenue over the period. Adjusted net profit margin increased further to 5.1%

in FY2022, primarily due to a decrease in effective tax rate as we were able to use previously

unrecognised tax losses and there was no withholding tax on dividends as compared to

withholding tax on dividends of HK$4.8 million in FY2021.

Return on equity

Our return on equity increased from 5.2% for FY2020 to 13.4% for FY2021, primarily

due to an increase in net profit for the year in FY2021. Our return on equity remained relatively

stable at 13.1% for FY2022.

Return on total assets

Our return on total assets increased from 2.6% for FY2020 to 6.2% for FY2021, primarily

due to an increase in net profit. Our return on total assets decreased from 6.2% for FY2021 to

5.5% for FY2022, primarily due to an increase in our total assets related to the purchase and

renovation of our new production site in Penang and purchase of relevant equipment.

Interest coverage ratio

Our interest coverage ratio remained relatively stable at 12.1 times for FY2020 and 12.0

times for FY2021. Our interest coverage ratio increased to 13.5 times for FY2022, primarily

due to an increase in profit before interest and tax in that year.

Current ratio

Our current ratio remained relatively stable at 1.2 times as at 31 March 2020, 1.1 times

as at 31 March 2021 and 1.1 times as at 31 March 2022.


– 351 –


Quick ratio

Our quick ratio remained relatively stable at 0.7 times as at 31 March 2020, 0.7 times as

at 31 March 2021 and 0.6 times as at 31 March 2022.

Gearing ratio

Our gearing ratio remained relatively stable at 30.0% as at 31 March 2020 and 30.7% as

at 31 March 2021. Our gearing ratio increased from 30.7% as at 31 March 2021 to 52.0% as

at 31 March 2022 due to an increase in bank borrowings used to finance an increase in

inventories caused by component shortages.

Net debt-to-equity ratio

Our net debt-to-equity ratio as at 31 March 2021 and 31 March 2022 was 2.1% and

23.9%, respectively. The increase in the net debt-to-equity ratio as at 31 March 2022 was

primarily due to a significant increase in bank borrowings used to finance an increase in

inventories caused by component shortages.

RELATED PARTY TRANSACTIONS

Our Directors confirm that all the transactions with related parties described in Note 28

to the Accountant’s Report set out in Appendix I to this document were conducted on normal

commercial terms and/or that such terms not less favourable to us than terms available from

independent third parties which are fair and reasonable and in the interest of our shareholders

as a whole. These include fixed service fees paid to Grand Dragon International Enterprise

Limited of HK$50,000, and HK$50,000, in FY2020 and FY2021, respectively. These fees

related to the receipt by Grand Dragon International Enterprise Limited on our behalf of

HK$400,000, HK$310,000 in FY2020 and FY2021, respectively, as a result of the sale by

Grand Dragon International Enterprise Limited on our behalf of limited amounts of

components for which we had no further identifiable demand in the forseeable future. We chose

to sell such components through Grand Dragon International Enterprise Limited rather than

directly, to avoid any appearance that we engage in the business of component trading and to

keep our brand name solely associated with our key business as an EMS provider for

specialised and highly-regulated industries. As confirmed by our Directors and as advised by

our Hong Kong Legal Advisers, we are prohibited neither by contractual provisions with our

major customers nor by relevant laws or regulations from engaging in such sales, either directly

or through Grand Dragon International Enterprise Limited. Such fees were mutually agreed

between parties involved and have ceased since 1 April 2021. In FY2022 we disposed of

financial assets measured at FVOCI comprising unlisted equity instruments to one of our

Controlling Shareholders, In-Tech Holdings, for HK$4.5 million. The selling price of the

disposed financial asset at FVOCI was based on the fair value determined by an independent

valuer.


– 352 –


SUFFICIENCY OF WORKING CAPITAL

Our Directors are of the opinion that after taking into account the existing financial

resources available to us, including internally generated funds from operating activities,

existing cash and cash equivalents, available banking facilities and the estimated net

[REDACTED] from the [REDACTED], we have sufficient working capital for its present

requirements for the next 12 months from the date of this document.

DISTRIBUTABLE RESERVES

Our Company was incorporated in the Cayman Islands and has not carried out any

business since the date of its incorporation, save for investment holding and the transactions

related to the Reorganisation. Accordingly, we had no reserves available for distribution to the

Shareholders as at the Latest Practicable Date.

DIVIDENDS

As at the Latest Practicable Date, no dividends have been declared or paid by our

Company since its incorporation. Pursuant to a directors’ resolution dated 17 June 2021,

dividends of HK$40 million were declared by In-Tech Investment, a company now comprising

our Group, to the equity holders of that company as at 31 March 2021. Such dividends were

paid in cash on 22 June 2021. Pursuant to a directors’ resolution dated 26 August 2021,

dividends of HK$60 million were declared by In-Tech Investment to the equity holders of that

company as at 31 March 2021. HK$4.5 million of such dividends were offset by the

consideration of the disposal of equity interests in a private company incorporated in the

United Kingdom from our Group to In-Tech Holdings on 30 September 2021, and the

remaining HK$55.5 million were paid in cash on 5 October 2021 using our internal resources.

Pursuant to a directors’ resolution dated 31 May 2022, dividends of HK$125 million were

declared by In-Tech Electronics HK to In-Tech Electronics BVI, which in turn declared such

dividends to its equity holders as at 31 March 2021. Pursuant to the resolution, such dividends

are to be paid on or before 31 December 2022. As at 1 June 2022, none of such dividends have

been paid.

Our Company has no fixed dividend policy specifying a dividend payout ratio. Any

amount of dividends we pay will be at the discretion of our Directors and will depend on our

future operations and earnings, capital requirements and surplus, general financial condition,

contractual restrictions and others factors which our Directors consider relevant. Any

declaration and payment as well as the amount of dividends will be subject to our constitutional

documents and the Cayman Companies Act. Our Shareholders in a general meeting may

approve any declaration of dividends, which must not exceed the amount recommended by our

Board. No dividend shall be declared or payable except out of our profits and reserves lawfully

available for distribution. Our future declarations of dividends may or may not reflect our

historical declarations of dividends and will be at the absolute discretion of the Board.


– 353 –


[REDACTED] EXPENSES

Assuming the [REDACTED] of HK$[REDACTED] per Share, being the mid-point of

the indicative range of the [REDACTED] stated in this document, the total amount of expenses

in relation to the [REDACTED], including the [REDACTED] commission, are estimated to

be HK$[REDACTED] million (equivalent to approximately [REDACTED]% of the expected

gross [REDACTED]), of which (i) [REDACTED] expenses (including but not limited to

commissions and fees) amount to HK$[REDACTED] million, and (ii) [REDACTED]

expenses amount to HK$[REDACTED] million, comprising fees and expenses of accountants

of HK$[REDACTED] million, fees and expenses of legal advisors of HK$[REDACTED]

million and other fees and expenses of HK$[REDACTED] million. Approximately

HK$[REDACTED] million of the total amount of expenses in relation to the [REDACTED]

is directly attributable to the [REDACTED] of the Shares to the public and will be accounted

for as a deduction from equity upon completion of the [REDACTED]. The remaining

estimated expenses in relation to the [REDACTED] of approximately HK$[REDACTED]

million was or will be charged to our profit or loss, of which approximately

HK$[REDACTED] million had been recorded in our consolidated income statements during

the Track Record Period, approximately HK$[REDACTED] million had been recorded in our

consolidated income statements during FY2019 and approximately HK$[REDACTED]

million is expected to be charged to our profit or loss for the year ending 31 March 2023.

DISCLOSURE REQUIREMENT UNDER THE LISTING RULES

Our Directors confirm that as at the Latest Practicable Date, they were not aware of any

circumstances that would give rise to a disclosure requirement under Rules 13.13 to 13.19 of

the Hong Kong Listing Rules.

UNAUDITED PRO FORMA ADJUSTED NET TANGIBLE ASSETS

The following is an illustrative unaudited pro forma statement of our adjusted

consolidated net tangible assets which has been prepared in accordance with Rule 4.29 of the

Listing Rules and on the basis of the notes set out below for the purpose of illustrating the

effect of the [REDACTED] on our consolidated net tangible assets attributable to owners of

our Company as at 31 March 2022 as if the [REDACTED] had taken place on 31 March 2022,

assuming the [REDACTED] is not exercised.


– 354 –


This unaudited pro forma statement of adjusted consolidated net tangible assets has beenprepared for illustrative purposes only and because of its hypothetical nature, it may not givea true picture of our consolidated net tangible assets had the [REDACTED] been completedas at 31 March 2022 or at any future dates following the [REDACTED]. It is prepared basedon our consolidated net assets as of 31 March 2022 as set out in the Accountant’s Report inAppendix I to this document, and adjusted as described below.

Auditedconsolidated net

tangible assetsof the Group

attributable toowners of the

Company as at30 September

2021(1)

Estimated net[REDACTED]

from the[REDACTED](2)

Unaudited proforma adjusted

consolidated nettangible assets

of the Groupattributable toowners of the

Company as at30 September

2021



per Share(3)

HK$’000 HK$’000 HK$’000 HK$

Based on an [REDACTED] ofHK$[REDACTED] per share 726,620 [REDACTED] [REDACTED] [REDACTED]

Based on an [REDACTED] ofHK$[REDACTED] per share 726,620 [REDACTED] [REDACTED] [REDACTED]

Notes:

(1) Our audited consolidated net tangible assets attributable to owners of our Company as at 31 March 2022is extracted from the Accountant’s Report set out in Appendix I to this document, which is the auditedconsolidated net assets attributable to owners of our Company as at 31 March 2022 of HK$726,620,000,as we did not have any intangible assets as at 31 March 2021.

(2) The estimated net [REDACTED] from the [REDACTED] are based on the indicative [REDACTED]of HK$[REDACTED] and HK$[REDACTED] per Share, being the low and high end of the indicative[REDACTED] range, respectively, after deduction of the [REDACTED] fees and other related fees andexpenses borne by us (excluding HK$[REDACTED] expenses which have been accounted for in theconsolidated income statements up to 31 March 2022), without taking into account of any Shares whichmay be allotted and issued pursuant to the exercise of the options which may be granted under the[REDACTED] Share Option Scheme and the Share Option Scheme or upon exercise of the[REDACTED] or any Shares which may be allotted and issued or repurchased by us pursuant to thegeneral mandate to issue shares or the general mandate to repurchase shares.

(3) The unaudited pro forma adjusted consolidated net tangible assets per Share is arrived at after theadjustments referred to in the preceding paragraphs and on the basis that [REDACTED] Shares werein issue (assuming that the [REDACTED] has been completed on 31 March 2022), without taking intoaccount of any Shares which may be alloted and issued pursuant to the exercise of the options whichmay be granted under the [REDACTED] Share Option Scheme and the Share Option Scheme uponexercise of the [REDACTED] or any Shares which may be alloted and issued or repurchased by uspursuant to the general mandate to issue shares or the general mandate to repurchase shares.

(4) Save as disclosed above, no adjustment has been made to reflect any trading result or other transactionsentered into subsequent to 31 March 2022.

(5) The unaudited pro forma adjusted consolidated net tangible assets of the Group does not take intoaccount the dividend of approximately HK$125,000,000 declared by the Group on 31 May 2022. Theunaudited pro forma adjusted consolidated net tangible assets per Share would have beenHK$[REDACTED] and HK$[REDACTED] per Share based on the [REDACTED] ofHK$[REDACTED] and HK$[REDACTED], respectively, after taking into account the declaration ofdividend of HK$125,000,000.


– 355 –


PROPERTY INTERESTS AND PROPERTY VALUATION

Details relating to our property interests are set out in Appendix III to this Document. Our

property valuer, Cushman & Wakefield Limited, has valued the properties in the PRC owned

by us (including nine buildings erected on a parcel of industrial land, housing three

dormitories, two plants, one canteen, two equipment rooms, one refuse room and four

corridors) owned by us as of 30 April 2022. The text of their letters, summary of value and

valuation certificates are set out in Appendix III to this Document.

A reconciliation of our selective property interests as of 30 April 2022 and such property

interests in our financial statements as of 31 March 2022, as required under Rule 5.07 of the

Listing Rules is set out below:

HK$ in millions

Net book value of property interests as of 31 March 2022 360.8Depreciation and amortisation for the period from 1 April

2022 to 30 April 2022 (1.3)

Net book value as of 30 April 2022 359.5Valuation surplus 190.4

Reference value as of 30 April 2022 as set out in

Appendix III to this Document 549.9(equivalent to

RMB448.0 million)

NO MATERIAL ADVERSE CHANGE

On 5 October 2021, we paid in cash dividends of HK$55.5 million using our internal

resources. See “– Dividends”. Other than this, our Directors confirm that, up to the date of this

document, there has been no material adverse change in our financial or trading position since

31 March 2022 (being the date on which our latest audited consolidated financial information

was prepared) and there is no event since 31 March 2022 which would materially affect the

information shown in our consolidated financial statements included in the Accountants’

Report in Appendix 1 to this document.


– 356 –


BUSINESS OBJECTIVES AND STRATEGIES

Please refer to the section headed “Business – Our Business Strategies” for our Group’sbusiness objectives and strategies.

USE OF [REDACTED]

We estimate that the aggregate net [REDACTED] to us from the [REDACTED] (afterdeducting [REDACTED] fees and estimated expenses payable by us in connection with the[REDACTED], and assuming an [REDACTED] of HK$[REDACTED] per [REDACTED],being the mid-point of the indicative [REDACTED] range) will be approximatelyHK$[REDACTED] million, assuming that the [REDACTED] is not exercised. We currentlyintend to apply such net [REDACTED] in the following manner:

• approximately HK$[REDACTED] million, representing approximately[REDACTED]% of the net [REDACTED], will be used for increasing ourproduction capacity and upgrading our production facilities, among which:

• approximately HK$[REDACTED] million will be used for purchasingadditional SMT lines and replacement of existing SMT lines and ancillaryproduction-related equipment, including (i) approximately HK$[REDACTED]million will be used for purchasing three SMT lines to replace existing SMTlines in our Dongguan facilities, and purchasing three additional SMT lines andrelated equipment such as solder paste printers, inspection equipment, reflowovens for PCB assembly, wave soldering machines, and AOI machines. Theadditional SMT lines are to be placed in either our Dongguan facilities or ourPenang facilities, depending on our assessment at the time as to which wouldbenefit greater from the additional production capacity. We expect the additionof these new SMT lines and replacement of existing SMT lines will increaseour capacity (as measured in total machine hours) for FY2023, FY2024 andFY2025 to levels that are approximately 5.0%, 15.0% and 27.5% higher thanlevels for FY2022.

The table below sets forth the utilisation rate of our SMT lines for the periodsindicated, as well as our projected total production capacity in terms ofmaximum potential SMT run hours for the years ending 31 March 2023, 2024and 2025, respectively:

FY2020 FY2021 FY2022 FY2023 FY2024 FY2025

PRC Production 8.5 lines(4)(5) 8 lines(5) 8 linesTotal actual SMT

run hours 31,479 42,526 45,027Maximum potential SMT

run hours(1) 48,017(5) 45,192(5) 45,192

FUTURE PLANS AND USE OF [REDACTED]

– 357 –


FY2020 FY2021 FY2022 FY2023 FY2024 FY2025

Utilisation rate(2) 65.6% 94.1%(6) 99.6%

Penang Production 0.5 lines(4) 1.75 lines(4) 2 linesTotal actual SMT

run hours 1,257 4,929 6,265Maximum potential SMT



Total actual SMTrun hours 32,736 47,455 51,292

Maximum potential SMTrun hours(1) 50,841 55,078 56,490 59,315 64,964 72,025

Utilisation rate(2) 64.4% 86.2%(6) 90.8%

Notes:

1. Assuming maximum operating time of 21 hours a day and 22 days a month across our PRCand Penang sites.

2. Based on total actual hours of operation divided by maximum potential hours of operationover the year.

3. The relatively low utilisation rates in our Penang production facilities over the TrackRecord Period were largely the result of our Penang operations being in the initial set-upstage. See “Business – Our Business Strategies – Increase our production capacity andupgrade our production facilities – 2. Upgrade and expand functionality at our productionfacilities in Penang” for further details.


5. The decrease in the number of SMT lines in the PRC and the resulting decrease inmaximum potential SMT run hours in the PRC related to the retirement of one older SMTproduction line during FY2020.

6. The increase in utilisation rate in the PRC from 65.6% in FY2020 to 94.1% in FY2021 wasdue to increased production in FY2021, in-line with total increase in our revenue fromHK$1,395.1 million in FY2020 to HK$1,801.7 million in FY2021, on 0.5 fewer lines, asone older SMT production line was retired during FY2020. Production increases in Penangwere largely offset by introduction of one additional SMT line in the first half of FY2021.

We believe there is sufficient sustainable market demand and business need for

our planned expansion of capacity. Such demand is illustrated by:

(i) strong backlog of orders: Throughout the Track Record Period our

backlog of orders has continued to grow, from HK$895.1 million as at 31

March 2020 to HK$1,278.1 million as at 31 March 2021 and HK$1,697.4

million as at 31 March 2022. These amounts do not include commitments


– 358 –


through binding forecasts, which represented an additional HK$649.1

million as at 31 March 2022. Thus as at 31 March 2022 amounts

represented from backlog of orders and binding forecasts already

represented HK$2,346.5 million, which is more than 12% higher than our

total revenue for FY2022. While some of this backlog came from

constraints on components supply and shipping delays, we estimate most

came from an increase in new orders, as described below. This indication

of increasing demand is supported by deposits we collected from

customers in relation to ongoing projects for materials and product-

specific tooling or equipment that we hold. As at 31 March 2020, 2021

and 2022, we held deposits totaling HK$147.7 million, HK$223.7 million

and HK$242.5 million, respectively;

(ii) increasing sales orders and high book-to-bill ratios: The sustainedstrength of on-going demand is further illustrated by the large andgrowing value of new orders we received over the Track Record Periodand the resulting book-to-bill ratios of significantly over 1. The value ofnew orders we received increased over the Track Record Period fromHK$1,618.0 million in FY2020 to HK$2,184.7 million in FY2021 andfurther to HK$2,508.1 million in FY2022. Our book-to-bill ratios forFY2021 and FY2022 were 1.2 and 1.2, respectively; and

(iii) high utilisation rates: Our production facilities are already operating atrelatively high utilisation rates. Our overall utilisation rates were 86.2%for FY2021 and 90.8% for FY2022. In particular, utilisation in ourDongguan facilities, was 99.6% for FY2022. We calculate our proposedpurchase of three additional lines and replacement of three existing SMTlines will only provide incremental capacity of approximately 27.5%versus existing capacity as at 31 March 2022, and believe such modestincrease in SMT line capacity is warranted and necessary.

Total cost for purchasing these new SMT lines and ancillary equipment inorder to increase our production capacity is expected to be HK$[REDACTED]million, all of which will come from the net [REDACTED] of the[REDACTED]; and (ii) approximately HK$[REDACTED] million will beused for additional component and product testing facilities, including ICT andother testing stations and a new flying probe tester, to increase our processingcapacity to correspond with the additional SMT capacity.

• approximately HK$[REDACTED] million will be used for upgrading andexpanding functionality at our production facilities, particularly in Penang,including (i) approximately HK$[REDACTED] million will be used forrenovating our third site in Penang to bring it up to EMS standards. Wecommenced operations at this third site in March 2022 and expect to completemigration of all equipment and operations to the site by the end of 2022; (ii)approximately HK$[REDACTED] million will be used for the expansion and


– 359 –


accreditation of our reliability, environmental and product verificationfacilities; (iii) approximately HK$[REDACTED] million will be used forhiring 21 additional customer-facing engineers, including eight in FY2023,nine in FY2024 and four in FY2025. We will primarily look for candidates withgraduate or equivalent level of education qualification with good written andspoken English capabilities and a minimum of five years’ experience within theelectronics manufacturing industry. We estimate the annual cost for eachcandidate, including salary, bonus and relevant benefits will range betweenHK$160,000 and HK$280,000, depending on the type of engineer, experiencelevel and responsibilities; and (iv) approximately HK$[REDACTED] millionwill be used for purchasing laboratory equipment related to new productintroduction and licencing.

• approximately HK$[REDACTED] million, representing approximately

[REDACTED]% of the net [REDACTED], will be used for increasing our IoT

business capabilities and market presence, among which:

• approximately HK$[REDACTED] million will be used to invest in product

development resources and equipment for IoT projects, including (i)

approximately HK$[REDACTED] million for hiring of an additional 21

engineers, including four in FY2023, 10 in FY2024 and seven in FY2025, to

handle the additional project volume. We will primarily look for candidates

with graduate level engineering or equivalent education based in Xili,

Shenzhen with a minimum of five years’ experience in product development or

programming. We estimate the annual cost for each candidate, including salary,

bonus and relevant benefits will range between HK$230,000 and HK$280,000,

depending on the type of engineer and experience level; (ii) approximately

HK$[REDACTED] million for purchase of additional tools and equipment

(including software development tools and hardware validation equipment);

and (iii) approximately HK$[REDACTED] million for other project,

development expenses, including cost of producing prototypes and other third

party project costs incurred to create new IoT devices and services; and

• approximately HK$[REDACTED] million will be used for enhancing our B2B

sales channels and our global market presence by appointing six sales and

marketing agents with technical backgrounds and relevant industry experience

(four in each of FY2023 and two in FY2024) and increasing our attendance at

trade shows for relevant industries. Such agents will provide training and other

customer support services to our customers within designated territories in the

Americas, Europe and Asia. We believe a dedicated local sales function will be

particularly important in connection with development and sale of our planned

customised industrial anti-tampering IoT solutions (see “Business – Our

Business Strategies – Increase our IoT business capabilities and market

presence”), for which we will be proactively identifying and approaching

potential customers with proposed solutions and the need to have direct contact


– 360 –


with the customer’s organisation will be key throughout the system trial and

adoption process. In addition to providing a direct sales presence in these

territories, such agents will help organise field trials to demonstrate our

product to potential customers, provide in-person training and other customer-

support services to facilitate trials, integration and adoption of new IoT devices

and associated services, help us address language and other jurisdiction-

specific issues and leverage their own connections and technical backgrounds

to help us gain access to an increased number of potential customers to

improve engagement rates. While we have provided direct customer support in

the past through our technical project teams, we believe the addition of local

sales and marketing employees, backed-up by existing and expanding project

and IT teams, will enhance our credibility and improve adoptions rates with

our target customers. We estimate annual cost for each such agent will be

approximately HK$1.2 million, which will consist of (i) a base monthly fee for

their services to engage with potential clients and related duties and (ii) a sales

bonus directly linked to the margin generated from their sales of product and

services to customers in their territory. We will look for candidates that have

(i) a minimum of five years of sales and marketing experience including key

account management responsibility and demonstrating a track record of

successful sales growth and key account development; (ii) graduate level

engineering or IT education; and (iii) good appreciation of IoT systems and the

technology involved and the ability to work directly with customers’ technical

teams. We appointed one such agent in FY2021 to serve as our sales and

marketing agent primarily in Europe with respect to certain IoT tracking and

anti-tampering devices in exchange for a monthly stipend and commission

fees. Such agent is a former vice president of global key accounts for a leading

supplier of industrial packaging products and services and a former classmate

at the London Business School of one of our Directors, Gordon Pope, with over

25 years of industry experience. We are in discussions with several additional

potential sales and marketing agents in the United States, Europe, Argentina,

Australia and India. Such potential agents were identified through our existing

sales and marketing agent in Europe. All the persons identified have

experience in channel management in their respective fields and have assisted

us with organising field trials for potential customers and providing feedback

on our IoT products and system’s performance and usability. Including our

existing sales and marketing agent in Europe, two of such agents were former

classmates at the London Business School of one of our Directors, Gordon

Pope, and one was his former colleague. Other than this, to the best knowledge

of our Directors, none of such agents have any past or present relationships

(including business, family, employment, financing or otherwise) with our

Company, its subsidiaries, Directors or senior management, or any of their

respective associates. As at the Latest Practicable Date, we had not entered into

any binding agreements with any such additional agents. We would expect

agreements ultimately entered into with additional agents to require such

agents to carry out the marketing and facilitation services described above for


– 361 –


a specific geographic jurisdiction in exchange for a monthly stipend plus

commission fees. As part of this initiative we will also increase our attendance

at trade shows for relevant industries.


[REDACTED]% of the net [REDACTED], will be used for funding the acquisition

of an electronics product development and marketing company based in one of our

major markets who provides specialist IoT electronics solutions to demanding

customers in similar industry segments as we do. The purpose of the acquisition will

be to enhance our market presence and capabilities in such market. When selecting

an acquisition target, we will consider factors that include, among other things,

depth of business and industry connections, industry focus, level of experience

working with demanding regulatory or environmental requirements and R&D

capabilities and engineering team, as well as location and total acquisition cost. The

target will need to demonstrate strong existing connections and have a record of

successful B2B channel management and new business generation. One of the key

capabilities for which we will be looking is a customer-facing technical project team

and strong product leads who can facilitate the adoption and then deployment of our

consolidated IoT platforms to create solutions for an increasing customer base. We

are initially targeting a company with annual revenue of between HK$391.3 million

(equivalent to US$50 million) to HK$586.9 million (equivalent to US$75 million).

We believe acquiring a company of such scale with strong growth capabilities would

allow us to exploit synergies with our operations, particularly our joint development

and product qualification and test engineering capabilities which smaller companies

often need to outsource.

We intend to initially focus our search on targets in Western Europe, potentially

expanding our search to include Australia or North America. According to the Frost

& Sullivan Report, there are more than 100 potential acquisition targets in Western

Europe operating in the IoT sector meeting the revenue criteria described above. As

at the Latest Practicable Date, we had not identified any specific acquisition targets.

We expect total acquisition cost of any potential target will be between HK$117.4

million (equivalent to US$15 million) and HK$234.8 million (equivalent to US$30

million), of which HK$[REDACTED] million will come from the [REDACTED]

of the [REDACTED]. Any additional costs will be financed using bank loans and

our internal resources.


[REDACTED]% of the net [REDACTED], will be used for investing in sustainable

manufacturing capabilities in our factories in Dongguan and Penang, among which:

• approximately HK$[REDACTED] million will be used for purchasing and

installing solar panels for our Penang production facilities; and


– 362 –


• approximately HK$[REDACTED] million will be used for developing and

implementing our ongoing ESG initiatives, encompassing reduced water

consumption, energy waste and usage of forestry, including approximately

HK$[REDACTED] million for our Dongguan production facilities,

approximately HK$[REDACTED] million for our Penang production facilities

and approximately HK$[REDACTED] million for hiring a senior

environmental specialist in each of Dongguan and Penang to manage this ESG

initiative. Measures we currently plan to implement to accomplish our ESG

goals include collection of rainwater for use in landscaping and operation of

flush toilets, replacement of paper workflows with electronic paperless

workflows and installation of solar thermal water supply systems, occupancy-

sensing lighting and air-conditioning and solar/wind-powered street lamps. It

will be the role of environmental specialists, once appointed, to formalise and

lead this process in the subsequent months.


[REDACTED]% of the net [REDACTED], will be used for upgrading our IT

capabilities by hiring nine IT system engineers to enhance our real time monitoring

and financial reporting capabilities associated with movement of materials and our

HRM capabilities across our multiple sites.


[REDACTED]% of the net [REDACTED], will be used for funding our general

working capital.

Implementation Timeline

The table below sets forth the breakdown of the application of the our net [REDACTED]

from the [REDACTED] by period of time:

Year ending31 March

Year ending31 March

Year ending31 March

Total

Approximate% of net

[REDACTED]2023 2024 2025(HK$ millions) (%)

Increase our production capacityand upgrade our productionfacilities [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]

– Purchase of additional and

replacement SMT lines and

ancillary production-related

equipment [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]


– 363 –


Year ending31 March

Year ending31 March

Year ending31 March

Total

Approximate% of net


• Purchasing three SMT lines to

replace existing SMT lines in

our Dongguan facilities and

purchasing three additional SMT

lines and related equipment [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]

• Additional component and

product testing facilities [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]

– Upgrading and expanding

functionality at our production

facilities, particularly in Penang [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]

• Renovating our third site in

Penang to bring it up to EMS

standards [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]

• Expansion and accreditation of

our reliability, environmental

and product testing and

verification facilities [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]

• Hiring 21 additional customer-

facing engineers [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]

• Purchasing laboratory equipment

related to new product

introduction and licencing[REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]


– 364 –


Year ending31 March

Year ending31 March

Year ending31 March

Total

Approximate% of net


Increasing our IoT businesscapabilities and market presence [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]

– Enhancing our B2B sales

channels and our global market

presence by appointing six sales

and marketing agents with

technical backgrounds and

relevant industry experience [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]

– Investing in product

development resources [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]

• Hiring 21 engineers [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]

• Purchasing additional tools and

equipment, including software

development tools and hardware

validation equipment [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]

• Project development expenses,

including cost of producing

prototypes and other third party

project costs incurred to create

new IoT devices and services [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]

Acquisition of an electronicsproduct development andmarketing company based in oneof our major markets [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]

Investing in sustainablemanufacturing capabilities [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]

– Purchasing solar system for

renewable energy supply to

factories (Penang) [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]


– 365 –


Year ending31 March

Year ending31 March

Year ending31 March

Total

Approximate% of net


– Developing and implementing

other ESG initiatives – water,

forest and energy

leakage/efficiencies etc. [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]

Investing in IT systems [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]

General working capital [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]

TOTAL [REDACTED] 100.0

If the [REDACTED] is fixed at HK$[REDACTED] per [REDACTED], being the higher

end of the indicative [REDACTED] range, the net [REDACTED] will be increased to

approximately HK$[REDACTED] million. If the [REDACTED] is fixed at

HK$[REDACTED] per [REDACTED], being the lower end of the indicative [REDACTED]

range, the net [REDACTED] will be reduced to approximately HK$[REDACTED] million.

Under such circumstances, we intend to increase or decrease, respectively, the net

[REDACTED] from the [REDACTED] to be used for the above purposes on a pro-rata basis.

The net [REDACTED] that we would receive if the [REDACTED] is exercised, which

is currently estimated to be approximately HK$[REDACTED] million, HK$[REDACTED]

million and HK$[REDACTED] million (assuming the lowest, middle and highest points of the

indicative [REDACTED] range, respectively), will be used for the above purposes on a

pro-rata basis.

Should our Directors decide to reallocate the intended use of [REDACTED] to other

business plans and/or our new projects to a material extent and/or should there be any material

modifications to the use of [REDACTED] as described above, we will issue an announcement

in accordance with the Listing Rules.

To the extent that the net [REDACTED] from the [REDACTED] are not immediately

required for the above purposes or if we are unable to effect any part of our future development

plans as intended, we may hold such funds in short-term deposits with licenced banks and

authorised financial institutions for so long as it is in our best interests.


– 366 –


[REDACTED]

[REDACTED]

[REDACTED] AND EXPENSES

[REDACTED]

[REDACTED]

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[REDACTED]

[REDACTED]

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[REDACTED]

[REDACTED]

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[REDACTED]

[REDACTED]

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[REDACTED]

[REDACTED]

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[REDACTED]

[REDACTED]

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UNDERTAKINGS TO THE STOCK EXCHANGE UNDER THE LISTING RULES

By us

Under Rule 10.08 of the Listing Rules, we have undertaken to the Stock Exchange that

we will not issue any further Shares or securities convertible into our equity securities (whether

or not of a class already [REDACTED]) or enter into any agreement to such issue within six

months from the [REDACTED] (whether or not such issue of Shares or our securities will be

completed within six months from the commencement of [REDACTED]), except pursuant to

the [REDACTED] or for the circumstances provided under Rule 10.08 of the Listing Rules.

By the Controlling Shareholders

[REDACTED]

[REDACTED]

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[REDACTED]

[REDACTED]

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[REDACTED]

[REDACTED]

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[REDACTED]

[REDACTED]

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[REDACTED]

[REDACTED] and expenses

[REDACTED]

[REDACTED]

– 377 –


[REDACTED]

[REDACTED] interest in our Group

Other than disclosed in the preceding paragraph, the obligations under the [REDACTED]

and the [REDACTED] and, if applicable, the [REDACTED] that may be entered into between

the [REDACTED] or its agent with our Controlling Shareholders, none of the [REDACTED]

has any shareholding interests in any member of our Group or any right (whether legally

enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any

member of our Group.

Sponsor’s independence

The Sole Sponsor satisfies the independence criteria applicable to sponsors as set out in

Rule 3A.07 of the Listing Rules.

Minimum public float

Our Directors will ensure that there will be a minimum [REDACTED]% of the total

issued Shares held in public hands in accordance with Rule 8.08 of the Listing Rules after

completion of the [REDACTED].

[REDACTED]

– 378 –


[REDACTED]

STRUCTURE OF THE [REDACTED]

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HOW TO APPLY FOR [REDACTED]

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The following is the text of a report set out on pages I-1 to I-3, received from the

Company’s reporting accountant, PricewaterhouseCoopers, Certified Public Accountants,

Hong Kong, for the purpose of incorporation in this document. It is prepared and addressed

to the directors of the Company and to the Sole Sponsor pursuant to the requirements of HKSIR

200 “Accountants’ Reports on Historical Financial Information in Investment Circulars”

issued by the Hong Kong Institute of Certified Public Accountants.

[Draft]

[Letterhead of PricewaterhouseCoopers]

ACCOUNTANT’S REPORT ON HISTORICAL FINANCIAL INFORMATION TO THEDIRECTORS OF IN-TECH HOLDINGS (CAYMAN) LIMITED AND DONGXINGSECURITIES (HONG KONG) COMPANY LIMITED

Introduction

We report on the historical financial information of In-Tech Holdings (Cayman) Limited

(the “Company”) and its subsidiaries (together, the “Group”) set out on pages I-4 to I-66, which

comprises the consolidated statements of financial position as at 31 March 2020, 2021 and

2022, the Company statement of financial position as at 31 March 2022, and the consolidated

income statements, the consolidated statements of comprehensive income, the consolidated

statements of changes in equity and the consolidated statements of cash flows for each of the

years ended 31 March 2020, 2021 and 2022 (the “Track Record Period”) and a summary of

significant accounting policies and other explanatory information (together, the “Historical

Financial Information”). The Historical Financial Information set out on pages I-4 to I-61

forms an integral part of this report, which has been prepared for inclusion in the document of

the Company dated [document date] (the “Document”) in connection with the initial

[REDACTED] of shares of the Company on the Main Board of The Stock Exchange of Hong

Kong Limited.

Directors’ responsibility for the Historical Financial Information

The directors of the Company are responsible for the preparation of Historical Financial

Information that gives a true and fair view in accordance with the basis of presentation and

preparation set out in Notes 1.3 and 2.1 to the Historical Financial Information, and for such

internal control as the directors determine is necessary to enable the preparation of Historical

Financial Information that is free from material misstatement, whether due to fraud or error.

APPENDIX I ACCOUNTANT’S REPORT

– I-1 –


Reporting accountant’s responsibility

Our responsibility is to express an opinion on the Historical Financial Information and to

report our opinion to you. We conducted our work in accordance with Hong Kong Standard on

Investment Circular Reporting Engagements 200, “Accountants’ Reports on Historical

Financial Information in Investment Circulars” issued by the Hong Kong Institute of Certified

Public Accountants (“HKICPA”). This standard requires that we comply with ethical standards

and plan and perform our work to obtain reasonable assurance about whether the Historical

Financial Information is free from material misstatement.

Our work involved performing procedures to obtain evidence about the amounts and

disclosures in the Historical Financial Information. The procedures selected depend on the

reporting accountant’s judgement, including the assessment of risks of material misstatement

of the Historical Financial Information, whether due to fraud or error. In making those risk

assessments, the reporting accountant considers internal control relevant to the entity’s

preparation of Historical Financial Information that gives a true and fair view in accordance

with the basis of presentation and preparation set out in Notes 1.3 and 2.1 to the Historical

Financial Information in order to design procedures that are appropriate in the circumstances,

but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal

control. Our work also included evaluating the appropriateness of accounting policies used and

the reasonableness of accounting estimates made by the directors, as well as evaluating the

overall presentation of the Historical Financial Information.

We believe that the evidence we have obtained is sufficient and appropriate to provide a

basis for our opinion.

Opinion

In our opinion, the Historical Financial Information gives, for the purposes of the

accountant’s report, a true and fair view of the financial position of the Company as at 31

March 2022 and the consolidated financial position of the Group as at 31 March 2020, 2021

and 2022 and of its consolidated financial performance and its consolidated cash flows for the

Track Record Period in accordance with the basis of presentation and preparation set out in

Notes 1.3 and 2.1 to the Historical Financial Information.

Report on matters under the Rules Governing the Listing of Securities on The StockExchange of Hong Kong Limited (the “Listing Rules”) and the Companies (Winding Upand Miscellaneous Provisions) Ordinance

Adjustments

In preparing the Historical Financial Information, no adjustments to the Underlying

Financial Statements as defined on page I-4 have been made.


– I-2 –


Dividends

We refer to Note 29 to the Historical Financial Information which contains information

about the dividend paid by a company now comprising the Group during the Track Record

Period. No dividends have been paid by In-Tech Holdings (Cayman) Limited in respect of the


No statutory financial statements for the Company

No statutory financial statements have been prepared for the Company since its date of

incorporation.

PricewaterhouseCoopersCertified Public Accountants

Hong Kong

[Date]


– I-3 –


I HISTORICAL FINANCIAL INFORMATION OF THE GROUP

Preparation of Historical Financial Information

Set out below is the Historical Financial Information which forms an integral part of this

accountant’s report.

The consolidated financial statements of the Group for the Track Record Period, on which

the Historical Financial Information is based, were audited by PricewaterhouseCoopers in

accordance with Hong Kong Standards on Auditing issued by the HKICPA (the “Underlying

Financial Statements”).

The Historical Financial Information is presented in Hong Kong Dollars and all values are

rounded to the nearest thousand (HK$’000) except when otherwise indicated.


– I-4 –


CONSOLIDATED INCOME STATEMENTS

Year ended 31 March2020 2021 2022

Note HK$’000 HK$’000 HK$’000

Revenue 5 1,395,061 1,801,670 2,088,775Cost of sales 8 (1,132,464) (1,507,434) (1,754,213)

Gross profit 262,597 294,236 334,562Administrative expenses 8 (190,852) (189,133) (217,609)Distribution costs 8 (5,783) (5,689) (5,830)Reversal of impairment loss on

financial assets, net 3.1(d) 239 52 169Other income 6 9,688 7,631 3,574Other (losses)/gains, net 7 (26,223) 23,371 16,023

Operating profit 49,666 130,468 130,889- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Finance income 10 1,007 509 2,576Finance costs 10 (4,199) (10,883) (9,857)

Finance costs, net 10 (3,192) (10,374) (7,281)- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Profit before income tax 46,474 120,094 123,608Income tax expense 11 (13,888) (30,455) (28,828)


Earnings per share attributable to

owners of the Company for the year– Basic and diluted 13 3.58 9.86 9.84


– I-5 –


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


Note HK$’000 HK$’000 HK$’000

Profit for the year 32,586 89,639 94,780Other comprehensive (loss)/income:Items that may be reclassified to

profit or loss

Exchange differences on translation of

foreign operations (32,558) 38,062 11,767Realisation of exchange reserves upon

deregistration of a subsidiary – (2,335) –

(32,558) 35,727 11,767Item that will not be reclassified to

profit or loss

Changes in fair values of financial

asset at fair value through other

comprehensive income 17 353 (347) (382)

353 (347) (382)Other comprehensive (loss)/income for

the year (32,205) 35,380 11,385

Total comprehensive income forthe year 381 125,019 106,165


– I-6 –


CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

As at 31 March2020 2021 2022

Note HK$’000 HK$’000 HK$’000

ASSETSNon-current assetsProperty, plant and equipment 15 399,359 441,079 472,140Right-of-use assets 16 99,489 97,593 133,021Deferred income tax assets 25 21,256 10,653 7,337Prepayments 20 708 69,010 19,717Financial asset at fair value through

other comprehensive income 17 5,188 4,841 –Pledged deposits 21 – – 23,001

526,000 623,176 655,216- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Current assetsInventories 18 300,613 351,475 583,620Trade receivables 19 183,519 275,915 355,006Deposits, prepayments and other

receivables 20 70,729 56,657 51,896Tax recoverables 540 2,556 4,447Amount due from a related company 28(c) 783 1,045 –Amount due from the ultimate holding

company 28(c) 30 30 –Pledged deposits 21 9,316 70,735 9,070Cash and cash equivalents 21 198,640 206,285 204,839

764,170 964,698 1,208,878- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Total assets 1,290,170 1,587,874 1,864,094


– I-7 –


As at 31 March2020 2021 2022

Note HK$’000 HK$’000 HK$’000

EQUITYEquity attributable to owners of the

CompanyShare capital 22 – – –Combined capital 22 25,000 25,000 –Reserves 22 (28,421) 609 45,187Retained earnings 618,857 694,846 681,433

Total Equity 615,436 720,455 726,620- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

LIABILITIESNon-current liabilitiesLease liabilities 16 25,034 16,263 6,374Other payables 23 1,568 3,835 3,989Deferred income tax liabilities 25 2,138 2,725 3,398Provisions 26 484 1,042 –

29,224 23,865 13,761- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Current liabilitiesTrade payables 23 221,689 310,862 401,606Other payables and accruals 23 255,417 326,817 335,701Income tax liabilities 8,508 899 14,083Bank borrowings 24 149,905 192,859 359,659Lease liabilities 16 9,991 12,117 12,131Provisions 26 – – 533

645,510 843,554 1,123,713- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Total liabilities 674,734 867,419 1,137,474- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Total equity and liabilities 1,290,170 1,587,874 1,864,094


– I-8 –


STATEMENT OF FINANCIAL POSITION OF THE COMPANY

As at31 March

2022Note HK$’000

ASSETSNon-current assetInvestment in a subsidiary 20,514

- - - - - - - - - - - - - -

Current assetPrepayments 20 4,904Cash and cash equivalents 21 9

4,913- - - - - - - - - - - - - -

Total assets 25,427

EQUITYEquity attributable to owners of the CompanyShare capital 22 –Accumulated loss (16,026)Reserve 22 20,514

Total equity 4,488- - - - - - - - - - - - - -

LIABILITIESCurrent liabilitiesOther payables and accruals 23 2,495Amount due to a subsidiary 28(d) 18,444

Total liabilities 20,939- - - - - - - - - - - - - -

Total equity and liabilities 25,427


– I-9 –


CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Attributable to owners of the Company

Sharecapital

Combinedcapital

Otherreserves

(Note 22)Retainedearnings

Totalequity

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Balances as at 1 April 2019 – 25,000 3,747 616,308 645,055Comprehensive incomeProfit for the year – – – 32,586 32,586Other comprehensive loss – – (32,205) – (32,205)

Total comprehensive(loss)/income – – (32,205) 32,586 381

Appropriation of profit – – 37 (37) –

Transaction with owners intheir capacity as owners

Dividends (Note 29) – – – (30,000) (30,000)

Total transaction with ownersin their capacity as owners – – – (30,000) (30,000)

Balances as at 31 March 2020 – 25,000 (28,421) 618,857 615,436

Balances as at 1 April 2020 – 25,000 (28,421) 618,857 615,436Comprehensive incomeProfit for the year – – – 89,639 89,639Other comprehensive income – – 35,380 – 35,380

Total comprehensive income – – 35,380 89,639 125,019

Appropriation of profit – – 972 (972) –Release of statutory reserves

upon deregistration ofa subsidiary – – (7,322) 7,322 –

– – (6,350) 6,350 –Transaction with owners in

their capacity as ownersDividends (Note 29) – – – (20,000) (20,000)

Total transaction with ownersin their capacity as owners – – – (20,000) (20,000)

Balances as at 31 March 2021 – 25,000 609 694,846 720,455


– I-10 –


Attributable to owners of the Company

Sharecapital

Combinedcapital

Otherreserves

(Note 22)Retainedearnings

Totalequity

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Balances as at 1 April 2021 – 25,000 609 694,846 720,455Comprehensive incomeProfit for the year – – – 94,780 94,780Other comprehensive income – – 11,385 – 11,385

Total comprehensive income – – 11,385 94,780 106,165

Appropriation of profit – – 6,346 (6,346) –Transfer of financial asset at

FVOCI reserves to retainedearnings (Note 17) – – 1,847 (1,847) –

– – 8,193 (8,193) –Transaction with owners in

their capacity as ownersIssue of share at date of

incorporation of theCompany (Note 1.2) – – – – –

Reclassification of combinedcapital to other reservepursuant to Reorganisation(Note 1.2) – (25,000) 25,000 – –

Dividends (Note 29) – – – (100,000) (100,000)

Total transaction with ownersin their capacity as owners – (25,000) 25,000 (100,000) (100,000)

Balances as at 31 March 2022 – – 45,187 681,433 726,620


– I-11 –


CONSOLIDATED STATEMENTS OF CASH FLOWS


Note HK$’000 HK$’000 HK$’000

Cash flows from operating activitiesCash generated from/(used in)

operations 27(a) 2,261 215,431 (30,161)Income tax paid (19,890) (27,796) (12,356)

Net cash (used in)/generated fromoperating activities (17,629) 187,635 (42,517)

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Cash flows from investing activitiesPurchases of property, plant and

equipment (144,244) (118,272) (46,110)Proceeds from sales of property, plant

and equipment 27(b) 39 – –Decrease in time deposits 1,259 – –Interest received 1,007 509 1,999

Net cash used in investing activities (141,939) (117,763) (44,111)- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Cash flows from financing activitiesProceeds from borrowings 27(c) 289,887 231,103 402,126Repayments of borrowings 27(c) (149,416) (196,802) (239,186)Principal elements of lease payments 27(c) (19,278) (11,076) (12,521)(Increase)/decrease in pledged deposits (1,098) (61,419) 39,059Dividends paid (30,000) (20,000) (95,541)Interest paid (7,415) (10,883) (8,918)[REDACTED] expense paid (220) (75) (4,135)

Net cash generated from/(used in)financing activities 82,460 (69,152) 80,884

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Net (decrease)/increase in cash andcash equivalents (77,108) 720 (5,744)

Cash and cash equivalents atbeginning of the year 282,093 198,640 206,285

Effect of foreign exchange ratechanges (6,345) 6,925 4,298

Cash and cash equivalents at end ofthe year 21 198,640 206,285 204,839


– I-12 –


II NOTES TO THE HISTORICAL FINANCIAL INFORMATION

1 GENERAL INFORMATION, REORGANISATION AND BASIS OF PRESENTATION

1.1 General information

In-Tech Holdings (Cayman) Limited (“the Company”) was incorporated in the Cayman Islands on 16 August2021 as an exempted company with limited liability under the Companies Act, Cap. 22 (Act 3 of 1961, asconsolidated and revised) of the Cayman Islands. The address of the Company’s registered office is Cricket Square,Hutchins Drive, P.O. Box 2681, Grand Cayman, KY1-1111, Cayman Islands.

The Company is an investment holding company and its subsidiaries (collectively the “Group”) are principallyengaged in the development, manufacturing and sales of electronic products for customers in different industries,such as the automotive, aerospace, medical, marine, banking security and wireless communication network industriesand provision of other engineering services (the “[REDACTED] Business”). The ultimate holding company andimmediate holding company of the Company are Source Capital Investment Ltd. and In-Tech Holdings Limited,respectively.

1.2 Reorganisation

Prior to the incorporation of the Company and the completion of the reorganisation (the “Reorganisation”), the[REDACTED] Business was carried out by In-Tech Electronics Limited, In-Tech Electronics Pte. Limited andIn-Tech Investment (HK) Limited (collectively, the “Operating Entities”). These Operating Entities were indirectlyowned subsidiaries of Source Capital Investment Ltd. through In-Tech Electronics Holdings Limited throughout theTrack Record Period.

In preparation for the [REDACTED] of the Company’s share on the Main Board of The Stock Exchange ofHong Kong Limited, the Group underwent the Reorganisation, pursuant to which the companies engaged in the[REDACTED] Business were transferred to the Company. The Reorganisation involved the following steps:

(i) On 13 August 2021, In-Tech Holdings Limited was incorporated in the BVI with limited liabilitycompany under the laws of the BVI with authorised share capital of 50,000 shares of a single class withno par value. On the same day, In-Tech Holdings Limited allotted and issued 75 nil-paid shares and 25nil-paid shares to Source Capital Investment Ltd. and Piggy Doggy Company Limited, respectively. Asa result, In-Tech Holdings Limited became 75% and 25% owned by Source Capital Investment Ltd. andPiggy Doggy Company Limited, respectively.

(ii) On 16 August 2021, the Company was incorporated in the Cayman Islands as an exempted companywith limited liability with authorised share capital of HK$380,000, divided into 38,000,000 shares witha par value of HK$0.01 each. At the time of incorporation, one subscriber share with a par value ofHK$0.01 was allotted and issued as fully-paid to the initial subscriber. On the same day, the said onefully-paid share was transferred to In-Tech Holdings Limited at par value. Upon completion of the saidtransfer, the Company became wholly-owned by In-Tech Holdings Limited.

(iii) On 17 September 2021, In-Tech Manufacturing Limited, subsidiary of In-Tech Electronic HoldingsLimited, acquired the entire issued share capital of In-Tech Electronics Pte. Limited from In-TechElectronics Holdings Limited, at a nominal consideration of US$1.00. Upon completion of the saidtransfer, In-Tech Electronics Pte. Limited became wholly-owned by In-Tech Manufacturing Limited.

On 17 September 2021, In-Tech Electronics Holdings Limited transferred the 9,999 shares held by it andP&B Nominee Services Limited transferred the one share held by it on trust for and on behalf of In-TechElectronics Holdings Limited, which in aggregate represent the entire issued share capital of In-TechEnterprise Limited, to Ocean Target Asia Limited at a total consideration of HK$10,000. Uponcompletion of the said transfer, In-Tech Enterprise Limited became wholly-owned by Ocean Target AsiaLimited.

On 17 September 2021, P&B Nominee Services Limited transferred the one share of In-Tech Investment(HK) Limited held by it on trust for and on behalf of In-Tech Electronics Holdings Limited back toIn-Tech Electronics Holdings Limited at par value. Upon unwinding the trust, In-Tech Investment (HK)Limited became 100% legally and beneficially owned by In-Tech Electronics Holdings Limited.

(iv) On 23 September 2021, the Company entered into a share swap agreement with Source CapitalInvestment Ltd. and Piggy Doggy Company Limited, pursuant to which the Company acquired 75% and25% shareholding interests of In-Tech Electronics Holdings Limited from Source Capital InvestmentLtd. and Piggy Doggy Company Limited, respectively, representing the entire issued share capital ofIn-Tech Electronics Holdings Limited. In consideration, the Company agreed to procure In-TechHoldings Limited to credit the 7,711 and 2,289 nil-paid shares in its share capital held by Source CapitalInvestment Ltd. and Piggy Doggy Company Limited, respectively, as fully-paid. Upon completion of thesaid share swap arrangement, In-Tech Electronics Holdings Limited became wholly-owned by theCompany.

After the completion of the reorganisation steps as described above, the Company became the holdingcompany of the companies now comprising the Group.


– I-13 –


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– I-16 –


1.3 Basis of presentation

Immediately prior to and after the Reorganisation, the [REDACTED] Business was carried out by theOperating Companies. The Company was newly set up during the Reorganisation and has not been involved in anyother business prior to the Reorganisation and do not meet the definition of a business. The Reorganisation is merelya recapitalisation of the [REDACTED] Business and does not result in any changes in business substance, nor in anymanagement or the controlling shareholder of the [REDACTED] Business. Accordingly, the Group resulting fromthe Reorganisation is regarded as a continuation of the [REDACTED] Business for the purpose of this report andthe Historical Financial Information has been prepared and presented as a continuation of the [REDACTED]Business with the assets and liabilities of the Group recognised and measured at the carrying amounts of the[REDACTED] Business for all periods presented, as if the current group structure had been in existence throughoutthe Track Record Period.

Inter-company transactions, balances and unrealised gains/losses on transactions between the companies nowcomprising the Group are eliminated on consolidation.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of the Historical Financial Information are set outbelow. These policies have been consistently applied to all the years presented, unless otherwise stated.

2.1 Basis of preparation

The principal accounting policies applied in the preparation of the Historical Financial Information which arein accordance with the Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Instituteof Certified Public Accountants (“HKICPA”) are set out below. The Historical Financial Information has beenprepared under the historical cost convention, except for a financial asset at fair value through other comprehensiveincome (“FVOCI”) which is measured at fair value.

The preparation of Historical Financial Information in conformity with HKFRSs requires the use of certaincritical accounting estimates. It also requires management to exercise its judgement in the process of applying theGroup’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas whereassumptions and estimates are significant to the Historical Financial Information, are disclosed in Note 4.

New standards and amendments to existing standards not yet adopted by the Group

The following are new standards and amendments to existing standards that have been published and aremandatory for the Group’s accounting periods beginning after 1 April 2022 or later periods, but have not beenearly adopted by the Group:

Effective for accountingyear beginning on or after

Amendments to HKFRS 3,HKAS 16 and HKAS 37

Narrow-scope amendments 1 April 2022

HKFRS Standards 2018-2020

Annual improvements 1 April 2022

Accounting Guideline 5(revised)

Revised Accounting Guideline 5Merger Accounting for CommonControl Combinations

1 April 2022

HKFRS 17 Insurance Contracts 1 April 2023Amendments to HKFRS 17 Insurance Contracts 1 April 2023HKAS 1 (Amendments) Classification of Liabilities as Current

or Non-current1 April 2023

HK Interpretation 5 (2020) Classification by the Borrower of aTerm Loan that Contains aRepayment on Demand Clause

1 April 2023

HKAS 8 (Amendments) Definition of Accounting Estimates 1 April 2023


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Effective for accountingyear beginning on or after

Amendments to HKAS 1and HKFRS PracticeStatement 2

Disclosure of Accounting Policies 1 April 2023

Amendments to HKFRS 4 Extension of the TemporaryExemption from ApplyingHKFRS 9

1 April 2023

Amendments to HKAS 12 Deferred Tax related to Assets andLiabilities arising from a SingleTransaction Tax

1 April 2023

HKFRS 10 and HKAS 28(Amendments)

Sale or contribution of assets betweenan investor and its associate or jointventure

To be determined

The Group is in the process of assessing potential impact of the above other new standards andamendments to existing standards that are relevant to the Group upon initial application. The management ofthe Group plans to adopt these new standards and amendments to existing standards when they becomeeffective.

2.2 Principles of consolidation

2.2.1 Subsidiaries

Subsidiaries are all entities (including structured entities) over which the Group has control. The Groupcontrols an entity where the Group is exposed to, or has rights to, variable returns from its involvement withthe entity and has the ability to affect those returns through its power to direct the activities of the entity.Subsidiaries are consolidated from the date on which control is transferred to the Group. They aredeconsolidated from the date that control ceases.

Except for the Reorganisation, the acquisition method of accounting is used to account for businesscombinations by the Group.

Inter-company transactions, balances and unrealised gains on transactions between group companies areeliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment ofthe transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensureconsistency with the policies adopted by the Group.

Non-controlling interests in the results and equity of subsidiaries are shown separately in theconsolidated income statement, consolidated statement of comprehensive income, consolidated statement ofchanges in equity and consolidated statement of financial position respectively.

2.2.2 Change in ownership interests

The Group treats transactions with non-controlling interests that do not result in a loss of control astransactions with equity owners of the Group. A change in ownership interest results in an adjustment betweenthe carrying amounts of the controlling and non-controlling interests to reflect their relative interests in thesubsidiary. Any difference between the amount of the adjustment to non-controlling interests and anyconsideration paid or received is recognised in a separate reserve within equity attributable to owners of theGroup.

When the Group ceases to consolidate or equity account for an investment because of a loss of control,joint control or significant influence, any retained interest in the entity is remeasured to its fair value with thechange in carrying amount recognised in profit or loss. This fair value becomes the initial carrying amount forthe purposes of subsequently accounting for the retained interest as an associate, joint venture or financialasset. In addition, any amounts previously recognised in other comprehensive income in respect of that entityare accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean thatamounts previously recognised in other comprehensive income are reclassified to profit or loss.


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2.2.3 Business combinations

The acquisition method of accounting is used to account for all business combinations, regardless ofwhether equity instruments or other assets are acquired. The consideration transferred for the acquisition of asubsidiary comprises the:

– fair values of the assets transferred;

– liabilities incurred to the former owners of the acquired business;

– equity interests issued by the Group;

– fair value of any asset or liability resulting from a contingent consideration arrangement; and

– fair value of any pre-existing equity interest in the subsidiary.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combinationare, measured initially at their fair values at the acquisition date. The Group recognises any non-controllinginterest in the acquired entity on an acquisition-by-acquisition basis either at fair value or at thenon-controlling interest’s proportionate share of the acquired entity’s net identifiable assets.

Acquisition-related costs are expensed as incurred.

The excess of the:

– consideration transferred,

– amount of any non-controlling interest in the acquired entity, and

– acquisition-date fair value of any previous equity interest in the acquired entity.

over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less thanthe fair value of the net identifiable assets of the business acquired, the difference is recognised directly inprofit or loss as a bargain purchase.

Where settlement of any part of cash consideration is deferred, the amounts payable in the future arediscounted to their present value as at the date of exchange. The discount rate used is the entity’s incrementalborrowing rate, being the rate at which a similar borrowing could be obtained from an independent financierunder comparable terms and conditions. Contingent consideration is classified either as equity or a financialliability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes infair value recognised in profit or loss.

If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’spreviously held equity interest in the acquiree is remeasured to fair value at the acquisition date. Any gainsor losses arising from such remeasurement are recognised in profit or loss.

2.2.4 Separate financial statements

Investments in subsidiaries are accounted for at cost less impairment. Cost includes direct attributablecosts of investment. The results of subsidiaries are accounted for by the Company on the basis of dividendreceived and receivable.

Impairment testing of the investments in subsidiaries is required upon receiving a dividend from theseinvestments if the dividend exceeds the total comprehensive income of the subsidiary in the period thedividend is declared or if the carrying amount of the investment in the separate financial statements exceedsthe carrying amount in the consolidated financial statements of the investee’s net assets including goodwill.


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2.3 Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chiefoperating decision-maker. The chief operating decision-maker (“CODM”), who is responsible for allocatingresources and assessing performance of the operating segments, has been identified as the Executive Directors whomake strategic decisions.

2.4 Foreign currency translation

(a) Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using thecurrency of the primary economic environment in which the entity operates (“the functional currency”). Thefinancial statements are presented in Hong Kong Dollars, which is the Company’s functional and the Group’spresentation currency.

(b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange ratesprevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gainsand losses resulting from the settlement of such transactions and from the translation at year-end exchangerates of monetary assets and liabilities denominated in foreign currencies are recognised in the consolidatedincome statements.

Foreign exchange gains and losses are presented in the consolidated income statements on a net basiswithin “other (losses)/gains, net”.

Non-monetary items that are measured at fair value in a foreign currency are translated using theexchange rates at the date when the fair value was determined. Translation differences on assets and liabilitiescarried at fair value are reported as part of the fair value gain or loss. For example, translation differences onnon-monetary assets and liabilities such as equities held at fair value through profit or loss are recognised inprofit or loss as part of the fair value gain or loss and translation differences on non-monetary assets such asequities classified as fair value through other comprehensive income are recognised in other comprehensiveincome.

(c) Group companies

The results and financial position of foreign operations (none of which has the currency of ahyperinflationary economy) that have a functional currency different from the presentation currency aretranslated into the presentation currency as follows:

– assets and liabilities for each balance sheet presented are translated at the closing rate at the dateof that balance sheet,

– income and expenses for each statement of profit or loss and income statement are translated ataverage exchange rates (unless this is not a reasonable approximation of the cumulative effect ofthe rates prevailing on the transaction dates, in which case income and expenses are translated atthe dates of the transactions), and

– all resulting exchange differences are recognised in other comprehensive income.

On consolidation, exchange differences arising from the translation of any net investment in foreignentities are recognised in other comprehensive income. When a foreign operation is sold, the associatedexchange differences are reclassified to profit or loss, as part of the gain or loss on disposal.

Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assetsand liabilities of the foreign operation and translated at the closing rate.


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2.5 Property, plant and equipment

Property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditurethat is directly attributable to the acquisition of the items.

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 costof the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs andmaintenance costs are charged in the consolidated income statement during the reporting period in which they areincurred.

Depreciation on property, plant and equipment is calculated using the straight-line method to allocate theircost, net of their residual values, over their estimated useful lives, as follows:

Buildings 12 to 25 yearsPlant and machinery 5 to 10 yearsFurniture and fixtures 5 yearsLeasehold improvements Shorter of lease terms or estimated useful lifeMotor vehicles 5 years

The asset’s residual values and useful lives are reviewed, and adjusted if appropriate, at the end of eachreporting period. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’scarrying amount is greater than its estimated recoverable amount (Note 2.6).

Gains and losses on disposals are determined by comparing proceeds with carrying amount and are recognisedwithin “other (losses)/gains, net” in the consolidated income statements.

Construction in progress represents property, plant and equipment under construction or pending installation,and is stated at cost less impairment losses. Cost comprises direct costs of construction including borrowing costsattributable to the construction during the period of construction. No provision for depreciation is made onconstruction in progress until such time as the relevant assets are completed and ready for intended use.

2.6 Impairment of non-financial assets

Assets that have an indefinite useful life are not subject to amortisation and are at least tested annually forimpairment. Assets which are subject to amortisation are reviewed for impairment whenever events or changes incircumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for theamount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higherof an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are groupedat the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financialassets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at eachreporting date.

2.7 Financial assets

(a) Classification

The Group classifies its financial assets in the following measurement categories:

• those to be measured subsequently at fair value (either through other comprehensive income(“OCI”), or through profit or loss), and

• those to be measured at amortised cost.

The classification depends on the entity’s business model for managing the financial assets and thecontractual terms of the cash flows.

For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI. Forinvestments in equity instruments that are not held for trading, this will depend on whether the Group has madean irrevocable election at the time of initial recognition to account for the equity investment at FVOCI.


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The Group reclassifies debt investments when and only when its business model for managing thoseassets changes.

See Note 14 for details about each type of financial asset.

(b) Recognition and derecognition

Regular way purchases and sales of financial assets are recognised on trade-date, the date on which theGroup commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cashflows from the financial assets have expired or have been transferred and the Group has transferredsubstantially all the risks and rewards of ownership.

(c) Measurement

At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financialasset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisitionof the financial asset. Transaction costs of financial assets carried at fair value through profit or loss areexpensed in profit or loss.

Debt instruments

Subsequent measurement of debt instruments depends on the Group’s business model formanaging the asset and the cash flow characteristics of the asset. The Group classifies its debtinstruments as the following measurement category:

Amortised cost: Assets that are held for collection of contractual cash flows where those cashflows represent solely payments of principal and interest are measured at amortised cost. A gain or losson a debt investment that is subsequently measured at amortised cost and is not part of a hedgingrelationship is recognised in profit or loss when the asset is derecognised or impaired. Interest incomefrom these financial assets is included in finance income using the effective interest rate method. Anygain or loss arising on derecognition is recognised directly in profit or loss and presented in “other(losses)/gains, net”. Impairment losses are presented as separate line item in the consolidated incomestatements.

Equity instruments

The Group subsequently measures all equity investments at fair value. Where the Group’smanagement has elected to present fair value gains and losses on equity investments in OCI, there is nosubsequent reclassification of fair value gains and losses to profit or loss following the derecognitionof the investment. Dividends from such investments continue to be recognised in profit or loss as otherincome when the Group’s right to receive payments is established.

Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCIare not reported separately from other changes in fair value.

(d) Impairment

The Group assesses on a forward-looking basis the expected credit losses associated with its debtinstruments carried at amortised cost. The impairment methodology applied depends on whether there has beena significant increase in credit risk. Note 3.1(d) details how the Group determines whether there has been asignificant increase in credit risk.

For trade receivables, the Group applies the simplified approach permitted in HKFRS 9 “FinancialInstruments” (“HKFRS 9”), which requires expected lifetime losses to be recognised from initial recognitionof the receivables. The provision matrix is determined based on historical observed default rates over theexpected life of the trade receivables with similar credit risk characteristics and is adjusted for forward-lookingestimates. At every reporting date, the historical observed default rates are updated and changes in theforward-looking estimates are analysed.


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Impairment of deposits and other receivables, amount due from a related company, amount due from theultimate holding company, time deposits, pledged deposits and cash and cash equivalents are measured aseither 12-month expected credit losses or lifetime expected credit losses, depending on whether there has beena significant increase in credit risk since initial recognition. If a significant increase in credit risk of areceivable has occurred since initial recognition, then impairment is measured as lifetime expected creditlosses.

2.8 Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is assigned to individual items ofinventory on the basis of first-in-first-out method. The cost of finished goods and work in progress comprises rawmaterials, direct labour, other direct costs and related production overheads based on normal operating capacity.

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

2.9 Trade receivables and other receivables

Trade receivables are amounts due from customers for good sold or services performed in the ordinary courseof business. If collection of trade receivables is expected in one year or less, they are classified as current assets. Ifno, they are presented as non-current assets.

Trade receivables and other receivables are recognised initially at fair values and subsequently measured atamortised cost using the effective interest method, less provision for impairment. See Note 2.7(c) for furtherinformation about the Group’s accounting for trade receivables and other receivables and Note 2.7(d) for adescription of the Group’s impairment policies.

2.10 Cash and cash equivalents

In the consolidated statements of cash flows, cash and cash equivalents include cash in hand and deposits heldat call with banks with original maturities of three months or less that are readily convertible to known amounts ofcash and which are subject to an insignificant risk of changes in value.

2.11 Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares oroptions are shown in equity as a deduction, net of tax, from the proceeds.

2.12 Trade and other payables

Trade and other payables are obligations to pay for goods or services that have been acquired in the ordinarycourse of business from suppliers. Trade and other payables are classified as current liabilities if payment is duewithin one year or less. If not, they are presented as non-current liabilities.

Trade and other payables are recognised initially at fair values and subsequently measured at amortised costusing the effective interest method.

2.13 Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings aresubsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and theredemption value is recognised in the consolidated income statements over the period of the borrowings using theeffective interest method.

Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extentthat it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until thedraw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawndown, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility towhich it relates.


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Borrowings are removed from the consolidated statements of financial position when the obligation specifiedin the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liabilitythat has been extinguished or transferred to another party and the consideration paid, including any non-cash assetstransferred or liabilities assumed, is recognised in profit or loss as finance costs.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlementof the liability for at least 12 months after the end of the reporting period.

2.14 Borrowing costs

General and specific borrowing costs that are directly attributable to the acquisition, construction or productionof a qualifying asset are capitalised during the period of time that is required to complete and prepare the asset forits intended use or sale. Qualifying assets are assets that necessarily take a substantial period of time to get readyfor their intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending their expenditure onqualifying assets is deducted from the borrowing costs eligible for capitalisation.

Other borrowing costs are expensed in the period in which they are incurred.

2.15 Current and deferred income tax

The income tax expense or credit for the period is the tax payable on the current period’s taxable income basedon the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilitiesattributable to temporary differences and to unused tax losses.

Current income tax

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enactedat the end of the reporting period in the countries where the Company’s subsidiaries operate and generatetaxable income. Management periodically evaluates positions taken in tax returns with respect to situations inwhich applicable tax regulation is subject to interpretation and considers whether it is probable that a taxationauthority will accept an uncertain tax treatment. The Group measures its tax balances either based on the mostlikely amount of the expected value, depending on which method provides a better prediction of the resolutionof the uncertainty.

Deferred income tax

Deferred income tax is provided in full, using the liability method, on temporary differences arisingbetween the tax bases of assets and liabilities and their carrying amounts in the consolidated financialstatements. However, deferred tax liabilities are not recognised if they arise from the initial recognition ofgoodwill. Deferred income tax is also not accounted for if it arises from initial recognition of an asset orliability in a transaction other than a business combination that at the time of the transaction affects neitheraccounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that havebeen enacted or substantially enacted by the end of the reporting period and are expected to apply when therelated deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred tax assets are recognised only if it is probable that future taxable amounts will be available toutilise those temporary differences and losses.

Deferred tax liabilities and assets are not recognised for temporary differences between the carryingamount and tax bases of investments in foreign operations where the Company is able to control the timingof the reversal of the temporary differences and it is probable that the differences will not reverse in theforeseeable future.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset currenttax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current taxassets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends eitherto settle on a net basis, or to realise the asset and settle the liability simultaneously.

Current and deferred tax is recognised in profit or loss, except to the extent that it relates to itemsrecognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in othercomprehensive income or directly in equity, respectively.


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2.16 Employee benefits

(a) Pension obligations

A defined contribution plan is a pension plan under which the Group pays fixed contributions into aseparate entity. The Group has no legal or constructive obligations to pay further contributions if the fund doesnot hold sufficient assets to pay all employees the benefits relating to employee service in the current and priorperiods. A defined benefit plan is a pension plan that is not a defined contribution plan.

The group companies in the People’s Republic of China (the “PRC”) participate in defined contributionretirement benefit plans organised by relevant government authorities for its employees in the PRC andcontribute to these plans based on certain percentage of the salaries of the employees on a monthly basis, upto a maximum fixed monetary amount, as stipulated by the relevant government authorities.

The PRC government authorities undertake to assume the retirement benefit obligations payable to allexisting and future retired employees under these plans.

The group companies in Malaysia participate in Employee Provident Fund (“EPF”) for its employees inMalaysia. EPF is a defined contribution scheme in accordance with the Employees Provident Fund Act 1991.Under the rules of EPF, the employer and its employees are required to contribute 12% and 11% respectivelyfor employees under 55 year of age. For employees over 55 years of age, the proportion of contribution isreduced to 6% and 5.5% for employer and its employees respectively.

The group companies in Hong Kong participate in a mandatory provident fund scheme (“MPF Scheme”)for its employees in Hong Kong. MPF Scheme is a defined contribution scheme in accordance with theMandatory Provident Fund Scheme Ordinance. Under the rules of MPF Scheme, the employer and itsemployees are required to contribute 5% of the employees’ salaries, up to a maximum of HK$1,500 peremployee per month. In addition, all employees are entitled to receive the employer’s additional voluntarycontributions equal to 3% of the employees’ monthly salaries when the employees make additional voluntarycontributions at the same time, up to HK$900 per employees per month. The assets of MPF Scheme are heldseparately from those of the group companies in an independently administered fund.

(b) Employee leave entitlements

Employee entitlements to annual leave are recognised when they accrue to employees. A provision ismade for the estimated liability for annual leave as a result of services rendered by employees up to thereporting date.

Employee entitlements to sick leave and maternity leave are not recognised until the time of leave.

(c) Bonus plans

The Group recognises a liability and an expense for bonuses, based on a formula that takes intoconsideration the profit attributable to the Company’s shareholders after certain adjustments. The Grouprecognises a provision where contractually obliged or where there is a past practice that has created aconstructive obligation.

(d) Termination benefits

Termination benefits are payable when employment is terminated by the Group before the normalretirement date, or when an employee accepts voluntary redundancy in exchange for these benefits. The Grouprecognises termination benefits at the earlier of the following dates: (i) when the Group can no longer withdrawthe offer of those benefits; and (ii) when the entity recognises costs for a restructuring that is within the scopeof HKAS 37 and involves the payment of terminations benefits. In the case of an offer made to encouragevoluntary redundancy, the termination benefits are measured based on the number of employees expected toaccept the offer. Benefits falling due more than 12 months after the end of the reporting period are discountedto present value.


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(e) Share-based payments

Share-based compensation benefits are provided to employees. Information relating to the scheme is setout in Note 22(d).

Under the transitional provisions in HKFRS2 “Share-based Payment” (“HKFRS2”), no share-basedpayments were recognised in the consolidated financial statements for the shares, share options or other equityinstruments that were granted before 7 November 2002.

For the grant of equity-settled share-based payment transactions after 7 November 2002, the fair valueof shares granted to employees is recognised as an expense over the relevant service period, being the year towhich the shares relates and the vesting period of the shares. The fair value is measured at the grant date ofthe shares and is recognised in equity in the share-based payment reserve. The number of shares expected tovest is estimated based on the non-market vesting conditions. The estimates are revised at the end of eachreporting period and adjustments are recognised in profit or loss and the share-based payment reserve.

Where shares are forfeited due to a failure by the employee to satisfy the service conditions, anyexpenses previously recognised in relation to such shares are reversed effective from the date of the forfeiture.

2.17 Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a result of pastevents; it is probable that an outflow of resources will be required to settle the obligation; and the amount has beenreliably estimated. Provisions are not recognised for future operating losses.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlementis determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood ofan outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligationusing a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to theobligation. The increase in the provision due to passage of time is recognised as interest expense.

2.18 Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable, and represents amounts forthe sale of goods and provision of services in the ordinary course of the Group’s activities. Revenue is shown net ofreturns and after eliminating sales within the Group.

The Group does not expect to have any contracts where the period between the transfer of the promised goodsto the customers and the payment by the customers exceeds one year. As a consequence, the Group does not adjustany of the transaction prices for the time value of money.

(a) Sales of goods

Sales are recognised when control of the products has transferred, being when the products are deliveredto the customers, the customers have accepted the product and have full discretion over the products, thecollection of the related consideration is probable and there is no unfulfilled obligation that could affect thecustomers’ acceptance of the products.

A receivable is recognised when the goods are delivered as this is the point in time that the considerationis unconditional because only the passage of time is required before the payment is due.

A contract liability is recognised when a customer pays consideration, or is contractually required to payconsideration and the amount is already due, before the Group recognises the related revenue. The Grouprecognised its contract liabilities under other payables and accruals in the consolidated statements of financialposition.

Incremental costs incurred to obtain a contract, if recoverable, are capitalised and presented as assetsand subsequently amortised when the related revenue is recognised. The Group recognises the incrementalcosts of obtaining a contract as an expenses when incurred if the amortisation period of the asset that the Groupotherwise would have recognised is one year or less.


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(b) Provision of services

The Group provides other engineering services, such as design and development, testing and tooling ofproduct. Revenue is recognised over the period that services are rendered by the Group.

2.19 Interest income

Interest income on financial assets at amortised cost calculated using the effective interest method isrecognised in profit or loss as part of other income.

Interest income is presented as finance income where it is earned from financial assets that are held for cashmanagement purposes, see Note 10 below. Any other interest income is included in other income.

Interest income is calculated by applying the effective interest rate to the gross carrying amount of a financialasset except for financial assets that subsequently become credit-impaired. For credit-impaired financial assets theeffective interest rate is applied to the net carrying amount of the financial asset (after deduction of the lossallowance).

2.20 Earnings per share

(i) Basic earnings per share

Basic earnings per share is calculated by dividing:

– the profit attributable to owners of the Company by the weighted average number of ordinaryshares outstanding during the financial year, adjusted for the contingently issuable shares issuedfrom the date when all necessary conditions are satisfied.

(ii) Diluted earnings per share

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share totake into account:

– the contingently issuable shares that would have been outstanding if the conditions are satisfied,from the beginning of the period (or from the date of the contingent share agreement, if later).

2.21 Leases

Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased assetis available for use by the Group.

Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions.The lease agreements do not impose any covenants other than the security interests in the leased assets that are heldby the lessor. Leased assets may not be used as security for borrowing purposes.

Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilitiesinclude the net present value of the following lease payments:

– fixed payments (including in-substance fixed payments), less any lease incentives receivable;

– variable lease payment that are based on an index or a rate, initially measured using the index or rateas at the commencement date;

– amounts expected to be payable by the Group under residual value guarantees;

– the exercise price of a purchase option if the Group is reasonably certain to exercise that option; and

– payments of penalties for terminating the lease, if the lease term reflects the Group exercising thatoption.


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Lease payments to be made under reasonably certain extension options are also included in the measurementof the liability.

The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readilydetermined, which is generally the case for leases in the Group, the lessee’s incremental borrowing rate is used, beingthe rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar valueto the right-of-use asset in a similar economic environment with similar terms, security and conditions.

To determine the incremental borrowing rate, the Group:

– where possible, uses recent third-party financing received by the individual lessee as a starting point,adjusted to reflect changes in financing conditions since third party financing was received,

– uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases heldby the Group, which does not have recent third-party financing, and

– makes adjustments specific to the lease, such as term, country, currency and security.

If a readily observable amortising loan rate is available to the individual lessee (through recent financing ormarket data) which has a similar payment profile to the lease, then the group entities use that rate as a starting pointto determine the incremental borrowing rate.

Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or lossover the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liabilityfor each period.

Right-of-use assets are measured at cost comprising the following:

– the amount of the initial measurement of lease liability;

– any lease payments made at or before the commencement date less any lease incentives received;

– any initial direct costs; and

– restoration costs.

Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the lease term ona straight-line basis. If the Group is reasonably certain to exercise a purchase option, the right-of-use asset isdepreciated over the underlying asset’s useful life.

Payments associated with short-term leases and all leases of low-value assets are recognised on a straight-linebasis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less without apurchase option.

2.22 Dividend distribution

Dividend distribution to the Company’s shareholders is recognised as a liability in the Group’s and theCompany’s financial statements in the period in which the dividends are approved by the Company’s shareholdersor directors, where appropriate.

2.23 Government grants

Grant from the government is recognised at its fair value where there is a reasonable assurance that the grantwill be received and the Group will comply with all attached conditions.

Government grant relating to costs is deferred and recognised in the consolidated income statements over theperiod necessary to match it with the costs that it is intended to compensate.

Government grant relating to property, plant and equipment is credited to the consolidated income statementson a straight-line basis over the expected lives of the related assets.


– I-28 –


3 FINANCIAL RISK MANAGEMENT

3.1 Financial risk factors

The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk,cash flow and fair value interest rate risk), credit risk, liquidity risk and price risk. The Group’s overall riskmanagement program focuses on the unpredictability of financial markets and seeks to minimise potential adverseeffects on the Group’s financial performance.

Risk management is carried out under policies approved by the directors. The directors provide principles foroverall risk management.

(a) Foreign exchange risk

The Group mainly operates in Hong Kong, the PRC and Malaysia with most of the transactionsdenominated and settled in Hong Kong Dollars (“HK$”), United States Dollars (“US$”), Malaysia Ringgit(“MYR”) and Chinese Renminbi (“RMB”). Foreign exchange risk arises from future commercial transactionsand recognised assets and liabilities that are denominated in a currency that is not in HK$, MYR or RMB,which are the functional currencies of the major operating companies within the Group.

Management closely monitors foreign currency exchange exposure and will take measures to minimisethe currency translation risk. It mainly includes managing the exposures arisen from purchases made by groupentities in currencies other than their own functional currencies. The Group also manages its foreign exchangerisk by performing regular reviews of the Group’s net foreign exchange exposure. During the years ended 31March 2020, 2021 and 2022, the Group has not entered into any derivative instruments to hedge its foreignexchange exposure.

Under the current pegging arrangement between HK$ and US$, the Directors of the Company considerforeign exchange risk as insignificant. The exchange rate of RMB to HK$ is subject to the rules and regulationsof foreign exchange control promulgated by the PRC government.

For companies with HK$ as their functional currency

As at 31 March 2020, 2021 and 2022, if RMB had strengthened/weakened by 5% against HK$,with all other variables held constant, the post-tax profit for each year would have changed mainly asa result of foreign exchange difference on translation of RMB denominated monetary assets andliabilities.

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

RMB/HK$Post-tax profit increase/(decrease)– Strengthened by 5% 316 294 137– Weakened by 5% (316) (294) (137)

For companies with RMB as their functional currency

As at 31 March 2020, 2021 and 2022, if USD had strengthened/weakened by 5% against RMB,with all other variables held constant, the post-tax profit for each year would have changed mainly asa result of foreign exchange difference on translation of USD denominated monetary assets andliabilities.

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

US$/RMBPost-tax profit (decrease)/increase– Strengthened by 5% (13,521) (18,142) (19,443)– Weakened by 5% 13,521 18,142 19,443


– I-29 –


For companies with MYR as their functional currency

As at 31 March 2020, 2021 and 2022, if USD had strengthened/weakened by 5% against MYR,with all other variables held constant, the post-tax profit for each year would have changed mainly asa result of foreign exchange difference on translation of USD denominated monetary assets andliabilities.

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

US$/MYRPost-tax profit (decrease)/increase– Strengthened by 5% (2,583) (4,013) (8,584)– Weakened by 5% 2,583 4,013 8,584

(b) Cash flow and fair value interest rate risk

The Group’s cash flow and fair value interest rate risk primarily relates to bank balances and bankborrowings. Borrowings issued at variable rates expose the Group to cash flow interest-rate risk. Borrowingsissued at fixed rates expose the Group to fair value interest rate risk.

The sensitivity analysis below has been determined based on the exposure to interest rates for itsvariable-rate bank balances and bank borrowings. The analysis is prepared assuming the variable-rate bankbalances and bank borrowings as at 31 March 2020, 2021 and 2022 were outstanding for the respective years.

If interest rates had been 100 basis points higher/lower for variable-rate bank balances and bankborrowings and all other variables were held constant, the effects to the Group’s post tax profit for the yearswill be as follows:

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

Post-tax profit increase/(decrease)Interest rate

– higher 627 1,269 (840)– lower (627) (1,269) 840

This is mainly attributable to the Group’s exposure to interest rates on its variable-rate bank balancesand bank borrowings.

(c) Price risk

The Group is exposed to price risk arises from investments held by the Group and classified on theconsolidated statements of financial position as financial asset at fair value through other comprehensiveincome (Note 17). The Group maintains these investments for long-term purpose.

If the price of the financial asset at FVOCI had been 10% higher/lower, the Group’s financial asset atFVOCI reserves for the years ended 31 March 2020 and 2021 would increase/decrease by approximatelyHK$519,000 and HK$484,000, respectively. The financial asset at FVOCI was disposed during the year ended31 March 2022.


– I-30 –


(d) Credit risk

(i) Risk management

Credit risk is managed on a group basis. The Group’s financial assets include trade receivables,other financial assets carried at amortised cost (including deposits and other receivables, amount duefrom a related company and amount due from the ultimate holding company), pledged deposits, timedeposits and cash and cash equivalents. The carrying value of these assets stated in the consolidatedstatements of financial position represent the Group’s maximum exposure to credit risk in relation tofinancial assets.

Credit risk of pledged deposits, time deposits and cash and cash equivalents.

The Group’s pledged deposits, time deposits and cash and cash equivalents were depositedwith high quality financial institutions. Therefore, the Group does not expect any losses arisingfrom non-performance by these counterparties and considered to be low risk.

Credit risk of trade receivables

The Group’s credit risk is concentrated on a number of major and long establishedcustomers. As at 31 March 2020, 2021 and 2022, trade receivables from the customer with largestrevenue during the corresponding years accounted for approximately 20%, 27%, and 27% of theGroup, respectively. As at 31 March 2020, 2021 and 2022, trade receivables from the customerswith top five largest revenue during the corresponding years accounted for approximately 59%,74%, and 67% of the Group’s total trade receivables, respectively. The Group has policies in placeto ensure that sales are made to customers with appropriate credit histories and to limit theamount of credit exposure to any individual customer.

Credit risk of other financial assets carried at amortised cost.

Management has closely monitored the credit qualities and the collectability. As at 31March 2020, 2021 and 2022, management considered the credit risk of other financial assetscarried at amortised cost to be low as counterparties have a strong capacity to meet theircontractual cash flow obligations in the near term.

(ii) Impairment of financial assets

The Group has the following financial assets that are subject to the expected credit loss model:

– pledged deposits, time deposits and cash and cash equivalents

– trade receivables

– other financial assets carried at amortised cost

While pledged deposits, time deposits and cash and cash equivalents are also subject to theimpairment requirements of HKFRS 9, the identified impairment loss was immaterial as they weredeposited with high quality financial institutions with good credit rating.

Trade receivables

The Group applies the HKFRS 9 simplified approach to measuring expected credit losseswhich uses a lifetime expected loss allowance for all trade receivables. To measure the expectedcredit losses, trade receivables have been grouped based on shared credit risk characteristics andthe days past due.

The expected loss rates are based on the payment profiles of sales over a period of 12months before 31 March 2020, 31 March 2021 and 31 March 2022, respectively, and thecorresponding historical credit losses experienced. The historical loss rates are adjusted to reflectcurrent and forward-looking information on macroeconomic factors affecting the ability of thecustomers to settle the receivables. The Group has identified the Gross Domestic Product(“GDP”) and unemployment rate of the countries in which it sells its goods and services to be themost relevant factors, and accordingly adjusted the historical loss rates based on the expectedchanges in these factors in the future period.


– I-31 –


As at 31 March 2022, the expected credit loss rate is up to 0.01%, 0.11%, 0.35%, 7.48%,and 100% for trade receivables under the age group of current, more than 30 days past due, morethan 60 days past due, more than 90 days past due and more than 120 days past due, respectively.

As at 31 March 2021, the expected credit loss rate is up to 0.01%, 0.29%, 65%, 99.9% and100% for trade receivables under the age group of current, more than 30 days past due, more than60 days past due, more than 90 days past due and more than 120 days past due, respectively.

As at 31 March 2020, the expected credit loss rate is up to 0.04%, 3.59%, 99.34%, 99.34%and 100% for trade receivables under the age group of current, more than 30 days past due, morethan 60 days past due, more than 90 days past due and more than 120 days past due, respectively.

On that basis, the loss allowances as at 31 March 2020, 2021 and 2022 were determinedas follows for trade receivables:

Current

More than30 days

past due

More than60 days

past due

More than90 days

past due

More than120 dayspast due Total

31 March 2020Gross carrying amount (In HK$’000) 176,554 6,852 198 110 58 183,772Loss allowance (In HK$’000) 13 37 131 14 58 253

31 March 2021Gross carrying amount (In HK$’000) 269,209 6,676 76 150 5 276,116Loss allowance (In HK$’000) 8 9 29 150 5 201

31 March 2022Gross carrying amount (In HK$’000) 351,044 3,799 155 10 30 355,038Loss allowance (In HK$’000) 1 1 – – 30 32

The movements of the loss allowances for trade receivables are as follows:

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

Opening loss allowances 492 253 201Reversal of impairment loss,

net (239) (52) (169)

Closing loss allowances 253 201 32

During the years ended 31 March 2020, 2021 and 2022, reversal of impairment loss onfinancial assets, net of HK$239,000, HK$52,000, and HK$169,000 in relation to trade receivableswere recognised in the consolidated income statements, respectively (Note 19).

Trade receivables are written off when there is no reasonable expectation of recovery.Indicators that there is no reasonable expectation of recovery include, amongst others, the failureof a debtor to engage in a repayment plan with the Group, and a failure to make contractualpayments. Impairment losses on trade receivables are presented as impairment losses on financialassets in the consolidated income statements. Subsequent recoveries of amounts previouslywritten off are credited against the same line item.


– I-32 –


Other financial assets carried at amortised cost

Other financial assets carried at amortised cost include deposits and other receivables andamount due from a related company and the ultimate holding company. Impairment on otherfinancial assets are measured as either 12-month expected credit losses or lifetime expected creditloss, depending on whether there has been a significant increase in credit risk since initialrecognition. If a significant increase in credit risk of a receivable has occurred since initialrecognition, then impairment is measured as lifetime expected credit losses. Management hasclosely monitored the credit qualities and the collectability of the other financial assets atamortised cost and considers that the expected credit loss is immaterial with the expected creditloss rate being close to zero.

(e) Liquidity risks

Prudent liquidity risk management implies maintaining sufficient cash and cash equivalents and theavailability of funding through internal operation and an adequate amount of available credit facilities. TheGroup manages its liquidity risk by monitoring its working capital requirements including closely monitoringthe turnover days of receivables and keeping credit lines available.

Management monitors rolling forecasts of the Group’s bank facilities and cash and cash equivalents onthe basis of expected cash flows. The Group’s policy is to regularly monitor current and expected liquidityrequirements to ensure that it maintains sufficient cash balances and adequate credit facilities to meet itsliquidity requirements in the short and long-term.

The table below analyses the Group’s financial liabilities into relevant maturity groupings based on theremaining period at each of the reporting date to the contractual maturity date. The amounts disclosed in thetable are the contractual undiscounted cash flows. Where the loan agreement contains a repayable on demandclause which gives the lender the unconditional right to call the loan at any time, the amounts repayable areclassified in the earliest time bracket in which the lender could demand repayment. Balances due within 12months equal their carrying balances as the impact of discounting is not significant.

The Group On demandWithin1 year

Between 2and 5 years Total

HK$’000 HK$’000 HK$’000 HK$’000

As at 31 March 2020Trade payables – 221,689 – 221,689Other payables and accruals – 80,627 – 80,627Bank borrowings– principal portion (Note) 149,905 – – 149,905Lease liabilities– principal portion – 9,991 25,034 35,025– interest portion – 1,511 1,691 3,202

149,905 313,818 26,725 490,448

As at 31 March 2021Trade payables – 310,862 – 310,862Other payables and accruals – 130,689 3,835 134,524Bank borrowings– principal portion (Note) 192,859 – – 192,859Lease liabilities– principal portion – 12,117 16,263 28,380– interest portion – 1,042 683 1,725

192,859 454,710 20,781 668,350


– I-33 –


The Group On demandWithin1 year

Between 2and 5 years Total

HK$’000 HK$’000 HK$’000 HK$’000As at 31 March 2022Trade payables – 401,606 – 401,606Other payables and accruals – 147,375 3,989 151,364Bank borrowings– principal portion (Note) 359,659 – – 359,659Lease liabilities– principal portion – 12,131 6,374 18,505– interest portion – 623 165 788

359,659 561,735 10,528 931,922

Note:

The table below summarises the maturity analysis of the Group’s financial liabilities with a repaymenton demand clause based on the scheduled repayments set out in the respective agreements. The amountsinclude interest payments computed using contractual rates. Taking into account the Group’s financialposition, the directors do not consider that it is probable that the banks will exercise their discretion todemand immediate repayment. The directors believe that such borrowings will be repaid in accordancewith the scheduled repayment dates set out in the agreements.

Within1 year

Between 2and 5 years Over 5 years Total

HK$’000 HK$’000 HK$’000 HK$’000

As at 31 March 2020Principal payables 86,296 63,609 – 149,905Interest payables 6,031 3,165 – 9,196

92,327 66,774 – 159,101

As at 31 March 2021Principal payables 161,448 31,411 – 192,859Interest payables 4,470 897 – 5,367

165,918 32,308 – 198,226

As at 31 March 2022Principal payables 302,528 45,241 11,890 359,659Interest payables 3,337 4,369 511 8,217

305,865 49,610 12,401 367,876

3.2 Capital risk management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a goingconcern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimalcapital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid toshareholders, issue new shares or sell assets to reduce debts.


– I-34 –


The Group monitors capital on the basis of the net debt-to-equity ratio. This ratio is calculated as net debtdivided by total equity. Net (cash)/debt is calculated as total borrowings (including bank borrowings and leaseliabilities) less cash and cash equivalents. Total equity is calculated as equity as shown in the consolidated statementsof financial position.

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

Bank borrowings (Note 24) 149,905 192,859 359,659Lease liabilities (Note 16) 35,025 28,380 18,505Less: cash and cash equivalents (Note 21) (198,640) (206,285) (204,839)

Net (cash)/debt (13,710) 14,954 173,325

Total equity 615,436 720,455 726,620

Net debt-to-equity ratio N/A 2.1% 23.9%

Management considers the Group’s capital risk is minimal as the Group was not in a net debt position as at31 March 2020. The net debt-to-equity ratio as at 31 March 2021 and 31 March 2022 are 2.1% and 23.9%,respectively. The increase in the net-debt-to-equity ratio was primarily due to an increase in bank borrowings.

3.3 Fair value estimation

(i) Fair value hierarchy

This section explains the judgements and estimates made in determining the fair values of the financialinstruments that are recognised and measured at fair value in the financial statements. To provide an indicationabout the reliability of the inputs used in determining fair value, the Group has classified its financialinstruments into the three levels prescribed under the accounting standards.

Level 1: The fair value of financial instruments traded in active markets (such as publicly tradedderivatives, and equity securities) is based on quoted market prices at the end of the reporting period. Thequoted market price used for financial assets held by the Group is the current bid price. These instruments areincluded in level 1.

Level 2: The fair value of financial instruments that are not traded in an active market (for example,over-the-counter derivatives) is determined using valuation techniques which maximise the use of observablemarket data and rely as little as possible on entity-specific estimates. If all significant inputs required to fairvalue an instrument are observable, the instrument is included in level 2.

Level 3: If one or more of the significant inputs is not based on observable market data, the instrumentis included in level 3. This is the case for unlisted equity securities.

As at 31 March2020 2021 2022

Level 3 Level 3 Level 3HK$’000 HK$’000 HK$’000

Financial asset at FVOCI (Note 17) 5,188 4,841 –

There were no transfers between levels 1, 2 and 3 for recurring fair value measurements during the yearsended 31 March 2020, 2021 and 2022.


– I-35 –


(ii) Valuation techniques used to determine fair values

In estimating the fair value of the financial asset at FVOCI, the Group uses market-observable data tothe extent it is available and engages third party qualified valuer to perform the valuation, where appropriate.

Refer to Note 17 for the changes in recurring fair value measurement of financial asset of FVOCI inlevel 3 for the years ended 31 March 2020 and 2021.

(iii) Valuation processes

The finance department of the Group works closely with the qualified external valuer to establish theappropriate valuation techniques and inputs to the model. Discussing of valuation processes and results areheld between the finance department and the directors of the Company at each reporting period. Quantitativeinformation about fair value measurements using significant unobservable inputs (Level 3) is as follow:

DescriptionFair value at

31 March 2020Valuationtechnique

Unobservableinput

Unlisted equity instrument 5,188 Market comparisonapproach

DLOM of 30%(Note)

DescriptionFair value at

31 March 2021Valuationtechnique

Unobservableinput

Unlisted equity instrument 4,841 Market comparisonapproach

DLOM of 30%(Note)

Note: An increase in the DLOM used in isolation would result in a decrease in the fair value, and viceversa. If the DLOM increased/decreased by 10% with all other variables held constant, the fairvalue of the financial asset at FVOCI would decrease/increase by HK$741,000 and HK$692,000for the years ended 31 March 2020 and 2021, respectively.

The Group also has a number of financial instruments which are not measured at fair value in theconsolidated statements of financial position.

For the trade receivables, deposits, other receivables, amount due from a related company, amount duefrom the ultimate holding company, pledged deposits, cash and cash equivalents, trade payable and accrualsand other payables, the fair values are not materially different from their carrying amounts since majority ofthese instruments are short-term in nature.

For bank borrowings and lease liabilities, the fair values are not materially different from their carryingamounts since the interest payables of these instruments are close to current market rates.

4 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Estimates and judgements are continually evaluated and are based on historical experience and other factors,including expectations of future events that are believed to be reasonable under the circumstances. The Group makeestimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equalthe related actual results. The estimates and assumptions that have a significant risk of causing a material adjustmentto the carrying amounts of assets and liabilities within the next financial year are discussed below.

(a) Provision for obsolete inventories

Inventories are carried at the lower of cost and net realisable value. The cost of inventories is written downto net realisable value when there is an objective evidence that the cost of inventories may not be recoverable. Thecost of inventories may not be recoverable if those inventories are aged and damaged, if they have become whollyor partially obsolete, or if their selling prices have declined. The cost of inventories may also not be recoverable ifthe estimated costs to be incurred to make the sales have increased.


– I-36 –


The amount written off to the consolidated income statements is the difference between the carrying value andnet realisable value of the inventories. In determining the net realisable value of inventories, significant judgementis required. In making this judgement, the Group evaluates, among other factors, the duration and extent by all meansto which the amount will be recovered.

(b) Impairment of trade receivables

The Group makes provision for impairment of receivables based on assumptions about risk of default andexpected loss rates. The Group uses judgement in making these assumptions and selecting the inputs to theimpairment calculation, based on the Group’s historical loss default rates, existing market conditions as well asforward looking estimates at the end of each reporting period. The identification of impairment of receivablesrequires the use of judgement and estimates. Where the expectations are different from the original estimates, suchdifferences will impact the carrying value of receivables and loss for the impairment of receivables recognised in theperiods in which such estimates have been changed.

(c) Income taxes

The Group is subject to income taxes mainly in Hong Kong, the PRC and Malaysia. Significant judgement isrequired in determining provision for income taxes. There are transactions and calculations for which the ultimatetax determination is uncertain during the ordinary course of business. Where the final tax outcome of these mattersis different from the amounts that were initially recorded, such differences will impact the income tax and deferredincome tax provisions in the periods in which such determination is made.

Deferred income tax assets relating to certain temporary differences and tax losses are recognised asmanagement considers it is probable that future taxable profit will be available against which the temporarydifferences or tax losses can be utilised. Where the expectation is different from the original estimate, suchdifferences will impact the recognition of deferred income tax assets and tax expense in the periods in which suchestimate is changed.

5 REVENUE AND SEGMENT INFORMATION

Management has determined the operating segments based on the information reviewed by the CODM. TheCODM, who is responsible for allocating resources and assessing performance of the operating segment, has beenidentified as the Executive Director of the Company.

Operating segments are reported in the manner consistent with the internal reporting provided to the CODM.The Group is subject to similar business risk, and resources are allocated based on what is beneficial to the Groupin enhancing the value as a whole.

The CODM considers the Group’s operation from a business perspective and determines that the Group hasone reportable operating segment being the development, manufacturing and sales of electronic products forcustomers in different industries, such as the automotive, aerospace, medical, marine, banking security and wirelesscommunication network industries and provision of other engineering services.

The CODM assesses the performance of the operating segment based on a measure of revenue and gross profit.

(a) Revenue from customers contributing over 10% of the total revenue of the Group:


HK$’000 HK$’000 HK$’000

Customer 1 157,358 183,091 351,841

Customer 2 140,401 186,084 N/A*

Customer 3 185,854 575,860 547,981

* The corresponding customer did not contribute over 10% of the total revenue of the Group for the yearended 31 March 2022.


– I-37 –


(b) Revenue by customers’ geographical location

The Group’s revenue by geographical location, which is determined by locations of customers, is as follows:


HK$’000 HK$’000 HK$’000

Sales of goods recognised at a point in time:– Europe 721,574 1,063,001 1,285,175– North America 476,277 394,623 492,219– Asia-Pacific 175,596 327,741 285,858– Others 3,713 1,639 68

1,377,160 1,787,004 2,063,320- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Provision of other engineering servicesrecognised over time:– Europe 10,599 10,496 16,899– North America 4,358 2,629 6,074– Asia-Pacific 2,944 1,541 2,482

17,901 14,666 25,455- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

1,395,061 1,801,670 2,088,775

(c) Non-current assets by geographical location

The total amounts of non-current assets, other than deferred tax assets, financial asset at FVOCI and pledgeddeposits, of the Group as at 31 March 2020, 2021 and 2022 are located in the following regions:


HK$’000 HK$’000 HK$’000

Hong Kong 10,054 8,075 6,972The PRC 451,650 473,801 468,410Malaysia 37,852 125,795 149,496Singapore – 11 –

499,556 607,682 624,878

(d) Incremental costs of obtaining a contract

During the years ended 31 March 2020, 2021 and 2022, as permitted by the relevant practical expedient underHKFRS 15 “Revenue from Contracts with Customers” (“HKFRS15”), the Group recognised the incremental costs ofobtaining a contract as expenses as the amortisation period of the asset that the Group otherwise would haverecognised is expected to be less than one year.

(e) Unsatisfied performance obligations

As at 31 March 2020, 2021 and 2022, all performance obligations not yet satisfied by the Group were fromcontracts with original expected duration of less than one year. Therefore, as permitted by the relevant practicalexpedient under HKFRS 15, the transaction price allocated to these unsatisfied performance obligations was notdisclosed.


– I-38 –


6 OTHER INCOME


HK$’000 HK$’000 HK$’000

Government grants (Note) 9,045 7,386 3,341Sundry income 643 245 233

9,688 7,631 3,574

Note: Government grants recognised were primarily related to the subsidies for capital investment and stablegrowth in foreign trade of the Group from the PRC government, subsidies from the Hong KongGovernment under the Employment Support Scheme.

There were no unfulfilled conditions and other contingencies attached to the receipts of those grants.

7 OTHER (LOSSES)/GAINS, NET


HK$’000 HK$’000 HK$’000

Foreign exchange differences, net (26,219) 23,558 15,982Gain on deregistration of a subsidiary (Note) – 158 –Losses on disposal of property,

plant and equipment (6) (39) (221)Others 2 (306) 262

(26,223) 23,371 16,023

Note: During the year ended 31 March 2021, Jingyanda R&D (Shenzhen) Co. Ltd, a wholly-owned subsidiaryof the Group, was deregistered and a gain of HK$158,000, including the realisation of exchange reservesof HK$2,335,000, was recognised in the consolidated income statements.

8 EXPENSES BY NATURE

Expenses included in costs of sales, administrative expenses and distribution costs are analysed as follows:


HK$’000 HK$’000 HK$’000

Changes in inventories recognised in cost ofsales (Note 18) 890,155 1,249,157 1,453,509

Entertainment expenses 387 140 256Office expenses 13,178 9,696 10,551Employee benefit expenses (including directors’

emoluments) (Note 9) 281,236 305,470 337,382Depreciation of property, plant and equipment

(Note 15) 22,860 34,192 39,851Depreciation of right-of-use assets (Note 16) 20,619 12,469 17,103Insurance expenses 3,595 3,776 4,112Auditor’s remuneration

– Audit 189 376 386– Non-audit – – –


– I-39 –



HK$’000 HK$’000 HK$’000

[REDACTED] expenses 885 825 14,430Consultancy fee 11,370 8,509 1,915Legal and professional fee 2,420 1,960 3,027Bank charges 1,040 722 1,020Travelling expenses 3,639 2,023 1,990Short term leases expenses (Note 16) 165 143 615COVID-19-related rent concessions (523) – –Provision for/(reversal of) obsolete inventories

(Note 18) 3,049 (396) (10,651)Logistics expenses 19,846 17,823 22,068Service fees for contract labour 6,713 10,288 26,532Other tax and surcharges 4,504 5,669 8,880Other expenses 43,772 39,414 44,676

1,329,099 1,702,256 1,977,652


HK$’000 HK$’000 HK$’000

Representing:Cost of sales 1,132,464 1,507,434 1,754,213Administrative expenses 190,852 189,133 217,609Distribution costs 5,783 5,689 5,830

1,329,099 1,702,256 1,977,652

9 EMPLOYEE BENEFIT EXPENSES

Employee benefit expenses (including directors’ emoluments) are as follows:


HK$’000 HK$’000 HK$’000

Wages, salaries, bonuses and allowances 227,619 263,697 271,141Pension costs – defined contribution plans (Note) 28,969 20,628 42,889Other employee benefits 17,553 21,145 23,352Severance payment expense (Note 26) 7,095 – –

281,236 305,470 337,382

Note: The decrease in pension costs for the year ended 31 March 2021 was mainly due to the exemption ofsocial insurance for certain periods during the year as a result of the COVID-19.

During the years ended 31 March 2020, 2021 and 2022, no forfeited contributions were utillised by theGroup to reduce its contributions for the corresponding year. As at 31 March 2020, 2021 and 2022, noforfeited contributions were available for utilisation by the Group to reduce future contributions.


– I-40 –


10 FINANCE COSTS, NET


HK$’000 HK$’000 HK$’000

Finance incomeInterest income from bank deposits 1,007 509 2,576

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Finance costsInterest expense on lease liabilities (Note 16) (2,136) (1,544) (1,109)Interest expense on bank borrowings (4,781) (6,367) (6,667)Interest expense on asset factoring (498) (2,972) (2,081)

Less: amount capitalised on qualifying assets 3,216 – –

(4,199) (10,883) (9,857)- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Finance costs, net (3,192) (10,374) (7,281)

During the year ended 31 March 2020, interest expenses on borrowings were capitalised at the weightedaverage rate of its general borrowings of approximately 2.95%.

11 INCOME TAX EXPENSE

Hong Kong profits tax has been provided at the rate of 16.5% on the estimated assessable profit for the yearsended 31 March 2020, 2021 and 2022.

During the years ended 31 March 2020, 2021 and 2022, the Group’s subsidiaries in the PRC and Malaysia aresubject to corporate income tax (“CIT”) at a standard rate of 25% and 24%, respectively.

No profits tax has been calculated for the Group’s entities that are incorporated in the BVI or the CaymanIslands as they are tax exempted in their jurisdictions.

The amount of taxation charged to the consolidated income statements represented:


HK$’000 HK$’000 HK$’000

Current income tax– Hong Kong profits tax 9,043 8,124 3,984– PRC CIT 211 5,230 20,566– Malaysia CIT 131 1 –– Withholding tax on dividends (Note) – 4,849 –

Deferred income tax expenses (Note 25) 4,503 12,251 4,278

13,888 30,455 28,828

Note: Pursuant to the Enterprise Income Tax law in the PRC, a 10% withholding tax is levied on dividendsdeclared by PRC companies to their foreign investors. A lower withholding tax rate of 5% is applicableif the direct foreign investors with at least 25% equity interest in the PRC company are incorporated inHong Kong and meet the relevant requirements pursuant to the tax arrangement between mainland Chinaand Hong Kong S.A.R. During the year ended 31 March 2021, withholding tax of HK$4,849,000represent withholding tax rate of 5% on dividends declared by a PRC subsidiary to a Hong Kongsubsidiary of the Group.


– I-41 –


The taxation on the Group’s profit before income tax differs from the theoretical amount that would arise usingthe applicable tax rate as follows:


HK$’000 HK$’000 HK$’000

Profit before income tax 46,474 120,094 123,608

Tax calculated at tax rates applicable to profitsof the respective subsidiaries 7,440 25,580 30,834

Income not subject to tax (131) (1,096) (1,763)Expenses not deductible for taxation purposes 1,583 356 6,598Utilisation of previously unrecognised tax losses – – (5,675)Recognition of previously unrecognised tax

losses – – (576)Tax losses not recognised 5,356 951 –Withholding tax on dividends – 4,849 –Tax concession (Note) (360) (185) (590)

13,888 30,455 28,828

Note: For the years ended 31 March 2020, 2021 and 2022, tax concession mainly relates to tax reduction underTwo-Tiered Profits Tax Rates Regime capped at HK$165,000 for one of the Hong Kong incorporatedentities of the Group and tax reduction under Small and Low-Profit Enterprise Tax Regime for one ofthe PRC incorporated entities of the Group.

Deferred income tax assets are recognised for tax loss carry-forward to the extent that the realisation of therelated tax benefit through future taxable profits is probable. As at 31 March 2020, 2021 and 2022, the Group didnot recognise deferred income tax assets arising from tax losses that can be carried forward against future taxableincome, as follows:

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

PRC subsidiaries– Tax losses 1,096 1,233 –– Deferred tax assets not recognised 274 308 –Malaysia subsidiary– Tax losses 21,215 26,137 –– Deferred tax assets not recognised 5,092 6,273 –

As at 31 March 2020, 2021 and 2022, the expiry dates of unrecognised tax losses are as follows:

Unrecognised tax losses As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

Expire in 2025 1,096 1,190 –Expire in 2026 – – –Expire in 2027 – 43 –Expire in 2028 21,215 22,179 –Expire in 2029 – 3,958 –

22,311 27,370 –


– I-42 –


Deferred income tax assets are recognised for unutilised capital allowance to the extent that the realisation ofthe related tax benefit through future taxable profits is probable. As at 31 March 2020, 2021 and 2022, in additionto the unrecognised tax losses, the Group did not recognise deferred income tax assets of nil, HK$1,365,000 and nilfor capital allowance of nil, HK$5,688,000 and nil arising from a Malaysia subsidiary that can be carried forwardagainst future taxable income, respectively. The unutilised capital allowance has no expiry date.

As at 31 March 2020, 2021 and 2022, deferred income tax liabilities of approximately HK$3,005,000,HK$563,000 and HK$3,470,000 have not been provided for in the consolidated statements of financial position inrespect of temporary differences attributable to accumulated profits of certain subsidiaries of the Group, as the Groupcontrols the dividend policy of the subsidiaries and it is probable that these temporary differences will not be reversedin the foreseeable future.

12 BENEFITS AND INTERESTS OF DIRECTORS

(a) Directors’ emoluments

The remunerations of each Director of the Company paid/payable by the Group for the years ended 31 March2020, 2021 and 2022 are set out below:

Fees

Salaries,other

allowancesand benefits

in kindDiscretionary

bonuses

Definedcontribution

pension costs TotalHK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Year ended 31 March 2020Executive DirectorsHo Woon Wah Albert

(Note (i)) – 3,069 3,619 29 6,717Gordon Christopher Pope

(Note (ii)) – 4,135 796 29 4,960Lee Lap Fai (Note (iii)) – 2,058 1,607 29 3,694Wong Sui Ling Karen

(Note (iii)) – 1,292 619 29 1,940Cheung Wing Hung

(Note (iii)) – 1,474 1,019 29 2,522

– 12,028 7,660 145 19,833


(Note (i)) – 3,136 3,567 29 6,732Gordon Christopher Pope

(Note (ii)) – 4,097 731 29 4,857Lee Lap Fai (Note (iii)) – 2,095 1,584 29 3,708Wong Sui Ling Karen

(Note (iii)) – 1,309 600 29 1,938Cheung Wing Hung

(Note (iii)) – 1,494 1,016 29 2,539

– 12,131 7,498 145 19,774


– I-43 –


Fees

Salaries,other

allowancesand benefits

in kindDiscretionary

bonuses

Definedcontribution

pension costs TotalHK$’000 HK$’000 HK$’000 HK$’000 HK$’000


(Note (i)) – 3,283 – 29 3,312Gordon Christopher Pope

(Note (ii)) – 4,083 949 29 5,061Lee Lap Fai (Note (iii)) – 2,185 – 29 2,214Wong Sui Ling Karen

(Note (iii)) – 1,361 1,220 29 2,610Cheung Wing Hung

(Note (iii)) – 1,552 1,460 29 3,041

– 12,464 3,629 145 16,238

Notes:

(i) On 16 August 2021, Mr. Ho Woon Wah Albert was appointed as the Company’s Chairman, ChiefExecutive Officer and executive director.

(ii) On 16 August 2021, Mr. Pope Gordon Christopher was appointed as the Company’s deputy CEO andexecutive director.

(iii) On 16 August 2021, Mr. Lee Lap Fai, Ms. Wong Sui Ling Karen and Mr. Cheung Wing Hung wereappointed as the Company’s executive directors.

On [●], Dr. Pang Kwok Hung, Mr. Chu Ho Hwa Howard and Mr. Cheung Shi Yeung were appointed as theCompany’s independent non-executive directors. During the years ended 31 March 2020, 2021 and 2022, theindependent non-executive directors have not yet been appointed and did not receive any directors’ remuneration inthe capacity of independent non-executive directors. There was no arrangement under which a Director waived oragreed to waive any emoluments during the Track Record Period.

(b) Directors’ retirement benefits and termination benefits

The Directors did not receive any other retirement benefits or termination benefits during the years ended 31March 2020, 2021 and 2022.

(c) Consideration provided to third parties for making available Directors’ services

During the years ended 31 March 2020, 2021 and 2022, no consideration was provided to or receivable by thirdparties for making available Directors’ services.

(d) Information about loans, quasi-loans and other dealings in favour of Directors, controlled bodiescorporate by and connected entities with such directors

As at 31 March 2020, 2021 and 2022, there were no loans, quasi-loans and other dealing arrangements infavour of Directors, their controlled bodies corporate and connected entities.

(e) Director’s material interests in transactions, arrangements or contracts

Save as disclosed in Note 28, no significant transactions, arrangements and contracts in relation to the Group’sbusiness to which the Company was a party and in which a Director of the Company had a material interest, whetherdirectly or indirectly, subsisted at the end of each of the years ended 31 March 2020, 2021 and 2022 or at any timeduring the years ended 31 March 2020, 2021 and 2022.


– I-44 –


(f) Five highest paid individuals

The five individuals whose emoluments were the highest in the Group include 4 Directors for all the yearspresented, whose emoluments are reflected in the analysis presented above. The emoluments payable to the remaining1 individual during the years ended 31 March 2020, 2021 and 2022, are as follows:


HK$’000 HK$’000 HK$’000

Wages, salaries and allowances 1,368 1,387 1,441Discretionary bonuses 1,064 1,036 1,520Pension costs – defined contribution plans 29 29 29

2,461 2,452 2,990

13 EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the profit attributable to owners of the Company by theweighted average number of ordinary shares in issue during the years ended 31 March 2020, 2021 and 2022.

In determining the weighted average number of shares in issue during the years ended 31 March 2020, 2021and 2022, 9,091 shares (Note 22(a)) were deemed to have been issued on 1 April 2019 as if the Company has beenincorporated by then.


Profit attributed to owners of the Company(HK$’000) 32,586 89,639 94,780

Weighted average number of ordinary sharesin issue 9,091 9,091 9,631

Basic earnings per share (HK$’000) 3.58 9.86 9.84

During the years ended 31 March 2020 and 2021, the Company has one category of dilutive potential ordinaryshare: Bonus Shares (Note 22(d)), which was considered as contingently issuable shares and the condition was notsatisfied as at 31 March 2020 and 2021. During the year ended 31 March 2022, the Bonus Shares were converted intothe Company’s ordinary shares in the preparation of the [REDACTED] of the Company. Hence, diluted earnings pershare for the years ended 31 March 2020, 2021 and 2022 is the same as the basic earnings per share.

The earnings per share presented above have not been taken into account the proposed capitalisation issuepursuant to the resolutions by the shareholders passed on [●] (Note 31(i)) as the proposed capitalisation issue has notbecome effective as at the date of this report.

14 Financial instruments by categories

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000Financial assetsFinancial asset at fair value through other

comprehensive income 5,188 4,841 –

Financial assets at amortised cost:Trade receivables 183,519 275,915 355,006Deposits and other receivables 20,206 21,686 31,954Amount due from a related company 783 1,045 –Amount due from the ultimate holding company 30 30 –Pledged deposits 9,316 70,735 32,071Cash and cash equivalents 198,640 206,285 204,839

412,494 575,696 623,870

417,682 580,537 623,870


– I-45 –


As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

Financial liabilitiesFinancial liabilities at amortised cost:Trade payables 221,689 310,862 401,606Other payables and accruals 80,627 134,524 151,364Bank borrowings 149,905 192,859 359,659Lease liabilities 35,025 28,380 18,505

487,246 666,625 931,134

15 Property, plant and equipment

BuildingsConstruction

in progressPlant and

machineryLeasehold

improvementsFurniture

and fixturesMotor

vehicles TotalHK$000 HK$000 HK$000 HK$000 HK$000 HK$000 HK$000

As at 1 April 2019Cost – 233,213 163,694 34,724 18,061 1,784 451,476Accumulated depreciation – – (140,899) (26,670) (13,948) (1,251) (182,768)

Net book amount – 233,213 22,795 8,054 4,113 533 268,708

Year ended 31 March 2020Opening net book amount – 233,213 22,795 8,054 4,113 533 268,708Additions – 127,426 36,178 9,167 4,064 92 176,927Transfer 360,639 (360,639) – – – – –Depreciation (Note 8) (5,523) – (12,344) (3,314) (1,531) (148) (22,860)Disposals – – – (8) (37) – (45)Exchange difference (19,425) – (2,721) (827) (394) (4) (23,371)

Closing net book amount 335,691 – 43,908 13,072 6,215 473 399,359

As at 31 March 2020Cost 341,029 – 187,742 21,424 13,117 1,871 565,183Accumulated depreciation (5,338) – (143,834) (8,352) (6,902) (1,398) (165,824)

Net book amount 335,691 – 43,908 13,072 6,215 473 399,359

Year ended 31 March 2021Opening net book amount 335,691 – 43,908 13,072 6,215 473 399,359Additions 11,758 – 18,185 8,158 4,208 1,298 43,607Depreciation (Note 8) (13,720) – (14,695) (3,310) (2,085) (382) (34,192)Disposals – – (2) – (37) – (39)Exchange difference 28,458 – 2,685 788 405 8 32,344

Closing net book amount 362,187 – 50,081 18,708 8,706 1,397 441,079


Net book amount 362,187 – 50,081 18,708 8,706 1,397 441,079


– I-46 –


BuildingsConstruction

in progressPlant and

machineryLeasehold

improvementsFurniture

and fixturesMotor

vehicles TotalHK$000 HK$000 HK$000 HK$000 HK$000 HK$000 HK$000

Year ended 31 March 2022Opening net book amount 362,187 – 50,081 18,708 8,706 1,397 441,079Additions 12,209 – 5,490 36,238 2,119 10 56,066Depreciation (Note 8) (16,667) – (15,686) (4,133) (2,941) (424) (39,851)Disposals – – (67) (26) (128) – (221)Exchange difference 14,270 – 785 (60) 70 2 15,067

Closing net book amount 371,999 – 40,603 50,727 7,826 985 472,140


Net book amount 371,999 – 40,603 50,727 7,826 985 472,140

Depreciation expenses of approximately HK$4,003,000, HK$4,182,000 and HK$6,462,000 have been chargedto administrative expenses and approximately HK$18,857,000, HK$30,010,000 and HK$33,389,000 have beencharged to cost of sales for the years ended 31 March 2020, 2021 and 2022, respectively.

As at 31 March 2020, 2021 and 2022, certain of the Group’s borrowings were secured by the buildings withan aggregate net book value of approximately HK$335,691,000, HK$362,187,000 and HK$371,999,000, respectively(Note 24).

16 LEASES

This note provides information for leases where the Group is a lessee.

(a) Amounts recognised in the consolidated statements of financial position

The consolidated statements of financial position show the following amounts relating to leases:

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

Right-of-use assets– Land use rights 69,327 73,642 118,085– Properties 30,162 23,951 14,936

99,489 97,593 133,021

Lease liabilities– Current 9,991 12,117 12,131– Non-current 25,034 16,263 6,374

35,025 28,380 18,505

Additions to the right-of-use assets during the years ended 31 March 2020, 2021 and 2022 were HK$2,098,000,HK$3,286,000 and HK$49,364,000, respectively. These amounts include reinstatement cost of HK$531,000 and thatwas capitalised as addition to right-of-use assets during the year ended 31 March 2021 (Note 26(b)).

As at 31 March 2020, 2021 and 2022, certain of the Group’s borrowings were secured by the land use rightof approximately HK$69,327,000, HK$73,642,000 and HK$118,085,000, respectively (Note 24).


– I-47 –


(b) Amounts recognised in the consolidated income statements

The consolidated income statements show the following amounts relating to leases:


HK$’000 HK$’000 HK$’000

Depreciation charge of right-of-use assets(Note 8)

– Land use rights 1,505 1,518 5,543– Properties 19,114 10,951 11,560

20,619 12,469 17,103

Interest expenses(included in finance costs) (Note 10) 2,136 1,544 1,109

Expenses relating to short-term leases (includedin administrative expenses) (Note 8) 165 143 615

(c) The consolidated statement of cash flows shows the following amounts relating to leases:


HK$’000 HK$’000 HK$’000

Cash flows from operating activities:– Payments for short-term leases 165 143 615

Cash flows used in financing activities:– Principal payments of lease liabilities 19,278 11,076 12,521– Interest expenses 2,136 1,544 1,109

21,414 12,620 13,630

21,579 12,763 14,245

(d) The Group’s leasing activities and how these are accounted for

The Group leases office premises, staff quarters and factories typically for fixed periods of 2 to 10 years butmay have extension options as described in (e) below.

The Group had land use rights in the PRC with lease period of 50 years.

During the year ended 31 March 2022, the Group also obtained land use rights in Malaysia with lease periodof 12 years of approximately MYR25,260,000 (equivalent to approximately HK$47,267,000).

Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions.The lease agreements do not impose any covenants other than the security interests in the leased assets that are heldby the lessor. Leased assets may not be used as security for borrowing purposes.

(e) Extension options

Extension options are included in certain offices leases across the Group. These are used to maximiseoperational flexibility in terms of managing the assets used in the Group’s operations. The majority of extension andtermination options held are exercisable only by the Group and not by the respective lessor.


– I-48 –


17 FINANCIAL ASSET AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

(a) Classification of financial asset at FVOCI

Financial asset at FVOCI comprise equity securities which is not held for trading, and which the Group hasirrevocably elected at initial recognition to recognise in this category. This is strategic investment and the Groupconsiders this classification to be more relevant.

(b) Equity investment at FVOCI

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

Non-current assetUnlisted equity instrument 5,188 4,841 –

The unlisted equity instrument at FVOCI represents the Group’s 10.65% and 10.62% equity interests in aprivate company incorporated in the United Kingdom as at 31 March 2020 and 2021, respectively.

The carrying values of financial asset at FVOCI approximated their fair values as at 31 March 2020 and 2021and were denominated in GBP. For details of valuation basis, please refer to Note 3.3.

(c) Movements in financial asset at FVOCI during the years ended are as follows:


HK$’000 HK$’000 HK$’000

Opening balance 4,835 5,188 4,841Fair value gains/(losses) recognised in other

comprehensive income 353 (347) (382)Disposal (Note) – – (4,459)

Closing balance 5,188 4,841 –

Note: During the year ended 31 March 2022, the Group has disposed its financial asset at FVOCI at aconsideration (net of transaction costs) of approximately HK$4,459,000 to its immediate holdingcompany (Note 28(a)) and as a result of the disposal, approximately HK$1,847,000 was reclassifiedfrom financial asset at FVOCI reserve to retained earnings.

18 INVENTORIES

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

Raw materials 241,532 270,562 486,641Work-in-progress 63,481 87,735 89,444Finished goods 9,837 7,019 10,725

314,850 365,316 586,810Less: impairment of inventories (14,237) (13,841) (3,190)

300,613 351,475 583,620


– I-49 –


Inventories of approximately HK$890,155,000, HK$1,249,157,000, HK$1,453,509,000 were recognised asexpenses in cost of sales during the years ended 31 March 2020, 2021 and 2022, respectively.

Provision for/(reversal of) obsolete inventories to net realisable value amounted to approximatelyHK$3,049,000, HK$(396,000), HK$(10,651,000) were recognised in cost of sales during the years ended 31 March2020, 2021 and 2022, respectively. During the year ended 31 March 2022, reversal of obsolete inventories ofapproximately HK$10,651,000 mainly represented the utilisation of previously written off raw materials as a resultof sales to certain customers.

19 TRADE RECEIVABLES

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

Trade receivables, gross 183,772 276,116 355,038Loss allowances (Note 3.1(d)) (253) (201) (32)

183,519 275,915 355,006

The Group generally grants credit period that ranges from 30 to 90 days to its customers.

As at 31 March 2020, 2021 and 2022, the ageing analysis of the gross trade receivables based on invoice datewere as follows:

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

0 – 30 days 129,797 169,809 264,31331 – 60 days 48,641 75,176 63,33861 – 90 days 5,249 30,964 26,554Over 90 days 85 167 833

183,772 276,116 355,038

The carrying amounts of the trade receivables include receivables which were subject to a factoringarrangement. Under this arrangement, the Group had transferred the relevant receivables to the banks in exchangefor cash and was prevented from selling or pledging the receivables. However, the Group had retained late paymentand credit risk and therefore continued to recognise the transferred assets in their entirety in its consolidatedstatements of financial position. The amount repayable under the factoring agreement was presented as securedborrowings. The Group considered that the held to collect business model remains appropriate for these receivablesand hence continued measuring them at amortised cost. The Group subsequently derecognised the transferred assetsand the associated secured borrowings upon settlement.

As at 31 March 2020, the transferred receivables and the associated amount repayable which presented assecured borrowings (Note 24) was HK$3,768,000 and HK$3,203,000, respectively.

Management considered that in substance the banks collected the amounts receivable on the Group’s behalfand retained the cash in settlement of the separate financing transaction. The Group therefore presented the cashinflows received from the banks as financing cash inflows and the subsequent payments by the debtor as bothoperating cash inflows and financing cash outflows.


– I-50 –


The Group applied the simplified approach to provide for expected credit losses prescribed by HKFRS 9,which permits the use of the lifetime expected loss provision for trade receivables. To measure the expected creditlosses, trade receivables have been grouped based on shared credit risk characteristics and the days past due. Thisresulted in a decrease of the loss allowance of HK$239,000, HK$52,000, HK$169,000 for trade receivables for theyears ended 31 March 2020, 2021 and 2022, respectively.

Information about the impairment of trade receivables and the Group’s exposure to credit risk can be foundin Note 3.1.

The carrying values of trade receivables approximated their fair values as at 31 March 2020, 2021 and 2022due to short maturities and were denominated in US$.

The maximum exposure to credit risk was the carrying values of trade receivables and the Group did not holdany collateral as security during the years ended 31 March 2020, 2021 and 2022.

20 DEPOSITS, PREPAYMENTS AND OTHER RECEIVABLES

As at 31 MarchThe Group 2020 2021 2022

HK$’000 HK$’000 HK$’000

Non-currentPrepayments for property, plant and equipment

and land use right 708 69,010 19,717

708 69,010 19,717- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

CurrentDeposits and other receivables 20,206 21,686 31,954Deferred [REDACTED] expenses 345 620 4,904Value-added tax recoverable 39,492 4,118 4,448Prepayments for raw materials 832 20,327 2,050Other prepayments 9,854 9,906 8,540

70,729 56,657 51,896- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

71,437 125,667 71,613

The carrying values of deposits, prepayments and other receivables of the Group approximated their fair valuesas at 31 March 2020, 2021 and 2022. The carrying values of the financial assets (including deposits and otherreceivables) of the Group as at 31 March 2020, 2021 and 2022 were denominated in the following currencies:

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

HK$ 16,303 18,179 27,300RMB 1,854 1,491 1,319MYR 2,049 2,016 3,277Singapore Dollar (“SGD”) – – 58

20,206 21,686 31,954


– I-51 –


As at 31 MarchThe Company 2020 2021 2022

HK$’000 HK$’000 HK$’000

Deferred [REDACTED] expenses – – 4,904

The carrying value of prepayments of the Company approximated its fair value as at 31 March 2022.

21 PLEDGED DEPOSITS AND CASH AND CASH EQUIVALENTS

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

Pledged deposits (Note (i)) 9,316 70,735 32,071Cash at bank 194,793 203,003 204,400Cash on hand 3,847 3,282 439

Pledged deposits and cash and cash equivalents 207,956 277,020 236,910Less:Pledged deposits (Note (i)) (9,316) (70,735) (32,071)

Cash and cash equivalents 198,640 206,285 204,839

Notes:

(i) As at 31 March 2020, 2021 and 2022, pledged deposits with carrying values of approximatelyHK$9,316,000, HK$70,735,000 and HK$32,071,000 were pledged to the facilities granted by banks tothe Group respectively, details of which are set out in Note 24. These pledged deposits had originalmaturity dates as follow:

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

Within 1 year 9,316 70,735 9,0701 to 2 years – – 23,001

9,316 70,735 32,071

(ii) As at 31 March 2020, 2021 and 2022, the Group’s pledged deposits and cash and cash equivalentsbalances of approximately HK$42,671,000, HK$114,071,000 and HK$79,179,000, were deposited withbanks in the PRC, where the remittance of funds is subject to foreign exchange control.

Pledged deposits and cash and cash equivalents were denominated in the following currencies:

As at 31 March2020 2021 2021

HK$’000 HK$’000 HK$’000

HK$ 17,694 24,190 22,572RMB 46,053 115,761 80,671US$ 142,216 129,092 124,999MYR 1,914 7,605 8,302Others 79 372 366

207,956 277,020 236,910


– I-52 –


As at 31 MarchThe Company 2020 2021 2022

HK$’000 HK$’000 HK$’000

Cash and cash equivalents – – 9

The cash and cash equivalents were denominated in HK$.

22 SHARE CAPITAL, COMBINED CAPITAL AND RESERVES

(a) Share capital

Number ofordinary shares Share Capital

HK$’000

Authorised:As at 16 August 2021 (date of incorporation of the Company) 38,000,000 380

Issued and fully paid:As at 16 August 2021 – –Issue of share at date of incorporation of the Company

(Note (i)) 1 –Issue of shares pursuant to the Incentive Arrangement

(Note (ii)) 9,999 –

As at 31 March 2022 10,000 –

Notes:

(i) On 16 August 2021, the Company was incorporated in the Cayman Islands with initial authorised sharecapital of HK$380,000 divided into 38,000,000 ordinary shares of par value of HK$0.01 each. Upon itsincorporation, 1 share at par value was allotted and issued, credited as fully paid, to the initial subscriberwhich then transferred the share to In-Tech Holdings Limited, a company 75% and 25% owned bySource Capital Investment Ltd. and Piggy Doggy Company Limited, respectively.

(ii) On 26 August 2021, the Company (i) enlarged its share capital by allotting and issuing 9,090 ordinaryshares to In-Tech Holdings Limited; and (ii) pursuant to the Incentive Arrangement (Note 22(d)),allotted and issued 909 ordinary shares, representing 9.09% of the enlarged share capital of theCompany, to the selected personnel in the management team (the “Selected Personnel”). Included in the909 ordinary shares, 838 ordinary shares were allotted and issued to In-Tech Holdings Limited, whichwere ultimately held by part of the Selected Personnel who are also the shareholders of In-TechHoldings Limited, and 71 ordinary shares were directly allotted and issued to the remaining SelectedPersonnel.

(b) Combined capital

The Reorganisation has not been completed as at 31 March 2021. Combined capital as at 31 March 2020 and2021 represented the combined capital of the companies now comprising the Group after the elimination ofinter-company investments. On 23 September 2021, the balance of combined capital of HK$25,000,000 wasreclassified to other reserve upon the completion of the Reorgansation (Note 1.2).


– I-53 –


(c) Reserves

The reserves movement of the Group is as follows:

Statutoryreserves

(Note (i))Exchange

reserves

Financialasset atFVOCI

reservesOther

reserve TotalHK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Balances as at1 April 2019 8,101 (2,883) (1,471) – 3,747

Fair value gains onfinancial asset at FVOCI – – 353 – 353

Exchange differences ontranslation of foreignoperations – (32,558) – – (32,558)

Appropriation of profit 37 – – – 37

Balances as at31 March 2020 8,138 (35,441) (1,118) – (28,421)

Balances as at1 April 2020 8,138 (35,441) (1,118) – (28,421)

Fair value losses onfinancial asset at FVOCI – – (347) – (347)

Exchange differences ontranslation of foreignoperations – 38,062 – – 38,062

Realisation of exchangereserves uponderegistration of asubsidiary – (2,335) – – (2,335)

Appropriation of profit 972 – – – 972Release of statutory

reserves uponderegistration of asubsidiary (7,322) – – – (7,322)

Balances as at31 March 2021 1,788 286 (1,465) – 609


– I-54 –


Statutoryreserves

(Note (i))Exchange

reserves

Financialasset atFVOCI

reservesOther

reserve TotalHK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Balances as at1 April 2021 1,788 286 (1,465) – 609

Fair value losses onfinancial asset at FVOCI – – (382) – (382)

Exchange differences ontranslation of foreignoperations – 11,767 – – 11,767

Reclassification ofcombined capital toother reserve pursuant tothe Reorganisation(Note 1.2) – – – 25,000 25,000

Appropriation of profit 6,346 – – – 6,346Transfer of finance asset at

FVOCI reserve toretained earnings(Note 17) – – 1,847 – 1,847

Balances as at 31 March2022 8,134 12,053 – 25,000 45,187

Note:

(i) The PRC laws and regulations require companies registered in the PRC to provide for certain statutoryreserves, which are to be appropriated from the profit after income tax (after offsetting accumulatedlosses from prior years) as reported in their respective statutory financial statements, before profitdistributions to equity holders. All statutory reserves are created for specific purposes. A PRC companyis required to appropriate an amount of not less than 10% of statutory profits after income tax tostatutory surplus reserves, prior to distribution of its post-tax profits of the current year. A PRC companymay discontinue the contribution when the aggregate sum of the statutory surplus reserve is more than50% of its registered capital. The statutory surplus reserves shall only be used to offset the accumulatedlosses of the PRC company, to expand the PRC company’s operations, or to increase the capital of thePRC company. In addition, a PRC company may make further contribution to the discretional surplusreserve using its post-tax profits in accordance with resolutions of the board of directors.

The reserve movement of the Company is as follows:

Capital reserve(Note)

HK$’000

Balance as at 16 August 2021 –Contribution from the immediate holding company arising from the

Reorganisation (Note) 20,514

Balance as at 31 March 2022 20,514

Note: Pursuant to Note (1.2(iv)), on 23 September 2021, the Company entered into a share swapagreement with Source Capital Investment Ltd. and Piggy Doggy Company Limited, to acquire 100%equity interests of In-Tech Electronics Holdings Limited. In consideration, the Company agreed toprocure its immediate holding company, In-Tech Holdings Limited, to credit the 7,711 and 2,289nil-paid shares in its share capital held by Source Capital Investment Ltd. and Piggy Doggy CompanyLimited, respectively, as fully-paid. The net asset value of In-Tech Electronics Holdings Limited ofHK$20,514,000 was regarded as the capital contribution from the immediate holding company and wasrecognised as the capital reserve of the Company.


– I-55 –


(d) Share-based payments

Incentive Arrangement

Pursuant to the shareholders’ agreement on 13 January 1998, it was agreed that In-Tech ElectronicsHoldings Limited (“ITEHL”) would allot a maximum of 2,500,000 bonus shares (the “Bonus Shares”),representing 10% of the then outstanding ordinary shares of ITEHL, to Selected Personnel. As permitted underthe transitional provisions in HKFRS 2 “Share-based Payment” (“HKFRS 2”), no share-based payments wererecognised in the consolidated financial statements as the Bonus Shares were granted before 7 November 2002.The Selected Personnel would also be given an annual management bonus (the “Management Bonus”) sincethe Bonus Shares were granted, which was calculated based on 10% of the net profits after tax of ITEHL ofthe particular year, after netting off any accumulated loss from prior years. Upon the successful [REDACTED]of the shares of the Group, the Bonus Shares will be converted into 9.09% of the enlarged share capital of theCompany, free of any consideration, and the Selected Personnel’s entitlement to the Management Bonus willcease. The above arrangement (the “Incentive Arrangement”) was further confirmed by a deed of confirmationexecuted by ITEHL and the Selected Personnel on 26 August 2021.

The Incentive Arrangement is designed to recognise the contribution of the management team of theGroup by granting shares to them as incentive or reward, to attract, retain and motivate them to makecontributions to the Group and strive for future development and expansion of the Group.

Except for the Bonus Shares, no other shares were granted, exercised, forfeited and expired and noshare-based payments expenses were recognised during the years ended 31 March 2020, 2021 and 2022.

2,500,000 Bonus Shares were not converted during the years ended 31 March 2020 and 2021. All BonusShares have no expiry dates.

During the year ended 31 March 2022, 2,500,000 Bonus Shares were fully converted into 909 ordinaryshares of the Company.

23 TRADE AND OTHER PAYABLES AND ACCRUALS

As at 31 MarchThe Group 2020 2021 2022

HK$’000 HK$’000 HK$’000

Non-currentDeferred government grants 1,568 – –Payables for acquisition of property, plant and

equipment – 3,835 3,989

1,568 3,835 3,989- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

CurrentTrade payables (Note (a)) 221,689 310,862 401,606

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Accrued staff costs 57,073 66,533 46,841Accrued [REDACTED] expenses 300 1,100 1,728Contract liabilities (Note (b)) 116,447 129,595 141,485Deferred government grants 1,270 – –Deposits from customers 31,278 94,149 101,040Payables for acquisition of property, plant and

equipment 20,717 11,218 16,170Other accrued operating expenses 25,343 22,131 22,752Other payables 2,989 2,091 5,685

Other payables and accruals 255,417 326,817 335,701- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

478,674 641,514 741,296


– I-56 –


The carrying values of trade and other payables and accruals of the Group, approximated their fair values asat 31 March 2020, 2021 and 2022. The trade and other payables and accruals (excluding non-financial liabilities) ofthe Group were denominated in the following currencies:

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

EUR 1,718 1,100 752HK$ 49,285 61,290 58,958JPY 5,129 6,417 6,836RMB 37,819 35,606 56,931US$ 204,553 336,334 419,274Others 3,812 4,639 10,219

302,316 445,386 552,970

(a) Trade payables

Trade payables are unsecured and the credit terms of trade payables granted by suppliers are mostly 30 to 90days from invoice date. The ageing analysis of trade payables based on invoice date as at 31 March 2020, 2021 and2022 were as follows:

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

0 – 30 days 92,554 129,787 139,05531 – 60 days 67,482 75,813 122,77661 – 90 days 32,918 62,830 76,628Over 90 days 28,735 42,432 63,147

221,689 310,862 401,606

(b) Contract liabilities

Contract liabilities for the contracts with customers increased during the years ended 31 March 2021 and 2022due to the negotiation of larger prepayments on overall contract activities.

Revenue recognised during the years ended 31 March 2020, 2021 and 2022 that was included in the contractliabilities balance at the beginning of the year amounted to approximately HK$42,104,000, HK$24,434,000,HK$48,524,000 respectively.

The Company 2020 2021 2022HK$’000 HK$’000 HK$’000

Accrued [REDACTED] expenses – – 1,728Other accrued operating expenses – – 767

– – 2,495

The carrying value of other payables and accruals of the Company approximated its fair value. Other payablesand accruals of the Company were denominated in HK$ as at 31 March 2022.


– I-57 –


24 BANK BORROWINGS

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

CurrentTerm loans with repayment on demand clauses 123,098 161,689 275,643Trade loans with repayment on demand clauses 26,807 30,664 84,016Bank overdrafts – 506 –

Total borrowings 149,905 192,859 359,659

Amount of HK$3,203,000 of the bank borrowings as at 31 March 2020 was related to transferred receivables(Note 19).

The Group had total unused facilities amounting to approximately HK$368,088,000, HK$437,483,000 andHK$374,814,000 as at 31 March 2020, 2021 and 2022, respectively.

As at 31 March 2020, 2021 and 2022, the total bank borrowings were guaranteed/secured by:

(i) Property, plant and equipment (Note 15);

(ii) Right-of-use-assets (Note 16) and

(iii) Pledged deposits (Note 21).

The weighted average effective interest rates as at 31 March 2020, 2021 and 2022 were as follows:

As at 31 March2020 2021 2022

Term loans 5.04% 4.16% 2.22%Trade loans 3.58% 3.73% 1.41%Bank overdrafts N/A 1.47% N/A

The fair value of the bank borrowings approximates their carrying amounts, as their interest rates areconsidered current market rates.

An analysis of the carrying amounts of the Group’s borrowings by currency is as follows:

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

HK$ – 506 –RMB 109,092 86,157 22,785US$ 40,813 106,196 336,874

149,905 192,859 359,659


– I-58 –


25 DEFERRED INCOME TAX

2020 2021 2022HK$’000 HK$’000 HK$’000

Deferred tax assets 21,256 10,653 7,337Deferred tax liabilities (2,138) (2,725) (3,398)

19,118 7,928 3,939

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset currentincome tax assets against current income tax liabilities and when the deferred income tax assets and liabilities relateto income tax levied by the same taxation authority on either the taxable entity or different taxable entities wherethere is an intention to settle the balances on a net basis.

The movements in the net deferred income tax assets and liabilities are as follows:

HK$’000

As at 1 April 2019 24,977Charged to the consolidated income statement (Note 11) (4,503)Exchange difference (1,356)

As at 31 March 2020 and 1 April 2020 19,118Charged to the consolidated income statement (Note 11) (12,251)Exchange difference 1,061

As at 31 March 2021 and 1 April 2021 7,928Charged to the consolidated income statement (Note 11) (4,278)Exchange difference 289

As at 31 March 2022 3,939

(a) Net deferred tax assets

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

The balance comprises temporary differencesattributable to:

Decelerated tax depreciation 7,409 9,959 5,973Tax losses 14,587 – 575Provisions 1,326 2,762 1,267Leases 703 728 537

Total deferred tax assets 24,025 13,449 8,352- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Set-off of deferred tax liabilities pursuant tooffsetting of balances within same taxationjurisdiction (2,769) (2,796) (1,015)

Net deferred tax assets 21,256 10,653 7,337


– I-59 –


Deceleratedtax

depreciation Tax losses Provisions Leases TotalMovement HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

As at 1 April 2019 4,394 – 20,933 688 26,015Credited/(charged) to the

consolidated incomestatement 3,315 15,090 (18,851) 63 (383)

Exchange difference (300) (503) (756) (48) (1,607)

As at 31 March 2020 and1 April 2020 7,409 14,587 1,326 703 24,025

Credited/(charged) to theconsolidated incomestatement 2,017 (15,222) 1,292 (33) (11,946)

Exchange difference 533 635 144 58 1,370

As at 31 March 2021 and1 April 2021 9,959 – 2,762 728 13,449

(Charged)/credited to theconsolidated incomestatement (4,234) 576 (1,557) (216) (5,431)

Exchange difference 248 (1) 62 25 334

As at 31 March 2022 5,973 575 1,267 537 8,352

(b) Net deferred tax liabilities

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

The balance comprises temporary differencesattributable to:

Inventories (2,815) (2,530) (2,342)Accelerated tax depreciation (1,880) (2,801) (2,047)Leases (212) (190) (24)

Total deferred tax liabilities (4,907) (5,521) (4,413)- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Set-off of deferred tax assets pursuant tooffsetting of balances within same taxationjurisdiction 2,769 2,796 1,015

Net deferred tax liabilities (2,138) (2,725) (3,398)


– I-60 –


Inventories

Acceleratedtax

depreciation Leases TotalMovement HK$’000 HK$’000 HK$’000 HK$’000

As at 1 April 2019 (988) (50) – (1,038)Charged to the consolidated income

statement (1,968) (1,929) (223) (4,120)Exchange difference 141 99 11 251

As at 31 March 2020 and1 April 2020 (2,815) (1,880) (212) (4,907)

Credited to the consolidatedincome statement 492 (828) 31 (305)

Exchange difference (207) (93) (9) (309)

As at 31 March 2021 and1 April 2021 (2,530) (2,801) (190) (5,521)

Credited to the consolidated incomestatement 236 752 165 1,153

Exchange difference (48) 2 1 (45)

As at 31 March 2022 (2,342) (2,047) (24) (4,413)

26 PROVISIONS

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

CurrentRestructuring costs (Note (a)) – – –Reinstatement costs (Note (b)) – – 533

– – 533- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Non-currentReinstatement costs (Note (b)) 484 1,042 –

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

484 1,042 533


– I-61 –


(a) Restructuring costs

The restructuring costs provision is related to the severance payment in relation to a restructuring project putin place in 2018 to relocate the manufacturing plant from Shenzhen to Dongguan in the PRC. Jingyanda R&D(Shenzhen) Co. Ltd, a wholly-owned subsidiary, was subsequently deregistered upon completion of the restructuringin November 2020 and a gain of HK$158,000 was recognised in the consolidated income statements under other(losses)/gains, net (Note 7). Movements of this balance during the year ended 31 March 2020 are set out below:

Year ended31 March

2020HK$’000

Beginning of the year 76,891Addition for the year (Note 9) 7,095Settled during the year (81,620)Exchange difference (2,366)

End of the year –

(b) Reinstatement costs

The Group is required to restore the leased properties to their original condition at the end of the respectivelease terms. A provision is recognised based on the estimated expenditure required to remove any leaseholdimprovements. These costs are capitalised as part of the cost of right-of-use assets and are amortised over the shorterof the term of the lease or the useful life of the assets. Movements of this balance during the years ended 31 March2020, 2021 and 2022 are set out below:


HK$’000 HK$’000 HK$’000

Beginning of the year 520 484 1,042Additional provision capitalised in right-of-use

assets – 531 –Utilised during the year – – (504)Exchange difference (36) 27 (5)

End of the year 484 1,042 533


– I-62 –


27 CASH GENERATED FROM/(USED IN) OPERATIONS

(a) Reconciliation of profit before income tax to cash generated from/(used in) operations:


HK$’000 HK$’000 HK$’000

Profit before income tax 46,474 120,094 123,608Adjustments for:

Depreciation of property,plant and equipment 22,860 34,192 39,851

Depreciation of right-of-use assets 20,619 12,469 17,103Finance income (1,007) (509) (2,576)Finance costs 4,199 10,883 9,857Losses on disposals of property, plant and

equipment 6 39 221Gain on deregistration of a subsidiary – (158) –Reversal of impairment loss on financial

assets, net (239) (52) (169)Provision for/(reversal of) obsolete inventories 3,049 (396) (10,651)Net exchange differences 7,261 (6,551) (16,526)

103,222 170,011 160,718

Changes in working capital:Inventories (16,885) (50,465) (221,494)Trade receivables 9,241 (91,550) (76,624)Deposits, prepayments and other receivables (16,586) 14,844 9,484Amount due from a related company (347) (262) 1,045Amount due from the ultimate holding

company – – 30Trade payables (10,449) 90,871 93,460Other payables and accruals 8,590 81,982 3,724Provisions (74,525) – (504)

Cash generated from/(used in) operations 2,261 215,431 (30,161)

(b) In the consolidated statement of cash flows, proceeds from disposal of property, plant and equipment comprise:


HK$’000 HK$’000 HK$’000

Net book amount 45 39 221Losses on disposals of property, plant and

equipment (6) (39) (221)

Proceeds from disposal of property, plant andequipment 39 – –


– I-63 –


(c) Reconciliation of liabilities arising from financing activities:

The analysis of liabilities arising from financing activities and the movements in liabilities arising fromfinancing activities for the years ended 31 March 2020, 2021 and 2022 is as follows:


HK$’000 HK$’000 HK$’000

Bank borrowings (Note 24) 149,905 192,859 359,659Lease liabilities (Note 16) 35,025 28,380 18,505

184,930 221,239 378,164

1 April Cash flows

Foreignexchange

movement

Othernon-cash

movement 31 MarchHK$’000 HK$’000 HK$’000 HK$’000 HK$’000

For the year ended31 March 2020

Bank borrowings 13,961 140,471 (4,527) – 149,905Lease liabilities 53,896 (19,278) (1,691) 2,098 35,025

67,857 121,193 (6,218) 2,098 184,930


Bank borrowings 149,905 34,301 8,653 – 192,859Lease liabilities 35,025 (11,076) 1,676 2,755 28,380

184,930 23,225 10,329 2,755 221,239


Bank borrowings 192,859 162,940 3,860 – 359,659Lease liabilities 28,380 (12,521) 549 2,097 18,505

221,239 150,419 4,409 2,097 378,164

(d) Major non-cash transactions:

During the year ended 31 March 2022, the sales proceeds of approximately HK$4,459,000 from the disposalof the financial asset at FVOCI to the immediate holding company (Note 17) was offset against the dividends paidto its then equity holders of the same amount.

28 RELATED PARTY TRANSACTIONS

Parties are considered to be related if an entity, a person or a close member of that person’s family has control,joint control or significant influence over the other party in making financial and operating decisions.


– I-64 –


The Directors are of the view that the following entity was a related party that had transactions or balanceswith the Group as at and during the years ended 31 March 2020, 2021 and 2022:

Name of the related company Relationship with the Group

Grand Dragon International Enterprise Limited Controlled by Mr. Lee Lap Fai

Source Capital Investment Ltd. Ultimate holding company

In-tech Holdings Limited Immediate holding company

In addition to the transactions and balances disclosed elsewhere in the historical financial information, theGroup entered into the following significant related party transactions:

(a) Transactions with related parties:


HK$’000 HK$’000 HK$’000

Discontinued transactionsTrade in nature:Service fee paid to:Related company– Grand Dragon International Enterprise Limited

(Note (i)) 50 50 –

Trade in nature:Receipts on behalf by:Related company– Grand Dragon International Enterprise Limited

(Note (i)) 400 310 –

Non-trade nature:Sales of financial asset at FVOCI:Immediate holding company– In-Tech Holdings Limited (Note (ii)) – – 4,459

Note (i): These transactions were determined based on the terms mutually agreed between parties involved andwere ceased since 1 April 2021.

Note (ii): The selling price of the disposed financial asset at FVOCI was based on the fair value determinedby an independent valuer.

(b) Key management compensation

Key management includes Executive Directors and the senior management of the Group.

Compensation of the key management personnel of the Group, including Director’s remunerations as disclosedin Note 12 the Historical Financial Information, is as follows:


HK$’000 HK$’000 HK$’000

Wages, salaries and allowances 15,881 16,070 16,586Discretionary bonuses 9,461 9,317 5,649Pension costs – defined contribution plans 372 402 417

25,714 25,789 22,652


– I-65 –


(c) Amount due from a related company and the ultimate holding company

As at 31 March 2020 and 2021, the amount due from a related company and the ultimate holding company ofthe Group were trade in nature, unsecured, interest-free, repayable on demand and due within 30 days. The balancesapproximated their fair values and were denominated in HK$. These balances were settled during the year ended 31March 2022.

(d) Amount due to a subsidiary

As at 31 March 2022, the amount due to a subsidiary of the Company represents the expenses paid by thesubsidiary on behalf of the Company, which was unsecured, interest-free, repayable on demand. The balanceapproximated its fair value and was denominated in HK$.

29 DIVIDENDS

No dividend has been paid or declared by the Company since its incorporation.

Dividends for each of the years ended 31 March 2020, 2021 and 2022 represented dividends declared by asubsidiary of the Group to its then equity holders during each of the years ended 31 March 2020, 2021 and 2022. Therates for dividend and the number of shares ranking for dividends are not presented as such information is notconsidered meaningful for the purpose of this report.

30 CAPITAL COMMITMENTS

As at 31 March2020 2021 2022

HK$’000 HK$’000 HK$’000

Additions to plant, property and equipment 66 24,661 4,423

31 SUBSEQUENT EVENTS

The following significant events took place subsequent to 31 March 2022.

(i) Pursuant to a shareholders’ resolution passed on [●], conditional on the share premium account of theCompany being credited as a result of the [REDACTED], the directors are authorised to and will issuea total of [REDACTED] shares by way of capitalisation of the sum of HK$[REDACTED] standing tothe credit of the share premium account of the Company upon the [REDACTED].

(ii) Pursuant to a shareholder’s resolution passed on [●], the Company conditionally adopted a[REDACTED] share option scheme and a share option scheme which the directors may grant optionsto Eligible Persons (as defined in Appendix V to the Company’s document dated [●] in connection withthe proposed [REDACTED] of the shares of the Company) to subscribe shares of the Company. Nooptions have been granted up to the date of this report.

(iii) On 31 May 2022, dividends of HK$125 million were declared by companies now comprising the Groupto the equity holders of the companies as at 31 March 2021. Such dividends had not been paid up to thedate of this report.

III. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by the Company or any of the

companies now comprising the Group in respect of any period subsequent to 31 March 2022

and up to the date of this report. Save as disclosed in this report in Notes 29 and 31, no dividend

or distribution has been declared or made by the Company or any of the companies now

comprising the Group in respect of any period subsequent to 31 March 2022.


– I-66 –


The information set out in this Appendix does not form part of the Accountant’s Report

from the reporting accountant, PricewaterhouseCoopers, Certified Public Accountants, Hong

Kong, as set out in Appendix I, and is included herein for illustrative purposes only. The

unaudited pro forma financial information should be read in conjunction with the section

headed “Financial Information” of this document and the Accountant’s Report set out in

Appendix I to this document.

A. UNAUDITED PRO FORMA STATEMENT OF ADJUSTED CONSOLIDATED NETTANGIBLE ASSETS

The following is an illustrative unaudited pro forma statement of adjusted consolidated

net tangible assets of the Group which has been prepared in accordance with Rule 4.29 of the

Listing Rules and on the basis of the notes set out below for the purpose of illustrating the

effect of the [REDACTED] on the consolidated net tangible assets of the Group attributable

to owners of the Company as at 31 March 2022 as if the [REDACTED] had taken place on 31

March 2022, assuming the [REDACTED] is not exercised.

This unaudited pro forma statement of adjusted consolidated net tangible assets has been

prepared for illustrative purposes only and because of its hypothetical nature, it may not give

a true picture of the consolidated net tangible assets of the Group had the [REDACTED] been

completed as at 31 March 2022 or at any future dates following the [REDACTED]. It is

prepared based on the consolidated net assets of the Group as of 31 March 2022 as set out in

the Accountant’s Report of the Group, the text of which is set out in Appendix I to this

document, and adjusted as described below. The unaudited pro forma statement of adjusted net

tangible assets does not form part of the Accountant’s Report.

Auditedconsolidated net

tangible assetsof the Group

attributable toowners of the

Company as at31 March 2022

Estimated net[REDACTED]

from the[REDACTED]


consolidated nettangible assetsattributable toowners of the

Company as at31 March 2022



per Share(Note 1)

HK$’000

(Note 2)

HK$’000 HK$’000

(Note 3)

HK$

Based on an [REDACTED] of

HK$[REDACTED] per share [726,620] [REDACTED] [REDACTED] [REDACTED]

Based on an [REDACTED] of

HK$[REDACTED] per share [726,620] [REDACTED] [REDACTED] [REDACTED]

APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION

– II-1 –


Notes:

(1) The audited consolidated net tangible assets of the Group attributable to owners of the Company as at31 March 2022 is extracted from the Accountant’s Report set out in Appendix I to this document, whichis the audited consolidated net assets of the Group attributable to owners of the Company as at 31 March2022 of HK$726,620,000, as the Group did not have any intangible assets as at 31 March 2022.

(2) The estimated net [REDACTED] from the [REDACTED] are based on the indicative [REDACTED]of HK$[REDACTED] and HK$[REDACTED] per Share, being the low and high end of the indicative[REDACTED] range respectively, after deduction of the [REDACTED] fees and other related fees andexpenses borne by the Group (excluding HK$[REDACTED] expenses which have been accounted forin the consolidated income statements up to 31 March 2022), without taking into account of any Shareswhich may be allotted and issued pursuant to the exercise of the options which may be granted underthe [REDACTED] Share Option Scheme and the Share Option Scheme or any Shares which may beallotted and issued or repurchased by the Company pursuant to the general mandate to issue shares orthe general mandate to repurchase shares.

(3) The unaudited pro forma adjusted consolidated net tangible assets per Share is arrived at after theadjustments referred to in the preceding paragraphs and on the basis that [REDACTED] Shares werein issue (assuming that the [REDACTED] has been completed on 31 March 2022), without taking intoaccount of any Shares which may be alloted and issued pursuant to the exercise of the options whichmay be granted under the [REDACTED] Share Option Scheme and the Share Option Scheme or anyShares which may be alloted and issued or repurchased by the Company pursuant to the general mandateto issue shares or the general mandate to repurchase shares.

(4) Save as disclosed above, no adjustment has been made to reflect any trading result or other transactionsof the Group entered into subsequent to 31 March 2022.

(5) The unaudited pro forma adjusted consolidated net tangible assets of the Group does not take intoaccount the dividend of approximately HK$125,000,000 declared by the Group on 31 May 2022. Theunaudited pro forma adjusted consolidated net tangible assets per Share would have beenHK$[REDACTED] and HK$[REDACTED] Share based on the [REDACTED] of HK$[REDACTED]and HK$[REDACTED], respectively, after taking into account the declaration of dividend ofHK$125,000,000.


– II-2 –


[REDACTED]


– II-3 –


[REDACTED]


– II-4 –


[REDACTED]


– II-5 –


The following is the text of a letter and valuation report prepared for the purpose ofincorporation in this Document received from Cushman & Wakefield Limited, an independentproperty valuer, in connection with its opinion of market value of the Property owner-occupiedby the Group in the PRC as at 30 April 2022.

27/F One Island EastTaikoo Place

18 Westlands RoadQuarry BayHong Kong

[●] 2022

In-Tech Holdings (Cayman) Limited精達控股有限公司13/F Wing Tai Centre12 Hing Yip StreetKwun TongKowloonHong Kong

Dear Sirs,

Re: No. 41, Jingang Middle Road, Shatian Town, Dongguan City, Guangdong Province,the PRC (中華人民共和國廣東省東莞市沙田鎮進港中路41號) (the “Property”)

Instructions, Purpose &Date of Valuation

In accordance with your instructions for us to value the Propertyheld by In-Tech Holdings (Cayman) Limited (the “Company”)or its subsidiary (together the “Group”) in the People’s Republicof China (the “PRC”), we confirm that we have carried outinspections, made relevant enquiries and obtained such furtherinformation as we consider necessary for the purpose ofproviding you with our opinion of the market values of theproperty interests in existing state as at 30 April 2022 (the“Valuation Date”).

Definition of MarketValue

Our valuation of the Property represents its market value whichin accordance with The HKIS Valuation Standards 2020published by the Hong Kong Institute of Surveyors is defined as“the estimated amount for which an asset or liability shouldexchange on the valuation date between a willing buyer and awilling seller in an arm’s length transaction, after propermarketing and where the parties had each acted knowledgeably,prudently and without compulsion”.

Our valuation of the Property is on an entirety interest basis.

APPENDIX III PROPERTY VALUATION REPORT

– III-1 –


Valuation Basis ofAssumptions

Our valuation of the Property excludes an estimated priceinflated or deflated by special terms or circumstances such asatypical financing, sale and leaseback arrangements, specialconsiderations or concessions granted by anyone associatedwith the sale, or any element of special value available only toa specific owner or purchaser.

In the course of our valuation of the Property situated in thePRC, with reference to the legal opinion (the “PRC LegalOpinion”) of the Company’s legal advisers as to PRC law,Commerce & Finance Law Offices (通商律師事務所) (the “PRCLegal Advisers”), we have prepared our valuation on the basisthat transferable land use rights in respect of the Property for itsspecific term at nominal annual land use fees have been grantedand that any premium payable has already been fully paid. Wehave relied on the information and advice given by the Companyand the PRC Legal Opinion, dated [●], regarding the title to theProperty and the interest in the Property. In valuing theProperty, we have prepared our valuation on the basis that theowner has enforceable title to the Property and have free anduninterrupted rights to use, occupy or assign the Properties forthe whole of the unexpired term as granted.

No allowance has been made in our valuation for any charges,mortgages or amounts owing on the Property nor for anyexpenses or taxation which may be incurred in effecting a sale.Unless otherwise stated, it is assumed that the Property is freefrom encumbrances, restrictions and outgoings of an onerousnature which could affect its value.

Method of Valuation In valuing the Property which is held for owner-occupation bythe Group in the PRC, in the absence of relevant market data toarrive at the market value of the Property by means ofmarket-based evidence, we have valued the Property byDepreciated Replacement Cost Approach which requires avaluation of the market value of the land in its existing use andan estimate of the new replacement cost of the buildings andstructures, from which deductions are made to allow for the age,condition and functional obsolescence. The reported marketvalues by Depreciated Replacement Cost Approach only applyto the whole of the Property as a unique interest, and nopiecemeal transaction of the Property are assumed.

In valuing the Property, we have complied with the requirementsset out in Chapter 5 and Practice Note 12 of the RulesGoverning the Listing of Securities on The Stock Exchange ofHong Kong Limited (the “Listing Rules”) and HKIS ValuationStandards 2020.


– III-2 –


Source of Information In the course of our valuation, we have relied to a considerableextent on the information given by the Group in respect of theProperty in the PRC and have accepted advice given to us onsuch matters as planning approvals or statutory notices,easements, tenure, identification of property, completion date ofbuildings, particulars of occupancy, construction costs, site andfloor areas and all other relevant matters.

Dimensions, measurements and areas included in the valuationreport are based on the copies of documents or other informationprovided to us by the Group and are therefore onlyapproximations. No on-site measurement has been carried out.We have had no reason to doubt the truth and accuracy of theinformation provided to us by the Group which is material to thevaluations. We were also advised by the Group that no materialfacts have been omitted from the information provided.

We would point out that the copies of documents provided to usare mainly compiled in Chinese characters and thetransliteration into English represents our understanding of thecontents. We would therefore advise the Company to makereference to the original Chinese edition of the documents andconsult your legal adviser regarding the legality andinterpretation of these documents.

In respect of the Property situated in the PRC, the status of titlesand grant of major certificates, approvals and licences, inaccordance with the information provided by the Group are setout in the notes in the valuation report.

Title Investigation We have been provided by the Group with copies or extracts ofdocuments. However, we have not searched the originaldocuments to verify ownership or to ascertain any amendmentsto any documents. We have not been able to cause title searchesfor the Property in the PRC but we have relied on the advicegiven by the PRC Legal Advisers and the Group. All documentshave been used for reference only and all dimensions,measurements and areas are approximate.


– III-3 –


Site Inspection Our Shenzhen Office valuer, Ms. Sabrina Zhao (1.5 year

property valuation experience, China Real Estate Appraiser)

have inspected the exterior of the Property in September 2021.

However, no structural survey has been made, but in the course

of our inspection, we did not note any serious defects. We are

not, however, able to report whether the Property is free of rot,

infestation or any other structural defects. No tests were carried

out to any of the services. Unless otherwise stated, we have not

been able to carry out detailed on-site measurements to verify

the site and floor areas of the Property and we have assumed that

the areas shown on the documents handed to us are correct.

Currency Unless otherwise stated, all monetary sums stated in our

valuations are in Renminbi (“RMB”), the official currency of

the PRC.

Other Disclosure The Property is used for non-property activities as defined under

Rule 5.01(2) of the Listing Rules. The carrying amount of the

Property is or is above 15% of the total assets of the Group and

is included in the Valuation Report under Rule 5.01B (2) (a) of

the Listing Rules.

We hereby confirm that Cushman & Wakefield Limited and the

valuers conducting the valuations have no pecuniary or other

interests that could conflict with the proper valuation of the

Property or could reasonably be regarded as being capable of

affecting our ability to give an unbiased opinion. We confirm

that we are an independent qualified valuer, as referred to

Chapter 5 of the Listing Rules.

We enclose herewith the valuation report for your attention.

Yours faithfully,For and on behalf of

Cushman & Wakefield LimitedPhilip C Y Tsang

Registered Professional Surveyor (General Practice)Registered China Real Estate Appraiser

MSc, MHKISDirector

Note: Mr. Philip C Y Tsang is Registered Professional Surveyor who has over 29 years’ experience in the valuationof properties in the PRC.


– III-4 –


VALUATION CERTIFICATE

Property owner-occupied by the Group in the PRC

Property Description and tenureParticulars ofoccupancy

Market value inexisting state as at30 April 2022

No.41, Jingang Middle

Road, Shatian Town,

Dongguan City,

Guangdong Province,

The PRC

(中華人民共和國廣東省東莞市沙田鎮進港中路41號)

The Property comprises

an industrial complex

erected on a parcel of

land with site area of

88,163.09 sq.m.

The Property has 8

industrial and dormitory

buildings, 4 corridors

and a refuse room with

total gross floor area of

120,324.11 sq.m.

(Please refer to the

notes below for the

details of the gross

floor area.)

The Property is located

at Jingang Middle

Road, Shatian Town,

Dongguan.

Developments in

vicinity comprise

mainly Industrial

developments. The

Property is for

industrial uses, there is

no environmental issues

and litigation dispute.

The land use rights of

the Property have been

granted for a term due

to expire on 14

November 2067 for

industrial use.

At the Valuation Date,

the property was owner

occupied and self-

operated.

RMB448,020,000,

(RENMINBI FOUR

HUNDRED FORTY

EIGHT MILLION

TWENTY

THOUSAND)

(100% interest

attributable to the

Group:

RMB448,020,000,

RENMINBI FOUR

HUNDRED FORTY

EIGHT MILLION

TWENTY

THOUSAND)


– III-5 –


Notes:

(1) In-Tech Electronics (Dongguan) Co. Ltd. (精達電子(東莞)有限公司), an indirect wholly-owned subsidiary ofthe Company, (“In-Tech Dongguan”) owns the Property with details as below:

Land Site Area Remarks(sq.m.)

A parcel of industrial land 88,163.09 Please refer to Note (2) below.

Buildings/Corridor Gross Floor Area Remarks(sq.m.)

8 industrial and dormitory buildings 119,190.91 Please refer to Note (2) below.No. 12, 13, 14, 15 Corridor & No.16 Refuse

room1,133.20 Please refer to Note (3) below.

Total 120,324.11

(2) According to 8 Real Property Ownership Certificates, the land, with site area of 88,163.09 sq.m. and a landuse term due to expire on 14 November 2067 for industrial use, 8 industrial and dormitory buildings are ownedby In-Tech Dongguan as below:

No.

Certificate No.(粵(2020)東莞不動產權第*號) Building

No. ofStorey Use

GrossFloor Area

(sq.m.)

1 0224327 No.1 Dormitory 14 Dormitory 20,155.552 0224326 No.2 Dormitory 14 Dormitory 19,955.073 0224328 No.3 Dormitory 14 Dormitory 19,799.624 0224325 No.4 Canteen 4 Industrial 3,519.735 0224329 No.6 Plant 4 Industrial 26,095.676 0224323 No.7 Plant 4 Industrial 24,480.797 0224324 No.10 Equipment room 2 Industrial 4,785.488 0220871 No.17 Equipment room 2 Industrial 399.00

Total: 119,190.91

(3) According to 5 Certificate for the Record of Completion Acceptance, 4 corridors and a refuse room have gonethrough the completion acceptance record:

No. Building Certificate No. Gross Floor Area(sq.m.)

1 No.12 Corridor 441900202002140005 109.192 No.13 Corridor 441900202002140004 207.873 No.14 Corridor 441900202205270004 390.884 No.15 Corridor 441900202002140002 131.265 No.16 Refuse room 441900202101210002 294.00

Total: 1,133.20

(4) According to Business Licence No. 91441900322284595H dated 16 July 2019, In-Tech Dongguan has beenestablished as a limited company with a registered capital of USD45,000,000 for an operation period from 15June 2015 to 15 June 2065.


– III-6 –


(5) According to the PRC Legal Opinion:

(i) In-Tech Dongguan is a limited liability company legally established in accordance with Chinese laws;

(ii) In-Tech Dongguan has obtained the Real Property Ownership Certificates and is the legal owner of theindustrial land, with site area of 88,163.09 sq.m., and 8 industrial and dormitory buildings, with totalgross floor area of 119,190.91 sq.m.;

(iii) The land and the 8 industrial and dormitory buildings are mortgaged to HSBC Bank (China) Co., Ltd.Dongguan Branch from 28 February 2019 to 28 February 2029;

(iv) Subject to the said bank mortgage; In-Tech Dongguan independently enjoys the right to possess, use andbenefit from the land and the 8 industrial and dormitory buildings in accordance with the law before theexpiration date specified in the Real Property Ownership Certificate;

(v) In-Tech Dongguan has obtained the construction permit for 4 corridors and a refuse room, with totalgross floor area of 1,133.20 sq.m., and has passed the inspection and acceptance; In-Tech Dongguanindependently has the right to possess, use and benefit from the said corridors and refuse room inaccordance with the law before the expiration date specified in the Real Property Ownership Certificate.

(6) According to the information provided to us, the status of title and grant of major approvals and licences areas follows:

Real Property Ownership Certificate YesCertificate for the Record of Completion Acceptance YesBusiness Licence Yes


– III-7 –


Set out below is a summary of certain provisions of the Memorandum and Articles of

Association of the Company and of certain aspects of Cayman company law.

The Company was incorporated in the Cayman Islands as an exempted company with

limited liability on 16 August 2021 under the Companies Act, Cap. 22 (Act 3 of 1961, as

consolidated and revised) of the Cayman Islands (the “Companies Act”). The Company’s

constitutional documents consist of its Memorandum of Association (the “Memorandum”) and

its Articles of Association (the “Articles”).

1. MEMORANDUM OF ASSOCIATION

(a) The Memorandum 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 objects for which the Company is established are unrestricted

(including acting as an investment company), and that the Company shall have and be

capable of exercising all the functions of a natural person of full capacity irrespective of

any question of corporate benefit, as provided in section 27(2) of the Companies Act and

in view of the fact that the Company is an exempted company that the Company will not

trade in the Cayman Islands with any person, firm or corporation except in furtherance of

the business of the Company carried on outside the Cayman Islands.

(b) The Company may by special resolution alter its Memorandum with respect to any

objects, powers or other matters specified therein.

2. ARTICLES OF ASSOCIATION

The Articles were [conditionally] adopted on [●] [with effect from the [REDACTED]].

The following is a summary of certain provisions of the Articles:

(a) Shares

(i) Classes of shares

The share capital of the Company consists of ordinary shares.

(ii) Variation of rights of existing shares or classes of shares

Subject to the Companies Act, if at any time the share capital of the Company is

divided into different classes of shares, all or any of the special rights attached to the

shares or any class of shares may (unless otherwise provided for by the terms of issue of

that class) be varied, modified or abrogated either with the consent in writing of the

holders of not less than three-fourths in nominal value of the issued shares of that class

or with the sanction of a special resolution passed at a separate general meeting of the

holders of the shares of that class. To every such separate general meeting the provisions

APPENDIX IV SUMMARY OF THE CONSTITUTION OFTHE COMPANY AND CAYMAN COMPANY LAW

– IV-1 –


of the Articles relating to general meetings will mutatis mutandis apply, but so that the

necessary quorum (other than at an adjourned meeting) shall be two persons holding or

representing by proxy not less than one-third in nominal value of the issued shares of that

class and at any adjourned meeting two holders present in person or by proxy (whatever

the number of shares held by them) shall be a quorum. Every holder of shares of the class

shall be entitled to one vote for every such share held by him.

Any special rights conferred upon the holders of any shares or class of shares shall

not, unless otherwise expressly provided in the rights attaching to the terms of issue of

such shares, be deemed to be varied by the creation or issue of further shares ranking pari

passu therewith.

(iii) Alteration of capital

The Company may by ordinary resolution of its members:

a. increase its share capital by the creation of new shares;

b. consolidate all or any of its capital into shares of larger amount than its

existing shares;

c. divide its shares into several classes and attach to such shares any preferential,

deferred, qualified or special rights, privileges, conditions or restrictions as the

Company in general meeting or as the directors may determine;

d. subdivide its shares or any of them into shares of smaller amount than is fixed

by the Memorandum; or

e. cancel any shares which, at the date of passing of the resolution, have not been

taken and diminish the amount of its capital by the amount of the shares so

cancelled.

The Company may reduce its share capital or any capital redemption reserve or other

undistributable reserve in any way by special resolution.

(iv) Transfer of shares

All transfers of shares may be effected by an instrument of transfer in the usual or

common form or in a form prescribed by The Stock Exchange of Hong Kong Limited (the

“Stock Exchange”) or in such other form as the board may approve and which may be

under hand or, if the transferor or transferee is a clearing house or its nominee(s), by hand

or by machine imprinted signature or by such other manner of execution as the board may

approve from time to time.


– IV-2 –


Notwithstanding the foregoing, for so long as any shares are listed on the Stock

Exchange, titles to such listed shares may be evidenced and transferred in accordance

with the laws applicable to and the rules and regulations of the Stock Exchange (the

“Listing Rules”) that are or shall be applicable to such listed shares. The register of

members in respect of its listed shares (whether the principal register or a branch register)

may be kept by recording the particulars required by Section 40 of the Companies Act in

a form otherwise than legible if such recording otherwise complies with the laws

applicable to and the rules and regulations of the Stock Exchange that are or shall be

applicable to such listed shares.

The instrument of transfer shall be executed by or on behalf of the transferor and the

transferee provided that the board may dispense with the execution of the instrument of

transfer by the transferee. The transferor shall be deemed to remain the holder of the share

until the name of the transferee is entered in the register of members in respect of that

share.

The board may, in its absolute discretion, at any 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.

The board may decline to recognise any instrument of transfer unless a fee (not

exceeding the maximum sum as the Stock Exchange may determine to be payable)

determined by the Directors is paid to the Company, the instrument of transfer is properly

stamped (if applicable), it 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 any newspaper or by any other means in accordance with the

requirements of the Stock Exchange, at such times and for such periods as the board may

determine. The register of members must not be closed for periods exceeding in the whole

thirty (30) days in any year.

Subject to the above, fully paid shares are free from any restriction on transfer and

free of all liens in favour of the Company.


– IV-3 –


(v) Power of the Company to purchase its own shares

The Company is empowered by the Companies Act and the Articles to purchase its

own shares subject to certain restrictions and the board may only exercise this power on

behalf of the Company subject to any applicable requirements imposed from time to time

by the Stock Exchange.

The board may accept the surrender for no consideration of any fully paid share.

(vi) Power of any subsidiary of the Company to own shares in the Company

There are no provisions in the Articles relating to ownership of shares in the

Company by a subsidiary.

(vii) Calls on shares and forfeiture of shares

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 instalments. 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 twenty per

cent. (20%) 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 instalments 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 fourteen (14) 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.


– IV-4 –


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

twenty per cent. (20%) per annum as the board determines.

(b) Directors

(i) Appointment, retirement and removal

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) shall retire from office by rotation provided that every Director shall be subject to

retirement at an annual general meeting at least once every three years. The Directors to

retire by rotation shall include any Director who wishes to retire and not offer himself for

re-election. Any further Directors so to retire shall 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.

Neither a Director nor an alternate Director is required to hold any shares in the

Company by way of qualification. Further, there are no provisions in the Articles relating

to retirement of Directors upon reaching any age limit.

The Directors have the power to appoint any person as a Director either to fill a

casual vacancy on the board or as an addition to the existing board. Any Director so

appointed shall hold office until the next following annual general meeting of the

Company and shall then be eligible for re-election.

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) and

members of the Company may by ordinary resolution appoint another in his place. Unless

otherwise determined by the Company in general meeting, the number of Directors shall

not be less than two. There is no maximum number of Directors.

The office of director shall be vacated if:

a. he resigns by notice in writing delivered to the Company;

b. he becomes of unsound mind or dies;


– IV-5 –


c. without special leave, he is absent from meetings of the board for six (6)

consecutive months, and the board resolves that his office is vacated;

d. he becomes bankrupt or has a receiving order made against him or suspends

payment or compounds with his creditors;

e. he is prohibited from being a director by law; or

f. he ceases to be a director by virtue of any provision of law or is removed from

office pursuant to the Articles.

The board may appoint one or more of its body to be managing director, joint

managing director, or deputy managing director or to hold any other employment or

executive office with the Company for such period 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 must, 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.

(ii) Power to allot and issue shares and warrants

Subject to the provisions of the Companies Act and the Memorandum and Articles

and to any special rights conferred on the holders of any shares or class of shares, any

share may be issued (a) with or have attached thereto such rights, or such restrictions,

whether with regard to dividend, voting, return of capital, or otherwise, as the Directors

may determine, or (b) on terms that, at the option of the Company or the holder thereof,

it is liable to be redeemed.

The board may issue warrants or convertible securities or securities of similar nature

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 determine.

Subject to the provisions of the Companies Act and the Articles and, where

applicable, the rules of the Stock Exchange 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 are 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 to their nominal value.


– IV-6 –


Neither the Company nor the board is 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.

(iii) Power to dispose of the assets of the Company or any of its subsidiaries

There are no specific provisions in the Articles relating to the disposal of the assets

of the Company or any of its subsidiaries. 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 Articles or the Companies Act to be exercised

or done by the Company in general meeting.

(iv) Borrowing powers

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 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.

(v) Remuneration

The ordinary remuneration of the Directors is to be determined by the Company in

general meeting, such sum (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 are also entitled to be prepaid or repaid all travelling, hotel and incidental

expenses reasonably expected to be incurred or 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.

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 as the board may

determine and such extra remuneration shall be in addition to or in substitution for any

ordinary remuneration as a Director. An executive Director appointed to be a managing


– IV-7 –


director, joint managing director, deputy managing director or other executive officer

shall receive such remuneration and such other benefits 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.

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 past 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 dependents 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 dependents, or to any of such persons,

including pensions or benefits additional to those, if any, to which such employees or

ex-employees or their dependents 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.

The board may resolve to capitalise all or any part of any amount for the time being

standing to the credit of any reserve or fund (including a share premium account and the

profit and loss account) whether or not the same is available for distribution by applying

such sum in paying up unissued shares to be allotted to (i) employees (including directors)

of the Company and/or its affiliates (meaning any individual, corporation, partnership,

association, joint-stock company, trust, unincorporated association or other entity (other

than the Company) that directly, or indirectly through one or more intermediaries,

controls, is controlled by or is under common control with, the Company) upon exercise

or vesting of any options or awards granted under any share incentive scheme or

employee benefit scheme or other arrangement which relates to such persons that has

been adopted or approved by the members in general meeting, or (ii) any trustee of any

trust to whom shares are to be allotted and issued by the Company in connection with the

operation of any share incentive scheme or employee benefit scheme or other

arrangement which relates to such persons that has been adopted or approved by the

members in general meeting.


– IV-8 –


(vi) Compensation or payments for loss of office

Pursuant to the Articles, 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.

(vii) Loans and provision of security for loans to Directors

The Company must not make any loan, directly or indirectly, to a Director or his

close associate(s) if and to the extent it would be prohibited by the Companies Ordinance

(Chapter 622 of the laws of Hong Kong) as if the Company were a company incorporated

in Hong Kong.

(viii) Disclosure of interests in contracts with the Company or any of its subsidiaries

A Director may hold any other office or place of profit with the Company (except

that of the auditor of the Company) in conjunction with his office of Director for such

period and upon such terms as the board may determine, and may be paid such extra

remuneration therefor in addition to any remuneration provided for by or pursuant to the

Articles. A Director may be or become a director or other officer of, or otherwise

interested in, 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. 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.

No Director or proposed or intended 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 must declare the


– IV-9 –


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 approving any contract or arrangement or other proposal in which he or any of his

close associates is materially interested, but this prohibition does not apply to any of the

following matters, namely:

(a) the giving of any security or indemnity either:

(aa) to the Director or his close associate(s) in respect of money lent or

obligations incurred or undertaken by him or any of them at the request

of or for the benefit of the Company or any of its subsidiaries; or

(bb) to a third party in respect of a debt or obligation of the Company or any

of its subsidiaries for which the Director or his close associate(s) has

himself/themselves assumed responsibility in whole or in part and

whether alone or jointly under a guarantee or indemnity or by the giving

of security;

(b) any proposal concerning an offer of shares or debentures or other securities of

or by the Company or any other company which the Company may promote or

be interested in for subscription or purchase where the Director or his close

associate(s) is/are or is/are to be interested as a participant in the underwriting

or sub-underwriting of the offer;

(c) any proposal or arrangement concerning the benefit of employees of the

Company or its subsidiaries including:

(aa) the adoption, modification or operation of any employees’ share scheme

or any share incentive or share option scheme under which the Director

or his close associate(s) may benefit; or

(bb) the adoption, modification or operation of a pension fund or retirement,

death or disability benefits scheme which relates to the Directors, his

close associate(s) and employee(s) of the Company or any of its

subsidiaries and does not provide in respect of any Director, or his close

associate(s), as such any privilege or advantage not generally accorded to

the class of persons to which such scheme or fund relates;


– IV-10 –


(d) any contract or arrangement in which the Director or his close associate(s)

is/are interested in the same manner as other holders of shares or debentures or

other securities of the Company by virtue only of his/their interest in shares or

debentures or other securities of the Company.

(c) Proceedings of the Board

The board may meet for the despatch of business, adjourn and otherwise regulate its

meetings as it considers appropriate. Questions arising at any meeting shall be determined by

a majority of votes. In the case of an equality of votes, the chairman of the meeting shall have

an additional or casting vote.

(d) Alterations to constitutional documents and the Company’s name

The Articles may be rescinded, altered or amended by the Company in general meeting

by special resolution. The Articles state that a special resolution shall be required to alter the

provisions of the Memorandum, to amend the Articles or to change the name of the Company.

(e) Meetings of members

(i) Special and ordinary resolutions

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

notice has been duly given in accordance with the Articles.

Under the Companies Act, a copy of any special resolution must be forwarded to the

Registrar of Companies in the Cayman Islands within fifteen (15) days of being passed.

An ordinary resolution is defined in the Articles to mean a resolution passed by a

simple majority of the votes of such members of the Company as, being entitled to do so,

vote in person or, in the case of corporations, by their duly authorised representatives or,

where proxies are allowed, by proxy at a general meeting of which notice has been duly

given in accordance with the Articles.

(ii) Voting rights and right to demand a poll

Subject to any special rights or restrictions as to voting for the time being attached

to any shares, at any general meeting 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 but


– IV-11 –


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. A member

entitled to more than one vote need not use all his votes or cast all the votes he uses in

the same way.

At any general meeting a resolution put to the vote of the meeting is to be decided

by way of a poll save that the chairman of the meeting may in good faith, allow a

resolution which relates purely to a procedural or administrative matter to be voted on by

a show of hands in which case every member present in person (or being a corporation,

is present by a duly authorised representative), or by proxy(ies) shall have one vote

provided that where more than one proxy is appointed by a member which is a clearing

house (or its nominee(s)), each such proxy shall have one vote on a show of hands.

If a recognised clearing house (or its nominee(s)) is a member of the Company it

may authorise such person or persons as it thinks fit to act as its representative(s) at any

meeting of the Company or at any meeting of any class of members of the Company

provided that, if more than one person is so authorised, the authorisation shall specify the

number and class of shares in respect of which each such person is so authorised. A person

authorised pursuant to this provision shall be deemed to have been duly authorised

without further evidence of the facts and be entitled to exercise the same powers on behalf

of the recognised clearing house (or its nominee(s)) as if such person was the registered

holder of the shares of the Company held by that clearing house (or its nominee(s))

including, where a show of hands is allowed, the right to vote individually on a show of

hands.

All shareholders have the right to speak and vote at a general meeting except where

a shareholder is required, by the Listing Rules, to abstain from voting to approve the

matter under consideration.

Where the Company has any knowledge that any shareholder is, under the Listing

Rules, 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.

(iii) Annual general meetings and extraordinary general meetings

The Company must hold an annual general meeting of the Company every financial

year and such general meeting must be held within six (6) months after the end of the

Company’s financial year unless a longer period would not infringe the Listing Rules.


– IV-12 –


Extraordinary general meetings may be convened on the requisition of one or more

shareholders holding, at the date of deposit of the requisition, not less than one-tenth of

the paid up capital of the Company having the right of voting at general meetings. Such

requisition shall be made in writing to the board or the secretary for the purpose of

requiring an extraordinary general meeting to be called by the board for the transaction

of any business or resolution specified in such requisition. Such meeting shall be held

within 2 months after the deposit of such requisition. If within 21 days of such deposit,

the board fails to proceed to convene such meeting, the requisitionist(s) himself/herself

(themselves) may do so in the same manner, and all reasonable expenses incurred by the

requisitionist(s) as a result of the failure of the board shall be reimbursed to the

requisitionist(s) by the Company.

(iv) Notices of meetings and business to be conducted

An annual general meeting must be called by notice of not less than twenty-one (21)

clear days. All other general meetings must be called by notice of at least fourteen (14)

clear days. The notice is exclusive of the day on which it is served or deemed to be served

and of the day for which it is given, and must specify (a) the time and date of the meeting,

(b) save for an electronic meeting, the place of the meeting and if there is more than one

meeting location as determined by the Board pursuant to the Articles, the principal place

of the meeting (the “Principal Meeting Place”), (c) if the general meeting is to be a hybrid

meeting or an electronic meeting, the notice shall include a statement to that effect and

with details of the electronic facilities for attendance and participation by electronic

means at the meeting or where such details will be made available by the Company prior

to the meeting, and (d) particulars of resolutions to be considered at the meeting.

In addition, notice of every general meeting must be given to all members of the

Company other than to such members as, under the provisions of the Articles or the terms

of issue of the shares they hold, are not entitled to receive such notices from the Company,

and also to, among others, the auditors for the time being of the Company.

Any notice to be given to or by any person pursuant to the Articles may be given or

issued by the following means:

(aa) by serving it personally on the relevant person;

(bb) by sending it through the post to such member’s registered address;

(cc) by delivering or leaving it at such member’s registered address;

(dd) by placing an advertisement in newspapers or other publication and where

applicable, in accordance with the requirements of the Stock Exchange;


– IV-13 –


(ee) by sending or transmitting it as an electronic communication to the relevant

person at such electronic address as he may provide under the Articles, subject

to the Company complying with the Cayman Islands laws and any other

applicable laws, rules and regulations from time to time in force with regard

to any requirements for the obtaining of consent (or deemed consent) from

such person;

(ff) by publishing it on the Company’s website to which the relevant person may

have access, subject to the Company complying with the Cayman Islands law

and any other applicable laws, rules and regulations from time to time in force

with regard to any requirements for the obtaining of consent (or deemed

consent) from such person and/or for giving notification to any such person

stating that the notice, document or publication is available on the Company’s

computer network website; or

(gg) by sending or otherwise making it available to such person through such other

means to the extent permitted by and in accordance with the Cayman Islands

law and other applicable laws, rules and regulations.

All business that is transacted at an extraordinary general meeting and at an annual

general meeting is deemed special, save that in the case of an annual general meeting,

each of the following business is deemed an ordinary business:

a. the declaration and sanctioning of dividends;

b. the consideration and adoption of the accounts and balance sheet and the

reports of the directors and the auditors;

c. the election of directors in place of those retiring;

d. the appointment of auditors and other officers; and

e. the fixing of the remuneration of the directors and of the auditors.

(v) Quorum for meetings and separate class meetings

No business shall be transacted at any general meeting unless a quorum is present

when the meeting proceeds to business, but the absence of a quorum shall not preclude

the appointment of a chairman.

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

or, for quorum purposes only, two persons appointed by the clearing house as authorised

representative or proxy, and entitled to vote. In respect of a separate class meeting (other


– IV-14 –


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.

(vi) Proxies

Any member of the Company entitled to attend and vote at a meeting of the

Company is entitled to appoint another person as his proxy to attend and vote instead of

him. A member who is the holder of two or more shares may appoint more than one proxy

to represent him and vote on his behalf at a general meeting of the Company or at a class

meeting. A proxy need not be a member of the Company and is entitled to exercise the

same powers on behalf of a member who is an individual and for whom he acts as proxy

as such member could exercise. In addition, a proxy is entitled to exercise the same

powers on behalf of a member which is a corporation and for which he acts as proxy as

such member could exercise as if it were an individual member. Votes may be given either

personally (or, in the case of a member being a corporation, by its duly authorised

representative) or by proxy.

(f) Accounts and audit

The board shall cause true accounts to be kept of the sums of money received and

expended by the Company, and the matters in respect of which such receipt and expenditure

take place, and of the property, assets, credits and liabilities of the Company and of all other

matters required by the Companies Act or necessary to give a true and fair view of the

Company’s affairs and to explain its transactions.

The accounting records must be kept at the registered office or 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 to inspect 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. However, an exempted company must make available at its

registered office in electronic form or any other medium, copies of its books of account or parts

thereof as may be required of it upon service of an order or notice by the Tax Information

Authority pursuant to the Tax Information Authority Act of the Cayman Islands.

A copy of every balance sheet and profit and loss account (including every document

required by law to be annexed thereto) which is to be laid before the Company at its general

meeting, together with a printed copy of the Directors’ report and a copy of the auditors’ report,

shall not less than twenty-one (21) days before the date of the meeting and at the same time

as the notice of annual general meeting be sent to every person entitled to receive notices of

general meetings of the Company under the provisions of the Articles; however, subject to

compliance with all applicable laws, including the Listing Rules, the Company may send to

such persons summarised financial statements derived from the Company’s annual accounts


– IV-15 –


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.

At the annual general meeting or at a subsequent extraordinary general meeting in each

year, the members shall appoint an auditor to audit the accounts of the Company and such

auditor shall hold office until the next annual general meeting. Moreover, the members may,

at any general meeting, by ordinary resolution remove the auditor at any time before the

expiration of his terms of office and shall by ordinary resolution at that meeting appoint

another auditor for the remainder of his term. The remuneration of the auditors shall be fixed

by the Company in general meeting or in such manner as the members may determine.

The Directors may fill any casual vacancy in the office of the auditors but while any such

vacancy continues the surviving or continuing auditor(s), if any, may act. The remuneration of

any auditor so appointed by the Directors may be fixed by the board.

The financial statements of the Company shall be audited by the auditor in accordance

with generally accepted auditing standards which may be those of a country or jurisdiction

other than the Cayman Islands. The auditor shall make a written report thereon in accordance

with generally accepted auditing standards and the report of the auditor must be submitted to

the members in general meeting.

(g) Dividends and other methods of distribution

The Company in general meeting may declare dividends in any currency to be paid to the

members but no dividend shall be declared in excess of the amount recommended by the board.

The Articles provide dividends may be declared and paid out of the profits of the

Company, realised or unrealised, or from any reserve set aside from profits which the directors

determine is no longer needed. With the sanction of an ordinary resolution dividends may also

be declared and paid out of share premium account or any other fund or account which can be

authorised for this purpose in accordance with the Companies Act.

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 any member 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.


– IV-16 –


Whenever the board or the Company in general meeting has resolved that a dividend be

paid or declared on the share capital of the Company, the board may further resolve either (a)

that such dividend be satisfied wholly or in part in the form of an allotment of shares credited

as fully paid up, provided that the shareholders entitled thereto will be entitled to elect to

receive such dividend (or part thereof) in cash in lieu of such allotment, or (b) that shareholders

entitled to such dividend will be entitled to elect to receive an allotment of shares credited as

fully paid up in lieu of the whole or such part of the dividend as the board may think fit.

The Company may also upon the recommendation of the board by an ordinary resolution

resolve in respect of any one particular dividend of the Company that it may be satisfied wholly

in the form of an allotment of shares credited as fully paid up without offering any right to

shareholders to elect to receive such dividend in cash in lieu of such allotment.

Any dividend, interest or other sum payable in cash to the holder of shares may be paid

by cheque or warrant sent through the post addressed to the holder at his registered address,

or in the case of joint holders, addressed to the holder whose name stands first in the register

of the Company in respect of the shares at his address as appearing in the register or addressed

to such person and at such addresses as the holder or joint holders may in writing direct. Every

such cheque or warrant shall, unless the holder or joint holders otherwise direct, be made

payable to the order of the holder or, in the case of joint holders, to the order of the holder

whose name stands first on the register in respect of such shares, and shall be sent at his or their

risk and payment of the cheque or warrant by the bank on which it is drawn shall constitute

a good discharge to the Company. Any one of two or more joint holders may give effectual

receipts for any dividends or other moneys payable or property distributable in respect of the

shares held by such joint holders.

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.

No dividend or other monies payable by the Company on or in respect of any share shall

bear interest against the Company.


– IV-17 –


(h) Inspection of corporate records

Pursuant to the Articles, the register and branch register of members shall be open to

inspection for at least two (2) hours during business hours by members without charge, or by

any other person upon a maximum payment of HK$2.50 or such lesser sum specified by the

board, at the registered office or such other place at which the register is kept in accordance

with the Companies Act or, upon a maximum payment of HK$1.00 or such lesser sum specified

by the board, at the office where the branch register of members is kept, unless the register is

closed in accordance with the Articles.

(i) Rights of minorities in relation to fraud or oppression

There are no provisions in the Articles relating to rights of minority shareholders in

relation to fraud or oppression. However, certain remedies are available to shareholders of the

Company under Cayman Islands law, as summarised in paragraph 3(f) of this Appendix.

(j) Procedures on liquidation

A resolution that the Company be wound up by the court or be wound up voluntarily shall

be a special resolution.

Subject to any special rights, privileges or restrictions as to the distribution of available

surplus assets on liquidation for the time being attached to any class or classes of shares:

(i) if the Company is wound up and the assets available for distribution amongst the

members of the Company shall be more than sufficient to repay the whole of the

capital paid up at the commencement of the winding up, the excess shall be

distributed pari passu amongst such members in proportion to the amount paid up

on the shares held by them respectively; and

(ii) if the Company is wound up and the assets available for distribution amongst the

members as such shall be insufficient to repay the whole of the paid-up capital, such

assets shall be distributed so that, as nearly as may be, the losses shall be borne by

the members in proportion to the capital paid up, or which ought to have been paid

up, at the commencement of the winding up on the shares held by them respectively.

If the Company is 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


– IV-18 –


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.

(k) Subscription rights reserve

The Articles provide that to the extent that it is not prohibited by and is in compliance

with the Companies Act, if warrants to subscribe for shares have been issued by the Company

and the Company does any act or engages in any transaction which would result in the

subscription price of such warrants being reduced below the par value of a share, a subscription

rights reserve shall be established and applied in paying up the difference between the

subscription price and the par value of a share on any exercise of the warrants.

3. CAYMAN ISLANDS COMPANY LAW

The Company is incorporated in the Cayman Islands subject to the Companies Act and,

therefore, operates subject to Cayman Islands law. Set out below is a summary of certain

provisions of Cayman company law, although this does not purport to contain all applicable

qualifications and exceptions or to be a complete review of all matters of Cayman company law

and taxation, which may differ from equivalent provisions in jurisdictions with which

interested parties may be more familiar:

(a) Company operations

As an exempted company, the Company’s operations must be conducted mainly outside

the Cayman Islands. The Company is required to file an annual return each year with the

Registrar of Companies of the Cayman Islands and pay a fee which is based on the amount of

its authorised share capital.

(b) 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 of the value of the premiums on

those shares shall be transferred to an account, to be called the “share premium account”. At

the option of a company, these provisions may not apply to premiums on shares of that

company allotted pursuant to any arrangement in consideration of the acquisition or

cancellation of shares in any other company and issued at a premium.

The Companies Act provides that the share premium account may be applied by the

company subject to the provisions, if any, of its memorandum and articles of association in (a)

paying distributions or dividends to members; (b) paying up unissued shares of the company

to be issued to members as fully paid bonus shares; (c) the redemption and repurchase of shares


– IV-19 –


(subject to the provisions of section 37 of the Companies Act); (d) writing-off the preliminary

expenses of the company; and (e) writing-off the expenses of, or the commission paid or

discount allowed on, any issue of shares or debentures of the company.

No distribution or dividend may be paid to members out of the share premium account

unless immediately following the date on which the distribution or dividend is proposed to be

paid, the company will be able to pay its debts as they fall due in the ordinary course of

business.

The Companies Act provides that, subject to confirmation by the Grand Court of the

Cayman Islands (the “Court”), a company limited by shares or a company limited by guarantee

and having a share capital may, if so authorised by its articles of association, by special

resolution reduce its share capital in any way.

(c) Financial assistance to purchase shares of a company or its holding company

There is no statutory restriction in the Cayman Islands on the provision of financial

assistance by a company to another person for the purchase of, or subscription for, its own or

its holding company’s shares. Accordingly, a company may provide financial assistance if the

directors of the company consider, in discharging their duties of care and acting in good faith,

for a proper purpose and in the interests of the company, that such assistance can properly be

given. Such assistance should be on an arm’s-length basis.

(d) Purchase of shares and warrants by a company and its subsidiaries

A company limited by shares or a company limited by guarantee and having a share

capital may, if so authorised by its articles of association, issue shares which are to be

redeemed or are liable to be redeemed at the option of the company or a shareholder and the

Companies Act expressly provides that it shall be lawful for the rights attaching to any shares

to be varied, subject to the provisions of the company’s articles of association, so as to provide

that such shares are to be or are liable to be so redeemed. In addition, such a company may,

if authorised to do so by its articles of association, purchase its own shares, including any

redeemable shares. However, if the articles of association do not authorise the manner and

terms of purchase, a company cannot purchase any of its own shares unless the manner and

terms of purchase have first been authorised by an ordinary resolution of the company. At no

time may a company redeem or purchase its shares unless they are fully paid. A company may

not redeem or purchase any of its shares if, as a result of the redemption or purchase, there

would no longer be any issued shares of the company other than shares held as treasury shares.

A payment out of capital by a company for the redemption or purchase of its own shares is not

lawful unless immediately following the date on which the payment is proposed to be made,

the company shall be able to pay its debts as they fall due in the ordinary course of business.


– IV-20 –


Shares purchased by a company is to be treated as cancelled unless, subject to the

memorandum and articles of association of the company, the directors of the company resolve

to hold such shares in the name of the company as treasury shares prior to the purchase. Where

shares of a company are held as treasury shares, the company shall be entered in the register

of members as holding those shares, however, notwithstanding the foregoing, the company is

not be treated as a member for any purpose and must not exercise any right in respect of the

treasury shares, and any purported exercise of such a right shall be void, and a treasury share

must not be voted, directly or indirectly, at any meeting of the company and must not be

counted in determining the total number of issued shares at any given time, whether for the

purposes of the company’s articles of association or the Companies Act.

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 Cayman Islands law that a company’s memorandum

or articles of association contain a specific provision enabling such purchases and the directors

of a company may rely upon the general power contained in its memorandum of association to

buy and sell and deal in personal property of all kinds.

Under Cayman Islands law, a subsidiary may hold shares in its holding company and, in

certain circumstances, may acquire such shares.

(e) Dividends and distributions

The Companies Act permits, subject to a solvency test and the provisions, if any, of the

company’s memorandum and articles of association, the payment of dividends and

distributions out of the share premium account. With the exception of the foregoing, there are

no statutory provisions relating to the payment of dividends. Based upon English case law,

which is regarded as persuasive in the Cayman Islands, dividends may be paid only out of

profits.

No dividend may be declared or paid, 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) may be made to the company, in respect of a treasury share.

(f) Protection of minorities and shareholders’ suits

The Courts ordinarily would be expected to follow English case law precedents which

permit a minority shareholder to commence a representative action against or derivative

actions in the name of the company to challenge (a) an act which is ultra vires the company

or illegal, (b) an act which constitutes a fraud against the minority and the wrongdoers are

themselves in control of the company, and (c) an irregularity in the passing of a resolution

which requires a qualified (or special) majority.


– IV-21 –


In the case of a company (not being a bank) having a share capital divided into shares,

the Court may, on the application of members holding not less than one fifth of the shares of

the company in issue, appoint an inspector to examine into the affairs of the company and to

report thereon in such manner as the Court shall direct.

Any shareholder of a company may petition the Court which may make a winding up

order if the Court is of the opinion that it is just and equitable that the company should be

wound up or, as an alternative to a winding up order, (a) an order regulating the conduct of the

company’s affairs in the future, (b) an order requiring the company to refrain from doing or

continuing an act complained of by the shareholder petitioner or to do an act which the

shareholder petitioner has complained it has omitted to do, (c) an order authorising civil

proceedings to be brought in the name and on behalf of the company by the shareholder

petitioner on such terms as the Court may direct, or (d) an order providing for the purchase of

the shares of any shareholders of the company by other shareholders or by the company itself

and, in the case of a purchase by the company itself, a reduction of the company’s capital

accordingly.

Generally claims against a company by its shareholders must be based on the general laws

of contract or tort applicable in the Cayman Islands or their individual rights as shareholders

as established by the company’s memorandum and articles of association.

(g) Disposal of assets

The Companies Act contains no specific restrictions on the power of directors to dispose

of assets of a company. However, as a matter of general law, 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.

(h) Accounting and auditing requirements

A company must cause proper books of account 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.

Proper books of account shall not be deemed to be kept if there are not kept such books

as are necessary to give a true and fair view of the state of the company’s affairs and to explain

its transactions.


– IV-22 –


An exempted company must make available at its registered office in electronic form or

any other medium, copies of its books of account or parts thereof as may be required of it upon

service of an order or notice by the Tax Information Authority pursuant to the Tax Information

Authority Act of the Cayman Islands.

(i) Exchange control

There are no exchange control regulations or currency restrictions in the Cayman Islands.

(j) Taxation

Pursuant to the Tax Concessions Act of the Cayman Islands, the Company has obtained

an undertaking:

(i) that no law which is enacted in the Cayman Islands imposing any tax to be levied

on profits, income, gains or appreciation shall apply to the Company or its

operations; and

(ii) that the aforesaid tax or any tax in the nature of estate duty or inheritance tax shall

not be payable on or in respect of the shares, debentures or other obligations of the

Company.

The undertaking for the Company is for a period of twenty years from 27 August 2021.

The Cayman Islands currently levy no taxes on individuals or corporations based upon

profits, income, gains or appreciations and there is no taxation in the nature of inheritance tax

or estate duty. There are no other taxes likely to be material to the Company levied by the

Government of the Cayman Islands save for certain stamp duties which may be applicable,

from time to time, on certain instruments executed in or brought within the jurisdiction of the

Cayman Islands. The Cayman Islands are a party to a double tax treaty entered into with the

United Kingdom in 2010 but otherwise is not party to any double tax treaties.

(k) Stamp duty on transfers

No stamp duty is payable in the Cayman Islands on transfers of shares of Cayman Islands

companies except those which hold interests in land in the Cayman Islands.

(l) Loans to directors

There is no express provision in the Companies Act prohibiting the making of loans by

a company to any of its directors.


– IV-23 –


(m) Inspection of corporate records

The notice of registered office is a matter of public record. A list of the names of the

current directors and alternate directors (if applicable) is made available by the Registrar of

Companies for inspection by any person on payment of a fee. The register of mortgages is open

to inspection by creditors and members.

Members of the Company have no general right under the Companies Act to inspect or

obtain copies of the register of members or corporate records of the Company. They will,

however, have such rights as may be set out in the Company’s Articles.

(n) Register of members

An exempted company may maintain its principal register of members and any branch

registers at such locations, whether within or without the Cayman Islands, as the directors may,

from time to time, think fit. The register of members shall contain such particulars as required

by Section 40 of the Companies Act. A branch register must be kept in the same manner in

which a principal register is by the Companies Act required or permitted to be kept. The

company shall cause to be kept at the place where the company’s principal register is kept a

duplicate of any branch register duly entered up from time to time.

There is no requirement under the Companies Act for an exempted company to make any

returns of members to the Registrar of Companies of the Cayman Islands. The names and

addresses of the members are, accordingly, not a matter of public record and are not available

for public inspection. However, an exempted company shall make available at its registered

office, in electronic form or any other medium, such register of members, including any branch

register of members, as may be required of it upon service of an order or notice by the Tax

Information Authority pursuant to the Tax Information Authority Act of the Cayman Islands.

(o) Register of Directors and Officers

The Company is required to maintain at its registered office a register of directors and

officers which is not available for inspection by the public. A copy of such register must be

filed with the Registrar of Companies in the Cayman Islands and any change must be notified

to the Registrar within thirty (30) days of any change in such directors or officers.

(p) Beneficial Ownership Register

An exempted company is required to maintain a beneficial ownership register at its

registered office that records details of the persons who ultimately own or control, directly or

indirectly, 25% or more of the equity interests or voting rights of the company or have rights

to appoint or remove a majority of the directors of the company. The beneficial ownership

register is not a public document and is only accessible by a designated competent authority

of the Cayman Islands. Such requirement does not, however, apply to an exempted company


– IV-24 –


with its shares listed on an approved stock exchange, which includes the Stock Exchange.

Accordingly, for so long as the shares of the Company are [REDACTED] on the Stock

Exchange, the Company is not required to maintain a beneficial ownership register.

(q) Winding up

A company may be wound up (a) compulsorily by order of the Court, (b) voluntarily, or

(c) under the supervision of the Court.

The Court has authority to order winding up in a number of specified circumstances

including where the members of the company have passed a special resolution requiring the

company to be wound up by the Court, or where the company is unable to pay its debts, or

where it is, in the opinion of the Court, just and equitable to do so. Where a petition is

presented by members of the company as contributories on the ground that it is just and

equitable that the company should be wound up, the Court has the jurisdiction to make certain

other orders as an alternative to a winding-up order, such as making an order regulating the

conduct of the company’s affairs in the future, making an order authorising civil proceedings

to be brought in the name and on behalf of the company by the petitioner on such terms as the

Court may direct, or making an order providing for the purchase of the shares of any of the

members of the company by other members or by the company itself.

A company (save with respect to a limited duration company) may be wound up

voluntarily when the company so resolves by special resolution or when the company in

general meeting resolves by ordinary resolution that it be wound up voluntarily because it is

unable to pay its debts as they fall due. In the case of a voluntary winding up, such company

is obliged to cease to carry on its business (except so far as it may be beneficial for its winding

up) 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.

For the purpose of conducting the proceedings in winding up a company and assisting the

Court therein, there may be appointed an official liquidator or official liquidators; and the court

may appoint to such office such person, either provisionally or otherwise, as it thinks fit, and

if more persons than one are appointed to such office, the Court must declare whether any act

required or authorised to be done by the official liquidator is to be done by all or any one or

more of such persons. The Court may also determine whether any and what security is to be

given by an official liquidator on his appointment; if no official liquidator is appointed, or

during any vacancy in such office, all the property of the company shall be in the custody of

the Court.

As soon as the affairs of the company are fully wound up, the liquidator must make a

report and an account of the winding up, showing how the winding up has been conducted and

how the property of the company has been disposed of, and thereupon call a general meeting


– IV-25 –


of the company for the purposes of laying before it the account and giving an explanation

thereof. This final general meeting must be called by at least 21 days’ notice to each

contributory in any manner authorised by the company’s articles of association and published

in the Gazette.

(r) Reconstructions

There are statutory provisions which facilitate reconstructions and amalgamations

approved by a majority in number representing seventy-five per cent. (75%) in value of

shareholders or class of shareholders or creditors, as the case may be, as are present at a

meeting called for such purpose and thereafter sanctioned by the Court. Whilst a dissenting

shareholder would have the right to express to the Court his view that the transaction for which

approval is sought would not provide the shareholders with a fair value for their shares, the

Court is unlikely to disapprove the transaction on that ground alone in the absence of evidence

of fraud or bad faith on behalf of management.

(s) Take-overs

Where an offer is made by a company for the shares of another company and, within four

(4) months of the offer, the holders of not less than ninety per cent. (90%) of the shares which

are the subject of the offer accept, the offeror may at any time within two (2) months after the

expiration of the said four (4) months, by notice in the prescribed manner require the dissenting

shareholders to transfer their shares on the terms of the offer. A dissenting shareholder may

apply to the Court within one (1) month of the notice objecting to the transfer. The burden is

on the dissenting shareholder to show that the Court should exercise its discretion, which it will

be unlikely to do unless there is evidence of fraud or bad faith or collusion as between the

offeror and the holders of the shares who have accepted the offer as a means of unfairly forcing

out minority shareholders.

(t) Indemnification

Cayman Islands law does not limit the extent to which a company’s articles of association

may provide for indemnification of officers and directors, except to the extent any such

provision may be held by the Court to be contrary to public policy (e.g. for purporting to

provide indemnification against the consequences of committing a crime).

(u) Economic Substance Requirements

Pursuant to the International Tax Cooperation (Economic Substance) Act, 2018 of the

Cayman Islands (“ES Act”) that came into force on 1 January 2019, a “relevant entity” is

required to satisfy the economic substance test set out in the ES Act. A “relevant entity”

includes an exempted company incorporated in the Cayman Islands as is the Company;


– IV-26 –


however, it does not include an entity that is tax resident outside the Cayman Islands.

Accordingly, for so long as the Company is a tax resident outside the Cayman Islands,

including in Hong Kong, it is not required to satisfy the economic substance test set out in the

ES Act.

4. GENERAL

Conyers Dill & Pearman, the Company’s special legal counsel on Cayman Islands law,

have sent to the Company a letter of advice summarising certain aspects of Cayman Islands

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 VI

to this document. Any person wishing to have a detailed summary of Cayman Islands 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.


– IV-27 –


A. FURTHER INFORMATION ABOUT OUR COMPANY

1. Incorporation

Our Company was incorporated as an exempted company in the Cayman Islands under the

Cayman Companies Act with limited liability under the Cayman Companies Act on 16 August

2021. Our registered office is situated at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand

Cayman, KY1-1111, Cayman Islands. We have been registered in Hong Kong under Part 16 of

the Companies Ordinance as a non-Hong Kong company and our principal place of business

in Hong Kong is at 13/F Wing Tai Centre, No. 12 Hing Yip Street, Kwun Tong, Kowloon, Hong

Kong. In compliance with the requirements of the Companies Ordinance, Ms. Wong Sui Ling

Karen of 13/F Wing Tai Centre, No. 12 Hing Yip Street, Kwun Tong, Kowloon, Hong Kong has

been appointed as the authorised representative of our Company for the acceptance of service

of process and notices in Hong Kong.

As we were incorporated in the Cayman Islands, our corporate structure, the

Memorandum and the Articles are subject to the relevant laws of the Cayman Islands. A

summary of the relevant provisions of the Memorandum and the Articles and certain relevant

aspects of the Companies Act are set out in Appendix IV to this document.

2. Changes in the Share Capital of Our Company

As at the date of the incorporation of our Company, the initial authorised share capital of

our Company was HK$380,000 divided into 38,000,000 Shares of HK$0.01 each. At the time

of incorporation, one Share of HK$0.01 was issued to an initial subscriber who is an

Independent Third Party. On the same day, the said one Share was transferred to In-Tech

Holdings for a consideration at par value and credited as fully-paid.

On 26 August 2021, our Company allotted and issued an aggregate of 71 Shares to the

Individual Employees for a consideration at par value and credited as fully-paid.

Immediately following completion of the Capitalisation Issue and the [REDACTED] and

assuming that the [REDACTED] is not exercised, the authorised share capital of our Company

will be HK$[40,000,000] divided into [4,000,000,000] Shares of par value HK$0.01 each, of

which [REDACTED] Shares will be issued fully paid or credited as fully paid and

[REDACTED] Shares will remain unissued. Other than pursuant to the general mandate to

issue Shares referred to in the paragraph headed “– A. Further Information about our Company

– 4. Written resolutions of the then Shareholders of our Company passed on [●]” in this

Appendix, our Directors do not have any present intention to issue any of the authorised but

unissued share capital of our Company and, without prior approval of our Shareholders in

general meetings, no issue of Shares will be made which would effectively alter the control of

our Company.

Save for aforesaid and as disclosed in this document, there has been no alteration in the

share capital of our Company since its incorporation.

APPENDIX V STATUTORY AND GENERAL INFORMATION

– V-1 –


3. Changes in share capital of our subsidiaries

Save as disclosed in “History, Reorganisation and Corporate Structure – Reorganisation”

in this document, there has been no alteration in the share capital or registered capital of our

subsidiaries within two years preceding the date of this document.

4. Written resolutions of the then Shareholders of our Company passed on [●]

Pursuant to the written resolutions of the then shareholders of our Company entitled to

vote at general meetings of our Company, which were passed on [●]:

(a) our Company approved and adopted the Memorandum of Association with

immediate effect;

(b) the authorised share capital of our Company was increased from HK$380,000

divided into 38,000,000 Shares of HK$0.01 each to HK$[40,000,000] divided into

[4,000,000,000] Shares of HK$0.01 each by the creation of [3,962,000,000] Shares

of HK$0.01 each, which shall rank pari passu in all respects with the Shares in issue

as at the date of the resolution;

(c) conditional on (i) the Listing Committee granting approval for the [REDACTED]

of, and permission to [REDACTED], the Shares in issue and to be issued pursuant

to the Capitalisation Issue (if any), and the [REDACTED] as mentioned in this

document (including any Shares that may be issued pursuant to the exercise of the

[REDACTED]) and any Shares which may be issued pursuant to the exercise of any

options granted under the [REDACTED] Share Option Scheme and the Share

Option Scheme; (ii) the entering into, execution and delivery of the [REDACTED]

and the [REDACTED] on or around the [REDACTED]; and (iii) the obligations of

the [REDACTED] under each of the [REDACTED] having become unconditional

and not having been terminated in accordance with the terms of the respective

[REDACTED] or otherwise:

(i) our Company approved and adopted the Articles of Association;

(ii) conditional on the share premium account of our Company being credited as a

result of the [REDACTED], the sum of HK$[REDACTED] be capitalised and

applied in paying up in full at par value [REDACTED] Shares for allotment

and issue to our Shareholders whose names were on the register of members of

our Company on [●] and such Shares (or as they may direct) to be allotted and

issued pursuant to this resolution shall rank pari passu in all respect with the

existing issued Shares;


– V-2 –


(iii) the [REDACTED] and the [REDACTED] be approved and our Directors be

authorised to allot and issue the [REDACTED] under the [REDACTED] and

the [REDACTED] on and subject to the terms and conditions stated in this

document; and

(iv) the rules of the Share Option Scheme be approved and adopted, and our

Directors be authorised, at their sole discretion, to: (i) grant Shares or options

thereunder; (ii) modify or amend the Share Option Scheme as may be required

by the Hong Kong Stock Exchange and which they deem necessary and/or

desirable; (iii) allot, issue and deal with the Shares pursuant to the exercise of

any options which may be granted pursuant to the Share Option Scheme; and

(iv) take all such actions as they consider necessary, desirable or expedient to

implement or give effect to the Share Option Scheme subject to the conditions

therein;

(v) a general unconditional mandate was given to our Directors to exercise all the

powers of our Company to allot, issue and deal with (including the power to

make an offer or agreement, or grant securities which would or might require

Shares to be allotted and issued), otherwise than by way of rights issue, or

pursuant to any scrip dividend schemes or similar arrangements providing for

the allotment and issue of Shares in lieu of the whole or part of a dividend on

Shares in accordance with the Articles of Association of our Company or

pursuant to the issue of Shares upon the exercise of any subscription rights

attached to any warrants of our Company or pursuant to the exercise of options

which may be granted under the [REDACTED] Share Option Scheme and the

Share Option Scheme or any other option scheme(s) or similar arrangement for

the time being adopted for the grant or issue to directors and/or officers and/or

employees of our Company and/or any of our subsidiaries or right to acquire

Shares or pursuant to a specific authority granted by the shareholders in

general meeting, the Shares with an aggregate nominal amount not exceeding

20% of the total number of Shares of our Company in issue immediately

following completion of the [REDACTED] and the Capitalisation Issue

(excluding Shares which may be allotted and issued under the [REDACTED]

and options be granted under the [REDACTED] Share Option Scheme and the

Share Option Scheme) plus the aggregate nominal amount of the share capital

repurchased by our Company under the repurchase mandate. Such mandate

shall expire at: (i) the conclusion of the next annual general meeting of our

Company; (ii) the expiration of the period within which the next annual general

meeting of our Company is required to be held by the Articles of Association

of our Company, the Companies Act or any applicable laws of the Cayman

Islands; and (iii) the day on which such mandate is revoked or varied by an

ordinary resolution of our Shareholders in a general meeting, whichever occurs

first;


– V-3 –


(vi) a general unconditional mandate was given to our Directors authorising them

to exercise all powers of our Company to repurchase on the Hong Kong Stock

Exchange or on any other stock exchange on which the Shares may be listed

and which is recognised by the SFC and the Hong Kong Stock Exchange for

this purpose, such number of Shares with an aggregate nominal amount of not

exceeding 10% of the total number of Shares of our Company in issue

immediately following completion of the [REDACTED] and the

Capitalisation Issue (excluding Shares which may be allotted and issued under

the [REDACTED] and options be granted under the [REDACTED] Share

Option Scheme and the Share Option Scheme). Such mandate shall expire at:

(i) the conclusion of the next annual general meeting of our Company; (ii) the

expiration of the period within which the next annual general meeting of our

Company is required to be held by the Articles of Associations, the Companies

Act or any applicable laws of the Cayman Islands to be held, or (iii) the day

on which such mandate is revoked or varied by an ordinary resolution of our

Shareholders in a general meeting, whichever occurs first; and

(vii) the extension of the issuing mandate to allot, issue and deal with Shares as

mentioned in paragraph (c)(v) above by the addition to the aggregate nominal

value of the share capital of our Company which may be allotted or agreed

conditionally or unconditionally to be allotted by our Directors pursuant to

such issuing mandate of an amount representing the aggregate nominal value

of the share capital of our Company repurchased by our Company pursuant to

paragraph (c)(vi) above, provided that such extended amount shall not exceed

10% of the number of Shares of our Company in issue immediately following

the [REDACTED] and the Capitalisation Issue (excluding Shares which may

be allotted and issued under the [REDACTED] and options be granted under

the [REDACTED] Share Option Scheme and the Share Option Scheme) and

the issuing mandate shall expire at: (i) the conclusion of the next annual

general meeting of our Company; (ii) the expiration of the period within which

the next annual general meeting of our Company is required to be held by the

Articles of Association of our Company, the Companies Act or any applicable

laws of the Cayman Islands; and (iii) the day on which such mandate is

revoked or varied by an ordinary resolution of our Company’s Shareholders in

a general meeting, whichever occurs first, was approved.

5. Reorganisation

In order to streamline the corporate structure and rationalise our corporate structure for

the [REDACTED], our Group underwent the Corporate Reorganisation. Please refer to

“History, Reorganisation and Corporate Structure – Reorganisation” in this document for

details.


– V-4 –


6. Repurchase of our Shares

This section includes information relating to the repurchases of securities, including

information required by the Stock Exchange to be included in this document concerning such

repurchase.

(a) Provisions of the Listing Rules

The Listing Rules permit companies whose primary listing is on the Stock Exchange to

repurchase their securities on the Stock Exchange subject to certain restrictions, the most

important restrictions are summarised below:

(i) Shareholders’ approval

All proposed repurchases of Shares must be approved in advance by an ordinary

resolution of our Shareholders in a general meeting, either by way of general mandate or

by specific approval in relation to a particular transaction.

Pursuant to the written resolutions of the then shareholders of our Company passed

on [●], 2022, a general unconditional mandate (the “Repurchase Mandate”) was given

to our Directors to exercise all powers of our Company to repurchase Shares (Shares

which may be listed on the Stock Exchange) with a total nominal value of not more than

10% of the total number of Shares in issue or to be issued immediately following

completion of the [REDACTED] (excluding Shares which may be issued pursuant to the

exercise of the [REDACTED] and any options which may be granted under the

[REDACTED] Share Option Scheme and the Share Option Scheme), further details of

which have been described above in “A. Further information about our Company – 4.

Written resolutions of the then shareholders of our Company passed on [●]” in this

Appendix.

(ii) Source of funds

Any repurchases of Shares by us must be paid out of funds legally available for the

purpose in accordance with our Articles of Association, the Listing Rules and the

Companies Act. We are not permitted to repurchase our Shares on the Stock Exchange for

a consideration other than cash or for settlement otherwise than in accordance with the

trading rules of the Stock Exchange from time to time.

(iii) Shares to be repurchased

The Listing Rules provide that the Shares which are proposed to be repurchased by

us must be fully-paid up.


– V-5 –


(b) Reasons for repurchases

Our Directors believe that it is in the best interests of our Company and our Shareholders

for our Directors to have general authority from our Shareholders to enable them to repurchase

Shares in the market. Such repurchases may, depending on market conditions and funding

arrangements at the time, lead to an enhancement of the net asset value per Share and/or

earnings per Share and will only be made where our Directors believe that such repurchases

will benefit our Company and our Shareholders.

(c) Funding of repurchases

In repurchasing Shares, we may only apply funds legally available for such purpose in

accordance with the Articles of Association, the Listing Rules and the applicable laws and

regulations of the Cayman Islands. We are not permitted to repurchase our Shares on the Stock

Exchange for a consideration other than cash or for settlement otherwise than in accordance

with the trading rules of the Stock Exchange from time to time.

On the basis of our Company’s current financial position as disclosed in this document

and taking into account its current working capital position, our Directors consider that, if the

Repurchase Mandate is exercised in full, it might have a material adverse effect on our working

capital and/or gearing position as compared with the position disclosed in this document.

However, our Directors do not propose to exercise the Repurchase Mandate to such an extent

as it would, in the circumstances, have a material adverse effect on our working capital

requirements or the gearing levels which in the opinion of our Directors are from time to time

appropriate for us.

(d) General

None of our Directors nor, to the best of their knowledge having made all reasonable

enquiries, any of their close associates currently intends to sell any Shares to us.

Our Directors have undertaken to the Stock Exchange that, so far as the same may be

applicable, they will exercise the Repurchase Mandate in accordance with the Listing Rules

and the applicable laws and regulations of the Cayman Islands.

If, as a result of any repurchase of Shares, a shareholder’s proportionate interest in the

voting rights is increased, such increase will be treated as an acquisition for the purposes of

the Takeovers Code. Accordingly, a shareholder or a group of shareholders acting in concert

could obtain or consolidate control of us and become obliged to make a mandatory offer in

accordance with rule 26 of the Takeovers Code. Save as aforesaid, our 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.

We have not made any repurchases of our own securities in the past six months.


– V-6 –


No core connected person has notified us that he/she has a present intention to sell Shares

to us, or has undertaken not to do so, if the Repurchase Mandate is exercised.

B. FURTHER INFORMATION ABOUT OUR BUSINESS

1. Summary of the material contracts

The following contracts (not being contracts entered into in the ordinary course of

business) were entered into by our Group within the two years preceding the date of this

document and are or may be material:

(a) a deed of confirmation dated 26 August 2021 entered into between In-Tech

Electronics BVI and Cheng Chit Ming whereby they confirmed the details of an

incentive arrangement to be implemented during the Reorganisation;

(b) a deed of confirmation dated 26 August 2021 entered into between In-Tech

Electronics BVI and Cheung Wing Hung, whereby they confirmed the details of an


(c) a deed of confirmation dated 26 August 2021 entered into between In-Tech

Electronics BVI and Cheung Wing Kin, whereby they confirmed the details of an


(d) a deed of confirmation dated 26 August 2021 entered into between In-Tech

Electronics BVI and Mr. Albert Ho, whereby they confirmed the details of an


(e) a deed of confirmation dated 26 August 2021 entered into between In-Tech

Electronics BVI and Ho Wun Man Terence, whereby they confirmed the details of

an incentive arrangement to be implemented during the Reorganisation;

(f) a deed of confirmation dated 26 August 2021 entered into between In-Tech

Electronics BVI and Lee Lap Fai, whereby they confirmed the details of an incentive

arrangement to be implemented during the Reorganisation;

(g) a deed of confirmation dated 26 August 2021 entered into between In-Tech

Electronics BVI and So Sau San, whereby they confirmed the details of an incentive

arrangement to be implemented during the Reorganisation;

(h) a deed of confirmation dated 26 August 2021 entered into between In-Tech

Electronics BVI and Tang Ching Yu, whereby they confirmed the details of an



– V-7 –


(i) a deed of confirmation dated 26 August 2021 entered into between In-Tech

Electronics BVI and Tso Hum Ying, whereby they confirmed the details of an


(j) a deed of confirmation dated 26 August 2021 entered into between In-Tech

Electronics BVI and Tsui Kwan Keung Jackson, whereby they confirmed the details

of an incentive arrangement to be implemented during the Reorganisation;

(k) a deed of confirmation dated 26 August 2021 entered into between In-Tech

Electronics BVI and Wong Hop To, whereby they confirmed the details of an


(l) a deed of confirmation dated 26 August 2021 entered into between In-Tech

Electronics BVI and Wong Sui Ling Karen, whereby they confirmed the details of

an incentive arrangement to be implemented during the Reorganisation;

(m) a deed of confirmation dated 26 August 2021 entered into between In-Tech

Electronics BVI and Yeung Wai Keung, whereby they confirmed the details of an


(n) the sale and purchase agreement dated 17 September 2021 entered into between

In-Tech Electronics Holdings Ltd., P & B Nominee Services Limited and Ocean

Target Asia Limited, pursuant to which Ocean Target Asia Limited agreed to acquire

the entire issued share capital of In-Tech Enterprise HK at a consideration of

HK$10,000;

(o) the share purchase agreement dated 17 September 2021 entered into between

In-Tech Electronics BVI and In-Tech Manufacturing, pursuant to which In-Tech

Electronics BVI agreed to transfer and In-Tech Manufacturing agreed to purchase

the entire issued share capital of In-Tech Electronics Singapore at a consideration of

US$1.00;

(p) the share transfer agreement dated 23 September 2021 entered into between our

Company, Source Capital, Piggy Doggy and In-Tech Holdings, pursuant to which

our Company agreed to acquire and Source Capital and Piggy Doggy agreed to sell

the entire issued share capital of In-Tech Electronics BVI at a consideration of our

Company procuring In-Tech Holdings to credit the 7,711 nil-paid shares and 2,289

nil-paid shares held by Source Capital and Piggy Doggy, respectively;

(q) Deed of Indemnity; and

(r) [REDACTED].


– V-8 –


2. Intellectual property rights of our Group

(a) Trademarks

As at the Latest Practicable Date, we have registered one trademark which, in the opinion

of our Directors, is material to our business:

No. Trademark Registered ownerPlace ofregistration

Registernumber Class Validity period

1. In-Tech Electronics HK Hong Kong 305634856 35, 37, 39,

40, 42

25 May 2021 to

24 May 2031

As at the Latest Practicable Date, we have made applications for the registration of the

following trademarks which, in the opinion of our Directors, are material to our business:

No. Trademark ApplicantPlace ofapplication Class

Applicationnumber

Applicationdate

1. COLD CHAIN

PROTECTOR

In-Tech Enterprise

HK

United States 09 90/593411 22 March 2021

2. COLD CHAIN

PROTECTOR PRO

In-Tech Enterprise

HK


3. COLD CHAIN

PROTECTOR LITE

In-Tech Enterprise

HK


4. COLD CHAIN

PROTECTOR MATE

In-Tech Enterprise

HK


5. E-RING In-Tech Enterprise

HK


6. E-VALVE In-Tech Enterprise

HK


7. E-SECURITY TAPE In-Tech Enterprise

HK



– V-9 –


(b) Patents

As at the Latest Practicable Date, we have registered 19 patents which, in the opinion of

our Directors, are material to our business:

No. Patent Registered ownerPlace ofregistration Patent number

Expirationdate

1. Container System,

Closure System and

Container Closure

Security Method

In-Tech Enterprise

HK

China ZL201910241415.0 28 March 2039

2. Container Security

System

In-Tech Enterprise

HK

United States 10538371 28 March 2038


System

In-Tech Enterprise

HK

United States 10769934 25 June 2039


System

In-Tech Enterprise

HK

United States 10974882 17 January

20405. Track And Locate

System

In-Tech Enterprise

HK

United States 10939244 5 November

20396. Receiver Device For A

Track And Locate

System

In-Tech Enterprise

HK


2039

7. Tracking Device For

Track And Locate

System

In-Tech Enterprise

HK


2039


System

In-Tech Enterprise

HK



System

In-Tech Enterprise

HK



System

In-Tech Enterprise

HK

Hong Kong 40015532 28 March 2039


System

In-Tech Enterprise

HK

Germany 602020002532.4 25 June 2040


System

In-Tech Enterprise

HK

Belgium 3758397 25 June 2040


System

In-Tech Enterprise

HK

European

Patent

Convent

EP3758397 25 June 2040


System

In-Tech Enterprise

HK

Spain 3758397 25 June 2040


System

In-Tech Enterprise

HK

France EP3758397 25 June 2040


System

In-Tech Enterprise

HK

United

Kingdom

EP3758397 25 June 2040


– V-10 –


No. Patent Registered ownerPlace ofregistration Patent number

Expirationdate


System

In-Tech Enterprise

HK

Italy 3758397 25 June 2040


System

In-Tech Enterprise

HK

Netherlands EP3758397 25 June 2040


System

In-Tech Enterprise

HK

Sweden EP3758397 25 June 2040

As of the Latest Practicable Date, we have made applications for the registration of the

following patents which, in the opinion of our Directors, are material to our business:

No. Patent ApplicantPlace ofapplication

Applicationnumber

Applicationdate


System

In-Tech Enterprise

HK

China 202010581350.7 23 June 2020

2. Container System,

Closure System, and

Container Closure

Security Method

In-Tech Enterprise

HK

China 202011582260.6 28 March 2019


System

In-Tech Enterprise

HK

Europe 19165829.3 28 March 2019

4. Track And Locate

System

In-Tech Enterprise

HK

China 202011222946.4 5 November

20205. Track And Locate

System

In-Tech Enterprise

HK

Europe 20205861.6 5 November

20206. Container Closure

Node System

In-Tech Enterprise

HK

China 202110101321.0 26 January


Node System

In-Tech Enterprise

HK

Europe 21150791.8 8 January 2021


Node System

In-Tech Enterprise

HK

United States 17/021140 15 September

20209. Container Valve Node

System

In-Tech Enterprise

HK

China 202110080970.7 21 January


System

In-Tech Enterprise

HK

Europe 21150792.6 8 January 2021


System

In-Tech Enterprise

HK

United States 17/021214 15 September

202012. Container Locking

System

In-Tech Enterprise

HK

United States 17/127326 18 December

2020


– V-11 –


(c) Domain Names

As at the Latest Practicable Date, we have registered the following domain name which,

in the opinion of our Directors, is material to our business:

No. Registrant Domain nameDate ofregistration Expiration date

1. In-Tech Electronics HK www.in-tech.com.hk 28 May 2021 1 September 2024

C. FURTHER INFORMATION ABOUT OUR DIRECTORS

1. Directors’ service contracts and letters of appointment

Each of our executive Directors [has entered] into a service contract with us for an initial

fixed term of [three years] commencing from the [REDACTED] and will continue thereafter

until terminated by not less than [three months]’ notice in writing served by either party on the

other, which notice shall not expire until after the fixed term.

Each of our independent non-executive Directors [has entered] into a letter of

appointment with us for an initial fixed term of [one year] commencing from the

[REDACTED] and will continue thereafter until terminated by not less than [three months]’

notice in writing by served by the independent non-executive Director to our Company or with

immediate effect following the notice in writing served by our Company to the independent

non-executive Director.

The current basic annual salaries of our Directors are as follows:

Name of Director HK$

Mr. Ho Woon Wah Albert 3,057,600Mr. Pope Gordon Christopher 3,477,600Mr. Lee Lap Fai 2,035,200Ms. Wong Sui Ling Karen 1,267,200Mr. Cheung Wing Hung 1,446,000Dr. Pang Kwok Hung 240,000Mr. Chu, Howard Ho Hwa 240,000Mr. Cheung Shi Yeung 240,000

Save as aforesaid, none of our Directors has or is proposed to have a service contract with

us or any of our subsidiaries (other than contracts expiring or determinable by the employer

within one year without the payment of compensation (other than statutory compensation)).


– V-12 –


2. Directors’ remuneration during the Track Record Period


remuneration paid and benefits in kind granted to our Directors by us and our subsidiaries was

HK$19.8 million, HK$19.8 million and HK$16.2 million, respectively.

Save as disclosed above, no other emoluments have been paid or are payable, in respect

of the three years ended 31 March 2020, 2021 and 2022 by us to our Directors.

Under the arrangements currently in force, we estimate that the aggregate remuneration

payable to, and benefits in kind receivable by, our Directors (excluding discretionary bonus)

for the year ending 31 March 2023 would be approximately HK$14.0 million.

D. DISCLOSURE OF INTERESTS

1. Disclosure of interests

(a) Interests and short positions of our Directors in our share capital and our associated

corporations as of the Latest Practicable Date and following the Capitalisation Issue

and the [REDACTED]

Immediately following completion of the Capitalisation Issue and the [REDACTED] and

taking no account of any Shares which may be allotted and issued pursuant to the

[REDACTED] Share Option Scheme and the Share Option Scheme or the exercise of the

[REDACTED], the interests or short positions of our Directors and the chief executive of our

Company in our Shares, underlying Shares and debentures of our associated corporations,

within the meaning of Part XV of the SFO which will have to be notified to our Company and

the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests

and short positions which he is taken or deemed to have under such provisions of the SFO) or

which will be required, pursuant to section 352 of the SFO, to be recorded in the register

referred to therein or which will be required to be notified to us and the Stock Exchange

pursuant to the Model Code for Securities Transactions by Directors of Listed Companies

contained in the Listing Rules, will be as follows:


[REDACTED](1)

NameCapacity/Nature ofinterest

Numberof Shares

Approximatepercentage ofshareholding

in our Company

Mr. Albert Ho Interest in a controlled

corporation(2)



– V-13 –


Notes:



(b) Interests and/or short positions discloseable under Divisions 2 and 3 of Part XV of theSFO

Immediately following completion of the Capitalisation Issue and the [REDACTED] (butwithout taking into account of any Shares which may be issued upon the exercise of the[REDACTED] or Shares which may be issued pursuant to the exercise of any options grantedunder the [REDACTED] Share Option Scheme and the Share Option Scheme), so far as ourDirectors are aware, the following persons (not being a Director or a chief executive of ourCompany) will have an interest or short position in the Shares or underlying Shares whichwould fall to be disclosed to our Company and the Hong Kong Stock Exchange under theprovisions of Divisions 2 and 3 of Part XV of the SFO, or who will, directly or indirectly, beinterested in 10% or more of the nominal value of any class of share capital carrying rights tovote in all circumstances at general meetings of any member of our Company:


[REDACTED](1)

NameCapacity/Natureof interest

Number ofShares


shareholding inour Company

In-Tech Holdings Beneficial owner [REDACTED] [REDACTED]%

Source Capital Interest in a controlledcorporation(2)


Ms. Lee Sau Har Irene Interest of spouse(3) [REDACTED] [REDACTED]%

Notes:



(3) Ms. Lee Sau Har Irene is the spouse of Mr. Albert Ho and she is thus deemed to be interested in all theShares held by Mr. Albert Ho under the SFO.


– V-14 –


2. Disclaimers

Save as disclosed in this appendix and “Substantial Shareholders” in this document:

(a) our Directors are not aware of any person (not being our Director or chief executive)

who will, immediately after completion of the Capitalisation Issue and the

[REDACTED] (without taking into account Shares which may be issued upon the

exercise of the [REDACTED] or the Shares which may be issued upon the exercise

of options granted under the [REDACTED] Share Option Scheme and the Share

Option Scheme and the Capitalisation Issue), have an interest or a short position in

Shares or underlying Shares which would fall to be disclosed to us under the

provisions of Divisions 2 and 3 of Part XV of the SFO, or who will, directly or

indirectly, be interested in 10% or more of the nominal value of any class of share

capital carrying rights to vote in all circumstances at general meetings of any other

members of the Group;

(b) none of our Directors has any interest or short position in any of our Shares,

underlying Shares or debentures of any associated corporation within the meaning

of Part XV of the SFO, which will have to be notified to us and the Stock Exchange

pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short

positions which he is deemed to have under such provisions 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 to be notified to us and the Stock

Exchange pursuant to the Model Code for Securities Transactions by Directors of

Listed Companies, in each case once our Shares are [REDACTED];

(c) none of our Directors nor any of the parties listed in the section headed “F. Other

Information – 11. Consents of experts” in this Appendix is interested in the

promotion of our Company, or in any assets which have been, within the two years

immediately preceding the date of this document, acquired or disposed of by or

leased to our Company or any of our subsidiaries, or are proposed to be acquired or

disposed of by or leased to our Company or any of our subsidiaries;

(d) none of our Directors nor any of the parties listed in the section headed “F. Other

Information – 11. Consents of experts” in this Appendix is materially interested in

any contract or arrangement subsisting at the date of this document which is

significant in relation to our business;

(e) save in connection with the [REDACTED], none of the parties listed in the section

headed “F. Other Information – 11. Consents of experts” in this Appendix: (i) is

legally or beneficially interested in any securities of any member of our Group; or

(ii) has any right (whether legally enforceable or not) to subscribe for or to nominate

persons to subscribe for securities in any member of our Group; or (iii) is an officer

or servant or in employment of an officer or servant of our Group;


– V-15 –


(f) none of our Directors or their close associates (as defined in the Listing Rules) or

the existing Shareholders (who, to the knowledge of our Directors, owns more than

5% of our issued share capital) has any interest in any of the five largest customers

or the five largest suppliers of our Group; and

(g) no cash, share or other benefit has been paid, allotted or given within the two years

preceding the date of this document to any promoter of our Company nor is any

cash, share or benefit intended to be paid, allotted or given on the basis of the

[REDACTED] or related transactions as mentioned in this document.

E. [REDACTED] SHARE OPTION SCHEME AND SHARE OPTION SCHEME

1. [REDACTED] Share Option Scheme

The following is a summary of principal terms of the [REDACTED] Share Option

Scheme conditionally approved by a resolution of the then Shareholders passed on [●] 2022

and adopted by a resolution of our Board on [●] 2022 (the “[REDACTED] Share OptionScheme Adoption Date”). The terms of the [REDACTED] Share Option Scheme are not

subject to the provisions of Chapter 17 of the Listing Rules as the [REDACTED] Share Option

Scheme will not involve the grant of options by us to subscribe for Shares after the

[REDACTED].

(a) Purpose

The purpose of the [REDACTED] Share Option Scheme is to give eligible participants

an opportunity to have a personal stake in our Company and help motivate them to optimise

their future performance and efficiency to our Group and/or to reward them for their past

contributions, to attract and retain or otherwise maintain on-going relationships with such

eligible participants who are significant to and/or whose contributions are or will be beneficial

to the performance, growth or success of our Group.

(b) Eligible persons

Subject to the terms of the [REDACTED] Share Option Scheme, our Board shall be

entitled to offer the grant of any option to subscribe for Shares granted pursuant to the

[REDACTED] Share Option Scheme for the time being subsisting (“Option”) to any persons

who satisfy the following eligibility criteria (“Eligible Person(s)”) as our Board may in its

absolute discretion select:

(i) any current or former executive director of, manager of, headmaster of, dean of, or

other employee holding an executive, managerial, supervisory or similar position in

any member of our Group (an “Executive”), any current or former full-time or

part-time employee, or a person for the time being seconded to work full-time or

part-time for any member of our Group (an “Employee”);


– V-16 –


(ii) a current or former director or proposed director (including an independent

non-executive director) or current or former manager of any member of our Group;

and

(iii) an associate (which shall have the same meaning ascribed to it under the Listing

Rules) of any of the persons referred to in (a) to (b) above.

The basis of eligibility shall be determined by our Board from time to time.

(c) Duration and administration

The [REDACTED] Share Option Scheme shall come into effect upon the approval and

adoption of the [REDACTED] Share Option Scheme by all the Shareholders.

Subject to the approval of the Shareholders and the termination provisions in the

[REDACTED] Share Option Scheme, the [REDACTED] Share Option Scheme shall be valid

and effective for a period of 10 years commencing on the [REDACTED] Share Option Scheme

Adoption Date, provided that no option shall be granted on or after the [REDACTED] Date.

The period during which an Option may be exercised will be determined by our Board in its

absolute discretion, except no Option may be exercised more than 10 years after the date it was

offered, being the date of our Board resolution approving the grant of such Option, which must

be a business day (the “Offer Date”).

The [REDACTED] Share Option Scheme shall be subject to the administration of our

Board whose decision on all matters arising in relation to the [REDACTED] Share Option

Scheme or its interpretation or effect shall (save as otherwise provided in the [REDACTED]

Share Option Scheme) be final and binding on all parties. Our Board may delegate any or all

of its powers in relation to the [REDACTED] Share Option Scheme to any of its committees.

(d) Offer and grant of Options

Subject to the terms of the [REDACTED] Share Option Scheme, our Board shall be

entitled at any time between (a) the [REDACTED] Share Option Scheme Adoption Date and

(b) the [REDACTED] (including the former but excluding the latter) to offer the grant of an

Option to any Eligible Person as the Board may in its absolute discretion select to subscribe

at the Subscription Price for such number of Shares as our Board may (subject to the maximum

number of shares available for subscription) determine.

Our Board may in its absolute discretion when offering the grant of an Option impose any

conditions, restrictions or limitations in relation thereto in addition to those set forth in the

[REDACTED] Share Option Scheme as our Board may think fit (to be stated in the letter

containing the offer of the grant of the Option) including (without prejudice to the generality

of the foregoing) qualifying and/or continuing eligibility criteria, conditions, restrictions or

limitations relating to the achievement of performance, operating or financial targets by our

Company and/or the grantee, the satisfactory performance or maintenance by the grantee of


– V-17 –


certain conditions or obligations or the time or period when the right to exercise the Option in

respect of all or some of the Option Shares shall vest provided that such terms or conditions

shall not be inconsistent with any other terms or conditions of this [REDACTED] Share

Option Scheme. For the avoidance of doubt, subject to such terms and conditions as our Board

may determine as aforesaid (including such terms and conditions in relation to their vesting,

exercise or otherwise) there is no minimum period for which an Option must be held before it

can be exercised.

An offer of the grant of an Option shall remain open for acceptance by the Eligible Person

concerned for a period of 28 days from the Offer Date provided that no such grant of an Option

may be accepted after the expiry of the effective period of the [REDACTED] Share Option

Scheme. An Option shall be deemed to have been granted and accepted by the Eligible Person

and to have taken effect on the relevant Offer Date when the duplicate offer letter comprising

acceptance of the offer of the Option duly signed by the grantee together with a remittance in

favour of our Company of HK$1.00 by way of consideration for the grant thereof is received

by our Company on or before the acceptance date. Such remittance shall in no circumstances

be refundable.

(e) Performance targets

Our Board may impose and set out in the offer letter of grant such performance target(s)

as it may deem fit for relevant Eligible Person to achieve before any Option can be exercised.

(f) Subscription price

The subscription price in respect of any particular Option shall be a price not more than

100% (inclusive) of the [REDACTED] price which shall be determined by our Board in its

absolute discretion.

(g) Exercise of Option

An Option shall be exercised in whole or in part within the period commencing

immediately after the [REDACTED] and expiring on the date of expiry which shall not exceed

10 years from the [REDACTED] for such Option (the “Option Period”) in the manner as set

out in the terms of the [REDACTED] Share Option Scheme by the grantee by giving notice

in writing to our Company stating that the Option is thereby exercised and specifying 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 aggregate subscription price for the Shares in respect

of which the notice is given. Within 30 days after receipt of the notice and, where appropriate,

receipt of the auditors’ certificate in the event of reorganisation of capital structure, our

Company shall accordingly allot and issue the relevant number of Shares to the grantee

credited as fully paid with effect from (but excluding) the relevant exercise date and issue to

the grantee share certificate(s) in respect of the Shares so allotted.


– V-18 –


The exercise of any Option may be subject to a vesting schedule to be determined by our

Board in its absolute discretion, which shall be specified in the offer letter. Notwithstanding the

foregoing, the earliest vesting date shall not be earlier than the [REDACTED].

The exercise of any Option shall be subject to the shareholders of our Company in general

meeting approving any necessary increase in the authorised share capital of our Company.

Subject as hereinafter provided and other terms of the [REDACTED] Share Option

Scheme, an Option may be exercised by the grantee at any time during the Option Period,

provided that, among others:

(i) In the event that the grantee (except in the proper course of his duties), either during

his time of employment or at any time after his termination of employment (however

arising) or retirement, having used or disclosed to any person, company or other

organisation whatsoever (and did not use his best endeavours to prevent the

publication or disclosure of) any confidential information of our Group (other than

any use or disclosure authorised by our Board or required by law), our Board shall

have the absolute right, at its sole discretion, to determine at any time that the

grantee is no longer a qualified person, and our Company shall have the right to

cancel any outstanding Option or any part of it.

(ii) Except with the prior written consent of our Company, in the event that the grantee

directly or indirectly invests, participates, or engages in the restricted businesses

within three years after retiring or resigning from our Group in accordance with its

internal rules and policies, our Board shall have the absolute right, at its sole

discretion, to determine at any time that the grantee is no longer a qualified person,

and our Company shall have the right to cancel any outstanding Option or any part

of it.

(iii) Except having obtained prior written consent of our Company, in the event that the

grantee during its term of employment provides to his immediate family member(s)

any confidential information, and such immediate family member(s) directly or

indirectly invests, participates, and engages in the restricted businesses, our Board

shall have the absolute right, at its sole discretion, to determine at any time that the



(iv) In the event that the grantee ceases to be an Executive by reason of his transfer of

employment to an affiliate company pursuant to the authorisation and approval of

our Board, his Option (to the extent not already exercised) shall be exercisable until

the expiry of the relevant Option Period, but if such transfer of employment to an

affiliate company has not been authorised and approved by our Board, our Board

shall have the absolute right, at its sole discretion, to determine at any time that the




– V-19 –


(v) In the event that the grantee abuses his position and engages in graft and bribery, our

Board shall have the absolute right, at its sole discretion, to determine at any time

that the grantee is no longer a qualified person, and our Company shall have the

right to cancel any outstanding Option or any part of it.

(vi) In the event that the grantee violates the internal rules and policies of our Group or

any of its members, or departs our Group unilaterally without going through formal

resignation procedures, our Board shall have the absolute right, at its sole discretion,

to determine at any time that the Grantee is no longer a qualified person, and our

Company shall have the right to cancel any outstanding Option or any part of it.

(vii) If a general offer is made to all holders of Shares and such offer becomes or is

declared unconditional (in the case of a takeover offer) or is approved by the

requisite majorities at the relevant meetings of shareholders of our Company (in the

case of a [REDACTED] Share Option Scheme of arrangement), the grantee shall be

entitled to exercise the Option (to the extent not already exercised) at any time (in

the case of a takeover offer) within one month after the date on which the offer

becomes or is declared unconditional or (in the case of a scheme of arrangement)

prior to such time and date as shall be notified by our Company.

(viii) If a compromise or arrangement between our Company and its members or creditors

is proposed for the purpose of or in connection with a scheme for the reconstruction

of our Company or its amalgamation with any other company, our Company shall

give notice thereof to the grantees who have Options unexercised at the same time

as it despatches notices to all members or creditors of our Company summoning the

meeting to consider such a compromise or arrangement and thereupon each grantee

(or his or receiver) may until the expiry of the earlier of:

a. the Option Period;

b. the period of two months from the date of such notice; or

c. the date on which such compromise or arrangement is sanctioned by the court,

exercise in whole or in part his Option.

(ix) In the event a notice is given by our 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 our Company, our Company shall on the same date as or soon

after it despatches such notice to each member of our Company give notice thereof

to all grantees and thereupon, each grantee shall be entitled to exercise all or any of

his options at any time not later than two business days prior to the proposed general

meeting of our Company by giving notice in writing to our Company, accompanied

by a remittance for the full amount of the aggregate Subscription Price for the

Shares in respect of which the notice is given whereupon our Company shall as soon


– V-20 –


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 the relevant Shares to

the grantee credited as fully paid.

(h) Maximum number of shares

The maximum number of Shares which may be issued upon exercise of all Options to begranted under the [REDACTED] Share Option Scheme and any other schemes of our Groupshall not in aggregate exceed 10% of the Shares in issue as at the [REDACTED], excludingShares which may fall to be issued upon the exercise of any [REDACTED] granted by theCompany.

The said maximum numbers shall be adjusted, in such manner as the auditors orindependent financial advisor appointed by our Company shall certify in writing to our Boardto be fair and reasonable in the event of any alteration to the capital structure of our Companyin accordance with the terms of the [REDACTED] Share Option Scheme whether by way ofcapitalisation of profits or reserves, rights issue, consolidation, reclassification, reconstruction,subdivision or reduction of the share capital of our Company but shall not in any event exceedthe limits imposed by the Listing Rules. Any such adjustment shall give the Eligible Personsthe same proportion of equity capital as they were previously entitled to and no adjustmentsshall be made to the extent that a share would be issued at less than its nominal value. Inrespect of any such adjustments, other than any made on a capitalisation issue, the auditors orindependent financial advisor shall confirm to our Board in writing that the adjustments satisfythe requirement.

(i) Transferability of Options

An Option shall be personal to the grantee and shall not be assignable and no grantee shallin any way sell, transfer, charge, mortgage, encumber or create any interest (legal or beneficial)in favour of any third party over or in relation to any Option or attempt so to do (save that thegrantee may nominate a nominee in whose name the Shares issued pursuant to the[REDACTED] Share Option Scheme may be registered), except with the prior written consentof our Board from time to time. Any breach of the foregoing shall entitle our Company tocancel any outstanding Option or part thereof granted to such grantee.

(j) Lapse of Option

An Option shall lapse automatically and not be exercisable (to the extent not alreadyexercised) on the earliest of:

(i) the expiry of the Option period;

(ii) the expiry of any of the period referred to in section (g) relating to the exercise ofOptions above;

(iii) the date of the commencement of the winding-up of our Company;


– V-21 –


(iv) there is an unsatisfied judgement, order or award outstanding against the grantee orour Board has reason to believe that the grantee is unable to pay or to have noreasonable prospect of being able to pay his/its debts;

(v) there are circumstances which entitle any person to take any action, appoint anyperson, commence proceedings or obtain any order of the type mentioned in theterms of the [REDACTED] Share Option Scheme; or

(vi) a bankruptcy order has been made against any director or shareholder of the grantee(being a corporation) in any jurisdiction.

No compensation shall be payable upon the lapse of any Option, provided that our Boardshall be entitled in its discretion to pay such compensation to the grantee in such manner as itmay consider appropriate in any particular case.

(k) Cancellation of Options

Our Board shall be entitled for the following causes to cancel any Option in whole or inpart by giving notice in writing to the grantee stating that such Option is thereby cancelled witheffect from the date specified in such notice (the “Cancellation Date”):

(i) the grantee commits or permits or attempts to commit or permit a breach of the termsof the [REDACTED] Share Option Scheme referred to in section (i) relating totransferability of Options above or any terms or conditions attached to the grant ofthe Option;

(ii) the grantee makes a written request to our Board for the Option to be cancelled; or

(iii) if the grantee has, in the opinion of our Board, conducted himself in any mannerwhatsoever to the detriment of or prejudicial to the interests of our Company or aSubsidiary.

The Option shall be deemed to have been cancelled with effect from the Cancellation Datein respect of any part of the Option which has not been exercised as at the Cancellation Date.No compensation shall be payable upon any such cancellation, provided that our Board shallbe entitled in its discretion to pay such compensation to the grantee in such manner as he mayconsider appropriate in any particular case.

(l) Reorganisation of capital structure

In the event of any alteration to the capital structure of our Company while any Optionremains exercisable, whether by way of capitalisation of profits or reserves, open offer, rightsissue, consolidation, reclassification, reconstruction, sub-division or reduction of the sharecapital of our Company, our Board may, if it considers the same to be appropriate, direct thatadjustments be made to:

(i) the maximum number of Shares subject to the [REDACTED] Share Option Scheme;and/or


– V-22 –


(ii) the aggregate number of Shares subject to the Option so far as unexercised; and/or

(iii) the Subscription Price of each outstanding Option.

Where our Board determines that such adjustments are appropriate (other than an

adjustment arising from a capitalisation issue), the Auditors appointed by our Company shall

certify in writing to our Board that any such adjustments are in their opinion fair and

reasonable, provided that:

(i) any such adjustments shall be made on the basis that the aggregate Subscription

Price payable by the grantee on the full exercise of any Option shall remain as nearly

as practicable the same as (but shall not be greater than) as it was before such event;

(ii) no such adjustments shall be made the effect of which would be to enable a Share

to be issued at less than its nominal value;

(iii) no such adjustment shall be made that would increase the aggregate Intrinsic Value

of the outstanding Options;

(iv) any such adjustments shall be made in accordance with the provisions as stipulated

under Chapter 17 of the Listing Rules and supplementary guidance on the

interpretation of the Listing Rules issued by the Stock Exchange from time to time;

and

(iv) the issue of securities as consideration in a transaction shall not be regarded as a

circumstance requiring any such adjustments.

(m) Termination of the [REDACTED] Share Option Scheme

Our Company may by resolution in general meeting at any time terminate the operation

of the [REDACTED] Share Option Scheme. Upon termination of the [REDACTED] Share

Option Scheme as aforesaid, no further Options shall be offered but the provisions of the

[REDACTED] Share Option Scheme shall remain in force and effect in all other respects. All

Options granted prior to such termination and not then exercised shall continue to be valid and

exercisable subject to and in accordance with the [REDACTED] Share Option Scheme.

(n) Alteration of the [REDACTED] Share Option Scheme

The [REDACTED] Share Option Scheme may be altered in any respect by a resolution

of our Board except the following shall not be carried out except with the prior sanction of an

ordinary resolution of the shareholders of our Company in general meeting:

(i) any material alteration to its terms and conditions or any change to the terms of

Options granted (except where the alterations take effect under the existing terms of

the [REDACTED] Share Option Scheme);


– V-23 –


(ii) any alteration to the provisions of the [REDACTED] Share Option Scheme inrelation to the matters set out in Rule 17.03 of the Listing Rules to the advantage ofgrantee;

(iii) any change to the authority of our Board or any person or committee delegated byour Board pursuant to the terms of the [REDACTED] Share Option Scheme toadminister the day-to-day running of the [REDACTED] Share Option Scheme; and

(iv) any alteration to the above alteration provisions of the [REDACTED] Share OptionScheme,

provided always that the amended terms of the [REDACTED] Share Option Scheme shallcomply with the applicable requirements of the Listing Rules.

(o) Outstanding Options granted

The grant of Options under the [REDACTED] Share Option Scheme to the grantees asset out below has been approved by our Board on [●]. The overall limit on the number ofunderlying Shares pursuant to the [REDACTED] Share Option Scheme is [REDACTED]Shares. The number of underlying Shares pursuant to the outstanding Options granted underthe [REDACTED] Share Option Scheme amounts to [REDACTED] Shares, representing[REDACTED]% of the issued Shares immediately following the completion of the[REDACTED] (assuming no exercise of the [REDACTED] or any options that may begranted under the [REDACTED] Share Option Scheme or the Share Option Scheme).

As at the Latest Practicable Date, we have granted Options to seven participants,including to one Director, under the [REDACTED] Share Option Scheme. Save as Mr. LiewSeng Keong and Mr. Ng Beng Hooi, no grantee under the [REDACTED] Share Option Schemeis a member of senior management or connected persons of our Company. The exercise priceof the Options granted under the [REDACTED] Share Option Scheme is [50]% of the[REDACTED]. Details of the grantees under the [REDACTED] Share Option Scheme are setout below:

Name and positionof grantee Address

Number ofShares under the

Option granted Date of grant Vesting period

Approximatepercentage ofissued Shares

immediately aftercompletion of the

[REDACTED](1)

DirectorMr. Gordon

Christopher Pope(Executive Director anddeputy chief executiveofficer)

17/F, Bowen’sLookout 13Bowen RoadHong Kong

[REDACTED] [●] 2022 Vesting equally oneach of the second,third and fourthanniversary of the[REDACTED]

[REDACTED]


– V-24 –







[REDACTED](1)

Senior ManagementMr. Liew Seng Keong

(Human resources andtraining director)

6B-7-3A BukitJambul, JalanBukit Jambul11900 BayanLepas, Penang,Malaysia


[REDACTED]

Mr. Ng Beng Hooi(Operations director)

5, LengkokKikik 7 TamanInderawasih13600 PeraiPenang,Malaysia


[REDACTED]

Other employeesMr. Tsang Sai

Ping Jacky(R&D manager)

23C, Block 2Villa Athena,600 Sai ShaRoad Ma OnShan, ShatinHong Kong


[REDACTED]

Mr. Tso Hum Ying(R&D manager)

Flat 3, 5/F,Block C NgaTsui HouseLok Nga CourtNgau Tau KokKowloonHong Kong


[REDACTED]

Mr. Tse Mak(R&D manager)

Flat D, 2/F,Block 5Sereno Verde99 Tai TongRoad YuenLongHong Kong


[REDACTED]


– V-25 –







[REDACTED](1)

Mr. Ho WaiCheung Davis(IT manager)

1/F, No. 18Third LaneWu Kai ShaVillage Ma OnShan, ShatinHong Kong


[REDACTED]

Note:

(1) The above table assumes the [REDACTED] is not exercised and does not take into account any Shares whichmay be issued upon the exercise of any options that may be granted under the [REDACTED] Share OptionScheme or the Share Option Scheme.

Assuming full exercise of the outstanding options granted under the [REDACTED] Share

Option Scheme, the shareholding of the Shareholders immediately following completion of the

Capitalisation Issue and the [REDACTED] (assuming no exercise of the [REDACTED] or

any options that may be granted under the Share Option Scheme) will be diluted by

approximately [REDACTED]% as calculated based on [REDACTED] Shares then in issue.

Save and except as set out above, no other Options will be granted or agreed to be granted by

our Company under the [REDACTED] Share Option Scheme.

2. Share Option Scheme

The following is a summary of principal terms of the Share Option Scheme conditionally

approved by a resolution of the then shareholders of our Company passed on [●] and adopted

by a resolution of our Board on [●] (the “Adoption Date”). The terms of the Share Option

Scheme are in compliance with the provisions of Chapter 17 of the Listing Rules.

(a) Purpose

The purpose of the Share Option Scheme is to give the Eligible Persons (as defined in the

following paragraph) an opportunity to have a personal stake in our Company and help

motivate them to optimise their future contributions to our Group and/or to reward them for

their past contributions, to attract and retain or otherwise maintain on-going relationships with

such Eligible Persons who are significant to and/or whose contributions are or will be

beneficial to the performance, growth or success of our Group, and additionally in the case of

Executives (as defined below), to enable our Group to attract and retain individuals with

experience and ability and/or to reward them for their past contributions.


– V-26 –


(b) Who may join

The Board may, at its absolute discretion, offer options (“Options”) to subscribe for suchnumber of Shares in accordance with the terms set out in the Share Option Scheme to:

(i) any executive director of, manager of, or other employee holding an executive,managerial, supervisory or similar position in any member of our Group(“Executive”), any proposed employee, any full-time or part-time employee, or aperson for the time being seconded to work full-time or part-time for any memberof our Group (“Employee”);

(ii) a director or proposed director (including an independent non-executive director) ofany member of our Group;

(iii) a direct or indirect shareholder of any member of our Group;

(iv) a supplier of goods or services to any member of our Group;

(v) a customer, consultant, business or joint venture partner, franchisee, contractor,agent or representative of any member of our Group;

(vi) a person or entity that provides design, research, development or other support orany advisory, consultancy, professional or other services to any member of ourGroup;

(vii) an associate of any of the persons referred to in paragraphs (a) to (f) above; and

(viii) any person involved in the business affairs of the Company whom our Boarddetermines to be appropriate to participate in the Share Option Scheme

(the person referred above are the “Eligible Persons”).

(c) Maximum number of Shares

The maximum number of Shares which may be issued upon exercise of all options to begranted under the Share Option Scheme and any other schemes of our Group shall not inaggregate exceed 10% of the Shares in issue as at the [REDACTED] (such 10% limitrepresenting [REDACTED] Shares) excluding Shares which may fall to be issued upon theexercise of the [REDACTED] granted by our Company (the “Scheme Mandate Limit”)provided that:

(i) our Company may at any time as our Board may think fit seek approval from ourShareholders to refresh the Scheme Mandate Limit, save that the maximum numberof Shares which may be issued upon exercise of all options to be granted under theShare Option Scheme and any other schemes of our Company shall not exceed 10%of our Shares in issue as at the date of approval by our Shareholders in general


– V-27 –


meeting where the Scheme Mandate Limit is refreshed. Options previously grantedunder the Share Option Scheme and any other schemes of our Company (includingthose outstanding, cancelled, lapsed or exercised in accordance with the terms of theShare Option Scheme or any other schemes of our Company) shall not be countedfor the purpose of calculating the Scheme Mandate Limit as refreshed. OurCompany shall send to our Shareholders a circular containing the details andinformation required under the Listing Rules;

(ii) our Company may seek separate approval from our Shareholders in general meeting

for granting Options beyond the Scheme Mandate Limit, provided that the Options

in excess of the Scheme Mandate Limit are granted only to the Eligible Person

specified by our Company before such approval is obtained. Our Company shall

issue a circular to our Shareholders containing the details and information required

under the Listing Rules; and

(iii) notwithstanding paragraph (a) above, 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 schemes of our Group shall not exceed 30%

of our Company’s issued share capital from time to time. No Options may be granted

under the Share Option Scheme and any other share option scheme of our Company

if this will result in such limit being exceeded.

(d) Maximum entitlement of each participants

No Option may be granted to any one person such that the total number of Shares issued

and to be issued upon exercise of Options granted and to be granted to that person in any

12-month period exceeds 1% of our Company’s issued share capital from time to time. Where

any further grant of Options to such an Eligible Person would result in our Shares issued and

to be issued upon exercise of all Options granted and to be granted to such Eligible Person

(including exercised, cancelled and outstanding Options) in the 12-month period up to and

including the date of such further grant representing in aggregate over 1% of our Shares in

issue, such further grant shall be separately approved by our Shareholders in general meeting

with such Eligible Person and his close associates (or his associates if such Eligible Person is

a connected person) abstaining from voting. Our Company shall send a circular to our

Shareholders disclosing the identity of the Eligible Person, the number and terms of the

Options to be granted (and Options previously granted) to such Eligible Person, and containing

the details and information required under the Listing Rules. The number and terms (including

the subscription price) of the Options to be granted to such Eligible Person must be fixed

before the approval of our Shareholders and the date of the Board meeting proposing such grant

shall be taken as the offer date for the purpose of calculating the subscription price of those

Options.


– V-28 –


(e) Offer and grant of Options

Subject to the terms of the Share Option Scheme, the Board shall be entitled at any time

within 10 years from the Adoption Date to offer the grant of an Option to any Eligible Person

as the Board may in its absolute discretion select to subscribe at the subscription price for such

number of Shares as the Board may (subject to the terms of the Share Option Scheme)

determine (provided the same shall be a board lot for dealing in the Shares on the Stock

Exchange or an integral multiple thereof).

(f) Granting Options to connected persons

Subject to the terms in the Share Option Scheme, only insofar as and for so long as the

Listing Rules require, where any offer of an Option is proposed to be made to a director, chief

executive or a substantial shareholder (as defined in the Listing Rules) of our Company or any

of their respective associates, such offer must first be approved by the independent

non-executive Directors of our Company (excluding the independent non-executive Director

who or whose associates is the grantee of an Option).

Where any grant of Options to a substantial shareholder (as defined in the Listing Rules)

or an independent non-executive Director of our Company, or any of their respective

associates, would result in the securities issued and to be issued upon exercise of all Options

already granted and to be granted (including Options exercised, cancelled and outstanding) to

such person in the 12-month period up to and including the date of such grant:

(i) representing in aggregate over 0.1% of the relevant class of securities in issue; and

(ii) (where the securities are [REDACTED] on the Stock Exchange), having an

aggregate value, based on the closing price of the securities at the date of each grant,

in excess of HK$5.0 million,

such further grant of Options must be approved by our Shareholders (voting by way of a poll).

Our Company shall send a circular to our Shareholders containing the information required

under the Listing Rules. The grantee, his associates and all core connected persons of our

Company must abstain from voting in favour at such general meeting.

Approval from our Shareholders is required for any change in the terms of Options

granted to a participant who is a substantial shareholder or an independent non-executive

Director of our Company, or any of their respective associates. The grantee, his associates and

all core connected persons of our Company must abstain from voting in favour at such general

meeting.


– V-29 –


(g) Restriction on the time of grant of Options

The Board shall not grant any Option under the Share Option Scheme after inside

information has come to its knowledge until such inside information has been announced

pursuant to the requirements of the Listing Rules. In particular, no Option shall be granted

during the period commencing one month immediately preceding the earlier of 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 our Company’s results for any year, half-year, quarterly or

any other interim period (whether or not required under the Listing Rules) and the deadline for

our Company to publish an announcement of its results for any year, half-year, quarterly or any

other interim period (whether or not required under the Listing Rules), and ending on the date

of the results announcements.

(h) Minimum holding period, vesting and performance target

Subject to the provisions of the Listing Rules, the Board may in its absolute discretion

when offering the grant of an Option impose any conditions, restrictions or limitations in

relation thereto in addition to those set forth in the Share Option Scheme as the Board may

think fit (to be stated in the letter containing the offer of the grant of the Option) including

(without prejudice to the generality of the foregoing) qualifying and/or continuing eligibility

criteria, conditions, restrictions or limitations relating to the achievement of performance,

operating or financial targets by our Company and/or the grantee, the satisfactory performance

or maintenance by the grantee of certain conditions or obligations or the time or period before

the right to exercise the Option in respect of any of the Shares shall vest provided that such

terms or conditions shall not be inconsistent with any other terms or conditions of the Share

Option Scheme. For the avoidance of doubt, subject to such terms and conditions as the Board

may determine as aforesaid (including such terms and conditions in relation to their vesting,

exercise or otherwise) there is no minimum period for which an Option must be held before it

can be exercised and no performance target which need to be achieved by the grantee before

the Option can be exercised.

(i) Amount payable for Options and offer period

An offer of the grant of an Option shall remain open for acceptance by the Eligible Person

concerned for a period of 28 days from the offer date provided that no such grant of an Option

may be accepted after the expiry of the effective period of the Share Option Scheme. An Option

shall be deemed to have been granted and accepted by the Eligible Person and to have taken

effect when the duplicate offer letter comprising acceptance of the offer of the Option duly

signed by the grantee together with a remittance in favour of our Company of HK$1.00 by way

of consideration for the grant thereof is received by our Company on or before the date upon

which an offer of an Option must be accepted by the relevant Eligible Person, being a date no

later than 28 days after the offer date (the “Acceptance Date”). Such remittance shall in no

circumstances be refundable.


– V-30 –


Any offer of the grant of an Option may be accepted in respect of less than the number

of Shares in respect of which it is offered provided that it is accepted in respect of board lots

for dealing in Shares on the Stock Exchange or an integral multiple thereof and such number

is clearly stated in the duplicate offer letter comprising acceptance of the offer of the Option.

To the extent that the offer of the grant of an Option is not accepted by the Acceptance Date,

it will be deemed to have been irrevocably declined.

(j) Subscription price

The subscription price in respect of any particular Option shall be such price as the Board

may in its absolute discretion determine at the time of grant of the relevant Option (and shall

be stated in the letter containing the offer of the grant of the Option) but the subscription price

shall not be less than whichever is the highest of:

(i) the nominal value of a Share;

(ii) the closing price of a Share as stated in the Stock Exchange’s daily quotations sheet

on the offer date; and

(iii) the average closing price of a Share as stated in the Stock Exchange’s daily

quotations sheets for the 5 Business Days (as defined in the Listing Rules)

immediately preceding the offer date.

(k) Exercise of Option

(i) An Option shall be exercised in whole or in part (but if in part only, in respect of

a board lot or any integral multiple thereof) within the Option period in the manner

as set out in this Share Option Scheme by the grantee (or his or her legal personal

representative(s)) by giving notice in writing to our Company stating that the Option

is thereby exercised and specifying 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 aggregate subscription price for the Shares in respect of which the

notice is given. Within 28 days after receipt of the notice and, where appropriate,

receipt of a certificate from our auditors pursuant to the Share Option Scheme, our

Company shall accordingly allot and issue the relevant number of Shares to the

grantee (or his or her legal personal representative(s)) credited as fully paid with

effect from (but excluding) the relevant exercise date and issue to the grantee (or his

or her legal personal representative(s)) share certificate(s) in respect of the Shares

so allotted.

(ii) The exercise of any Option may be subject to a vesting schedule to be determined

by the Board in its absolute discretion, which shall be specified in the offer letter.


– V-31 –


(iii) The exercise of any Option shall be subject to the members of our Company in

general meeting approving any necessary increase in the authorised share capital of

our Company.

(iv) Subject as hereinafter provided, among others:

a. in the event that the grantee dies or becomes permanently disabled before

exercising an Option (or exercising it in full), he or she (or his or her legal

representative(s)) may exercise the Option up to the grantee’s entitlement

immediately prior to the death or permanently disability (to the extent not

already exercised) within a period of 12 months following his or her death or

permanent disability or such longer period as the Board may determine;

b. in the event that the grantee ceases to be an Executive for any reason (including

his or her employing company ceasing to be a member of our Group) other than

his or her death, permanent disability, retirement pursuant to such retirement

scheme applicable to our Group at the relevant time or the transfer of his or her

employment to an affiliate company or the termination of his or her

employment with the relevant member of our Group by resignation or culpable

termination, the Option (to the extent not already exercised) shall lapse on the

date of cessation of such employment and not be exercisable unless the Board

otherwise determines in which event the Option (or such remaining part

thereof) shall be exercisable within such period as the Board may in its

absolute discretion determine following the date of such cessation;

c. if a general offer is made to all holders of Shares and such offer becomes or

is declared unconditional (in the case of a takeover offer) or is approved by the

requisite majorities at the relevant meetings of our Shareholders (in the case of

a scheme of arrangement), the grantee shall be entitled to exercise the Option

(to the extent not already exercised) at any time (in the case of a takeover offer)

within one month after the date on which the offer becomes or is declared

unconditional or (in the case of a scheme of arrangement) prior to such time

and date as shall be notified by our Company;

d. if a compromise or arrangement between our Company and its members or

creditors is proposed for the purpose of or in connection with a scheme for the

reconstruction of our Company or its amalgamation with any other company,

our Company shall give notice thereof to the grantees who have Options

unexercised at the same time as it dispatches notices to all members or

creditors of our Company summoning the meeting to consider such a

compromise or arrangement and thereupon each grantee (or his or her legal

representatives or receiver) may until the expiry of the earlier of:

(1) the Option period;


– V-32 –


(2) the period of two months from the date of such notice; or

(3) the date on which such compromise or arrangement is sanctioned by the

court, exercise in whole or in part his or her Option.

e. in the event a notice is given by our 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 our Company, our Company shall on the

same date as or soon after it dispatches such notice to each member of our

Company give notice thereof to all grantees and thereupon, each grantee (or his

or her legal personal representative(s)) shall be entitled to exercise all or any

of his or her options at any time not later than two Business Days (as defined

in the Listing Rules) prior to the proposed general meeting of our Company by

giving notice in writing to our Company, accompanied by a remittance for the

full amount of the aggregate subscription price for the Shares in respect of

which the notice is given whereupon our Company shall as soon as possible

and, in any event, no later than the business day (as defined in the Listing

Rules) immediately prior to the date of the proposed general meeting referred

to above, allot the relevant Shares to the grantee credited as fully paid.

(l) Life of Share Option Scheme

Subject to the terms of this Share Option Scheme, the Scheme shall be valid and effective

for a period of 10 years from the Adoption Date, after which no further options will be granted

or offered but the provisions of the Share Option Scheme shall remain in force and effect to

the extent necessary to give effect to the exercise of any subsisting Options granted prior to the

expiry of the 10-year period or otherwise as may be required in accordance with the provisions

of the Share Option Scheme.

(m) Lapse of Share Option Scheme

An Option shall lapse automatically and not be exercisable, to the extent not already

exercised, on the earliest of:

(i) the expiry of the Option period;

(ii) the expiry of any of the period referred to paragraphs related to exercise of the

Option;

(iii) subject to the terms of the period mentioned in the paragraph headed “E.

[REDACTED] Share Option Scheme and Share Option – 2. Share Option Scheme

– (k) Exercise of Option” in this Appendix, the date of the commencement of the

winding-up of our Company;


– V-33 –


(iv) there is an unsatisfied judgement, order or award outstanding against the grantee or

the Board has reason to believe that the grantee is unable to pay or to have no

reasonable prospect of being able to pay his/her/its debts;

(v) there are circumstances which entitle any person to take any action, appoint any

person, commence proceedings or obtain any order of the type mentioned in (d)

above and in the paragraph headed “E. [REDACTED] Share Option Scheme and

Share Option – 2. Share Option Scheme – (k) Exercise of Option”; or

(vi) a bankruptcy order has been made against any director or shareholder of the grantee

(being a corporation) in any jurisdiction.

No compensation shall be payable upon the lapse of any Option, provided that the Board

shall be entitled in its discretion to pay such compensation to the grantee in such manner as it

may consider appropriate in any particular case.

(n) Adjustment

In the event of any alteration to the capital structure of our Company while any Option

remains exercisable, whether by way of capitalisation of profits or reserves, right issue,

consolidations, reclassification, reconstruction, sub-division or reduction of the share capital of

our Company, the Board may, if it considers the same to be appropriate, direct that adjustments

be made to:

(i) the maximum number of Shares subject to the Share Option Scheme; and/or

(ii) the aggregate number of Shares subject to the Option so far as unexercised; and/or

(iii) the subscription price of each outstanding Option.

Where the Board determines that such adjustments are appropriate (other than an

adjustment arising from a Capitalisation issue), the auditors appointed by our Company shall

certify in writing to the Board that any such adjustments are in their opinion fair and

reasonable, provided that:

(i) any such adjustments shall give the Eligible Persons the same proportion of equity

capital as they were previously entitled to. In respect of any such adjustments, other

than any made on a Capitalisation issue, the auditors shall confirm to the Board in

writing that the adjustments satisfy this requirement;

(ii) any such adjustments shall be made on the basis that the aggregate subscription

price payable by the grantee on the full exercise of any Option shall remain as nearly

as practicable the same as (but shall not be greater than) it was before such event;


– V-34 –


(iii) no such adjustments shall be made the effect of which would be to enable a Share

to be issued at less than its nominal value;

(iv) any such adjustments shall be made to in accordance with the provisions as

stipulated under Chapter 17 of the Listing Rules and supplementary guidance on the

interpretation of the Listing Rules issued by the Stock Exchange from time to time;

and

(v) the issue of securities as consideration in a transaction shall not be regarded as a

circumstance requiring any such adjustments.

(o) Cancellation of Options not exercised

The Board shall be entitled for the following causes to cancel any Option in whole or in

part by giving notice in writing to the grantee stating that such Option is thereby cancelled with

effect from the date specified in such notice (the “Cancellation Date”):

(i) the grantee commits or permits or attempts to commit or permit a breach of

restriction on transferability of Option or any terms or conditions attached to the

grant of the Option;

(ii) the grantee makes a written request to the Board for the Option to be cancelled; or

(iii) if the grantee has, in the opinion of the Board, conducted himself in any manner

whatsoever to the detriment of or prejudicial to the interests of our Company or its

subsidiary.

(p) Ranking of Shares

The Shares to be allotted upon the exercise of an Option will be subject to all the

provisions of the Articles of Association and the laws of the Cayman Islands from time to time

and shall rank pari passu in all respects with the then existing fully paid Shares in issue

commencing from (i) the allotment date or, (ii) if that date falls on a day when the register of

members of our Company is closed, the first date of the re-opening of the register of members.

Accordingly, it will entitle the holders to participate in all dividends or other distributions paid

or made on or after (i) the allotment date or, (ii) if that date falls on a day when the register

of members of our Company is closed, the first day of the re-opening of the register of

members, other than any dividend or other distribution previously declared or recommended or

resolved to be paid or made if the record date therefore shall be before the allotment date.

A Share issued upon the exercise of an Option shall not carry rights until the registration

of the grantee (or any other person) as the holder thereof.


– V-35 –


(q) Termination

Our Company may by resolution in general meeting at any time terminate the operation

of the Share Option Scheme. Upon termination of the Share Option Scheme as aforesaid, no

further Options shall be offered but the provisions of the Share Option Scheme shall remain

in force and effect in all other respects. All 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.

(r) Transferability

The Option shall be personal to the grantee and shall not be assignable and no grantee

shall in any way sell, transfer, charge, mortgage, encumber or create any interest (legal or

beneficial) in favour of any third party over or in relation to any Option or attempt to do so

(save that the grantee may nominate a nominee in whose name the Shares issued pursuant to

the Share Option Scheme may be registered). Any breach of the foregoing shall entitle our

Company to cancel any outstanding Option or part thereof granted to such grantee.

(s) Alteration of Share Option Scheme

The Share Option Scheme may be altered in any respect by a resolution of the Board

except that the following shall not be carried out except with the prior sanction of an ordinary

resolution of the our Shareholders in general meeting, provided always that the amended terms

of the Share Option Scheme shall comply with the applicable requirements of the Listing

Rules:

(i) any material alteration to its terms and conditions or any change to the terms of

Options granted (except where the alterations take effect under the existing terms of

the Share Option Scheme);

(ii) any alteration to the provisions of the Share Option Scheme in relation to the matters

set out in Rule 17.03 of the Listing Rules to the advantage of grantee;

(iii) any change to the authority of the Board or any person or committee delegated by

the Board pursuant to the Share Option Scheme to administer the day-to-day running

of the Scheme; and

(iv) any alteration to the aforesaid alteration provisions.


– V-36 –


(t) Conditions of the Share Option Scheme

The Share Option Scheme shall come into effect on the date on which the followingconditions are fulfilled:

(i) subject to (b) and (c) below, the approval of our Shareholders for the adoption of theShare Option Scheme;

(ii) the approval of the Stock Exchange for the [REDACTED] of and permission to[REDACTED], a maximum of [REDACTED] Shares to be allotted and issuedpursuant to the exercise of the Share Option Scheme in accordance with the termsand conditions of the Share Option Scheme; and

(iii) the commencement of [REDACTED] in our Shares on the Stock Exchange.

Application has been made to the Stock Exchange for the [REDACTED] of[REDACTED] Shares which may be issued pursuant to the exercise of Options under theShare Option Scheme.

F. OTHER INFORMATION

1. Deed of Indemnity

In-Tech Holdings and Source Capital have entered into the Deed of Indemnity with and

in favour of our Company for itself and as trustee for its subsidiaries, to provide indemnities

in respect of, among other things:

(a) certain estate duty which might be payable by any companies in our Group by virtue

of or under the provisions of the Estate Duty Ordinance (Chapter 111 of Laws of

Hong Kong) or laws and regulations of any other jurisdiction; and

(b) any liability of any or all of the members of our Group to any form of taxation and

duty whenever created or imposed, whether of Hong Kong, the PRC or of any other

part of the world, and without prejudice to the generality of the foregoing includes

profits tax, provisional profits tax, business tax on gross income, income tax, value

added tax, interest tax, salaries tax, property tax, land appreciation tax, lease

registration tax, estate duty, capital gains tax, death duty, capital duty, stamp duty,

payroll tax, withholding tax, rates, import, customs and excise duties and generally

any tax duty, impost, levy or rate or any amount payable to the revenue, customs or

fiscal authorities of local, municipal, provincial, national, state or federal level

whether of Hong Kong, the PRC or of any other part of the world falling on any of

the members of our Group resulting from or by reference to any income, profits or

gains earned, accrued or received on or before the [REDACTED] or any event on

transaction on or before [REDACTED] whether alone or in conjunction with any

circumstances whenever occurring and whether or not such taxation is chargeable

against or attributable to any other person, firm or company.


– V-37 –


The Deed of Indemnity does not cover any claim and our Controlling Shareholders shall

be under no liability under this Deed of Indemnity in respect of above:

(a) to the extent that provision or allowance has been made for such taxation in the

consolidated financial statements of our Group as set out in Appendix I to this

document or in the audited accounts of the relevant members of our Group for the

three years ended 31 March 2020, 2021 and 2022 (the “Accounts”); or

(b) for which any company of our Group is liable as a result of any event occurring or

income, profits earned, accrued or received or alleged to have been earned, accrued

or received or transactions entered into in the ordinary course of business or in the

ordinary course of acquiring and disposing of capital assets after 31 March 2022 up

to and including the [REDACTED] or consisting of any member of our Group

ceasing, or being deemed to cease, to be a company in our Group for the purposes

of any matter of the taxation; or

(c) to the extent that such claim arises or is incurred as a result of a retrospective change

in the law or practice coming into force after the [REDACTED] or to the extent

such claim arises or is increased by an increase in the rates of taxation after the

[REDACTED] with retrospective effect; or

(d) to the extent that any provision or reserve made for such taxation in the Accounts

is finally established to be an over-provision or an excessive reserve as certified by

a firm of accountants acceptable to our Company then the liability of our

Controlling Shareholders (if any) in respect of such taxation shall be reduced by an

amount not exceeding such over-provision or excess reserve.

Under the Deed of Indemnity, In-Tech Holdings and Source Capital have also undertaken

to indemnify, on a joint and several basis, from any depletion in or reduction in value of its

assets or any loss (including all legal costs and suspension of operation), cost, expenses,

damages, penalties, fines or other liabilities which any member of our Group may incur or

suffer arising from the non-compliances by any member of our Group with any applicable laws,

rules and regulations for so long as such non-compliances occur or occurred on or before the

[REDACTED].

2. Litigation

As at the Latest Practicable Date, neither we nor any of our subsidiaries were/was

engaged in any litigation, arbitration or claim of material importance, and no litigation,

arbitration or claim of material importance is known to our Directors to be pending or

threatened by or against us, that would have a material adverse effect on its results of

operations or financial condition.


– V-38 –


3. Preliminary expenses

Our estimated preliminary expenses relating to the incorporation of our Company are

approximately HK$43,800 and have been paid by our Company.

4. Promoter

There are no promoters of our Company.

5. Sole Sponsor

The Sole Sponsor has made an application on our behalf to the Stock Exchange for the

[REDACTED] of, and permission to [REDACTED], the Shares in issue and to be issued

pursuant to (i) the [REDACTED]; (ii) the [REDACTED]; (iii) the [REDACTED] Share

Option Scheme; and (iv) the Share Option Scheme.

The Sole Sponsor satisfies the independence criteria applicable to sponsor set out in Rule

3A.07 of the Listing Rules. Pursuant to the engagement letter entered into between the

Company and the Sole Sponsor, the Sole Sponsor will receive a fee of HK$4.0 million for

acting as the sponsor for the [REDACTED].

6. No material adverse change

Our Directors confirm that there has been no material adverse change in our Company’s

financial or trading position or prospects since 31 March 2022 (being the date to which our

latest audited consolidated financial statements were made up).

7. Compliance Adviser

We have appointed Dongxing Securities (Hong Kong) Company Limited as our

compliance adviser pursuant to Rule 3A.19 of the Hong Kong Listing Rules. Pursuant to Rule

3A.23 of the Hong Kong Listing Rules, the compliance adviser will advise us on the following

circumstances:

(a) before the publication of any regulatory announcement, circular or financial report;

(b) where a transaction, which might be a notifiable or connected transaction, is

contemplated including share issues and share repurchases;

(c) where we propose to use the [REDACTED] of the [REDACTED] in a manner

different from that detailed in this document or where our business activities,

developments or results deviate from any estimate, or other information in this

document; and


– V-39 –


8. Binding effect

This document shall have the effect, if an 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 (WUMP) Ordinance so far as applicable.

9. Miscellaneous

Save as disclosed in “History, Reorganisation and Corporate Structure” and

“[REDACTED]” in this document:

(a) within the two years immediately preceding the date of this document, no share or

loan capital of our Company or any of our subsidiaries has been issued or agreed to

be issued fully or partly paid either for cash or for a consideration other than cash;

(b) no share or loan capital of our Company or any of our subsidiaries is under option

or is agreed conditionally or unconditionally to be put under option;

(c) neither our Company nor any of our subsidiaries have issued or agreed to issue any

founder shares, management shares or deferred shares;

(d) within the two years immediately preceding the date of this document, no

commissions, discounts, brokerage or other special terms have been granted in

connection with the issue or sale of any shares or loan capital of any member of our

Group;

(e) within the two years preceding the date of this document, no commission has been

paid or payable (except commissions to the [REDACTED]) for subscription,

agreeing to subscribe, procuring subscription or agreeing to procure subscription of

any Shares in our Company;

(f) none of the equity and debt securities of our Company is [REDACTED] or dealt

with in any other stock exchange nor is any [REDACTED] or permission to deal

being or proposed to be sought; and

(g) we have no outstanding convertible debt securities.

There has not been any interruption in the business of our Group which may have or have

had a significant effect on the financial position of our Group in the twelve (12) months

immediately preceding the date of this document.


– V-40 –


10. Qualifications of experts

The following are the qualifications of the experts who have given opinion or advice

which are contained in this document:

Name Qualification

Dongxing Securities (Hong

Kong) Company Limited

Licenced to conduct type 1 (dealing in securities), type 4

(advising on securities) and type 6 (advising on corporate

finance) regulated activities as defined under SFO

PricewaterhouseCoopers Certified Public Accountants under the Professional

Accountants Ordinance (Chapter 50 of the Laws of Hong

Kong) and Registered Public Interest Entity Auditor

under the Financial Reporting Council Ordinance

(Chapter 588 of the Laws of Hong Kong)

Conyers Dill & Pearman Cayman Islands attorneys-at-law

Commerce & Finance Law

Offices

Legal advisers to our Company as to PRC law

Ong and Manecksha Legal advisers to our Company as to Malaysian law

Morgan, Lewis & Bockius LLP Legal advisers to our Company as to US law

Cheung & Yip Legal advisers to our Company as to certain aspects of

Hong Kong laws

Frost & Sullivan Limited Independent industry consultant

Cushman & Wakefield Limited Independent property valuer

PricewaterhouseCoopers Limited Independent Transfer Pricing Expert

11. Consents of experts

Each of the experts named in paragraph 10 of this Appendix has given and has not

withdrawn their respective consent to the issue of this document with the inclusion of its report

and/or letter and/or summary of valuations and/or legal opinion (as the case may be) and

references to its name included in the form and context in which it respectively appears.

None of the experts named above has any shareholding interests in our Company or any

of our subsidiaries or the right (whether legally enforceable or not) to subscribe for or to

nominate persons to subscribe for securities in our Company or any of our subsidiaries.


– V-41 –


12. Dividend

Our Directors confirm that they are not aware of any arrangements in existence under

which future dividends of our Company are to be waived or agreed to be waived.

13. Bilingual document

The English language and the Chinese language versions of this document are being

published separately, in reliance upon the exemption provided by section 4 of the Companies

(Exemption of Companies and Prospectuses from Compliance with Provisions) Notice

(Chapter 32L of the Laws of Hong Kong).


– V-42 –


DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES

The documents attached to the copy of this document delivered to the Registrar of

Companies in Hong Kong for registration were:

(a) a copy of the [REDACTED];

(b) the written consents referred to in “F. Other Information – 11. Consents of experts”

in Appendix V to this document; and

(c) copies of the material contracts referred to in “B. Further Information about our

Business – 1. Summary of the material contracts” in Appendix V to this document.

DOCUMENTS AVAILABLE ON DISPLAY

Copies of the following documents will be available on display on the website of the

Stock Exchnage at www.hkexnews.hk and our website at http://www.in-tech.com.hk during

a period of 14 days from the date of this document:

(a) our Memorandum and the Articles of Association;

(b) the Accountant’s Report of our Group prepared by PricewaterhouseCoopers, the text

of which is set out in Appendix I to this document;

(c) the report on the unaudited pro forma financial information of our Group prepared

by PricewaterhouseCoopers, the text of which is set out in Appendix II to this

document;

(d) the audited consolidated financial statements of our Group for the three years ended

31 March 2020, 2021 and 2022;

(e) the PRC legal opinions issued by our PRC Legal Advisers in respect of certain

aspects of our Group and our property interests;

(f) the Malaysian legal opinion issued by our Malaysian Legal Advisers;

(g) the letter of advice prepared by Conyers Dill and Pearman, our legal advisers as to

Cayman Islands law, summarising certain aspects of Cayman Islands company law

referred to in Appendix IV to this document;

(h) the property valuation report prepared by Cushman & Wakefield Limited, the text of

which is set out in Appendix III to this document;

(i) the industry report prepared by Frost & Sullivan;

APPENDIX VI DOCUMENTS DELIVERED TO THE REGISTRAR OFCOMPANIES AND AVAILABLE ON DISPLAY

– VI-1 –


(j) the written consents referred to in “F. Other Information – 11. Consents of experts”

in Appendix V to this document;

(k) the material contracts referred to in “B. Further Information about our Business – 1.

Summary of the material contracts” in Appendix V to this document;

(l) the service contracts and letters of appointment entered into between our Company

and each of our Directors;

(m) the Companies Act;

(n) the terms of the [REDACTED] Share Option Scheme and a list of grantees under

the [REDACTED] Share Option Scheme; and

(o) the terms of the Share Option Scheme.

APPENDIX VI DOCUMENTS DELIVERED TO THE REGISTRAR OFCOMPANIES AND AVAILABLE ON DISPLAY

– VI-2 –
