IMPORTANT NOTICE

THIS OFFERING IS AVAILABLE ONLY TO INVESTORS WHO ARE ADDRESSEES OUTSIDE OF THEUNITED STATES.

IMPORTANT: You must read the following disclaimer before continuing. The following disclaimerapplies to the attached Preliminary Offering Circular. You are advised to read this disclaimer carefullybefore accessing, reading or making any other use of the attached Preliminary Offering Circular. Inaccessing the attached Preliminary Offering Circular, you agree to be bound by the following terms andconditions, including any modifications to them from time to time, each time you receive any informationfrom the company as a result of such access.

Confirmation of Your Representation: In order to be eligible to view this Preliminary Offering Circularor make an investment decision with respect to the securities, investors must be outside the UnitedStates. This Preliminary Offering Circular is being sent to you at your request and by accepting thee-mail and accessing the attached Preliminary Offering Circular, you shall be deemed to represent toBNP Paribas, Hong Kong Branch and BOCI Asia Limited (together, the “Joint Lead Managers”) that (1)you and any customers you represent are outside the United States and that the e-mail address thatyou gave us and to which this e-mail has been delivered is not, located in the United States, itsterritories or possessions, and (2) you consent to delivery of the attached Preliminary Offering Circularand any amendments or supplements thereto by electronic transmission.

The attached Preliminary Offering Circular has been made available to you in electronic form. You arereminded that documents transmitted via this medium may be altered or changed during the processof transmission and, consequently, none of the Joint Lead Managers or any of their respective affiliates,directors, officers, employees, representatives, agents and each person who controls the Joint LeadManagers or any of their respective affiliates accepts any liability or responsibility whatsoever inrespect of any discrepancies between the document distributed to you in electronic format and the hardcopy version available to you upon request from the Joint Lead Managers.

Restrictions: The attached document is being furnished in connection with an offering in offshoretransactions to persons outside the United States in compliance with Regulation S under the SecuritiesAct of 1933, as amended (the “Securities Act”) solely for the purpose of enabling a prospective investorto consider the purchase of the securities described herein.

NOTHING IN THIS ELECTRONIC TRANSMISSION CONSTITUTES AN OFFER OF SECURITIES FORSALE IN THE UNITED STATES OR ANY OTHER JURISDICTION WHERE IT IS UNLAWFUL TO DOSO. THE SECURITIES HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THESECURITIES ACT OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OROTHER JURISDICTION AND THE SECURITIES MAY NOT BE OFFERED OR SOLD WITHIN THEUNITED STATES, EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOTSUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT ANDAPPLICABLE STATE OR LOCAL SECURITIES LAWS.

You are reminded that you have accessed the attached Preliminary Offering Circular on the basis thatyou are a person into whose possession this Preliminary Offering Circular may be lawfully delivered inaccordance with the laws of the jurisdiction in which you are located and you may not, nor are youauthorised to, deliver this document, electronically or otherwise, to any other person. If you have gainedaccess to this transmission contrary to the foregoing restrictions, you are not allowed to purchase anyof the securities described in the attached.

Actions that You May Not Take: If you receive this document by e-mail, you should not reply by e-mailto this document, and you may not purchase any securities by doing so. Any reply e-mailcommunications, including those you generate by using the “Reply” function on your e-mail software,will be ignored or rejected.

YOU ARE NOT AUTHORISED TO AND YOU MAY NOT FORWARD OR DELIVER THE ATTACHEDPRELIMINARY OFFERING CIRCULAR, ELECTRONICALLY OR OTHERWISE, TO ANY OTHERPERSON OR REPRODUCE SUCH PRELIMINARY OFFERING CIRCULAR IN ANY MANNERWHATSOEVER. ANY FORWARDING, DISTRIBUTION OR REPRODUCTION OF THE ATTACHEDPRELIMINARY OFFERING CIRCULAR IN WHOLE OR IN PART IS UNAUTHORISED. FAILURE TOCOMPLY WITH THIS DIRECTIVE MAY RESULT IN A VIOLATION OF THE SECURITIES ACT OR THEAPPLICABLE LAWS OF OTHER JURISDICTIONS.

You are responsible for protecting against viruses and other destructive items. If you receive thisdocument by e-mail, your use of this e-mail is at your own risk and it is your responsibility to takeprecautions to ensure that it is free from viruses and other items of a destructive nature.

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. Subject to Completion

Preliminary Offering Circular dated 6 January 2014 Strictly Confidential

China Electronics Corporation Holdings Company Limited(incorporated in the Cayman Islands and continued in Bermuda with limited liability)

(HKSE Stock Code: 00085)

CNY[●] [●] per cent. Bonds due [●]

Issue Price: [●] per cent.

The [●] per cent. Bonds due [●] in the aggregate principal amount of CNY[●] (the “Bonds”) will be issued by China Electronics Corporation

Holdings Company Limited (the “Issuer”). The Issuer’s majority shareholder is China Electronics Corporation (the “Company”).

Interest on the Bonds is payable semi-annually in arrear on the Interest Payment Date (as defined in the “Terms and conditions of the

Bonds”) falling on, or nearest to, [●] and [●] in each year commencing on [●] 2014 (the “Issue Date”). The Bonds will be direct, unconditional,

unsubordinated and (subject to Condition 4(a) of the Terms and Conditions of the Bonds) unsecured obligations of the Issuer, at all times

ranking pari passu without any preference or priority among themselves and ranking at least equally with all other present and future

unsecured and unsubordinated obligations of the Issuer. Payments on the Bonds will be made without deduction for or on account of taxes

of Bermuda or the PRC (as defined herein) to the extent described in “Terms and conditions of the Bonds – Taxation”.

The Issuer and the Company will enter into a keepwell deed on or about the Issue Date with BNP Paribas Trust Services (Hong Kong)

Limited (the “Trustee”) as trustee of the Bonds (the “Keepwell Deed”) as further described in “Description of the Keepwell Deed”. The

Keepwell Deed does not constitute a guarantee by the Company of the obligations of the Issuer under the Bonds.

The Company and the Trustee will enter into a deed of equity interest purchase undertaking on or about the Issue Date (the “Deed of Equity

Interest Purchase Undertaking”) as further described in “Description of the Deed of Equity Interest Purchase Undertaking”.

The Bonds will mature on the Interest Payment Date falling on, or nearest to [●] at their principal amount. The Bonds are subject to

redemption, in whole but not in part, at their principal amount, together with accrued interest, at the option of the Issuer at any time in the

event of certain changes affecting taxes of Bermuda or the PRC. The Bonds also contain a provision for redemption at the option of the

Bondholders at 101 per cent. of the principal amount of each Bond, together with interest accrued to the date for redemption, upon the

occurrence of a Change of Control Put Event (as defined in the “Terms and conditions of the Bonds”) with respect to the Bonds. See “Terms

and conditions of the Bonds – Redemption and Purchase”.

Investing in the Bonds involves certain risks. See “Risk Factors” beginning on page 22.

The Bonds have not been and will not be registered under the United States Securities Act of 1933, as amended (the “Securities Act”), and

may not be offered or sold within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration

requirements of the Securities Act. Accordingly, the Bonds are being offered and sold only outside the United States in offshore transactions

in compliance with Regulation S under the Securities Act (“Regulation S”). For a description of these and certain further restrictions on offers

and sales of the Bonds and the distribution of this Offering Circular, see the section entitled “Subscription and Sale” on page 118.

The denomination of the Bonds shall be CNY1,000,000 each and integral multiples of CNY10,000 in excess thereof.

Application has been made to The Stock Exchange of Hong Kong Limited (the “Hong Kong Stock Exchange” or “HKSE”) for listing of, and

permission to deal in, the Bonds by way of debt issues to professional investors only and such permission is expected to become effective

on [●].

Hong Kong Exchanges and Clearing Limited and the Hong Kong Stock Exchange take no responsibility for the contents of this document,

make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising

from or in reliance upon the whole or any part of the contents of this document.

The Bonds will be issued in registered form and represented by a global bond certificate (the “Global Certificate”) which will be registered

in the name of the Hong Kong Monetary Authority (the “HKMA”) as operator of, and shall be deposited with a sub-custodian for, the Central

Moneymarkets Unit Service (the “CMU”), the book entry clearing system operated by the HKMA, on or about the Issue Date. The Global

Certificate will be held for the account of CMU members who have accounts with the CMU operator, or the CMU participants. Beneficial

interests in the Global Certificate will be shown on, and transfers thereof will be effected only through, records maintained by the CMU. For

persons seeking to hold a beneficial interest in the Bonds through Euroclear Bank S.A./N.V. (“Euroclear”) or Clearstream Banking, société

anonyme (“Clearstream”), such persons will hold their interests through an account opened and held by Euroclear or Clearstream (as the

case may be) with the CMU.

Joint Global Coordinators, Joint Bookrunners and Joint Lead Managers

BNP PARIBAS BOC International

Offering Circular dated [●]

TABLE OF CONTENTS

Page

IMPORTANT NOTICE ........................................................................................................ 1

FORWARD-LOOKING STATEMENTS ............................................................................... 5

GLOSSARY........................................................................................................................ 6

SUMMARY ......................................................................................................................... 9

OFFER STRUCTURE......................................................................................................... 11

THE ISSUE ........................................................................................................................ 13

SUMMARY FINANCIAL INFORMATION OF THE COMPANY ........................................... 16

SUMMARY FINANCIAL INFORMATION OF THE ISSUER ............................................... 20

RISK FACTORS ................................................................................................................. 22

CAPITALISATION AND INDEBTEDNESS ......................................................................... 43

USE OF PROCEEDS ......................................................................................................... 45

INDUSTRY OVERVIEW ..................................................................................................... 46

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS.......................................................................................... 47

TERMS AND CONDITIONS OF THE BONDS ................................................................... 58

DESCRIPTION OF THE KEEPWELL DEED...................................................................... 74

DESCRIPTION OF THE DEED OF EQUITY INTEREST PURCHASE UNDERTAKING .... 75

SUMMARY OF PROVISIONS RELATING TO THE BONDS IN GLOBAL FORM.............. 77

DESCRIPTION OF THE ISSUER....................................................................................... 79

DESCRIPTION OF THE GROUP ....................................................................................... 86

DIRECTORS AND MANAGEMENT ................................................................................... 104

PRC REGULATIONS ......................................................................................................... 109

TAXATION.......................................................................................................................... 115

SUBSCRIPTION AND SALE ............................................................................................. 118

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN PRC GAAP AND IFRS.......... 123

GENERAL INFORMATION ................................................................................................ 124

INDEX TO INTERIM FINANCIAL INFORMATION, FINANCIAL STATEMENTS AND

UNAUDITED PRO FORMA FINANCIAL INFORMATION ............................................... F-1

APPENDIX I – CCID REPORT .......................................................................................... A-1

i

IMPORTANT NOTICE

Prospective investors should rely only on the information contained in this Offering Circular. None

of the Company, the Issuer, nor any of BNP Paribas, Hong Kong Branch and BOCI Asia Limited

(each a “Joint Lead Manager,” together, the “Joint Lead Managers”) has authorised any other

person to provide prospective investors with different information. If anyone provides prospective

investors with different or inconsistent information, prospective investors should not rely on it.

Prospective investors should assume that the information appearing in this Offering Circular is

accurate only as of the date on its front cover. The Group’s business, financial condition, results

of operations and prospects may have changed since that date.

The Bonds have not been and will not be registered under the Securities Act and, subject to

certain exceptions, may not be offered or sold within the United States. By purchasing the Bonds,

prospective investors will be deemed to have made the acknowledgements, representations,

warranties and agreements described under the heading “Subscription and Sale” in this Offering

Circular.

This Offering Circular is highly confidential and has been prepared by the Issuer and the Company

solely for use in connection with the proposed offering of the Bonds described herein. Neither the

Issuer nor the Company has authorised its use for any other purpose. This Offering Circular may

not be copied or reproduced in whole or in part, and it may be distributed and its contents

disclosed only to the prospective investors to whom it is provided. By accepting delivery of this

Offering Circular each investor agrees to these restrictions.

The distribution of this Offering Circular and the offering of the Bonds in certain jurisdictions may

be restricted by law. Persons into whose possession this Offering Circular comes are required by

the Issuer and the Joint Lead Managers to inform themselves about and observe any such

restrictions. No action is being taken to permit a public offering of the Bonds or the distribution of

this Offering Circular in any jurisdiction where action would be required for such purposes. There

are restrictions on the offer and sale of the Bonds, and the circulation of documents relating

thereto, in certain jurisdictions including the United States, the United Kingdom, the European

Economic Area, Bermuda, Hong Kong, Singapore, the PRC, Japan, Taiwan and Switzerland and

to persons connected therewith. For a description of certain further restrictions on offers, sales

and resales of the Bonds and distribution of this Offering Circular, see “Subscription and Sale”.

This Offering Circular includes particulars given in compliance with the Rules Governing the

Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) for the

purpose of giving information with regard to the Issuer, the Company and the Group. The Issuer

and the Company accept full responsibility for the accuracy of the information contained in this

Offering Circular and confirm, having made all reasonable enquiries, that to the best of their

knowledge and belief there are no other facts the omission of which would make any statement

herein misleading.

No person has been or is authorised to make any representation concerning the Issuer, the

Company, the Bonds, the Deed of Equity Interest Purchase Undertaking or the Keepwell Deed

other than as contained herein and, if given or made, any such other information or representation

should not be relied upon as having been authorised by the Issuer, the Company, the Joint Lead

Managers, the Trustee (as defined herein) or the Agents (as defined herein). Neither the delivery

of this Offering Circular nor any offering, sale or delivery made in connection with the issue of the

Bonds shall, under any circumstances, constitute a representation that there has been no change

or development reasonably likely to involve a change in the affairs of the Issuer or the Company

since the date hereof or create any implication that the information contained herein is correct as

of any date subsequent to the date hereof. This Offering Circular does not constitute an offer of,

or an invitation by or on behalf of the Issuer, the Company, the Joint Lead Managers, the Trustee

or the Agents to subscribe for or purchase any of the Bonds and may not be used for the purpose

of an offer to, or a solicitation by, anyone in any jurisdiction or in any circumstances in which such

offer or solicitation is not authorised or is unlawful.

1

The Issuer and the Company, having made all reasonable inquiries, confirm that this Offering

Circular contains all information with respect to the Issuer, the Company, their respective

subsidiaries and the Group, the Bonds, the Deed of Equity Interest Purchase Undertaking and the

Keepwell Deed that is material in the context of the issue and offering of the Bonds, that the

information and statements contained herein is true and accurate and not misleading in all

material respects, that the opinions and intentions expressed herein are honestly held, that

neither the Issuer nor the Company is aware of any other facts the omission of which in the Issuer

and the Company’s reasonable opinion might make this Offering Circular as a whole or any of

such information or the expression of any such opinions or intentions materially misleading and

that all reasonable inquiries have been made by the Issuer and the Company to verify the

accuracy of such information; provided that this Offering Circular contains summaries with respect

to certain terms of some documents and the Issuer and the Company refer prospective investors

to them for a more complete understanding of the matters that being discussed in this Offering

Circular. In making an investment decision, prospective investors must rely on their own

examination of the Issuer, the Company and their respective subsidiaries and the terms of the

Bonds, including the merits and risks involved. See “Risk Factors” for a discussion of certain

factors to be considered in connection with an investment in the Bonds.

No representation or warranty, express or implied, is made or given by the Joint Lead Managers,

the Trustee or the Agents as to the accuracy, completeness or sufficiency of the information

contained in this Offering Circular, and nothing contained in this Offering Circular is, or shall be

relied upon as, a promise, representation or warranty by the Joint Lead Managers, the Trustee or

the Agents. This Offering Circular is not intended to provide the basis of any credit or other

evaluation nor should it be considered as a recommendation by any of the Issuer, the Company,

the Joint Lead Managers, the Trustee and the Agents that any recipient of this Offering Circular

should purchase the Bonds. Each potential purchaser of the Bonds should determine for itself the

relevance of the information contained in this Offering Circular and its purchase of the Bonds

should be based upon such investigations with its own tax, legal and business advisers as it

deems necessary. Each person receiving this Offering Circular acknowledges that such person

has not relied on the Joint Lead Managers or any person affiliated with the Joint Lead Managers

or on the Trustee or the Agents in connection with his investigation of the accuracy of such

information or his investment decision.

To the fullest extent permitted by law, none of the Joint Lead Managers, the Trustee nor the Agents

accepts any responsibility for the contents of this Offering Circular. Each of the Joint Lead

Managers, the Trustee and the Agents accordingly disclaims all and any liability whether arising

in tort or contract or otherwise which it might otherwise have in respect of this Offering Circular

or any such statement. None of the Joint Lead Managers, the Trustee nor the Agents undertakes

to review the financial condition or affairs of the Issuer or the Company during the life of the

arrangements contemplated by this Offering Circular.

IN CONNECTION WITH THE ISSUE OF THE BONDS, BNP PARIBAS, HONG KONG BRANCH

(THE “STABILISING MANAGER”) (OR PERSONS ACTING ON BEHALF OF THE STABILISING

MANAGER) MAY, IN ACCORDANCE WITH APPLICABLE LAW, OVER-ALLOT OR EFFECT

TRANSACTIONS WITH A VIEW TO SUPPORTING THE MARKET PRICE OF THE BONDS AT A

LEVEL HIGHER THAN THAT WHICH MIGHT OTHERWISE PREVAIL. HOWEVER, THERE IS NO

ASSURANCE THAT THE STABILISING MANAGER (OR PERSONS ACTING ON BEHALF OF

THE STABILISING MANAGER) WILL UNDERTAKE STABILISATION ACTION. ANY

STABILISATION ACTION MAY BEGIN ON OR AFTER THE DATE ON WHICH ADEQUATE

PUBLIC DISCLOSURE OF THE FINAL TERMS OF THE OFFER OF THE BONDS IS MADE AND,

IF BEGUN, MAY BE ENDED AT ANY TIME, BUT IT MUST END NO LATER THAN THE EARLIER

OF 30 DAYS AFTER THE ISSUE DATE OF THE BONDS AND 60 DAYS AFTER THE DATE OF

THE ALLOTMENT OF THE BONDS.

2

The Issuer reserves the right to withdraw the offering of the Bonds at any time. The Issuer and the

Joint Lead Managers also reserve the right to reject and offer to purchase, in whole or in part, for

any reason or to sell less than all of the Bonds offered hereby.

Presentation of Financial and Other Data

The Issuer’s published audited consolidated financial statements as at and for the year ended 31

December 2012, which are included elsewhere in this Offering Circular, have been audited by

PricewaterhouseCoopers (“PwC”). The Issuer’s published, condensed consolidated interim

financial information as at and for the six months ended 30 June 2013, which is included

elsewhere in this Offering Circular, has been reviewed but not audited by PwC.

The Company’s published audited consolidated financial statements as at and for the year ended

31 December 2012, which are included elsewhere in this Offering Circular, have been audited by

Wuyige Certified Public Accountants LLP (“Daxin”). The Company’s published consolidated

interim financial information as at and for the nine months ended 30 September 2013, which is

included elsewhere in this Offering Circular, has not been reviewed nor audited by Daxin. The

Company’s financial statements included in this Offering Circular are English translations of those

prepared in Chinese.

The financial statements of the Issuer were prepared in accordance with, Hong Kong Financial

Reporting Standards (“HKFRS”). The financial statements of the Company were prepared in

accordance with Generally Accepted Accounting Principles in the People’s Republic of China

(“PRC GAAP”). PRC GAAP differs in certain material respects from the International Financial

Reporting Standard (“IFRS”). For a discussion of certain differences between PRC GAAP and

IFRS, please see “Summary of Significant Differences between PRC GAAP and IFRS”.

This Offering Circular includes certain pro forma financial information. Such pro forma financial

information is presented for illustrative purposes only and because of its hypothetical nature, it

does not provide any assurance or indication that any event will take place in the future and may

not be indicative of the current or future financial condition and results of operations of the Issuer

Group. The pro forma financial information has been derived from historical financial statements

and certain adjustments and assumptions have been made after giving effect to the injection. The

information upon which these adjustments and assumptions have been made is preliminary, and

such adjustments and assumptions are difficult to make with complete accuracy. As a result, the

actual financial condition and results of operations upon completion of the relevant acquisition

may not be consistent with, or evident from, such pro forma financial information. In addition, the

assumptions used in preparing the pro forma financial information may not prove to be accurate,

and other factors may also affect the Issuer Group’s financial condition and results of operations.

As such, investors are cautioned not to place undue reliance on such pro forma financial

information.

This Offering Circular includes certain figures relating to EBITDA. EBITDA is not a standard

measure under HKFRS, but is a widely used financial indicator of a company’s ability to service

and incur debt. EBITDA should not be considered in isolation or construed as an alternative to

cash flows, net income or any other measure of performance or as an indicator of the Group’s

operating performance, liquidity, profitability or cash flows generated by operating, investing or

financing activities. EBITDA is calculated based on the profit for the year/period of the Group but

does not account for finance costs, income tax expenses, depreciation and amortisation and

excludes change in fair value of investment properties, other losses/(gains) net and share of

profit/(loss) of an associate. In evaluating EBITDA, the Issuer and the Company believe that

investors should consider, among other things, the components of EBITDA such as revenue and

operating expenses and the amount by which EBITDA exceeds capital expenditures and other

charges. The Issuer and the Company have included EBITDA because they believe it is a useful

supplement to cash flow data as a measure of the Group’s performance and its ability to generate

cash flow from operations to cover debt service and taxes. EBITDA presented herein may not be

comparable to similarly titled measures presented by other companies. Investors should not

compare the Group’s EBITDA to EBITDA presented by other companies because not all

companies use the same definition.

3

Industry Data

Economic and other data included in this Offering Circular on the industries in which the Issuerand the Group operate in the PRC, including information in relation to the Group’s and itscompetitors’ relative positions in these industries, are based on various government and privateindustry publications or the good faith belief of their management. This Offering Circular alsoincludes market share, market position, industry data and forecasts and other information from areport commissioned by the Issuer and prepared by CCID Consulting Co., Ltd. (“CCID”), which isreferred to as the CCID Report. Third-party industry publications, studies and surveys, includingthe CCID Report, generally state that they have been obtained from sources believed to bereliable, although they do not guarantee the accuracy or completeness of such information.Although the Issuer and the Company believe that such industry sources are reliable, they havenot been independently verified by the Issuer, the Company, the Joint Lead Managers, theTrustee, the Agents or their respective directors and advisors and may not be consistent with otherinformation compiled within or outside the PRC. The Issuer and the Company take responsibilityfor only the accurate reproduction and extraction of such summaries and data, but accepts noother responsibility for such industry information. None of the Issuer, the Company, the Joint LeadManagers, the Trustee, the Agents nor their respective directors and advisors makes anyrepresentation as to the accuracy and completeness of such industry information statistics.Investors are advised to read and understand the contents of this Offering Circular beforeinvesting. Due to possibly inconsistent collection methods and other problems, the statisticsherein may be inaccurate and should not be unduly relied upon.

Certain Conventions and Currency Presentation

This Offering Circular has been prepared using a number of conventions, which investors shouldconsider when reading the information contained herein. In this Offering Circular, reference to the“Issuer” is to China Electronics Corporation Holdings Company Limited (HKSE stock code:00085), the term “Company” refers to China Electronics Corporation and the term “Group” refersto the Company and its subsidiaries, including the Issuer, individually or collectively, as thecontext requires.

The English names of the PRC entities, organisations or individuals, or legislations, policies orgovernment guidance mentioned in this Offering Circular are translations from their Chinesenames and are for identification purpose only. If there is any inconsistency, the Chinese namesshall prevail.

References to the “United States” and “US” are to the United States of America, and referencesto the “PRC” and “China” are to the People’s Republic of China and, for purposes of this OfferingCircular, do not include Hong Kong, Macau or Taiwan, references to “Hong Kong” are to the HongKong Special Administrative Region of the PRC, references to “US$”, “USD” or “US dollars” areto the lawful currency of the United States of America, references to “Renminbi”, “RMB” or “CNY”are to the lawful currency of the PRC, and references to “Hong Kong dollar” or “HK$” are to thelawful currency of Hong Kong. “PRC Government” or “State” means the central government of thePRC, including all political subdivisions (including provincial, municipal and other regional or localgovernmental entities) and instrumentalities thereof, or, where the context requires, any of them.

The financial statements of the Company are prepared using Renminbi and the financialstatements of the Issuer are prepared using HK dollars. For convenience only and unlessotherwise noted, all translations from HK dollars into Renminbi in this Offering Circular were madeat the rate of HK$1.00 to RMB0.7929, based on the median rate set by the PBOC for foreignexchange transactions prevailing on 30 September 2013. No representation is made that the USdollar, HK dollar or Renminbi amounts referred to in this Offering Circular could have been orcould be converted into Renminbi, US dollars or HK dollars, as the case may be, at any particularrate or at all.

In this Offering Circular, where information has been presented in thousands or millions of units,amounts may have been rounded up or down. Accordingly, totals of columns or rows of numbersin tables may not be equal to the apparent total of the individual items and actual numbers maydiffer from those contained herein due to rounding. References to information in billions of unitsare to the equivalent of a thousand million units.

4

FORWARD-LOOKING STATEMENTS

This Offering Circular includes “forward-looking statements”. All statements other than statements

of historical fact contained in this Offering Circular, including, without limitation, those regarding

the Group’s future financial position and results of operations, strategy, plans, objectives, goals

and targets, future developments in the markets where the Group participates or is seeking to

participate, and any statements preceded by, followed by or that include the words “believe”,

“expect”, “aim”, “intend”, “will”, “may”, “anticipate”, “seek”, “should”, “estimate” or similar

expressions or the negative thereof, are forward-looking statements. These forward-looking

statements involve known and unknown risks, uncertainties and other factors, some of which are

beyond the Group’s control, which may cause the Group’s actual results, performance or

achievements, or industry results to be materially different from any future results, performance

or achievements expressed or implied by the forward-looking statements. These forward-looking

statements are based on numerous assumptions regarding the Group’s present and future

business strategies and the environment in which the Group will operate in the future. Important

factors that could cause the Group’s actual results, performance or achievements to differ

materially from those in the forward-looking statements include, among others, the following:

• the Group’s business and operating strategies;

• various business opportunities that the Group may pursue;

• the Group’s ability to enter into new markets and manage the growth of its business lines;

• the Group’s operations and business prospects;

• the Group’s financial condition and results of operations;

• availability of and changes to bank loans and other forms of financing;

• availability of government subsidies and preferential tax treatment;

• the general economic and industry outlook of the PRC, including but not limited to electronics

market;

• changes in political, economic, legal and social conditions in the PRC, including the PRC

Government’s specific policies with respect to economic growth, inflation, foreign exchange,

institutional lending policies and the availability of credit;

• changes in competitive conditions and the Group’s ability to compete under these conditions;

• changes in currency exchange rates; and

• other factors beyond the Group’s control.

Additional factors that could cause actual results, performance or achievements to differ

materially include, but are not limited to, those discussed under “Risk Factors” and elsewhere in

this Offering Circular. In light of these risks, uncertainties and assumptions, the forward-looking

events discussed in this Offering Circular might not occur. The Issuer and the Company caution

prospective investors not to place undue reliance on these forward-looking statements which

reflect the Issuer and the Company’s management’s view only as of the date of this Offering

Circular. The Issuer and the Company will not update or revise any forward-looking statements,

whether as a result of new information, future events or otherwise.

5

GLOSSARY

In this Offering Circular, unless the context otherwise requires, the following terms shall have themeanings set out below.

“BiCMOS” . . . . . . . . . . . . . . . . . . bipolar CMOS

“CCDOS”. . . . . . . . . . . . . . . . . . . Changcheng disk operating system

“CEC Beihai”. . . . . . . . . . . . . . . . China Electronics Beihai Industrial Park Development Co.,

Ltd. (中國電子北海產業園發展有限公司), a company

established under the laws of the PRC

“CEC Technology”. . . . . . . . . . . . China Electronics Technology Development Co., Ltd. (中國電子科技開發有限公司), a company established under the laws

of the PRC

“CEC Xi’an”. . . . . . . . . . . . . . . . . China Electronics Xi’an Industrial Park Development Co., Ltd.

(中國電子西安產業園發展有限公司), a company established

under the laws of the PRC

“Central SASAC”. . . . . . . . . . . . . SASAC at the State Council level (國務院國有資產監督管理委員會)

“China Huada” . . . . . . . . . . . . . . China Integrated Circuit Design Corp., Ltd. (中國華大集成電路設計集團有限公司), a substantial shareholder of the Issuer

“CMMI5” . . . . . . . . . . . . . . . . . . . capability maturity model integration 5

“CMOS”. . . . . . . . . . . . . . . . . . . . complementary metal oxide semiconductor

“CMP” . . . . . . . . . . . . . . . . . . . . . chemical mechanical polishing

“COSA” . . . . . . . . . . . . . . . . . . . . communications open system architecture

“CPU” . . . . . . . . . . . . . . . . . . . . . central processing unit

“CRTs”. . . . . . . . . . . . . . . . . . . . . cathode ray tubes

“DCS” . . . . . . . . . . . . . . . . . . . . . distributed control system

“DSP” . . . . . . . . . . . . . . . . . . . . . digital signal process

“EBITDA” . . . . . . . . . . . . . . . . . . earning before interest, taxes, depreciation and amortisation

“EDA” . . . . . . . . . . . . . . . . . . . . . electronics design automation

“ERP” . . . . . . . . . . . . . . . . . . . . . enterprise resource planning

“Group” . . . . . . . . . . . . . . . . . . . . the Company and its subsidiaries

“Hainan RSC” . . . . . . . . . . . . . . . Hainan Resort Software Community Investment and

Development Co., Ltd. (海南生態軟件園投資發展有限公司), a

company established under the laws of the PRC

6

“Huada Electronics” . . . . . . . . . . Huada Electronic Design Co., Ltd. (北京中電華大電子設計有限責任公司), a company established under the laws of the PRC

“IC” . . . . . . . . . . . . . . . . . . . . . . . integrated circuit

“Issuer Group” . . . . . . . . . . . . . . Issuer and its subsidiaries

“ISP” . . . . . . . . . . . . . . . . . . . . . . internet service provider

“IT” . . . . . . . . . . . . . . . . . . . . . . . information technology

“LCD” . . . . . . . . . . . . . . . . . . . . . liquid crystal display

“LED” . . . . . . . . . . . . . . . . . . . . . light emitting diode

“LIPS” . . . . . . . . . . . . . . . . . . . . . LCD integrated power supply

“MIIT” . . . . . . . . . . . . . . . . . . . . . Ministry of Industry and Information Technology of the PRC

(工業和信息化部)

“MOF” . . . . . . . . . . . . . . . . . . . . . Ministry of Finance of the PRC (財政部)

“MOFCOM” . . . . . . . . . . . . . . . . . Ministry of Commerce of the PRC (商務部)

“MOST” . . . . . . . . . . . . . . . . . . . . Ministry of Science & Technology of the PRC (科技部)

“NDRC” . . . . . . . . . . . . . . . . . . . . National Development and Reform Commission (國家發展改革委員會)

“ODM” . . . . . . . . . . . . . . . . . . . . . original design manufacturing

“OEM” . . . . . . . . . . . . . . . . . . . . . original equipment manufacturing

“OFAC” . . . . . . . . . . . . . . . . . . . . Office of Foreign Assets Control of the U.S. Department of

Treasury

“OLED” . . . . . . . . . . . . . . . . . . . . organic LED

“PBOC” . . . . . . . . . . . . . . . . . . . . People’s Bank of China, the central bank of the PRC (中國人民銀行)

“PC” . . . . . . . . . . . . . . . . . . . . . . personal computer

“R&D” . . . . . . . . . . . . . . . . . . . . . research and development

“RFID” . . . . . . . . . . . . . . . . . . . . . radio frequency identification

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

“SASAC” . . . . . . . . . . . . . . . . . . . State-owned Assets Supervision and Administration

Commission (國有資產監督管理委員會)

7

“SGX” . . . . . . . . . . . . . . . . . . . . . Singapore Stock Exchange

“SOC” . . . . . . . . . . . . . . . . . . . . . system-on-a-chip

“SOE” . . . . . . . . . . . . . . . . . . . . . state-owned enterprise

“SPC” . . . . . . . . . . . . . . . . . . . . . statistical programme control

“SSE” . . . . . . . . . . . . . . . . . . . . . Shanghai Stock Exchange

“State Council” . . . . . . . . . . . . . . State Council of the PRC (國務院)

“SZSE” . . . . . . . . . . . . . . . . . . . . Shenzhen Stock Exchange

“TFT-LCD”. . . . . . . . . . . . . . . . . . thin-film-transistor liquid crystal display

“TV”. . . . . . . . . . . . . . . . . . . . . . . television

“UHF-RFID”. . . . . . . . . . . . . . . . . ultrahigh frequency RFID

“WLAN” . . . . . . . . . . . . . . . . . . . . wireless local area networks

8

SUMMARY

The summary below is only intended to provide a limited overview of detailed information

described elsewhere in this Offering Circular. As it is a summary, it does not contain all of the

information that may be important to investors and terms defined elsewhere in this Offering

Circular shall have the same meanings when used in this summary. Prospective investors should

therefore read the entire Offering Circular, including the section entitled “Risk Factors” and the

consolidated financial statements of each of the Issuer and the Company and related notes

thereto, before making an investment decision.

The Issuer

The Issuer was incorporated as a company with limited liability on 22 April 1997 under the laws

of the Cayman Islands and continued in Bermuda and registered as an exempted company in

Bermuda with limited liability. The Issuer was formerly under the name of “Winsan (China)

Investment Group Company Limited” and has been listed on the Hong Kong Stock Exchange

since 1997. The Company acquired approximately 74.98% of the equity interest in the Issuer in

September 2004, and the Issuer changed its name to “China Electronics Corporation Holdings

Company Limited”.

The principal activities of the Issuer and its subsidiaries are the design, research and development

and sale of IC products and the development of application systems in relation to IC products. The

IC products are mainly used in smart cards such as PRC second-generation identity cards, social

security cards, telecommunications cards, utility cards and petroleum cards, and the Issuer Group

has a strong presence in each of these sectors. The IC products are also applied in WLAN.

On 5 July 2013, the Issuer entered into an equity transfer agreement to acquire 100% equity

interest in CEC Technology from the Company at a consideration of RMB600 million (equivalent

to approximately HK$750 million) (the “Acquisition”). CEC Technology is an investment holding

company with subsidiaries engaged in development and management of industrial parks.

Completion of the Acquisition is subject to approvals from the relevant authorities in the PRC. CEC

Technology and its subsidiaries are primarily engaged in the development and management of

industrial parks in the PRC.

The Issuer believes the development of the electronics and IT industrial parks in the PRC will be

a driver for future growth in the PRC IT industry and believes the Acquisition is in line with its

development strategies. It is anticipated that, subsequent to the Acquisition, the Issuer will step

up its efforts in developing CEC Technology by leveraging its strong IT expertise and client

network, and the Issuer believes that such efforts will enhance the quality of the assets held by

the Issuer and thereby enhance the Issuer’s growth.

For the years ended 31 December 2011 and 2012 and the six months ended 30 June 2013, the

Issuer had a consolidated revenue of HK$995 million, HK$1,156 million and HK$728 million,

respectively, and a consolidated gross profit of HK$329 million, HK$452 million and HK$330

million, respectively, for the same periods.

The Company

Overview

The Group is the largest IT group under the Central SASAC in the PRC in terms of total assets

and revenue and a leading provider of electronics and IT products and services in the PRC. It is

wholly and directly owned by the Central SASAC. The Group ranks 26th out of 113 on Central

SASAC’s list of Grand State-Owned Enterprises and is also the highest ranking IT enterprise on

the list. The Group has maintained its position among “China’s Top 500 Competitive Large

Enterprises” selected by National Bureau of Statistics (國家統計局) since 2007 and ranked top

three of MIIT “China’s Top 100 Electronics and IT Enterprises” in 2013. It has also been named

in the Fortune Global 500 since 2011 and ranked 395th in 2013.

9

The Group’s primary businesses include (i) the design and manufacturing of IC products (集成電路), (ii) information security, including development of operating, supporting and application

software and the development and manufacturing of computer and computer related hardware

products (信息安全), (iii) high-tech electronics, including the development and manufacturing of

mobile and digital telecommunications products (高新電子), (iv) the development and

manufacturing of flat-panel displays (新型顯示), and (v) modern IT services which predominately

includes e-commerce and trading (現代信息服務).

Headquartered in Beijing, the Group comprises a group of IT companies, with business operations

in major cities across the PRC, including Shanghai, Wuhan, Shenzhen, Nanjing, Changsha,

Xiamen, Haikou and Xi’an. It has also undertaken overseas projects in Mexico, Poland and Brazil.

The Group has formed joint ventures, ODM and OEM arrangements and other strategic

partnerships with global market leaders, including IBM, Microsoft, Sharp, Philips, HP, Hitachi and

Nokia.

The Group’s revenue for the years ended 31 December 2011 and 2012 and the nine months ended

30 September 2013 was RMB168.7 billion, RMB183.0 billion and RMB137.7 billion, respectively,

and its net profit for the same period was RMB2.9 billion, RMB2.8 billion and RMB0.9 billion,

respectively.

Competitive Strengths

The Group believes that it enjoys several key competitive advantages in its principal activities:

• Favourable government policies to support the growth of the PRC IT industry;

• Strategic importance to the PRC electronics and IT industry and continued support from the

Central SASAC and the PRC government;

• Good corporate governance and transparency;

• Strong credit profile with access to low-cost funding;

• Preferential corporate tax treatment;

• Powerful R&D capabilities;

• Competitive cost structure; and

• Experienced and efficient management team with strong track record.

Strategies

The Group aims to strengthen its leading position in the electronics and IT industry in the PRC.

To achieve these objectives, it intends to focus on the following strategies:

• Continued transition to high value-added business model;

• Leveraging relationships with government bodies, state-controlled entities and large

enterprises;

• Continued emphasis on R&D to extend its technology leadership in the PRC;

• Further strengthening its leadership in the PRC electronics market; and

• Increasing operational efficiencies.

10

OFFER STRUCTURE

The following is a description of the structure of the offering, which should be read in conjunction

with the sections entitled “Risk Factors”, “Terms and Conditions of the Bond”, “Description of the

Keepwell Deed” and “Description of the Deed of Equity Interest Purchase Undertaking”.

The Bonds

The Bonds will be issued by the Issuer. Subject to the Conditions, the Bonds will constitute direct,

unsubordinated, unconditional and unsecured obligations of the Issuer and the payment

obligations of the Issuer under the Bonds will at all times rank at least equally with all the Issuer’s

other present and future unsecured and unsubordinated obligations.

The Issuer was incorporated in the Cayman Islands and continued in Bermuda, and is a subsidiary

of the Company. The Company is a state-owned enterprise established under the laws of the PRC,

and is a holding company that directly or indirectly holds various subsidiaries, associate

companies and jointly-controlled entities which carry on certain electronics business in the PRC

predominately.

The Keepwell Deed

The Issuer and the Company will execute the Keepwell Deed (as further described in “Description

of the Keepwell Deed”) in favour of the Trustee on the Issue Date. Defined terms used in this

section have the meanings given to them in the Keepwell Deed. Pursuant to the Keepwell Deed,

the Company will undertake with the Issuer and the Trustee that it shall, (i) directly or indirectly,

own and hold more than 50 per cent. of the outstanding shares of the Issuer, (ii) will not directly

or indirectly pledge, grant a security interest, or in any way encumber or otherwise dispose of any

such shares, and (iii) maintain the Issuer as one of the primary overseas platforms of the

Company for investments and offshore financing. In addition, the Company will undertake that it

shall cause:

• the Issuer to have an aggregate Consolidated Net Worth of at least US$1.00 at all times;

• the Issuer to have sufficient liquidity to ensure timely payment by the Issuer of any amounts

payable in respect of the Bonds in accordance with the Trust Deed and/or the Terms and

Conditions of the Bonds and otherwise under the Trust Deed and the Agency Agreement; and

• the Issuer to remain solvent and a going concern at all times under the laws of its jurisdiction

of incorporation or applicable accounting standard.

If the Issuer at any time determines that it will have insufficient liquidity to meet its payment

obligations as they fall due, then the Issuer shall promptly notify the Company of the shortfall and

the Company will make available to the Issuer, before the due date of the relevant payment

obligations under the Bonds and the Trust Deed, funds sufficient to enable the Issuer to pay such

payment obligations in full as they fall due. The Issuer shall use any funds made available to it by

the Company in accordance with the Keepwell Deed solely for the payment when due of such

payment obligations under the Bonds and the Trust Deed.

The Company will undertake:

• to procure that the articles of association of the Issuer shall not be amended in a manner that

is, directly or indirectly, materially adverse to holders of the Bonds;

• to cause the Issuer to remain in full compliance with the Terms and Conditions of the Bonds,

the Trust Deed and all applicable rules and regulations in Hong Kong;

• promptly to take any and all action necessary to comply with its obligations under the

Keepwell Deed; and

11

• to cause the Issuer to take all action necessary in a timely manner to comply with its

obligations under the Keepwell Deed.

The Keepwell Deed is not a guarantee or a legal obligation of the Company to pay any amount due

under the Bonds. The performance by the Company of its obligations under the Keepwell Deed

may be subject to the approvals, registrations, filings or clearance or other authorisation of PRC

government authorities and the Company will undertake to use its best endeavours to obtain the

same. See “Risk factors – The Keepwell Deed is not a guarantee of the payment obligations under

the Bonds.”

The Deed of Equity Interest Purchase Undertaking

The Company will execute the Deed of Equity Interest Purchase Undertaking (as further described

in “Description of the Deed of Equity Interest Purchase Undertaking”) in favour of the Trustee on

the Issue Date. While the Keepwell Deed contains a general obligation requiring the Company to

ensure that the Issuer have sufficient liquidity to meet any payment obligations under the Bonds,

the Deed of Equity Interest Purchase Undertaking provides a specified means by which the

Company could assist the Issuer to meet any outstanding debt obligations under the Bonds upon

the occurrence of an Event of Default.

Under the Deed of Equity Interest Purchase Undertaking, the Company will undertake to the

Trustee that upon receipt of a written notice from the Trustee following the occurrence of an Event

of Default under the Bonds, the Company will, subject to obtaining all necessary consents and

approvals from the relevant PRC authorities, purchase, either by itself or through a PRC

incorporated subsidiary of the Company, all or any equity interests of a PRC subsidiary of the

Company that is held by the Relevant Transferor(s) (as defined in the Deed of Equity Interest

Purchase Undertaking). The purchase price for any proposed acquisition will be determined by the

Company (subject to the appraisal procedure of equity interest(s) in accordance with the

applicable laws and regulations) provided that the relevant purchase price must be sufficient for

the Issuer to (i) discharge in full its obligations under the Bonds and the Trust Deed, (ii) to pay for

an amount being the interest payable in respect of one interest period on the Bonds, and (iii) to

pay for all costs, fees and expenses payable to the Trustee and/or the Agents under or in

connection with the Bonds, the Trust Deed, the Agency Agreement, the Keepwell Deed and/or the

Deed of Equity Interest Purchase Undertaking.

Please see “Risk Factors – Performance by the Company of its undertaking under the Deed of

Equity Interest Purchase Undertaking is subject to approvals of the PRC governmental

authorities.”

12

THE ISSUE

The following is a brief summary of the terms of this Offering and is qualified in its entirety by the

remainder of this Offering Circular. For a detailed description of the Bonds, see the section entitled

“Terms and Conditions of the Bonds”. The terms and conditions of the Bonds prevail to the extent

of any inconsistency set forth in this section. This summary is not intended to be complete and

does not contain all of the information that is important to an investor. Phrases used in this

summary and not otherwise defined shall have the meanings given to them in “Terms and

Conditions of the Bonds”.

Issuer . . . . . . . . . . . . . . . . . . . . . China Electronics Corporation Holdings Company Limited.

Issue . . . . . . . . . . . . . . . . . . . . . CNY [●] aggregate principal amount of [●] per cent. Bonds

due [●].

Issue Price. . . . . . . . . . . . . . . . . [●] per cent. of the principal amount of the Bonds.

Form and Denomination. . . . . . The Bonds will be issued in registered form in the specified

denomination of CNY1,000,000 each and integral multiples of

CNY10,000 in excess thereof.

Interest. . . . . . . . . . . . . . . . . . . . The Bonds will bear interest from and including the Issue Date

at the rate of [●] per cent. per annum, payable semi-annually

in arrear on the Interest Payment Dates falling on, or nearest

to, [●] and [●] in each year, commencing on [●] 2014.

Issue Date . . . . . . . . . . . . . . . . . [●].

Maturity Date . . . . . . . . . . . . . . . The Interest Payment Date falling on, or nearest to [●].

Status of the Bonds . . . . . . . . . The Bonds constitute direct, unsubordinated, unconditional

and (subject to Condition 4(a) of the Terms and Conditions of

the Bonds) unsecured obligations of the Issuer and shall at all

times rank pari passu and without any preference among

themselves and at least equally with the Issuer’s other

present and future unsecured and unsubordinated

obligations, as further described in Condition 3 of the Terms

and Conditions of the Bonds.

Negative Pledge . . . . . . . . . . . . The Bonds contain a negative pledge provision, as further

described in Condition 4(a) of the Terms and Conditions of the

Bonds.

Events of Default . . . . . . . . . . . The Bonds contain certain events of default provisions as

further described in Condition 9 of the Terms and Conditions

of the Bonds.

13

Taxation . . . . . . . . . . . . . . . . . . . All payments of principal, premium (if any) and interest by or

on behalf of the Issuer in respect of the Bonds shall be made

free and clear of, and without withholding or deduction for,

any taxes, duties, assessments or governmental charges of

whatever nature imposed, levied, collected, withheld or

assessed by or within Bermuda or the PRC or any political

subdivision or authority therein or thereof having power to tax,

unless such withholding or deduction is required by law, as

further described in Condition 8 of the Terms and Conditions

of the Bonds. In such event, the Issuer shall, subject to the

limited exceptions specified in the Terms and Conditions of

the Bonds, pay such additional amounts as will result in

receipt by the Bondholders of such amounts as would have

been received by them had no such withholding or deduction

been required.

Final Redemption . . . . . . . . . . . Unless previously redeemed or purchased and cancelled, the

Bonds will be redeemed at their principal amount on the

Interest Payment Date falling on, or nearest to [●].

Redemption for Tax Reasons . . The Bonds may be redeemed at the option of the Issuer in

whole, but not in part, at their principal amount, together with

accrued interest, at any time in the event of certain changes

affecting taxes of Bermuda or the PRC, as further described in

Condition 6(b) of the Terms and Conditions of the Bonds.

Redemption for Change of

Control Put Event . . . . . . . . . . At any time following the occurrence of a Change of Control Put

Event, the holder of any Bond will have the right, at such

holder’s option, to require the Issuer to redeem all, but not some

only, of such holder’s Bonds, at 101 per cent. of their principal

amount, together with accrued interest, as further described in

Condition 6(c) of the Terms and Conditions of the Bonds.

A Change of Control Put Event will be deemed to occur if (i) the

Company ceases to control the Issuer; or (ii) the Central

SASAC, and any other person directly wholly owned by the

central government of the PRC, together cease to directly or

indirectly control the Company. See “Terms and Conditions of

the Bonds – Redemption and Purchase – Redemption for

Change of Control Put Event”.

Keepwell Deed . . . . . . . . . . . . . . The Issuer, the Company and the Trustee will enter into a

keepwell deed as further described in “Description of the

Keepwell Deed”.

Deed of Equity Interest

Purchase Undertaking . . . . . . The Company and the Trustee will enter into a deed of equity

interest purchase undertaking as further described in

“Description of the Deed of Equity Interest Purchase

Undertaking”.

14

Clearing Systems . . . . . . . . . . . . The Bonds will be issued in registered form and will be

represented by a Global Certificate which will be registered in

the name of the HKMA as operator of, and shall be lodged with

a sub-custodian for, the CMU, the book-entry clearing system

operated by the HKMA. The Global Certificate will be

exchangeable for definitive Bond Certificates in registered form

in the denomination of CNY1,000,000 and integral multiples of

CNY10,000 in excess thereof, in the limited circumstances set

out therein. The Global Certificate will be held for the account of

CMU members who have accounts with the CMU operator, or

the CMU participants. Beneficial interests in the Global

Certificate will be shown on, and transfers thereof will be

effected only through, records maintained by the CMU.

For persons seeking to hold a beneficial interest in the Bonds

through Euroclear or Clearstream, such persons will hold their

interests through an account opened and held by Euroclear or

Clearstream (as the case may be) with the CMU operator.

Clearance and Settlement . . . . . The Bonds have been accepted for clearance by CMU under the

CMU Instrument Number of PARBFB14001. The ISIN and

Common Code of the Bonds is HK0000179140 and 101345963,

respectively.

Governing Law . . . . . . . . . . . . . . The Bonds, the Trust Deed, the Agency Agreement, the

Keepwell Deed and the Deed of Equity Interest Purchase

Undertaking will be governed by and will be construed in

accordance with the laws of Hong Kong.

Trustee . . . . . . . . . . . . . . . . . . . . BNP Paribas Trust Services (Hong Kong) Limited.

Principal Paying Agent . . . . . . . BNP Paribas Securities Services, Hong Kong Branch.

Register, Transfer Agent and

CMU Lodging Agent . . . . . . . . BNP Paribas Securities Services, Hong Kong Branch.

Listing . . . . . . . . . . . . . . . . . . . . Application has been made to the Hong Kong Stock Exchange

for the listing of, and permission to deal in, the Bonds by way of

debt issues to professional investors only.

Further Issues . . . . . . . . . . . . . . The Issuer may from time to time, without the consent of the

Bondholders, create and issue further bonds having the same

terms and conditions as the Bonds in all respects (or in all

respects except for the first payment of interest on them) so as

to form a single series with the Bonds, as further described in

Condition 15 of the Terms and Conditions of the Bonds.

Use of Proceeds. . . . . . . . . . . . . See section entitled “Use of Proceeds”.

Risk Factors . . . . . . . . . . . . . . . . For a discussion of certain factors that should be considered in

evaluating an investment in the Bonds, see “Risk Factors”.

15

SUMMARY FINANCIAL INFORMATION OF THE COMPANY

The selected consolidated statement of comprehensive income data for the years ended 31

December 2011 and 2012, respectively, except for EBITDA data, and the selected consolidated

statement of financial position data as at 31 December 2011 and 2012, respectively, as set out

below, have been derived from the Company’s published audited consolidated financial

statements for the year ended 31 December 2012, which have been audited by Daxin, and are

included elsewhere in this Offering Circular.

The selected consolidated statement of comprehensive income data for the nine months ended 30

September 2012 and 2013, respectively, except for EBITDA data, and the selected consolidated

statement of financial position data as at 30 September 2013, as set out below, have been derived

from the Company’s published, unaudited and unreviewed consolidated financial statements for

the nine months ended 30 September 2013, which are included elsewhere in this Offering

Circular. The unaudited and unreviewed consolidated financial results of the Company as at and

for the nine months ended 30 September 2013 should not be taken as an indication of the

expected financial condition or results of operations of the Company for the full financial year

ending 31 December 2013.

Prospective investors should read the selected financial data below in conjunction with

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and

the Company’s published consolidated financial statements and the related notes included

elsewhere in this Offering Circular. Historical results are not necessarily indicative of results that

may be achieved in any future period. The Company’s consolidated financial statements have

been prepared and presented in accordance with PRC GAAP.

Selected Consolidated Statements of Comprehensive Income Data of the Company

Unit: RMB million

Year ended 31 DecemberNine months ended

30 September

2011 2012 2012 2013

(audited) (audited) (unaudited) (unaudited)

Revenue . . . . . . . . . . . . . . . . . . . . . . . 168,730.6 183,034.6 129,285.9 137,671.3

Operating revenue . . . . . . . . . . . . . . . . 168,664.3 182,966.7 129,285.9 137,671.3

Expenses . . . . . . . . . . . . . . . . . . . . . . (168,225.0) (185,604.8) (130,487.7) (139,239.1)

Operating expenses . . . . . . . . . . . . . . . (153,218.6) (166,080.1) (118,104.8) (125,043.2)

Taxes and surcharges on operations . . . . (708.0) (712.8) (489.4) (691.0)

Selling and distribution expenses. . . . . . . (4,216.5) (5,447.4) (3,787.8) (4,305.6)

General and administrative expenses . . . . (8,625.4) (10,679.5) (6,958.5) (7,549.4)

In which: Research and developmentexpenses . . . . . . . . . . . . . . . (2,849.8) (4,490.1) (2,544.1) (2,795.6)

Finance (expenses)/income . . . . (841.4) (1,579.0) (1,147.1) (1,649.7)

Impairment loss on assets . . . . . (585.3) (1,094.3) (217.8) (512.8)

Plus: Gain or loss from changes infair value . . . . . . . . . . . . . . . . . . 21.2 (350.8) (57.1) 306.2

Investment income . . . . . . . . . . . . 1,498.5 2,329.0 872.8 785.5

In which: Investment income from jointventure and affiliates . . . . . . . . 287.0 502.6 32.4 87.5

Operating Profit . . . . . . . . . . . . . . . . . . 2,022.3 (592.1) (603.9) (988.8)

Plus: Non-operating revenue . . . . . . . . . 1,971.5 4,647.2 2,307.6 2,468.6

In which: Government subsidies. . . . 1,200.2 3,012.0 1,260.0 1,217.5

Less: Non-operating expenses . . . . . . . . (218.3) (228.1) (106.9) (70.2)

Total Profit . . . . . . . . . . . . . . . . . . . . . 3,775.4 3,827.1 1,596.8 1,409.6

Less: Income tax expenses . . . . . . . . . . (870.9) (982.1) (539.9) (490.0)

Net Profit . . . . . . . . . . . . . . . . . . . . . . 2,904.5 2,845.0 1,056.9 919.5

Other Comprehensive Income . . . . . . . . . (1,443.7) (562.5) – –

Total Comprehensive Income . . . . . . . . . 1,460.8 2,282.5 1,056.9 919.5

Attributable to shareholders ofparent company: . . . . . . . . . . . . . . . . . 545.9 1,273.2 447.0 640.9

Attributable to minority shareholders: . . . . . 914.9 1,009.3 609.9 278.7

16

Selected Consolidated Statements of Financial Position Data of the Company

Unit: RMB million

As at 31 DecemberAs at

30 September

2011 2012 2013

(audited) (audited) (unaudited)

Current Assets

Monetary capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,731.1 30,597.7 36,614.2

Financial assets held for trading . . . . . . . . . . . . . . . . . . 282.5 264.5 390.1

Notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,422.2 3,397.1 2,612.7

Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . 23,716.6 24,114.0 27,250.6

Advances to suppliers . . . . . . . . . . . . . . . . . . . . . . . . 9,538.4 11,432.8 12,783.9

Interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . 87.1 210.6 266.6

Dividends receivable . . . . . . . . . . . . . . . . . . . . . . . . . 5.0 1.1 –

Other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,096.0 5,537.0 5,996.5

Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,675.1 28,499.3 32,117.5

In which: Raw materials . . . . . . . . . . . . . . . . . . . . . . 4,444.4 5,104.3 8,157.7

Finished goods . . . . . . . . . . . . . . . . . . . . . 7,675.9 9,464.4 10,376.7

Non-current assets maturing within one year . . . . . . . . . . 9.9 36.2 16.1

Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . 3,140.3 1,694.2 1,628.5

Total Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 96,704.4 105,784.5 119,676.6

Non-current Assets

Loans and payments . . . . . . . . . . . . . . . . . . . . . . . . . 208.1 213.9 –

Available-for-sale financial assets . . . . . . . . . . . . . . . . . 4,542.2 4,530,6 4,954.1

Held-to-maturity investments . . . . . . . . . . . . . . . . . . . . – – 1,504.1

Long-term receivables . . . . . . . . . . . . . . . . . . . . . . . . 60.5 31.9 41.6

Long-term equity investments . . . . . . . . . . . . . . . . . . . . 6,445.5 6,713.4 6,927.6

Investment real estates . . . . . . . . . . . . . . . . . . . . . . . . 6,513.7 6,940.6 6,692.7

Original value of fixed assets . . . . . . . . . . . . . . . . . . . . 27,990.4 34,968.9 35,265.5

Less: Accumulated depreciation . . . . . . . . . . . . . . . . . 11,594.3 13,588.8 14,725.3

Fixed assets – net value . . . . . . . . . . . . . . . . . . . . . . . 16,396.1 21,380.1 20,540.2

Less: Reserves for fixed assets impairment . . . . . . . . . . 245.7 353.2 383.8

Net fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,150.4 21,026.9 20,156.4

Construction in progress . . . . . . . . . . . . . . . . . . . . . . . 10,460.2 7,326.9 8,138.0

Fixed assets in liquidation . . . . . . . . . . . . . . . . . . . . . . (16.3) 59.3 (635.8)

Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,563.2 4,925.9 4,994.5

Development costs . . . . . . . . . . . . . . . . . . . . . . . . . . 115.1 102.1 195.3

Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,237.0 1,293.1 1,293.1

Long-term deferred expenses . . . . . . . . . . . . . . . . . . . . 506.5 549.0 476.0

Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . 682.5 990.8 1,016.2

Other non-current assets . . . . . . . . . . . . . . . . . . . . . . . 161.2 419.8 1,111.4

Total Non-current Assets . . . . . . . . . . . . . . . . . . . . . . . 49,629.9 55,124.4 56,865.1

Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146,334.4 160,908.8 176,541.7

17

As at 31 DecemberAs at

30 September

2011 2012 2013

(audited) (audited) (unaudited)

Current Liabilities

Short-term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,826.3 17,808.7 22,188.4

Loans from customers and other banks. . . . . . . . . . . . . . 284.0 96.8 –

Transaction financial liabilities . . . . . . . . . . . . . . . . . . . 168.1 440.6 59.8

Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,435.6 1,929.1 1,773.0

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,347.5 25,374.3 27,852.4

Payments received in advance . . . . . . . . . . . . . . . . . . . 18,086.2 18,823.8 17,594.7

Employee compensation payable. . . . . . . . . . . . . . . . . . 1,564.3 1,851.0 1,638.0

In which: Wages payable . . . . . . . . . . . . . . . . . . . . . 1,274.4 1,494.2 1,288.1

Welfare benefits payable . . . . . . . . . . . . . . . 36.4 102.9 37.1

Taxes and surcharges payable . . . . . . . . . . . . . . . . . . . (300.2) (137.1) (588.9)

In which: Taxes payable . . . . . . . . . . . . . . . . . . . . . . (395.6) (146.9) (598.0)

Interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 246.0 317.5 667.2

Dividends payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 84.7 69.8 –

Other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,600.5 13,346.2 10,865.4

Non-current liabilities maturing within one year . . . . . . . . . 2,968.4 4,388.0 3,008.1

Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . 605.8 1,037.7 1,330.1

Total Current Liabilities . . . . . . . . . . . . . . . . . . . . . . . . 80,085.2 85,346.4 86,388.3

Non-current Liabilities

Long-term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,845.5 10,425.1 14,802.1

Debt securities issued . . . . . . . . . . . . . . . . . . . . . . . . 5,120.2 9,007.1 10,356.7

Long-term payables . . . . . . . . . . . . . . . . . . . . . . . . . . 2,109.0 4,969.3 5,007.8

Specific item payables . . . . . . . . . . . . . . . . . . . . . . . . 1,540.9 1,691.6 2,159.7

Estimated liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 125.1 128.9 103.1

Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 862.9 789.1 884.5

Other non-current liabilities . . . . . . . . . . . . . . . . . . . . . 1,815.3 1,858.6 2,495.9

Total Non-current Liabilities . . . . . . . . . . . . . . . . . . . . . 23,418.8 28,869.8 35,809.9

Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103,504.0 114,216.2 122,198.2

Owner’s Equity

Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,602.7 10,102.7 11,702.7

State-owned capital . . . . . . . . . . . . . . . . . . . . . . . . . . 8,602.7 10,102.7 11,702.7

Net paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,602.7 10,102.7 11,702.7

Capital reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,489.7 4,300.6 4,067.9

Surplus reserve. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69.0 125.7 125.7

In which: Statutory surplus reserves . . . . . . . . . . . . . . 69.0 125.7 125.7

Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,980.4 3,369.5 3,980.4

Exchange differences on translation offinancial statements of foreign operations . . . . . . . . . . . (153.9) (110.9) (302.6)

Total equity attributable to shareholders ofparent company . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,988.0 17,787.5 19,574.0

Minority shareholders’ equity . . . . . . . . . . . . . . . . . . . . 27,842.4 28,905.1 34,769.5

Total Owners’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . 42,830.3 46,692.6 54,343.5

Total Liabilities and Owners’ Equity . . . . . . . . . . . . . . . . 146,334.4 160,908.8 176,541.7

18

EBITDA Data of the Company(1)

Unit: RMB million

Year ended/As at 31 December

2011 2012

Net Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,904.5 2,845.0

Income tax expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 870.9 982.1

Interests income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (65.4) (66.5)

Interest expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.7 11.4

Finance expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 841.4 1,579.0

Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,145.5 2,878.4

Amortisation of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 204.3 539.1

Amortisation of long-term deferred expenses. . . . . . . . . . . . . . . . . . . . 119.5 129.0

EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,050.4 8,897.5

Adjustment(2)

Non-operating revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,971.5) (4,647.2)

Non-operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 218.3 228.1

Impairment loss on assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 585.3 1,094.3

Gain/(loss) on foreign exchange transactions . . . . . . . . . . . . . . . . . . . 3.0 0.1

Investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,498.5) (2,329.0)

Gain or loss from changes in fair value . . . . . . . . . . . . . . . . . . . . . . . (21.2) 350.8

Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,365.9 3,594.6

Adjusted EBITDA margin(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.6% 2.0%

Government subsidies(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,200.2 3,012.0

Adjusted EBITDA with government subsidies. . . . . . . . . . . . . . . . . . . . 5,566.1 6,606.6

Adjusted EBITDA margin with government subsidies(3) . . . . . . . . . . . . . 3.3% 3.6%

Short term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,826.3 17,808.7

Long term loan due within one year . . . . . . . . . . . . . . . . . . . . . . . . . 2,968.4 4,388.0

Long term loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,845.5 10,425.1

Debt securities issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,120.2 9,007.1

Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,760.4 41,628.9

Cash on hand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,731.1 30,597.7

Net debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,029.3 11,031.2

Leverage ratio

Total debt/EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.36x 4.68x

Total debt/Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.65x 11.58x

Total debt/Adjusted EBITDA with government subsidies. . . . . . . . . . . . 6.78x 6.30x

Net debt/EBITDA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.42x 1.24x

Net debt/Adjusted EBITDA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.30x 3.07x

Total debt/Adjusted EBITDA with government subsidies. . . . . . . . . . . . 1.80x 1.67x

Notes:

(1) EBITDA for any year/period is calculated as the Company’s net profit plus income tax expenses, net finance cost,

depreciation, amortisation of intangible assets and amortisation of long-term deferred expenses.

(2) Adjusted EBITDA for any year/period is calculated as EBITDA adjusted for other revenue, other expenses,

impairment loss on assets, gain/(loss) on foreign exchange transactions, investment income, gain or loss from

changes in fair value.

(3) The relevant EBITDA margin equals the relevant EBITDA divided by total revenue.

(4) The Group receives grants and subsidies from various government organisations at both central and local levels in

connection with government-led or government supported projects. Government organisations (such as the NDRC

and MIIT) regularly set aside funding on an annual basis to support the development of certain industries (such as

the IC industry) or programmes (such as LCD panel production lines) that are identified as strategic growth areas.

Granting of the funding is open for application by SOEs as well as private companies that carry out projects in the

relevant industry or under the relevant programme. Once granted, the subsidies may only be applied towards

specific projects and the use of the subsidies is subject to annual audit by the government organisation making the

grant. Various subsidiaries of the Group apply for and receive government subsidies on an annual basis. The

Group’s LCD panel production line in Nanjing received government subsidies of approximately RMB400 million in

2011 and approximately RMB1.5 billion in 2012.

19

SUMMARY FINANCIAL INFORMATION OF THE ISSUER

The selected consolidated income statements and statements of comprehensive income data for

the years ended 31 December 2011 and 2012 and the selected consolidated balance sheet data

as at 31 December 2011 and 2012, as set out below, have been derived from the Issuer’s

published audited consolidated financial statements for the year ended 31 December 2012, which

have been audited by PwC, and are included elsewhere in this Offering Circular.

The selected consolidated income statements and statements of comprehensive income data for

the six months ended 30 June 2012 and 2013 and the selected consolidated balance sheet data

as at 30 June 2013, as set forth below, have been derived from the Issuer’s published unaudited

condensed consolidated interim financial information for the six months ended 30 June 2013,

which have been reviewed by PwC and are included elsewhere in this Offering Circular. The

unaudited interim consolidated financial results of the Issuer as at and for the six months ended

30 June 2013 should not be taken as an indication of the expected financial condition or results

of operations of the Issuer for the full financial year ending 31 December 2013.

Prospective investors should read the selected financial data below in conjunction with the

Issuer’s published audited consolidated financial statements and published unaudited condensed

consolidated interim financial information and the related notes included elsewhere in this Offering

Circular. Historical results are not necessarily indicative of results that may be achieved in any

future period.

Consolidated Income Statements and Statements of Comprehensive Income Data of the

Issuer

Unit: HK$ thousand

Year ended 31 December Six months ended 30 June

2011 2012 2012 2013

(audited) (audited) (unaudited) (unaudited)

Revenue . . . . . . . . . . . . . . . . . . . . . . 995,111 1,155,632 611,317 728,341

Cost of sales . . . . . . . . . . . . . . . . . . . (665,832) (703,904) (378,643) (398,618)

Gross Profit . . . . . . . . . . . . . . . . . . . . 329,279 451,728 232,674 329,723

Other gains – net . . . . . . . . . . . . . . . . . 31,244 28,679 21,981 13,485

Selling and marketing costs . . . . . . . . . . (41,289) (57,310) (25,422) (25,690)

Administrative expenses . . . . . . . . . . . . (189,287) (200,768) (94,492) (160,314)

Operating Profit . . . . . . . . . . . . . . . . . 129,947 222,329 134,741 157,204

Finance income – net . . . . . . . . . . . . . . 1,282 3,194 813 3,444

Profit before Taxation . . . . . . . . . . . . . 131,229 225,523 135,554 160,648

Taxation. . . . . . . . . . . . . . . . . . . . . . . (16,570) (27,939) (21,691) (24,184)

Profit for the year/period . . . . . . . . . . . 114,659 197,584 113,863 136,464

Attributable to Owners of the Issuer . . . 114,659 197,584 113,863 136,464

Dividends . . . . . . . . . . . . . . . . . . . . . – – – 50,747

Earnings Per Share (expressed inHK cents per share)

Basic . . . . . . . . . . . . . . . . . . . . . . . . 6.78 11.68 6.73 8.07

Diluted . . . . . . . . . . . . . . . . . . . . . . . 6.78 11.68 6.73 8.07

Profit for the year/period . . . . . . . . . . . 114,659 197,584 113,863 136,464

Other Comprehensive Income for theyear/period

Exchange differences on translation offinancial statements of foreignoperations . . . . . . . . . . . . . . . . . . . . 20,133 639 (3,229) 14,536

Total Comprehensive Income for theyear/period . . . . . . . . . . . . . . . . . . . 134,792 198,223 110,634 151,000

Attributable to Owners of the Issuer . . . 134,792 198,223 110,634 151,000

20

Selected Consolidated Balance Sheet Data of the Issuer

Unit: HK$ thousand

As at 31 December As at 30 June

2011 2012 2013

(audited) (audited) (unaudited)

ASSETS

Non-current Assets

Property, plant and equipment . . . . . . . . . . . . . . . . . . . 16,988 21,210 19,080

Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,281 3,671 8,761

Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . 28,560 41,950 55,921

Available-for-sale financial assets . . . . . . . . . . . . . . . . . 2,467 2,467 2,511

52,296 69,298 86,273

Current Assets

Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 268,457 308,185 276,035

Trade and other receivables . . . . . . . . . . . . . . . . . . . . . 404,672 494,604 654,971

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . 329,453 476,619 521,900

1,002,582 1,279,408 1,452,906

Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,054,878 1,348,706 1,539,179

EQUITY AND LIABILITIES

Equity attributable to Owners of the Issuer

Issued equity/share capital and premium . . . . . . . . . . . . . 889,171 889,171 289,171

Other reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (321,238) (320,599) 28,656

Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,646 237,230 588,228

Total Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 607,579 805,802 906,055

Liabilities

Non-current Liabilities

Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . – – 4,816

Current Liabilities

Trade and other payables . . . . . . . . . . . . . . . . . . . . . . 422,629 541,671 627,053

Short term bank loans . . . . . . . . . . . . . . . . . . . . . . . . 24,670 1,233 1,255

Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 447,299 542,904 633,124

Total Equity and Liabilities . . . . . . . . . . . . . . . . . . . . . . 1,054,878 1,348,706 1,539,179

Net Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 555,283 736,504 824,598

Total Assets less Current Liabilities . . . . . . . . . . . . . . . . 607,579 805,802 910,871

EBITDA Data of the Issuer

Unit: HK$ thousand

Year ended 31 December Six months ended 30 June

2011 2012 2012 2013

Profit for the year/period . . . . . . . . . . . . . . . . 114,659 197,584 113,863 136,464

Taxation. . . . . . . . . . . . . . . . . . . . . . . . . . . 16,570 27,939 21,691 24,184

Finance income – net . . . . . . . . . . . . . . . . . . (1,282) (3,194) (813) (3,444)

Depreciation and amortisation expenses . . . . . . 14,363 16,982 8,238 8,321

EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . 144,310 239,311 142,979 165,525

Other gains – net . . . . . . . . . . . . . . . . . . . . . (31,244) (28,679) (21,981) (13,485)

Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . 113,066 210,632 120,998 152,040

Adjusted EBITDA margin . . . . . . . . . . . . . . . . 11.4% 18.2% 19.8% 20.9%

Government grants . . . . . . . . . . . . . . . . . . . . 28,772 30,737 24,229 13,000

Adjusted EBITDA with government grants. . . . . . 141,838 241,369 145,227 165,040

Adjusted EBITDA margin with government grants . . 14.3% 20.9% 23.8% 22.7%

Notes:

(1) EBITDA for any year/period is calculated as the Issuer’s profit for the year/period plus taxation, net finance income,depreciation and amortisation of expenses.

(2) Adjusted EBITDA for any year/period is calculated as EBITDA adjusted for net other gains.

(3) The relevant EBITDA margin equals the relevant EBITDA divided by total revenue.

21

RISK FACTORS

An investment in the Bonds is subject to a number of risks. Investors should carefully consider all

of the information in this Offering Circular and, in particular, the risks described below before

deciding to invest in the Bonds. The following describes some of the significant risks that could

affect the Group and the value of the Bonds. Some risks may be unknown to the Group and other

risks, currently believed to be immaterial, could in fact be material. Any of these could materially

and adversely affect the business, financial condition, results of operations and prospects of the

Group. The market price of the Bonds could decline due to any of these risks, and investors could

lose part or all of their investment. This Offering Circular also contains forward-looking statements

that involve risks and uncertainties. The actual results of the Group could differ materially from

those anticipated in these forward-looking statements as a result of certain factors, including the

risks described below and elsewhere in this Offering Circular. The Group is affected materially by

requirements and restrictions that arise under PRC laws, regulations, judicial interpretations and

government policies in nearly all aspects of its business in the PRC.

Risks Relating to the Group’s Industries and Businesses

The Group is heavily dependent on the electronics and IT industry in the PRC.

The core business of the Group depends on the growth of the electronics and IT industry in the

PRC which is the driving force behind the demand for electronic products and development of IT

industrial parks in the PRC. Although the electronics and IT industry has been growing in recent

years, in part due to the support of favourable government policies, any negative trend relating to

this industry may materially and adversely affect the business, financial condition and results of

operations of the Group.

The Group is exposed to risks as a result of ongoing changes specific to the flat-panel

display industry.

The global flat-panel display industry historically has experienced considerable volatility in capital

equipment investment levels, due in part to the limited number of LCD manufacturers, the

concentrated nature of LCD end-use applications, and excess production capacity relative to

end-use demand. In 2011 and 2012, the Group’s flat-panel display business contributed 42.9%

and 41.1% of its operating revenue. Industry growth has depended primarily on consumer demand

for increasingly larger and more advanced LCD TVs, and more recently on demand for smart

phones and other mobile devices, which demand is highly sensitive to cost and improvements in

technologies and features. The flat-panel display industry is characterised by ongoing changes

particular to this industry, including:

• the timing and extent of planned expansions of manufacturing facilities in the PRC by

domestic and foreign-invested manufacturers and the ability of foreign-invested

manufacturers to obtain government approvals on a timely basis;

• the slowing rate of transition to larger panel sizes for LCD-TVs and the resulting effect on

capital intensity in the industry and on the Group’s product differentiation, gross margin and

return on investment;

• the increasing importance of new types of display technologies, such as low temperature

polysilicon, OLED and metal oxide, and new touch panel films, such as anti-reflective and

anti-fingerprint; and

• uncertainty with respect to future LCD technology end-use applications and growth drivers.

If the Group does not successfully manage the risks resulting from the ongoing changes occurring

in the flat-panel display industry, its business, financial condition and results of operations could

be materially and adversely affected.

22

The Group may not be able to successfully develop and produce quality products that meet

its customers’ needs.

The markets in which the Group competes are characterised by rapidly changing technology,

evolving industry standards and continuous improvements in products and services. The Group is

continually evaluating new products and production processes. The Group believes that its future

success will depend upon its ability to develop new production processes, maintain technological

leadership and anticipate or respond to technological changes in production processes in a

cost-effective and timely manner, as well as its ability to design new products which meet its

customers’ evolving needs. The Group has engaged and will continue to engage in R&D activities

to keep pace with market developments and remain competitive. For the years ended 31

December 2011 and 2012 and the nine months ended 30 September 2013, the Group’s R&D

expenses were RMB2.8 billion, RMB4.5 billion and RMB2.8 billion, respectively.

The integration of new technology or industry standards or the upgrading of the Group’s facilities

and production capabilities may require substantial time, effort and funding, and therefore the

Group may not be able to successfully develop new production processes in a cost-effective and

timely manner, if at all. Furthermore, the development of new products and services requires

significant time and expertise in order to meet relevant industry standards, criteria issued by

relevant governmental authorities and customer specifications. The Group’s continued success in

selling products that appeal to its customers is dependent on its ability to innovate, with respect

to both products and operations, and on the availability of legal protections for such innovation.

Although the Group devotes considerable efforts to the development and commercial applications

of new and enhanced technology, there is no assurance that any of its research and development

efforts will necessarily generate sufficient revenue to justify commercialisation. Failure to continue

to deliver high-quality and competitive products to the marketplace, to supply products that meet

applicable regulatory requirements or to predict market demand or gain market acceptance for its

products, could have a material and adverse effect on the Group’s business, financial condition

and results of operations.

As holding companies, the Company and the Issuer mainly rely on dividends and

repayments on intercompany loans from their subsidiaries for funding, and one of the

material subsidiaries of the Issuer, Huada Electronics, is prohibited from distributing

dividends to the Issuer due to its failure to obtain the Foreign Exchange Registration

Certificate.

As holding companies, the Company and the Issuer operate business mainly through their

subsidiaries. The availability of funds for the Issuer to service its debts and for the Company to

meet its obligations under the Keepwell Deed and the Deed of Equity Interest Purchase

Undertaking depends upon dividends received from their subsidiaries. If any subsidiary incurs

debt, the holders of such debt may be able to impair the ability of such subsidiaries to pay

dividends or other distributions to the Issuer or the Company and in turn impairs the Issuer’s ability

to service its debts and the Company’s ability to fulfil its obligations under the Keepwell Deed and

the Deed of Equity Interest Purchase Undertaking.

PRC laws require that dividends can only be paid out of the net income calculated according to

PRC GAAP and financial regulations in the PRC. In addition, the PRC laws require the companies

incorporated in the PRC to set aside part of their net income as statutory reserves. These statutory

reserves are not available for distribution as cash dividends. PRC companies also require certain

approvals in order to be able to distribute dividends to their shareholders. For example, Huada

Electronics, the material PRC subsidiary of the Issuer, has not obtained the Foreign Exchange

Registration Certificate, which would prohibit it from distributing dividends to the Issuer. These

restrictions may restrict PRC subsidiaries of the Issuer and the Company from distributing

dividends to the Issuer and the Company and impairs the Issuer’s ability to service its debts and

the Company’s ability to fulfil its obligations under the Keepwell Deed and the Deed of Equity

Interest Purchase Undertaking.

23

The Group relies on a limited number of suppliers for certain key components and raw

materials.

The Group’s ability to meet customer demand depends, in part, on its ability to obtain timely and

adequate delivery of raw materials and key components from its suppliers. The Group purchases

its principal raw materials and components from a limited number of suppliers which the Group

believes currently satisfy the Group’s quality standards and can meet its volume requirements.

Although the Group believes it has maintained stable relationships with these suppliers, there can

be no assurance that shortages of supply will not occur in the future and that, if such shortages

occur, the Group will be able to obtain an adequate alternative supply of components and raw

materials in a timely manner to meet production demand which in turn could materially and

adversely affect its business, financial condition and result of operations.

Any failure by the Group to maintain relationships with its large customers would have an

adverse effect on the Group’s operating results.

For some of the business lines of the Group, a substantial portion of the sales revenue is

attributable to a relatively small number of customers, which primarily comprise government

organisations and large enterprises in the PRC. There can be no assurance that the Group will be

able to maintain or improve its relationships with these customers, or that it will be able to continue

to supply products to these customers at current levels or at all. In addition, the Group’s customers

may in the future experience significant decreases in demand for the Group’s products and

services or the payment settlement cycle with these customers may in the future become longer.

The uncertain economic conditions in several of the markets in which the Group’s customers

operate may prompt some of these customers to cancel orders, delay or reduce their orders with

the Group. Cancellations, reductions or the delay of orders by the Group’s customers could result

in:

• reduced sales;

• increased inventories of raw materials; and

• lower levels of asset utilisation which could adversely affect the Group’s business, financial

condition and results of operations.

Elimination of, or changes to, any of the incentives provided to the Group by the PRC

government could materially reduce the Group’s profitability.

The PRC government has provided various incentives to the Group’s businesses, including

reduced corporate income tax rates and ad hoc grants. For the years ended 31 December 2011

and 2012 and the nine months ended 30 September 2013, the Group received government

subsidies of RMB1.2 billion, RMB3.0 billion and RMB1.2 billion, respectively. In particular, the

Group’s LCD panel production line in Nanjing received government subsidies of approximately

RMB400 million in 2011 and RMB1.5 billion in 2012. However, the PRC government could

determine at any time to eliminate or reduce the scale of any preferential tax policy. Similarly,

government grants are typically awarded at the discretion of the relevant government agencies.

There is no assurance that the Group will continue to receive such government support and if the

Group is not able to remain qualified for, or the relevant PRC government authority changes its

policy regarding, such government support, the Group’s financial results may be adversely

affected.

The Group may experience losses on inventories.

The Group may not be able to reduce fixed costs in the event of any unexpected shortfall between

forecasted and actual sales, and its operating results may suffer. Any significant shortfall in sales

may require the Group to maintain higher levels of finished goods and inventories of components

and raw materials than it requires, thereby increasing the risk of inventory obsolescence and

corresponding inventory write-downs and write-offs.

24

In addition, price fluctuations in the Group’s raw materials, components and finished goods couldalso result in a decline in the net realisable value of the Group’s inventory, which may requireinventory write-downs. If there is a shortage of raw materials or components, the prices of suchraw materials or components may increase, which could have an adverse effect on the Group’sprofit margin to the extent it is not able to pass along these higher costs to its customers.

The Group’s margins and profitability may be adversely affected if it is unable to reducecosts or if the prices of its products decline sharply.

Part of the Group’s business requires it to maintain a large fixed cost base and its productionprocesses rely to a large extent on manual labour. Therefore, its profitability is dependent, in part,on its ability to spread fixed production costs over higher production volumes and to control labourcosts. If the Group is unable to generate sufficient production cost savings in the future to offsetprice reductions or if any reduction in consumer demand results in decreased sales, its marginsand profitability would be materially and adversely affected.

The Group faces competition in all of its businesses, and general economic and businessconditions can put pressure on the Group to lower its prices. If the Group’s competitors offersignificant discounts on certain products or develop products that the marketplace considers morevaluable, the Group may need to lower prices or offer other favourable terms in order to retain itscustomers and market positions. Any such changes may reduce the Group’s profitability and cashflow which could materially and adversely affect its business, financial condition and results ofoperations.

The Group faces competition in the industries where it operates, which may adverselyaffect its business and results of operations.

The Group competes against many domestic and international manufacturers in each of itsbusiness lines, certain of which may have better research and development capabilities, greaterglobal logistics, financial, marketing and other resources than the Group. The Group’s competitorsmay also be able to respond to changes in market conditions more promptly and effectively thanthe Group can. If the Group is unable to maintain a competitive position, adapt to changing marketconditions or otherwise compete successfully with its competitors in its main business lines, theGroup’s prospects, business, financial condition and results of operations may be materially andadversely affected.

The Group is subject to risks arising from international operations.

The Group undertakes certain overseas projects in Asia, Europe and Americas and has formedjoint ventures, ODM and OEM arrangements and strategic partnerships with other internationalcompanies. The Group continues to consider additional opportunities to make foreignacquisitions, construct new foreign facilities and engage in partnerships or joint ventures withother international companies. As a result of its international operations, the Group may beaffected by economic and political conditions in foreign countries, including the imposition ofgovernment controls, political and economic instability, trade restrictions, changes in tariffs, lawsand policies affecting trade and investment, the lack of development of local infrastructure, labourunrest and difficulties in staffing, coordinating communications among and managing internationaloperations, fluctuations in currency exchange rates and misappropriation of intellectual property.

The Group may further expand internationally, which may require the incurrence of additional

capital expenditures. The Group cannot assure investors that it will realise the anticipated

strategic benefits of its international operations or that its international operations will contribute

positively to, and not adversely affect the Group’s business and results of operations.

The Group may be subject to OFAC penalties if it conducts transactions in violation of

OFAC regulations.

The United States currently imposes various economic sanctions, which are administered by

OFAC, and applied only to US persons and, in certain cases, to foreign subsidiaries of US persons

or to transactions involving certain items subject to the US jurisdiction. OFAC sanctions are

25

intended to address a variety of policy concerns, primarily denying certain countries, including

Cuba, Burma, Iran, Libya, Syria and Sudan and certain individuals and entities in those and other

countries, the ability to support international terrorism and, in the case of Iran, North Korea and

Syria, as well as certain individuals and entities in those and other countries, to pursue weapons

of mass destruction and missile programmes. Prior to 2013, certain subsidiaries within the Group

conducted transactions with a small number of companies based in Iran and Burma. The value of

these transactions constituted less than 0.1% of the Group’s revenue in 2012 and the products

sold in these transactions are for consumer use only. Although the Group and its subsidiaries do

not intend to conduct transactions in violation of OFAC regulations in the future, the past violation

or the failure to prevent future violation of OFAC regulations could expose the Group to potential

penalties, and consequently the Group’s reputation and ability to conduct future business in the

United States or with US persons could be adversely affected.

The Group may not be able to expand its business effectively through acquisitions,

investments, joint ventures and new business opportunities.

The Group’s business strategy includes selective acquisitions of new assets or businesses,

entering into new strategic alliances and joint ventures and investing in or entering into new

business opportunities. The Group’s ability to benefit from such acquisitions, investments,

alliances and joint ventures will depend upon a number of factors, including, but are not limited to,

the Group’s ability to:

• identify appropriate assets or businesses for acquisitions, investments, joint ventures or

alliances;

• execute the acquisitions and integrate any business the Group acquires;

• identify additional new markets;

• work with joint venture partners or other shareholders;

• train and retain qualified personnel to manage and operate growing business and any new

business opportunities; and

• upgrade and improve risk management controls and systems.

The failure to manage any of these factors effectively could negatively affect the Group’s ability

to expand its business which could in turn materially and adversely affect its business, financial

condition or results of operations.

Further, business growth could place a significant strain on the Group’s managerial, operational

and financial resources. Integrating new assets or businesses into the Group’s operational

framework and ensuring their proper management may involve unanticipated delays, costs and

operational problems, in particular with respect to business lines with which the Group has not had

extensive experience. The Group may encounter unexpected problems or have disagreements or

conflicting interests with its joint venture partners or other shareholders of the entities it acquires.

Further, with respect to some joint ventures or equity investments in which it only holds a minority

share, it may lack board representation or veto power. In case of disagreements with joint venture

partners or shareholders of acquired businesses, the Group’s management may be required to

divert its attention away from other aspects of the Group’s businesses to address such

disagreements.

The Group’s corporate structure, which consists of a large number of companies in

multiple business lines, exposes it to challenges not found in companies with a single

business line, such as conflicts of interest among business lines.

The Group consists of companies operating in multiple industries, and due to the diverse

characteristics of these companies, it faces challenges not found in companies with a single

business line. In particular:

26

• the Group is exposed to business, market and regulatory risks relating to different industriesor different countries. The Group must devote substantial resources to monitor changes indifferent operating environments so that it may react with appropriate strategies that fit theneeds of the companies affected;

• due to the number of companies within the Group, the Group requires an effectivemanagement and internal control system that emphasises proper authorisation, reliabilityand accountability, imposes financial and internal control discipline on portfolio companies,and creates value-focused incentives for management; and

• conflicts of interest may exist among companies within the Group, which may implementconflicting strategies to achieve their respective business interests.

Delays in collecting receivables from customers could have a material and adverse effecton the Group’s business, financial condition and results of operations.

The payment arrangements that the Group has with its customers vary depending on the type ofbusiness involved. Generally speaking, the Group accepts all forms of payment arrangementscustomarily adopted in the industries in which it operates. The Group’s customers often need tomake significant capital commitments to purchase its products. Any downturn in a customer’sbusiness or other circumstances that affects the customer’s ability or willingness to pay for itsorders could, therefore, have a material and adverse effect on the Group’s accounts receivable.The Group believes that its current receivables collection cycle is sufficient for maintaining itsnormal operations. However, the failure by its customers to make payments on a timely basis orat all in the future could require the Group to write off receivables or increase its provision for badand doubtful debts, which could reduce its profits.

If disruptions in its transportation network occur or its shipping costs substantiallyincrease, the Group may be unable to deliver its products in a timely manner and itsoperating expenses could increase.

The Group is highly dependent upon the transportation systems it uses to ship its products,including surface and air freight. The Group’s efforts to closely match its inventory levels to itsproduct demand further increase its reliance on the effective functioning of these transportationsystems. These transportation systems are subject to disruption from a variety of causes,including operational inefficiencies, labour disputes or port strikes, acts of war or terrorism andnatural disasters. If the Group’s delivery times increase unexpectedly for these or other reasons,the Group’s ability to deliver products on time could be materially and adversely affected andresult in delayed or lost revenue. In addition, if fuel prices were to increase, the Group’stransportation costs would likely increase. A prolonged transportation disruption or a significantincrease in the cost of transportation could severely disrupt the Group’s business and adverselyaffect its business, financial condition and results of operations.

Control of the Issuer is concentrated in one shareholder.

The Company is the indirect majority shareholder of the Issuer, and the Company is in turnwholly-owned by the Central SASAC and is under its direct supervision. The interest of theCompany may not be consistent with the Issuer’s interests or those of the Issuer’s creditors,including the Bondholders. To the extent that there are conflicts of interest between the Companyand the Issuer or its creditors, there is no assurance that the Company will not cause the Issuerto enter into transactions or take, or omit to take, other actions or make decisions that conflict withthe best interests of the Issuer’s other shareholders or creditors, including the Bondholders.Further, there is no assurance that the Company, as the indirect majority shareholder of the Issuer,will always act in a way that benefits other shareholders of the Issuer, the Bondholders or otherholders of securities of the Issuer.

The PRC government does not guarantee the obligations of the Company.

Although the Company is wholly-owned by the PRC central government and the Central SASAChas in the past provided financial support to the Company, the Company’s borrowings and otherobligations, including payments to be made under the Bonds, are not guaranteed by the PRC

27

government. There is no assurance that the Central SASAC or any other government authority will

provide financial or other support to any member of the Group in the future if such member of the

Group experiences any liquidity problems.

Interim financial information of the Group contained in this Offering Circular has not been

audited or reviewed by the Group’s auditors.

None of the consolidated interim financial results of the Group as at and for the nine months ended

30 September 2012 and 2013 included in this Offering Circular has been audited or reviewed by

the Group’s auditors. Consequently, such financial information should not be relied upon by

potential investors to provide the same quality of information associated with information that has

been subject to an audit or review. Potential investors must exercise caution when using such data

to evaluate the Group’s financial condition and results of operations.

The Group’s success depends on the continuing services of its senior management team,

key research and development personnel and other key personnel.

The Group’s future success depends heavily upon the continuing services of its directors and

senior management team as well as key research and development personnel. To a large extent,

the Group’s continued ability to successfully integrate new operations and to identify other market

opportunities will depend on the experience and expertise of its senior management. If one or

more of the Group’s senior management or other key personnel are unable or unwilling to continue

in their present positions, the Group may not be able to replace them easily or at all, and its

business may be disrupted and its financial condition and results of operations may be materially

and adversely affected.

In addition, as competition in the PRC for senior management and key personnel with experience

and industry expertise is intense, and the pool of qualified candidates is very limited, the Group

may not be able to retain the services of its senior management or other key personnel, or attract

and retain high-quality senior management or other key personnel in the future. If the Group fails

to attract and retain qualified personnel, its business and prospects may be adversely affected.

Moreover, along with its growth and expansion, the Group will need to continue to employ, train

and retain employees. If the Group cannot attract and retain suitable human resources, its

business, prospects, financial condition and results of operations will be materially and adversely

affected.

Any failure to maintain an effective quality control system at the Group’s manufacturing

facilities could have a material and adverse effect on its business and operations.

The performance, quality and safety of the Group’s products are critical to the success of its

business. These characteristics depend significantly on the effectiveness of the Group’s quality

control systems, which in turn, depend on a number of factors, including the quality training

program, the design of the systems, and its ability to ensure that its employees adhere to the

quality control guidelines and policies. Any significant failure or deterioration of the Group’s quality

control systems could have a material and adverse effect on its reputation in the market among

current or potential customers, which could in turn lead to fewer orders in the future, harming the

Group’s business, financial condition and results of operations.

If the Group’s internal control system fails to detect risks in its business as intended, its

business, financial condition and results of operations could be materially and adversely

affected.

The Group has established an internal control system designed to monitor and control potential

risk areas relevant to its business operations. Due to the inherent limitations in the design and

implementation of an internal control system, there can be no assurance that the Group will be

able to identify, prevent and manage all risks relevant to its business operations. Furthermore,

although the Group will examine additional enhancements to its internal control system in

connection with its various completed and pending acquisitions, integration of various business

28

operations from those acquisitions may give rise to additional internal control risks that arecurrently unknown to the Group, despite its efforts to anticipate such issues. If the Group’s internalcontrol system fails to detect risks in its business as intended or is otherwise exposed toweaknesses and deficiencies, the Group’s business, financial condition and results of operationscould be materially and adversely affected.

The Group is subject to business disruptions and operational risks.

A significant portion of the Group’s manufacturing, research and development activities andcertain other critical business operations are concentrated in a few geographic areas. Breakdown,failure or substandard performance of equipment, delays in delivery of equipment or improperinstallation or operation of equipment, difficulties in upgrading or expanding existing facilities inchanging manufacturing line technologies, capacity constraints, labour disturbances, fire, naturaldisasters such as earthquakes or typhoons, environmental hazards and industrial accidents at anyof its critical facilities could materially and adversely affect the Group’s ability to conduct normalbusiness operations and cause delivery delays and reduced output, which would have a materialand adverse effect on the Group’s business, financial condition and results of operations. TheGroup does not maintain any business interruption insurance.

The Group’s brand image, patents and other non-patented intellectual property arevaluable assets, and if the Group is unable to protect them from infringement, the Group’sbusiness prospects may be harmed.

The brand image of the Group plays an integral role in all of its business operations. Any negativeincident or negative publicity concerning the Group could adversely affect its reputation andbusiness. In addition, the Group’s success will depend in part on the Group’s ability to obtain andmaintain trade secret and patent protection for the Group’s technologies, know-how, processesand products as well as to successfully enforce the Group’s intellectual properties and to defendthe Group’s intellectual properties against third-party challenges. The Group will only be able toprotect its technologies, processes and products from unauthorised use by third parties to theextent that valid and enforceable intellectual property protections cover them. As at the date of theOffering Circular, the Company’s total number of registered patents reached 4,919. In the eventthat the Group’s issued patents and the Group’s applications do not adequately describe, enableor otherwise provide coverage for the Group’s technologies, processes or products, the Groupmay not be able to exclude others from developing or commercialising these technologies,processes and products. Historically, the PRC has not protected intellectual property rights to thesame extent as certain other countries, and infringement of intellectual property rights continuesto pose a serious risk to doing business in the PRC. Monitoring and preventing unauthorised useis difficult, and the measures the Group takes to protect its intellectual property rights may not beadequate. Furthermore, the application of laws governing intellectual property rights in the PRCand abroad is uncertain and evolving. If the Group is unable to adequately protect its intellectualproperty rights, the Group may lose its competitive advantage.

As some of the Group’s technologies and production methods or processes involve unpatented,proprietary technology, processes, know-how or data, the Group also relies on trade secretprotection and agreements to safeguard the Group’s interests. However, trade secrets are difficultto protect. While the Group uses reasonable efforts to protect the Group’s trade secrets, includingrequiring the Group’s employees, contractors or scientific and other advisors to enter intoconfidentiality agreements with the Group, such persons may unintentionally or wilfully disclosethe Group’s information to competitors. In addition, confidentiality agreements may not beenforceable or provide an adequate remedy in the event of unauthorised use or disclosure. It maybe difficult to prove or enforce a claim that a third party had illegally obtained and used the Group’strade secrets. The Group’s enforcement efforts may be expensive and time consuming and theoutcome may be unpredictable. It is also possible that the Group’s competitors may independentlydevelop technologies that are equivalent to the Group’s trade secrets, in which case, the Groupmay not be entitled to enforce the Group’s trade secrets and the Group’s business, financialcondition and results of operations could be materially and adversely affected.

The Group may be involved in intellectual property disputes.

The Group has in the past received communications from third parties asserting patent rights tothe Group’s products and it may encounter future litigation by third parties based on claims thatthe Group’s technologies, processes or products infringe the intellectual property rights of others

29

or that the Group has misappropriated the trade secrets of others. The Group may also initiate

lawsuits to defend the ownership of the Group’s inventions and the Group’s trade secrets. It is

difficult to predict how such disputes would be resolved. Litigation relating to intellectual property

rights is costly and diverts technical and management personnel from their normal

responsibilities. Furthermore, the Group may not be able to prevail in any such litigation or

proceeding. A determination in an intellectual property litigation or proceeding that results in a

finding of non-infringement by others to the Group’s intellectual property or an invalidation of the

Group’s patents may result in the use by competitors of the Group’s technologies or processes

and sale by competitors of products that resemble the Group’s products.

Although the Group actively seeks to protect its intellectual property rights and internal know-how,

there can be no assurance that claims will not be brought by third parties against the Group, its

customers or its suppliers from time to time. If a claim is asserted, the Group cannot assure

prospective investors that any resolution of the claim would permit the Group to continue to use

the technologies or processes or produce the product in question on commercially reasonable

terms. Any adverse outcome from such litigation, or the time and cost of the proceedings

themselves, could materially and adversely affect the Group’s business, financial condition and

results of operations. In addition, there is a risk that some of the Group’s confidential information

could be compromised by disclosure during litigation. Furthermore, there could be public

announcements throughout the course of litigation or proceedings as to the results of hearings,

motions or other interim proceedings or developments in the litigation, any of which could

materially harm the Group’s reputation.

The Group’s insurance coverage may not adequately protect the Group against certain

operating and other hazards which may have an adverse effect on its business.

The Group believes that the coverage from insurance policies for its production facilities is in line

with industry norms, adequate for present operations and includes adequate coverage for risks

relating to its properties, plants, fixed assets, vehicles and other assets. However, the Group may

incur losses beyond the limits, or outside the coverage, of the Group’s insurance policies,

including liabilities for environmental remediation. Furthermore, there can be no assurance that

any claim under the insurance policies maintained by the Group will be timely honoured in full or

at all. To the extent that the Group suffers loss or damage that is not covered by insurance or

exceeds insurance coverage, the Group’s business, results of operations and financial condition

may be materially and adversely affected. There can also be no assurance that insurance will

continue to be available to provide reasonable, or any, coverage on reasonable commercial terms.

The Group may not be able to obtain coverage at current levels, and the premiums on the Group’s

insurance coverage may increase significantly, in the future.

The Group may be sued for product liability or experience problems with product quality or

performance which could result in adverse publicity or subject the Group to unexpected

expenses, including potentially significant monetary damages.

The Group typically provides a warranty (where it is required by PRC laws) to its customers for its

products, and some of the Group’s products are produced and sold according to customer

specifications. If the Group’s products fail to meet its customers’ specifications, it will usually

replace the products. However, the Group is still subject to claims from the Group’s customers that

end products sold by the Group’s customers failed to perform or caused injury, death or damage

due to problems in the Group’s products. While the Group has not incurred substantial expenses

in the past relating to product failures, any future product failures could cause the Group to incur

substantial expense to replace defective products, provide refunds or resolve disputes with the

Group’s customers through litigation, arbitration or other means.

The Group is not required under PRC laws to maintain product liability insurance coverage and it

has not secured any product liability insurance or any third party liability insurance. There may be

circumstances in which the Group would not be covered or compensated by insurance in respect

of losses, damages, claims and liabilities arising from or in connection with product liability or third

party liability.

30

If any product liability claims are successfully asserted against the Group, the Group could be

required to pay significant monetary damages. Even if a product liability claim does not result in

a judgment in favour of a claimant, the Group may still incur substantial legal expenses defending

against such a claim. In addition, product failures and the assertion of product liability claims

against the Group, even if unsuccessful, could also result in adverse publicity that may damage

the Group’s reputation and customer relationships, which could have a material and adverse

effect on the Group’s business, financial condition and results of operations.

The Group may be involved in legal disputes and other proceedings arising out of its

operations from time to time and may incur material losses and liabilities as a result.

The Group may be involved in disputes with various parties, including but not limited to joint

venture partners, purchasers, suppliers and contractors, and these disputes may lead to legal

and/or other proceedings. In addition, it is subject to regulation by PRC and Hong Kong regulatory

authorities, and, from time to time, it may be subject to regulatory and administrative proceedings.

These legal, regulatory and other proceedings may result in substantial costs, delays in its

development schedule, and the diversion of resources and management’s attention, regardless of

the outcome. As at 30 September 2013, the Group had not been involved in any legal disputes

which had a material and adverse effect on its business, financial condition or results of operation.

However, there can be no assurance that the Group will not be involved in legal disputes in the

future or that such legal disputes will not be material in nature. The outcome of these proceedings

may materially and adversely affect the Group’s reputation, business, prospects, financial

condition and results of operations.

In addition, the Group has established certain companies and made certain investments in the

PRC through joint ventures or cooperation arrangements. The Group’s joint venture partners or

cooperation partners may have economic or business interests or goals that are inconsistent with

the Group’s interests or goals, may take actions contrary to the Group’s instructions or requests

or contrary to its policies or objectives, may be unable or unwilling to fulfil their obligations under

relevant joint venture or cooperation agreements or otherwise have financial difficulties.

Disagreements with any of its joint venture or other partners could adversely affect the Group’s

business, financial condition and result of operations.

The Group may be adversely affected by fluctuations in the global economy and financial

markets.

Since the second half of 2008, the global financial system has experienced significant difficulties

and disruptions, leading to reduced liquidity, greater volatility, widening credit spreads, and a lack

of price transparency in the global financial markets. While the rate of deterioration of the global

economy slowed in the second half of 2009, with some signs of stabilisation and improvement

since 2010, the outlook for the world economy and financial markets remains uncertain. Economic

uncertainty and related factors exacerbate negative trends in business and consumer spending

and may cause certain customers to reduce their orders with the Group or the prices with which

these orders are placed or cancel their orders. The reduced orders and prices may lead to reduced

revenues, lower profit margins and/or loss of market share, any of which would have a material

and adverse effect on the Group’s business, financial condition and results of operations.

If the global economy continues to grow at a slow rate, or experiences a double-dip recession, the

prospects of the electronics and IT industry may be adversely affected, which may in turn have a

material and adverse effect on the Group’s business, financial condition and results of operations.

If the Group fails to comply with environmental regulations, it may be subject to adverse

publicity and potentially material and adverse monetary damages and fines.

Some of the Group’s manufacturing processes employ or create various hazardous substances,

including chemical waste and waste water. The Group is subject to a variety of regulations in the

jurisdictions in which it operates relating to the use, storage, discharge and disposal of chemicals

and waste used in its manufacturing processes. Any failure to comply with present and future

31

regulations or obtain the necessary certificates and permits could subject the Group to future fines

and liabilities or other government sanctions. In addition, if more stringent regulations are adopted

in the future, the costs of compliance with these new regulations could be substantial. Any failure

to control the use of or to restrict adequately the discharge of hazardous substances could subject

the Group to monetary fines and liabilities or other government sanctions. If the Group is held

liable for damages in the event of contamination or injury, it could have a material and adverse

effect on the Group’s business, financial condition and results of operations.

In accordance with environmental regulations, the Group is required to obtain, and has obtained,

relevant licences and permits. The Group’s ability to maintain, or renew such licences and permits

on acceptable terms is subject to change, as the regulations and policies of applicable

governmental authorities may change. It cannot be assured that the Group will be successful in

obtaining the required approvals, licences and permits or that they would be granted by the

relevant authorities in a timely manner. Failure to obtain the necessary approvals, licences and

permits may subject the Group to monetary fines and liabilities or government sanctions which

could adversely affect the Group’s business, financial condition and result of operations.

The Group may not be able to obtain, renew or otherwise meet the requirements for

approvals from the relevant government authorities to construct or upgrade its production

facilities or to operate its business.

In accordance with applicable PRC laws and regulations, the Group is required to obtain approvals

from relevant government authorities to construct new production facilities or to upgrade or expand

existing production facilities. If the Group fails to obtain the required approvals, it may be subject to

sanctions, such as fines, or be required to shut down the relevant facility. The Group cannot assure

investors that it will be granted the licences, approvals or permits necessary for its operations, or

that upon the expiration of its existing licences, approvals or permits, it will be able to successfully

renew them or that employees and members of the Group will be able to comply with the terms of

the licences, approvals, or permits in accordance with PRC laws and regulations. In addition, if the

relevant authorities enact new regulations, the Group cannot assure investors that it will be able to

successfully meet such requirements. If the Group fails to obtain or renew the necessary regulatory

licences, approvals and permits, it may have to cease construction or operation of projects, be

subject to fines, or face other penalties, which could have a material and adverse effect on the

Group’s business, financial condition and results of operations.

The Group faces risks related to force majeure events, natural disasters, health epidemics

and other outbreaks, which could significantly affect its operations.

The Group’s facilities, modes of transportation and customers could be materially and adversely

affected by natural disasters, epidemics, inclement weather, terrorist attacks and other hostilities.

The Group generally maintains partial property insurance to cover its main fixed assets, facilities

and equipment. However, if it incurs substantial losses or liabilities and its insurance coverage is

unavailable or inadequate to cover such loss or liabilities, its financial condition and results of

operations could be materially and adversely affected.

There can be no assurance of the accuracy or comparability of facts, forecasts and

statistics contained in this Offering Circular with respect to the PRC, its economy or the

relevant industry.

Facts, forecasts and statistics in this Offering Circular relating to the PRC, the PRC’s economy and

the relevant industry, including any market share information, are derived from various official and

other publicly available sources which are generally believed by the Issuer, the Company and the

Group to be reliable. However, there can be no assurance as to the quality and reliability of such

official source materials. In addition, these facts, forecasts and statistics have not been

independently verified by the Issuer, the Company, the Group, the Joint Lead Managers, the

Trustee, the Agents or their respective advisors and therefore none of the Issuer, the Company, the

Group, the Joint Lead Managers, the Trustee, the Agents or their respective advisors makes any

representation as to the accuracy or fairness of such facts, forecasts and statistics, which may not

32

be consistent with other information compiled within or outside the PRC and may not be complete

or up to date. Each of the Issuer, the Company and the Group has taken reasonable care in

reproducing or extracting the information from such sources. However, because of possibly flawed

or ineffective methodologies underlying the published information or discrepancies between the

published information and market practice and other problems, these facts, forecasts and other

statistics may be inaccurate or may not be comparable from period to period or be comparable to

facts, forecasts or statistics produced for other economies and should not be unduly relied upon.

Risks Relating to Conducting Business in the PRC

Changes in PRC economic, political and social conditions, as well as government policies,

could have a material and adverse effect on the Group’s business, prospects, financial

condition and results of operations.

Substantially all of the Group’s business and operations are conducted in the PRC. Accordingly,

its business, prospects, financial condition and results of operations are, to a significant degree,

subject to economic, political and social developments in the PRC. The Chinese economy differs

from the economies of most developed countries in many respects, including the extent of

government involvement, level of development, growth rate, control of foreign exchange and

allocation of resources. Although the PRC government has implemented measures since the late

1970s emphasising the utilisation of market forces for economic reform, the reduction of state

ownership of productive assets and the establishment of improved corporate governance in

business enterprises, a substantial portion of productive assets in the PRC is still owned by the

PRC government. In addition, the PRC government continues to play a significant role in

regulating industry development by imposing industrial policies. The PRC government also

exercises significant control over the PRC’s economic growth through allocation of resources,

controlling payment of foreign currency denominated obligations, setting monetary policy and

providing preferential treatment to particular industries or companies. Certain measures taken by

the PRC government to guide the allocation of resources may benefit the overall economy of the

PRC but may, however, also have a negative effect on the Group.

Changes in the favourable taxation treatment and government incentives to the Group’s

PRC subsidiaries may adversely affect the Group’s profitability.

The Group’s PRC subsidiaries are subject to the Corporate Income Tax (the CIT), on the taxable

income as reported in the PRC statutory accounts adjusted in accordance with relevant PRC

income tax laws. In accordance with the Corporate Income Tax Law (the CIT Law), which came

into effect on 1 January 2008, the applicable statutory tax rate of the Group is 25%. However,

some of the Group’s subsidiaries are qualified as “High and New Technology Enterprises” (the

HNTEs) and thus were granted a 15% preferential rate for various periods. Such qualification is

subject to periodic review, and if such subsidiaries fail to renew the qualification of HNTEs, they

may not continue to enjoy preferential tax rates. Furthermore, the Group’s subsidiaries have

received government incentives and subsidies for certain government led projects. However there

can be no assurance that the Group will continue to benefit from preferential tax treatment and

government incentives. Failure to receive such preferential tax treatment and government

incentives may adversely affect the Group’s financial condition and results of operations.

Under the Corporate Income Tax Law, the Issuer may be classified as a “resident

enterprise” of the PRC. Such classification could result in unfavourable tax consequences

to it and its non-PRC Bondholders.

Under the CIT Law, an enterprise established outside of the PRC with a “de facto management

organisation” located within the PRC will be considered a “resident enterprise”, and consequently

will be treated in a manner similar to a Chinese enterprise for CIT purposes. The implementing

rules of the CIT Law define “de facto management” as “substantial and overall management and

control over the production and operations, personnel, accounting, and properties” of the

enterprise. However, it is still unclear how the PRC tax authorities will determine whether a

non-PRC entity (that has not already been notified of its status for CIT purposes) will be classified

33

as a “resident enterprise” and therefore there can be no assurance that the Issuer would not be

considered to be a PRC resident enterprise. As described in “Taxation – PRC”, if the Issuer were

treated as a PRC resident enterprise, interest paid by the Issuer to “non-resident enterprise”

holders of the Bonds may be treated as income derived from sources within the PRC and be

subject to PRC withholding tax at a rate of 10%, and capital gains realised by holders of the Bonds

may be treated as income derived from sources within the PRC and be subject to a 10% PRC tax,

in each case, subject to any applicable tax treaty. Interest or gains earned by non-resident

individuals may be subject to PRC income tax (which in the case of interest may be withheld at

source by us) at a rate of 20%. If the Issuer is required under the CIT Law to withhold PRC tax

on its interest payable to its Bondholders it will be required, subject to certain exceptions, to pay

such additional amounts as will result in receipt by a holder of the Bonds of such amounts as

would have been received by the holder had no such withholding been required. The requirement

to pay additional amounts will increase the cost of servicing interest payments on the Bonds, and

could have a material and adverse effect on the Issuer’s ability to pay interest on, and repay the

principal amount of, the Bonds, as well as their profitability and cash flow.

In certain circumstances described in Condition 6(b), the Issuer may be able to redeem the Bonds

in whole, but not in part, in the event the Issuer is required to pay additional amounts mentioned

above due to its being treated as a PRC resident enterprise under the CIT Law. The date on which

the Issuer elects to redeem the Bonds may not accord with the preference of particular

Bondholders. In addition, a Bondholder may not be able to reinvest the redemption proceeds in

comparable securities at the same rate of return of the Bonds.

The legal system of the PRC is still developing and there are inherent uncertainties that

may affect the protection afforded to the Group’s business.

The Group’s business and operations in the PRC are governed by the PRC legal system that is

based on written statutes. Prior court decisions may be cited for reference but have limited

precedential value. Since the late 1970s, the PRC government has promulgated laws and

regulations dealing with economic matters such as foreign investment, corporate organisation and

governance, commerce, taxation and trade. However, as these laws and regulations are relatively

new and continue to evolve, interpretation and enforcement of these laws and regulations involve

significant uncertainties and different degrees of inconsistency. Some of the laws and regulations

are still in the developmental stage and are therefore subject to policy changes. Many laws,

regulations, policies and legal requirements have only been recently adopted by PRC central or

local government agencies, and their implementation, interpretation and enforcement may involve

uncertainty due to the lack of established practice available for reference. It is unclear what the

effect of future legal developments in the PRC, including the promulgation of new laws, changes

in existing laws or their interpretation or enforcement, or the pre-emption of local regulations by

national laws will have on the Group. As a result, there is substantial uncertainty as to the legal

protection available to the Group. Furthermore, due to the limited volume of published cases and

the non-binding nature of prior court decisions, the outcome of dispute resolution may not be as

consistent or predictable as in other more developed jurisdictions, which may limit the legal

protection available to the Group. In addition, any litigation in the PRC may be protracted and

result in substantial costs and the diversion of resources and management attention. The Group’s

operations in the PRC are subject to PRC regulations governing PRC companies. These

regulations contain provisions that are required to be included in the articles of association of PRC

companies and are intended to regulate the internal affairs of these companies.

It may be difficult to effect service of process upon, or to enforce against, the Group or its

Directors or senior management who reside in the PRC in connection with judgments

obtained in non-PRC courts.

Most of the Group’s assets and its subsidiaries are located in the PRC. In addition, most of its

Directors and senior management reside within the PRC, and the assets of its Directors and

senior management may also be located within the PRC. As a result, it may not be possible to

effect service of process outside the PRC upon most of its Directors and senior management,

including for matters arising under applicable securities law. A judgment of a court of another

34

jurisdiction may be reciprocally recognised or enforced if the jurisdiction has a treaty with the PRC

or if judgments of the PRC courts have been recognised before in that jurisdiction, subject to the

satisfaction of other requirements. However, the PRC does not have treaties providing for the

reciprocal enforcement of judgments of courts with Japan, the United Kingdom, the United States

and many other countries. In addition, Hong Kong has no arrangement for the reciprocal

enforcement of judgments with the United States. As a result, recognition and enforcement in the

PRC or Hong Kong of judgments from various jurisdictions is uncertain.

Higher labour costs and inflation in the PRC may adversely affect the Group’s business and

profitability.

Labour costs in the PRC have risen in recent years as a result of the enactment of new labour laws

and social development. In addition, inflation in the PRC has increased, which in turn increases

the costs of labour and the costs of raw materials the Group must purchase for production. Rising

labour costs may increase the Group’s operating costs and partially erode the cost advantage of

the Group’s PRC-based operations and therefore negatively impact the Group’s profitability.

Risks Relating to the Bonds, the Deed of Equity Interest Purchase Undertaking and the

Keepwell Deed

The Bonds are unsecured obligations.

The Bonds are unsecured obligations of the Issuer. The repayment of the Bonds may be adversely

affected if:

• the Issuer enters into bankruptcy, liquidation, reorganisation or other winding-up

proceedings;

• there is a default in payment under the Issuer’s future secured indebtedness or other

unsecured indebtedness; or

• there is an acceleration of any of the Issuer’s indebtedness.

If any of these events were to occur, the Issuer’s assets may not be sufficient to pay amounts due

on the Bonds.

The Issuer may not be able to redeem the Bonds upon the due date for redemption thereof.

Following the occurrence of a Change of Control Put Event (as defined in the Terms and

Conditions of the Bonds), the Issuer may, at the option of any holder of the Bonds, be required to

redeem all, but not some only, of such holder’s Bonds at 101% of their principal amount, together

with accrued interest. If such an event were to occur, the Issuer may not have sufficient cash in

hand and may not be able to arrange financing to redeem the Bonds in time, or on acceptable

terms, or at all. The ability to redeem the Bonds in such event may also be limited by the terms

of other debt instruments. The Issuer’s failure to repay, repurchase or redeem tendered Bonds

could constitute an event of default under the Bonds, which may also constitute a default under

the terms of the Issuer’s, the Company’s or the Group’s other indebtedness.

Claims by the Bondholders are structurally or effectively subordinated to other debt.

The Bonds are senior and unsecured obligations of the Issuer. Payments under the Bonds are

structurally or effectively subordinated to all the secured debts of the Issuer to the extent of the

value of the assets securing such debts, and to the debts and other liabilities of the Issuer’s

subsidiaries. The effect of this subordination is that, in the event of a bankruptcy, liquidation,

dissolution, reorganisation or similar proceeding involving the Issuer, the assets of the affected

entity could not be used to pay the Bondholders until after:

• all secured claims against the affected entity have been fully paid; and

35

• if the affected entity is the Issuer’s subsidiary, all other claims against such subsidiary,

including trade payables, have been fully paid.

The Keepwell Deed is not a guarantee of the payment obligations under the Bonds.

The Company will enter into the Keepwell Deed in relation to the Bonds. See “Description of the

Keepwell Deed”. Upon the occurrence of an event of default as set out in Condition 9 in the Terms

and Conditions of the Bonds, the Trustee may take action against the Company to enforce the

provisions of the Keepwell Deed. However, neither the Keepwell Deed nor any actions taken by

the Company thereunder can be deemed as a guarantee by the Company for the payment

obligation of the Issuer under the Bonds. Accordingly, the Company will only be obliged to cause

the Issuer to obtain, before the due date of the relevant payment obligations, funds sufficient by

means as permitted by applicable laws and regulations so as to enable the Issuer to pay such

payment obligations in full as they fall due, rather than assume the payment obligation as in the

case of a guarantee. Furthermore, even if the Company intends to perform its obligations under

the Keepwell Deed, depending on the manner in which the Company performs its obligations

under the Keepwell Deed in causing the Issuer to obtain, before the due date of the relevant

payment obligations, funds sufficient to meet its obligations under the Bonds, such performance

may be subject to obtaining prior consent or approvals from, or making filings/registrations with,

relevant PRC governmental authorities, including but not limited to the NDRC, SASAC, MOFCOM

and SAFE, or their respective local counterparts.

In addition, any claim by the Issuer and/or the Trustee against the Company in relation to the

Keepwell Deed will be structurally subordinated to all existing and future obligations of the

Company’s subsidiaries (which do not guarantee the Bonds), particularly their respective

operating subsidiaries, and all claims by creditors of such subsidiaries will have priority to the

assets of such entities over the claims of the Issuer and/or the Trustee under the Keepwell Deed.

The rights of the Trustee (for itself and the Bondholders) under the Keepwell Deed may be subject

to procedural and practical difficulties. For example, if the Bondholders were to obtain a

successful judgment against the Company under the Keepwell Deed from a Hong Kong court, the

judgment of the Hong Kong court would have to be enforced in the PRC, where substantially all

of the assets of the Company are located, subject to review and consent from the PRC court

pursuant to the <Arrangement of the Supreme People’s Court for the Reciprocal Recognition and

Enforcement by the Courts of the Mainland and of the Hong Kong Special Administrative Region

of the Judgments of Civil and Commercial Cases under Consensual Jurisdiction> (最高人民法院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 Company may issue bonds or provide security for any bond issue in the future.

The Company may, from time to time, without prior consultation or consent of the holder of the

Bonds, issue bonds, provide guarantee for any bond issue by any member of the Group or provide

security for any bond issue by itself or any member of the Group. There can be no assurance that

such bond issuance or capital raising activity will not adversely affect the market price of the

Bonds.

Performance by the Company of its undertaking under the Deed of Equity Interest Purchase

Undertaking is subject to approvals of the PRC governmental authorities.

The Company intends to assist the Issuer to meet its obligations under the Bonds and the Trust

Deed by entering into the Deed of Equity Interest Purchase Undertaking on the Issue Date. Under

the Deed of Equity Interest Purchase Undertaking, the Company agrees to purchase from the

Issuer and/or any of its subsidiaries incorporated outside the PRC (each, a “Relevant Transferor”)

the equity interest in certain of PRC-incorporated subsidiaries held by the Relevant Transferor at

a purchase price not less than (a) the amount sufficient to enable the Issuer to discharge its

obligations under the Bonds and the Trust Deed; plus (b) an amount of CNY[●], being the interest

payable in respect of one interest period on the Bonds; plus (c) all costs, fees and expenses and

other amounts in CNY payable to the Trustee and/or the Agents under or in connection with the

36

Bonds, the Trust Deed, the Agency Agreement, the Keepwell Deed and/or the Deed of Equity

Interest Purchase Undertaking as at the date of the Purchase Notice given pursuant to the Deed

of Equity Interest Purchase Undertaking plus provisions for costs, fees and expenses and other

amounts which may properly be incurred after the date of such Purchase Notice, as notified by the

Trustee in such Purchase Notice.

Performance by the Company of the Deed of Equity Interest Purchase Undertaking is subject to

compliance with the rules of the stock exchange applicable to the Issuer and the laws of the

jurisdiction in which the Relevant Transfer is located as well as the approval of or filings or

registrations with:

• the SASAC for the transfer of equity interests or the compliance with other procedures

relating to SOEs for the transfer of equity interests, if applicable;

• MOFCOM or its local counterparts in respect of the transfer of the equity interest in the

PRC-incorporated subsidiaries from the Relevant Transferor to the Company, if applicable;

• the competent administration for industry and commerce of the PRC in respect of the transfer

of the equity interest in the PRC-incorporated subsidiaries from the Relevant Transferor to

the Company;

• the relevant PRC tax authorities in respect of tax on capital gains realised by the Relevant

Transferor, if any;

• SAFE or its local counterparts in respect of (i) changing SAFE registration of the

PRC-incorporated companies being sold, and (ii) the remittance of the purchase price,

denominated in Renminbi, from the Company in the PRC to the Relevant Transferor (where

applicable).

As the approval/filing/registration process is beyond the control of the Company, there can be no

assurance that the Company will successfully obtain either of the requisite approvals or complete

the requisite filings/registrations in time, or at all. In the event that the Company fails to obtain the

requisite approvals or complete the requisite filings/registrations, the Issuer may have insufficient

funds to discharge their outstanding payment obligations to the holders of the Bonds.

The consideration of transfer of the equity interest may also be subject to the appraisal

procedures and registration of the appraisal result with regard to the state-owed equity interest of

the PRC-incorporated subsidiaries, which may delay the completion of the purchase and affect the

consideration of the equity interest being transferred, which may affect the monetary amount to be

received by the Issuer to enable it to discharge its obligations under the Bonds and the Trust

Deed.

Further, in the event of an insolvency of a Relevant Transferor, any sale proceeds received by that

Relevant Transferor may be subject to the insolvency claims of third parties. The Trustee’s claim

against the sale proceeds will be an unsecured claim and may rank lower in priority to any claims

by secured third party creditors of such Relevant Transferor where it is the Issuer. Where a

Relevant Transferor is not the Issuer, the Trustee will not have a direct claim against the sale

proceeds received by such Relevant Transferor.

Performance by the Company of its undertaking under the Deed of Equity Interest Purchase

Undertaking may be subject to consent from third party creditors and shareholders, and

may also be restricted if any of the equity interests are secured in favour of third party

creditors.

Under the terms of the Deed of Equity Interest Purchase Undertaking, the Company agrees to

purchase, upon the occurrence of an Event of Default (as defined in Condition 9 of the Terms and

Conditions of the Bonds), from the Relevant Transferor (as defined above) the equity interest held

by it in certain of such Relevant Transferor’s PRC incorporated subsidiaries subject to the

37

applicable laws and regulations and requisite approvals/filings/registrations. The ability of the

Company to perform this undertaking may be affected by any present or future financing

agreements of the Issuer and its subsidiaries:

• in the event that such financial agreements contain non-disposal or other restrictive

covenants that would prevent the sale of an equity interest by a Relevant Transferor, the

Issuer and its subsidiaries would need to obtain the consent from the third party creditor

before the Relevant Transferor is able to proceed with the sale of such equity interest; and

• in the event that certain equity interests have been secured in favour of third party creditors,

the Issuer and its subsidiaries would need to arrange for these security interests to be

released before the Relevant Transferor is able to proceed with the sale of such equity

interests.

Currently under certain financing arrangements, certain Group members have granted a pledge

of the equity interest held by them in their respective subsidiaries in favour of their respective

creditors, and under the Terms and Conditions of the Bonds and the Keepwell Deed, there are no

restrictions on the Issuer or its offshore subsidiaries entering into financing agreements with

non-disposal or other restrictive covenants or securing the equity interests of the Issuer and its

offshore subsidiaries in favour of their creditors.

In the event the obligation to purchase under the Deed of Equity Interest Purchase Undertaking

becomes effective, there is no assurance that the Relevant Transferor will be able to obtain any

required consents from its creditors or that it will be able to arrange for any existing security

arrangement to be released in order for the sale of the equity interest to proceed. If the Relevant

Transferor is not able to do so, it may need to repay the indebtedness owed to its third party

creditors in order to be able to sell the relevant equity interests to the Company.

In the event that the required consents or waivers from third party creditors are not able to be

obtained and in the case of third party creditors, the relevant indebtedness cannot be repaid in a

timely manner, the sale of the equity interest may not able to proceed and eventually the Issuer

may have insufficient funds to discharge its payment obligations to the holders of the Bonds.

In addition, the sale of the equity interests in certain non-wholly-owned companies may be subject

to pre-emptive rights or other restrictions in such company’s articles of association, shareholders’

agreement, provisions in the corporate law or otherwise that would require the selling shareholder

to obtain consent or waiver from other shareholders before any equity interest can be sold to the

Company. If the sale of equity interests constitutes a major transaction or very substantial disposal

and/or a connected transaction of the Issuer and therefore is subject to the reporting,

announcement and independent shareholders’ approval requirements under the Listing Rules,

performance by the Company of its undertaking under the Deed of Equity Interest Purchase

Undertaking will be subject to the approval of the Issuer’s compliance with such requirements. In

the event the obligation to purchase under the Deed of Equity Interest Purchase Undertaking

becomes effective there is no assurance that any required consents, approved or waivers can be

obtained from any third party or independent shareholders in a timely manner or at all.

If the Issuer is unable to comply with the restrictions and covenants in its debt agreements

(if any) or the Bonds, there could be a default under the terms of these agreements or the

Bonds, which could cause repayment of the Issuer’s debt to be accelerated.

If the Issuer is unable to comply with the restrictions and covenants in the Bonds or current or

future debt obligations and other agreements (if any), there could be a default under the terms of

these agreements. In the event of a default under these agreements, the holders of the debt could

terminate their commitments to lend to the Issuer, accelerate repayment of the debt, declare all

amounts borrowed due and payable or terminate the agreements, as the case may be. If any of

these events occur, there can be no assurance that the Group’s assets and cash flows would be

sufficient to repay in full all of the Issuer’s indebtedness, or that it would be able to find alternative

financing. Even if the Issuer could obtain alternative financing, there can be no assurance that it

would be on terms that are favourable or acceptable to the Issuer.

38

Renminbi is not freely convertible, which may adversely affect the liquidity of the Bonds.

Renminbi is not freely convertible at present. The PRC government continues to regulate

conversion between Renminbi and foreign currencies, including the Hong Kong dollar, despite the

significant reduction over the years by the PRC government of its control over routine foreign

exchange transactions under current accounts. Participating banks in Hong Kong have been

permitted to engage in the settlement of Renminbi trade transactions under a pilot scheme

introduced in July 2009. This represents a current account activity. The pilot scheme was

extended in August 2011 to cover the whole nation and to make Renminbi trade and other current

account item settlement available in all countries worldwide.

On 7 April 2011, SAFE promulgated the Circular on Issues Concerning the Capital Account Items

in connection with Cross-Border Renminbi (國家外匯管理局綜合司關於規範跨境人民幣資本項目業務操作有關問題的通知) (the “SAFE RMB Circular”), which became effective on 1 May 2011.

According to the SAFE RMB Circular, in the event that foreign investors intend to use cross-border

Renminbi (including offshore Renminbi and onshore Renminbi held in the capital accounts of

non-PRC residents) to make contribution to an onshore enterprise or make payment for the

transfer of an equity interest of an onshore enterprise by a PRC resident, such onshore enterprise

shall be required to submit the prior written consent of the MOFCOM or the relevant local

counterparts to the relevant local branches of SAFE of such onshore enterprise and register for

a foreign invested enterprise status. Further, the SAFE RMB Circular clarifies that the foreign

debts borrowed, and the external guarantee provided, by an onshore entity (including a financial

institution) in Renminbi shall, in principle, be regulated under the current PRC foreign debt and

external guarantee regime.

On 3 December 2013, MOFCOM promulgated the Circular on Issues in relation to Cross-border

Renminbi Foreign Direct Investment (關於跨境人民幣直接投資有關問題的公告) (the “MOFCOM

RMB FDI Circular”) which became effective on 1 January 2014. Pursuant to the MOFCOM RMB

FDI Circular, the proceeds of foreign direct investment in RMB may not be used towards

investment in securities, financial derivatives or entrustment loans in the PRC, except for

investments in PRC domestic listed companies under the PRC strategic investment regime with

the approval of MOFCOM pursuant to the Administrative Measures for Strategic Investment by

Foreign Investors in Listed Companies (外國投資者對上市公司戰略投資管理辦法).

On 13 October 2011, PBOC issued the Measures on Administration of the RMB Settlement in

relation to Foreign Direct Investment (外商直接投資人民幣結算業務管理辦法) (the “PBOC RMB FDI

Measures”), to roll out PBOC’s detailed RMB FDI administration system, which covers almost all

aspects of RMB FDI, including capital injection, payment of purchase price in the acquisition of

PRC domestic enterprises, repatriation of dividends and distribution, as well as RMB denominated

crossborder loans. Under the PBOC RMB FDI Measures, special approval for RMB FDI and

shareholder loans from the PBOC which was previously required is no longer mandatory. On 14

June 2012, PBOC further issued the implementing rules for the PBOC RMB FDI Measures.

On 5 July 2013, the PBOC promulgated the Notice on Simplifying the Procedures of Cross-border

Renminbi Business and Improving Relevant Policies (關於簡化跨境人民幣業務流程和完善有關政策的通知) (the “Notice”), which simplifies the operating procedures on current account cross-border

Renminbi settlement and further publishes policies with respect to issuance of offshore Renminbi

bonds by onshore non-financial institutions. The Notice intends to improve the efficiency of

cross-border Renminbi settlement and facilitate the use of cross-border Renminbi settlement by

banks and enterprises.

There is no assurance that the PRC government will continue to gradually liberalise the control

over cross-border RMB settlement and remittances in the future, that the pilot scheme introduced

in July 2009 will not be discontinued or that new PRC regulations will not be promulgated in the

future which have the effect of restricting or eliminating the remittance of Renminbi into or outside

the PRC.

39

There is only limited availability of Renminbi outside the PRC, which may affect the Group’sability to source Renminbi outside the PRC to service the Bonds.

As a result of the restrictions by the PRC government on cross-border Renminbi fund flows, theavailability of Renminbi outside the PRC is limited.

Since February 2004, in accordance with arrangements between the PRC central government andthe Hong Kong government, licensed banks in Hong Kong may offer limited Renminbi-denominated banking services to Hong Kong residents and specified business customers. ThePBOC, the central bank of the PRC, has also established a Renminbi clearing and settlementsystem for participating banks in Hong Kong. On 19 July 2010, further amendments were madeto the Settlement Agreement on the Clearing of Renminbi Business (the “Settlement Agreement”)between the PBOC and Bank of China (Hong Kong) Limited (the “RMB Clearing Bank”) to furtherexpand the scope of Renminbi business for participating banks in Hong Kong. Pursuant to therevised arrangements, all corporations are allowed to open Renminbi accounts in Hong Kong;there is no longer any limit (other than as provided in the following paragraph) on the ability ofcorporations to convert Renminbi; and there will no longer be any restriction on the transfer ofRenminbi funds between different accounts in Hong Kong.

However, the current size of Renminbi-denominated financial assets outside the PRC is limited.Renminbi business participating banks do not have direct Renminbi liquidity support from thePBOC. The RMB Clearing Bank only has access to onshore liquidity support from the PBOC tosquare open positions of participating banks for limited types of transactions, including openpositions resulting from conversion services for corporations relating to cross-border tradesettlement and for individual customers with accounts in Hong Kong of up to RMB20,000 perperson per day. The RMB Clearing Bank is not obliged to square for participating banks any openpositions resulting from other foreign exchange transactions or conversion services and theparticipating banks will need to source Renminbi from the offshore market to square such openpositions.

Although it is expected that the offshore Renminbi market will continue to grow in depth and size,its growth is subject to many constraints as a result of PRC laws and regulations on foreignexchange. There is no assurance that new PRC regulations will not be promulgated or theSettlement Agreement will not be terminated or amended in the future which will have the effectof restricting availability of Renminbi offshore. The limited availability of Renminbi outside the PRC

may affect the liquidity of the Bonds. To the extent we are required to source Renminbi in the

offshore market to service the Bonds, there is no assurance that the Group will be able to source

such Renminbi on satisfactory terms, if at all.

Investment in the Bonds is subject to interest rate risks.

The PRC government has gradually liberalised the regulation of interest rates in recent years.

Further liberalisation may increase interest rate volatility. The Bonds will carry a fixed interest rate.

Consequently, the value of the Bonds will vary with the fluctuations in the Renminbi interest rates.

If investors try to sell their Bonds before their maturity, they may receive an offer that is less than

the amount they have invested.

Exchange rate risks may result in a Bondholder receiving less interest or principal than

expected.

The Issuer will pay principal and interest on the Bonds in Renminbi. This presents certain risks

relating to currency conversions if a Bondholder’s financial activities are denominated principally

in a currency or currency unit (the “Investor’s Currency”) other than Renminbi. These include the

risk that exchange rates may significantly change (including changes due to devaluation of the

Renminbi or revaluation of the Investor’s Currency) and the risk that authorities with jurisdiction

over the Investor’s Currency may impose or modify exchange controls. An appreciation in the

value of the Investor’s Currency relative to the Renminbi would decrease (i) the Investor’s

Currency equivalent yield on the Bonds; (ii) the Investor’s Currency equivalent value of the

principal payable on the Bonds; and (iii) the Investor’s Currency equivalent market value of the

Bonds.

40

The liquidity and price of the Bonds following this offering may be volatile.

The price and trading volume of the Bonds may be highly volatile. Factors such as variations in

the revenues, earnings and cash flows of the Group and proposals of new investments, strategic

alliances and/or acquisitions, interest rates and fluctuations in prices for comparable companies

could cause the price of the Bonds to change. Any such developments may result in large and

sudden changes in the volume and price at which the Bonds will trade. There can be no assurance

that these developments will not occur in the future.

Developments in other markets may adversely affect the market price of the Bonds.

The market price of the Bonds may be adversely affected by declines in the international financial

markets and world economic conditions. The market for the Bonds is, to varying degrees,

influenced by economic and market conditions in other markets, especially those in Asia. Although

economic conditions are different in each country, investors’ reactions to developments in one

country can affect the securities markets and the securities of issuers in other countries, including

China. Since the sub-prime mortgage crisis in 2008, the international financial markets have

experienced significant volatility. If similar developments occur in the international financial

markets in the future, the market price of the Bonds could be adversely affected.

A trading market for the Bonds may not develop.

The Bonds are a new issue of securities for which there is currently no trading market. There can

be no assurance as to the liquidity of the Bonds or that an active trading market will develop. If

such a market were to develop, the Bonds could trade at prices that may be higher or lower than

the initial issue price depending on many factors, including prevailing interest rates, the Group’s

operations and the market for similar securities. The Joint Lead Managers are not obligated to

make a market in the Bonds and any such market making, if commenced, may be discontinued at

any time at the sole discretion of the Joint Lead Managers.

The insolvency laws of Bermuda and other local insolvency laws may differ from those of

another jurisdiction with which the holders of the Bonds are familiar.

As the Issuer is registered under the laws of Bermuda, any insolvency proceeding relating to the

Issuer would likely involve Bermuda insolvency laws, the procedural and substantive provisions

of which may differ from comparable provisions of the local insolvency laws of jurisdictions with

which the holders of the Bonds are familiar.

There may be less publicly available information about the Group than is available in

certain other jurisdictions.

The Issuer is listed on the Hong Kong Stock Exchange, and the Company is not listed on any stock

exchange. There may be less publicly available information about companies listed in Hong Kong

than is regularly made available by public companies in certain other countries. In addition, the

financial information of the Issuer included in this Offering Circular has been prepared in

accordance with HKFRS, and the financial information of the Company included in this Offering

Circular has been prepared in accordance with PRC GAAP which differ in certain respects from

HKFRS and generally accepted accounting principles in other jurisdictions, which might be

material to the financial information contained in this Offering Circular.

The Trustee may request holders of the Bonds to provide an indemnity and/or security

and/or prefunding to its satisfaction.

In certain circumstances, including without limitation giving of notice to the Issuer pursuant to

Condition 9 and taking enforcement steps pursuant to Condition 13 of the Terms and Conditions

of the Bonds, the Trustee may, at its sole discretion, request holders of the Bonds to provide an

indemnity and/or security and/or prefunding to its satisfaction before it takes actions on behalf of

41

holders of the Bonds. The Trustee shall not be obliged to take any such actions if not indemnified

and/or secured and/or prefunded to its satisfaction. Negotiating and agreeing to an indemnity

and/or security and/or prefunding can be a lengthy process and may impact on when such actions

can be taken. The Trustee may not be able to take actions, notwithstanding the provision of an

indemnity or security or prefunding to it, in breach of the terms of the Trust Deed (as defined in

the Terms and Conditions of the Bonds) or the Terms and Conditions of the Bonds and in

circumstances where there is uncertainty or dispute as to the applicable laws or regulations and,

to the extent permitted by the agreements and the applicable law, it will be for the holders of the

Bonds to take such actions directly.

Decisions that may be made on behalf of all holders of the Bonds may be adverse to the

interests of individual holders of the Bonds.

The Terms and Conditions of the Bonds contain provisions for calling meetings of holders of the

Bonds to consider matters affecting their interests generally. These provisions permit defined

majorities to bind all holders of the Bonds including holders who did not attend and vote at the

relevant meeting and holders who voted in a manner contrary to the majority. Furthermore, there

is a risk that the decision of the majority of holders of the Bonds may be adverse to the interests

of the individuals.

42

CAPITALISATION AND INDEBTEDNESS

Capitalisation and Indebtedness of the Company

The following table sets forth the Company’s consolidated capitalisation and indebtedness as at

30 September 2013 on an actual basis and as adjusted on a pro forma basis to give effect to the

issue of the Bonds. The following table should be read in conjunction with the Company’s

consolidated financial statements and related notes and the section entitled “Management’s

Discussion and Analysis of Financial Condition and Results of Operations” included in this

Offering Circular.

Unit: RMB million

As at 30 September 2013

Actual As adjusted

Short-term borrowings(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,196.5 25,196.5

Long-term borrowings(2)

– Long-term borrowings (other than bonds) . . . . . . . . . . . . . . . . . . . 14,802.1 14,802.1– Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,356.7 10,356.7– Bonds to be issued(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . – [●]

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,158.8 [●]Total equity(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,343.5 53,343.5

Total capitalisation(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78,502.3 [●]

Notes:

(1) Short-term borrowings represent the current loans and bonds, which include the current portion of non-current loans

and bonds.

(2) Long-term borrowings include the non-current loans and bonds, which exclude the current portion of the non-current

loans and bonds.

(3) Refers to the aggregate principal amount of the Bonds before deducting the commission and other expenses

incurred in connection with the issuance of the Bonds.

(4) Total equity includes share capital, share premium, reserves, retained earnings and minority interests.

(5) Total capitalisation equals total long-term borrowings (excluding the current portion of long-term borrowings) and

total equity.

Except as otherwise disclosed above, there has been no material change in the consolidated

capitalisation and indebtedness of the Company since 30 September 2013.

Capitalisation and Indebtedness of the Issuer

The following table sets forth the Issuer’s consolidated capitalisation and indebtedness as at 30

June 2013 on an actual basis and as adjusted on a pro forma basis to give effect to the issue of

the Bonds. The following table should be read in conjunction with the Issuer’s audited

consolidated financial statements for the year ended 31 December 2012 and the Issuer’s

unaudited condensed consolidated interim financial information for the six months ended 30 June

2013 included in this Offering Circular.

At 30 June 2013

Actual As adjusted

HKD inthousands

RMB inthousands

HKD inthousands

RMB inthousands

Short-term borrowings(1) . . . . . . . . . . . . . . . . 1,255 995 1,255 995

Long-term borrowings(2)

– Bonds to be issued(3) . . . . . . . . . . . . . . . . – – [●] [●]

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,255 995 [●] [●]Total equity(4) . . . . . . . . . . . . . . . . . . . . . . . 906,055 718,411 906,055 718,411

Total capitalisation(5) . . . . . . . . . . . . . . . . . . . 906,055 718,411 [●] [●]

43

Notes:

(1) Short-term borrowings represent the current loans and bonds, which include the current portion of non-current loans

and bonds.

(2) Long-term borrowings include the non-current loans and bonds, which exclude the current portion of the non-current

loans and bonds.

(3) Refers to the aggregate principal amount of the Bonds before deducting the commission and other expenses

incurred in connection with the issuance of the Bonds.

(4) Total equity includes share capital, share premium, reserves, retained earnings and minority interests.

(5) Total capitalisation equals total long-term borrowings (excluding the current portion of long-term borrowings) and

total equity.

Except as otherwise disclosed above, there has been no material change in the consolidated

capitalisation and indebtedness of the Issuer since 30 June 2013.

44

USE OF PROCEEDS

The Issuer estimates that the net proceeds from this Offering, after deducting underwriting

commissions to be charged by the Joint Lead Managers and other estimated expenses payable

in connection with this offering, will be approximately RMB[●] million. The Issuer intends to use the

net proceeds from this offering for working capital and general corporate purposes.

45

INDUSTRY OVERVIEW

CCID is a research firm specialising in China’s electronic and information market.

It has been commissioned by the Issuer to prepare the CCID Report which is set out in full in

Appendix I of this Offering Circular. CCID believes that it has accurately described the business

lines in which the Group operates, subject to the availability and reliability of the data supporting

the statistical information represented. CCID’s methodologies for collecting information and data,

and therefore the information discussed in this section, may differ from those of other sources and

does not reflect all or even necessarily a comprehensive set of the actual transactions occurring

in the electronics industry. The information contained in the CCID Report has not been

independently verified by the Issuer, the Company, the Joint Lead Managers, the Trustee or the

Agents. Much of this information is based on estimates and should therefore be regarded as

indicative only and treated with the appropriate caution.

In compiling the historical and forecast industry data contained in this section, CCID relied on

primary and secondary data sources. The forecasts are based on varying levels of quantitative

and qualitative analyses. As with most industry forecasts for the electronic sectors, significant

levels of judgment are employed and the results of such forecasts cannot be guaranteed.

46

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the section entitled “Selected

Financial Information of the Company” and the consolidated financial statements of the Company,

including the notes thereto, included in this Offering Circular. All significant intra-group

transactions, balances and unrealised gains on intra-group transactions have been eliminated.

The consolidated financial statements of the Company were prepared in accordance with PRC

GAAP. As such, the Company’s consolidated financial statements differ in certain material

respects from GAAP in other jurisdictions or IFRS. The discussion in this section contains

forward-looking statements that involve risks and uncertainties. The Company’s actual results and

timing of selected events could differ from those anticipated in these forward-looking statements

as a result of various factors including those set forth under “Risk Factors” and elsewhere in this

Offering Circular.

OVERVIEW

Established in 1989 with the approval of the State Council of the PRC, the Group is a leading

provider of electronic and IT products and services in the PRC. Its primary businesses include: (i)

the design and manufacturing of IC products (集成電路), (ii) information security, including the

development of operating, supporting and application software and the development and

manufacturing of computer and computer related hardware products (信息安全), (iii) high-tech

electronics, including the development and manufacturing of mobile and digital

telecommunications products (高新電子), (iv) the development and manufacturing of flat-panel

displays (新型顯示), and (v) modern IT services which predominately includes e-commerce and

trading (現代信息服務).

The Group’s IC products are used in consumer products, network communication equipment and

industrial production and control. Its IC cards are mainly used in second-generation PRC identity

cards, social security cards, telecommunications cards, electricity cards and petroleum cards as

well as in wireless local area networks. The Group also treats hard disk products, such as

magnetic heads and substrates, as part of the IC products business line.

The Group’s information security products mainly include (i) software products, such as operating

software, supporting software and application software, which includes ERP, hotel management

system, local network management system, mobile telecommunication network, office document

processing system, distance education system and teaching management system, and (ii)

hardware products, such as computer products, storage products, power supply products, power

supply related products, and new energy products.

The Group’s high-tech electronics business mainly covers mobile and digital telecommunication

products for both national defence and civilian purposes.

The Group’s flat-panel display business focuses on LCDs and covers a wide range of the value

chain from panels, modules, driver ICs, LCD monitors and LCD TVs.

The Group’s modern IT service business primarily consists of modern e-commerce and trading

business. In addition, businesses in relation to industrial park, operated through subsidiaries such

as CEC Technology, as well as system engineering, construction and financial services also

contribute to a small portion of this business line.

For the years ended 31 December 2011 and 2012 and the nine months ended 30 September 2013,

the Group’s revenue was RMB168,730.6 million, RMB183,034.6 million and RMB137,671.3

million, respectively, and its net profit was RMB2,904.5 million, RMB2,845.0 million and

RMB919.5 million, respectively.

47

Factors Affecting the Group’s Results of Operations

Product mix

The Group derives revenue from the sales of products in five business lines, namely – ICproducts, information security, high-tech electronics, flat-panel displays and modern IT services.The Group’s results of operations have been and are expected to be substantially affected by thetypes of products it sells and its product mix. In the future, as the Group continues to refine itsproduct mix and sales strategy, it anticipates its revenue, gross profit margin and net profit marginwill continue to be affected accordingly.

Market position, competition and pricing

The Group’s financial condition and results of operations depend on the attractiveness of anddemand for its product and service offerings. The rapid evolution of available technologies andinfrastructure in the IT and electronics industries may allow the Group to provide more innovativeproduct and service offerings to its users. The Group competes with international and domesticbrands in each of its businesses. The Group believes the factors that are critical to itscompetitiveness in this market include marketing and distribution channels, quality of productofferings, competitive pricing, brand recognition and R&D capabilities. The Group believes that ithas enjoyed certain competitive advantages as a result of its strong relationships with itscustomers, competitive pricing and brand recognition, among other factors.

The Group’s ability to keep pace with technological developments will be an important factor inmaintaining its competitiveness. For the years ended 31 December 2011 and 2012 and the ninemonths ended 30 September 2013, the Group’s R&D investments were RMB2.8 billion, RMB4.5billion and RMB2.8 billion, respectively. The Group’s future growth depends on its ability tocontinue to develop and manufacture products that are accepted by and meet the changing needsof customers. As the Group has recently increased its presence in the e-commerce transactionsbusiness, it continues to invest to offer more goods and services sold through its e-commerceplatforms. Further, the Group intends to devote more resources to fund capital expenditures foradditional facilities to warehouse increased inventory and to expand its logistics and warehousingsystem in connection with the expansion of its e-commerce transactions business.

Access to capital and cost of financing

The Group has historically met its liquidity requirements through a combination of cash flow fromoperations, internal resources, short-term bank borrowings and debt securities. As at 31December 2011 and 2012 and 30 September 2013, the Group’s total bank and other borrowingswere RMB37,769.4 million, RMB41,628.9 million and RMB50,355.3 million, respectively. For theyears ended 31 December 2011 and 2012 and the nine months ended 30 September 2013, theGroup’s net finance expenses were RMB841.4 million, RMB1,579.0 million and RMB1,649.7million, respectively. The interest rates applicable to a substantial portion of the Group’sborrowings are linked to benchmark lending rates published by the PBOC. The PBOC adjusts thebenchmark lending rates from time to time. Any change in the interest rates on the Group’s bankand other borrowings will affect its interest payments and finance expenses and therefore affectits cash flow, financial condition and results of operations.

Government support

The PRC government has provided various incentives to the Group’s business, including reducedcorporate income tax rates and ad hoc grants. For the years ended 31 December 2011 and 2012and the nine months ended 30 September 2013, the Group received government subsidies ofRMB1.2 billion, RMB3.0 billion and RMB1.2 billion, respectively. However, government grants aretypically awarded at the discretion of the relevant government agencies, and any change in theamount of grants awarded to the Group will affect its cash flow, financial condition and results ofoperations.

Basis of Presentation

The Company has adopted the PRC GAAP.

48

The Company’s financial year ends on 31 December. The Company’s reporting currency isRenminbi.

The Company has adopted the accrual basis of accounting. It usually uses the historical cost asthe principle of measurement of the financial statements and performs the measurement by costof replacement, net realisable value, current value and fair value, provided that the amount ofdetermined accounting elements are able to be obtained and reliably measured.

The scope of consolidation in the Group’s consolidated financial statements is determined on thebasis of control. Control means an investment in more than 50% of the registered capital of theinvestee, or substantial control over the investee if the investment accounts for 50% or less of theinvestee’s registered capital.

Certain Income Statement Items

Operating revenue

The Group primarily engages in the electronics and IT industry in the PRC. Its primary businessesinclude (i) the design and manufacturing of IC products (集成電路), (ii) information security,including the development of operating, supporting and application software and manufacturing ofcomputer and computer related hardware products (信息安全), (iii) the development andmanufacturing of mobile and digital telecommunications products (高新電子), (iv) the developmentand manufacturing of flat-panel displays (新型顯示), and (v) modern IT services whichpredominately includes e-commerce and trading (現代信息服務).

IC products

Revenue from the Group’s IC products business is primarily derived from the sale of IC productsand the provision of IC assembling services.

Information security

Revenue from the Group’s information security business is primarily derived from the sale ofcomputer hardware and components, the provision of computer software and related applicationsas well as the provision of services in relation to computer software and related applications.

High-tech electronics

Revenue from the Group’s high-tech electronics business is primarily derived from the sale ofmobile and digital telecommunication products.

Flat-panel display

Revenue from the Group’s flat-panel display business is primarily derived from the sale of panels,modules, LCD monitors and LCD TVs.

Modern IT services

Revenue from the Group’s modern IT services business is primarily derived from the provision ofe-commerce related business services.

Operating expenses

Operating expenses for the Group’s five business lines primarily include raw materials and labourcosts. Additional operating expenses for the Group’s information security business include costsassociated with supporting applications for software development.

Selling and distribution expenses

Selling and distribution expenses primarily consist of costs incurred in connection with the Group’spromotional and advertising activities, such as wages and benefits for sales staff, purchases ofthird-party advertising and promotional events. In recent years, the Group’s selling anddistribution expenses have increased in line with the growth of its business.

49

General and administrative expenses

General and administrative expenses primarily consist of research and development expenses,

related staff costs, travel and entertainment expenses, depreciation and other general office

expenses.

Finance expenses/(income)

Finance expenses/(income) consist primarily of the net of interest income on bank savings and

interest expense on bank loans and short-term notes (excluding capitalised interest), as well as

gains and losses on foreign exchange and other finance-related costs. Finance expenses

fluctuate from period to period primarily due to a change in the proportion of interest expense that

cannot be capitalised as a result of changes in types of borrowings.

Investment income/(loss)

Investment income/(loss) mainly includes income/(loss) from (i) long-term equity investment

income calculated by the cost method, (ii) long-term equity investment income calculated by the

equity method, and (iii) investment income from disposal of long-term equity investment.

Non-operating revenue

Non-operating revenue mainly includes (i) government subsidies, (ii) disposal of non-current

assets, and (iii) income from debt restructuring.

Government subsidies

The Group receives grants and subsidies from various government organisations at both central

and local levels in connection with government-led or government supported projects.

Government organisations (such as the NDRC and MIIT) regularly set aside funding on an annual

basis to support the development of certain industries (such as the IC industry) or programmes

(such as LCD panel production lines) that are identified as strategic growth areas. Granting of the

funding is open for application by SOEs as well as private companies that carry out projects in the

relevant industry or under the relevant programme. Once granted, the subsidies may only be

applied towards specific projects and the use of the subsidies is subject to annual audit by the

government organisation making the grant. Various subsidiaries of the Group apply for and

receive government subsidies on an annual basis. In particular, the Group’s LCD panel production

line in Nanjing received government subsidies of approximately RMB400 million in 2011 and

approximately RMB1.5 billion in 2012.

Income tax expenses

Substantially all of the Group’s revenue is derived from its entities incorporated in the PRC. Its

entities incorporated in the PRC are subject to income tax in the PRC. A number of the Group’s

PRC subsidiaries and consolidated affiliated entities enjoyed preferential tax treatments under the

2008 CIT Law or other preferential tax treatments in 2010, 2011, 2012 and the nine months ended

30 September 2013 as set out in the Company’s annual report for the year ended 31 December

2012 reproduced in this Offering Circular.

50

Consolidated Results of Operations

The following table sets forth, for the periods indicated, certain items derived from the Group’sconsolidated income statements.

Unit: RMB million

Year ended 31 DecemberNine months ended

30 September

2011 2012 2012 2013

Revenue . . . . . . . . . . . . . . . . . . . . . . 168,730.6 183,034.6 129,285.9 137,671.3

Operating revenue . . . . . . . . . . . . . . . 168,664.3 182,966.7 129,285.9 137,671.3

Expenses . . . . . . . . . . . . . . . . . . . . . 168,225.0 185,604.8 130,487.7 139,239.1

Operating expenses . . . . . . . . . . . . . . (153,218.6) (166,080.1) (118,104.8) (125,043.2)

Taxes and surcharges on operations . . . (708.0) (712.8) (489.4) (691.0)

Selling and distribution expenses. . . . . . (4,216.5) (5,447.4) (3,787.8) (4,305.6)

General and administrative expenses . . . (8,625.4) (10,679.5) (6,958.5) (7,549.4)

Research and development expenses. . . (2,849.8) (4,490.1) (2,544.1) (2,795.6)

Finance (expenses)/income . . . . . . . . . (841.4) (1,579.0) (1,147.1) (1,649.7)

Impairment loss on assets . . . . . . . . . . (585.3) (1,094.3) (217.8) (512.8)

Plus: Gain or loss from changes infair value . . . . . . . . . . . . . . . . . 21.2 (350.8) (57.1) 306.2

Investment income . . . . . . . . . . . 1,498.5 2,329.0 872.8 785.5

Investment income from jointventures and affiliates . . . . . . . . . 287.0 502.6 32.4 87.5

Operating Profit . . . . . . . . . . . . . . . . . 2,022.3 (592.1) (603.9) (988.8)

Plus: Non-operating revenue . . . . . . . . 1,971.5 4,647.2 2,307.6 2,468.6

In which: Government subsidies. . . 1,200.2 3,012.0 1,260.0 1,217.5

Less: Non-operating expenses . . . . . . . (218.3) (228.1) (106.9) (70.2)

Total Profit . . . . . . . . . . . . . . . . . . . . 3,775.4 3,827.1 1,596.8 1,409.6

Less: Income tax expense . . . . . . . . . . (870.9) (982.1) (539.9) (490.0)

Net Profit . . . . . . . . . . . . . . . . . . . . . 2,904.5 2,845.0 1,056.9 919.5

Other Comprehensive Income . . . . . . . . (1,443.7) (562.5) – –

Total Comprehensive Income . . . . . . . . 1,460.8 2,282.5 1,056.9 919.5

Attributable to the equity shareholders . . 545.9 1,273.2 447.0 640.9

Attributable to minority shareholders . . . 914.9 1,009.3 609.9 278.7

Nine months ended 30 September 2013 compared to nine months ended 30 September 2012

Operating revenue

Operating revenue increased by 6.5% from RMB129,258.9 million for the nine months ended 30September 2012 to RMB137,671.3 million for the nine months ended 30 September 2013. Thisprimarily reflected an increase in the operating revenue from the Group’s e-commerce and tradingbusiness under its modern IT services business line.

Operating expenses

Operating expenses increased by 6.7% from RMB130,487.7 million for the nine months ended 30September 2012 to RMB139,239.1 million for the nine months ended 30 September 2013. Thisprimarily reflected an increase in the operating expenses of the Group’s e-commerce and tradingbusiness in line with the revenue growth of this business.

Selling and distribution expenses

Selling and distribution expenses increased by 13.7% from RMB3,787.8 million for the ninemonths ended 30 September 2012 to RMB4,305.6 million for the nine months ended 30September 2013, which reflected increased expenses in line with the growth of the overallbusiness.

General and administrative expenses

General and administrative expenses increased by 8.5% from RMB6,958.5 million for the ninemonths ended 30 September 2012 to RMB7,549.4 million for the nine months ended 30September 2013. This primarily reflected an increase in R&D expenses and related labour costs.

51

Net finance expenses

Net finance expenses increased by 43.8% from RMB1,147.1 million for the nine months ended 30

September 2012 to RMB1,649.7 million for the nine months ended 30 September 2013. This

primarily reflected an increase in interest-bearing debts and the recognition of exchange losses

on the Group’s foreign currency-denominated debts for the nine months ended 30 September

2013.

Investment income

Income from investment decreased by 10.0% from RMB872.8 million for the nine months ended

30 September 2012 to RMB785.5 million for the nine months ended 30 September 2013, primarily

due to a decrease in dividends received from the Group’s long-term equity investments partially

offset by an increase in investment income from joint ventures and affiliates.

Non-operating revenue

Non-operating revenue increased by 7.0% from RMB2,307.6 million for the nine months ended 30

September 2012 to RMB2,468.6 million for the nine months ended 30 September 2013, primarily

reflecting gains from the disposal of fixed assets partially offset by a decrease in government

subsidies.

Income tax expenses

Income tax expenses decreased by 9.2% from RMB539.9 million for the nine months ended 30

September 2012 to RMB490.0 million for the nine months ended 30 September 2013, primarily

reflecting a decrease in the Group’s total profit.

Net profit

As a result of the factors discussed above, the Group’s net profit decreased by 13.0% from

RMB1,056.9 million for the nine months ended 30 September 2012 to RMB919.5 million for the

nine months ended 30 September 2013.

2012 compared to 2011

Operating revenue

Operating revenue increased by 8.5% from RMB168,664.3 million in 2011 to RMB182,966.7

million in 2012. This primarily reflected an increase in the operating revenue from the Group’s

information security business (up by 15.1%), high-tech electronics business (up by 13.7%) and

modern IT services business (up by 21.0%).

Operating expenses

Operating expenses increased by 8.4% from RMB153,218.6 million in 2011 to RMB166,080

million in 2012. This primarily reflected an increase in the operating expenses from the Group’s

information security business, high-tech electronics business and modern IT services business in

line with the revenue growth of these business lines.

52

Selling and distribution expenses

Selling and distribution expenses increased by 29.2% from RMB4,216.5 million in 2011 to

RMB5,447.4 million in 2012. This is primarily due to the Group’s acquisition of a company

engaged in the flat-panel display business in April 2012 and the consolidation of such entity’s

selling and distribution expenses into the Group’s financial results for 2012.

General and administrative expenses

General and administrative expenses increased by 23.8% from RMB8,625.4 million in 2011 to

RMB10,679.5 million in 2012. This is primarily due to an increase in R&D expenses and related

staff costs as well as acquisition of the subsidiary in April 2012 as described above and the

consolidation of its administrative expenses.

Net finance expenses

Net finance expenses increased by 87.7% from RMB841.4 million in 2011 to RMB1,579.0 million

in 2012. This primarily reflected an increase in the balances of the Group’s interest-bearing debts

in 2012.

Investment income

Investment income increased by 55.4% from RMB1,498.5 million in 2011 to RMB2,329.0 million

in 2012, primarily due to the Group’s disposal of one of its subsidiaries.

Non-operating revenue

Non-operating revenue increased by 135.7% from RMB1,971.5 million in 2011 to RMB4,647.2

million in 2012, primarily due to an increase in government subsidies relating to various

government-support projects such as the Group’s LCD panel production line.

Income tax expenses

Income tax expenses increased by 11.3% from RMB870.9 million in 2011 to RMB982.1 million in

2012, primarily due to an increase in profits generated by the Group’s subsidiaries that do not

qualify for preferential tax treatment.

Net profit

As a result of the factors discussed above, the Group’s net profit decreased by 2.0% from

RMB2,904.5 million in 2011 to RMB2,845.0 million in 2012.

Liquidity and Capital Resources

Historically, the Group has financed its liquidity requirements, and anticipates that in the future,

it will continue to finance its liquidity requirements through a combination of cash flows from

operating activities, internal resources, offering of debt securities and bank borrowings.

53

Cash Flows

The following table presents selected cash flow data from the Group’s consolidated cash flow

statements for the periods indicated.

Unit: RMB million

Year ended31 December

Nine months ended30 September

2011 2012 2012 2013

Net cash flows from/(used in)operating activities . . . . . . . . . . . . . . . 2,913.6 8,061.8 164.9 (2,405.4)

Net cash flows from/(used in)investing activities . . . . . . . . . . . . . . . (13,462.1) (7,820.7) (3,072.1) 815.8

Net cash flows from/(used in)financing activities . . . . . . . . . . . . . . . 11,479.5 3,199.1 (1,412.0) 6,822.0

Effect of foreign exchange rate changes oncash and cash equivalents. . . . . . . . . . (304.9) (95.8) 249.6 (64.5)

Net increase/(decrease) in cashand cash equivalents . . . . . . . . . . . . . 626.0 3,344.3 (1,245.6) 5,167.9

Cash and cash equivalents at the end ofthe period . . . . . . . . . . . . . . . . . . . . 20,788.0 24,132.3 18,789.1 29,300.3

Cash Flows from Operating Activities

The Group derives its cash flows from operating activities principally from the receipt of payments

for the sale of its products and provision of services. The Group’s cash used in operating activities

is mainly used to pay for costs and expenses relating to its operating activities.

Nine months ended 30 September 2013. The Group had net cash outflow used in operating

activities of RMB2,405.4 million for the nine months ended 30 September 2013. This net cash

outflow was primarily due to (i) cash payments for goods purchased and services received of

RMB123,940.0 million, (ii) other cash payments relating to operating activities of RMB13,669.9

million and (iii) cash payments to and on behalf of employees of RMB9,488.2 million, partly offset

by (i) cash received from the sale of goods and the rendering of services of RMB135,458.2 million

and (ii) other cash received from operating activities of RMB9,082.4 million.

2012. The Group had net cash inflow from operating activities of RMB8,061.8 million for 2012.

This net cash inflow was primarily due to (i) cash received from the sale of goods and the

rendering of services of RMB189,038.9 million and (ii) other cash received from operating

activities of RMB8,132.0 million, partly offset by (i) cash payments for goods purchased and

services received of RMB167,651.7 million, (ii) other cash payments relating to operating

activities of RMB12,170.7 million and (iii) cash payments to and on behalf of employees of

RMB11,536.5 million.

2011. The Group had net cash inflow from operating activities of RMB2,913.6 million for 2011. This

net cash inflow was primarily due to (i) cash received from the sale of goods and the rendering of

services of RMB174,459.6 million and (ii) other cash received from operating activities of

RMB5,005.8 million, partly offset by (i) cash payments for goods purchased and services received

of RMB158,059.5 million, (ii) cash payments to and on behalf of employees of RMB9,993.8 million

and (iii) other cash payments relating to operating activities of RMB9,033.9 million.

54

Cash Flows from Investing Activities

Nine months ended 30 September 2013. The Group had net cash inflow from investing activities

of RMB815.8 million for the nine months ended 30 September 2013. This net cash inflow was

primarily due to (i) cash received from disposal of and withdrawal from investments of

RMB4,221.3 million, (ii) cash received from return on investments of RMB413.4 million and (iii)

cash received from disposal of fixed assets, intangible assets and other long-term assets of

RMB306.2 million, partly offset by (i) cash payments to acquire investments of RMB3,847.1 million

and (ii) cash payments to acquire and construct fixed assets, intangible assets and other

long-term assets of RMB3,433.6 million.

2012. The Group had net cash outflow used in investing activities of RMB7,820.7 million for 2012.

This net cash outflow was primarily due to (i) cash payments to acquire investments of

RMB8,702.6 million and (ii) cash payments to acquire and construct fixed assets, intangible

assets and other long-term assets of RMB7,005.6 million, partly offset by (i) cash received from

disposal of and withdrawal from investments of RMB6,342.2 million, (ii) cash received from

disposal of fixed assets, intangible assets and other long-term assets of RMB700.3 million and (iii)

cash received from return on investments of RMB698.2 million.

2011. The Group had net cash outflow used in investing activities of RMB13,462.1 million for 2011.

This net cash outflow was primarily due to (i) cash payments to acquire and construct fixed assets,

intangible assets and other long-term assets of RMB11,272.1 million and (ii) cash payments to

acquire investments of RMB4,368.3 million primarily, partly offset by (i) cash received from

disposal of and withdrawal from investments of RMB1,946.9 million, (ii) cash received from return

on investments of RMB340.2 million and (iii) cash received from disposal of fixed assets,

intangible assets and other long-term assets of RMB237.6 million.

Cash Flows from Financing Activities

Nine months ended 30 September 2013. The Group had net cash inflow from financing activities

of RMB6,822.0 million for the nine months ended 30 September 2013. This net cash inflow was

primarily due to (i) cash received from borrowings of RMB32,632.4 million and (ii) other cash

received relating to financing activities of RMB3,066.6 million primarily arising from finance

leases, partly offset by (i) cash payments for amounts borrowed of RMB23,906.0 million and (ii)

other cash payments relating to financing activities of RMB4,153.0 million primarily arising from

finance leases, charitable donations and purchase of assets by instalments.

2012. The Group had net cash inflow from financing activities of RMB3,199.1 million for 2012. This

net cash inflow was primarily due to (i) cash received from borrowings of RMB35,596.1 million and

(ii) other cash received relating to financing activities of RMB6,198.1 million primarily arising from

finance leases, partly offset by (i) cash payments for amounts borrowed of RMB34,003.3 million

and (ii) other cash payments relating to financing activities of RMB4,813.3 million primarily arising

from finance leases, charitable donations and purchase of assets by instalments.

2011. The Group had net cash inflow from financing activities of RMB11,479.5 million for 2011.

This net cash inflow was primarily due to (i) cash received from borrowings of RMB31,617.5

million and (ii) other cash received relating to financing activities of RMB3,557.8 million primarily

arising from finance leases, partly offset by (i) cash payments for amounts borrowed of

RMB19,628.9 million and (ii) other cash payments relating to financing activities RMB2,863.8

million primarily arising from finance leases, charitable donations and purchase of assets by

instalments.

55

Borrowings

The following table sets forth the Group’s notes and short-term paper outstanding as at the date

of the Offering Circular:

Item Face value Issue date TenorGross

proceeds

(RMB inmillions)

(RMB inmillions)

CEC Panda 2011 Medium-term Note . . . . . . 1,500.0 9 December 2011 5 years 1,482.1CEC Panda 2012 Medium-term Note. . . . . . 1,900.0 22 March 2012 5 years 1,871.5TPV Technology Note*. . . . . . . . . . . . . . . 500.0 21 March 2011 3 years 489.6CEC 2009 Note . . . . . . . . . . . . . . . . . . . 2,500.0 29 October 2009 7 years 2,500CEC 2011 Medium-term Note . . . . . . . . . . 1,000.0 12 December 2011 5 years 1,000CEC 2012 Medium-term Note . . . . . . . . . . 2,000.0 13 August 2012 5 years 2,000CEC 2013 Short-term Paper* . . . . . . . . . . 1,000.0 23 April 2013 270 days 1,000Total. . . . . . . . . . . . . . . . . . . . . . . . . . 10,400.0 – – 10,343.3

Note: the Group intends to repay the TPV Technology Note and the CEC 2013 Short-term Paper in full upon their maturity.

The following table sets forth the Group’s borrowings at the dates indicated:

Unit: RMB million

As at 31 DecemberAs at

30 September

2011 2012 2013

Borrowings included in non-current liabilities:Long-term loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,854.5 10,425.1 14,802.1Long-term debt securities . . . . . . . . . . . . . . . . . . . . . . 5,120.2 9,007.1 10,356.7

Borrowings included in current liabilities:Short-term loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,826.3 17,808.7 22,188.4Long-term borrowing due within one year . . . . . . . . . . . . 2,968.4 4,388.0 3,008.1

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,769.4 41,628.9 50,355.3

As at 31 December 2012, the Group had total bank and other borrowings of RMB341,628.9

million, which includes RMB10,747.4 million in the form of secured bank borrowings.

As at 30 September 2013, the Group had cash and bank deposits of RMB36,614.2 million.

Total undrawn banking facilities available to the Group were approximately RMB89.6 billion as at

30 September 2013.

Contingent Liabilities

Details of the contingent liabilities of the Group are set out in the Company’s annual report for the

year ended 31 December 2012 included elsewhere in this Offering Circular.

Off-Balance Sheet Commitments And Arrangements

Except as disclosed in the section above headed “Contingent Liabilities”, at the date of this

Offering Circular, the Company has no material off-balance sheet commitments or arrangement.

Market Risks

Interest Rate Risk

The Group has interest-bearing assets including term deposits with initial term of over three

months and cash and cash equivalents. Its exposure to market rate risk for changes in interest

rates relates primarily to its debt (including short-term borrowings, long-term borrowings and

long-term notes issued). Borrowings issued at variable rates expose the Group to cash flows

interest rate risk which is partially offset by cash held at variable rates. Borrowings issued at fixed

rates expose the Group to fair value interest rate risk.

56

Price Risk

The Group is exposed to price risk because of its investments which are classified as

available-for-sale financial assets and derivative financial instruments. These investments were

made either for improving investment yield, maintaining high liquidity level simultaneously, or were

strategic investments. To manage its price risk arising from the investments, the Group diversifies

its portfolio. These investments are held for strategic rather than trading purposes and the Group

does not actively trade these investments.

Commodities Risk

The Group is exposed to fluctuations in the prices of raw materials for its products. Rising prices

for raw materials will affect its production costs and may have an impact on its results of

operations as a result.

Currency Risk

The Group mainly operates in the PRC with most of its transactions settled in Renminbi. The

conversion of RMB denominated balances into foreign currencies is subject to the rates and

regulations of foreign exchange control promulgated by the PRC government. Therefore, to

maintain the flexibility in its activities including payment of dividends, share repurchases and

offshore investments, the Group holds some monetary assets denominated in US dollars, Euros,

HK dollars and other foreign currencies subject to certain thresholds stated in its treasury

mandate. As at 31 December 2012, the Group had US dollar-denominated cash and cash

equivalents totalling RMB2,808.0 million equivalent and Euro dollar-denominated cash and cash

equivalents totalling RMB2,607.7 million equivalent.

The Group closely monitors the effects of changes in the foreign exchange rates on its currency

risk exposure and has entered into various derivatives transactions to hedge against currency risk

exposure.

Credit Risk

The Group’s credit risk relates mainly to its amounts due from trade and other receivables, bank

balances and cash, and pledged bank deposits. The Group deposits its cash and cash equivalents

in major financial institutions including state-owned banks, which the Group believes are of high

credit quality. With respect to trade and other receivables, the Group conducts credit evaluations

periodically on parties to which the Group grants credit by assessing their financial position, past

experience and other factors. The Group also closely monitors receivables to ensure actions are

taken to recover balances in the case the Group believes there is a risk of default.

Liquidity Risk

The Group aims to maintain sufficient cash and cash equivalents and marketable securities. Due

to the dynamic nature of its underlying businesses, the Group maintains flexibility in funding by

maintaining adequate cash and cash equivalents. In order to improve liquidity, the Group also

issued notes and entered into long-term borrowings. The Group will, based on an assessment of

relevant future costs and benefits, pursue such funding options as are appropriate.

57

TERMS AND CONDITIONS OF THE BONDS

The following other than the words in italics is the text of the terms and conditions of the Bondswhich will appear on the reverse of each of the definitive certificates evidencing the Bonds:

The issue of CNY[●] [●] per cent. bonds due [●] (the “Bonds”, which term shall include, unless thecontext requires otherwise, any additional Bonds issued in accordance with Condition 15 andconsolidated and forming a single series therewith) was authorised by a resolution of the boardof Directors of China Electronics Corporation Holdings Company Limited (the “Issuer”), asubsidiary of China Electronics Corporation (the “Company”), passed on 3 January 2014. TheBonds are constituted by a Trust Deed (the “Trust Deed”) dated on or about [●] (the “Issue Date”)between the Issuer, the Company and BNP Paribas Trust Services (Hong Kong) Limited (the“Trustee” which expression shall, where the context so permits, include all persons for the timebeing the trustee or trustees under the Trust Deed) as trustee for the holders of the Bonds. Theseterms and conditions include summaries of, and are subject to, the detailed provisions of the TrustDeed, which includes the form of the Bonds. Copies of the Trust Deed and of the AgencyAgreement (the “Agency Agreement”) dated on or about the Issue Date relating to the Bondsbetween the Issuer, the Trustee, BNP Paribas Securities Services, Hong Kong Branch as registrar(the “Registrar”), as initial principal paying agent (the “Principal Paying Agent”), as CMU (asdefined below) lodging agent (the “CMU Lodging Agent”) and as transfer agent (the “Transfer

Agent”) and any other agents named in it, are available for inspection during usual business hoursat the principal office of the Trustee (presently at 21/F, PCCW Tower, Taikoo Place, 979 King’sRoad, Quarry Bay, Hong Kong) and at the specified offices of the Principal Paying Agent, theRegistrar, the CMU Lodging Agent and the Transfer Agent. The “Agents” means the PrincipalPaying Agent, the Registrar, the CMU Lodging Agent, the Transfer Agent and any other agent oragents appointed from time to time with respect to the Bonds. The Bonds also have the benefit of(i) a keepwell deed dated on or about the Issue Date (the “Keepwell Deed”) entered into by theIssuer, the Company and the Trustee and (ii) a deed of equity interest purchase undertaking datedon or about the Issue Date (the “Deed of Equity Interest Purchase Undertaking”) entered intoby the Company and the Trustee, both deeds being executed in favour of the Trustee. Theentering into the Keepwell Deed was authorised by a resolution of the board of directors of theIssuer on 3 January 2014. The entering into the Keepwell Deed and the Deed of Equity InterestPurchase Undertaking was authorised by a resolution of the board of directors of the Company on

3 May 2013. The Bondholders are entitled to the benefit of, are bound by, and are deemed to have

notice of, all the provisions of the Trust Deed and are deemed to have notice of those applicable

to them of the Agency Agreement, the Keepwell Deed and the Deed of Equity Interest Purchase

Undertaking.

All capitalised terms that are not defined in these terms and conditions (“these Conditions”) will

have the meanings given to them in the Trust Deed.

1 FORM, SPECIFIED DENOMINATION AND TITLE

The Bonds are issued in the specified denomination of CNY1,000,000 and integral multiples

of CNY10,000 in excess thereof.

The Bonds are represented by registered certificates (“Certificates”) and, save as provided

in Condition 2(a), each Certificate shall represent the entire holding of Bonds by the same

holder.

Title to the Bonds shall pass by registration in the register that the Issuer shall procure to be

kept by the Registrar in accordance with the provisions of the Agency Agreement (the

“Register”). Except as ordered by a court of competent jurisdiction or as required by law, the

holder (as defined below) of any Bond shall be deemed to be and may be treated as its

absolute owner for all purposes whether or not it is overdue and regardless of any notice of

ownership, trust or an interest in it, any writing on the Certificate representing it or the theft

or loss of such Certificate and no person shall be liable for so treating the holder.

In these Conditions, “Bondholder” and (in relation to a Bond) “holder” means the person in

whose name a Bond is registered.

58

Upon issue, the Bonds will be represented by a global certificate (the “Global Certificate”)

registered in the name of, and lodged with a sub-custodian for, the Hong Kong Monetary

Authority as operator (the “Operator”) of the Central Moneymarkets Unit Service (the

“CMU”). These conditions are modified by certain provisions contained in the Global

Certificate. See “Summary of Provisions relating to the Bonds in Global Form”.

2 TRANSFERS OF BONDS

(a) Transfer: A holding of Bonds may, subject to Condition 2(d), be transferred in whole or

in part upon the surrender (at the specified office of the Registrar or any Transfer Agent)

of the Certificate(s) representing such Bonds to be transferred, together with the form

of transfer endorsed on such Certificate(s) (or another form of transfer substantially in

the same form and containing the same representations and certifications (if any),

unless otherwise agreed by the Issuer), duly completed and executed and any other

evidence as the Registrar or such Transfer Agent may require. In the case of a transfer

of part only of a holding of Bonds represented by one Certificate, a new Certificate shall

be issued to the transferee in respect of the part transferred and a further new

Certificate in respect of the balance of the holding not transferred shall be issued to the

transferor. In the case of a transfer of Bonds to a person who is already a holder of

Bonds, a new Certificate representing the enlarged holding shall only be issued against

surrender of the Certificate representing the existing holding. All transfers of Bonds and

entries on the Register will be made in accordance with the detailed regulations

concerning transfers of Bonds scheduled to the Agency Agreement. The regulations

may be changed by the Issuer, with the prior written approval of the Registrar and the

Trustee, or by the Registrar, with the prior written approval of the Trustee. A copy of the

current regulations will be made available by the Registrar to any Bondholder upon

written request.

(b) Delivery of New Certificates: Each new Certificate to be issued pursuant to Condition

2(a) shall be available for delivery within seven business days of receipt of a duly

completed form of transfer. Delivery of the new Certificate(s) shall be made at the

specified office of any Transfer Agent or of the Registrar (as the case may be) to whom

delivery or surrender of such form of transfer and Certificate shall have been made or,

at the option of the holder making such delivery or surrender as aforesaid and as

specified in the relevant form of transfer or otherwise in writing, be mailed by uninsured

post at the risk of the holder entitled to the new Certificate to such address as may be

so specified, unless such holder requests otherwise and pays in advance to the relevant

Transfer Agent or the Registrar (as the case may be) the costs of such other method of

delivery and/or such insurance as it may specify. In this Condition 2(b), “business day”

means a day, other than a Saturday or Sunday or public holiday, on which banks are

open for business in the place of the specified office of the relevant Transfer Agent or

the Registrar (as the case may be).

(c) Transfer or Exercise Free of Charge: Certificates, on transfer, exercise of an option

or redemption, shall be issued and registered without charge by or on behalf of the

Issuer, the Registrar or any Transfer Agent, but upon payment of any tax or other

governmental charges that may be imposed in relation to it (or the giving of such

indemnity and/or security and/or prefunding as the Registrar or the relevant Transfer

Agent may require).

(d) Closed Periods: No Bondholder may require the transfer of a Bond to be registered (i)

during the period of 15 days ending on (and including) the due date for redemption of

that Bond, (ii) during the period of 15 days prior to (and including any date on which

Bonds may be called for redemption by the Issuer at its option pursuant to Condition

6(d), or (iii) during the period of seven days ending on (and including) any Record Date

(as defined in Condition 7(a)(ii)).

59

3 STATUS

The Bonds constitute direct, unsubordinated, unconditional and (subject to Condition 4(a))

unsecured obligations of the Issuer and shall at all times rank pari passu and without any

preference among themselves. The payment obligations of the Issuer under the Bonds shall,

save for such exceptions as may be provided by applicable legislation and subject to

Condition 4(a), at all times rank at least equally with all the Issuer’s other present and future

unsecured and unsubordinated obligations.

4 COVENANTS

(a) Negative Pledge:

So long as any Bond remains outstanding (as defined in the Trust Deed), the Issuer

shall not, and the Issuer shall procure that none of its Subsidiaries will, create, permit

to subsist or have outstanding, any mortgage, charge, lien, pledge or other security

interest upon the whole or any part of its present or future undertaking, assets or

revenues to secure any Relevant Indebtedness or to secure any guarantee or indemnity

in respect of any Relevant Indebtedness without at the same time or prior thereto

according to the Bonds the same security as is created or subsisting to secure any such

Relevant Indebtedness, guarantee or indemnity or such other security as either (i) the

Trustee shall in its absolute discretion deem not materially less beneficial to the interest

of the Bondholders or (ii) shall be approved by an Extraordinary Resolution (as defined

in the Trust Deed) of the Bondholders;

(b) Financial Information Covenants: For so long as any Bond remains outstanding:

(i) The Issuer will procure the Company to furnish the Trustee with (A) a Compliance

Certificate of the Company (on which the Trustee may rely as to such compliance)

and a copy of the relevant Company Audited Financial Reports within 120 days of

the end of each Relevant Period prepared in accordance with the Generally

Accepted Accounting Principles in the People’s Republic of China (audited by an

internationally recognised firm of independent accountants) of the Company and

its subsidiaries and if such statements shall be in the Chinese language, together

with an English translation of the same translated by (aa) an internationally

recognised firm of accountants or (bb) a professional translation service provider

and checked by an internationally recognised firm of accountants, together with a

certificate signed by a director of the Company certifying that such translation is

complete and accurate; and (B) a copy of the Company Unaudited Financial

Reports within 60 days of the end of each Relevant Period prepared on a basis

consistent with audited consolidated financial statements of the Company and its

subsidiaries and if such statements shall be in the Chinese language, together

with an English translation of the same and translated by (aa) an internationally

recognised firm of accountants or (bb) a professional translation service provider

and checked by an internationally recognised firm of accountants, together with a

certificate signed by a director of the Company certifying that such translation is

complete and accurate; and

(ii) the Issuer will furnish the Trustee with (aa) a Compliance Certificate of the Issuer

(on which the Trustee may rely as to such compliance) and a copy of the Issuer

Audited Financial Reports within 120 days of the end of each Relevant Period; and

(bb) a copy of the Issuer Unaudited Financial Reports within 60 days of the end of

each Relevant Period;

(c) Deed of Equity Interest Purchase Undertaking: Upon the occurrence of any Event of

Default (as defined under Condition 9), the Trustee shall give to the Company (with a

copy to the Issuer) a notice in writing in accordance with the Trust Deed notifying the

Company of its obligations to purchase under the Deed of Equity Interest Purchase

60

Undertaking. Upon the completion of any equity purchase made in accordance with theDeed of Equity Interest Purchase Undertaking, (i) the Issuer undertakes to direct theCompany promptly to pay or procure to be paid an amount (being an amount no lessthan the amount sufficient to enable the Issuer to discharge its obligations under theBonds) from the proceeds to be received by the Issuer or the relevant Subsidiaries ofthe Issuer incorporated outside the PRC (each, the “Transferor”) in relation to suchequity purchase made in accordance with the Deed of Equity Interest PurchaseUndertaking to or to the order of the Trustee and (ii) the Company undertakes it shalland shall procure each Transferor to promptly do all such things and take all suchactions as may be necessary to promptly do all such things (including entering into andexecuting any agreements or arrangements required) and take all actions necessary forthe proceeds received in accordance with the Deed of Equity Interest PurchaseUndertaking (in the case of a Transferor which is not the Issuer) to be transferred to theIssuer (whether by loan or otherwise) and in any case to be applied solely towards thepayment in accordance with the Trust Deed of any outstanding amounts under the TrustDeed and the Bonds (including any interest accrued but unpaid on the Bonds) prior anyother use, disposal or transfer of the proceeds received.

In these Conditions:

“Company Audited Financial Reports” means annual audited consolidated statementof comprehensive income, statement of financial position and statement of cashflow ofthe Company together with any statements, reports (including any Directors’ andauditors’ reports) and notes attached to or intended to be read with any of them;

“Company Unaudited Financial Reports” means semi-annual (or any other interimreporting period required by applicable law or regulations) unaudited consolidatedstatement of comprehensive income, statement of financial position and statement ofcashflow of the Company together with any statements, reports (including anyDirectors’ and auditors’ review reports, if any) and notes (if any) attached to or intendedto be read with any of them;

“Compliance Certificate” means a certificate of each of the Company and the Issuer(as the case may be) signed by any two of their respective directors that, having madeall reasonable enquiries, to the best of the knowledge, information and belief of theCompany or the Issuer (as the case may be) as at a date (the “Certification Date”) notmore than five days before the date of the certificate:

(i) no Event of Default (as defined in Condition 9) or Potential Event of Default hadoccurred since the Certification Date of the last such certificate or (if none) thedate of the Trust Deed or, if such an event had occurred, giving details of it; and

(ii) each of Company and the Issuer (as the case may be) has complied with all itsobligations under the Trust Deed and the Bonds;

“Potential Event of Default” means an event or circumstance which could with thegiving of notice, lapse of time, issue of a certificate and/or fulfilment of any otherrequirement provided for in Condition 9 become an Event of Default;

“PRC” means the People’s Republic of China which, for the purposes of theseConditions, shall not include Hong Kong, Macau and Taiwan;

“Issuer Audited Financial Reports” means annual audited consolidated statement ofcomprehensive income, statement of financial position and statement of cashflow of theIssuer together with any statements, reports (including any Directors’ and auditors’reports) and notes attached to or intended to be read with any of them;

“Issuer Unaudited Financial Reports” means semi-annual (or any other interimreporting period required by applicable law or regulations) unaudited consolidatedstatement of comprehensive income, statement of financial position and statement ofcashflow of the Issuer together with any statements, reports (including any Directors’and auditors’ review reports, if any) and notes attached to or intended to be read withany of them;

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“Relevant Indebtedness” means any present or future indebtedness issued outside

the PRC which is in the form of or represented by any bond, note, debenture, debenture

stock, loan stock, or other securities which is, or is capable of being, listed, quoted or

traded on any stock exchange or in any securities market (including, without limitation,

any over-the-counter market);

“Relevant Period” means, in relation to each of the Company Audited Financial Reports

and the Issuer Audited Financial Reports, each period of twelve months ending on the

last day of their respective financial year (being 31 December of that financial year) and,

in relation to each of the Company Unaudited Financial Reports and the Issuer

Unaudited Financial Reports, each period of six months ending on the last day of their

respective first half financial year (being 30 June of that financial year);

a “Subsidiary” of any person means (a) any company or other business entity of which

that person owns or controls (either directly or through one or more other Subsidiaries)

more than 50 per cent. of the issued share capital or other ownership interest having

ordinary voting power to elect directors, managers or trustees of such company or other

business entity, or (b) any company or other business entity which at any time has its

accounts consolidated with those of that person or which, under the law, regulations or

generally accepted accounting principles of the jurisdiction of incorporation of such

person from time to time, should have its accounts consolidated with those of that

person; and

5 INTEREST

The Bonds bear interest on their outstanding principal amount from and including the Issue

Date at the rate of [●] per cent. per annum, payable semi-annually in arrear on [●] and [●] in

each year (each an “Interest Payment Date”). If any Interest Payment Date would otherwise

fall on a day which is not a business day (as defined below), it shall be postponed to the next

day which is a business day unless it would thereby fall into the next calendar month in which

event it shall be brought forward to the immediately preceding business day.

Each Bond will cease to bear interest from the due date for redemption unless, upon

surrender of the Certificate representing such Bond, payment of principal or premium (if any)

is improperly withheld or refused. In such event it shall continue to bear interest at such rate

(both before and after judgment) until whichever is the earlier of (a) the day on which all sums

due in respect of such Bond up to that day are received by or on behalf of the relevant

Bondholder, and (b) the day seven calendar days after the Trustee or the Principal Paying

Agent has notified Bondholders of receipt of all sums due in respect of all the Bonds up to

that seventh day (except to the extent that there is failure in the subsequent payment to the

relevant holders under these Conditions).

In these Conditions, the period beginning on and including the Issue Date and ending on but

excluding the first Interest Payment Date and each successive period beginning on and

including an Interest Payment Date and ending on but excluding the next succeeding Interest

Payment Date is called an “Interest Period”.

Interest in respect of any Bond shall be calculated per CNY10,000 in principal amount of the

Bonds (the “Calculation Amount”). The amount of interest payable per Calculation Amount

for any period shall be equal to the product of the rate of interest specified above, the

Calculation Amount and the actual number of days in the Interest Period (or such other

period) divided by 365, rounding the resulting figure to the nearest cent (half a cent being

rounded upwards).

In this Condition, the expression “business day” means a day (other than a Saturday,

Sunday or public holiday) upon which commercial banks are generally open for business and

settlement of Renminbi payments in Hong Kong.

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6 REDEMPTION AND PURCHASE

(a) Final Redemption: Unless previously redeemed or purchased and cancelled, the

Bonds will be redeemed at their principal amount on the Interest Payment Date falling

on, or nearest to, [●] (the “Maturity Date”). The Bonds may not be redeemed at the

option of the Issuer other than in accordance with this Condition 6.

(b) Redemption for Tax Reasons: The Bonds may be redeemed at the option of the Issuer

in whole, but not in part, at any time, on giving not less than 30 nor more than 60 days’

notice to the Bondholders (which notice shall be irrevocable), at their principal amount,

(together with interest accrued to the date fixed for redemption), if (i) the Issuer satisfies

the Trustee immediately prior to the giving of such notice that it has or will become

obliged to pay Additional Tax Amounts as provided or referred to in Condition 8 as a

result of any change in, or amendment to, the laws or regulations of the Bermuda or the

PRC or any political subdivision or any authority thereof or therein having power to tax,

or any change in the application or official interpretation of such laws or regulations,

which change or amendment becomes effective on or after the Issue Date, and (ii) such

obligation cannot be avoided by the Issuer taking reasonable measures available to it,

provided that no such notice of redemption shall be given earlier than 90 days prior to

the earliest date on which the Issuer would be obliged to pay such Additional Tax

Amounts were a payment in respect of the Bonds then due. Prior to the giving of any

notice of redemption pursuant to this Condition 6(b), the Issuer shall deliver to the

Trustee a certificate signed by two directors of the Issuer stating that the obligation

referred to in (i) above of this Condition 6(b) cannot be avoided by the Issuer taking

reasonable measures available to it, and the Trustee shall be entitled to accept such

certificate as sufficient evidence of the satisfaction of the condition precedent set out in

(ii) above of this Condition 6(b) without further enquiry and without liability to any

Bondholder, in which event it shall be conclusive and binding on the Bondholders.

(c) Redemption for Change of Control Put Event: At any time following the occurrence

of a Change of Control Put Event, the holder of any Bond will have the right, at such

holder’s option, to require the Issuer to redeem all but not some only of that holder’s

Bonds on the Put Settlement Date at 101 per cent. of their principal amount, together

with accrued interest to, such Put Settlement Date. To exercise such right, the holder of

the relevant Bond must deposit at the specified office of any Paying Agent a duly

completed and signed notice of redemption, in the form for the time being current,

obtainable from the specified office of any Paying Agent (a “Put Exercise Notice”),

together with the Definitive Certificates evidencing the Bonds to be redeemed, by not

later than 30 days following the occurrence of a Change of Control Put Event or, if later,

30 days following the date upon which notice thereof is given to Bondholders and the

Trustee by the Issuer in accordance with Condition 16. The “Put Settlement Date” shall

be the 14th day after the expiry of such period of 30 days as referred to above.

A Put Exercise Notice, once delivered, shall be irrevocable and the Issuer shall redeem

the Bonds subject to the Put Exercise Notices delivered as aforesaid on the Put

Settlement Date.

The Issuer shall give notice to Bondholders in accordance with Condition 16 and the

Trustee by not later than 14 days following the first day on which it becomes aware of

the occurrence of a Change of Control Put Event, which notice shall specify the

procedure for exercise by holders of their rights to require redemption of the Bonds

pursuant to this Condition 6(c).

The Trustee and the Agents shall not be required to take any steps to ascertain whether

a Change of Control Put Event has occurred and shall not be responsible for or liable

to Bondholders, the Issuer or the Company for any loss arising from any failure to do

so.

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In this Condition 6(c):

a “Change of Control Put Event” means the occurrence of any of the following events:

(i) the Company ceases to Control the Issuer; or

(ii) the Central SASAC, and any other person directly wholly owned by the centralgovernment of the PRC, together directly or indirectly cease to Control theCompany;

“Control” means (where applicable): (i) the ownership, acquisition or control of morethan 50 per cent. of the voting rights of the issued share capital of a person or (ii) theright to appoint and/or remove all or the majority of the members of a person’s board ofdirectors or other governing body, whether obtained directly or indirectly, and whetherobtained by ownership of share capital, the possession of voting rights, contract orotherwise and the terms “controlling” and “controlled” have meanings correlative to theforegoing;

“Central SASAC” means the State-owned Assets Supervision and AdministrationCommission of the State Council of the PRC or its successor; and

References to “principal” in these Conditions shall, unless the context otherwiserequires, include the premium referred to in this Condition 6(c).

(d) Notice of Redemption: All Bonds in respect of which any notice of redemption is givenunder this Condition 6 shall be redeemed on the date specified in such notice inaccordance with this Condition 6. If there is more than one notice of redemption givenin respect of any Bond (which shall include any notice given by the Issuer pursuant toCondition 6(b) and Condition 6(d) and any Put Exercise Notice given by a Bondholderpursuant to Condition 6(c)), the notice given first in time shall prevail and in the eventof two notices being given on the same date, the first to be given shall prevail.

(e) Purchase: The Company, the Issuer and their respective Subsidiaries may at any timepurchase Bonds in the open market or otherwise at any price. The Bonds so purchased,while held by or on behalf of the Company, the Issuer or any such Subsidiary, shall notentitle the holder to vote at any meetings of the Bondholders and shall not be deemedto be outstanding for the purposes of calculating quorums at meetings of theBondholders or for the purposes of Conditions 9, 12(a) and 13.

(f) Cancellation: All Certificates representing Bonds purchased by or on behalf of theCompany, the Issuer or their respective Subsidiaries shall be surrendered forcancellation to the Registrar and, upon surrender thereof, all such Bonds shall becancelled forthwith. Any Certificates so surrendered for cancellation may not bereissued or resold and the obligations of the Issuer in respect of any such Bonds shallbe discharged.

7 PAYMENTS

(a) Method of Payment:

(i) Payments of principal and premium (if any) shall be made (subject to surrender ofthe relevant Certificates at the specified office of any Transfer Agent or of theRegistrar if no further payment falls to be made in respect of the Bondsrepresented by such Certificates) by transfer to the registered account of theBondholder.

(ii) Interest on each Bond shall be paid to the person shown on the Register at theclose of business on the fifth Payment Business Day before the due date forpayment thereof (the “Record Date”). Payments of interest on each Bond shall bemade in Renminbi by transfer to the registered account of the Bondholder.

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(iii) For the purposes of this Condition, a Bondholder’s “registered account” means theRenminbi account maintained by or on behalf of it with a bank in Hong Kong,details of which appear on the Register at the close of business on the fifthPayment Business Day before the due date for payment.

(iv) If the amount of principal being paid upon surrender of the relevant Certificate isless than the outstanding principal amount of such Certificate, the Registrar willannotate the Register with the amount of principal so paid and will (if so requestedin writing by the Issuer or a Bondholder) issue a new Certificate with a principalamount equal to the remaining unpaid outstanding principal amount. If the amountof premium (if any) or interest being paid is less than the amount then due, theRegistrar will annotate the Register with the amount of premium (if any) or interestso paid.

For so long as any of the Bonds are represented by the Global Certificate, payments ofinterest or principal will be made to the persons for whose account a relevant interestin the Global Certificate is credited as being held by the Operator at the relevant time,as notified to the Principal Paying Agent by the Operator in a relevant CMU instrumentposition report (as defined in the rules of the CMU) or in any other relevant notificationby the Operator. Such payment will discharge the Issuer’s obligations in respect of thatpayment. Any payments by the CMU participants to indirect participants will begoverned by arrangements agreed between the CMU participants and the indirectparticipants and will continue to depend on the inter-bank clearing system and

traditional payment methods. Such payments will be the sole responsibility of such

CMU participants.

(b) Payments subject to Fiscal Laws: All payments are subject in all cases to any

applicable fiscal or other laws, regulations and directives in the place of payment. No

commission or expenses shall be charged to the Bondholders in respect of such

payments.

(c) Payment Initiation: Where payment is to be made by transfer to a registered account,

payment instructions (for value on the due date or, if that is not a Payment Business

Day, for value the first following day which is a Payment Business Day) will be initiated

on the due date for payment or, in the case of payments of principal and premium (if

any) where the relevant Certificate has not been surrendered at the specified office of

any Transfer Agent or of the Registrar, on a Payment Business Day on which the

Principal Paying Agent is open for business and on which the relevant Certificate is

surrendered.

(d) Appointment of Agents: The Principal Paying Agent, the Registrar, the CMU Lodging

Agent and the Transfer Agent initially appointed by the Issuer and their respective

specified offices are listed below. The Principal Paying Agent, the Registrar, the CMU

Lodging Agent and the Transfer Agent act solely as agents of the Issuer and do not

assume any obligation or relationship of agency or trust for or with any Bondholder. The

Issuer reserves the right at any time with the prior written approval of the Trustee to vary

or terminate the appointment of the Principal Paying Agent, the Registrar, the CMU

Lodging Agent, any Transfer Agent or any of the other Agents and to appoint additional

or other Agents, provided that the Issuer shall at all times maintain (i) a Principal Paying

Agent, (ii) a Registrar with a specified office outside the United Kingdom, (iii) a CMU

Lodging Agent, (iv) a Transfer Agent and (v) such other agents as may be required by

any other stock exchange on which the Bonds may be listed.

Notice of any such termination or appointment or any change of any specified office of

an Agent shall promptly be given by the Issuer to the Bondholders.

(e) Delay in payment: Bondholders will not be entitled to any interest or other payment for

any delay after the due date in receiving the amount due on a Bond if the due date is

not a Payment Business Day or if the Bondholder is late in surrendering or cannot

surrender its Certificate (if required to do so).

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(f) Payment Business Days: In this Condition 7, “Payment Business Day” means a day

(other than a Saturday or Sunday) on which banks and foreign exchange markets are

open for business and settlement of Renminbi payments in Hong Kong and (if surrender

of the relevant Certificate is required) the relevant place of presentation.

8 TAXATION

All payments of principal, premium (if any) and interest by or on behalf of the Issuer in

respect of the Bonds shall be made free and clear of, and without withholding or deduction

for, any taxes, duties, assessments or governmental charges of whatever nature imposed,

levied, collected, withheld or assessed by or within Bermuda or the PRC or any political

subdivision or authority therein or thereof having power to tax, unless such withholding or

deduction is required by law.

Where such withholding or deduction is made by the Issuer by or within the PRC at the rate

of up to and including 10 per cent. the Issuer will increase the amounts paid by it to the extent

required, so that the net amount received by Bondholders equals the amounts which would

otherwise have been receivable by them had no such withholding or deduction been

required.

If the Issuer is required to make a deduction or withholding in respect of PRC tax in excess

of 10 per cent., or any Bermuda deduction or withholding is required, in such event that the

Issuer shall pay such additional amounts (“Additional Tax Amounts”) as will result in receipt

by the Bondholders of such amounts as would have been received by them had no such

withholding or deduction been required, except that no Additional Tax Amounts shall be

payable in respect of any Bond:

(a) Other connection: to a holder (or to a third party on behalf of a holder) who is liable

to such taxes, duties, assessments or governmental charges in respect of such Bond

by reason of his having some connection with Bermuda or the PRC other than the mere

holding of the Bond; or

(b) Surrender more than 30 days after the Relevant Date: in respect of which the

Certificate representing it is presented for payment more than 30 days after the

Relevant Date except to the extent that the holder of it would have been entitled to such

Additional Tax Amounts on surrendering the Certificate representing such Bond for

payment on the last day of such period of 30 days; or

(c) Payment to individuals: where such withholding or deduction is imposed on a payment

to an individual and is required to be made pursuant to European Council Directive

2003/48/EC or any other European Union Directive implementing the conclusions of the

ECOFIN Council meeting of 26-27 November 2000 on the taxation of savings income

or any law implementing or complying with, or introduced in order to conform to, such

Directive.

“Relevant Date” in respect of any Bond means the date on which payment in respect of it first

becomes due or (if any amount of the money payable is improperly withheld or refused) the

date on which payment in full of the amount outstanding is made or (if earlier) the date seven

days after that on which notice is duly given to the Bondholders that, upon further surrender

of the Certificate representing such Bond being made in accordance with these Conditions,

such payment will be made, provided that payment is in fact made upon such surrender.

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9 EVENTS OF DEFAULT

If any of the following events (“Events of Default”) occurs the Trustee at its discretion may,

and if so requested by holders of at least 25 per cent. of the aggregate principal amount of

the Bonds then outstanding or if so directed by an Extraordinary Resolution shall, (provided

in any such case that the Trustee shall first have been indemnified and/or secured and/or

prefunded to its satisfaction), give written notice to the Issuer declaring that the Bonds are,

and they shall immediately become, due and payable at their principal amount together (if

applicable) with accrued interest:

(a) Non-Payment: there is a failure to pay the principal of or any premium or interest on

any of the Bonds when due and in the case of interest such failure continues for a period

of seven days; or

(b) Breach of Other Obligations: the Company or the Issuer does not perform or comply

with any one or more of its other obligations in the Bonds, the Keepwell Deed, the Deed

of Equity Interest Purchase Undertaking or the Trust Deed, (other than those referred

to in Condition 9(a)) which default is incapable of remedy or is not remedied within 30

days after notice of such default shall have been given to the Issuer by the Trustee; or

(c) Cross-Default: (i) any other present or future indebtedness of the Company, the Issuer

or any of their respective Subsidiaries for or in respect of moneys borrowed or raised

becomes (or becomes capable of being declared) due and payable prior to its stated

maturity by reason of any actual default, event of default or the like (howsoever

described), or (ii) any such indebtedness is not paid when due or, as the case may be,

within any originally applicable grace period, or (iii) the Company, the Issuer or any of

their respective Subsidiaries fails to pay when due any amount payable by it under any

present or future guarantee for, or indemnity in respect of, any moneys borrowed or

raised provided that the aggregate amount of the relevant indebtedness, guarantees

and indemnities in respect of which one or more of the events mentioned above in this

Condition 9(c) have occurred equals or exceeds CNY200,000,000 or its equivalent (on

the basis of the middle spot rate for the relevant currency against the US dollar as

quoted by any leading bank on the day on which this Condition 9(c) operates); or

(d) Enforcement Proceedings: a distress, attachment, execution or other legal process is

levied, enforced or sued out on or against a material part of the property, assets or

revenues of the Company, the Issuer or any of their respective Principal Subsidiaries

and is not discharged or stayed within 30 days; or

(e) Security Enforced: any mortgage, charge, pledge, lien or other encumbrance, present

or future, created or assumed by the Company, the Issuer or any of their respective

Principal Subsidiaries over all or a material part of the assets of the Company, the

Issuer or the relevant Principal Subsidiary, as the case may be, becomes enforceable

and any step is taken to enforce it (including the taking of possession or the

appointment of a receiver, manager or other similar person) and is not discharged until

30 days; or

(f) Insolvency: the Company, the Issuer or any of their respective Principal Subsidiaries

is (or is expected to by law or a court to be) insolvent or bankrupt or unable to pay its

debts, stops, suspends or threatens to stop or suspend payment of all or a material part

of its debts, proposes or makes any agreement for the deferral, rescheduling or other

readjustment of all of its debts, proposes or makes a general assignment or an

arrangement or composition with or for the benefit of the relevant creditors in respect

of any of such debts or a moratorium is agreed or declared in respect of or affecting all

or a material part of the debts of the Company, the Issuer, or any of their respective

Principal Subsidiaries, as the case may be; or

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(g) Winding-up: an administrator is appointed, an order is made or an effective resolution

passed for the winding-up or dissolution or administration of the Company, the Issuer

or any of their respective Principal Subsidiaries, or the Company, the Issuer or any of

their respective Principal Subsidiaries ceases or threatens to cease to carry on all or

substantially all of its business or operations, except for (A) the purpose of and followed

by a reconstruction, amalgamation, reorganisation, merger or consolidation (i) on terms

approved by an Extraordinary Resolution of the Bondholders, or (ii) in the case of a

Principal Subsidiary of the Issuer or the Company, whereby the undertaking and assets

of such Subsidiary are transferred to or otherwise vested in the Company, the Issuer or

any of their respective Principal Subsidiaries; (B) a solvent winding up of any Principal

Subsidiary of the Company other than the Issuer; or (C) a disposal of a Principal

Subsidiary of the Issuer on an arm’s length basis where the assets (whether in cash or

otherwise) resulting from such disposal are vested in the Issuer or any of its

wholly-owned Subsidiaries; or

(h) Authorisation and Consents: any action, condition or thing (including the obtaining or

effecting of any necessary consent, approval, authorisation, exemption, filing, licence,

order, recording or registration) at any time required to be taken, fulfilled or done in

order (i) to enable the Issuer and the Company lawfully to enter into, exercise their

respective rights and perform and comply with their respective obligations under the

Bonds, the Trust Deed, the Keepwell Deed (other than with regard to the performance

and compliance with the obligations thereunder) and the Deed of Equity Interest

Purchase Undertaking (other than with regard to the performance and compliance with

the obligations thereunder), (ii) to ensure that those obligations are legally binding and

enforceable and (iii) to make the Bonds, the Trust Deed, the Keepwell Deed and the

Deed of Equity Interest Purchase Undertaking admissible in evidence in the courts of

Hong Kong is not taken, fulfilled or done; or

(i) Illegality: it is or will become unlawful for any of the Company and the Issuer to perform

or comply with any one or more of their respective obligations under any of the Bonds

or the Trust Deed, the Keepwell Deed or the Deed of Equity Interest Purchase

Undertaking; or

(j) Keepwell Deed and Deed of Equity Interest Purchase Undertaking: the Keepwell

Deed or the Deed of Equity Interest Purchase Undertaking is not or is claimed by the

Company not to be in full force and effect, or the Keepwell Deed or the Deed of Equity

Interest Purchase Undertaking is modified, amended or terminated other than strictly in

accordance with its respective terms; or

(k) Analogous Events: any event occurs which under the laws of any relevant jurisdiction

has an analogous effect to any of the events referred to in any of Condition 9(d) to

Condition 9(g) (all inclusive).

In this Condition 9, “Principal Subsidiary” means any Subsidiary of the Issuer or the

Company:

(a) whose revenue or (in the case of a Subsidiary which itself has Subsidiaries)

consolidated revenue, as shown by its latest audited income statement are at least

5 per cent. of the consolidated revenue as shown by the latest audited

consolidated income statement of the Issuer or the Company (as applicable) and

its Subsidiaries including, for the avoidance of doubt, the Issuer or the Company

(as applicable) and its consolidated Subsidiaries’ share of profits of Subsidiaries

not consolidated and of jointly controlled entities and after adjustments for minority

interests; or

(b) whose gross profits or (in the case of a Subsidiary which itself has Subsidiaries)

consolidated gross profit, as shown by its latest audited income statement are at

least 5 per cent. of the consolidated gross profit as shown by the latest audited

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consolidated income statement of the Issuer or the Company (as applicable) and

its Subsidiaries including, for the avoidance of doubt, the Issuer or the Company

(as applicable) and its consolidated Subsidiaries’ share of profits of Subsidiaries

not consolidated and of jointly controlled entities and after adjustments for minority

interests; or

(c) whose gross assets or (in the case of a Subsidiary which itself has Subsidiaries)

gross consolidated assets, as shown by its latest audited balance sheet are at

least 5 per cent. of the amount which equals the amount included in the

consolidated gross assets of the Issuer or the Company (as applicable) and its

Subsidiaries as shown by the latest audited consolidated balance sheet of the

Issuer or the Company (as applicable) and its Subsidiaries as being represented

by the investment of the Issuer or the Company (as applicable) in each Subsidiary

whose accounts are not consolidated with the consolidated audited accounts of

the Issuer or the Company (as applicable) and after adjustment for minority

interests; or

(d) to which is transferred the whole or substantially the whole of the assets of a

Subsidiary which immediately prior to such transfer was a Principal Subsidiary,

provided that the Principal Subsidiary which so transfers its assets shall forthwith

upon such transfer cease to be a Principal Subsidiary and the Subsidiary to which

the assets are so transferred shall cease to be a Principal Subsidiary at the date

on which the first audited accounts (consolidated, if appropriate), of the Issuer or

the Company (as applicable) prepared as of a date later than such transfer are

issued unless such Subsidiary would continue to be a Principal Subsidiary on the

basis of such accounts by virtue of the provisions of paragraphs (a), (b) or (c)

above of this definition;

provided that, in relation to paragraphs (a), (b) and (c) above of this definition:

(i) in the case of a corporation or other business entity becoming a Subsidiary

after the end of the financial period to which the latest consolidated audited

accounts of the Issuer or the Company (as applicable) relate, the reference

to the then latest consolidated audited accounts of the Issuer or the Company

(as applicable) for the purposes of the calculation above shall, until

consolidated audited accounts of the Issuer or the Company (as applicable)

for the financial period in which the relevant corporation or other business

entity becomes a Subsidiary are available be deemed to be a reference to the

then latest consolidated audited accounts of the Issuer or the Company (as

applicable) adjusted to consolidate the latest audited accounts (consolidated

in the case of a Subsidiary which itself has Subsidiaries) of such Subsidiary

in such accounts;

(ii) if at any relevant time in relation to the Issuer or the Company (as applicable)

or any Subsidiary which itself has Subsidiaries no consolidated accounts are

prepared and audited, revenue, gross profit or gross assets of the Issuer or

the Company, as applicable, and/or any such Subsidiary shall be determined

on the basis of pro forma consolidated accounts prepared for this purpose by

the Issuer or the Company (as applicable);

(iii) if at any relevant time in relation to any Subsidiary, no accounts are audited,

its revenue, gross profit or gross assets (consolidated, if appropriate) shall be

determined on the basis of pro forma accounts (consolidated, if appropriate)

of the relevant Subsidiary prepared for this purpose by the Issuer or the

Company (as applicable); and

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(iv) if the accounts of any Subsidiary (not being a Subsidiary referred to in proviso

(i) above) are not consolidated with those of the Issuer or the Company (as

applicable), then the determination of whether or not such subsidiary is a

Principal Subsidiary shall be based on a pro forma consolidation of its

accounts (consolidated, if appropriate) with the consolidated accounts

(determined on the basis of the foregoing) of the Issuer or the Company (as

applicable).

In addition, any Subsidiary which is not itself a Principal Subsidiary shall

nevertheless be treated as a Principal Subsidiary if the revenue (or consolidated

revenue if the Subsidiary itself has subsidiaries), gross profit (or consolidated

gross profit if the Subsidiary itself has subsidiaries) or gross assets (or

consolidated gross assets if the Subsidiary itself has subsidiaries) attributable to

such Subsidiary when aggregated with the revenue (or consolidated revenue if

appropriate), gross profit (or consolidated gross profit if appropriate) or gross

assets (or consolidated gross assets if appropriate) attributable to any other

Subsidiary which is not itself a Principal Subsidiary and with respect to which any

of the events referred to in this Condition 9 has occurred since the Issue Date of

the Bonds, exceeds 5 per cent. of the consolidated revenue, consolidated gross

profit or consolidated gross assets of the Issuer or the Company (as applicable)

and its Subsidiaries as shown in the latest audited financial statements.

10 PRESCRIPTION

Claims against the Issuer for payment in respect of the Bonds shall be prescribed and

become void unless made within 10 years (in the case of principal or premium) or five years

(in the case of interest) from the appropriate Relevant Date in respect of them.

11 REPLACEMENT OF CERTIFICATES

If any Certificate is lost, stolen, mutilated, defaced or destroyed, it may be replaced, subject

to applicable laws, regulations or other relevant regulatory authority regulations, at the

specified office of the Registrar or any Transfer Agent, in each case on payment by the

claimant of the fees and costs incurred in connection therewith and on such terms as to

evidence, security, indemnity and otherwise as (a) the Issuer may require (provided that the

requirement is reasonable in light of prevailing market practice) and (b) the Registrar or the

relevant Transfer Agent may require. Mutilated or defaced Certificates must be surrendered

before replacements will be issued.

12 MEETINGS OF BONDHOLDERS, MODIFICATION AND WAIVER

(a) Meetings of Bondholders: The Trust Deed contains provisions for convening meetings

of Bondholders to consider matters affecting their interests, including the sanctioning by

Extraordinary Resolution of a modification of any of these Conditions or any provisions

of the Trust Deed, the Keepwell Deed or the Deed of Equity Interest Purchase

Undertaking. Such a meeting may be convened by the Issuer or the Trustee and shall

be convened by the Trustee if requested to do so by Bondholders holding not less than

10 per cent. in principal amount of the Bonds for the time being outstanding. The

quorum for any meeting convened to consider an Extraordinary Resolution will be two

or more persons holding or representing a more than 50 per cent. in principal amount

of the Bonds for the time being outstanding, or at any adjourned meeting two or more

persons being or representing Bondholders whatever the principal amount of the Bonds

held or represented, unless the business of such meeting includes consideration of

proposals, inter alia, (i) to modify the maturity of the Bonds or the dates on which

interest is payable in respect of the Bonds, (ii) to reduce or cancel the principal amount

of, any premium payable in respect of, or interest on, the Bonds, (iii) to change the

currency of payment of the Bonds, (iv) to modify the provisions concerning the quorum

required at any meeting of Bondholders or the majority required to pass an

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Extraordinary Resolution, or (v) to cancel or amend the Keepwell Deed or the Deed of

Equity Interest Purchase Undertaking other than in accordance with this Condition 12,

in which case the necessary quorum will be two or more persons holding or

representing not less than 66 per cent., or at any adjourned meeting not less than 33

per cent., in principal amount of the Bonds for the time being outstanding. Any

Extraordinary Resolution duly passed shall be binding on Bondholders (whether or not

they were present at the meeting at which such resolution was passed).

The Trust Deed provides that a resolution in writing signed by or on behalf of the holders

of not less than 90 per cent. in principal amount of the Bonds outstanding shall for all

purposes be as valid and effective as an Extraordinary Resolution passed at a meeting

of Bondholders duly convened and held. Such a resolution in writing may be contained

in one document or several documents in the same form, each signed by or on behalf

of one or more Bondholders.

(b) Modification of Agreements and Deeds: The Trustee may (but shall not be obliged to)

agree, without the consent of the Bondholders, to (i) any modification of any of these

Conditions or any of the provisions of the Trust Deed, the Keepwell Deed or the Deed

of Equity Interest Purchase Undertaking that is in its opinion of a formal, minor or

technical nature or is made to correct a manifest error or an error established as such

to the satisfaction of the Trustee or is to comply with any mandatory provision of

applicable law, and (ii) any other modification (except as mentioned in the Trust Deed),

and any waiver or authorisation of any breach or proposed breach, of any of these

Conditions or any of the provisions of the Trust Deed, the Keepwell Deed or the Deed

of Equity Interest Purchase Undertaking that is in the opinion of the Trustee not

materially prejudicial to the interests of the Bondholders. Any such modification,

authorisation or waiver shall be binding on the Bondholders and shall be notified by the

Issuer to the Bondholders as soon as practicable thereafter.

(c) Entitlement of the Trustee: In connection with the exercise of its functions, rights,

powers and discretions (including but not limited to those referred to in this Condition

12) the Trustee shall have regard to the interests of the Bondholders as a class and

shall not have regard to the consequences of such exercise for individual Bondholders,

and the Trustee shall not be entitled to require on behalf of any Bondholders, nor shall

any Bondholder be entitled to claim, from the Issuer any indemnification or payment in

respect of any tax consequence of any such exercise upon individual Bondholders.

13 ENFORCEMENT

At any time after the Bonds become due and payable, the Trustee may, at its discretion and

without further notice, institute such proceedings against the Company and/or the Issuer as

it may think fit to enforce the terms of the Trust Deed, the Keepwell Deed, the Deed of Equity

Interest Purchase Undertaking and the Bonds, but it need not take any such proceedings

unless (a) it shall have been so directed by an Extraordinary Resolution or so requested in

writing by Bondholders holding at least 25 per cent. in principal amount of the Bonds then

outstanding, and (b) it shall first have been indemnified and/or secured and/or pre-funded to

its satisfaction. No Bondholder may proceed directly against the Company and/or the Issuer

unless the Trustee, having become bound so to proceed, fails to do so within a reasonable

time and such failure is continuing.

14 INDEMNIFICATION OF THE TRUSTEE

The Trust Deed contains provisions for the indemnification of the Trustee and for its relief

from responsibility, including provisions relieving it from taking proceedings to enforce

payment unless first indemnified and/or secured and/or pre-funded to its satisfaction. The

Trustee is entitled to enter into business transactions with the Company, the Issuer and/or

any entity related (directly or indirectly) to the Company or the Issuer without accounting for

any profit.

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None of the Trustee or any of the Agents shall be responsible for the performance by theIssuer, the Company and any other person appointed by the Issuer in relation to the Bondsof the duties and obligations on their part expressed in respect of the same and, unless it hasexpress written notice from the Issuer or the Company to the contrary, the Trustee and eachAgent shall assume that the same are being duly performed. None of the Trustee or anyAgent shall be liable to any Bondholder or any other person for any action taken by theTrustee or such Agent in accordance with the instructions of the Bondholders. The Trusteeshall be entitled to rely on any direction, request or resolution of Bondholders given byholders of the requisite principal amount of Bonds outstanding or passed at a meeting ofBondholders convened and held in accordance with the Trust Deed. Whenever the Trusteeis required or entitled by the terms of the Trust Deed, the Keepwell Deed, the Deed of EquityInterest Purchase Undertaking or these Conditions to exercise any discretion or power, takeany action, make any decision or give any direction, the Trustee is entitled, prior to itsexercising any such discretion or power, taking any such action, making any such decision,or giving any such direction, to seek directions from the Bondholders by way of anExtraordinary Resolution, and the Trustee is not responsible for any loss or liability incurredby any person as a result of any delay in it exercising such discretion or power, taking suchaction, making such decision, or giving such direction where the Trustee is seeking suchdirections or in the event that no such directions are received. The Trustee shall not be underany obligation to monitor compliance with the provisions of the Trust Deed, the AgencyAgreement, the Keepwell Deed, the Deed of Equity Interest Purchase Undertaking or theseConditions.

The Trustee may rely without liability to Bondholders on any report, confirmation or certificateor any advice of any legal advisers, accountants, financial advisers, financial institution orany other expert, whether or not addressed to it and whether their liability in relation theretois limited (by its terms or by any engagement letter relating thereto entered into by theTrustee or any other person or in any other manner) by reference to a monetary cap,methodology or otherwise. The Trustee may accept and shall be entitled to rely on any suchreport, confirmation or certificate or advice and, in such event, such report, confirmation orcertificate or advice shall be binding on the Issuer, the Company and the Bondholders.

15 FURTHER ISSUES

The Issuer may from time to time without the consent of the Bondholders create and issuefurther securities either having the same terms and conditions as the Bonds in all respects(or in all respects except for the first payment of interest on them) and so that such furtherissue shall be consolidated and form a single series with the outstanding securities of anyseries (including the Bonds) or upon such terms as the Issuer may determine at the time oftheir issue. References in these Conditions to the Bonds include (unless the context requiresotherwise) any such other securities issued pursuant to this Condition 15 and forming asingle series with the Bonds. Any further securities forming a single series with theoutstanding securities of any series (including the Bonds) constituted by the Trust Deed orany deed supplemental to it shall, and any other securities may (with the consent of theTrustee), be constituted by a deed supplemental to the Trust Deed. The Trust Deed containsprovisions for convening a single meeting of the Bondholders and the holders of securitiesof other series where the Trustee so decides.

16 NOTICES

Notices to the holders of Bonds shall be mailed to them at their respective addresses in theRegister and deemed to have been given on the fourth weekday (being a day other than aSaturday or a Sunday) after the date of mailing. The Issuer shall also ensure that notices areduly published in a manner that complies with the rules and regulations of any stockexchange or other relevant authority on which the Bonds are for the time being listed. Anysuch notice shall be deemed to have been given on the date of such publication or, ifpublished more than once, on the first date on which publication is made.

So long as the Global Certificate is held on behalf of the Operator, any notice to the holdersof the Bonds shall be validly given by the delivery of the relevant notice to the accountholdershown in a CMU instrument position report issued by the Operator on the business daypreceding the date of despatch of such notice as holding interests in the Global Certificate,where “business day” means a day on which CMU is operating and open for business.

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17 GOVERNING LAW AND JURISDICTION

(a) Governing Law: The Trust Deed, the Agency Agreement, the Keepwell Deed, the Deed

of Equity Interest Purchase Undertaking and the Bonds, and any obligations arising out

of or in connection with them are governed by, and shall be construed in accordance

with, the laws of Hong Kong.

(b) Jurisdiction: The courts of Hong Kong are to have exclusive jurisdiction to settle any

disputes that may arise out of or in connection with the Bonds, the Keepwell Deed, the

Deed of Equity Interest Purchase Undertaking and the Trust Deed and accordingly any

legal action or proceedings arising out of or in connection with any Bonds, the Keepwell

Deed, the Deed of Equity Interest Purchase Undertaking or the Trust Deed

(“Proceedings”) may be brought in the courts of Hong Kong. Pursuant to the Trust

Deed, each of the Issuer and the Company has irrevocably submitted to the jurisdiction

of the courts of Hong Kong.

(c) Agent for Service of Process: The Company has irrevocably agreed to receive service

of process at the Issuer’s principal place of business at Room 3403, 34th Floor, China

Resources Building, 26 Harbour Road, Wanchai, Hong Kong in any Proceedings in

Hong Kong.

(d) Waiver of Immunity: Each of the Company and Issuer has, pursuant to the Trust Deed,

waived any right to claim sovereign or other immunity from jurisdiction or execution and

any similar defence, and has irrevocably consented to the giving of any relief or the

issue of any process, including, without limitation, the making, enforcement or

execution against any property whatsoever (irrespective of its use or intended use) of

any order or judgment made or given in connection with any Proceedings.

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DESCRIPTION OF THE KEEPWELL DEED

The following contains summaries of certain key provisions of the Keepwell Deed. Such

statements do not purport to be complete and are qualified in their entirety by reference to the

Keepwell Deed.

Under the Keepwell Deed, the Company will undertake with the Issuer and the Trustee that it shall,

(i) directly or indirectly, own and hold more than 50 per cent. of the outstanding shares of the

Issuer, (ii) will not directly or indirectly pledge, grant a security interest, or in any way encumber

or otherwise dispose of any such shares, and (iii) maintain the Issuer as one of the primary

overseas platforms of the Company for investment and offshore financing.

In addition, the Company will undertake that it shall cause:

• the Issuer to have an aggregate Consolidated Net Worth of at least US$1.00 at all times;

• the Issuer to have sufficient liquidity to ensure timely payment by the Issuer of any amounts

payable in respect of the Bonds in accordance with the Trust Deed and/or the Terms and

Conditions of the Bonds and otherwise under the Trust Deed and the Agency Agreement; and

• The Issuer to remain solvent and a going concern at all times under the laws of its jurisdiction

of incorporation or applicable accounting standard.

If the Issuer at any time determines that it will have insufficient liquidity to meet its payment

obligations as they fall due, then the Issuer shall promptly notify the Company of the shortfall and

the Company will make available to the Issuer, before the due date of the relevant payment

obligations under the Bonds and the Trust Deed, funds sufficient to enable the Issuer to pay such

payment obligations in full as they fall due. The Issuer shall use any funds made available to it by

the Company in accordance with the Keepwell Deed solely for the payment when due of such

payment obligations under the Bonds and the Trust Deed.

The Company will undertake:

• to procure that the articles of association of the Issuer shall not be amended in a manner that

is, directly or indirectly, materially adverse to holders of the Bonds;

• to cause the Issuer to remain in full compliance with the Terms and Conditions of the Bonds,

the Trust Deed and all applicable rules and regulations in Hong Kong;

• promptly to take any and all action necessary to comply with its obligations under the

Keepwell Deed; and

• to cause the Issuer to take all action necessary in a timely manner to comply with its

obligations under the Keepwell Deed.

The Keepwell Deed may be modified, amended or terminated by the written agreement of the

parties thereto subject to the provisions of the Terms and Conditions of the Bonds and the Trust

Deed.

The Keepwell Deed is not, and nothing therein contained and nothing done pursuant thereto by

the Company shall be deemed to constitute, a guarantee by the Company of the payment of any

obligation, responsibilities, indebtedness or liability, of any kind or character whatsoever, of the

Issuer under the laws of any jurisdictions.

The parties to the Keepwell Deed will acknowledge that in order for each of the Issuer and the

Company to comply with its respective obligations under the Keepwell Deed, it may be subject to

regulatory approvals, permits and filings as may be required by applicable laws.

The Keepwell Deed will be governed by and construed in accordance with Hong Kong law.

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DESCRIPTION OF THE DEED OF EQUITY INTEREST PURCHASE UNDERTAKING

The following contains summaries of certain key provisions of the Deed of Equity Interest

Purchase Undertaking. Such statements do not purport to be complete and are qualified in their

entirety by reference to the Deed of Equity Interest Purchase Undertaking.

The Company intends to assist the Issuer in meeting its obligations under the Bonds. Pursuant to

the terms of the Deed of Equity Interest Purchase Undertaking (the “Undertaking”) entered into

between the Trustee and the Company, the Company agrees to purchase, either by itself or

through a PRC incorporated subsidiary of the Company (the “Designated Purchaser”), the Equity

Interest upon the receipt of a written purchase notice (the “Purchase Notice”) provided by the

Trustee (the “Purchase”). The equity interests comprise the equity interests of a subsidiary of the

Company that is held by such Relevant Transferor (the “Equity Interest”).

Following the occurrence of an Event of Default under the Bonds, the Trustee shall issue a

Purchase Notice to the Company. Within 20 Business Days after the date of the Purchase Notice,

the Company shall, subject to the appraisal procedure of Equity Interest(s) in accordance with the

applicable laws and regulations, determine (i) the purchase price of the Equity Interest(s) subject

to the Purchase (the “Purchase Price”) in accordance with any applicable PRC laws and

regulations effective at the time of determination; and (ii) the other applicable terms relating to the

Purchase. Provided that the Purchase Price shall be no less than the aggregate of the following

amounts (the “Shortfall Amount”):

• the amount in Renminbi sufficient to enable the Issuer to discharge in full its obligations

under the Bonds and the Trust Deed (including without limitation the principal amount of the

Bonds then outstanding as at the date of such Purchase Notice and any and all interest due

and unpaid and/or accrued but unpaid on the Bonds up to but excluding the date of such

Purchase Notice), plus

• an amount equal to CNY[●], being the interest payable in respect of one interest period on

the Bonds, plus

• all costs, fees and expenses and other amounts payable to the Trustee and/or the Agents

under or in connection with the Bonds, the Trust Deed, the Agency Agreement, the Keepwell

Deed and/or the Undertaking as at the date of such Purchase Notice plus provisions for

costs, fees, expenses and other amounts which may be properly incurred after the date of

the Purchase Notice, as notified by the Trustee in the Purchase Notice.

In relation to the Purchase of any Equity Interest relating to a company held by any Relevant

Transferor, the Company agrees that:

Within 25 Business Days after the date of the Purchase Notice, the Company shall, and shall

procure each Relevant Transferor to, execute, and the Company shall procure the board of

directors of each of the companies the Equity Interest in which is subject to the Purchase to

execute (where applicable), an equity interest transfer agreement and all other required

application documents and file such agreements and/or documents with MOFCOM for approval of

the transfer of the equity interests as being the subject of the Purchase. Within five Business Days

after the receipt of approval from MOFCOM, the Company shall submit all application documents

to the competent PRC State Administration for Industry and Commerce (the “AIC”) for AIC

registration of the transfer of the Equity Interest of each Relevant Transferor. As soon as

reasonably practicable after receipt of AIC registration from the competent AIC, the Company shall

complete the procedures in respect of withholding tax for the Relevant Transferor required by

applicable laws and regulations of the PRC with the competent tax authority to obtain the tax

clearance certificate from such tax authority.

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Within five Business Days after completion of the change of AIC registration and the receipt of the

tax clearance certificate, the Company shall submit all required application documents to SAFE

(a) to change the SAFE registration of the companies the Equity Interests in which is or (as the

case may be) are subject to the Purchase and (b) for the purchase of the Renminbi amount of the

Purchase Price and the outbound remittance of the Purchase Price. Closing shall take place on

the fifth Business Day after the date of receipt of the approvals from SAFE whereupon the

Company shall pay to or to the order of each Relevant Transferor the Purchase Price payable in

immediately available funds in Renminbi to such account in Hong Kong as may be designated by

such Relevant Transferor.

The Company may discharge its obligations either by itself or through the Designated Purchaser.

The Undertaking shall remain in full force and effect so long as any of the Bonds remain

outstanding.

The Undertaking will be governed by and construed in accordance with Hong Kong law.

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SUMMARY OF PROVISIONS RELATING TO THE BONDS IN GLOBAL FORM

The Bonds will be issued in registered form and represented by a Global Certificate registered in

the name of the HKMA, in its capacity as operator of the CMU, and shall be delivered to and held

by a sub-custodian nominated by the HKMA as operator of the CMU. The Global Certificate will

be held for the account of the CMU members who have accounts with the CMU Operator, or the

CMU participants. For persons seeking to hold a beneficial interest in the Bonds through

Euroclear or Clearstream, such persons will hold their interests through an account opened and

held by Euroclear or Clearstream with the CMU Operator. Interests in the Global Certificate will

only be shown on, and transfers of interests will be effected through, records maintained by the

CMU.

The Global Certificate will become exchangeable in whole, but not in part (save as otherwise

provided), for definitive certificates in denominations of CNY1,000,000 each and integral multiples

of CNY10,000 in excess thereof if any of the following events occurs:

• if the Global Certificate is held on behalf of the CMU or any other clearing system and such

clearing system is closed for business for a continuous period of 14 days (other than by

reason of holidays, statutory or otherwise) or announces an intention to cease business

permanently or does in fact do so; or

• upon or following any failure to pay principal in respect of any Bonds when it is due and

payable; or

• with the consent of the Issuer.

Since the CMU Operator can act only on behalf of the CMU participants, who in turn may act on

behalf of persons who hold interests through them, or indirect participants, the ability of persons

having interests in a Global Certificate to pledge such interests to persons or entities that are not

CMU participants, or otherwise take action in respect of such interests, may be affected by the

lack of definitive bonds.

While the Global Certificate representing the Bonds is held by or on behalf of the CMU Operator,

payments of interest or principal will be made to the persons for whose account a relevant interest

in the Global Certificate is credited as being held by the CMU Operator at the relevant time, as

notified to the CMU Lodging Agent by the CMU Operator in a relevant CMU instrument position

report as at the date which is one business day prior to each interest or principal payment due date

(as defined in the rules of the CMU) or in any other relevant notification by the CMU Operator. So

long as the Bonds are represented by the Global Certificate and such Global Certificate is held by

or on behalf of the CMU Operator, such payment by the Issuer will discharge the Issuer’s

obligations in respect of that payment. Any payments by the CMU participants to indirect

participants will be governed by arrangements agreed between the CMU participants and the

indirect participants and will continue to depend on the inter-bank clearing system and traditional

payment methods. Such payments will be the sole responsibility of such CMU participants.

Payments, transfers, exchanges and other matters relating to interests in the Global Certificate

may be subject to various policies and procedures adopted by the CMU Operator from time to

time. None of the Issuer, the Joint Global Coordinators, Joint Lead Managers and Joint

Bookrunners, the Trustee, the Agents or any of their respective directors, officers, employees or

agents will have any responsibility or liability for any aspect of the CMU Operator’s records

relating to, or for payments made on account of, interests in the Global Certificate, or for

maintaining, supervising or reviewing any records relating to such interests.

For so long as all the Bonds are represented by the Global Certificate and the Global Certificate

is held on behalf of the CMU Operator, notices to holders of such series of the Bonds may be given

by delivery of the relevant notice to the persons shown in a CMU instrument position report issued

by the CMU Operator on the second business day preceding the date of despatch of such notice

as holding interests in the Global Certificate for communication to the CMU participants. Any such

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notice shall be deemed to have been given to the holders of the Bonds on the second business

day on which such notice is delivered to the persons shown in the relevant CMU instrument

position report as aforesaid. Indirect participants will have to rely on the CMU participants

(through whom they hold the Bonds, in the form of interests in the Global Certificate) to deliver the

notices to them, subject to the arrangements agreed between the indirect participants and the

CMU participants.

The CMU Operator is under no obligation to maintain or continue to operate the CMU and the

CMU Operator is under no obligation to perform or continue to perform the procedures described

above.

Accordingly, the CMU and such procedures may be discontinued or modified at any time. None of

the Issuer, the Joint Lead Managers, the Trustee, the Agents or any of their respective directors,

officers, employees or agents will have any responsibility for the performance by the CMU

Operator or the CMU participants of their respective obligations under the rules and procedures

governing their operations.

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DESCRIPTION OF THE ISSUER

Overview and History

Basic information

The Issuer was incorporated as a company with limited liability on 22 April 1997 under the laws

of the Cayman Islands and continued in Bermuda and registered in Bermuda as an exempted

company with limited liability. The registered office of the Issuer is Clarendon House, 2 Church

Street, Hamilton HM 11, Bermuda.

The Issuer was formerly under the name of “Winsan (China) Investment Group Company Limited”

and has been listed on the Hong Kong Stock Exchange since 1997. The Company acquired

approximately 74.98% of the equity interest in the Issuer in September 2004, and the Issuer

changed its name to “China Electronics Corporation Holdings Company Limited”.

Corporate structure and relationship with the Company

The Company is the ultimate controlling shareholder of the Issuer holding, directly and indirectly,

approximately 71.3% of the issued share capital of the Issuer as at the date of this Offering Circular.

As the only “red-chip” company and the principal offshore subsidiary within the Group, the Issuer

is positioned to be the overseas flagship of the Group and consequently receives significant

support from the Group. At the management level, the Chairman of the Issuer, Mr. Rui Xiaowu, is

also the Chief Executive Director of the Company.

The Issuer runs its principal activities through Huada Electronics (together with the Issuer, the

Issuer Group), which, as at the date of this Offering Circular, is 100% owned by the Issuer.

Financial highlights

For the years ended 31 December 2011 and 2012 and the six months ended 30 June 2013, the

Issuer had a consolidated revenue of HK$995 million, HK$1,156 million and HK$728 million,

respectively, and a consolidated gross profit of HK$329 million, HK$452 million and HK$330

million, respectively, for the same periods.

As at 31 December 2011 and 2012, the Issuer’s undrawn credit facilities stood at HK$49.3 million

and HK$72.8 million, respectively. As at 31 December 2011 and 2012 and 30 June 2013, the

consolidated cash and cash equivalents of the Issuer amounted to HK$329.5 million, HK$476.6

million and HK$521.9 million, respectively.

Business Activities

Products and services

The principal activities of the Issuer Group are the design, research and development and sale of

IC products and the development of application systems in relation to IC products. The IC

products are mainly used in smart cards such as PRC second-generation identity cards, social

security cards, telecommunications cards, utility cards and petroleum cards, and the Issuer Group

has a strong presence in each of these sectors. The IC products are also applied in WLAN.

Production process

The Issuer Group focuses on the design, research and development and sale of IC products, and

outsources the manufacturing, testing and assembling procedures to other members of the Group

which operate within the IC business as well as to third-party service providers. The Issuer Group

also purchases from the Group raw materials and modules for the R&D of IC cards, smart cards

and chips, on a non-committed basis.

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Marketing and sales

Given the nature of the Issuer Group’s IC products, its customers are primarily government bodies

and telecommunications, utility and energy companies rather than individual end users.

The Issuer Group is one of the key suppliers to the PRC Ministry of Public Security for

second-generation PRC identity cards, a leading supplier of social security cards and a leading

supplier of petroleum cards. It has also obtained a sizeable market share in relation to subscriber

identity module (SIM) cards. In 2012, the aggregate sales revenue attributable to the five largest

customers of the Issuer Group accounted for 61.2% of the Issuer Group’s sales for the year and

the sales attributable to the largest customer accounted or 16.1% of the Issuer Group’s sales for

the year.

The Issuer Group achieved record-high revenue in 2012, over 80% of which was attributable to

the sales of IC products in the social security card, telecommunications card, identity card and

electricity card sectors. In particular, sales revenue attributable to social security card chips

exceeded HK$300 million, sales revenue attributable to telecommunications card chips exceeded

HK$200 million and sales revenue attributable to identity card chips as well as utility card chips

exceeded HK$100 million in 2012. By targeting the social security, telecommunication, utility and

petroleum sectors, the Issuer Group introduced a number of advanced products featuring high

functionality, high security and low consumption to meet customer needs, thereby successfully

consolidated and expanded the leading position of its principal products in different industry

sectors. The Issuer Group has also been actively exploring and developing new industry and

corporate customers and providing tailor-made products to meet customers’ needs.

Research and development

The Issuer Group has sustained its growth through increasing investment in R&D. In 2011, 2012

and the six months ended 30 June 2013, R&D costs were HK$139.0 million, HK$163.4 million and

HK$83.0 million respectively which represented 14.0%, 14.1% and 11.4% respectively of the total

revenue for the same period. R&D during these periods primarily focused on the EMV (Europay,

MasterCard and Visa) card, mobile payment card and RFID chip products.

A number of the Issuer Group’s products have won science and technology awards presented by

various government organisations and industrial bodies. Huada Electronics was selected as one

of the “Top 10 IC Design Enterprises in the PRC in 2012” by the PRC Semiconductor Industry

Association and its “UHF RFID Electronic Tag Chip CIT86128” received the certification for the

PRC Semiconductor Technological Innovation by the PRC Semiconductor Industry Association

and other industrial bodies. Several senior managers of the Issuer Group have also won the first

prize of the National Science and Technology Progress Award for their contribution in the

development of second-generation PRC identity cards.

In 2012, the Issuer Group obtained 20 new patents and registered 21 computer software

copyrights and 12 integrated circuit layout designs. For the six months ended 30 June 2013, the

Issuer Group obtained 25 new patents.

The Issuer Group’s R&D capability also forms an important part of the Group’s R&D programme

within in the IC business. See the section entitled “Description of the Group – The Group’s

Business – Research and Development” for more information in relation to the Group’s R&D

arrangements.

Cooperation with other Group members

The Issuer Group constitutes a key part of the Group’s IC business line and it cooperates closely

with other Group members within the same business line. Pursuant to a business services

agreement between the Issuer and the Company, the Group provides products processing, testing

and assembling services to the Issuer Group for the manufacturing of IC products. The Issuer

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Group also purchases from the Group raw materials and modules for the R&D of IC cards, smart

cards and chips, on a non-committed and arm’s length basis. Such raw materials and modules

include but are not limited to wafers, IC modules, IC cards, IC and printed circuit boards. Purchase

of raw materials and modules from the Group amounted to HK$585.0 million for the year ended

31 December 2012, which represented 83% of the Issuer Group’s cost of sales for that year.

Please refer to the “Description of the Group – The Group’s Business – Primary Business Lines

– IC products” for more information in relation to IC products business.

Recent Development

Acquisition of CEC Technology

On 5 July 2013, the Issuer and the Company entered into an equity transfer agreement (the

“Equity Transfer Agreement”) to transfer the 100% equity interest in CEC Technology from the

Company to the Issuer at a consideration of RMB600 million (equivalent to approximately HK$750

million) (the “Acquisition”). 60% of the consideration was payable within five business days of the

effective date of the Equity Transfer Agreement and the remaining 40% of the consideration will

be payable within six months of the effective date of the Equity Transfer Agreement.

The Acquisition has been approved by the Issuer’s shareholders and the Central SASAC but is still

subject to approval from MOFCOM.

Overview of CEC Technology

CEC Technology is wholly owned by the Company. Mr. Xie Qinghua, Managing Director of the

Issuer, has been one of the directors and the general manager of CEC Technology since 2007,

and the chairman of the board of directors of CEC Technology since 2012.

The principal business activity of CEC Technology is investment holding. CEC Technology will

hold, upon completion of the Acquisition (as anticipated on 28 August 2013, which is the date on

which the Issuer published its circular to its shareholders in relation to the Acquisition (the

Circular Date)), among others, 100% equity interest in CEC Beihai, 40% equity interest in Hainan

RSC and 66.23% equity interest in CEC Xi’an. Hainan RSC is expected to remain as an associate

of CEC Technology upon completion of the Acquisition. The principal business activities of CEC

Beihai, Hainan RSC and CEC Xi’an have been the development and management of industrial

parks in the PRC which provide a platform for industry participants to develop electronics and IT

business. CEC Beihai is engaged in the construction and operation of the CEC Beihai Industrial

Park (中國電子北海產業園), while Hainan RSC is engaged in the construction and operation of the

Hainan Resort Software Community (海南生態軟件園) and CEC Xi’an is engaged in the

construction and operation of the CEC Xi’an Industrial Park (中國電子西安產業園).

CEC Technology’s revenue is mainly derived from sales of properties and land use rights and

rental income of CEC Beihai. During the two years ended 31 December 2011 and 2012 and the

four months ended 30 April 2013, save for one developed property sold in 2010, all properties

developed by CEC Beihai were held for rental yields and there were no sales of properties. While

most of the land use rights held by CEC Beihai were developed by CEC Beihai, it has also sold

a small portion of land use rights to third parties. Rental income remained relatively stable during

the two years ended 31 December 2011 and 2012 and the four months ended 30 April 2013.

During the two years ended 31 December 2011 and 2012 and the four months ended 30 April

2013, Hainan RSC derived its revenue mainly from the sales of certain properties, including

apartments and office units. CEC Xi’an Industrial Park was still in development and hence had not

generated any sales revenue for the two years ended 31 December 2011 and 2012 and the four

months ended 30 April 2013. Being a subsidiary of the Group, CEC Technology’s industrial park

business forms part of the Group’s industrial park business in the modern IT services business

line.

Upon completion of the Acquisition, the industrial park business operated by CEC Technology will

become the Issuer Group’s second business line in addition to its current principal activities.

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The purpose of the industrial parks is to provide incubation and business services to science and

technology companies to nurture ideas, to help them innovate and grow during their inception

stages. These industrial parks provide the following business support to the resident enterprises:

• Human resources – the industrial parks facilitate the recruitment and training of resident

enterprises by cooperating with universities, research institutes and other training institutes.

They also provide support to personnel who work in the industrial parks by offering

residential quarters, community health centres and a range of communal facilities to them.

• Financial resources and governmental support – the industrial parks organise various

investment and financing matchmaking activities for resident enterprises. Also, as home of

various science and technology companies, which are generally welcome by local

government for the development of a knowledge-based economy, the industrial parks are in

a good position to act as a communication platform between the local government and

resident enterprises, and assist in obtaining financial support from the local government for

the benefit of resident enterprises.

• Infrastructure – the industrial parks provide infrastructure tailored for science and technology

companies, for including laboratories, open-source codes and shared use of software.

Brief information on the industrial parks is set out as follows:

CEC Beihai Industrial Park (中國電子北海產業園)

CEC Beihai is engaged in the construction and operation of the CEC Beihai Industrial Park. The

CEC Beihai Industrial Park is situated in Beihai, Guangxi Province, with a planned total area of

3,000 mu (equivalent to approximately two square kilometres), designated for industrial, research

and training, commercial and community facilities uses for the development of electronics and IT

services. The CEC Beihai Industrial Park targets manufacturers of computers and computer

storage, as well as enterprises engaging in software research and services, and the production of

key parts of LCD monitors and alternating current power. As at 21 August 2013, being the latest

practical date prior to the Circular Date, CEC Beihai Industrial Park has a total of 90 resident

enterprises, including 50 enterprises under its incubation programme (an incentive scheme for

start-up R&D enterprises including decreased rental and other preferential treatment).

Hainan Resort Software Community (海南生態軟件園)

Hainan RSC is engaged in the construction and operation of the Hainan Resort Software

Community. The Hainan Resort Software Community is situated in Haikou, Hainan Province, with

a planned total area of 3,000 mu (equivalent to approximately two square kilometres). The Hainan

Resort Software Community targets enterprises engaging in software research, software

outsourcing and information technology training, as well as call centres and internet media. As at

21 August 2013, being the latest practical date prior to the Circular Date, Hainan Resort Software

Community has a total of 275 resident enterprises, including Hewlett-Packard, Neusoft (東軟集團),

ChinaSoft, Greatwall Information (長城信息) and Join-Cheer (久其軟件).

CEC Xi’an Industrial Park (中國電子西安產業園)

CEC Xi’an is engaged in the construction and operation of the CEC Xi’an Industrial Park. The CEC

Xi’an Industrial Park is situated in Xi’an, Shaanxi Province and has a planned total area of 470 mu

(equivalent to approximately 0.313 square kilometres). The CEC Xi’an Industrial Park targets

enterprises engaging in cloud computing services and service outsourcing. Construction of CEC

Xi’an Industrial Park commenced in October 2011 and the first batch of resident enterprises are

expected to move in around August 2014.

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Background of the Acquisition

The Issuer believes the Acquisition is in line with its development strategies and will bring

long-term and strategic benefits to the Issuer Group.

For the purpose of promoting the development of electronics and IT industrial parks as well as

enhancing the innovation and competitiveness of relevant industrial sectors, the PRC government

promulgated “Policies regarding the support for the development of the State’s IT bases and

industrial parks” (《支持國家電子信息產業基地和產業園發展的若干政策》) on 18 August 2006,

which sets out guidance and policy support for the development of electronics and IT industrial

parks in the PRC.

Subsequent to the Acquisition, the Issuer intends to increase its efforts in developing CEC

Technology by leveraging on its strong IT expertise and client network. The Issuer believes that

such efforts will increase the earning potential of CEC Technology which will, in turn, enhance the

quality of the assets held by the Issuer Group.

Post-Acquisition structure

Upon completion of the Acquisition, CEC Technology will become a subsidiary of the Issuer and

the assets, liabilities and financial results of CEC Technology will be consolidated into the

consolidated financial statements of the Issuer.

The following is the simplified shareholding structure chart showing the subsidiaries of the Issuer

following completion of the Acquisition (as anticipated on the Circular Date):

100%

40%100% 66.23%

100%

CEC Technology

The Issuer

Huada Electronics

CEC Xi'anHainan RSCCEC Beihai

The unaudited pro forma financial information of the Issuer and its subsidiaries (including CEC

Technology and its subsidiaries) (the “Enlarged Issuer Group”) appearing on pages F-233 to

F-238 of this Offering Circular (the “Unaudited Pro Forma Financial Information”) is an illustrative

unaudited pro forma statement of assets and liabilities of the Issuer Group, which has been

extracted from the circular of the Acquisition published by the Issuer on the HKSE on 28 August

2013. The Unaudited Pro Forma Financial Information gives effect to the Acquisition as if it had

been consummated as at 31 December 2012.

The Unaudited Pro Forma Financial Information is based upon historical financial information of

the Issuer Group as adjusted to reflect certain significant assumptions, allocation and adjustments

that management of the Issuer believes are reasonable. The Unaudited Pro Forma Financial

Information does not purport to represent what the Enlarged Issuer Group’s financial position

would actually have been, had the Acquisition been completed on 31 December 2012, nor does

it purport to project the Issuer Group’s or the Enlarged Issuer Group’s financial position for any

future period or as at any date. Significant assumptions were made in the preparation of the

Unaudited Pro Forma Financial Information, including the related notes thereto. The Unaudited

Pro Forma Financial Information should be read in conjunction with other financial information

included elsewhere in this Offering Circular.

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Directors

The directors of the Issuer are:

Chairman and Non-executive Director

Mr. Rui Xiaowu, aged 53, is the Chairman of the Issuer and has served in this position since 2011.Mr. Rui graduated from the Science & Technology University for National Defense of the PRC in1982 with a major in Computer Software, was a Master’s postgraduate and a Research Fellow,and was awarded the “Government Special Allowance” by the State Council of the PRC. Mr. Ruiis also the chairman of the Company. Mr. Rui was previously the director of the 710 ResearchInstitute of the Ministry of Aerospace Industry of the PRC, the assistant general manager of ChinaAerospace Science & Technology Corporation, the general manager of China SatelliteCommunications Corporation and the deputy general manager of China Aerospace Science &Technology Corporation. Mr. Rui was also the chairman of China Satellite CommunicationsCorporation Limited, the chairman and a non-executive director of China Aerospace InternationalHoldings Limited, the chairman of NavInfo Company Limited (002405: Shenzhen), the chairmanof China Spacesat Company Limited (600118: Shanghai), the chairman, president and anexecutive director of China Aerospace International Holdings Limited, the chairman and anexecutive director of CASIL Telecommunications Holdings Limited, the chairman and a non-executive director of APT Satellite Holdings Limited.

Mr. Rui Xiaowu is also the Chief Executive Director of the Company.

Executive Directors

Mr. Xie Qinghua, aged 45, is the Managing Director and a member of the Remuneration andNomination Committee of the Issuer. Mr. Xie graduated from the School of Economics andManagement of Beijing Institute of Technology and holds a postgraduate degree in BusinessAdministration. Mr. Xie is the chairman of China Electronics Technology Development Co., Ltd.,a wholly owned subsidiary of the Issuer. Mr. Xie was in charge of the Overseas CooperationDepartment of the Company, the general manager of the Strategic Planning Department of ChinaGreat Wall Computer (Group) Corporation, the assistant general manager and the secretary to theboard of directors of Great Wall Broadband Network Service Co., Ltd., the general manager ofBeijing Branch of Great Wall Broadband Network Service Co., Ltd., the general manager ofShenzhen Great Wall Broadband Network Service Co., Ltd., the assistant general manager ofAerostrong Technology Co., Ltd., and in charge of the general manager office and the project

manager of the Communication Network Department of Jitong Communications Limited. Mr. Xie

joined the Issuer in August 2012.

Mr. Liu Jinping, aged 60, is the Executive Director of the Issuer. Mr. Liu graduated from the

Department of Radio Engineering of Beijing Institute of Technology and is a senior engineer. Since

2003, Mr. Liu is the general manager of China Huada, the Issuer’s substantial shareholder, and

the chairman of various subsidiaries of China Huada, which include Nationz Technologies Inc.

(300077: Shenzhen) and Beijing Huada Zhibao Electronic System Co., Ltd. From 1994 to 2002,

Mr. Liu was the deputy general manager of the SDIC Electronic Co. From 2002 to 2003, Mr. Liu

was the deputy general manager of SDIC Venture Capital Co., Ltd. Mr. Liu was appointed director

of the Issuer in July 2010.

Mr. Liu Hongzhou, aged 51, is the Executive Director of the Issuer. Mr. Liu graduated from the

School of International Business of Nanjing University and holds a postgraduate degree in

Business and Administration, and is a senior engineer. Mr. Liu, having spent much of his career

in the Company, was a divisional deputy director of the Asset Management Department of the

Company, an executive director and the deputy general manager of Winfair Development Limited,

a divisional director of the Investment Banking Department of the Company, the deputy general

manager of China Electronics Technology Development Corporation, the deputy general manager

of the Asset Management Department of the Company, the deputy general manager of the Issuer,

a director of the General Office of the Company, a director of Shenzhen SED Industry Co., Ltd

(000032: Shenzhen), and the managing director of SED Electronics Group Company Ltd. Mr. Liu

was appointed director of the Issuer in October 2013.

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Independent Non-executive Directors

Mr. Chan Kay Cheung, aged 66, is an Independent Non-executive Director, a member of the

Audit Committee and a member of the Remuneration and Nomination Committee of the Issuer. Mr.

Chan is a senior advisor of The Bank of East Asia, Limited, the vice chairman of The Bank of East

Asia (China) Limited and the chairman of Shaanxi Fuping BEA Rural Bank Corporation. Mr. Chan

was an executive director and the deputy chief executive of The Bank of East Asia, Limited. Mr.

Chan joined The Bank of East Asia, Limited in 1965 and possesses extensive knowledge and

experience in the banking industry. Mr. Chan is a fellow member of the Hong Kong Institute of

Bankers, a member of the Process Review Committee for the oversight of Hong Kong Monetary

Authority, a member of the Clearing and Settlement Systems Appeals Tribunal, a member of the

Committee of Overseers of Lee Woo Sing College, The Chinese University of Hong Kong, a

member of The China Unionpay International Advisory Group and an international senior

economic consultant of The People’s Government of Shaanxi Province. Mr. Chan is also an

independent non-executive director of Chu Kong Shipping Enterprises (Group) Company Limited

(formerly known as Chu Kong Shipping Development Company Limited), Dah Chong Hong

Holdings Limited, Hong Kong Food Investment Holdings Limited and SOCAM Development

Limited. Mr. Chan was appointed director of the Issuer in May 1997.

Mr. Qiu Hongsheng, aged 48, is an Independent Non-executive Director, a member of the Audit

Committee and a member of the Remuneration and Nomination Committee of the Issuer. Mr. Qiu

graduated from the School of Management of Harbin Institute of Technology and holds a

postgraduate degree in Management Science and Engineering; and is a Certified Public Valuer in

the PRC, a Certified Senior Enterprise Risk Manager in the PRC and a senior economist. Mr. Qiu

is an executive director and the general manager of China Consultants of Advisory and Finance

Management Co., Ltd. Mr. Qiu worked in 710 Research Institute of the Ministry of Aerospace

Industry of China as an economic analyst for a number of years. Mr. Qiu joined China Consultants

of Advisory and Finance Management Co., Ltd. (formerly known as China Financial and

Accounting Consulting Company), a company directly managed by the State Ministry of Finance

of the PRC, in 1994 and focuses on management consulting and corporation restructuring

transactions. Mr. Qiu possesses a wealth of professional knowledge and practical experiences on

corporate finance, mergers and acquisitions, strategic integration, meticulous management, etc.

Mr. Qiu is also an independent director of Lingyun Industrial Corporation Limited (900957:

Shanghai, Beijing Tiantan Biological Products Co., Ltd., (600161: Shanghai) and China National

Software & Service Co., Ltd., (600536: Shanghai), a subsidiary of the ultimate controlling

shareholder of the Issuer (all being companies listed on the Shanghai Stock Exchange). Mr. Qiu

was appointed director of the Issuer in November 2012.

Mr. Yin Yongli, aged 73, is an Independent Non-executive Director, a member of the Audit

Committee and a member of the Remuneration and Nomination Committee of the Issuer. Mr. Yin

graduated from Shandong Finance Institute. Mr. Yin is a Certified Public Accountant in the PRC

and has extensive experience in auditing and financial management. From 2005 to 2008, Mr. Yin

was the chairman of Tianhua Certified Public Accountants. He was the chairman of China

Rightson Certified Public Accountants and various audit firms in the PRC during the period from

1999 to 2005. Before that, Mr. Yin worked in the petrochemical industry in the PRC for over 35

years. From 1985 to 1999, Mr. Yin held various senior positions in the finance department of

Sinopec Corporation. Mr. Yin is the chairman of Beijing Tong Tai Insurance Brokerage Limited and

an independent director of China Merchants Energy Shipping Co., Ltd. Mr. Yin was appointed

director of the Issuer in September 2004.

Financial Information

For details of the Issuer’s financial information, see “Selected Financial Information of the Issuer”,

the Issuer’s audited consolidated financial statements as at and for the year ended 31 December

2012 and unaudited condensed consolidated interim financial information as at and for the six

months ended 30 June 2013 included in this Offering Circular.

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DESCRIPTION OF THE GROUP

Business Overview

The Group is the largest IT group under the Central SASAC in the PRC in terms of total assets

and revenue and a leading provider of electronics and IT products and services in the PRC. It is

wholly and directly owned by the Central SASAC. The Group ranks 26th out of 113 on Central

SASAC’s list of “Grand State-Owned Enterprises” and is also the highest ranking IT enterprise on

the list. The Group has maintained its position among “China’s Top 500 Competitive Large

Enterprises” selected by the National Bureau of Statistics (國家統計局) since 2007 and ranked in

the top three of MIIT’s “China’s Top 100 Electronics and IT Enterprises” in 2013. It has also been

named in the Fortune Global 500 since 2011 and ranked 395 in 2013.

The Group primarily engages in the electronics and IT industry in the PRC. Its primary businesses

include: (i) the design and manufacturing of IC products (集成電路), (ii) information security,

including the development of operating, supporting and application software and the development

and manufacturing of computer and computer related hardware products (信息安全), (iii) high-tech

electronics, including the development and manufacturing of mobile and digital

telecommunications products (高新電子), (iv) the development and manufacturing of flat-panel

displays (新型顯示), and (v) modern IT services which predominately includes e-commerce and

trading (現代信息服務). Certain of the Group’s products can be used for both national defence and

civilian purposes.

Headquartered in Beijing, the Group comprises a group of well-known IT companies, with

business operations in major cities across the PRC, including Shanghai, Wuhan, Shenzhen,

Nanjing, Changsha, Xiamen, Haikou and Xi’an. It has also undertaken overseas projects in

Mexico, Poland and Brazil. The Group has formed joint ventures, ODM and OEM arrangements

and other strategic partnerships with global market leaders, including IBM, Microsoft, Sharp,

Philips, HP, Hitachi and Nokia.

The Group’s revenue grew from RMB168.7 billion in 2011 to RMB183.0 billion in 2012, and the net

profit decreased from RMB2.9 billion in 2011 to RMB2.8 billion in 2012.

Among its notable achievements, the Group believes that it:

• is one of the national leaders in R&D, design and manufacturing of IC products in the PRC;

• has the leading market shares among all domestic developers in the PRC’s software industry

and is also a leading provider of standalone software and high-end industrial applications

and solutions in the PRC in the area of information security;

• is a leading global manufacturer of disk substrate and a leading manufacturer of PC power

supplies in the PRC;

• is a leading producer of displays and third largest producer of LCD TVs worldwide in the

business of flat-panel display; and

• is a top-ranking service provider and industrial park developer and operator in the PRC in the

area of e-commerce and logistics services.

The Group has established strategic partnerships with the local governments in a number of

provinces and cities and has set up large-scale manufacturing bases and industrial parks in

growing economic regions, including the Yangtze River Delta (長三角), Pearl River Delta (珠三角),

Bohai Rim (環渤海) and Pan-Beibu Gulf Region (泛北部灣) in the PRC. The development of such

manufacturing bases and industrial parks provides a strong foundation and is expected to be a

driver for future growth in the PRC IT industry.

86

Corporate History And Structure

Key Corporate Milestones

• The Company, China Electronics Corporation, formerly known as China Electronic

Information Industry Group Co., Ltd. (中國電子信息產業集團公司), was established on 8

January 1989 upon the approval of the General Office of the State Council in the Official

Reply of the General Office of the State Council on Establishment of China Electronic

Information Industry Group Co., Ltd. (GBH [1989] No. 1)《國務院辦公廳關於成立中國電子信息產業集團公司的覆函》 (國辦函[1989]1號). The establishment of the Company in 1989 was a

result of a political reform process in which the former Ministry of Machine-Building and

Electronics Industries (機械電子工業部) was instructed by the State Council to transfer the

ownership of a large number of stated-owned electronics enterprises in the PRC to the

Company. The Company therefore assumed certain functions of the Ministry of Machine-

Building and Electronics Industries and became the holding company of those stated-owned

companies transferred by the Ministry of Machine-Building and Electronics Industries.

• In 1991, the Company was merged into China Electronics Industry Corporation (中國電子工業總公司).

• In 1993, operations of the former China Electronic Information Industry Group Co., Ltd. were

resumed upon approval of the Reply of the State Council on Incorporation of China

Electronic Information Industry Group Co., Ltd (GH [1993] No. 127)《國務院關於組建中國電子信息產業集團公司的批覆》(國函[1993]127號).

• In 1995, the former Ministry of Electronics Industry (電子工業部) reformed and restructured

the Company and granted the Company further authority in managing state-owned assets

under the administration of the Ministry of Electronics Industry.

• In 1996, the Company built the first super-large scale IC production line in the PRC under the

“909 Project”.

• In 2003, the Company established China Integrated Circuit Design (Group) Corp., Ltd. (中國華大集成電路設計集團有限公司).

• In August 2005, China Great Wall Computer Group Company (中國長城計算機集團公司) was

merged into the Company.

• On 28 November 2006, China Electronic Information Industry Group Co., Ltd. was

restructured as a wholly state-owned company and renamed China Electronics Corporation

upon approval of the Central SASAC by the Reply on the Restructuring of China Electronic

Information Industry Group Co., Ltd. into A Wholly State-owned Company (GZGG [2006] No.

1455)《關於中國電子信息產業集團公司改建為國有獨資公司的批覆》(國資改革[2006]1455號).

• In 2007, the Company restructured seven of its subsidiaries based in Nanjing to consolidate

and strengthen the “Panda” brand.

• In 2009, the Company acquired equity interests in TPV Technology Limited (冠捷科技有限公司) and Solomon Systech (International) Limited (晶門科技有限公司) to build its flat-panel

display industry chain.

• In 2011, the Company’s registered capital was increased to RMB8,603 million after a capital

injection by the Central SASAC. The relevant business registration procedures were

completed on 21 June 2012.

• In 2011, the Company was named in the Fortune Global 500 for the first time.

• In 2012, the Company restructured the Irico group to further develop the Group’s flat-panel

display industry chain.

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Competitive Strengths

The Group believes that it enjoys several key competitive advantages in its principal businessareas.

Favourable government policies to support the growth of the PRC IT industry

The PRC IT industry is experiencing a phase of strong growth, led by the fast growing economyin the PRC and supported by favourable government policies. In particular, the government hasintroduced a number of plans and policies in recent years to encourage the development of theIT industry. Being a leading state-owned IT group in the PRC, the Group has contributed to as wellas benefitted from the rapid growth of the PRC IT industry. In particular, the Group has receivedstrong government support including preferential tax treatment, government subsidies as well asother forms of financial and non-financial benefits. See the sections entitled “Management’sDiscussion and Analysis of Financial Conditions and Results of Operations – Income taxexpenses” for more details in relation to the tax benefits that the Group has been granted and“Management’s Discussion and Analysis of Financial Conditions and Results of Operations –Government subsidies” for more details in relation to government allowance and subsidies.

According to the Twelfth Five-year Plan for the PRC’s Electronic Components (《中國電子元件“十二五”規劃》) issued by China Electronic Components Association, gross sales in the electroniccomponent industry in the PRC are expected to reach RMB1.88 trillion by 2015 with an averageexpected annual growth of 10% from 2010 to 2015. The Group believes that it will continue tobenefit from the favourable government policies in the future.

Strategic importance to the PRC electronics and IT industry and continued support fromCentral SASAC and the PRC government

The Group is the largest state-owned IT group under the Central SASAC in the PRC in terms oftotal assets and revenue, wholly and directly controlled by Central SASAC. Its core businessesare integral to national information security and the development of the national economy in thePRC. The Group has maintained a leading position and played a vital role in realising thegovernment’s blueprint for the development and transformation of the PRC electronics and ITindustry. In particular, various members of the Group such as SHHIC and CS&S, have beenselected by the PRC government as participating enterprises in the 863 Programme (《863計劃》)and the 909 Project (《909工程》). The 863 Programme was introduced by the PRC governmentin March 1986 to boost the country’s overall high-tech development, R&D capacity, socio-economic development and national security. The PRC government has invested approximatelyRMB11 billion in this programme. The 909 Project was introduced by the PRC government inDecember 1995 to encourage domestic IC production capability and reduce reliance onsemiconductor imports. The goals of the project were to develop the PRC’s own semiconductortechnology, to create internationally competitive semiconductor enterprises driven by the PRC’sgrowing market, and to train skilled engineers and managers in the IC industry. Total investmentin the 909 Project has exceeded RMB10 billion, more than the sum of all prior governmentinvestments in the semiconductor sector.

Due to its strategic importance to the PRC electronics and IT industry, the Group has enjoyed along-term and good relationship with Central SASAC and various central government bodies sinceits establishment. It has benefitted from government-led mergers and acquisitions andrestructuring activities, as well as the elimination of redundant capacity. Furthermore, the Grouphas established strategic partnership with numerous provincial and municipal governments to setup large-scale manufacturing bases and industrial parks. The Group has developed a number ofprojects and business operations to promote local economic growth and has obtained strongsupport from local governments in land acquisition and development, infrastructure facilities andother aspects of the Group’s business development.

Besides favourable government policies, the PRC government has also provided support for theindustry by way of government allowances and subsidies. In 2011 and 2012, the Group receivedgovernment allowances and subsidies of approximately RMB1.2 billion and RMB3.0 billion,respectively, and the Group believes the PRC government will continue its support for theelectronics an IT industry in the future.

88

Good corporate governance and transparency

The Company was among the first batch of SOEs to establish a board of directors in 2006. Its

Board of Directors consists of executive directors, external directors as well as employee

directors. The Company also has a committed Board of Supervisors and a professional

management team. The corporate governance structure of the Company is characterised by clear

responsibility, accountability and coordinated operation. It ensures the separation of power in

decision-making, supervision and execution as well as effective checks and balance between the

Board of Directors, Board of Supervisors and the management. Moreover, 16 subsidiaries of the

Company have been listed in the PRC or overseas. This demonstrates the level of transparency

and corporate governance in these subsidiaries and the Group as a whole.

Strong credit profile with access to competitive funding

The Group believes that it has a strong financial profile with recurring cash flows and high level

of liquidity. The Group’s primary source of debt funding includes bonds and loans. Due to the

strength of its balance sheet, the Company has maintained an “AAA” long-term credit rating with

a stable outlook since 2010 from Dagong Global Credit Rating Co., Ltd., a credit rating agency

recognised by the PRC government. The Company has historically been able to obtain

competitive borrowings in the PRC domestic financial market and has maintained high level of

liquidity. As at 30 September 2013, the Company had been granted credit facilities with an

aggregate amount of RMB140 billion, including an undrawn amount of RMB89.6 billion. The

consolidated cash and bank balance of the Group amounted to RMB36.614 billion as at 30

September 2013. As at the date of this Offering Circular, the Company has not experienced any

default under any of its external borrowings.

Preferential corporate tax treatment

Given that most of the Group’s business lines are considered strategically important to the PRC

and given the Group’s leading position in these industries, many of the Group’s subsidiaries

receive preferential tax treatment. See the section entitled “Management’s Discussion and

Analysis of Financial Conditions and Results of Operations – Certain Income Statement Items –

Income tax expenses” for details.

Powerful R&D capabilities

The Group believes that it has a competitive advantage in its platform for innovative and

cutting-edge products in the areas of IC products, information security, flat-panel displays and

high-tech electronics. For the years ended 31 December 2011 and 2012 and the nine months

ended 30 September 2013, the R&D expenses of the Group were RMB2.8 billion, RMB4.5 billion

and RMB2.8 billion, respectively. As at 30 September 2013, approximately 7.8% of the Group’s

employees are involved in the R&D process. The Group intends to allocate more of its resources

to explore emerging industries, including new energy batteries and LED lighting, taking advantage

of the development of “the internet of things”, cloud computing and “smart cities”, and adjust its

business focus to become an active player in the high end of the IT industry value chain. For more

information in relation to the Group’s R&D capabilities, see “– The Group’s Business – Research

and Development”.

Competitive cost structure

The Group takes advantage of its competitive cost structure to design high-quality products at

highly competitive prices. The Group believes that this is its key competitive advantage.

The Group conducts most of its manufacturing activities in the second and third tier cities in the

PRC which allows it to benefit from relatively low labour costs and rental expenses. The Group

also conducts most of its R&D activities in the PRC, utilising a large local pool of highly skilled

technical professionals, which enables it to maintain strong R&D capabilities on a relatively

low-cost basis.

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Experienced and efficient management team with strong track record

The Group’s senior management team and key operating personnel have extensive experience in

the Group’s businesses, with strong experience in manufacturing, marketing, operation, human

resources and management in the electronics and IT industry as well as strong capabilities in

developing and executing innovative business strategies. The Group has also recruited senior

management talents from leading global firms, such as Rui Xiaowu, the Chairman of the Board of

Directors and Chen Shengde, an External Director of the Company. The collective experience of

the Group’s management team brings together a mixture of local and international experience,

industry knowledge and complementary skill sets that enable the Group to respond in a timely

manner to changing market conditions. The Group believes that its committed and experienced

management team will continue to lead it to further success. For more information in relation to

the experience of the Group’s directors and senior management, please see the section entitled

“Directors and Management”.

The Group’s Strategies

The Group aims to strengthen its leading position in the electronics and IT industry in the PRC.

To achieve this objective, it intends to focus on the following strategies:

Continued transition to high value-added business model

The Group is continually reviewing its strategic position in the electronics and IT industry in the

PRC and intends to continue to focus its resources on high profit margin and high value-added

business lines such as IC products (集成電路), information security (信息安全), high-tech

electronics (高新電子), flat-panel displays (新型顯示) and modern IT services (現代信息服務).

Within each business line, the Group continues to transition towards the high end of the value

chain. For example, in the information security business, the Group has transitioned from a

leading manufacturer of computer and computer-related products to a leading supplier of

information technology solutions, providing customers with the design and installation of hardware

and software as well as continued service and support during the product life cycle.

Leveraging relationships with government organisations, state-controlled entities and

large enterprises

The Group expects to continue to work closely with both central and regional governments,

including participating in government-led initiatives in the electronics and IT industry and securing

government purchase orders. The Group also intends to further develop business in related

sectors identified by the PRC government as strategic growth areas so that the Group can

continue to benefit from the support of the government including favourable treatment in land

acquisition and development, acquisition of local businesses, preferential tax treatment,

government subsidies and financing support.

Many of the Group’s products are sold primarily to government organisations and large

enterprises, generating a stable source of revenue for the Group. The Group intends to

concentrate its sales efforts by increasing penetration of its existing customers as well as targeting

new customers that are emerging industry leaders. The Group also intends to develop and further

strengthen relationships with PRC domestic and multi-national market leaders by entering into

joint ventures, ODM or OEM arrangements and other strategic partnerships.

Continued emphasis on R&D to extend its technology leadership in the PRC

The electronics and IT industry in the PRC continues to experience rapid growth with fast-growing

demand for sophisticated and cutting-edge electronic and IT products and services. As a leading

player in this technology-oriented industry, the Group’s continuous focus on R&D is a key driver

behind its long-term business growth. As at 30 September 2013, approximately 7.8% of the

Group’s employees are involved in the R&D process. The Group will continue to invest in its

in-house R&D capabilities to enhance its leading technology platform and continue to develop

innovative and advanced products and production processes.

90

Further strengthening its leadership in the PRC electronics market

In the next three years, in an effort to increase its market share and enhance its competitive

advantages in the electronics and IT industry, the Group plans to increase its investments in its

core business by modernising its production lines and promoting technology and process

innovation. The Group also intends to invest in technology and production equipment to improve

its quality control and management system which the Group expects to further drive sales growth.

In particular, the Group plans to make significant investments in display technology, information

security, and electronics and IT product and service platform. The Group intends to update its

flat-panel display production lines, strategically position itself in the OLED industry, further extend

its capacity upstream and downstream in the supply chain for flat-panel displays, develop its

information security business and electronic products platform to build the “China Electronic

Network” (“中國電子網”) into a key brand and core platform for electronic products related trading,

logistics and services utilising certain core technologies such as cloud computing and virtual

storage.

Increasing operational efficiencies

The Group believes that managing its operational and production costs efficiently is essential to

its competitiveness in the industry sectors in which it operates, and it intends to achieve

efficiencies by adopting a holistic approach in managing the production and operation of the

Group as well as enhancing corporate governance at all levels. The Group also closely monitors

and reviews its operational performance with the aim to manage operational costs and expenses

and capital requirements, as well as increase efficiencies in its production operations.

The Group’s Business

The Group’s primary businesses include: (i) the design and manufacturing of IC products (集成電路), (ii) information security, including development of operating, supporting and application

software and the development and manufacturing of computer and computer related hardware

products (信息安全), (iii) high-tech electronics, including the development and manufacturing of

mobile and digital telecommunications products (高新電子), (iv) the development and

manufacturing of flat-panel displays (新型顯示), and (v) modern IT services which predominately

includes e-commerce and trading (現代信息服務).

The following table sets out the amount of operating revenue and percentage of the Group’s

overall operating revenue attributable to each of the Group’s five primary businesses for the

periods indicated.

Unit: RMB billion

2011 2012

Business lines Amount (%) Amount (%)

IC products. . . . . . . . . . . . . . . . . . . . . . . . . 23.4 13.9 22.5 12.3

Information security . . . . . . . . . . . . . . . . . . . 13.4 8.0 15.5 8.4

High-tech electronics . . . . . . . . . . . . . . . . . . 6.5 3.9 7.4 4.0

Flat-panel display . . . . . . . . . . . . . . . . . . . . . 72.4 42.9 75.2 41.1

Modern IT service . . . . . . . . . . . . . . . . . . . . 47.6 28.2 57.3 31.3

Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4 3.2 5.2 2.8

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168.7 100.0 183.0 100.0

As a result of the unique features of the PRC “planned economy” in the past and being a

state-owned company wholly owned and directly controlled by Central SASAC, the Company has

been assigned a large number of companies incorporated in the PRC as its subsidiary companies

and affiliate companies over the years. The Company has 37 direct subsidiaries as at the date of

this Offering Circular. However, the Group has been consolidating its business by transferring

various subsidiaries in the same business under a selected number of principal subsidiaries in

order to streamline its corporate structure and enhance operational efficiency.

91

Below is the abbreviated corporate structure chart showing the primary business lines of the

Group and the principal subsidiaries within each business line as at 31 December 2012. The

shareholding percentages set out in the structure chart below represent the beneficial interest

which the Company has in each of the entities in the chart. Where such entity is not directly held

by the Company, the shareholding percentage is calculated by multiplying the shareholding

percentages at each intermediate level between the Company and such entity.

Central SASAC

Company

IC products集成電路

China IntegratedCircuit Design

Group Corp., Ltd.中國華大集成電路設計集團有限公司

China ElectronicsCorporation HoldingsCo., Ltd. (the Issuer)中國電子集團控股有限公司

Shanghai BellingCo., Ltd.

(SZSE: 600171)上海貝嶺股份有限公司

Shanghai HuahongIntegrated Circuit

Co., Ltd.上海華虹集成電路有

限責任公司

CEC CoreCast Corp.,Ltd.

(SSE: 600764)中電廣通股份有限公司

Shenzhen KaifaTechnology Co., Ltd.

(SZSE: 000021)深圳長城開發科技股份有限公司

Nanjing HuadongElectronics Group

Co., Ltd.(SZSE: 000727)南京華東電子信息科技股份有限公司

Shenzhen SEDIndustry Co., Ltd.(SZSE: 000032)深圳桑達實業股份

有限公司

China Zhenhua(Group) Technology

Corporation(SZSE: 000733)中國振華(集團)科技股份有限公司

Shenzhen KaifaMagnetic Recording

Co., Ltd.深圳開發磁記錄股份

有限公司

Solomon Systech(International)

Limited(HKSE: 02878)晶門科技有限公司

Business

Lines

Operating

Subsidiaries

Informationsecurity信息安全

China NationalSoftware & Service

Ltd. (SSE: 600536)中國軟件與技術服務股份有限公司

The 6th Institute ofChina Electronics

Corporation Limited中國電子信息產業集團有限公司第六研究所

Great WallInformation Industry

Co., Ltd.(SZSE: 000748)長城信息產業股份有限公司

Great WallTechnology Co., Ltd.

(HKSE: 00074)長城科技股份有限公司

China Great WallComputer Shenzhen

Co., Ltd.(SZSE: 000066)中國長城計算機深圳股份有限公司

Shenzhen SEDElectronics Group

Ltd.深圳桑達電子集團有限公司

High-tech electronics高新電子

Wuhan ZhongyuanElectronic

Group Co., Ltd.武漢中原電子集團有限公司

Nanjing SanleElectronic

Information IndustryGroup Co., Ltd.南京三樂電子信息產業集團有限公司

Flat-panel display新型顯示

Nanjing PandaElectronics Company

Limited(HKSE: 005535;SSE: 600775)南京熊貓電子股份有限公司

TPV TechnologyLimited

(HKSE: 00903;SGX: T18)冠捷科技股份有限公司

CEC Panda LCDTechnology Co., Ltd.南京中電熊貓液晶顯示科技有限公司

Nanjing ZhongdianPanda Home

Appliances Co., Ltd.南京中電熊貓家電有限公司

Irico GroupElectronics Co., Ltd.

(HKSE: 00438)彩虹集團電子股份

有限公司

Irico DisplayDevices Company

Limited Corporation(SSE: 600707)彩虹顯示器示件股份有限公司

Modern IT services現代信息服務

China NationalElectronics Import &Export Corporation中國電子進出口總公司

China ElectronicAppliance

Corporation中國電子器材總公司

China ElectronicsTechnology

Development Co.,Ltd.

中國電子科技開發有限公司

*

*

*

*

*

* * *

*

*

*

*

*

*: subsidiaries directly owned by the Company

100.00%

50.00%

71.30%

27.81%

77.02%

53.47%

27.65%

15.93%

42.02%

9.74%

42.47%

28.64%

51.51%

100.00%

21.30%

62.11%

34.24%

100.00%

100.00%

70.00%

17.58%

18.88%

55.89%

52.57%

71.74%

28.10%

100.00%

100.00%

100.00%

92

Primary Business Lines

IC products

Overview

The Group’s IC products business is constituted by IC and related products including IC cards. It

also treats hard disk products, such as magnetic heads and substrates as part of the IC business

line. The Group is a leading developer and manufacturer of IC products in the PRC. IC is a set of

electronic circuits on one small plate (“chip”) of semiconductor material, normally silicon. ICs are

used in consumer products, network communication equipment and industrial production and

control. IC cards are pocket-sized cards with embedded ICs which provide identification,

authentication, data storage and application processing. The Group’s IC cards are widely used in

second-generation PRC identity cards, social security cards, telecommunications cards,

electricity cards and petroleum cards as well as in wireless local area networks.

The value chain for the IC products business can be divided into the upstream of IC design, the

midstream of IC manufacturing and the downstream of IC assembling. The Group is equipped with

the complete set of design, manufacturing, assembling and testing capabilities supported by its

proprietary technologies to cover the entire value chain of the IC industry.

Operating revenue attributable to the Group’s IC products business line reached RMB22.5 billion

in 2012, representing 12.3% of the Group’s total operating revenue for that year.

The principal subsidiaries specialising in IC design include the Issuer, Shanghai Huahong

Integrated Circuit Co., Ltd. (SHHIC) (上海華虹集成電路有限責任公司(華虹設計)) and China

Integrated Circuit Design (Group) Corp., Ltd. (CIDC) (中國華大集成電路設計集團有限公司 (中國華大)), while Shanghai Belling Co., Ltd. (Shanghai Belling) (上海貝嶺股份有限公司(上海貝嶺)) and

CEC CoreCast Corporation Limited (CEC CoreCast) (中電廣通股份有限公司(中電廣通)) primarily

focus on the manufacturing and assembling of IC products. Shenzhen Kaifa Technology Co., Ltd.

(Kaifa) (深圳長城開發科技股份有限公司(長城開發)) and Shenzhen Kaifa Magnetic Recording Co.,

Ltd. (Kaifa Magnetic Recording) (深圳開發磁記錄股份有限公司(開發磁記錄)) primarily engage in

hard disk products such as magnetic heads and substrates. These products are also included as

part of the IC products business line of the Group. In addition, the Group’s IC products business

line also includes a number of companies which do not operate in the mainstream IC products

industry, such as Solomon Systech (International) Limited (Solomon Systech) (晶門科技有限公司(晶門科技)). A number of other subsidiaries within the Group, such as Nanjing Huadong

Electronics Group Co., Ltd (HDEG) (南京華東電子集團有限公司(華東電子)) (SZSE Stock Code:

000727), Shenzhen SED Industry Co., Ltd. (深圳桑達實業股份有限公司) (SZSE Stock Code:

000032), China Zhenhua (Group) Technology Corporation (中國振華(集團)科技股份有限公司)

(SZSE Stock Code: 000733), all of which are listed on the Shenzhen Stock Exchange, also

operate in the Group’s IC products business line to certain extent.

Principal subsidiaries, affiliates and products

The Issuer is one of the subsidiaries in the Group that focus on the design, development and sales

of IC products. For more information about the Issuer, please refer to “Description of the Issuer”.

SHHIC (華虹設計) is a supplier of IC card and information security chip solutions in the PRC. It is

also one of the important IC design companies for the PRC’s “909 Project” (909工程). Its products

include contactless IC, contact CPU card chips, dual interface card chips, USBKEY chips,

multi-media chips as well as solutions for RFID, public transportation express cards, social

security, financial security, telecoms, mobile payment and high-end identification. SHHIC is in a

leading position in the development of utility metering chips and products based on DSP design

methods in the PRC. It has one of the largest market shares in the domestic IC industry and is an

important supplier for both public transportation card chip and social security card chip.

93

CIDC (中國華大) is a large-scale IC design company focusing on the design, system integration

and testing of chips and modules for IC cards, information security products, consumer electronics

and telecommunication products. CIDC also provides IC design companies with testing services

for various IC industrialisation wafers and finished products as well as validation service for IC

design. It has 10 sets of advanced testing systems, with a monthly testing capacity of 5,000 pieces

of 8-inch wafers. Moreover, it has independent design, modelling and processing capabilities and

can provide customers with various reliability tests for electronics products, such as life testing,

environment testing and stress testing. It can also provides solutions for IC design validation,

technical training, wafer testing, and assembling and finished product testing.

Shanghai Belling (上海貝嶺) is listed on the Shanghai Stock Exchange (SSE Stock Code: 600171).

It specialises in IC manufacturing and its main products include metering chips, power circuits and

telecommunication and mobile circuits, which are mainly used in cell phones, ammeters, home

appliance and LED backlight drivers. Shanghai Belling has 4-inch and 6-inch chip production lines

for telecommunication products with processing techniques of 2.0 – 6.0 micron double-pole, 1.2

micron CMOS and 1.2 – 3.0 micron BiCMOS. At present, it has a total of eight production lines for

4-inch, 5-inch, 6-inch and 8-inch chips. Shanghai Belling’s production line for 12-inch and below

90-nanometre chips is one of the main construction projects for “IC Upgrading” cited in the Plan

on Restructuring and Revitalisation of Electronics and IT Industry (“電子信息產業調整和振興規劃”).

CEC CoreCast (中電廣通) focuses on IC card and module assembling. CEC CoreCast holds a

leading position in the PRC IC card manufacturing industry in terms of assembling scale,

technique and quality. CEC CoreCast’s main business includes contact and contactless

assembling business for second-generation PRC identity cards, bank cards, citizen cards,

medicare cards, social security cards and electronic smart tags. CEC CoreCast has obtained the

IS09001 Quality Management System Certification and IS014001 Environmental Management

System Certification, and has established its own IC card assembling plant and module

assembling plant. CEC CoreCast has been listed on Shanghai Stock Exchange since 1996 (SSE

Stock Code: 600764).

Kaifa (長城開發) is a large-scale high-tech export-oriented company listed on the Shenzhen Stock

Exchange since 1994 (SZSE Stock Code: 000021). Kaifa is primarily focused on R&D and

manufacturing hard disk magnetic heads, utility metering products, tax control products, memory

products and electronic product processing. Kaifa’s business scope covers R&D, manufacturing

and sales. It has established R&D teams in Hong Kong, Singapore and United States. The

company has been certified with ISO9001, ISO14001, OHSAS18000 and TL9000 Quality

Management System. Kaifa is the second largest manufacturer of hard disk magnetic heads. It

also has a leading market share in utility metering products according to the CCID Report.

Kaifa Magnetic Recording (開發磁記錄) has been certified with IS09001 Quality System and the

Group believes that Kaifa Magnetic Recording is the only manufacturer of hard disk substrates in

the PRC, with products of aluminium substrates, nickel-dipping polished disk substrates, glass

disk substrates and carving disk substrates. Its customers are established disk substrate

manufacturers, such as IBM, Komag, MMC, Showa Denko, Seagate and Trace. Kaifa Magnetic

Recording has developed the core manufacturing technique of hard disk substrates, including

atom-scale CMP – EntegrisCMP technology, high-precision electroless nickel-planting technology

for aluminium substrates, nanoscale particles super purifying and cleaning technology, testing and

analysing technology of atom-scale defects. It is still developing its products and production

processes through continuous innovation and R&D.

The Group acquired an equity interest in Solomon Systech (晶門科技) in 2009. Solomon Systech

was spun off from the display driver business of Motorola’s semiconductor business. It is listed on

the Hong Kong Stock Exchange (HKSE Stock Code: 02878) and serves as a one-stop shop for

global manufacturers of mobile phones, portable devices, LCD monitors and LCD TVs. Solomon

Systech primarily produces LCD driver chips and holds approximately 20% market share of global

mobile monitor driver ICs, making it the largest supplier of OLED driver ICs and a competitive

market participant in the field of mobile monitors and new monitors.

94

Marketing and sales

Most of the Group’s revenue in its IC product business is generated from sales primarily to PRC

government organisations, SOEs and large private companies operating social security, banking,

telecommunication, electricity and petroleum sectors. The Group’s main customers include the

Ministry of Public Security of PRC, the People’s Bank of China, China Construction Bank,

Industrial and Commercial Bank of China, Union Pay, China Mobile, China Unicom, Sinopec,

China National Petroleum Corporation, State Grid Corporation of China, Huawei, BOE Technology

Group, Samsung, Philips and Nokia.

Competition

The Group competes with a number of PRC domestic companies as well as multi-national

companies. The Group believes its competitive advantage lies in its advanced technology and

effective cost management. The Group believes that it is the only enterprise in the PRC which

owns a complete IC industry chain encompassing design, manufacturing, assembling, testing,

EDA tools and process research. In addition, the Group has obtained various certifications

awarded by the PRC government, which enables it to compete effectively in the domestic IC

market.

Information security

Overview

The Group’s information security products mainly include (i) software products, such as operating

software, supporting software and application software, such as ERP, hotel management system,

local network management system, mobile telecommunication networks, office document

processing system, distance education system and teaching management systems, and (ii)

hardware products, such as computer products, storage products, power supply products, power

supply related products, smart metering products and new energy products.

Operating revenue of the information security business of the Group reached RMB15.5 billion in

2012, representing 8.4% of the operating revenue of the Group for that year.

Overview of the software business

The software business of the Group is mainly carried out by China National Software & Service

Co., Ltd. (CS&S) (中國軟件與技術服務股份有限公司(中國軟件)), the 6th Research Institute of China

Electronics Corporation Limited (The 6th Research Institute of CEC) (中國電子信息產業集團有限公司第六研究所(電子六所)) and GreatWall Information Industry Co., Ltd. (GWI) (長城信息產業股份有限公司(長城信息)).

Principal subsidiaries, affiliates and products in relation to the software business

CS&S (中國軟件) is dedicated to providing operating software, security software, platform software

and application software supported by its proprietary intellectual property rights, as well as

comprehensive solutions and related service. It is listed on the Shanghai Stock Exchange (SSE

Stock Code: 600536). CS&S is a leading PRC basic software developer according to the CCID

Report and possesses independent development capabilities covering the entire value chain from

operating system, database, middleware, security products to application system. It developed

the PRC’s first 64-bit operating system in Chinese, COS 1X64, by using its proprietary intellectual

property, and launched advanced Linux operating system, embedded real-time operating systems

and a domestic COSA system software platform. CS&S plays an important role in the “Golden”

series projects of national informatisation, including the development of “Golden Tax” (PRC Tax

Administration Information System), “Golden Informatisation” (Informatisation of Statistics

System), “Golden Shield” (Public Security Informatisation Project), “Golden Insurance” (Labour

and Social Security E-government Project), “Golden Audit” (Audit Informatisation System

95

Construction Project) and “Golden Macroeconomy” (Macroeconomic Management Informatisation

System). CS&S was among the first batch of companies to obtain the national “Software

Enterprise” certification and first-grade certification of computer information system integration. It

became the industry base for High-Tech Achievements of the “863 Programme” in 2001, and has

been selected as one of the “Top 100 Software Enterprises” for seven consecutive years. As at

2011, CS&S had won five national awards for science and technology and 23 ministerial awards

for science and technology. As at 30 September 2013, CS&S had registered 33 patents, filed 143

patent applications and registered 1,243 software copyrights.

The 6th Research Institute (電子六所) focuses on telecommunication, computer and control

technologies and has contributed to related R&D, manufacturing, system engineering and

technology service. It has undertaken several key PRC national programmes for science and

technology development in the fields of microcomputer, industrial control, stored programme

control exchange, computer software and industrial process computer control system, and has

received 180 national and ministerial awards for science and technology. The main products of the

6th Research Institute include Great Wall 0520B microcomputers, CCDOS, hanzify software,

Huasheng workstation, Huake SPC exchange and Hollysys DCS. The 6th Research Institute has

its R&D base headquartered in Zhongguancun Science and Technology Park in Beijing and is

supported by large-scale development and manufacturing establishments in Shangdi and Xisanqi

Information Industry Base in Beijing.

GWI (長城信息) is listed on the Shenzhen Stock Exchange (SZSE Stock Code: 000748) and is an

industrial informatisation products provider. It has been selected as one of the Top 10 National

Computer Manufacturing Enterprises with Strongest Independent Innovation Ability, one of the

Top 100 Chinese Software Enterprises, as well as one of the Key Enterprises with Development

Priority of Hunan Province. The primary businesses of GWI include financial electronics, medical

electronics, software system integration and the manufacturing of electronic products. GWI has

taken up one-third of the market share of financial electronic products in the PRC according to

statistics published by the Internet Data Centre, and is exploring overseas markets. GWI is also

the largest provider of education informatisation system and service and the biggest medical

science and technology company in Hunan Province according to statistics published by Hunan

Information Industry Association. It has also obtained a number of patents for medical products

and computer software copyrights. GWI established its first scientific research institute in 1980s,

which was awarded the First Batch of Enterprise Technical Centres of Hunan Province in 1999. In

2003, GWI set up a postdoctoral scientific research workstation to further improve its scientific

research capabilities.

Marketing and sales in relation to software products

The Group markets its software products primarily to government organisations and large

enterprises for their informatisation projects and IT system updates. The Group’s information

security products have been widely applied in governments’ informatisation processes. The Group

has undertaken and completed several e-government and e-commerce projects in the fields of

finance, tax and customs and plays a leading role in the PRC’s national informatisation process.

The Group’s key customers in this business line include the State Intellectual Property Office of

the PRC, the State Administration of Taxation, the Ministry of Railways, Beijing MTR Construction

Administration Corporation, Industrial and Commercial Bank of China, Bank of China and China

Construction Bank.

Competition in relation to software products

The Group enjoys a first-mover advantage in the emerging software industry in the PRC and

potential competitors face high entry barriers due to the heavy regulation of the industry for which

SOEs, in particular a large corporation like the Group have a big advantage. The Group aims to

strengthen its leading position by maintaining quality control and continuing investment in R&D.

The Group holds certifications such as first-grade certification of computer information system

integration, CMMI5 and ISP Licence for value-added telecommunication business. In 2010, 2011

and 2012, the Group registered 170, 269 and 333 software copyrights respectively.

96

Overview of computer and related hardware products

The Group produces computer and related hardware products on both OEM and ODM bases and

is one of the largest computer hardware manufacturers and a leading PC exporter in the PRC. The

Group believes that it is the only company group in the PRC that is capable of manufacturing all

computer core components (excluding CPU).

The computer and related hardware business of the Group is mainly carried out by Great Wall

Technology Company Limited (Great Wall Technology) (長城科技股份有限公司(長城科技)), China

Great Wall Computer Shenzhen Co., Ltd. (Great Wall Computer) (中國長城計算機深圳股份有限公司(長城電腦)) and Shenzhen SED Electronics Group Ltd. (SED Electronics) (深圳桑達電子集團有限公司(桑達電子)).

Principal subsidiaries, affiliates and products in relation to hardware products

Great Wall Technology (長城科技) is one of the Group’s primary operating subsidiaries and has

been listed on the Stock Exchange of Hong Kong since 1999 (HKSE Stock Code: 00074). It is a

leading R&D-oriented manufacturer of computer components such as memory disk, power supply

and other core accessories. It has established manufacturing bases in Beihai and Guilin of

Guangxi Province and Suzhou of Jiangsu Province since 2006 and has also developed strategic

partnerships with IBM and Hitachi. On 16 December 2013, Great Wall Technology published an

announcement on the HKSE in relation to its proposed privatisation by the Company and its

proposed merger by absorption by the Company.

Great Wall Computer (長城電腦) was established in 1987 and has been listed on Shenzhen Stock

Exchange since 1997 (SZSE Stock Code: 000066). Great Wall Computer has set up its own R&D

centres and manufacturing bases in Shenzhen of Guangdong Province, Beihai of Guangxi

Province, Beijing, Wuhan of Hubei Province, Fuqing of Fujian Province as well as in overseas

countries. It produced the very first set of advanced Chinese computer Great Wall 0520CH. The

computer and related hardware products independently developed by Great Wall Computer and

based on domestic CPU have a leading position in the PRC market according to the CCID report.

Great Wall Computer is a leading R&D-oriented manufacturer of computer power supply in the

PRC and the Great Wall brand has been selected as one of the Top 10 Chinese Leading Brands

of Consumer Electronics for five consecutive years.

SED Electronics (桑達電子) was first established in 1983 in Shenzhen, Guangdong Province. It

has a wide range of products covering telecommunication terminals, network equipment,

computer application and software, electronic components and home appliances. SED Electronics

has been named one of the Top 100 Chinese Electronics and IT Enterprises for 19 consecutive

years.

Marketing and sales in relation to hardware products

The Group markets its computer and related hardware products to government organisations and

large enterprises as well as to retail customers.

Competition in relation to hardware products

In the computer and related hardware market, the Group competes with various PRC domestic

and multi-national manufacturers. To remain competitive, the Group will strengthen its relationship

with long-term customers such as government organisations, and continue to maintain consistent

quality of its products and provide customer services in a timely manner.

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High-tech electronics

Overview

The Group’s high-tech electronics business mainly covers mobile and digital telecommunication

products for both national defence and civilian purposes.

Operating revenue of the high-tech electronics business of the Group reached RMB7.4 billion in

2012, representing 4.0% of the operating revenue of the Group for that year.

The high-tech electronics business of the Group is mainly carried out by Wuhan Zhongyuan

Electronics Group Co., Ltd. (Wuhan Zhongyuan) (武漢中原電子集團有限公司(武漢中原)) and

Nanjing Sanle Electronic Industry Technology Group Co., Ltd. (Nanjing Sanle) (南京三樂電子信息產業集團有限公司(南京三樂)).

Principal subsidiaries, affiliates and products

Founded in 1949, Wuhan Zhongyuan focuses on radio telecommunication products, electronic

components and electronic appliances used in both military and civilian fields. It was certified by

ISO9000 Quality Management System in 1996 and certified by ISO10012.1 Quality Management

System in 1998. Wuhan Zhongyuan is highly rated in the area of short-wave and micro-wave

telecommunication products, digital telecommunication and communication jamming equipments

in military field. It is also developing and manufacturing digital trunking, mobile communication

equipments, fiber optic communication equipments, radio management system digital mobile

phones and sealed maintenance-free lead-acid batteries.

Nanjing Sanle is a pioneer for China’s vacuum electronics industry. It was founded 1935 and

became the first enterprises in the PRC manufacturing electronic tubes in 1951. Its main products

include vacuum electronic devices, whole system of microwave energy applications, specialty

glass and ceramics and vacuum equipment. It has won various awards in relation to more than

300 products that it has developed.

Marketing and sales

A significant portion of the products in this business line are supplied to and used in the national

defence field and therefore government orders play a very important part of the marketing and

sales exercise of the Group. Key customers of the Group’s high-tech electronics business include

the People’s Liberation Army Air Force, China Aerospace Science and Technology Corporation,

China Aerospace Science and Industry Corporation and China Electronics Technology Group

Corporation.

Competition

Given the national defence element in this business line, Group operates in a fairly exclusive

market.

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Flat-panel displays

Overview

Flat-panel displays encompass a growing number of electronic visual display technologies. They

are lighter and thinner than traditional TV sets and video displays that use CRTs, and are usually

less than 10 centimetres (3.9 inches) thick. The Group focuses on LCDs, the most common types

of flat-panel displays alongside plasma panels and electroluminescent panels. The Group’s LCD

business covers a wide range of the value chain from panels, modules, driver ICs, LCD monitors

and LCD TVs. The Group manufactures LCD products on both OEM and ODM bases.

Operating revenue of the flat-panel display business of the Group reached RMB75.2 billion in

2012, representing 41.1% of the operating revenue of the Group for that year.

The business of flat-panel display is mainly carried out by CEC Panda LCD Technology Co., Ltd.

(CEC Panda LCD) (南京中電熊貓液晶顯示科技有限公司 (中電熊貓液晶)), Nanjing Zhongdian Panda

Home Appliances Co., Ltd. (CEC Panda Home Appliances) (南京中電熊貓家電有限公司(中電熊貓家電)), TPV Technology Limited (TPV Technology) (冠捷科技股份有限公司(冠捷科技)), Irico Display

Devices Company Limited Corporation (Irico Display) (彩虹顯示器件股份有限公司(彩虹股份)) and

Irico Group Electronics Company Limited (Irico Electronics) (彩虹集團電子股份有限公司(彩虹電子)).

Principal subsidiaries, affiliates and products

CEC Panda LCD (中電熊貓液晶) principally engages in the R&D, design and manufacturing of LCD

panels and displays. Its sixth-generation panel production line is the first advanced-generation

panel production line introduced into the PRC. This production line is also the most advanced

six-generation panel production line in the world according to the CCID Report and has a

production capacity of 80,000 panels per month.

Nanjing Panda Electronics Company Limited (Panda Electronics) (南京熊貓電子股份有限公司(熊貓電子)) is a large-scale state-owned electronics company and has been listed on both the Hong

Kong Stock Exchange (HKSE Stock Code: 00553) and the Shanghai Stock Exchange (SSE Stock

Code: 600775) since 1996. Its subsidiary, CEC Panda Home Appliances (中電熊貓家電), was

founded in June 2009 to consolidate the Group’s home appliances business. CEC Panda Home

Appliances is principally engaged in the manufacturing and sale of LCD TVs.

The Company acquired control over TPV Technology (冠捷科技) in 2009. TPV Technology is a

leading display solutions provider. It designs and produces a full range of PC monitors and LCD

TVs on an ODM basis for a long list of customers which comprise many of the top-tier PC and TV

brands. TPV Technology has production facilities in Beijing, Fujian, Wuhan, Suzhou and

Dongguan, as well as South America, Czech, Poland, Brazil, Germany and India. Its products add

value to its customers through cost leadership, timely delivery and superior quality. TPV

Technology also distributes its products globally under its own brands AOC and Envision.

According to the CCID Report, TPV Technology has a market share of 35% in the global PC

monitor market. It is also a leading LCD TV maker with the third largest shipment globally. Its

shares have been primarily listed on the Hong Kong Stock Exchange (HKSE Stock Code: 00903)

and secondarily listed on the Singapore Exchange (SGX Stock Code: T18) since October 1999.

Irico Display (彩虹股份) was founded in June 1992 and listed on the Shanghai Stock Exchange in

1996 (SSE Stock Code: 600707). It primarily focuses on the development and manufacturing of

LCD and OLED and has production facilities in Shaanxi, the Yangtze River Delta, Pearl River

Delta and Anhui regions.

Irico Electronics (彩虹電子) was founded in 2004 and was successfully listed on the Hong Kong

Stock Exchange in the same year (HKSE Stock Code: 00438). It primarily focuses on the

development and manufacturing of LCD and OLED and has production facilities in Shaanxi,

Guangdong and Jiangshu provinces.

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Marketing and sales

The LCD panels and displays produced by the Group are primarily sold to major system

manufacturers and OEMs. The PC monitors and LCD TVs are made to order or distributed through

retails stores.

Key customers of the Group’s flat-panel display business include multi-national companies such

as Sharp, HP, Philips, Dell, Sony and Samsung.

Competition

The Group competes with various PRC domestic and multi-national manufacturers in the

flat-panel display market. To remain competitive the Group will continue to provide competitive

pricing, maintain stringent quality levels and offer speedy, flexible and reliable customer services.

Modern IT service

Overview

The Group’s modern IT service business primarily consists of modern e-commerce and trading

business. In addition, businesses in relation to industrial park, which is operated through

subsidiaries such as CEC Technology, as well as system engineering, construction and financial

services also contribute to a small portion of this business line. In addition, the Group, through

subsidiaries (such as CEICE), integrates its hardware, software, business consulting service and

IT service into a comprehensive series of business solutions, such as international and domestic

tendering, procurement of techniques, equipments and raw materials, storage and logistics,

exhibition and advertisement and integration of technologies.

Modern e-commerce comprises the buying and selling of products or services that is conducted

over electronic systems such as the internet and other computer networks. E-commerce draws on

technologies such as mobile commerce, electronic funds transfer, supply chain management,

internet marketing, online transaction processing, electronic data interchange, inventory

management systems and automated data collection systems. The Group has established an

e-commerce, logistics and information service system.

In the trading field, the Group covers a wide range of product categories, including mechanical

equipment, telecommunication equipment, home appliances, vessels, computer and related

products, mobile phones, electromechanical products, electronic components and IC products.

The Group’s providers and strategic partners include well established multi-national companies,

such as Sharp, Cisco Systems, IBM, Baosteel and Wuhan Iron and Steel. The Group has also

established a sales network for electronic products covering major cities in the PRC and an

e-logistics network accessible in key access points across the country. It provides a range of

services, such as international trade, international bidding, system engineering, international

economic cooperation, promotion for PRC domestic and international conventions and exhibitions,

product distribution, warehousing and transportation.

Operating revenue of the modern IT service business of the Group reached RMB57.323 billion in

2012, representing 31.3% of the operating revenue of the Group for that year.

The modern e-commerce and trading business of the Group is mainly operated by China National

Electronics Import & Export Corporation (CEIEC) (中國電子進出口總公司(中電進出口)) and China

Electronic Appliance Corporation (CEAC) (中國電子器材總公司(中電器材)).

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Principal subsidiaries and products

CEIEC (中電進出口) was founded in April 1980 as one of the first PRC national enterprises

specialising in foreign trade. It is one of the leading import and export enterprises in the

electronics industry in the PRC. Its business covers various industries such as overseas

engineering, defence electronics, vessels and international trade, and it has established a wide

range of business cooperation relations with over 140 countries and regions. CEIEC has obtained

various first-grade certifications in relation to international trade, bidding and promotion for

conventions and exhibitions, including first-grade certification for international bidding issued by

MOFCOM, first-grade certification for government procurement in the PRC issued by the Ministry

of Finance, first-grade certification for technology renovation project bidding issued by former

Economic and Trade Commission and first-grade certificate for national electromechanical

bidding. In addition to import and export, CEIEC provides integrated business solutions to

customers.

CEAC (中電器材) was founded in 1964 and became a subsidiary of the Company in 1999. It is

principally engaged in electronic components distribution, trading, exhibition, radio

telecommunication and telecommunication terminals. It has over 20 subsidiaries and affiliated

companies with business operations spreading across the PRC as well as in over 10 overseas

countries.

The Company has recently consolidated CEIEC, CEAC and related businesses into the CEC

Intentional Centre with an aim to build the largest trading platform for electronic products as well

as a development base for modern e-commerce, trading, logistics, exhibition, new-generation

internet and financial services.

Marketing and sales

The Group’s markets to its trading business to big corporations which have high demand for

electronic components, such as Jiangsu New Century Shipbuilding Group, China Telecom and

China Unicom as well as to major retail chains, such as Sunning and Auchan.

Competition

Different from other mainstream e-commerce and trading platforms, such as those established

and run by Alibaba Group, the Group’s e-commerce and trading business focuses on and

specialises in the areas where the Group’s manufacturing business lines generally operate, such

as IC, flat-panel displays and electronic products. The Group believes that its in-depth knowledge

about the products and in relation to the logistics involved gives the Group an edge over other

e-commerce and trading operators.

Research and Development

The Group aims to sustain its growth through continued investment in R&D. It was among the first

to be certified as the “National Innovative Enterprises” in 2008 and has won recognition from the

Ministry of Science and Technology, the Central SASAC and All China Federation of Trade Unions

for its independent innovation capabilities.

The Group believes that it is the only enterprise in the PRC which owns a complete IC industry

chain encompassing design, manufacturing, assembling, testing, EDA tools and process

research. The Group has set up the first deep submicron integrated circuit technology research

centre in the PRC and the first eight-inch chip production line. It has mastered SOC design size

of 0.18µm and 10-million gates, applied eight-inch, 0.25-0.13µm technology in mass production

and possesses standard technology of 0.13µm and 90nm. The Group has developed its own IC

design tools and 10-million-gates SOC test program.

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The Group is also a leading developer of software, including system software, supporting softwareand application software, supported by its development team in State certified software industrialbases. The software covers system engineering of e-government and e-commerce in fields offinance, banking, taxation, and customs. In terms of research capabilities, the Group has one ofthe most important information security research institutes in the PRC, CEC InformationTechnology Research Co., Ltd (中電信息技術研究院有限公司).

Moreover, the Group believes that it is the only enterprise in the PRC that is capable ofmanufacturing all computer core parts (excluding CPU) and plays an important role in the R&D ofcomputer related technologies and processes. The Group is also a leading developer andmanufacturer in the world for displays and standalone computer disk substrates.

A number of the Group’s products have won National Science and Technology Progress Awardsand science and technology awards presented by various provinces and ministries. The VATCollection and Administration Application System of “Golden Tax Project” by the Group won thesecond prize of the National Science and Technology Progress Award in 2006. The Second-generation ID Card Project won the first prize of National Science and Technology Progress Awardin 2008. Key technology of polymer composites made by modifying inorganic particles into organicones developed by Nanjing Panda Electronics Co., Ltd (Panda Electronics) (南京熊貓電子股份有限公司) won the second prize of National Science and Technology Progress Award in 2009. CECCoreCast’s mobile and emergency communications technology & system for mines won thesecond prize of Beijing Science and Technology Progress Award in 2011. Shanghai Belling, PandaElectronics and CS&S were recognised by the State as leading examples for commercialisinghigh-tech achievements. The Group also had 174 projects awarded for technology innovation atthe provincial level during the eleventh Five-Year Plan period between 2006 and 2010.

As at 30 September 2013, the Group had approximately 25,154 technical staff, among which9,370 are employed in R&D. For the years ended 31 December 2011 and 2012 and the ninemonths ended 30 September 2013, the R&D expenses of the Group were RMB2.8 billion, RMB4.5billion and RMB2.8 billion, respectively.

Intellectual Property Rights

The Group continues to be a leader in technology innovations. The Company’s total number ofregistered patents kept growing steadily in recent years and reached 4,919 as at the date of theOffering Circular, including 1,597 invention patents. According to statistics released by the CentralSASAC in 2007, the Group ranked among the top 10 SOEs in both total number of patents andnumber of patents granted in that year. In 2008, the Group’s enterprise technology centre rankedeighth with 391 patents among the 575 enterprise technology centres certified by the State. In2009, the Group ranked 11th among state-owned electronics enterprises in total number ofpatents and fourth in number of invention patents.

The Group has seven national engineering research centres, seven State certified enterprisetechnology centres and branches, six specialised technology institutes, 17 laboratories andtesting centres certified by the State or international organisations, 42 enterprise technologycentres certified at provincial, ministerial and municipal levels, one overseas R&D institute and 11postdoctoral research centres.

Environmental Matters

As at the date of this Offering Circular, the Group is not subject to any fines or legal actioninvolving material non-compliance with any relevant environmental regulations, nor is the Groupaware of any material threatened or pending actions by any environmental regulatory authority,which, in its view, would have a material adverse impact on the business, financial condition andresults of operations of the Group.

Employees and Safety

The Group is subject to various PRC laws and regulations in respect of labour, insurance,accidents, health and safety, including the Labour Law of the PRC (中華人民共和國勞動法), theLabour Contract Law of the PRC (中華人民共和國勞動合同法), the Social Insurance Law of the

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PRC (社會保險法), the Interim Regulations on Collection and Payment of Social Insurance

Premiums (社會保險費徵繳暫行條例), the Regulations on Work-related Injury Insurances (工傷保險條例), the Regulations on Unemployment Insurance (失業保險條例), Safety Production Law of the

PRC (中華人民共和國安全生產法) and other related regulations, rules and provisions issued by the

relevant governmental authorities from time to time.

The Group is committed to recruiting, training and retaining skilled and experienced employees in

its business. The Group intends to achieve this by offering competitive remuneration packages as

well as by focusing on training and career development.

As at 30 September 2013, the Group had approximately 120,000 employees.

Legal Proceedings

The Group is involved in legal or other disputes from time to time in the ordinary course of its

business. As at the date of this Offering Circular, the Group is not aware of any legal proceeding,

pending or threatened against it, which could be expected to have a material adverse effect on its

business, financial conditions and results of operations.

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DIRECTORS AND MANAGEMENT

Board of Directors

The Company’s Board of Directors is responsible for, and has general power over, the

management and conduct of the business of the Company. The Company’s Board of Directors

currently consists of 9 Directors. The table below sets out certain information in respect of the

members of the Company’s Board of Directors:

Name Age Title

Rui Xiaowu . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Chairman of the Board, Secretary of the CommunistParty Branch in the Group

Liu Liehong. . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Director, General Manager, member of theCommunist Party Branch in the Group

Lang Jia. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Director, Head of the Discipline Inspection andSupervision Group of the Communist Party Branch inthe Group, member of the Communist Party Branchin the Group

Wang Zuoran . . . . . . . . . . . . . . . . . . . . . . . . . 62 External Director

Song Ning . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 External Director

Chen Shengde. . . . . . . . . . . . . . . . . . . . . . . . . 59 External Director

Chen Jie . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 External Director

Zhang Xiaotie . . . . . . . . . . . . . . . . . . . . . . . . . 61 External Director

Xu Haihe . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Employee Director

Directors

Rui Xiaowu, aged 54, is the Chairman of the Board of Directors of the Company and Secretary

of the Communist Party Branch in the Group and has served in these positions since May 2011.

Mr. Rui graduated from the Science & Technology University for National Defence of China in 1982

with a major in Computer Software, was a Master’s postgraduate and a Research Fellow, and was

awarded the “Government Special Allowance” by the State Council of the PRC. Mr. Rui is also the

chairman of the Issuer. Mr. Rui was previously the director of the 710 Research Institute of the

Ministry of Aerospace Industry of China, the assistant general manager of China Aerospace

Science & Technology Corporation, the general manager of China Satellite Communications

Corporation and the deputy general manager of China Aerospace Science & Technology

Corporation. Mr. Rui was also the chairman of China Satellite Communications Corporation

Limited, the chairman and a non-executive director of China Aerospace International Holdings

Limited, the chairman of NavInfo Company Limited (002405: Shenzhen), the chairman of China

Spacesat Company Limited (600118: Shanghai), the chairman, president and an executive

director of China Aerospace International Holdings Limited, the chairman and an executive

director of CASIL Telecommunications Holdings Limited, the chairman and a non-executive

director of APT Satellite Holdings Limited.

Liu Liehong, aged 45, is the Director and General Manager of the Company and member of the

Communist Party Branch in the Group. Mr. Liu is a senior engineer of researcher’s grade. He

graduated from the Automatic Control Department of East China Institute of Technology (now

renamed as Nanjing University of Science and Technology) in 1990, majoring in system

engineering, before acquiring an on-job Master’s degree in business administration from the

School of Management of Xi’an Jiaotong University in 1998. He served as deputy director of the

29th Research Institute, director and secretary of the Party Committee of the 2nd Research

Institute, deputy general manager and member of the Communist Party Branch in the Group of the

Company, chairman of China Centre for Information Industry Development (CCID) and Beijing

CCID Information Industry Group Co., Ltd. He has been awarded the “Government Special

Allowance”.

Lang Jia, aged 59, is a Director of the Company, Head of the Discipline Inspection and

Supervision Group of the Communist Party Branch in the Group, General Counsel and member

of the Communist Party Branch in the Group. Mr. Lang graduated from Liaoning Normal University

in 1982, majoring in Chinese, and then graduated from the Postgraduate Courses of Liaoning

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University in 1999, majoring in global economics. He served as procurator of the SupremePeople’s Procuratorate, head of the Discipline Inspection and Supervision Office and DeputySecretary of the Party Committee of China National School of Administration (NSA). He alsoserved as chairman of the board of supervisors of Great Wall Technology Company Limited andchairman of the board of supervisors Nanjing Electronics Information Industrial Corporation. Hewon the General Award issued by the Central Commission for Discipline Inspection and theMinistry of Supervision (an award to cadres serving discipline inspection and supervision postswho demonstrated outstanding performance from 1993 to 2002).

External Directors

Wang Zuoran, aged 62, is an External Director of the Company. Mr. Wang graduated fromShandong Economic Management Personnel Institute in 1994, majoring in economicmanagement. He is an economist of professor level. He served as deputy director and secretaryof the Communist Party Branch of Shengli Petroleum Administrative Bureau, Sinopec, assistantto general manager of Sinopec, head of the Discipline Inspection Group and supervisor ofSinopec.

Song Ning, aged 62, is an External Director of the Company. Mr. Song graduated from theDepartment of Economics of Wuhan University in 1990 with a Doctor’s degree in economics,served as deputy director of Regulations and Policies Section of National State AssetsAdministration Bureau, director and deputy director of General Section, deputy director ofResearch Institute of National State Assets administration Bureau, deputy director of theResearch Department for Industry, Transportation and Trade, deputy director and director of the

General Research Department under State Council. He also served as director of the Research

Department for Macroeconomics under State Council, director, deputy general manager and

member of the Communist Party Branch in the Group of China General Technology (Group)

Holding Co., Ltd.

Chen Shengde, aged 59, is an External Director of the Company. Mr. Chen graduated from the

Department of Politics of National Chengchi University (NCCU) in 1977, and then acquired a

Master’s degree in enterprise management upon graduating from the University of Missouri in

1980. He was a trader at the Finance Section of the Department of Entrepreneurial Finance of

Citibank, Taiwan Branch, director of the Department of Foreign Exchange of CialBank, Tokyo

Branch, head of Citibank Taiwan, general manager of ChinaTrust Commercial Bank of China

(CTBC) in Taiwan, general manager of CTBC Financial Holding Co., Ltd., and he currently serves

as the president of Asian Financial Holdings Co., Ltd., Temasek Holdings, Greater China and

North Asian region, and external director of Shenhua Group Co., Ltd.

Chen Jie, aged 60, is an External Director of the Company. Mr. Chen obtained degrees from

Northeast University of Finance and Economics, Beijing University, Southwest University of

Finance and Economics and obtained a Doctor’s degree in economics. He served as deputy chief

of the Value-added Tax Section, chief of the Business Tax Section, deputy director and director of

the Turnover Tax Department, director of the Agricultural Tax Bureau, director of the Property Tax

Department of the State Administration of Taxation. He currently serves as member of the

Development Strategy Committee of the PRC Certified Accountant Association, executive council

member of the PRC International Tax Institute and non-executive council member of the PRC

Listed Company Association.

Zhang Xiaotie, aged 61, is an External Director of the Company. Mr. Zhang is a senior economist

and graduated from Tsinghua University School of Economics and Management with an on-job

Master’s degree in 1989. He served as director of the Enterprises Administration Department,

director of the Planning & Programming Department of Beijing Municipal Telecom Administration

Bureau, deputy director of the Finance Section of the Ministry of Posts and Telecommunications

and deputy director and director of the Section of Economic Adjustment & Telecom Clearance of

the Ministry of Information Industry. He also served as assistant to the president and general

manager of the Finance Department of China Network Communications Group, deputy general

manager and member of the Communist Party Branch in the Group of China Network

Communications Group. He has also served as deputy general manager and member of the

Communist Party Branch in the Group of China Network Communications Group since May 2008.

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Employee Director

Xu Haihe, aged 58, is the Employee Director of the Company. Mr. Xu graduated in 1982 from the

Special Study Centre for Cadres of the Central University of Finance and Economics, majoring in

accounting, and graduated in 2002 from the Study & Research Centre for MBA of Renmin

University of China. He is a senior accountant and served as deputy general manager, member

of the Communist Party Branch in the Group, general manager and secretary of the Communist

Party Branch in the Group of China National Electronic Materials Corporation. He also served as

director of the Finance Department of the Company and chairman of the board of China

Electronics Financial Co., Ltd.

Supervisory Committee

The Company’s Supervisory Committee mainly exercises a supervisory function, examining and

monitoring financial matters and supervising the Board of Directors and members of the

Company’s senior management in the performance of their duties. The Company’s Supervisory

Committee currently consists of 8 supervisors. The table below sets out certain information in

respect of the members of the Company’s Supervisory Committee:

Name Title

Guo Yimin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chairman of the Board of Supervisors of State-ownedKey Large Enterprises

Yin Ying . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Designated Supervisor

Chen Xiaofei . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Designated Supervisor

Shi Yingli . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Designated Supervisor

Xia Gengxue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Designated Supervisor

Yan Chao . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Designated Supervisor

Xu Tao. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Employee Supervisor

Hu Xiaodong . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Employee Supervisor

Supervisors

Guo Yimin, aged 59, is the Chairman of the Board of Supervisors of State-owned Key Large

Enterprises. Mr. Guo served as secretary of the Politics Department and secretary of the Youth

League Committee of Tianjin Railway Branch Administration, secretary of the Communist Party

Committee of Nancang Station, Tianjin Railway Branch Administration, secretary of the Youth

League Committee and secretary of the Communist Party Committee of Beijing Railway

Administration, member of the Communist Party Committee of the Ministry of Railways and

chairman of the All China Federation of Railway Workers.

Xu Tao, aged 40, is an Employee Supervisor and currently serves as section chief of the No.1

Human Resources Department of the Company. Mr. Xu served as section chief of the Science &

Technology Project Section of the Science & Technology Administration Department of the

Information & Technology Research Institute of the Company, deputy general manager of the

General Technology Department of the Information & Technology Research Institute, section chief

of the Science & Technology Section of the Strategic Planning Department, and section chief of

the Employee Section of Human Resources Department of the headquarters of the Information &

Technology Research Institute.

Hu Xiaodong, aged 56, is an Employee Supervisor and currently serves as deputy director of the

Party-mass Work Department of the Company. He served as director of the General Office of

China GreatWall Information Industry Co., Ltd., vice president of Hunan Computer Co., Ltd and

deputy general manager of Great Wall Information Industry Co., Ltd.

Yin Ying, Chen Xiaofei, Shi Yingli, Xia Gengxue, Yan Chao are Supervisors designated by the

SASAC to examine and monitor the financial matters of the Company as well as the Board of

Directors and members of the senior management in the performance of their duties.

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Senior Management

The Company’s senior management is responsible for the day-to-day management of the

Company’s business. The following table sets forth certain information concerning the Company’s

senior management personnel:

Name Age Title

Nie Yuchun . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Deputy General Manager, member of the CommunistParty Branch in the Group

Yang Jun . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Deputy General Manager, member of the CommunistParty Branch in the Group

Li Xiaochun . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Chief accountant, member of the Communist PartyBranch in the Group

Lai Weide . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 Deputy General Manager, member of the CommunistParty Branch in the Group

Xiang Zizhong . . . . . . . . . . . . . . . . . . . . . . . . . 58 Deputy General Manager, member of the CommunistParty Branch in the Group

Chen Xu . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Deputy General Manager

Nie Yuchun, aged 58, is a member of the Communist Party Branch in the Group and Deputy

General Manager of the Company. Mr. Nie is a senior engineer who graduated in 1982 from

Shandong University majoring in Chinese language and literature. He served as vice minister of

the Organisation Department of the Party Committee of the General Office under State Council,

secretary of bureau level of the General Office under State Council, vice mayor of Wuhan

Municipal People’s Government and member of the Communist Party Branch in the Group. He

currently serves as Deputy General Manager and member of the Communist Party Branch in the

Group of the Company and Secretary of the Party Committee under the Company.

Yang Jun, aged 50, is a member of the Communist Party Branch in the Group and Deputy General

Manager of the Company. He is a senior engineer who graduated in 1984 from Northwest

Telecommunication Engineering Institute majoring in computer engineering, and in 1987 from

Northwest Telecommunication Engineering Institute with a Master’s degree in computer system

structure. He served as deputy general manager of China National Computer Software & Service

Co., Ltd., general manager and deputy secretary of the Party Committee of the Computer

Information Centre for Civil Aviation Administration of China, chairman and general manager of

China TravelSky Holding Company, president and secretary of the Party Committee of the

Computer Information Centre for Civil Aviation Administration of China, deputy general manager

of China TravelSky Holding Company and director and deputy general Manager of China Great

Wall Computer Group Company.

Li Xiaochun, aged 49, is the Chief Public Accountant and member of the Communist Party Branch

in the Group of the Company. He graduated in 1984 from Guilin University of Electronic

Technology majoring in mechanical manufacturing and devices, and then graduated in 1992 from

the School of Management of Harbin Institute of Technology with a Master’s degree in

management engineering. Mr. Li previously served as deputy director and director of the Finance

Department of China Aerospace Science & Industry Corporation, director and chairman of CASIC

Financial Co., Ltd..

Lai Weide, aged 55, is the Deputy General Manager and member of the Communist Party Branch

in the Group of the Company. Mr. Lai graduated in 1986 from the Correspondence School of

Renmin University majoring in economics management, and obtained a Master’s degree in

management science & engineering in 1995 from the Postgraduate Institute of University of

Electronic Science & Technology. He served as general manager and secretary of the Party

Committee of China Electronics Leasing Co., Ltd., chairman of China Shenzhen Colour TV Corp.,

chairman and interim secretary of the Party Committee of Shenzhen SED Electronics Group, and

held multiple posts including general manager and chairman at Nanjing Electronics Information

Industrial Corporation.

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Xiang Zizhong, aged 58, is the Deputy General Manager and member of the Communist Party

Branch in the Group of the Company. Mr. Xiang graduated in 1982 from Northwest

Telecommunication Engineering Institute majoring in electronic countermeasures and obtained a

Master’s degree in electronics & information engineering in 2000 from Huazhong University of

Science and Technology. He subsequently served as chief engineer, deputy general manager and

chairman of Wuhan Zhongyuan Electronics Group Co., Ltd.

Chen Xu, aged 51, is the Deputy General Manager of the Company. Mr. Chen graduated in 1983

from the Department of Radio Engineering of Nanjing Institute of Technology majoring in

microwave technology, and obtained an on-job Master’s degree in management science &

engineering from Huazhong University of Science and Technology in 2004. He served as assistant

to the president of China National Electronics Import & Export Corporation, general manager of

the 3rd Business Department of China National Electronics Import & Export Corporation and

deputy general manager and interim member of the Party Committee, general manager and

member of the Party Committee of China National Electronics Import & Export Corporation.

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PRC REGULATIONS

Overview of Favourable Government Policies in Electronics and IT Industry

Since 2000, the PRC government has adopted a series of policies to encourage the development

of the electronics and IT industry in the PRC. On 24 June 2000, the State Council issued Certain

Policies to Encourage the Development of Software and Integrated Circuit Industries (鼓勵軟件產業和集成電路產業發展若干政策的通知), to encourage the development of the software and

integrated circuit industries in China. On 24 July 2002, the State Counsel issued the Outline on

Development of Software Industry from 2002 to 2005 (振興軟件產業行動綱要(2002年-2005年)).

In recent years, the PRC government has promulgated more favorable government policies,

including:

• In April 2009, the State Council issued the Restructuring and Revitalisation Planning for

Electronics and IT Industry from 2009 to 2011 (電子信息產業調整和振興規劃(2009-2011))

where the government would offer supporting policies, in the form of financial investment,

preferential tax treatment, export and financing support, for the development of six

electronics-related sectors including IC, new display and colour TV, third-generation mobile

communications, digital TV, computers and next-generation internet, and software and

information services.

• On 28 January 2011, the State Council issued Certain Policies to Further Encourage the

Development of Software and Integrated Circuit Industries (進一步鼓勵軟件產業和集成電路產業發展的若干政策), to continue to promote the preferential value-added tax treatment policies

for software industry.

• In July 2011, the China Electronic Components Association issued the Twelfth Five-year Plan

for the PRC’s Electronic Components (中國電子元件“十二五”規劃), according to which, the

gross sales of electronic component industry in the PRC are expected to reach RMB1.88

trillion with an average annual growth of 10% from 2010 to 2015.

• In November 2011, the Ministry of Finance and the State Administration of Taxation published

the notice in relation to the preferential tax treatment for IC Industry enterprises.

• In November 2011, the MIIT issued the Twelfth Five-year Plan for Internet of Things (物聯網“十二五”發展規劃), to encourage the development of “internet of things” and the new-

generation IT industry.

• In January 2012, the State Council issued the Planning for Industrial Transformation and

Upgrading from 2011 to 2015 (工業轉型升級規劃(2011-2015)) to set out the goals for the

PRC’s electronics and IT industry including an expected growth in the production volume of

IC and flat-panel displays.

• In February 2012, the MIIT, the Ministry of Science & Technology, the Ministry of Finance and

the Central SASAC issued the Catalogue for Guidance of Major Independent and Innovative

Technical Equipment (重大技術裝備自主創新指導目錄), to encourage enterprises to increase

R&D investments in the areas of, among other things, IC equipment, photovoltaic equipment,

LED equipment and TFT-LCD.

• In July 2012, the State Council issued the Decisions of the State Council on Accelerating the

Cultivation and Development of New Strategic Industries (國務院關於加快培育和發展戰略新型產業的決定), to prioritise the development of new-generation information technology, such as

next-generation communication network, “internet of things”, new flat-panel display, high-

performance IC and high-end software.

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These policies encourage the development of the electronics and IT industry in China through

various methods, including, among others:

• encouraging venture capital investment in this industry and providing electronics and IT

enterprises or assisting such enterprises to raise capital overseas;

• providing tax incentives and preferential tax treatments to the electronics and IT enterprises,

such as the business tax exemption for any qualified software and IC enterprise which

engages in the development of the software and IC and some exemptions and reduced

corporate income tax rates;

• providing government support, such as government funding in the development of

electronics and IT industry enterprises; and

• implementing measures to enhance intellectual property protection in China.

Regulation on approvals for the Group’s core business and products

Industrial Production Permit (工業生產許可證). In accordance with the Regulation on the

Administration of Industrial Production Permits and its list (工業生產許可證管理條例及其目錄)

issued by the PRC General Administration of Quality Supervision, Inspection and Quarantine, the

Group’s relevant subsidiaries are required to obtain the Industrial Production Permits for

manufacturing certain products, such as IC cards, important electronic components and computer

products.

China Compulsory Certification (3C認證). As required by the China Compulsory Certification

System, the Group’s relevant subsidiaries need to apply for China Compulsory Certification for

certain products manufactured by them before sale of such products, such as LCD TVs,

computers and display devices.

Commercial Cipher Codes Products Manufacturing/Sale Permit (商業密碼產品生產/銷售許可).

The IC layouts designed and the IC cards manufactured by the Issuer’s and the Group’s relevant

subsidiaries contain cipher technology and products used for cipher-protection and verification.

According to the Regulation on the Administration of Commercial Cipher Codes, the Commercial

Cipher Codes Products Manufacturing/Sale Permits are required for such IC layout design and IC

cards manufacturing.

Relevant Licence and Permit required for the modern IT services.

The modern IT services conducted by the Group predominately include e-commerce and trading.

With respect to the e-commerce, as required by the MIIT, the relevant Value-added

Telecommunications Business Licence or Filing for records is required for the operation of

e-commerce business.

For the trading business, relevant trading companies shall apply for Customs Registration

Certificate and Foreign Trade Company Filing Registration for the import and export trading

business.

In addition, the Group also engages in the development of electronics and IT industrial parks through

CEC Technology and its subsidiaries. The PRC government promulgated the Opinions regarding the

Construction of National Electronic Information Industry Bases and Industrial Parks (信息產業部關於建設國家電子信息產業基地和產業園的意見) and the Policies regarding the Support for the

Development of the State’s Information Technology Bases and Industrial Parks (支持國家電子信息產業基地和產業園發展政策) respectively in 2003 and 2006. These policies lay down the directions and

policy support for the development of electronic information technology industrial parks in the PRC.

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Regulation on Intellectual Property Rights

The PRC has adopted comprehensive legislation governing intellectual property rights, including

trademarks, patents, copyrights and layout-design of IC.

Trademark. The PRC Trademark Law and its implementation rules protect registered trademarks.

The PRC Trademark Office of State Administration for Industry and Commerce is responsible for

the registration and administration of trademarks throughout the PRC. The Trademark Law has

adopted a “first-to-file” principle with respect to trademark registration.

Software Copyrights. The Administrative Measures on Software Products, issued by the MIIT in

October 2000 and subsequently amended, provide a registration and filing system with respect to

software products made in or imported into China. These software products may be registered

with the relevant local authorities in charge of software industry administration. Registered

software products may enjoy preferential treatment status granted by relevant software industry

regulations. Software products can be registered for five years, and the registration is renewable

upon expiration.

In order to further implement the Computer Software Protection Regulations promulgated by the

State Council in December 2001, the State Copyright Bureau issued the Computer Software

Copyright Registration Procedures in February 2002, which apply to software copyright

registration, licence contract registration and transfer contract registration.

Patents. The National People’s Congress adopted the Patent Law in 1984, which was

subsequently amended in 1992, 2000 and 2008. The purpose of the Patent Law is to protect lawful

interests of patent holders, encourage invention, foster applications of invention, enhance

innovative capabilities and promote the development of science and technology. To be patentable,

invention or utility models must meet three conditions: novelty, inventiveness and practical

applicability. Patents cannot be granted for scientific discoveries, rules and methods for

intellectual activities, methods used to diagnose or treat diseases, animal and plant breeds,

substances obtained by means of nuclear transformation or a design which has major marking

effect on the patterns or colors of graphic print products or a combination of both patterns and

colors. The Patent Office under the State Intellectual Property Office is responsible for

administering patents in the PRC. A patent is valid for a term of twenty years in the case of an

invention and a term of ten years in the case of utility models and designs, each starting from

application date. A third-party user must obtain consent or a proper licence from the patent owner

to use the patent. Otherwise, the use constitutes an infringement of patent rights. China follows

a “first to file” principle for patents. When more than one person files a patent application for the

same invention, the patent will be granted to the person who first filed the application.

Layout-Design of IC. The State Council issued the Regulation on the Protection of Layout-design

of Integrated Circuits in 2001. The purpose of this regulation is to protect the exclusive right of

layout-design of IC and to encourage the innovation of IC technology and promote the

development of science and technology in this area. A protected layout-design shall possess

originality. A layout-design holder of right enjoys the exclusive right to reproduce an original

layout-design in whole or in part under protection and to use the protected IC (or articles

incorporating a protected IC) for commercial purpose. The exclusive rights in a layout-design are

generated by the registration with the Intellectual Property Administrative Authority under the

State Council and any unregistered layout-designs are not protected by the PRC laws. The

duration of the protection for layout-design exclusive rights is ten years starting from the date of

application for registration of the layout-design or from the date of putting it into commercial use

somewhere all over the world, whichever is earlier. However, a layout-design, whether or not it is

registered or put into commercial use, is not protected after 15 years of its invention.

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SAFE Regulation

The PRC government imposes controls on the convertibility of Renminbi into foreign currencies

and, in certain cases, the remittance of currency to jurisdictions outside China. Under existing

PRC foreign exchange regulations, payments of certain current account items can be made in

foreign currencies without prior approval from the local branch of SAFE, by complying with certain

procedural requirements. However, approval from the appropriate government authorities is

required where Renminbi is to be converted into foreign currency and remitted to a jurisdiction

outside China to pay capital expenses such as the repayment of bank loans denominated in

foreign currencies. The PRC government may also, at its discretion, restrict access to foreign

currencies for current account transactions in the future.

Under PRC regulations, the Issuer may not be able to transfer to the Company’s PRC subsidiaries

proceeds from this offering, which could impair their respective ability to make timely payments of

interest and principal under the Bonds. Under PRC rules and regulations relating to supervision

of foreign debt, including policies of the SAFE, restrictions on the incurrence of foreign debt

(including intercompany debt that would be owed to the Issuer by the Company’s PRC

subsidiaries) will require that the proceeds of this offering and other funding the Issuer provide to

the Company’s PRC subsidiaries that will be used for land acquisitions and developments in China

may only be transferred to the Company’s PRC subsidiaries as equity investments and not as

loans.

CIT

Under the CIT Law, the Issuer may be classified as a “resident enterprise” of China. Such

classification could result in unfavourable tax consequences to its and its non-PRC Bondholders.

Under the CIT Law, an enterprise established outside of China with a “de facto management

organisation” located within China will be considered a “resident enterprise,” and consequently

will be treated in a manner similar to a Chinese enterprise for CIT purposes. The implementing

rules of the CIT Law define “de facto management” as “substantial and overall management and

control over the production and operations, personnel, accounting, and properties” of the

enterprise. However, it is still unclear how the PRC tax authorities will determine whether an entity

will be classified as a “resident enterprise”. If the PRC tax authorities determine that the Issuer is

a “resident enterprise” for PRC enterprise income tax purposes, a number of unfavourable PRC

tax consequences could follow. The Issuer may be subject to CIT at a rate of 25%, on its worldwide

taxable income as well as PRC CIT reporting obligations. In the present case, this would mean

that income such as interest from any investment of any portion of the offering proceeds and other

income sourced from outside the PRC would be subject to PRC CIT at a rate of 25%. If the Issuer

is considered a “resident enterprise,” interest payable to certain “non-resident enterprise” holders

of the Bonds without establishment within the PRC or its incomes have no actual connection to its

establishment inside the PRC may be treated as income derived from sources within China and

be subject to PRC withholding tax at a rate of 10%, or a lower rate for holders who qualify for the

benefits of a double-taxation treaty with China, and capital gains realised by such holders of the

Bonds may be treated as income derived from sources within China and be subject to a 10% PRC

tax. Furthermore, if the Issuer is considered a “resident enterprise,” interest or gains earned by

non-resident individuals may be subject to PRC income tax at a rate of 20% or a lower rate for

holders who qualify for the benefits of a double-taxation treaty with China.

As confirmed by the Issuer, as at the date of this Offering Circular, the Issuer has not been noticed

or informed by the PRC tax authorities that it is considered as a PRC tax resident enterprise for

the purpose of the CIT Law. However, there is no assurance that the Issuer will not be treated as

a PRC tax resident enterprise under the CIT Law and relevant implementation regulations in the

future.

The CIT Law and its implementation rules permit certain “high and new technology enterprise

strongly supported by the state” that hold independent ownership of core intellectual property and

meet statutory criteria, to enjoy a reduced 15% enterprise income tax rate. On April 14, 2008, the

State Administration of Taxation, the Ministry of Science and Technology and the Ministry of

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Finance jointly issued the Administrative Rules for the Certification of High and New Technology

Enterprises specifying the criteria and procedures for the certification of “high and new technology

enterprises”, or HNTEs. Certain PRC Subsidiaries of the Group are recognised as HNTEs and

thus are entitled to the preferential enterprise income tax rate of 15%.

Dividend Withholding Tax

Under the CIT Law, the profits of a foreign invested enterprise generated in 2008 and onwards

which are distributed to its immediate holding company outside the PRC will be subject to a

withholding tax rate of 10%, or a lower treaty rate as contained in any income tax treaty or

agreement to which China is a party. Pursuant to a special arrangement between Hong Kong and

the PRC, the withholding tax rate in respect to the payment of dividends by a PRC enterprise to

a Hong Kong enterprise is reduced to 5% from a standard rate of 10% if the Hong Kong enterprise

directly holds at least 25% of the PRC enterprise. Pursuant to the Notice of the State

Administration of Taxation on the Issues concerning the Application of the Dividend Clauses of Tax

Agreements, or Circular 81, a Hong Kong resident enterprise must meet the following conditions,

among others, in order to enjoy the reduced withholding tax: (i) it must directly own the required

percentage of equity interests and voting rights in the PRC resident enterprise; and (ii) it must

have directly owned such percentage in the PRC resident enterprise throughout the 12 months

prior to receiving the dividends. Some of the Company’s PRC subsidiaries are currently

wholly-owned by Hong Kong subsidiaries. However, according to the Circular of the SAT on

Printing and Issuing the Administrative Measures for Non-resident Individuals and Enterprises to

Enjoy the Treatment Under Taxation Treaties (《非居民享受稅收協定待遇管理辦法》), which

became effective on 1 October 2009, the 5% withholding tax rate does not automatically apply and

approvals from competent local tax authorities are required before an enterprise can enjoy any

benefits under the relevant taxation treaties. Moreover, according to a tax circular issued by the

SAT in February 2009, if the main purpose of an offshore arrangement is to obtain a preferential

tax treatment, the PRC tax authorities have the discretion to adjust the preferential tax rate for

which an offshore entity would otherwise be eligible. The PRC tax authorities might not grant

approvals on the 5% withholding tax rate on dividends received by the Company’s subsidiaries in

Hong Kong from the Company’s PRC subsidiaries.

PRC Bonds Tax

The following summary describes the principal PRC tax consequences of ownership of the Bonds

by beneficial owners who, or which, are not residents of mainland China for PRC tax purposes.

In considering whether to invest in the Bonds, investors should consult their individual tax advisors

with regard to the application of PRC tax laws to their particular situations as well as any tax

consequences arising under the laws of any other tax jurisdiction.

Pursuant to the CIT Law and its implementation regulations, any nonresident enterprise without

establishment within the PRC or its incomes have no actual connection to its establishment inside

the PRC shall pay enterprise income tax at the rate of 10%, on the incomes sourced inside the

PRC, and such income tax shall be withheld by sources with the PRC payer acting as the

obligatory withholder, who shall withhold the tax amount from each payment. Accordingly, in the

event the Issuer is deemed to be a PRC tax resident enterprise by the PRC tax authorities in the

future, the Issuer shall withhold income tax from the payments of interest in respect of the Bonds

for any non-PRC enterprise Bondholder at a rate of 10%, or a lower rate for holders who qualify

for the benefits of a double-taxation treaty with China subject to approval of in-charge tax

authorities. However, despite the potential withholding of PRC tax by the Issuer, the Issuer has

agreed to pay additional amounts to Bondholders so that they would receive the full amount of the

scheduled payment, as further set out in the Terms and Conditions of the Bonds.

113

According to the double taxation arrangement between China and Hong Kong, residents of Hong

Kong will not be subject to PRC tax on any capital gains from a sale or exchange of the Bonds.

For other investors of the Bonds, according to the CIT Law and related implementation

regulations, it is unclear whether the capital gains of non-resident enterprises derived from a sale

or exchange of the Bonds will be subject to PRC income tax. If such capital gains are determined

as income sourced in China by PRC tax authority, those non-resident enterprise holders, other

than Hong Kong residents, may be subject to PRC enterprise income tax at a rate of 10%, of the

gross proceeds (unless other tax preferential treatments are provided by any special tax

arrangements). Furthermore, if the Issuer is considered a “resident enterprise,” interest or gains

earned by non-resident individuals may be subject to PRC income tax at a rate of 20%, or a lower

rate for holders who qualify for the benefits of a double-taxation treaty with China subject to

approval of in-charge tax authorities.

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TAXATION

The following summary of certain Bermuda and Hong Kong tax consequences of the purchase,

ownership and disposition of Bonds is based upon applicable laws, regulations, rulings and

decisions in effect as of the date of this Offering Circular, all of which are subject to change

(possibly with retroactive effect). This discussion does not purport to be a comprehensive

description of all the tax considerations that may be relevant to a decision to purchase, own or

dispose of the Bonds and does not purport to deal with consequences applicable to all categories

of investors, some of which may be subject to special rules. Persons considering the purchase of

Bonds should consult their own tax advisors concerning the tax consequences of the purchase,

ownership and disposition of Bonds.

Bermuda

Under current Bermuda legislation, there is no income or profits tax, withholding tax, capital gains

tax, capital transfer tax, estate duty or inheritance tax payable by the Issuer or any shareholders

who are not ordinarily resident in Bermuda in respect of the Bonds. Furthermore, the Issuer has

obtained from the Minister of Finance of Bermuda under the Exempted Undertakings Tax

Protection Act, 1966, an assurance that, in the event that any legislation is enacted in Bermuda

imposing any tax computed on profits or income, or computed on any capital asset, gain or

appreciation or any tax in the nature of estate duty or inheritance tax, such tax shall not, until 28

March 2016, be applicable to the Issuer or to any of its operations or its shares, debentures or

other obligations except insofar as such tax applies to persons ordinarily resident in Bermuda or

is payable by the Issuer in respect of real property owned or leased by it in Bermuda.

As an exempted company, the Issuer is exempt from all stamp duties except on transactions

involving “Bermuda property”. This term relates essentially to real and personal property

physically situated in Bermuda, including shares in local (as opposed to exempted) companies.

None of the Issuer, its shareholders or the holders of the Bonds, as the case may be (other than

persons ordinarily resident in Bermuda), are subject to stamp duty or other similar duty on the

issue or transfer of the Bonds.

Hong Kong

Withholding tax

No withholding tax is payable in Hong Kong on payments of principal or interest on the Bonds or

in respect of any capital gains arising from the sale of the Bonds.

Profits tax

Hong Kong profits tax is charged on every person carrying on a trade, profession or business in

Hong Kong in respect of assessable profits arising in or derived from Hong Kong from such trade,

profession or business.

Under the Inland Revenue Ordinance (Chapter 112 of the Laws of Hong Kong) (the “Inland

Revenue Ordinance”) as it is currently applied, Hong Kong profits tax may be charged on

assessable profits arising on the sale, disposal or redemption of the Bonds where such sale,

disposal or redemption is or forms part of a trade, profession or business carried on in Hong Kong.

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Interest on the Bonds will be subject to Hong Kong profits tax where such interest has a HongKong source, and is received by or accrues to:

• a financial institution (as defined in the Inland Revenue Ordinance) and arises through orfrom the carrying on by the financial institution of its business in Hong Kong, notwithstandingthat the moneys in respect of which the interest is received or accrues are made availableoutside Hong Kong; or

• a corporation carrying on a trade, profession or business in Hong Kong by way of interestderived from Hong Kong; or

• a person, other than a corporation, carrying on a trade, profession or business in Hong Kongby way of interest derived from Hong Kong and such interest is in respect of the funds of thetrade, profession or business.

Stamp duty

No Hong Kong stamp duty will be chargeable upon the issue or transfer of a Bond.

Estate duty

There is no estate duty in Hong Kong, and thus, no estate duty is payable under the Estate DutyOrdinance in respect of the Bonds.

PRC

The following summary describes the principal PRC tax consequences of ownership of the Bondsby beneficial owners who, or which, are not residents of mainland China for PRC tax purposes.These beneficial owners are referred to as non-PRC Bondholders in this “PRC Taxation” section.In considering whether to invest in the Bonds, investors should consult their individual tax advisorswith regard to the application of PRC tax laws to their particular situations as well as any taxconsequences arising under the laws of any other tax jurisdiction.

Pursuant to the CIT Law and its implementation regulations, enterprises that are establishedunder laws of foreign countries and regions (including Hong Kong, Macau and Taiwan) but whose“de facto management body” are within the territory of China are treated as PRC tax residententerprises for the purpose of the CIT Law and must pay PRC enterprise income tax at the rateof 25% in respect of their taxable income. If relevant PRC tax authorities decide, in accordancewith applicable tax rules and regulations, that the “de facto management body” of the Issuer iswithin the territory of PRC, the Issuer may be held to be a PRC tax resident enterprise for thepurpose of the CIT Law and be subject to PRC enterprise income tax at the rate of 25% on itstaxable income. At the date of this Offering Circular, the Issuer has not been notified or informedby the PRC tax authorities that it is considered as a PRC tax resident enterprise for the purposeof the CIT Law.

However, there is no assurance that the Issuer will not be treated as a PRC tax resident enterpriseunder the CIT Law and related implementation regulations in the future. Pursuant to the CIT Lawand its implementation regulations, any non-resident enterprise without an establishment withinthe PRC or whose income has no connection to its establishment inside the PRC must payenterprise income tax on income sourced within the PRC, and such income tax must be withheldat source by the PRC payer acting as a withholding agent, who must withhold the tax amount fromeach payment. Accordingly, in the event the Issuer is deemed to be a PRC tax resident enterpriseby the PRC tax authorities in the future, the Issuer may be required to withhold income tax fromthe payments of interest in respect of the Bonds to any non-PRC Bondholder, and gain from thedisposition of the Bonds may be subject to PRC tax, if the income or gain is treated asPRC-source. The tax rate is generally 10% for non-resident enterprise Bondholders without anestablishment within the PRC or whose incomes have no connection to its establishment inside

the PRC and 20% in the case of non-resident individuals. The Issuer has agreed to pay additional

amounts to Bondholders, subject to certain exceptions, so that they would receive the full amount

of the scheduled payment, as further set out in the Terms and Conditions of the Bonds.

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Stamp Duty

No PRC stamp tax will be chargeable upon the issue or transfer of the Bonds to the extent that

the register of holders of the Bonds is maintained outside the PRC. The Issuer intends to maintain

the register of holders of the Bonds outside the PRC.

Estate duty

There is no estate duty in the PRC, and thus, no estate duty is payable in respect of the Bonds.

Proposed EU Directive on the Taxation of Savings Income

Under the Directive on the taxation of savings income, Member States are required to provide to

the tax authorities of another Member State details of payments of interest (or similar income) paid

by a person within its jurisdiction to an individual resident in that other Member State or to certain

limited types of entities established in that other Member State. However, for a transitional period,

Luxembourg and Austria are instead required (unless during that period they elect otherwise) to

operate a withholding system in relation to such payments (the ending of such transitional period

being dependent upon the conclusion of certain other agreements relating to information

exchange with certain other countries). A number of non-EU countries and territories, including

Switzerland, have adopted similar measures (a withholding system in the case of Switzerland).

On 15 September 2008, the European Commission issued a report to the Council of the European

Union on the operation of the Directive, which included the Commission’s advice on the need for

changes to the Directive. On 13 November 2008, the European Commission published a more

detailed proposal for amendments to the Directive, which included a number of suggested

changes. The European Parliament approved an amended version of this proposal on 24 April

2009. If any of those proposed changes are made in relation to the Directive, they may amend or

broaden the scope of the requirements described above.

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SUBSCRIPTION AND SALE

The Issuer and the Company have entered into a subscription agreement with BNP Paribas, Hong

Kong Branch and BOCI Asia Limited as the Joint Lead Managers dated [●] (the “Subscription

Agreement”) pursuant to which and subject to certain conditions contained in the Subscription

Agreement, the Issuer agreed to sell to the Joint Lead Managers, and the Joint Lead Managers

agreed to severally, but not jointly, subscribe and pay for the aggregate principal amount of the

Bonds set forth opposite its name below.

Joint Lead ManagerPrincipal amount of theBonds to be subscribed

BNP Paribas, Hong Kong Branch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CNY[●]

BOCI Asia Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CNY[●]

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CNY[●]

The Subscription Agreement provides that the Issuer and the Company will jointly and severally

indemnify the Joint Lead Managers against certain liabilities in connection with the offer and sale

of the Bonds. The Subscription Agreement provides that the obligations of the Joint Lead

Managers are subject to certain conditions precedent and entitles the Joint Lead Managers to

terminate it in certain circumstances prior to payment being made to the Issuer.

The Joint Lead Managers and their respective affiliates are full service financial institutions

engaged in various activities, which may include securities trading, commercial and investment

banking, financial advisory, investment management, principal investment, hedging, financing and

brokerage activities. The Joint Lead Managers and their respective affiliates have, from time to

time, performed, and may in the future perform, various financial advisory and investment banking

services for the Issuer and the Company, for which they received or will receive customary fees

and expenses.

The Joint Lead Managers and their respective affiliates may purchase the Bonds and be allocated

the Bonds for asset management and/or proprietary purposes but not with a view to distribution.

In the ordinary course of their various business activities, the Joint Lead Managers and their

respective affiliates may make or hold a broad array of investments and actively trade debt and

equity securities (or related derivative securities) and financial instruments (including bank loans)

for their own account and for the accounts of their customers and may at any time hold long and

short positions in such securities and instruments. Such investment and securities activities may

involve securities and instruments of the Issuer and/or the Company.

In connection with the issue of the Bonds, BNP Paribas, Hong Kong Branch (the “Stabilising

Manager”) or any person acting on behalf of the Stabilising Manager may, to the extent permitted

by applicable laws and directives, over-allot the Bonds or effect transactions with a view to

supporting the market price of the Bonds at a level higher than that which might otherwise prevail,

but in so doing, the Stabilising Manager or any person acting on behalf of the Stabilising Manager

shall act as principal and not as agent of the Issuer or the Company. However, there is no

assurance that the Stabilising Manager or any person acting on behalf of the Stabilising Manager

will undertake stabilisation action. Any stabilisation action may begin on or after the date on which

adequate public disclosure of the terms of the Bonds is made and, if begun, may be ended at any

time, but it must end no later than the earlier of 30 days after the issue date of the Bonds and 60

days after the date of the allotment of the Bonds. Any loss or profit sustained as a consequence

of any such over-allotment or stabilisation shall be for the account of the Stabilising Manager.

118

General

The Bonds are a new issue of securities with no established trading market. No assurance can begiven as to the liquidity of any trading market for the Bonds.

The distribution of this Offering Circular or any offering material and the offering, sale or deliveryof the Bonds is restricted by law in certain jurisdictions. Therefore, persons who may come intopossession of this Offering Circular or any offering material are advised to consult with their ownlegal advisers as to what restrictions may be applicable to them and to observe such restrictions.This Offering Circular may not be used for the purpose of an offer or invitation in anycircumstances in which such offer or invitation is not authorised.

No action has been taken or will be taken in any jurisdiction that would permit a public offering ofthe Bonds, or possession or distribution of this Offering Circular or any amendment or supplementthereto or any other offering or publicity material relating to the Bonds, in any country orjurisdiction where action for that purpose is required.

United States

The Bonds have not been and will not be registered under the Securities Act and, subject tocertain exceptions, may not be offered or sold within the United States.

The Bonds are being offered and sold outside of the United States in reliance on Regulation S.

In addition, until 40 days after the commencement of the offering of the Bonds, an offer or sale ofSecurities within the United States by any dealer (whether or not participating in the offering) mayviolate the registration requirements of the Securities Act.

European Economic Area

In relation to each Member State of the European Economic Area which has implemented theProspectus Directive (each, a “Relevant Member State”), each of the Joint Lead Managers hasrepresented and agreed that with effect from and including the date on which the ProspectusDirective is implemented in that Relevant Member State (the “Relevant Implementation Date”) ithas not made and will not make an offer of Bonds which are the subject of the offeringcontemplated by this Offering Circular to the public in that Relevant Member State other than:

(a) to any legal entity which is a qualified investor as defined in the Prospectus Directive;

(b) to fewer than 100 or, if the Relevant Member State has implemented the relevant provisionof the 2010 PD Amending Directive, 150, natural or legal persons (other than qualifiedinvestors as defined in the Prospectus Directive), as permitted under the ProspectusDirective, subject to obtaining the prior consent of the relevant Joint Lead Manager or JointLead Managers nominated by the Issuer for any such offer; or

(c) in any other circumstances falling within Article 3(2) of the Prospectus Directive,

provided that no such offer of Bonds shall require the Issuer or the Joint Lead Managers to publisha prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectuspursuant to Article 16 of the Prospectus Directive.

For the purposes of this provision, the expression an “offer of Bonds to the public” in relation toany Bonds in any Relevant Member State means the communication in any form and by anymeans of sufficient information on the terms of the offer and the Bonds to be offered so as toenable an investor to decide to purchase or subscribe the Bonds, as the same may be varied inthat Member State by any measure implementing the Prospectus Directive in that Member State,the expression “Prospectus Directive” means Directive 2003/71/EC (and amendments thereto,including the 2010 PD Amending Directive, to the extent implemented in the Relevant MemberState), and includes any relevant implementing measure in each Relevant Member State and theexpression 2010 PD Amending Directive means Directive 2010/73/EU.

119

United Kingdom

Each Joint Lead Manager has represented, warranted and agreed that:

(a) it has only communicated or caused to be communicated and will only communicate or cause

to be communicated an invitation or inducement to engage in investment activity (within the

meaning of Section 21 of the Financial Services and Markets Act 2000 (the “FSMA”))

received by it in connection with the issue or sale of the Bonds in circumstances in which

Section 21(1) of the FSMA does not apply to the Issuer; and

(b) it has complied and will comply with all applicable provisions of the FSMA with respect to

anything done by it in relation to the Bonds in, from or otherwise involving the United

Kingdom.

Bermuda

No offer or invitation may be made to the public in Bermuda to subscribe for the Bonds. The Joint

Lead Managers have represented and agreed that it has not offered or sold, and will not offer or

sell, any Bonds to the public in Bermuda and will procure that any purchaser of the Bonds from

the Joint Lead Managers will comply with such prescription.

Hong Kong

Each Joint Lead Manager has represented, warranted and agreed that:

(a) it has not offered or sold and will not offer or sell in Hong Kong, by means of any document,

any Bonds other than (i) to “professional investors” as defined in the Securities and Futures

Ordinance (Chapter 571 of the Laws of Hong Kong) and any rules made under that

Ordinance; or (ii) in other circumstances which do not result in the document being a

“prospectus” as defined in the Companies Ordinance (Chapter 32 of the Laws of Hong Kong)

or which do not constitute an offer to the public within the meaning of that Ordinance; and

(b) it has not issued or had in its possession for the purposes of issue, and will not issue or have

in its possession for the purposes of issue, whether in Hong Kong or elsewhere, any

advertisement, invitation or document relating to the Bonds, which is directed at, or the

contents of which are likely to be accessed or read by, the public of Hong Kong (except if

permitted to do so under the securities laws of Hong Kong) other than with respect to the

Bonds which are or are intended to be disposed of only to persons outside Hong Kong or only

to “professional investors” as defined in the Securities and Futures Ordinance and any rules

made under that Ordinance.

Singapore

Each Joint Lead Manager has acknowledged that the Offering Circular has not been and will not

be registered as a prospectus with the Monetary Authority of Singapore. Accordingly, each Joint

Lead Manager has represented, warranted and agreed that it has not offered or sold any Bonds

or caused such Bonds to be made the subject of an invitation for subscription or purchase and will

not offer or sell such Bonds or cause such Bonds to be made the subject of an invitation for

subscription or purchase, and has not circulated or distributed, nor will it circulate or distribute, the

Offering Circular or any other document or material in connection with the offer or sale, or

invitation for subscription or purchase, of such Bonds, whether directly or indirectly, to persons in

Singapore other than (i) to an institutional investor under Section 274 of the Securities and

Futures Act, Chapter 289 of Singapore (the “SFA”), (ii) to a relevant person pursuant to Section

275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions

specified in Section 275, of the SFA, or (iii) otherwise pursuant to, and in accordance with the

conditions of, any other applicable provision of the SFA.

120

Where the Bonds are subscribed or purchased under Section 275 of the SFA by a relevant person

which is:

(a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the

sole business of which is to hold investments and the entire share capital of which is owned

by one or more individuals, each of whom is an accredited investor; or

(b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold

investments and each beneficiary of the trust is an individual who is an accredited investor,

securities (as defined in Section 239(1) of the SFA) of that corporation or the beneficiaries’ rights

and interest (howsoever described) in that trust shall not be transferred within six months after

that corporation or that trust has acquired the Bonds pursuant to an offer made under Section 275

of the SFA, except:

(i) to an institutional investor or to a relevant person defined in Section 275(2) of the SFA, or to

any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the

SFA;

(ii) where no consideration is or will be given for the transfer;

(iii) where the transfer is by operation of law;

(iv) as specified in Section 276(7) of the SFA; or

(v) as specified in Regulation 32 of the Securities and Futures (Offer of Investments) (Shares

and Debentures) Regulations 2005 of Singapore.

The PRC

Each Joint Lead Manager has represented, warranted and agreed that the Bonds are not being

offered or sold and may not be offered or sold, directly or indirectly, in the People’s Republic of

China (for such purposes, not including Hong Kong and Macau Special Administrative Regions or

Taiwan), except as permitted by the securities laws of the People’s Republic of China.

Japan

The Bonds have not been and will not be registered under the Financial Instruments and

Exchange Act of Japan (Act No. 25 of 1948, as amended, the “Financial Instruments and

Exchange Act”). Accordingly, each Joint Lead Manager has represented and agreed that it has

not, directly or indirectly, offered or sold and will not, directly or indirectly, offer or sell any Bonds

in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any

person resident in Japan, including any corporation or other entity organised under the laws of

Japan) or to others for re-offering or re-sale, directly or indirectly, in Japan or to, or for the benefit

of, any resident of Japan except pursuant to an exemption from the registration requirements of,

and otherwise in compliance with, the Financial Instruments and Exchange Act and other relevant

laws and regulations of Japan.

Taiwan

Each of the Joint Lead Managers has represented, warranted and agreed that the Bonds are not

being offered or sold and may not be offered or sold, directly or indirectly, in Taiwan, except as

permitted by the securities laws of Taiwan.

121

Switzerland

This Offering Circular is not intended to constitute an offer or solicitation to purchase or invest in

the Bonds described herein. The Bonds may not be publicly offered, sold or advertised, directly

or indirectly, in, into or from Switzerland and will not be listed on the SIX Swiss Exchange or on

any other exchange or regulated trading facility in Switzerland. Neither this Offering Circular nor

any other offering or marketing material relating to the Bonds constitutes a prospectus as such

term is understood pursuant to article 652a or article 1156 of the Swiss Code of Obligations, and

neither this Offering Circular nor any other offering or marketing material relating to the Bonds may

be publicly distributed or otherwise made publicly available in Switzerland.

122

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN PRC GAAP AND IFRS

The Audited Financial Statements of the Company have been prepared in accordance with the

Accounting Standards for Business Enterprises issued by the Ministry of Finance of the PRC on

15 February 2006, and the Application Guidance for Accounting Standards for Business

Enterprises, Interpretations of Accounting Standards for Business Enterprises and other relevant

regulations issued thereafter. At present, other than on reversal of impairment provisions taken on

non-current non-financial assets and certain other differences in accounting treatment due to

different operational practices such as the revaluation of assets and corresponding depreciation

and amortisation and employee bonus and welfare fund, PRC GAAP are substantially consistent

with IFRS. There are no other significant differences between the principal accounting policies

adopted by the Company and IFRS.

Reversal of impairment losses on assets

In accordance with to “PRC Accounting Standards No. 8 – Impairment of Assets”, an asset

impairment loss that has been recognised shall not be reversed in subsequent accounting

periods, while in accordance with IAS 36 “Impairment of Assets”, an entity shall assess at the end

of each reporting period whether there is any indication that an impairment loss recognised in prior

periods for an asset other than goodwill may no longer exist or may have decreased. If any such

indication exists, the entity shall estimate the recoverable amount of that asset. An impairment

loss recognised in prior periods for an asset other than goodwill can be reversed if, and only if,

there has been a change in the estimates used to determine the recoverable amount of that asset

since the last impairment loss was recognised.

As at 31 December 2010, 2011 and 2012, the Company had no such reversal of impairment losses

on assets. Therefore, the above technical difference had no substantial impact on the audited

financial statements included elsewhere in this Offering Circular.

The above analysis is not meant to be an exhaustive description of all significant differences

between PRC GAAP and IFRS. In making an investment decision, investors must rely upon their

own examination of the Company, the Group, the terms of the offering and the financial

information included herein. Potential investors should consult their own professional advisors for

an understanding of any differences that may exist between PRC GAAP and IFRS, and how those

differences might affect the financial information included herein.

123

GENERAL INFORMATION

1. Clearing Systems: The Bonds will be lodged and cleared through the CMU. The CMU

instrument numbers for the Bonds is PARBFB14001. For persons seeking to hold a beneficial

interest in the Bonds through Euroclear or Clearstream, such persons will hold their interests

through an account opened and held by Euroclear or, as the case may be, Clearstream with

the CMU operator. The ISIN and Common Code of the Bonds is HK0000179140 and

101345963, respectively.

2. Authorisations: The Issuer has obtained all necessary consents, approvals and

authorisations in connection with the issue and performance of its obligations under the

Bonds, the Trust Deed, the Agency Agreement and the Keepwell Deed. The issue of the

Bonds was authorised by resolutions of the board of directors of the Issuer on 3 January

2014. The Company has obtained all necessary consents, approvals and authorisations in

connection with entry into the Keepwell Deed and the Deed of Equity Interest Purchase

Undertaking and the entry into the transaction documents in connection with the Bonds was

authorised by resolutions of the board of directors of the Company on 3 May 2013. PRC

counsels to the Company and the Joint Lead Managers have advised that no approvals or

consents are required from any regulatory authorities or other relevant authorities in the PRC

for the Company to enter into the Keepwell Deed and the Deed of Equity Interest Purchase

Undertaking and the Trust Deed.

3. No Material Adverse Change: There has been no material adverse change in the financial or

trading position or prospects of the Issuer since 30 June 2013, or of the Company and the

Group since 30 September 2013.

4. Litigation: None of the Issuer, the Company or any other member of the Group is involved in

any litigation or arbitration proceedings that the Issuer or the Company, as the case may be,

believes are material in the context of the Bonds, neither the Issuer nor the Company is

aware that any such proceedings are pending or threatened.

5. Available Documents: Copies of the Issuer’s published audited consolidated financial

statements for the year ended 31 December 2012, the Issuer’s published unaudited

condensed consolidated interim financial information for the six months ended 30 June 2013,

the Company’s published audited financial statements for the year ended 31 December

2012, the Company’s published unaudited financial statements for nine months ended 30

September 2013, the Trust Deed, the Agency Agreement, the Keepwell Deed, the Deed of

Equity Interest Purchase Undertaking and the Articles of Association of the Issuer and the

Company will be available for inspection from the Issue Date at the Issuer’s principal place

of business in Hong Kong at Room 3403, 34th Floor, China Resources Building, 26 Harbour

Road, Wanchai, Hong Kong, during normal business hours, so long as any of the Bonds is

outstanding. The Issuer prepares and publishes an annual report every year and an interim

report every six months. Copies of the Issuer’s annual report and interim report can be

obtained from its corporate website. The Company prepares its annual financial statements

each year.

6. Financial Statements: The published audited consolidated financial statements of the

Company as at and for the year ended 31 December 2012 which have been audited by

Daxin, and the published audited consolidated financial statements of the Issuer as at and

for the year ended 31 December 2012 which have been audited by PwC, respectively, as

stated in their respective reports appearing herein, are included elsewhere in this Offering

Circular. The published consolidated financial statements of the Company as at and for the

nine months ended 30 September 2013, which are included elsewhere in this Offering

Circular, have not been audited and have not been reviewed. The published unaudited

condensed consolidated interim financial information of the Issuer as at and for the six

months ended 30 June 2013, which are included elsewhere in this Offering Circular, have

been reviewed by PwC as stated in its reports appearing herein. The published consolidated

financial statements of the Company are prepared under the PRC GAAP and the published

124

consolidated financial statements of the Issuer are prepared under the HKFRS. These

published consolidated financial statements are not intended to present the financial

position, results of operations and cash flows in accordance with accounting principles and

practices generally accepted in other countries and jurisdictions.

7. Listing: An application has been made to the Hong Kong Stock Exchange for the listing of,

and permission to deal in, the Bonds by way of debt issues to professional investors only. It

is expected that dealing in, and listing of, the Bonds on the Hong Kong Stock Exchange will

commence on or around [●].

125

INDEX TO INTERIM FINANCIAL INFORMATION, FINANCIAL STATEMENTS AND

UNAUDITED PRO FORMA FINANCIAL INFORMATION

Page

The Company’s Consolidated Interim Financial Information and Financial Statements

Interim Financial Information for the nine months ended 30 September 2013 .................. F-2

Financial Statements and Auditor’s Report for the year ended 31 December 2012.......... F-7

The Issuer’s Consolidated Interim Financial Information and Financial

Statements, and Unaudited Pro Forma Financial Information of the Enlarged

Issuer Group

Interim Financial Information and Review Report for the six months ended

30 June 2013 .................................................................................................................. F-152

Financial Statements and Auditor’s Report for the year ended 31 December 2012.......... F-171

Unaudited Pro Forma Financial Information of the Enlarged Issuer Group and

Reporting Accountant’s Assurance Report...................................................................... F-233

Note: References to page numbers in the audited consolidated financial statements, the unaudited consolidated

interim financial information and the unaudited pro forma financial information refer to the original page

numbers of the annual report or interim report for the related periods and the unaudited pro forma financial

information included in the Issuer’s circular in relation to the Acquisition. Cross-references to page numbers

included in the independent auditors’ report, review report and reporting accountant’s assurance report are

to such original page numbering. The consolidated interim financial information and financial statements,

and the unaudited pro forma financial information have not been specifically prepared for inclusion in this

Offering Circular.

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F-6

F-7

F-8

F-9

F-10

F-11

F-12

F-13

F-14

F-15

F-16

China Electronics Corporation Notes to Consolidated Financial Statements

1 January 2012 to 31 December 2012

All amounts are stated in RMB Yuan unless otherwise stated

I. Corporate profile

China Electronics Corporation (the “Company”) was established in 1989 which was

approved by the State Council, and registered in the State Administration for Industry and

Commerce on May 26, 1989 with registration number 1000001001024 enterprise legal

person business license.

The company is a state-owned company;

Legal representative: Xiong Qunli

Registered capital 8,602,652.00 Thousand Yuan

Registered address: 27 WanShou Road, HaiDian District, Beijing

Business license no.: 100000000010245

The Company is one of the SASAC’s boards of directors’ pilot enterprises; it currently

controls 37 2nd-level subsidiaries, including 21 fully-funded subsidiaries and 16 holding

subsidiaries.

The company is an industrial company. Its business scope covers semiconductors and

components, software and system integration, computer and key computer parts, flat panel

display, consumer electronics, and modern trade &industrial park services.

II. Preparation basis of financial statement

The financial statements are prepared on a going concern transactions and events

actually occurred, subsequently promulgated in accordance with the Ministry of Finance

issued the "Accounting Standards for Enterprises - Basic Standards" and 38 specific

accounting standards, the Accounting Standards for Enterprises Application Guide,

corporate accountingexplain the guidelines and other provisions (hereinafter collectively

known as the "Enterprise Accounting Standards"), and based on the following significant

accounting policies, accounting estimates prepared.

F-17

III. Declaration on compliance with the Accounting Standards for

Business Enterprises

The financial statements of the Company were prepared under the requirements of

“Accounting Standards for Business Enterprises”, reflecting the Group and the Company’s

financial positions, operating results, cash flows and other relevant information on a true and

complete basis in 2012.

IV. Significant Accounting Policy and Accounting Estimate

I. ) Accounting period

The accounting period of the Company is from 1 January to 31 December of each

calendar year.

II. ) Reporting currency

The Company use RMB as the reporting currency.

III. ) Determine the standard of the Company (a) Cash and cash equivalents

The cash as determined by the cash flow statement refers to the Company's cash on

hand and can be used to pay deposit.

Cash equivalents as determined by the Company in the cash flow statement refers to

the Company held short-term, highly liquid, readily convertible to known amounts of cash,

worth an insignificant risk of changes in investment.

IV. ) Foreign Currency Translations

At the time of initial recognition of a foreign currency transaction, the amount in the

foreign currency will be translated into the amount in RMB at the spot exchange rate of the

transaction date.

The Company, on the balance sheet date, treats the foreign currency monetary items

and foreign currency non-monetary items in accordance with the following provisions:

(1) The foreign currency monetary items shall be translated at the spot

exchange rate on the balance sheet date. The balance of exchange arising from the

difference between the spot exchange rate on the balance sheet date and the spot

exchange rate at the time of initial recognition or prior to the balance sheet date shall be

recorded into the profits and losses at the current period.

F-18

(2) The foreign currency non-monetary items measured at the historical cost shall still

be translated at the spot exchange rate on the transaction date, of which the amount of

reporting currency shall not be changed.

Principles of the conversion of foreign currency statements:

1 The asset and liability items in the balance sheet shall be translated at the spot

exchange rate on the balance sheet date; the equity items, except retained profit, shall be

translated at the spot exchange rate when it occurs.

2 The income and expense items in the income statement shall be translated at the

spot exchange rate on the transaction date.

3 The translation reserve shall be presented separately under the equity item in

balance sheet.

4 The cash flow statement shall be translated at the spot exchange rate on

transaction date. The effect of a change in exchange rate on cash shall, as an adjustment

item, separately presented in the cash flow statement.

V. ) Criteria for cash and cash equivalents recognition

When the cash flow statement is prepared by the entity, the cash includes cash on hand

and demand deposits.

When the cash flow statement is prepared by the entity, the cash equivalents refer to

the investments which are short-term; highly liquid that is readily convertible to known

amounts of cash and which are subject to an insignificant risk of changes in value.

VII. ) Account receivables

The account receivables include the account receivables, long account receivables and

other account receivables. If there was objective evidence showing the impairment of the

account receivables at balance sheet date, we regard the difference between the balance

value and the present value of future cash flows as the impairment loss.

1. Accounts receivable which single amount is significant and need single

provision for bad debt.

Standard for the single amount is significant The balance number is over 1000 million

Depreciation method After the teat, we regard the difference between the balance value and the present value of future cash flows as the impairment loss and records as bad-debt provision.

F-19

2. Accounts receivable which single amount is not significant, but the portfolio risk is significant after grouped by credit risk feature

Age of accounts Percentage (%)

Within 1 year (including 1 year) 0-10

1-2 years (including 2 years) 10-30

2-3 years (including 3 years) 20-50

3-4 years (including 4 years) 40-100

4-5 years (including 5 years) 45-100

Over 5 years 80-100

3. Accounts receivable which single amount is not significant but need single

provision for bad debt

Reasons for single provision for bad debt

If there was objective evidence showing the impairment of the account receivables which single amount is not significant at balance sheet date, we regard the difference between the balance value and the present value of future cash flows as the impairment loss.

Depreciation method specific identification

VIII. ) Inventory

1. Classification of inventory

The inventory of company is the finished goods or commodities which held for sale,

inventory in process, consumables during the processing or serving. Inventory includes raw

materials, turnover materials, processing materials, packing materials and low-value

products, in product, homemade semi-finished products, finished goods (inventory), etc.

2. Inventory valuation methods

Use method of weighted mean to measure the goods shipped in transit.

3. According to determine the net realizable value of inventories and inventory

write-down provision method

According to determine the net realizable value of inventories and inventory write-down

provision method

To determine the net realizable value of inventories on the basis of:

(1) Finished goods net realizable value for the estimated selling price minus the

estimated sales amount after expenses and relevant taxes;

F-20

(2) for the production, the amount of material, etc., with its production of the net

realizable value higher than the cost of finished goods in accordance with the cost

measurement; When material price drop shows net realizable value of finished goods below

cost, net realizable value is estimated selling price minus to completion estimate what will

happen after costs, the estimated selling expenses and relevant taxes amount;

(3) Hold materials for sale, net realizable value is the market price.

4. Stock inventory system

The company stock inventory system is the perpetual inventory system.

5. Amortization method of low-value consumption goods and packages

Low-value goods and packaging use a reseller, amortization method.

IX) Long-term Equity Investment

1. Initial Measurement of long-term equity investment

(1) For the merger of enterprises under the same control, if the consideration of the

merging enterprise is that it makes payment in cash, transfers non-cash assets or bear its

debts, it shall, on the date of merger, regard the share of the book value of the owner's

equity of the merged enterprise as the initial cost of the long-term equity investment.

(2) The initial cost of a long-term equity investment obtained by making payment in

cash shall be the purchase cost which is actually paid. The initial cost consists of the

expenses directly relevant to the obtainment of the long- term equity investment, taxes and

other necessary expenses.

(3) The initial cost of a long-term equity investment obtained on the basis of issuing

equity securities shall be the fair value of the equity securities issued.

(4) The initial cost of a long-term equity investment of an investor shall be the value

stipulated in the investment contract or agreement except the unfair value stipulated in the

contract or agreement.

(5) The initial cost of a long-term equity investment obtained by recombination of

liabilities shall be ascertained in accordance with Accounting Standards for Enterprises No.

12 – Debt Restructuring.

F-21

2. Measurement of long-term equity investment and Determination of profit and

loss

Cost method and Equity method shall be used in subsequent measurement of

long-term equity investment. When using equity method, after the Company has acquired a

long-term equity investment, it shall recognized its share of net profits or losses made by the

investee as investment income or losses, and adjust the carrying amount of the investment

accordingly. The carrying amount of the investment shall be reduced by the portion of any

profit distributions or cash dividends declared by the investee that is attributed to the

investing enterprise.

Under cost method, the carrying amount of long-term equity investment stays constant

unless additional investment is made or the investment is recouped. When using cost

method, profit distributions or cash dividends declared by the investee shall be recognized

as investment income in the current period.

When the Company can exercise common control or significant influence over the

investee, a long-term equity investment shall be accounted for using the equity method; in

other cases the cost method shall be used.

3. Determination of Joint Control and Significant Influence

“Joint control” refers to the control over an economic activity in accordance with the

contracts and agreements, which does not exist unless the investing parties of the economic

activity with one an assent on sharing the control power over the relevant important financial

and operating decisions.

“Significant influences” refers to the power to participate in making decisions on the

financial and operating policies of an enterprise, but not to control or do joint control

together with other parties over the formulation of these policies.

4. Recognition and measurement of provision for impairment of long-term

equity investment

When the recoverable amount less than the carrying amount due to the continuous fall

in market price or the bad operating statute of the investee, and the decrease is unable to

restore during the predicted period of time, the balance of the recoverable amount less than

the carrying amount shall be recognized as provision for long-term equity investment

impairment.

F-22

The provision for impairment shall be measured at whichever lower of the cost and the

recoverable amount of the investment project.

X) Investment Properties

1. Investment property types and measurement model

Investment properties refer to the properties held for generating rent and/or capital

appreciation. The investment property shall be measured and sold respectively, which

includes the right to use any land which has already been rented; the right to use any land

which is held and prepared for transfer after appreciation; and the right to use any building

which has already been rented.

The initial measurement of the investment property of the Company is made at its cost;

the follow-up measurement to the investment property is made through the cost pattern.

2. Using the cost model accounting policies

The same depreciation and amortization method, with fixed assets and intangible

assets, will be employed by the investment property.

On balance sheet date, if there is any sigh indicating a possible impairment of the

investment in property, the provision of impairment on property investment shall be tested

and be measured by signal item.

XI) Fixed assets

1. Recognition criteria of fixed assets

Fixed assets” are tangible items that:

a: are held for use in the production or supply of goods or services, for rental to others,

or for administrative purposes; and

b: are expected to be used during more than on period.

Fixed asset shall be recognized as an asset if, and only if it simultaneously meets the

conditions as follows:

(1) It is probable that future economic benefits associated with the item will flow to the

entity; and

(2) The cost of the item can be measured reliably.

2. The separate classes of fixed asset and its depreciation methods

The entity’s main fixed assets include: land and buildings, machinery, electronic

F-23

equipment and transportation equipments, etc. The entity selects the straight-line method.

The useful life, estimated residual life and depreciation method of fixed asset shall be

reviewed at the end of annual reporting period and, if there has been any difference with the

estimated value, adjustment should be made. The entity depreciates all the fixed assets,

except for the fixed asset which is fully depreciated and land which is accounted for

separately.

Classes of Fixed assets Expected useful Life(Year) Estimated Residual Rate (%)

Annual Depreciation Rate (%)

Land & Buildings 10-50 3-10 1.80-9.70

Machinery 5-20 3-10 4.50-19.40

Transportation equipments 5-12 3-10 7.50-19.40

others 3-10 3-10 9.00-32.33

3. Depreciation of fixed assets

An entity assesses at reporting date whether there is any indication that an asset may

be impaired. If any such indication exists, the entity estimates the recoverable amount of the

asset. If, and only if, the recoverable amount of an asset is less than its carrying amount, the

carrying amount of the asset shall be reduced to its recoverable amount, and an impairment

loss shall be recognized immediately in profit or loss for current period, once any loss of

asset impairment is recognized, it shall not be switched back in the future accounting

periods.

The recoverable amount is as the higher of an asset’s fair value less costs to sell and its

value in use. If selling price exists during fair trading, the recoverable amount could be

measured as the net value of selling price less costs to sell. If there is an active market or

selling price for the same industry, the entity uses the market price as its recoverable

amount.

4. Recognition and Measurement of Finance Lease

A finance lease is a lease that transfers substantially all the risks and rewards incidental

to ownership of a fixed asset. Examples of situations that individually or in combination

would normally lead to a lease being classified as a finance lease are:

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(1) The lease transfers ownership of the asset to the lessee by the end of the lease

term;

(2) The lessee has the option to purchase the asset at a price that is expected to be

sufficiently lower than the fair value at the date the option becomes exercisable for it to be

reasonably certain, at the inception of the lease, that the option will be exercised.

(3) The lease term is for the major part of the economic life of the asset even if title is

not transferred;

(4) At the inception of the lease the present value of the minimum lease payments

amounts to at least substantially all of the fair value of the lease asset; and

(5) The leased assets are of such a specialized nature that only the lessee can use

them without major modifications.

Measurement of finance leases: at the commencement of the lease term, lessees shall

recognize finance leases at amounts equal to the fair value of the leased property or, if

lower, the present value of the minimum lease payments, each determined at the inception

of the lease.

Subsequent measurement of finance leases: the policy applied by the entity’s

depreciable leased asset and its impairment is consistent with that for fixed assets that are

owned.

XII) Construction in progress

1. Classes of construction in progress

There are two ways of construction in progress: self-construction and outsource

construction.

2. The standards and time-point of transfer the construction in progress to

fixed assets

The company transfers the construction in progressto fixed assets when the asset is in

serviceable condition. The standards of serviceable condition:

(1) Entity construction of fixed asset (including installation) has been completed or has

essentially completed;

(2) If the fixed asset has been trial production or trial operation, and can run normally,

produce qualified productsor the commissioning results show that it can operate

normally.

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(3) It shows that the spending amount of the fixed asset is less or almost no longer

occurs;

(4) The design and construction of fixed assets has reachedrequirements of the

contract.

3. Provision for impairment of construction in progress

On the balance sheet date, if there is any sigh of construction in progress impairment,

provision for impairment of construction in progress shall be measured at balance of

recoverable amount less the carrying value of the relevant asset (asset group).

Once any loss of constructions in progress impairment is recognized, it shall not be

switched back in the future accounting periods.

XIII) Borrowing cost

1. Recognition principle of the capitalization of the borrowing costs

The borrowing cost of company which can be directlyattributable to the construction or

production eligible for capitalization,shall be capitalized and recorded into the cost of the

related assets; other borrowing cost can record to the related expense and transfer to the

current profit and loss. The asset

2. The calculation method of capitalization

Capitalizable period: it is the period from the beginning time-point of capitalizable

borrowing cost to the end.

Suspend of capitalizable period: the process of construction or productive process is

interrupted abnormally, and interrupt time more than 3 consecutive months, the

capitalization of the borrowing costs shall be suspended during the period.

XIV) Intangible Assets

1. The measurement and the cost of intangible assets

The entity’s intangible asset is measured initially at cost. The cost incurred initially to

acquire an intangible asset and those incurred subsequently. When an intangible asset is

arises from contractual or other legal right, the actual cost of an intangible asset will be

measured at the agreement or contract value, and if there is not fair transaction, the cost

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should be measured at fair value. For self-developed intangible assets, the cost shall be the

total expenditures of preparing the asset for its intended use.

Amortization period and method for intangible assets:

(1) An intangible asset with a finite useful life selected the straight-line method. The

useful life and amortization method will be reviewed at the end of the current reporting

period. If the expected useful life and amortization method of the asset is different from

previous estimates, the related adjustment should be made.

(2) An intangible asset with indefinite useful life shall not be amortized. The useful life

of an intangible asset that is not being amortized shall be reviewed at the end of the current

reporting period to determine whether events and circumstances continue to support an

indefinite useful life assessment for that asset. If they do not and with an solid evident to

prove that, the expected useful life of it should be estimated and applying the straight-line

amortization method to it.

2. Estimation for intangible assets with finite useful lives

There are many factors are considered by the entity in determining the useful life of an

intangible asset, including:

(1) Typical product life cycles for the asset and public information on estimates of

useful lives of similar assets that are used in a similar way;

(2) Technical, technological, commercial or other types of obsolescence;

(3) The stability of the industry in which the asset operates and changes in the market

demand for the products or services output from the asset;

(4) Expected actions by competitors or potential competitors;

(5) The level of maintenance expenditure required to obtain the expected future

economic benefits from the asset and the entity’s ability and intention to reach such a level;

(6) The period of control over the asset and legal or similar limits on the use of the

asset, such as the expiry dates of related leases; and

(7) Whether the useful life of the asset is dependent on the useful life of other assets of

the entity.

3. Recognition for intangible assets with indefinite useful lives

An intangible asset is regarded by the entity as having an indefinite useful life when,

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based on an analysis of all of the relevant factors, there is no foreseeable limit to the period

over which the asset is expected to generate net cash inflows for the entity.

Factors for determining indefinite useful life:

(1) The useful life of an intangible asset that arises from contractual or other legal

rights is not declared clearly;

(2) According to the situation of the same industry or evidence from relevant experts,

there is no evident that the intangible asset will generate net cash inflows for the entity.

The useful life of an intangible asset with an indefinite useful life shall be reviewed at

each end of the year to determine whether events and circumstances continue to support an

indefinite useful life assessment of that asset. This review will be supervised by the related

department.

4. Amortization and provision for intangible assets

At balance sheet date, the Company assesses whether objective evidence of

impairment exists for intangible assets. If there is objective evidence that an impairment loss

of intangible assets has been incurred, an impairment loss test shall be made on the

intangible assets and their recoverable value shall be measured. The amount of the loss is

valued as lower of the assets’ carrying amount and recoverable amount. Impairment losses

on these assets shall not be reversed in successive accounting period. The recoverable

amount is measured as higher of fair value less disposal cost and the present value of

expected future cash flows.

5. Criteria for internally generated intangible assets: research phase and

development phase, and criteria for capitalizing.

Expenditure on research shall be recognized as an expense when it is incurred. An

intangible asset arising from development shall be recognized if , and only if, an entity can

demonstrate all of the following:

(1) The technical feasibility of completing the intangible asset so that it will be available

for use or sale;

(2) Its intention to complete the intangible asset and use or sell it;

(3) How the intangible asset will generate probable future economic benefits. Among

other things, the entity can demonstrate the existence of a market for the output of the

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intangible asset or the intangible asset itself or, if it is to be used internally, the usefulness of

the intangible asset;

(4) The availability of adequate technical, financial and other resources to complete

the development and to use or sell the intangible asset; and

(5) Its ability to measure reliably the expenditure attributable to the intangible asset

during its development.

Recognition criteria for distinguishing the research phase form the development phase

of an internal project: research activities are activities aimed at obtaining new knowledge

and the development activities are the design, construction and testing of pre-production or

pre-use prototypes and models, the design of tools, jigs, moulds and dies involving new

technology.

XV) Long-term prepaid expenses

Long-term prepaid expenses is an expense that is paid but the corresponding benefit

period is more than one year (does not include one year), including long term prepaid rent.

Long term deferred shall be amortized by the straight-line method to the accounting period

in which the expense occurred.

XVI) Employee Compensation

1. Employee Compensation Information

Employee compensation refers to all kinds of payments and other relevant

expenditures given by the Company in exchange of the services offered by the employees.

The employee compensation shall include: wages, bonuses, allowances and subsidies for

the employees; welfare expenses for the employees; medical insurance, endowment

insurance, unemployment insurance, work injury insurance, maternity insurance and other

social insurances, housing fund, trade union operating fees and staff education expenses,

non-monetary benefits, termination benefits and other relevant expenditures.

Profit-sharing and bonuses payments are in accordance with ASBE (“Accounting

Standards for Business Enterprises”) Standard No.11-Profit-sharing and Standard No.

10-Bonuses of Business Enterprises separately.

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2. Confirmation and Measurement

During the accounting period of an employee' providing services to an enterprise, the

enterprise shall recognize the compensation payable as liabilities. Except for the

compensations for the cancellation of the labor relationship with the employee, the

enterprise shall, in accordance with beneficiaries of the services offered by the employee,

treat the following circumstances respectively:

(1) The compensation for the employee for producing products or providing services

shall be recorded as the product costs and service costs;

(2) The compensation for the employee for any on-going construction project or for any

intangible asset shall be recorded as the costs of fixed asset or intangible assets; or

(3) The compensation for the employee other than those as mentioned in Items (1) and

(2) shall be recorded as profit or loss for the current period.

3. Termination Benefits

The entity recognizes termination benefits as a liability and an expense when, and only

when, the entity is demonstrably committed to either:

(a) Terminate the employment of an employee or group of employees before the

normal retirement date; or

(b) Provide termination benefits as a result of an offer made in order to encourage

voluntary redundancy.

(1) The entity is demonstrably committed to a termination when, and only when, the

entity has a detailed formal plan for the termination and is without realistic possibility of

withdrawal.

This detailed play includes: the location, function, and approximate number of

employees whose services are to be terminated; the termination benefits for each job

classification or function; the time at which the plan will be implemented.

(2) The entity cannot withdraw the termination plan unilaterally.

Termination benefits are include: enhancement of retirement benefits or of other

post-employment benefits, either indirectly through an employee benefit plan or directly;

salary until the end of a specified notice period if the employee renders no further service

that provides economic benefits to the entity.

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Post-employment benefit plans are formal or informal arrangements under which an

entity provides post-employment benefits for one or more employees. If the entity applies

the post-employment benefit plans, even if the labor relationship is not terminated, as the

this part of employees render no further service that provides economic benefits to the

entity, the entity compensate this part of employees similar to termination benefits if the part

of employees meet the conditions for the recognition of estimated debts. The entity shall

compensate the employee with salary and social insurance premiums since they cease the

service to the entity, and the expense will be recorded as employee benefits. The

obligations caused by post-employment salary and related social insurance premiums

cannot be recognized separately during the each period after retirement.

Where termination benefits fall due more than 12 months after the reporting date, they

shall be discounted using the discount rate and included in current profit or loss. The

difference between discounted amount and actual payment is defined as unrecognized

financing charges and recorded to financial costs when actual pay the amount. it is not

necessary to discount termination benefits if the difference is not significant.

XVII) Share-based Payments

It transfers of an entity’s equity instruments by its shareholders to parties that have

supplied goods or services to the entity (including employee) are share-based payment

transactions.

1. Classification of Share-based Payments

The share-based payments including: equity-settled share-based payments and

cash-settled share-based payments.

Equity-settled share-based payment transactions, in which the entity receives goods or

services as consideration for equity instruments of the entity (including shares or share

options);

Cash-settled share-based payment transactions, in which the entity acquires goods or

services by incurring liabilities to the supplier of those goods or services for amounts that are

based on the price (or value) of the entity’s shares or other equity instruments of the entity.

Transactions in which the entity acquires net assets by issuing equity instruments

during consolidation shall in accordance with ASBE No.20-Company Consolidation and

No.22-Recognition and Measurement for financial instruments.

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2. Measurement of share-based payment

(1) Equity-settled share-based payment

The equity-settled share-based payment in return for employee services shall be

measured at the fair value of the equity instruments granted to the employees. For

equity-settled share-based payment transactions, the entity shall measure the goods or

services received, and the corresponding increase in equity, directly, at the fair value of the

goods or services received, unless that fair value cannot be estimated reliably.

If the equity instruments granted vest immediately, the counterparty is not required to

complete a specified period of service before becoming unconditionally entitled to those

equity instruments. In this case, on grant date the entity shall recognize the services

received in full, with a corresponding increase in equity.

Grant date is the date on which the share-based payment agreement is approved.

If the equity instruments granted do not vest until the counterparty complete a specified

period of service, the entity shall presume that the services to be rendered by the

counterparty as consideration for those equity instruments will be received in the future,

during the vesting period. The entity shall account for those services as they are rendered

by the counterparty during the vesting period, with a corresponding increase in equity. The

entity shall recognize an amount for the goods or services received during the vesting period

based on the best available estimate of the number of equity instruments expected to vest

and shall revise that estimate, if necessary, if subsequent information indicates that the

number of equity instruments expected to vest differs from previous estimates. On vesting

date, the entity shall revise the estimate to equal the number of equity instruments that

ultimately vested.

Vesting period is the total period that specified vesting conditions has been satisfied. If

vesting condition is a specified period of service, vesting period is the period which from

grant date to vesting date. If a party is granted share options conditional upon the

achievement of a performance condition and remaining in the entity’s employ until that

performance condition is satisfied, and the length of the vesting period varies depending on

when that performance conditions is satisfied, the entity shall presume that the services to

be rendered by the employee as consideration for the share options will be received in the

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future, over the expected vesting period. The entity shall estimate the length of the expected

vesting period at grant date, based on the most likely outcome of the performance condition.

Having recognized the goods or services received and a corresponding increase in

equity, the entity shall make no subsequent adjustment to total equity after vesting date.

If the entity can estimate reliably the fair value of the goods or services received, the

entity shall measure their value directly at fair value, and the corresponding increase in

equity.

If the entity cannot estimate reliably the fair value of the goods or services received, the

entity shall measure their value, and the corresponding increase in equity, indirectly, by

reference to the fair value of the equity instruments granted.

(2) Cash-settled share-based payment transactions

For cash-settled share-based payment transactions, the entity shall measure the goods

or services acquired and the liability incurred at the fair value of the liability.

For some share appreciation rights vest immediately and the employees are therefore

not required to complete a specified period of service to become entitled to the cash

payment. The entity shall recognize immediately the services received and a liability to pay

for them.

If a party is granted share appreciation rights conditional upon the achievement of a

performance condition. The entity shall recognize an amount for the goods or services

received during the vesting period based on the best available estimate of the fair value of

the liability and recorded it into current cost or expenses and liability. If subsequent

information indicates that the expected value of the liability is differs from previous

estimates, adjustment should be made at reporting date. On vesting date, the entity shall

revise the estimate to equal the level of ultimately vested.

The entity shall recalculate the fair value of the liability at reporting date or settlement

date which is just before related settlement of liability, and including the changes in current

profit or loss.

XVIII) Bonds Payables

Bonds issued by the Company shall be treated as debts based on the total actual issue

price; the difference between the issue price and the par value in recognized as premium or

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discount, and amortize bond discount and premium by the effective-interest method before

due.

XIX) Estimated liabilities

1. Recognition of Estimated liabilities

The obligation pertinent to contingencies shall be recognized as estimated liabilities

when the following conditions are satisfied simultaneously:

(1) That obligation is a current obligation of the enterprise;

(2) It is likely to cause any economic benefit to flow out of the enterprise as a result of

performance of the obligation; and

(3) The amount of the obligation can be measured in a reliable way.

2. Measurement of Estimated liabilities

The estimated liabilities shall be initially measured in accordance with the best estimate

of the necessary expenses for the performance of the current obligation.

If there is a sequent range for the necessary expenses and if all the outcomes within

this range are equally likely to occur, the best estimate shall be determined in accordance

with the middle estimate within the range.

In other cases, the best estimate shall be conducted in accordance with the following

situations, respectively:

(1) If the Contingencies concern a single item, it shall be determined in the light of the

most likely outcome.

(2) If the Contingencies concern two or more items, the best estimate should be

calculated and determined in accordance with all possible outcomes and

the relevant probabilities.

XX) Revenues

1. Revenue from Selling Goods

No revenue from selling goods may be recognized unless the following conditions are

met simultaneously:

(1) The significant risks and rewards of ownership of the goods have been transferred

to the buyer by the enterprise;

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(2) The enterprise retains neither continuous management right that usually keeps

relation with the ownership nor effective control over the sold goods;

(3) The relevant amount of revenue can be measured in a reliable way;

(4) The relevant economic benefits may flow into the enterprise; and

(5) The relevant costs incurred or to be incurred can be measured in a reliable way.

The Company ascertains the revenue incurred by selling goods in accordance with the

received or receivable price stipulated in the contract or agreement signed between the

enterprise and the buyer, unless the received or receivable amount as stipulated in the

contract or agreement is unfair.

If the collection of the price as stipulated in the contract or agreement is delayed and if it

has the financing nature, the revenue incurred by selling goods shall be ascertained in

accordance with the fair value of the receivable price as stipulated in the contract or

agreement.

2. Revenue from Providing Labor Services

If the Company can, on the date of the balance sheet, reliably estimate the outcome of

a transaction concerning the labor services it provides, it shall recognize the revenue from

providing services employing the percentage-of-completion method. The Company adopts

the measurement of the work completed to ascertain the schedule of completion under the

transaction concerning the providing of labor services

If the Company cannot, on the date of the balance sheet, measure the result of a

transaction concerning the providing of labor services in a reliable way, it shall be conducted

in accordance with the following circumstances, respectively:

(1) If the cost of labor services incurred is expected to be compensated, the revenue

from the providing of labor services shall be recognized in accordance with the amount of

the cost of labor services incurred, and the cost of labor services shall be carried forward at

the same amount; or

(2) If the cost of labor services incurred is not expected to compensate, the cost

incurred should be included in the current profits and losses, and no revenue from the

providing of labor services may be recognized.

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3. Render service

Use completion percentage method to confirm the reliablemeasured outcome of the

transactions concerning the labor services on the balance sheet date. Our company uses

the measurement of finished job to confirm the percentage of the providing labor service.

If the job progress on balance sheet date cannot be measured reliably,

4. Revenue from A alienating the Right to Use Assets

No revenue from a alienating of right to use assets may be recognized unless the

following conditions are met simultaneously:

(1) The relevant economic benefits are likely to flow into the enterprise; and

(2) The amount of revenues can be measured in a reliable way.

5. Revenue from construction contract

The recognition of revenue of construction contract will in accordance with the items of

the contract.

XXI) Construction Contracts

1. Classification of construction contracts

A construction contract is a contract specifically negotiated for the construction of an

asset or a combination of assets that are closely interrelated or interdependent in terms of

their design, technology and function or their ultimate purpose or use. There are fixed price

contract and cost plus contract. A fixed price contract is a construction contract in which the

contractor agrees to a fixed contract price, or a fixed rate per unit of output. A cost plus

contract is a construction contract in which the contractor is reimbursed for allowable or

otherwise defined costs, plus a percentage of these costs or a fixed fee.

2. Combining and segmenting construction contracts

The requirements of this Standard are usually applied separately to each construction

contract. However, in certain circumstances, it is necessary to apply the standard to the

separately identifiable components of a single contract or to a group of contracts together in

order to reflect the substance of a contract or a group of contracts.

When a contract covers a number of assets, the construction of each asset shall be

treated as a separate construction contract when:

(1) Separate proposals have been submitted for each asset;

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(2) Each asset has been subject to separate negotiation and the contractor and

customer have been able to accept or reject that part of the contract relating to each asset;

and

(3) The costs and revenues of each asset can be identified.

The construction of an additional asset shall be treated as a separate construction

contract when:

(1) The asset differs significantly in design, technology or function from the asset or

assets covered by the original contract; or

(2) The price of the asset is negotiated without regard to the original contract price.

A group of contracts, whether with a single customer or with several customers, shall be

treated as a single construction contract when:

(1) The group of contracts is negotiated as a single package;

(2) The contracts are so closely interrelated that they are, in effect, part of a single

project with an overall profit margin; and

(3) The contracts are performed concurrently or in a continuous sequence.

3. Contract Revenue

Contract revenue shall comprise:

(1) The initial amount of revenue agreed in the contract; and

(2) Variations in contract work, claims and incentive payments:

A variation is an instruction by the customer for a change in the scope of the work to be

performed under the contract. It is included in contract revenue when:

(1) It is probable that the customer will approve the variation and the amount of

revenue arising from the variation; and

(2) The amount of revenue can be reliably measured.

A claim is an amount that the contractor seeks to collect from the customer or another

arty as reimbursement for costs not included in the contract price. Claims are included in

contract revenue only when:

(1) Negotiations have reached an advanced stage such that it is probable that the

customer will accept the claim; and

(2) The amount that it is probable will be accepted by the customer can be measured

reliably.

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Incentive payments are additional amounts paid to the contractor if specified

performance standards are met or exceeded. Incentive payments are included in contract

revenue when:

(1) The contract is sufficiently advanced that it is probable that the specified

performance standards will be met or exceeded; and

(2) The amount of the incentive payment can be measured reliably.

4. Contract Costs

Contract costs shall comprise: costs that relate directly to the specific contract; costs

that are attributable to contract activity in general and can be allocated to the contract; and

such other costs as are specifically chargeable to the customer under the terms of the

contract.

Costs that relate directly to a specific contract include:

(1) Costs of materials used in construction

(2) Site labor costs

(3) Utilization expenses of equipment

(4) Other direct expenses

Costs that may be attributable to contract activity in general and can be allocated to

specific contracts include:

(1) Insurance;

(2) Costs of design and technical assistance that are not directly related to a specific

contract; and

(3) Construction overheads

The allocation is based on the normal level of construction activity. Construction

overheads include costs such as the preparation and processing of construction personnel

payroll.

Direct costs are recognized as the cost of the contract when it actually incurred. Indirect

costs are allocated using methods that are systematic and rational, and recorded into the

cost of the contract.

The contract costs may be offset against by any incidental income pertinent to the

contract such as the income from the disposal of surplus materials at the end of the contract.

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The contract costs do not include the costs that shall be included in the current profits

and losses, such as the administration costs, the selling costs, the financial costs.

The relevant expenses incurred by the sign of a contract shall be directly included in the

current profits and losses.

5. Recognition of contract revenue and expenses

When the outcome of a construction contract can be estimated reliably, contract

revenue and contract costs associated with the construction contract shall be recognized as

revenue and expenses respectively by reference to the stage of completion of the contract

activity at the reporting date.

In the case of a fixed price contract, the outcome of a construction contract can be

estimated reliably when all the following conditions are satisfied:

(1) Total contract revenue can be measured reliably;

(2) It is probable that the economic benefits associated with the contract will flow to

the entity;

(3) Both the contract costs to complete the contract and the stage of contract

completion at the reporting date can be measured reliably; and

(4) The contract costs attributable to the contract can be clearly identified and

measured reliably so that actual contract costs incurred can be compared with prior

estimates.

In the case of a cost plus contract, the outcome of a construction contract can be

estimated reliably when all the following conditions are satisfied:

(1) It is probable that the economic benefits associated with the contract will flow to

the entity; and

(2) The contract costs attributable to the contract, whether or not specifically

reimbursable, can be clearly identified and measured reliably.

The stage of completion of a contract may be determined in a variety of ways, the

methods may include:

(1) The proportion that contract costs incurred for work performed to date bear to the

estimated total contract costs;

(2) Surveys of work performed; or

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(3) Completion of a physical proportion of the contract work.

When the stage of completion is determined by reference to the contract costs incurred

to date, only those contract costs that reflect work performed are included in costs incurred

to date. Examples of contract costs which are excluded are:

(1) Contract costs that relate to future activity on the contract, such as costs of

materials that have been delivered to a contract site or set aside for use in a contract but not

yet installed, used or applied during contract performance, unless the materials have been

made specially for the contract; and

(2) Payments made to subcontractors in advance of work performed under the

subcontract.

Under the percentage of completion method, contract revenue is recognized as

revenue in the income statement in the reporting periods in which the work is performed.

Contract costs are usually recognized as an expense in the income statement in the

reporting periods in which the work to which they relate is performed.

The contract which is completed during current period, the actual contract revenue

deducts the amount which is recognized as revenue during previous accounting period will

be recognized as current contract revenue. The accumulated contract cost deducts the

amount which is recognized as costs during previous accounting period will be recognized

as current contract cost.

When the outcome of a construction contract cannot be estimated reliably:

(1) It may be probable that the entity will recover the contract costs incurred,

therefore, contract revenue is recognized only to the extent of costs incurred that are

expected to be recoverable. The contract cost will be recognized as contract expenses at

period that it incurred.

(2) Contract costs that are not probable of being recovered are recognized as an

expense immediately. No revenue is recognized.

When the uncertainties that prevented the outcome of the contract being estimated

reliably no longer exist, revenue and expenses associated with the construction contract

shall be recognized in accordance with standard.

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When it is probable that total contract costs will exceed total contract revenue, the

expected loss shall be recognized as an expense immediately.

XXII) Government Grants

1. Government grants including: Grants related to Assets and Grants related to

Income.

2. Accounting for government grants

Government grants related to assets, including non-monetary grants at fair value, shall

be presented in the balance sheet either by setting up the grant as deferred income or by

deducting the grant in arriving at the carrying amount of the asset. Grants related to income

are sometimes presented as a credit in the income statement, either separately or under a

general heading such as “Other income”; alternatively, they are deducted in reporting the

related expense.

XXIII) Deferred Tax Assets and Deferred Tax Liabilities

Recognition of deferred tax assets and deferred tax liabilities

1. A deferred tax asset or deferred tax liability shall be recognized according to the

differences between the carrying amount of an asset or liability in the balance sheet and its

tax base.

2. The recognition for deferred tax asset is limited to the likely amount of taxable

income tax that may be used for making up the deductible temporary difference. If there is

solid evidence indicates that it is likely to acquire sufficient taxable income tax that may be

used for making up the deductible temporary difference, the entity shall recognized the

deferred tax assets which are not recognized during previous period. If it is unlikely to obtain

sufficient taxable income taxes to offset the benefit of the deferred income tax assets, the

carrying amount of the deferred income tax assets shall be written down.

3. The taxable temporary difference shall be recognized as liability for subsidiaries

and Joint venture investment, unless this company could control the tax return time of the

temporary differences and also this temporary difference is unlikely to return in the

foreseeable future. When the temporary difference for subsidiaries and joint venture

investment are likely to return in the foreseeable future and it is likely to acquire the taxable

income tax that may be used for making up the deductible temporary difference, it shall be

recognize as deferred tax asset.

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XXIV) Leases

Where a lease satisfies one or more of the following criteria, it shall be recognized as a

finance lease:

(1) The ownership of the leased asset is transferred to the lessee when the term of

lease expires;

(2) The lessee has the option to buy the leased asset at a price which is expected to

be 5% (including 5%) lower than the fair value of the leased asset at the date when the

option becomes exercisable. Thus, on the lease beginning date, it can be reasonably

determined that the option will be exercised;

(3) Even if the ownership of the asset is not transferred, the lease term covers the

major part of the use life of the leased asset.

The operating lease shall refer to a lease other than a financing lease.

Accounting treatments of lessees of the Company are applying under Accounting

Standards of Business Enterprise--Leases ..

XXV) Accounting method for income tax

This company use debt method based on balance sheet to calculate the income tax.

Income tax of this company includes domestic and overseas tax amount based on income

tax payable.

1. Tax basis

If the tax basis which company use is different from the tax basis of a new asset or

liability, company should confirm the deferred income tax assets and liabilities.

The tax basis of asset is the deductible amount from the income tax payable when

company buys back the book value of an asset.

The tax basis of liability is the book value of a liability minus future deductible amount.

2. Temporary differences

Temporary difference is the difference between the book value of an asset or liability

and its tax base; if a project was not determined as an asset or a liability but under the

taxation law can be determined its tax basis, the difference between the book value and the

tax basis is also the temporary difference.

According to the effect of temporary differences taxable amounts in future, temporary

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differences can be divided into taxable temporary differences and deductible temporary

differences.

Taxable temporary differences means the temporary differences result from

determining taxable income during the period of the future recovery of assets or settlement

of liabilities.

Deductible temporary differences, means to determine the future recovery of assets or

settlement of liabilities to be taxable income during the period, the assets will result in

deductible temporary difference amount.

3. Recognize

Company recognizes the income tax payable of the current and prior periods as liability

and the overpayment income tax as asset.

To recognize the existence of taxable temporary differences or deductible temporary

differences as the deferred tax liability or deferred tax assets.

In addition to the deferred tax liabilities arising from these transactions, the company

recognizes all taxable temporary differences deferred tax as liabilities:

(1) Initial recognition of goodwill;

(2) While the initial recognition of an asset or liability in a transaction with the following

characteristics:

the transaction is not a business combination;

When the transaction occurs affects neither the accounting profit nor taxable income

(or deductible loss).

If there are taxable temporary differences between companies and subsidiaries,

associates and joint ventures, the corresponding tax liability should be recognized.

However, except for the following conditions are satisfied:

(1) Investment companies can control the timing of the reversal of temporary

differences;

(2) The temporary differences in the foreseeable future are unlikely to be reversed.

The company recognizes deferred tax assets arising from deductible temporary

differences under the limit which is the probable amount which can be used to deduct the

deductible temporary differences taxable income. But while the deferred tax assets due to

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the confirmation of initial recognition of assets or liabilities under the following characteristics

in a transaction will not be recognized.

(1) The transaction is not a business combination;

(2) When the transaction occurs affects neither the accounting profit nor taxable

income (or deductible loss).

There is strong evidence that it is unlikely to get enough taxable income to deduct the

deductible temporary differences in balance sheet date, deferred tax assets not recognized

in prior periods should be recognized.

If there are taxable temporary differences between companies and subsidiaries,

associates and joint ventures, the corresponding tax asset should be recognized. However,

except for the following conditions are satisfied:

(1) Investment companies can control the timing of the reversal of temporary

differences;

(2) The temporary differences in the foreseeable future are likely to be reversed.

4. Measurement

To calculate the income tax liability (or assets) of current and prior period should

measure by the expected amount under tax law.

For deferred tax assets and deferred tax liabilities on balance sheet date, the tax should

be based on the applicable tax rate of the period of expected recovery of the asset or the

liability.

If the applicable tax rate is changed, recognized deferred tax assets and deferred tax

liabilities should be re-measured. In addition to the deferred tax assets and deferred tax

liabilities which rise from transactions or events recognized directly in equity, other current

period effects should be accounted into current income tax expense.

The measurement of deferred income tax assets and liabilities should reflect the tax

influence from the method to recovery of assets or settlement of the liabilities. So company

should same tax rare and tax basis when recover assets or settle liabilities.

Company should not discount the deferred income tax assets and liabilities.

Company should review the carrying amount of deferred income tax assets at balance

sheet date. If it is unlikely to get enough taxable income to deduct the deferred income tax

assets, the carrying amount of deferred income tax assets should be reduced.

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When it is probable to get enough taxable income, the reduced amount should be

written back.

The current income tax and deferred income tax should be recorded into income tax

expense or earnings are recorded into current profit and loss, but followings are not

including:

(1) Business combination

(2) Transactions or events directly recognized in equity.

Current income tax and deferred income tax related to the transactions or events

directly recognized in equity should be recorded into equity.

Company pays income tax by installments and final payment in annual income tax

report.

XXVI) Business combination

1. Business combination under same control

The asset and liability obtained by combining party should be measured by the book

value recorded in combined party at combining date. The difference arises from the book

value of net asset and paying merge book value need to adjust the capital reserve; when

capital reserve is insufficient, adjust retained earnings.

The direct expense for business combination of combining party should be recorded

into current profit and loss.

2. Business combination not under same control

For business combination not under same control, Combination cost for the purchaser

is the fair value of asset paid or liabilities incurred or assumed and equity securities issued

which is used to get the control power of acquire. For business combination under many

multiple exchanges trading, the combination cost should be the sum of every single trading.

The direct expense for business combination of combining party should be recorded into

combination cost. If there are agreements in the contract about events may happen in the

future which can influence the combination cost, the estimated future events are likely to

occur and its effects on the cost of the combination can be measured reliably, the amount

should be included in the cost of consolidation.

The identifiable asset, liability and contingent liability which purchasers get from the

business combination and meet the recognition criteria should be measured in fair value.

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The difference between the purchase costs of the combination over the net fair value of

identifiable asset of acquiree is recognized as goodwill; otherwise, it is recognized into

current profit and loss.

3. Compilation method of consolidated financial statements

The Company let the subsidiaries under actual control and special purpose entities

included in the consolidated financial statements.

The Company's consolidated financial statements in accordance with "Accounting

Standards for Enterprises No. 33 - Consolidated Financial Statements" and related

regulations offset all significant intercompany transactions and transactions within the scope

of consolidation. Shareholders' equity of subsidiaries not part of the parent company shall

be presented separately as minority interests in the consolidated financial statements. The

equity of subsidiary which is not belongs to parent company shall be presented separately

as minority interests in the consolidated financial statements.

If the using accounting policy and accounting period of subsidiary and parent company

is different, when group company prepare combination financial statement, financial

statement should be adjusted based on parent company’s accounting policy and accounting

period.

For the subsidiaries not under same control, group company should adjust subsidiary’s

respective financial statement based on fair value of the identifiable assets at the acquisition

date when prepare combination financial statement. For the subsidiaries under same

control, its assets, liabilities, operating results and cash flows from the beginning of the

consolidation period shall be included in the consolidated financial statements.

V. A description of accounting policies and changes in accounting estimates

and corrections of errors

1 Description of change in main accounting policies

The reporting period has no major changes in accounting policy matters.

2 Description of change in main accounting estimates

The reporting period has no major changes in accounting estimates matters.

3 Correction of prior accounting errors

Recording to the State-owned assets property rights 2012 782<reply for chengdu

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jinjiang electrical appliance manufacturing co. LTD., the state-owned property rights transfer

for free>. State Assets Administration Committee of chengdu Districttransfer its 100% of

state-owned property rights of chengdu jinjiang electrical appliance manufacturing co., LTD

to our company for free, and renamed CEC JINJIANG INFO INDUSTRIAL CO., LTD.CEC

JINJIANG INFO INDUSTRIAL CO. LTD is under the same control of CEC, so merge into the

range of report, according to the transfer date then confirm the merge base date is January

1, 2012, adjust the opening merge data as well. The influence for the opening merge data

from this item is as follows:

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VI. Taxes

Major taxes and tax rates

Tax Tax (Fee) Basis Tax (Fee) Rate Note

value-added tax Sales and services revenues

Business tax Taxable revenue

Urban construction tax Actual paid turnover tax

Educational Surtax Actual paid turnover tax

Housing property tax

the residual value after the subtraction of 10% to 30% of the original value from the original value

of the property; the rental income from the property

Corporation income tax Taxable income

Tax incentives and approvals for level 2 subsidiaries and significant subsidiaries

1. Wuhan Yangtze Rong Da Electronics Co., Ltd.

According to relevant regulations, "the PRC Enterprise Income Tax Law" on January 1

2008, country would focus on supporting high-tech enterprises so that government reduces

the income tax rate to 15% for those enterprises. Company obtained high-tech enterprise

qualification. Certificate number: GF201242000065, Certification Date: August 20, 2012,

valid for three years.

2. China Electronic Information Industry Group Co., Ltd. No.6 Research Institute

Value-added tax

According to " Ministry of Finance and State’s Administration of Taxation on VAT policy

for software products - Cai Shui [2011] No. 100", the collection method of value-added tax

for VAT general taxpayers sell their software products on its own is to calculate at 17% first

then the part over 3% of the actual implementation of VAT tax can be tax-refund. China

Electronic Information Industry Group Co., Ltd. No.6 Research Institute Rui Da Technology

Development Co., Ltd. and its subsidiary Beijing International System Control Co., Ltd suit

that policy this year.

3. Shanghai Hua Hong Integrated Circuit Co., Ltd.

Company was identified as high-tech enterprises; income tax rate is 15%.

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4. Eleventh Design and Research Institute of Information Industry Electronic

Technology Engineering Co., Ltd.

(1) Business tax

According to Sichuan Provincial Science and Technology Department and Sichuan

excise office in Chuanke city No. 3 [2000], technical trading income exempts from sales tax.

(2) Value-added tax

The value-added tax rate of the revenue of construction equipment settlement is 17%.

According to the “the measures for the implementation of Transportation industry and part of

the modern service industry change from business tax to value-added tax “which is

promulgated by Ministry of Finance and State Administration of Taxation, the tax rate of

Shanghai branch is 6% from Jan 1 2012; the tax rate of Wuxi branch Huadong branch and

Hefei branch is 6% from OCT 1 2012;Hangzhou branch use 6% tax rate from DEC 1 2012.

(3) Income tax for company

Company acquired the Certification of High-tech Enterprise which was promulgated by

Sichuan Provincial Science and Technology Department, Sichuan Provincial Department of

Finance, State Administration of Sichuan Province, Sichuan Province Local Taxation Bureau.

Duration: three years, the certificate number: GR200851000177. October 12, 2011, the

company has passed the review of high-tech enterprises; high-tech enterprise certificate

number is GF201151000028, the income tax rate for this period is 15%.

4. The Great Wall information industry co. LTD

Company acquired the Certification of High-tech Enterprise which was promulgated by

Hunan Provincial Science and Technology Department, Hunan Provincial Department of

Finance, State Administration of Hunan Province, Hunan Province Local Taxation Bureau.

According to relevant regulations, "the PRC Enterprise Income Tax Law" at January 1, 2008,

high-tech enterprises pay corporate income tax at the reduced rate of 15%.

According to the Ministry of Finance, the State Administration of Taxation, Cai Shui

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[2006] No. 88 "preferential policies about the enterprise income tax of the technological

innovation," company’s technology development costs which complies with the conditions,

in accordance with the provisions, 100% deduction on the basis of the year and then can

deduct 50% of the actual amount.

5. China huada integrated circuit design group co., LTD

Company was identified as high-tech enterprises, so the company income tax rate is

15% under the preferential tax policies related to high-tech enterprises.

6. China software and technology services co., LTD

(1) Value-added tax

Tax basis of the company is income from selling product and raw material and tax rate

is 17 %( input taxes shall be deducted).According to the regulation “about the notification of

the change from business tax to value-added tax for transportation industry and any service

industry at 8 areas including BeiJing” promulgated by Ministry of Finance and State

Administration of Taxation, tax rate for technical services revenue is 6% from 1 Sep 2012.

According to "notice of VAT policy for software products promulgated by Ministry of

Finance State Administration of Taxation on" (Cai Shui [2011] No. 100), to promote the

development of software industry, software products VAT policies are:

the collection method of value-added tax for VAT general taxpayers sell their software

products on its own is to calculate at 17% first then the part over 3% of the actual

implementation of VAT tax can be tax-refund.

VAT general taxpayer transform imported software product localization for sale, its

revenue of software products can enjoy the value-added tax levied immediately returned

policy.

Taxpayer were commissioned to develop software products and copyright belongs to

the trustees then taxpayer need to pay for value-added tax; Copyright belongs to the

commissioning party or both parties will not subject to VAT. If company registered in National

Copyright Administration and then transfer the copyright at the time of sale will not subject to

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VAT.

(2) Company income tax

Company acquired the Certification of High-tech Enterprise which was promulgated by

Beijing Municipal Science and Technology Commission, Beijing Municipal Finance Bureau,

Beijing Municipal State Administration of Taxation, the Beijing Local Taxation Bureau from

OCT 2011, Certificate No. is GF201111001722, and so the tax rate is 15% this period.

7. Shanghai Belling Co., Ltd.

Company acquired the Certification of High-tech Enterprise which was promulgated by

Shanghai Science and Technology Commission, Shanghai Municipal Finance Bureau,

Shanghai Municipal State Tax Bureau and Shanghai Municipal Local Taxation Bureau from

OCT 2011 and the tax rate is 15% this period.

8. the national technology co., LTD

According to “the notice of corporate income tax policy as Ministry of Finance, State

Administration of Taxation prepare to further encourage the development of the software

industry and integrated circuit industry”, and so the tax rate is 10% this period

9. China Great Wall Computer Shenzhen Co., Ltd.

The company got the High-tech Enterprise Certificate which was promulgated by State

tax authorities from 2011. Certificate No. is GR201144200817. The certificate is valid for 3

years. According to relevant regulations "PRC Enterprise Income Tax Law" Article 28 of the

2012 annual corporate income tax rate applicable to the Company is 15%.

10. Shenzhen Great Wall development and Technology Co., Ltd.

The company got the High-tech Enterprise Certificate which was promulgated by State

tax authorities from 2011. The certificate is valid for 3 years. According to relevant

regulations "PRC Enterprise Income Tax Law" Article 28 of the 2012 annual corporate

income tax rate applicable to the Company's 15%.

11. Nanjing Electronics Information Industrial Corporation

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The company got the High-tech Enterprise Certificate which was promulgated by

Jiangsu province science and technology department from 30 Sep 2011. Certificate No. is

GF201132000407. The certificate is valid for 3 years. According to relevant regulations

"PRC Enterprise Income Tax Law" Article 28, corporate income tax rate applicable to the

Company is 15% from 1 Jan 2011 to 31 Dec 2013.

Preparation of consolidated financial statements

(I) Basic information of secondary and subsidiaries in consolidation

China Integrated Circuit Design Corp., Ltd.

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Note:

Type of enterprise: 1 Domestic non-financial sub-company, 2. Domestic financial

sub-company, 3 foreign subsidiary enterprises, 4 institutions, 5. Infrastructure units.

Method of acquire: 1 invested, 2. Companies under common control, 3. Enterprises

under common control, 4 other

Note 1: The Company put addition shares (20 million) to their subsidiary Shanghai

huahong integrated circuit co., LTD by cash this period.

Note 2: The company set up CLP Great Wall the system application co., LTD and

invested in 40 million by cash and hold 80% of the stock rights. The company belongs to

Changping Science and Technology Park, the above contribution has been approved by the

Beijing Municipal Industry and Commerce Bureau Changping Branch.

Note 3: The Company set up Telecom Investment Holdings Ltd. and invested in 1 billion

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by cash and hold 100% of the stock rights. Daxin CPA Ltd. has issued the audit report for the

capital verification.

Note 4: The Company set up Telecom Investment Holdings Ltd. and invested in 80

million by cash and hold 100% of the stock rights. The company belongs to Changping

Science and Technology Park, the above contribution has been approved by the Beijing

Municipal Industry and Commerce Bureau Changping Branch.

Note 5: According to no. 782 document state-owned assets’property rights (2012) “reply

for free transfers of state property to Chengdu Jinjiang Electric Manufacturing Co., Ltd.”, the

company accepts 100% stock rights of Chengdu Jinjiang Electric Manufacturing Co., Ltd.

After 31 Dec 2012, Owners’ equity attributable to the parent company was 18,508.63 ten

thousand yuan. Then the company put addition shares 20000 ten thousand yuan by cash to

Chengdu Jinjiang Electric Manufacturing Co., Ltd. and Daxin CPA Ltd. has issued the audit

report for the capital verification. Then Chengdu Jinjiang Electric Manufacturing Co., Ltd.

was renamed Chengdu Jinjiang Electric Information Industry Co., Ltd.

(II). The parent company owns less than half of the voting rights of the invested unit but

has control over the invested unit as a result of the followings:

Note 1: The company holds 30.36% stock rights of Shanghai pudong software park co.

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LTD directly as their first majority shareholder. Our company has effective control over the

company; it will be incorporated into the scope of consolidation;

Note 2: The company holds 18.5% stock rights of Wuhan Yangtze River Rongda

Electronics Co., Ltd. as their second majority shareholder, the first majority shareholder is

China Huarong Asset Management Co., Ltd which hold 56.8% of the stock shares. As China

Huarong Asset Management Co., Ltd will not put Wuhan Yangtze River Rongda Electronics

Co., Ltd. to their scope of consolidation and do not take part in the financial management,

our company has effective control over the company, and therefore be included in the scope

of consolidation.

Note 3: The company holds 30.36% stock rights of Electronic Information Industry

Electronic Eleventh Design and Research Institute of Science and Technology Engineering

Co., Ltd. and as their first majority shareholder. This company changes to enterprise and the

remaining equity holdings by natural persons. Our company has effective control over the

company; it will be incorporated into the scope of consolidation;

Note 4: Great Wall Information Industry Co., Ltd. is a listed company and has public

offering of securities. Our company is their first majority shareholder. Our company has

effective control over the company; it will be incorporated into the scope of consolidation;

Note 5: China Electronics Technology Development Co., Ltd. is restructured enterprise,

the remaining equity holdings by natural persons. Our company holds 49.03% of the stock

shares and as their first majority shareholder. Our company has effective control over the

company; it will be incorporated into the scope of consolidation;

Note 6: Shanghai Belling Co., Ltd. is a listed company and have public offering of

securities. Our company is their first majority shareholder. Our company has effective

control over the company; it will be incorporated into the scope of consolidation;

Note 7: Our company holds 42.43% stock rights of Shanghai xin xin investment co.,

LTD directly as their first majority shareholder. Our company has effective control over the

company; it will be incorporated into the scope of consolidation;

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Note 8: Shenzhen sen da industrial co., LTD is a listed company and have public

offering of securities. Our company is their first majority shareholder. Our company has

effective control over the company; it will be incorporated into the scope of consolidation;

Note 9: Nationz Technologies Inc is a listed company and have public offering of

securities. Our company is their first majority shareholder. Our company has effective

control over the company; it will be incorporated into the scope of consolidation;

Note 10: Shenzhen Great Wall development technology co., LTD is a listed company

and has public offering of securities. Our company is their first majority shareholder. Our

company has effective control over the company; it will be incorporated into the scope of

consolidation;

Note 11: Nanjing east China electronic information science and technology co., LTD is a

listed company and have public offering of securities. Our company is their first majority

shareholder. Our company has effective control over the company; it will be incorporated

into the scope of consolidation;

Note 12: China Zhenhua (Group) Science and Technology Co., Ltd. is a listed company

and have public offering of securities. Our company is their first majority shareholder. Our

company has effective control over the company; it will be incorporated into the scope of

consolidation;

(III). The reasons for the parent company directly or indirectly through other subsidiaries

have been invested more than half of the voting rights but failed to control

(IV). The preparation of the consolidated financial statements for the parent company

under different accounting policy with subsidiary

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1. Foreign subsidiary included in the scope of consolidation perform local accounting

standards. The foreign currency has been transferred to standard money under the method

of "Enterprise Accounting Standards" and the "Note 4 (d)".

2. Nanjing Electronics Information Industrial Corporation LTD which is the subsidiary of

Nanjing cec panda information industry group co., LTD measures the investment property

(Use rights of No. 301 East Zhongshan Road, Nanjing) subsequently in fair value. But CEC

use cost method to do the subsequent measurement for investment property, CEC adjust it

to the cost model when prepare the consolidating report.

3. China Electronic Finance Company Limited is the second level sub-financial

enterprise and included in the scope of consolidation. CEC transfer it’s the financial

enterprise accounting statements to enterprise accounting statements for consolidation.

(V). Parent company and subsidiary company with same accounting period

(VI). Original subsidiary which will not be involved in the consolidation scope

(Continue)

Note: this during the reporting period of the company has been listed by way of letter

will hold Xinhong investment 50% stake in the transfer abroad.

(VII). New subjects in the consolidation scope for this year including the following two

levels of important sub enterprises.

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(VIII)This is no restrictions on subsidiaries transfer funds to the parent company.

VIII Notes to significant items of the consolidated financial statements

1. Monetary capital

1) Monetary capital

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2) Other Monetary capital:

Closing Balance

3) The use of limited for more than three months of currency funds

Closing Balance

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Closing Balance

Note: in addition to the above items ending does not exist because of mortgage, pledge or freezing has

limits, used to store has potential risk of recovery in overseas.

2 Financial assets held for trading

(1) Trading financial assets according to the categories listed

Note 1 Trading investments in equity instruction is mainly in the secondary market to buy or purchase

of stock.

Note 2 Outstanding derivative financial instruments holding by subsidiaries of Guanjie technology is

total up to 221,571,784.77 RMB, which are the main derivative financial assets.

Note 3 There are no significant restrictions for realization of trading financial assets investment.

3 Notes Receivables

1)Notes receivable by category

2)The ten ranked of discounted and undue trade acceptance

Amount Note

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Amount Note

4 Accounts receivable

1) Account receivable by category

2)Allowance for book age analysis Bad Debts of Accounts Receivables

3)Single provision for bad debts of accounts receivable

(1) Significant single amount and individual provision for bad debts of accounts

receivable

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(2) Individually insignificant but individual provision for accounts receivable at the

end of year

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4). Current reversal or recovery situations

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Note 1: According to the CEC Guangtong and China Cable Television signed the Shareholders' “Capital Increase

Agreement”, with its assessed on Chinese cable total price of all claims 19,196.0666 million, 19,114.3151 million in new

investment into the China Cable Television, the new investment accounted for 10.99 percent after the investment capital

.The entire share capital of the relevant change of business have been completed in September 2012, the corresponding

reversal of provision for bad debts;

Note 2: The ExcelStor Great Wall due to poor operating conditions last year, its provision for bad debts of accounts

receivable, it has applied for bankruptcy protection before the receivables are recoverable in Saikang current period, the

corresponding reversal of provision for bad debts.

5)Witten off circumstance of account receivable in this report

F-65

5 Advances to suppliers

1). Advances to suppliers by book aging

2). Circumstance of large Advances to suppliers aged over one year

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F-67

Note Nanjing Electronic Technology Co., Ltd. dividends receivable is 605,000.00 yuan which belongs to the

historical issues. The Company has full provision for impairment.

8 Other receivables

1) Other receivables by category

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2) Allowance for age analysis Bad Debts of Other Receivables

3) Prepare to individual provision for bad debt of other receivable

(1) Individually amount insignificant and individual provision for other receivables

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(2) Individually insignificant but individual provision for bad debts of other

receivables at end of the year

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4) Reversal or recovery of other receivables this year

5) Actual written off for other receivable in this report

F-71

9 Inventories

1) Component of inventories

2) Land reserve areas circumstance (unit: square meter)

3) Land reserve amount circumstance (unit: Yuan)

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4) Inventories in the balance of the amount of borrowing costs capitalized as

following

10 Non-current assets expire within 1 year

11 Other current assets

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Note: The other end of current assets compared to the beginning of increase of 1,446.1413 million RMB, mainly due

to the import and export of electricity and other companies to buy financial products, as well as the Panda stay to offset

input tax due to a substantial increase.

12 Loans and payments

1) According to personal and enterprise distribution circumstance for loans and

advances

2) According to industrial distribution circumstance for loans and advances

3) Loans and advances by geographical region

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4) Distribution of loans and advances the guarantee

5) Overdue loans

6) Provision for impairment of Loans

F-75

13 Available for sale financial assets

Note : Other major is Chinese Huada acquire its development Capital Trust plans 10th Golden Peacock and National

Investment Trust Capital Trust Hongyan No.177 which cost 29,000,000.00 yuan and China Telecom bought finance

products in China Construction Bank, the end of the investment cost is $ 197,000,000.00, accrued interest is $

2,264,033.33.

14 Held to maturity investments

Item 31 Dec, 2011 31 Dec, 2010

Entrust loans

Shenyang Shenhai thermalpowerplant

Less: Provision for impairmentTotal - -

Note Entrusted Loan commissioned loan of held to maturity investments for Shenzhen Development Magnetic

Recording Co., Ltd. divided into four entrusted loan provided by the Shenzhen Branch of China CITIC Bank to its

associates Donghong development disk Co., Ltd. from 2005 to 2006 which loan principal is $ 1,097 Million.

As of December 31, 2007, the Shenzhen Development Magnetic Recording Co., Ltd. accumulated recognized in the

above entrusted loan interest of $ 3,696,913.74.

In December 2010, Board of Directors of Shenzhen Donghong development of disk Co., Ltd. decided the company

into liquidation. In December 30, 2010, the company in the Shenzhen Economic Daily released the liquidation

advertising.

As of December 31, 2011, the liquidation of the development of eastern red disk Ltd. in Shenzhen is still ongoing.

Shenzhen Development magnetic recording CO., LTD. based on the fair value assessment on the entrusted loans of the

Hong Kong Zhonghe BMI Appraisals Limited in full impairment loss.

F-76

15 Long term receivable

Note: Mainly long-term account receivable is subsidiary of Guanjie Technology providing to the trade union

committee of Fujian Jielian Electricity Co.,Ltd.

16 Long-term equity investments

1) Summary of long-term equity investments

2) significant equity investment under cost method

(1) Investment in subsidiary

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Note 1: China Electronics International Economic Cooperation will not be included in the scope of consolidation this

period, Long-term equity investments and Provision for impairment increases $ 17,599,216.96 at the same time.

Note 2:Zhongyuan electronic delegate Wuhan guanggu United assets and equity exchange co., LTD to transfer the

55% stock shares of Wuhan Yongli power co., LTD. long-term equity investment (7,563,359.47 yuan) and its provision

(7,563,359.47 yuan) will be written off.

Note 3: Beijing Jinfeng Xintiandi Technology Co., Ltd. led to the cancellation of long-term equity investment which

decreased 8,000,000.00 yuan;

Note 4: Approval "on the Great Wall of China state-owned property finance company free transfer issues related to

approval" (Quan [2011] No. 21) and the "Great Wall of China Banking Regulatory Commission on China financial

corporate debt restructuring program and transfer of equity under the State-owned Assets Supervision and

Administration Commission "(Yin Jian Fu [2011] No. 59) and other documents, Great Wall group put the 100% ownership

of its subsidiary China Electronic Finance Company Limited were transferred to China Railway Construction Corporation.

March 28, 2012 the company has completed the change of business procedures and related transfer work will be

completed this year.

(2) Investment in other enterprises

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Note 1: long-term equity investment and provision for diminution in value decreased 30,360,000.00 yuan because of

the write off of Dapeng securities co., LTD.

Note 2: According to the equity transfer agreement between CLP Guangtong with China Cable Network Co., Ltd.,

our company will change the account receivable of China Cable Network Co., Ltd to investment, change of business

registration were completed in September 2012.

Note 3:long-term equity investment decreased 40000000.00 yuan because of Guizhou cec zhenhua precision

machinery co., LTD was included in the consolidation scope.

3) significant equity investment under cost method

(1) Investment in joint venture

Note 1: Shenzhen Ai Hua Heng Qi co., LTD was the subsidiary company of Shenzhen Ai Hua co., LTD in the past;

the company sold 45% of the stock shares of Shenzhen Ai Hua Heng Qi co., LTD this year and Shenzhen Ai Hua Heng

Qi co., LTD change to joint ventures under equity method.

Note 2: San jie technology (xiamen) co., LTD and TPV Technology was joint ventures in the past, TPV investment

co., ltd (subsidiary of TPV Technology) made agreement about stock right transfer with Mountain clustering enterprises

co., LTD on 31 May 2012, TPV investment co., ltd sold 40.91% of stock shares to San jie technology (xiamen) co., LTD

by 5,040 thousand American Dollars. Acquisition is finished on 1 Oct 2012, after that, TPV Technology hold 86.36%

stock shares of San jie technology (xiamen) co., LTD and appointed most of the directors of San jie technology (xiamen)

co., LTD to manage the company and made San jie technology (xiamen) co., LTD is their subsidiary. It will be included in

the scope of consolidation this year.

F-80

(2) Investments in associates

F-81

(3) Basic information about joint ventures and associates

F-82

F-83

F-84

F-85

Note 1: Shandong yunlong technology electronics co. LTD, which is joint stock company of The Great Wall

development co., LTD. plan to listing-for-sale. Shandong yunlong technology electronics co. LTD has been discontinued

and net asset is negative. Group Company prepared full impairment provision.

Note 2: Beijing Elcoteq Electronics Co., Ltd. (Beijing Elcoteq) is joint managed by the Great Wall Computer and

ELCOTEQ SE (Elcoteq Finland, Elcoteq short). Registered capital is U.S. $ 53 million, our company invested in $

5,512,000 and hold 10.40% of the stock shares. Since Elcoteq has filed for bankruptcy, the court appointed liquidator and

decided to phase out Beijing Elcoteq's operations, Beijing Elcoteq was in poor operating situation and got continuing

losses recently. After the consideration of board of Great Wall Computer, they prepare to liquidate Beijing Elcoteq

Electronics Co., Ltd. and cannot recover the investment, so they took all amout of impairment provision for the

investment.

Note 3: Because of IMP Microelectronics Co., Ltd. was in poor condition, according to the expected losses the

company toke provision for impairment of $ 17,463,133.49.

5) The subsidiary companies without the ability to transfer funds to the investment

restrictions.

17 Investment property

1) Investment property under Cost-Method

F-86

Note: the current counting and drawing for depreciation and amortization of 249,055,825.70 RMB.

18 Fixed Asset

1) 1 Classification of fixed assets

F-87

19 Construction-In-Progress

1 Fundamental state

F-88

2) The ten largest ending balance of construction in progress

Opening Balance

Closing Balance

including

F-89

Opening Balance

Closing Balance

3 Provision of impairment for Construction-In-Progress

20 Fixed asset in liquidation

1) Fixed asset in liquidation list

F-90

Note1 This year, Fixed asset in liquidation increased 12,326,718.96, the reason was subsidiary’s electricity import

and export "Gold Number" into the wreck, insurance claims and related clean-up is being processed;

Note2 This year, Fixed asset in liquidation assets decreased45,746,134.60 yuan, policy has not been completed

due to the relocation project

21 Intangible assets

Item 31,Dec,2011 Increase Decrease 31,Dec,2012

1. Total cost

Software

Right to use the land

Patent right

Non-patent technology

Trademark right

Copyright

Concessions

Others

2. Total accumulated amortization

Software

Right to use the land

Patent right

Non-patent technology

Trademark right

Copyright

Concessions

Others 3. Total provision to impairment of intangible assets Software

Right to use the land

Patent right

Non-patent technology

Trademark right

Copyright

F-91

Item 31,Dec,2011 Increase Decrease 31,Dec,2012

Concessions

Others 4. Total net book value of intangible assets Software

Right to use the land

Patent right

Non-patent technology

Trademark right

Copyright

Concessions

Others

Note: In the period, amortization of intangible asset is 539,110,756.88 RMB.

22 Goodwill

1)Carrying amount

F-92

Note 1: The reduction of 19,733,073.39 yuan is because that Nanjing Huadong Electronics Group Ltd disposed part

of his owned East China Science and Technology Ltd’s stock rights; circulation right for equity separation reduces

19,733,073.39 yuan accordingly.

Note 2: June 11, 2012, National Technology Co., Ltd.which is the subsidiary of CIDC purchase all Shenzhen

Science and Technology Co., Ltd from the shares of YangZhicheng RaoJunfeng and Sungang hold at the price of 7.5

yuan per share, total price paid by National Technology Co., Ltd.is 165 million yuan by cash. The fair value of the

identifiable net assets of Ansett letter Shenzhen Technology Co., Ltd. 110,330,143.78 yuan at the purchase date.

Goodwill is measured as 54,669,856.22 yuan after the consolidation.

Note 3: TPV Technology finished the acquisition of 100% stock shares of Hefei Kaidi Will electronics co. LTD.

through their subsidiary TPV Technology (Qingdao) on 7 Dec 2012. TPV Technology paid 44,789,000 yuan and Goodwill

was measured as 22,894,240.59 yuan.

2)Provision of impairment for goodwill

Note: Subsidiary company Nanjing cec panda magnetoelectricity technology co., LTD bought 73.98% shares from

individual shareholder of Shenzhen cec panda zhonglian number generator electronics co., LTD and the goodwill was

measured as purchase cost 10,264,508.55 yuan minus the fair value of net asset of Shenzhen cec panda zhonglian

number generator electronics co., LTD which is 8,631,507.89 yuan equal 1,633,000.66 yuan. According to the policy to

measure the enterprises ‘goodwill not with same control,

The goodwill of Shenzhen CEC panda zhonglian number generator electronics co., LTD

shall be made fully provision for impairment loss because of the bad management.

23. Long-term prepaid expenses

F-93

Note: Other item decreased 12,935,627.36 yuan this year. The main reasons include the changes in the scope of

consolidation, provision for impairment and disposal. 2,712,204.11 yuan decreased under the reason of changes of

consolidation scope and took impairment provision for 5,497,900.07 due to recoverable amount are lower than the book

value.

24. Deferred income tax assets

1) Deferred tax assets and deferred tax liabilities were not the net amount after

offsetting

(1) Recognized deferred tax assets and deferred tax liabilities

F-94

(2) Unconfirmed deferred income tax assets

25. Other non-current asset

F-95

Note 1: Our subsidiary companyNanjing Sanle Electronic Information Industry Group Co., LTD. (hereinafter referred

to as the "Sanle Electronic") and Suzhou Taihe Real Estate Development co., LTD. (hereinafter referred to as the "Taihe

company") was signed joint construction agreement for joint construction cooperationin 1998, agreed by the land use

right of taihe company development, after being built houses, SanLe Electronic have fractional ownershipof the office

building, other property owned by the Taihe company, was founded in 2005 SanLe Electronic changes will should obtain

the assets assessment project billing as other non-current assets. Due to the planning of continuous change and Nanjing

planning bureau approval to issue a variety of reasons, such as delayed. As of December 31, 2012, the principal part of

the project has been completed, did not deal with acceptance of fixed assets, has not yet been transferred to the fixed

assets;

Note 2: The Debt dispute between CEC Panda Mobile Communication Equipment co., LTD and Nanjing

HanxinEducation Development Co., LTD. In the execution phase, the court auction institutions entrusted to Nanjing on

October 12, 2009, Hanxin education development co., LTD is located in Dinglin,Kirin town,Jiangning district, Nanjing,

such as land use right for the third time the auction (the last two with no one to participate in the auction). The company's

subsidiary Nanjing Electronics Information Industrial Corporatio (hereinafter referred to as the "CEC Panda") to retrieve

the balance Nanjing Panda Mobile Communication Equipment Co., LTD., to avoid further loss of state-owned assets,

therefore, to participate in the auction for the third time, and obtain an auction of land use rights for RMB 29,305,280.00.

Due to kirin town’land of Nanjing Hanxin did not deal with land use card, part of the system and the ground buildings

neo-treasure hill and other historical reasons, although the CEC Panda since October23,2009. were court ruled the

determination of access but according to the CEC Panda this year's Nanjing Jiangning bureau, bureau of land and

resources issued "jiangning land (No. 382" for assistance in execution Jiangning district tangshan street kirin community

or Lin Cun block letter said, because the original land property does not belong to the Hanxin education development co.,

LTD., Nanjing cannot for assistance in execution to handle the land use right transfer to CEC Panda property. Due to

power cannot be protected; CEC Panda in 2010, the full provision for impairment of assets, now the item is still in the

communication process;

Note 3: The Great Wall Group Accounts Maintenance responsibilities shall 322,490,148.50 yuan mainly TPV current

merger TP Vision receivable increased responsibility Maintenance section.ofAdmiral Oversea Corporation TP Vision and

increases the maintenance responsibility for accounts receivable.

F-96

26. Assets with limited ownership

I

II

III

V

F-97

Note 1: Other causes of limited ownership of assets in the central bank deposit reserve 787 million yuan, China

power financial co., LTD and zhenhua financial central bank deposit reserve;

Note 2: Restricted bank deposit assets of 500 million, for the eleven lawsuits electronic hospital, the lawsuit asked

the court to freeze the company party bank deposits, please refer to the note "Nine, (b), 8";

Note 3: Other causes of housing reform funds 1,563,100 yuan, the Department of subordinate enterprises CLP

Zhenhua housing reform earmarking funds in the bank account deposits;

Note 4: The four subsidiaries of Shenzhen SED Electronics Electronics Co., Ltd. of Shenzhen City, the original equity

investment in Union Industrial Investment Co., Ltd. ( now canceled ) , because due to Huizhou City Trading Co., Ltd.

Anhui Gui 1.8 million yuan loan principal and interest ( as of January 31, 2010 interest 6,456,131 yuan ) has not yet ,

Guangdong Province, Hui County People's Court on October 11, 2009 to ( 2009 ) Hui Min law enforcement plus word civil

Ruling No. 4 to electronics company in Shenzhen in Shenzhen Union launched during the Industrial Investment Co., Ltd. ,

invested untrue , respond debtor Industrial Investment Co., Ltd. of Shenzhen City Union debt responsibility on the

grounds , ruling Shenzhen Electronics Co., Ltd. is the case the debtor shall be funded within the scope of 6.4 million yuan

untrue executor assume repayment obligations on the application . Guangdong Province, Hui County People's Court in

October 25, 2010 (2008) Wai law enforcement refers to the word No. 110-5 "Performing ruling" , deduct 1.02 million yuan

from the Shenzhen Electronics Co., Ltd. Account and seizure of Shenzhen in the electronics company under the name of

five sets of real estate. Before the restructuring of Shenzhen Electronics Co., Ltd. , has been transferred to these five sets

of real estate SED Electronics , but not for transfer procedures .

27. Details of asset impairment

I

II

III

IV

V

VI

VII

VIII

IX

X

XI

F-98

28. Short-term loans

29. Deposits from customers and other banks

30. Financial assets held for liabilities

F-99

Note: the business of financial liability compare to the beginning of the year increased 272.5325 million RMB,

rise162.12%, 32.3881 million RMB of it is due to consolidation of TP Vision. Phillip has the right to sale 30% holding

shares to Guanjie Science and Technology Corporation and Guanjie recognized it as Held-for-trading financial liabilities.

Other reason for the change is that Guanjie increased the investment in derivative financial instruments (foreign

exchange forward contracts and interest rate swap contracts) and the changes of the fair value.

31. Notes payable

32.Accounts payable

33 Payments received in advance

34.Funds from sales of financial assets with repurchasement agreement

1)Financial assets sold for repurchase

F-100

2) Financial assets repurchased by trading competitors listed below

35. Employee benefits payable

Note (1): Depreciation expense quarters mainly non-monetary benefits provided to employees, annual prizes, etc.;

Note (2): Compensation for termination of labor relations should be given mainly: 1) a subsidiary of TPV new TP

Vision merged with the European R & D center in Singapore to streamline severance severance costs incurred, which

are not paid in full during the year to reduce the remaining part payment terms are presented in accordance with the

expected other current liabilities and other non-current liabilities; 2) Shenzhen Kaifa Magnetic Recording Co. Ltd.,

Guangdong, China Electronics Import and Export companies to dismiss some employees compensation 9.71 million

yuan..

36. Taxes and surcharges payable

F-101

37. Interest payable

38. Dividends payable

F-102

39 Other payables

40 .Non-current liabilities due within one year

41.Other current liabilities

F-103

Note 1:TPV warranty provisions of TPV provision of product quality assurance estimated debts;

Note 2: Restructuring obligations are incorporated subsidiary of TPV new TP Vision and European R & D center in

Singapore to streamline severance severance costs incurred. Expect to pay in accordance with the deadline will be

included in the project is expected to take at the expense of future dollars a year.

42.Long-term loan

43 Debt securities issued

Note 1: The current bonds payable to China Construction Bank Corporation as the lead underwriter, the amount on

December 9, 2011 issue of 1.5 billion yuan of "Nanjing Electronics Information Industrial Corporation" 2011 Phase

medium-term notes;

Note 2: This issue bonds payable for the shares of China construction bank co., LTD., as the main underwriter, the

amount of released on March 22, 2012 to 1.9 billion yuan of "Nanjing Electronics Information Industrial Corporation" in

2012 the first phase of the medium-term notes;

Note 3: TPV Technology on March 21, 2011 issue of the nominal value of 500 million yuan of corporate bonds, with a

maturity of three years, expires March 21, 2014. The total amount of 489,639,000.00 yuan bond issue, the use of annual

simple interest per annum fixed interest rate of 4.25%, payable semiannually;

Note 4: According to the National Development and Reform Commission, "the National Development and Reform

Commission of China Electronic Information Industry Group Co., Ltd. issued 2009 Approval of Corporate Bonds" (Fa Gai

Cai Jin [2009] No. 2468), the State-owned Assets Supervision and Administration Commission. "About China electronic

Information Industry Group Company issued a corporate bond issues approved "(State property rights [2009] No. 406),

the Company issued the" 09 electronic debt "of 2.5 billion yuan of corporate bonds, with a maturity of seven years;

Note 5: The Company on December 12, 2011, issued by the Bank of China 10 billion in nominal value of

medium-term notes, the actual issue price of 10 billion bill for a period of five years, the coupon rate of 5.04%. Using

interest-bearing fixed interest rate formula, fixed interest rate of 5.04%, payable annually;

F-104

Note 6: our Company on August 13, 2012, through the bank of China issued 2 billion yuan face value of the

medium-term notes, the actual price of 2 billion yuan, paper deadline for five years, a 4.48% coupon. Use of fixed interest

rate of interest-bearing, fixed annual interest rate is 4.48%, interest once a year.

44.Long-term account payable

Note 1: The end of the fixed assets under finance lease payables increased significantly, mainly because of the

Company's subsidiary Nanjing Panda LCD Technology Co., Ltd. of six generations of production lines and power plant

facilities turn solid;

Note 2: Deal with the special bonus of TPV profit distribution to shareholders, according to the specific calculation

formula and determine the amount of bonuses and profit sharing, and confirm the costs and liabilities

Note 3: Philips license and amortize the final period is increased, mainly because of TPV this period need to be paid

to the philips license and amortisation increased 103734.99 103734 yuan;

Note 4: Retired as a whole other charges the final $23230557.96 increase from the beginning is the company

subordinate company of gGuizhou Zhenhua wing electric appliance co., LTD. (formerly: China zhenhua wing radio

equipment factory), Guizhou Zhenhua Hongyun electronics co., LTD. (formerly: China zhenhua group hongyun

equipment factory) and guizhou Zhenhua Hualian electronics co., LTD. (formerly: China zhenhua group hualian radio

equipment factory) in this issue for the state-owned enterprise restructuring, provision for retired as a whole other

charges in accordance with the provisions of the RMB 23,865,900.00, has used RMB 635,342.04, including current ;

Note 5: The Great Wall Group or consideration of current new merger TP Vision 8,536.97 million was to be paid or

payable for the long-term price increases.

45 Specific item payable

F-105

46.Estimated liabilities

Note 1: The guarantees provided for the end of 6,502,500.00 yuan, Department NEIIC Shanghai subsidiary of China

Electronics Industry Corporation, Shanghai Electric Products Co., Ltd. of China in CLP ITC expects borrowers 6,502,500

yuan credit guarantees provided. China Power International Trade Company has been closed in many years, the

management company wants its cancellation, which is still in the process of handling;

Note 2: The Beginning 35,054,099.00 yuan pending litigation , including 1 ) Cheung Siu Shing Estate Ltd. v. Great

late delivery of information transfer of land disputes , the Great Wall in 2010 the provision of information is estimated

liabilities of $ 29,674,099.00 , and 2 ) SED Electronics the four subsidiary Shenzhen Electronics Co., Ltd. Shenzhen

original equity investment in Union Industrial Investment Co. ( now canceled ) , because due to Huizhou City trading Co.,

Ltd. Anhui Gui 1.8 million yuan loan principal and interest ( as of 2010 January 31 interest 6,456,131 yuan ) has not yet ,

Guangdong Province, Hui County People's Court on October 11, 2009 to ( 2009 ) Hui Min law enforcement plus word No.

4 civil award to a subsidiary of Shenzhen SED Electronics United Electronics Co., Ltd. in Shenzhen Union launched

during the Industrial Investment Co., Ltd. , invested untrue , respond debtor Industrial Investment Co., Ltd. of Shenzhen

City Union debt responsibility on the grounds , ruling Shenzhen Electronics Co., Ltd. is the case the debtor shall be

funded within the scope of 6.4 million yuan untrue executor assume repayment obligations on the application .

F-106

Guangdong Province, Hui County People's Court in October 25, 2010 (2008) Wai law enforcement refers to the word No.

110-5 "Performing ruling" , deduct 1.02 million yuan from the Shenzhen Electronics Co., Ltd. Account and seized their

property under the name of five sets ( in the restructuring before transfer to Shenzhen SED Electronics Group Co., Ltd. ,

but the procedures for transfer ) . Shenzhen Electronics Co., Ltd. based on the remaining repayment obligation that " the

implementation of ruling" that have been seized property should bear the 5.38 million yuan provision for estimated

liabilities ;

Increase of $ 12,571,000.00 is due pending litigation and Past Licensing GmbH & C0.KG company associated with

the presence of a patent dispute, Past Licensing GmbH & C0.KG Company’s attorney to the lawyer's letter sent

ExcelStor Great Wall, ExcelStor Great Wall of compensation requested $ 2,000,000. ExcelStor Great Wall in Charge for

the year of $ 2,000,000 estimated loss. As of the reporting date, litigation is not over yet

Note 3: Product quality assurance, including: 1) a subsidiary of Shenzhen SED Electronics Sang Fei Consumer

Communications Co., part of the goods sold to provide warranty to the end user market and undertakes to repair or

replace the goods of poor performance. Company in accordance with the historical experience of the level of repairs and

replacements, it is expected to confirm the expected warranty claims liabilities. Beginning and ending amount of $

37,956,775.76, respectively, 41,907,377.61 yuan; 2) Kaifa warranty regulations based on product sales accrued product

warranty costs, beginning and ending were 16,154,587.28 yuan, 9,000,722.15 yuan; 3) NEIIC subsidiary Nanjing Huari

LCD display Technology Co., Ltd. at the end of each year by the end of the estimated cost to return the product quality

guarantee, beginning and ending of $ 944,912.68, respectively, 153,205.41 yuan;

Note 4: Other mainly includes: 1) placement of workers NEIIC gold reserve to reduce 4,750,311.53 yuan over the

beginning of the end for the company's subsidiary Vacuum Material Co., Ltd. Nanjing Huadong Electronics reversed

placement of workers set aside funds for the ending balance of $ 3,423,924.00; and 2) the electrical system dismissal

compensation accruals in line with projected liabilities, the beginning and ending of 1,181,997.91 yuan, respectively, of $

1,037,562.53;

Note 5: Loss of the contract to be executed for the period increased by 19,235,126.29 yuan, the Department of

Energy because of the power of the Great Wall because of an important customer bankruptcy liquidation, making their

products a material impairment occurs, the corresponding loss of raw material purchase orders, according to estimates

will be loss provision for estimated liabilities assumed.

47.Other non-current liabilities

48.Paid-in capital

F-107

Note: According to the "Ministry of Finance in 2012 a special central state capital budget (funding) issued a notice on

the China Electronic Information Industry Group Company" (Cai Qi [2012] No. 443), "the Ministry of Finance issued the

China Electronic Information Industry Group Co., Ltd. 2012 central state-owned capital operation budget (funding) notice

"(Cai Qi [2012] No. 455) and the Company's January 15, 2013 Board of Directors resolution (CLP Dong Zi [2013] No. 1),

the Company will receive Treasury central state-owned capital operation budget of the Ministry of Finance of special

central state-owned capital operation budget 1.5 billion yuan into capital, the Company will receive 1.5 billion yuan into

capital funding, the above capital increase has not been verification.

49.Capital reserve

Note 1: The changes in investments in other equity Increase of $ 79,584,103.60, of which the equity method of

Shanghai Hua Hong (Group) Co., Ltd. for the period of capital movements in reserves, the Company pro rata basis with a

corresponding increase in capital reserve of $ 31,034,259.47;

Note 2: Other changes in equity of the investee reduce the period of $ 8,017,431.11, of which: 1) Great Wall of China

to open up its investment management subsidiary company Guilin software company restructuring, subject to long-term

equity investment is adjusted, while reduced capital reserves 6,115,053.20 million. As follows: the Great Wall of China

before the restructuring of the company to develop long-term equity investment management software investment

10,489,053.20 Yuan Guilin, Guilin paid-up capital after the restructuring of the software was changed to 4,374,000.00, so

the first China Great Wall Asset Management Company will explore long-term investment and capital reserve at the same

time reduction of $ 6,115,053.20. 2) Other changes in the electrical unit equity investments accounted for under the

equity method of reducing imports and exports led to the current capital surplus of $ 1,311,378.66; electricity import and

F-108

export subsidiaries in Shenzhen Power Investment Co., Ltd. for the period since the company no longer has to develop in

Hungary control, long-term equity investments accounted for by the cost method to the equity method, the current foreign

currency translation differences recognized in calculating the impact of changes in equity-related capital reserve resulting

in decrease of $ 590,999.25;

Note 3: Increase in available 72,674,779.94 and $ 522,321,175.18 million available to reduce the period of changes

in the fair value of financial assets are sold, the owner changes in equity are included in the fair value of financial assets

Increase 112,492,266.04 yuan, the project owner's equity is included in the related income tax impact of the sale reduce

the tax effects related to the change in fair value of available items held-for-sale financial assets mainly affect

-14,973,967.11; available for sale financial assets during the period change in fair value decrease of $ 56,533,181.94,

owners' equity items related tax effects reduce -3,493,553.50 yuan Department of disposal capacity available for sale

financial assets due;

Note 4: The Company's other increases of $ 119,255,903.44, including: 1) Minority Aiwa Electronics, Great

information, CLP Zhenhua other companies owned enterprises of the capital increase, the acquisition of minority stake in

subsidiary capital reserve changes, so that the Company's capital reserve increase of $ 15,901,845.91; 2) a subsidiary of

CLP Guizhou Zhenhua Zhen Hua Hongyun Electronics Co., Ltd., Guizhou Zhenhua Hualian Electronics Co., Ltd.,

Guizhou Zhenhua Beat electric Co., Ltd., a subsidiary of Beijing China Investor CLP Investor property Limited and

subsidiaries Wall Guilin software company pioneering the period of state-owned enterprise restructuring, according to the

assessment results, such as an increase in capital reserve Tiaozhang 21,113,067.37 yuan; 3) financial allocation of

capital to capital reserve of $ 9,093,170.40, of which Chengdu JJ 4,800,000.00 yuan, a subsidiary of CLP Zhenhua

completion of technology projects carried forward 4,170,722.20 yuan, Beijing Huatai Zhi Bao electronic Systems Ltd

122,448.20 yuan; 4) NEIIC current liquidation of subsidiaries increased by 440,087.36 yuan; 5) Chinese Investor adjust

the revaluation of deferred income tax payable increase capital reserves of $ 72,707,732.40.

Note 5: The Company Other decrease of $ 3,281,947.72, including: 1) Great Wall Information Purchase of minority

interests in subsidiaries to reduce the capital surplus of $ 1,165,265.37; 2) Beijing six academy incubator software

industry this year is no longer limited liability companies included in the consolidation scope reduction of 541,084.13 yuan;

3) TPV shares pay decrease of $ 1,366,216.05;

Note 6: the original system of capital reserves into the reduced end at 1362873.48 yuan, are sander electronic

housing assessment of the investment real estate value-added part of the current year depreciation amount of

sterilisation in the capital reserves.

50.Surplus reserve

51.Retained Profit

F-109

Note 1: Increase the amount of $ 30,121,039.71 to other factors, including: 1) China Electronics Import and Export

Corporation, Chongqing liquidation group received repayments of $ 2,449,313.15 received from liquidation 6,819,522.00

Yuan Jinghua Trust; 2) Shenzhen, China Power Investment electric Co., Ltd. of Shenzhen City Industrial Co., Ltd. to

develop and explore the company's current Hungarian from cost method to the equity method of accounting adjustments

affect the amount of opening retained earnings of $ 4,219,586.87; 3) a subsidiary of Great Wall Guilin pioneering

company in the restructuring process, as assessed changes in owners' equity resulting from pre-audit, evaluation,

verification, restructuring and other items of $ 7,909,344.51; 4) Beijing six academy incubator software industry limited

liability company is no longer included in the scope of consolidation during the year resulted in increase in retained

earnings of $ 1,565,033.28; 5) reversal of previous years, affecting distribution of profits for the year of $ 7,158,239.91, of

which the reversal of 5,454,239.91 yuan Yantai Kexin, China electronic System Engineering construction Co., the second

reversal of 1,704,000.00 yuan.

Note 2: Current Other decrease -43,384,148.55 yuan, of which: 1) the import and export of electricity subsidiary of

China Electronics International Economic Cooperation, Hungary pioneering companies are no longer included in the

scope of consolidation effects of undistributed profits -52,904,621.63 yuan; 2) CLP Zhen Hua Hongyun subordinate

enterprises in Guizhou Zhenhua Electronics Co., Ltd., Guizhou Zhenhua Hualian Electronics Co., Ltd., Guizhou Zhenhua

Beat Electric Co., the state-owned enterprise restructuring capital verification, provision for staff compensation and other

matters affecting the undistributed profits of $ 9,230,032.21 ; and other effects the amount of $ 290,440.87.

52.Operating revenue and operating expenses

F-110

Construction contract amount of revenue recognized in the period of the 10

largest

1)Interest net income

F-111

2)Charges and commissions net income

53 Impairment loss on assets

F-112

Note: Other Impairment losses are mainly loans and advances to financial companies in the electricity provision for

impairment of $ 14,099,800.00, to recover the loan impairment provision in prior years Reversals of impairment losses of

$ 3,336,052.98, and Great Wall Technology long-term prepaid expenses impairment provision of $ 5,497,900.07.

54 Gain or loss from changes in fair values

55 Investment income

Note 1: Investment income from disposal of long-term equity investment 396,489,627.95 yuan , mainly due to : 1 )

the two subsidiaries SED Electronics Shenzhen SED Industry Co., Ltd. to sell its holdings of Shenzhen SED Bao Electric

Co., Ltd. 100% equity recognition of investment income 264,114,902.74 yuan ; 2 ) Epworth electronic sell its subsidiary

Shenzhen Aihua Weighing Limited 45% equity investment income recognized 43,941,364.29 3 ) a subsidiary of

F-113

Shanghai Xin Xin International Investment Limited will hold micro Galaxycore Electronics ( Shanghai ) Co., Ltd. 1.62% of

all transfers of shares investment income 21,646,173.34 yuan ; 4 ) China held in Beijing to sell its software soft Computer

Associates software Technologies Ltd. entire 30% equity , recognition of investment income 6,549,500 yuan ; subsidiary

of the China software soft Technology Venture Capital Co., Ltd. to sell its holdings of Ningbo Science and Technology

Development Co., Ltd. 40% of the soft equity investment income recognized 1,087.06 million. 5) Power Technology

Current dispose of their holdings of equity interest in Hainan Park Xing Real Estate Development Co. , the recognition of

investment income of $ 5,543,401.64 ; 6 ) East China Science and Technology , Nanjing days plus air-conditioning

equipment to sell their equity holdings Limited , has made investments RMB 28.67 million;

Note 2: Investment income from disposal of trading financial assets acquired primarily TPV period due to the

disposal of derivative financial assets;

Note 3: Other items mainly China Electronics Import and Export Corporation financial income 113,221,278.81 yuan;

Note 4: The Company repatriation of investment income is no significant restrictions.

56 Non-operating revenue

Note 1: Profits business combination under common control TPV this year, mergers and acquisitions department

formed two subsidiaries: M & BV70% equity interest in TP Vision Holding, the fair value of the identifiable net assets

acquired was 23,122.80 yuan to pay the transaction price 7,466.67 million in profits 15,656.13 ten thousand yuan

confirmation; M & 3JTech (Xiamen) Co., Ltd. 40.91% stake (previously held 45.45% stake), the fair value of the

identifiable net assets acquired after its acquisition of a total of ten thousand yuan to 7,829.00 combined total cost of

7,301.29 yuan, 5.2771 million yuan of profits is recognized;

Note 2: Other in operating income includes:

Electrical equipment in accordance with the Company "issued term economic

responsibility audit rectification notice" (CLP Choi (2012) No. 127) requirements, and the

resulting relocation compensation houses (Beijing West Street on the 5th hospital

Wanshoulu 3 # F) to 42,696,100.00 yuan accounted for;

F-114

Northeast China's electronic equipment housing companies will jointly share of the

proceeds (at Lake Street, Hung district town purple juncheng estate 7 sets of shops)

10,828,984.00 yuan accounted for;

Great Wall of China Guilin software technology development limited liability company will

share the glory with Guilin Fu Rong Real Estate developers jointly developed the "Wall Garden"

property value of $ 7,812,640.00, net of taxes and operating income of $ 1,226,584.48

6,586,055.52 yuan after crediting;

Huali Computer Corporation v. BOCO Inter-Telecom responsibilities dispute, winning a

total of 2.82 million yuan to obtain full compensation, including: credit losses 1,377,700 yuan,

842,000 yuan investment losses, interest and legal costs 600,300 yuan;

CEC CoreCast Corporation Limited and China Cable Television Network Co.,Ltd Litigation

penalty income 9,873,183.29

Wuhan Cybermart Co., Ltd transferred to cancel the lease contract fine of 800 yuan for

Wuhan Blue Sky Real Estate Development Co., Ltd;

Shenzhen Sang Fei Consumer Communications Co., Ltd., China Electronic Appliance

Shenzhen Co., Ltd., China National Electronics imp.& exp. Beijing CO., LTD and other

companies will be unable to pay the company's 24.4328 million into operating income.

57 Non-operating expenses

Note 1: The Great Wall of loss contracts are a subsidiary of Great Wall Computer and perfect galaxy energy loss

provision for inventory procurement contracts;

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Note 2: Other non-operating expenses include:

The electric system due to No.285 land Hezuo Road, Shijiazhuang due to be resumed this year due to the

relocation of the carrying amount of the asset and the related expenses incurred total losses of RMB 16,427,840.97;

CEACSZ East China company current taxes actually paid late fees of $ 4,028,140.00. East China Company in

1999, has received Beijing lasting Trading Company, Yinchuan Yinke Trade Co., Ltd. Shenzhen Sancao Industrial Trade

Co., Ltd. and Beijing Huahui Economic and Trade Co., Ltd issued a GH-Fusion 100 parts belong false VAT invoices

invoices according to the Shanghai Branch of the State Administration of Taxation and the seventh seventh Shanghai

local Taxation Bureau issued the Shanghai tax seventh protracted character of the [2002] No. 004 tax treatment of the

written decision, VAT shall not be deductible above invoice relates, Total should make tax 14,420,183.91 yuan. After

several years of gradual repayment, as of December 31, 2012, the Company's total outstanding taxes of $ 5,155,009.11

on these matters;

China Reida resolve and settle with Beijing Lantao Property Management Ltd. (referred to as the Lantao company)

about Beijing Wan Hung Road, Chaoyang District 5 Property Dispute confirmed 31,370,175.64 yuan operating expenses,

including the Beijing Municipal Higher People's Court civil mediation (2011) Gao Min Zhong Zi No. 2634, the company

solve and settle the dispute shall pay the Lantao company 's 40,000,000.00 yuan; recover the company's assessment of

the Lantao company center assets assessment by Beijing Co., Ltd. at a price of $ 9,071,018.00 All real estate,

assessment center Appraisal Report No. (2012) No. 061; sides agreed paid by the company to profit or loss during the

Blue Wave's transition 2,000,000.00 yuan, and the company enjoys the vesting period of transition and commitment of $

1,754,905.15 actual operating income, operating expenditures of $ 196,098.79;

CLP Panda and the Great Wall Group damages, liquidated damages and penalty expenses 14,287,245.45 yuan.

58 Income tax expenses

59 Other comprehensive income

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(LXII) Share-based payments

1. Overall share-based payment

2. Equity-settled share-based payments

2. PV Movements in the number of outstanding share options and their related weighted

average exercise prices are as follows:

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Number of shares vesting

Note 1: These options are exercisable at HK $ ($ 0.74) per share 5.750, on December

11, 2012 expiration. During the year, of which 530,000 shares (2010: 690,000 shares)

vesting termination of employment due to certain employees and failure.

Note 2: These options are exercisable at HK $ 5.008 ($ 0.64) per share, exercisable in

four tranches: the January 18, 2012 to January 17, 2021, January 18, 2013 to 2021 On

January 17, January 18, 2014 to January 17, 2021 from 18 January 2015 to January 2021

and 17, respectively, and to be 20%, 50%, 75% and 100% of the maximum percentage of

options exercisable to subscribe for shares of the Group. During the year, 4,000,000 shares

vesting termination of employment due to certain employees and failure.

(LXIII) Debt restructuring

1) Debtor disclosure

2) Creditors disclosure

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(LXIV) Borrowing costs

(LXV) Leases

1. Operating lessor of various types of leased assets

2. Information Disclosure lessees under finance leases and finance leases

related.

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The year after the payment of the minimum lease payments

Operating leases operating lease the lessee to disclose material information

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2. Current acquires or disposes of the relevant circumstances of subsidiaries and

other business units

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3. Cash and cash equivalents

IX. Contingencies

1. Guarantees

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Note 1: On October 8, 1994 CITIC Industrial Bank, Beijing Branch (hereinafter referred to as "China CITIC Bank")

and Beijing Wanhengtong Electronics Co., Ltd. (hereinafter referred to as "Wanhengtong") signed the "issuing import

agreement," agreed CITIC Bank is open 360 days Wanhengtong long-term credit, the agreement after receipt of CITIC

Bank letter of guarantee issued by the company to take effect. October 10, 1994, a pair of Finance Director of CLP and

export without authorization in the name of the Company to CITIC Bank issued "guarantees" to provide unconditional

irrevocable guarantee for the above agreement, warranty is in addition to all the open outside the issuing margin card

payments. Wanhengtong failed to repay after issuing payments, CITIC Bank has passed Wanhengtong affiliates

repayment of most debts. If CITIC Bank filed a lawsuit against the company, may have some impact on the company;

Note 2: Shanghai International Trade in electricity companies have closed down for many years, the management

company of its intention to cancel, still go through the process. NEIIC subsidiary of Shanghai Electric Products Co., Ltd.

is the loan contract with the Shanghai International Trade Company in 2000 signed jiangpu bank guarantee, the amount

of 4.05 million yuan contract interest rate 6.045%. 2001 Shanghai Yangpu District People's Court Civil Judgment (2001),

Yang Jing Chu Zi No. 630, ITC ruling Repayment, property companies jointly and severally liable. According to the actual

situation and the judgment of the Court of International Trade Company, is expected to lose 4.05 million yuan, 607,500

yuan paid in 2009, and 3,442,500 yuan left;

Note 3: Chinese electronics industry companies and property companies in Shanghai International Trade Company

September 27, 2001 obtained from the Shanghai branch of China Merchants Bank, $ 3.6 million of Contract Amount,

6.435% guaranteed interest rate of Short-term loans. Shanghai Hongkou District People's Court Judgement (2002) No.

190 Rainbow Man II (suppliers) early word Repayment ITC ruling, property companies and Shanghai company jointly

and severally liable. 2009 Shanghai company to pay 540,000 yuan, 3.06 million yuan left;

Note 4 : China Electronic Materials Corporation, a subsidiary of China Electronics Materials Northwest and

Northwest China Aviation Industry Supply and Marketing Company each other's bank loan guarantee and guarantee

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each other borrowers are overdue bank loans have been transferred to the China Great Wall Asset Management

Corporation Xi'an Office ( hereinafter referred to as : Wall assets of the company ) . December 23, 2007 the company

commissioned by the China Electronic Materials Corporation Electronic Materials Beijing China Great Wall Asset signed

with " packaged debt transfer contract" to 21.8 million price to buy the company and the China Aviation Industry Supply

and Marketing Northwest overdue loans, debt purchase includes northwest Great Wall Asset loans owed principal and

interest 2,442.26 ten thousand yuan ; northwest China Aviation Industry supply and Marketing Company Great Wall

Asset loans owed principal and interest 6,223.80 million. After January 30, 2008 the company signed an agreement with

China Aviation Industry Supply and Marketing Northwest, Northwest China Aviation Industry Supply and Marketing

Company to repay China Electronics Materials Beijing company 5.5 million yuan of principal and interest payments, not to

pursue Northwest China Aviation Industry Supply and Marketing Company's liability. In 2008 the company has received

the Northwest China Aviation Industry Supply and Marketing Company paid 5.5 million Yuan.

2. Litigation Matters

1) Import and export

Case detail

Against thisare additional shareholdercapital contribution

RMB 34,820,500

USD $8.5 million

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Case detail

2) Great Wall Info Industry Co., Ltd.

In May 2007, Great Wall Info Industry Co., Ltd. listed rights of usage of State-owned

land located in 161 Yuhua Road, Yuhua District, Changsha in Changsha Land Exchange

Center through Changsha Municipal Bureau of Land and Resources. Xiamen Sheng Li

Yuen Investment and Development Co., Ltd. and Shanghai Zhaorui Investment and

Development Co., Ltd. jointly bought the land at a price of Rmb 466 million. On 21st, June

2009, Changsha Zhao Sheng Real Estate Co. sued Great Wall Info Industry Co., Ltd. and

Changsha Municipal Bureau of Land and Resources for the delivery of three pieces of land

as well as Rmb 143.994 million compensation for breach of contract.

In December 2010, Great Wall Info Industry Co., Ltd. received the first instance

judgment, requiring Great Wall Info Industry Co., Ltd. to pay interests of 70% of the occupied

fund (the price of the land, Rmb 466 million, as the base and similar loan rate published by

People's Bank from 30th, October 2008 to 7th, May 2010 as the interest rate), the price of

court costs is Rmb 3,086,800.00, attributed to Great Wall Info Industry Co., Ltd. Rmb

2,160,760.00 and Changsha Zhao Sheng Real Estate Co. Rmb 2,160,760.00

Both sides appealed within appealing period, Great Wall Info Industry Co., Ltd. set

aside provisons of Rmb 29,674,099.00 for this lawsuit in 2010.

3) China Integrated Circuit Design Corp., Ltd.

On 14th, March 2012, the plaintiff, Quan Xin electronic technology (Shenzhen) Co., Ltd,

sued two of CEC Huada Electronics Design Co., Ltd's subsidiaries, which were Nanjing Wei

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Meng Electronics Inc and Shenzhen Jin Hui Xin Technology Co., Ltd, to intermediate

people's court of shenzhen municipality, appealing the defendants to cease the infringing act

of its exclusive right of layout-design of integrated circuits as well as to destruct the infringing

products. The plaintiff also asked for Rmb 3 million compensation for infringing acts. Up to

the financial reporting date, the case was under identification

4) Great Wall Technology Co., Ltd.

(1) In September 2012, one subsidiary of the company, Shenzhen Great Wall

development Polytron Technologies Inc, sued Wuhan Hui Fulin Technology Co. Ltd. to

People's court of Futian District, Shen Zhen, appealing the defendant to pay Rmb

441,000.00 unpaid bills. Up to 31st, December 2012, the court had not sentenced.

(2) In April 2012, En Da Technology Co., Ltd. sued China Machinery Engineering Co.,

Ltd. to pay USD 369,547 bill, and appealed its subsidiary, Shenzhen Great Wall

development Polytron Technologies Inc, to bear the joint liability. Up to 31st, December

2012, the court had not sentenced.

(3) In December 2008, one third party plaintiff in the USA sued Guanjie Technology Co.

Ltd. and a joint venture company as well as other third party companies. The plaintiff

appealed for the compensation for the tort of the patent rights (the rights for manufacturing

of computer screen: Patent I).

The director of Guanjie Technology stated that the result of the arbitration cannot be

assessed since the procedure was still pending.

(4) In January 2009, one third party plaintiff in Germany sued Guanjie Technology Co.

Ltd. and a joint venture company as well as other third party companies. The plaintiff

appealed for the compensation for the tort of the patent rights (the rights for manufacturing

of computer screen: Patent II).

In the case, the plaintiff mainly claimed:

Guanjie Technology and its joint venture company manufactured, used, led to use,

and tried to sale, import or led to import the product with Patent II in Germany, so as to

infringed, promoted and contributed to infringement of Patent II.

This infringement activity led and continued to led the plaintiff company loss of profit,

until the court issued an injunction, prohibiting the defendant's further violations of the

relevant patent.

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The director of Guanjie Technology stated that the result of the arbitration cannot be

assessed since the procedure was still pending.

(5) In July 2010, one third party company sued Guanjie Technology in the USA court.

The case was based on compensation clauses in an agreement signed by all parties.

The director of Guanjie Technology stated that the result of the arbitration cannot be

assessed since the procedure was still pending.

(6) In July 2010, one third party plaintiff in the USA sued Guanjie Technology Co.,Ltd

and a joint venture company as well as other third party companies. The plaintiff appealed

for the compensation for the tort of the patent rights (the rights for manufacturing of

television: Patent III).

In the case, the plaintiff mainly claimed:

Guanjie Technology and its joint venture company infringed, promoted others to

infringe the patent of Patent III.

This infringement activity led and continued to led the plaintiff company loss of profit,

until the court issued an injunction, prohibiting the defendant's further violations of the

relevant patent.

The director of Guanjie Technology stated that the result of the arbitration cannot be

assessed since the procedure was still pending.

(7) In 2010 November, a natural person appealed to USA court, claiming for the

compensation of personal injury caused by asbestos contained in products made by

Guanjie Technology.

The director of Guanjie Technology stated that the result of the arbitration cannot be

assessed since the procedure was still pending.

(8)In August 2011, a third party Plaintiff Company appealed to America court to

prosecute Guanjie Technology and a joint venture and other third party companies. The

case was about the patent litigation, which the plaintiff company registered in America (TV

integrated circuit technology: "Patent IV").

The director of Guanjie Technology stated that result of the arbitration cannot be

assessed since USA International Trade Commission has opened another investigationon

an appeal from the same subject,the procedure of the case was automatically terminated.

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(9) InJanuary 2012, America International Trade Commission started an investigation

based on the case which a third party plaintiff sued Guanjie Technology and its associated

enterprises and other third party companies. The casewas about the patent for the plaintiff

company registered in USA (TV integrated circuit technology: "patent IV") was infringed.

In the case, the plaintiff mainly referenced:

Guanjie Technology and a joint venture and other third party sold in American

territory, imported and sold televisions through importation which were direct invaded

"patent IV";

The plaintiff requested the permanent banning for all the accused TV from importing

into American, and appealed for a temporary order to cease and desist all business

behavior related to imports of infringing products.

The director of Guanjie Technology stated that the result of the arbitration cannot be

assessed since the investigation was still in the beginning stage.

(10) Due to the patent dispute with Past Licensing GmbH&C0.KGcompany, the

lawyers of Past Licensing GmbH&C0.KGcompany sent a letter to Yi Tuo Great Wall, asking

for compensation ofUSD 2 million. Yi Tuo Great Wall set aside a provision of USD 2 million.

Up to the report date, the litigation was not over yet.

5) China Electronic Systems Engineering Corp.

1 The dispute of Yunnan Tianda photovoltaic Co., owning China Electronic Systems

Engineering Corp. Branch Two the construction payment.

In 2009 Yunnan Tianda photovoltaic Co. Ltd signed " fabrication and installation of

phalanx fixed support contract" and "matrix inversion step-up device installation and

commissioning contract" with China Electronic Systems Engineering Corp. Branch Two, in

relating tothe first stage construction of solar photovoltaic grid experimental demonstration

power plant (demonstration) in Kunming Shilin, the formal acceptance was completed on 30,

April 2010,the account was settled on 28th, December2011 and the total amount was Rmb

16,157,801.54. Up to now, Yunnan Tianda photovoltaic Co. Ltd has paid Rmb 8,863,586.15,

the amount of unpaid bill was Rmb 7,294,215.39. After several friendly consultations with no

avail, China Electronic Systems Engineering Corp. Branch Two submitted pleadings and

application for property preservation of Rmb 7,782,715.39to the Yunnan province Kunming

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City Intermediate People's court based on "contract law" and "construction project cost

settlement procedures" on 29th, December 2012, the court has accepted the caseand made

the preservation on 4th, January 2013. Yunnan Tianda photovoltaic Co. Ltd then pay Rmb 3

million to China Electronic Systems Engineering Corp. Branch Twoon 6th, January 2013, up

to the report date, the case is pending.

(2) Dispute of right of Insurance Subrogation between the Peoples Insurance Company

of China Shanghai branch and China Electronic Systems Engineering Corp. Branch Two

China international economic and Trade Arbitration Commission, Shanghai branch

company made (2008) Chinese CIETAC arbitration No. 237 on 28th, November 2008,

according to the "installation contract" signed by Shanghai SVA NEC liquid crystal display

Ltd and China Electronic Systems Engineering Corp. Branch Two, and "share transfer

agreement" issued by Shanghai SVA NEC to PICC Property Shanghai branchNovember 28,

holding China Electronic Systems Engineering Corp. Branch Two pay damages and

overdue interest Rmb 13,026,509.34 in total. China Electronic Systems Engineering Corp.

appealed against this decisionto the Wuxi intermediate people's court for refusing to execute.

On 30th, March 2011 Wuxi intermediate people's court held, disallowing execution of an

arbitral award, effective immediately.

In April 2011 PICC Property Shanghai branch sent a litigation request to Shanghai

Minhang District people's court, which was transferred to Shanghai first intermediate

people's court afterwards, appealing for the compensation for the loss of property and

relative interest on a total amount of Rmb 22,300,801.11. On 21st, June 2012, the court held

that China Electronic Systems Engineering Corp. Branch Two had to pay Rmb

18,311,888.11 compensation in the first trial. China Electronic Systems Engineering Corp.

Branch Twoappealed against the sentence to the Shanghai Higher People's Court on 10th,

July 2012.The case is still pending. This year, China Electronic Systems Engineering Corp.

Branch Two, according to the present situation, confirmed Rmb 5,285,378.77 debt, while the

cumulative amount of debt is Rmb 18,311,888.11.

6) Shenzhen SED Industry Co. Ltd

Since Shenzhen Industrial Union Investment Limited (now cancelled), the original

investor ofShenzhen Electronics Co, which was the subsidiary of Shenzhen SED Industry

Co.,Ltd, owed Huizhou Wan GUI trade limited company Rmb 1.8million loan principal and

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interest (as of 31st, January 2010, the amount was Rmb 6,456,100 of interest) and has not

paid, Guangdong Huilai People's court made (2009) HUI FA MIN ZHI JIA No. 4 civil award,

holding that since Shenzhen Electronics Co., funded falsely while investing Shenzhen

Youlian Industrial Investment Co., Shenzhen Electronics Co. ought to bear the liabilities of

Shenzhen Youlian industrial investment limited and to be the executed party in this case,

bearing the liability of repayment within the amount of false capital, Rmb 6.4 million to the

appellant. On 25th, October2010, Guangdong Huilai People's Court deducted Rmb 1.02

million from the Shenzhen Electronics Co. Ltd's account, and seized five set of housing

under its name (already transferred to Shenzhen SED Electronics Group Co., Ltd., but did

not finish the procedures). Shenzhen Electronics Co. Ltd. booked Rmb 5.38 million

provisions for remaining liabilities of the seizure according to the "book".

7) Nanjing Electronics Information Industrial Corporation

(1) Nanjing electric panda properties Ltd, a subsidiary of Nanjing Electronics

Information Industrial Corporation, faced lawsuits this year. One customer, Zhu Changlong,

appealed to the Xuanwu District Jin Cun Court, Nanjing in March 2012, appealing for the

cancellation "Nanjing commercial housing the pre-sale contract", returning the payment of

the house, as well as compensation for the loss of interest, rent fee, consulting fee, litigation

cost, property costs and other related costs, since the purchased commercial housing was

not suitable for living and had quality problems.Up to31st, December 2012, the case is

pending.Due to the difficultyof forecasting the trial results and impact to Nanjing electric

panda’s properties Ltd, the company did not confirm provisions.

(2) On 29th, August 2012, Nanjing Dingxin Long Electrical Technology Co., Ltd. sued

Nanjing CLP panda touch display technology Co., Ltd, a subsidiary of Nanjing Electronics

Information Industrial Corporation, for returning the matured loan Rmb 38,000.00 and

litigation cost Rmb 375.00. Nanjing Qixia District People's court has accepted the case. Up

to31st, December 2012, the case is pending.

(3) Shanghai Electric World Trade Company (hereinafter referred to as the "World

Trade company") to obtained short-term loan from the Shanghai branch of China Merchants

Bank on 27th, September 2001. It is agreed in the contract that the capital amount wasRmb

3.6 million with annual interest rate 6.435%. Chinese electronic industrial Shanghai

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company and Shanghai electrical products Co. Ltd. (hereinafter referred to as "products

company") , which were both subsidiary companies of Nanjing Panda Electronics Company

Limited provided security for the loan. After the expiration of the contract, World Trade

company could not afford to repay the loans. In Shanghai Hongkou District people's court's

verdict "(2002) Hong Min II (business) Chu No.190", it judged World Trade company to

repay the loan,Chinese electronic industrial Shanghai company and Shanghai electrical

products Co. Ltd. bore joint liability. Therefore Chinese electronic industrial Shanghai

Company confirmed Rmb3.6 million provisions. In 2009 China electronic industrial Shanghai

company repaid Rmb 0.54 million, the repayment was not occurred in year 2010, 2011 2012.

Up to 31st, December 2012, the outstanding amount was Rmb 3.06 million.

(4) Shanghai Electric World Trade Company (hereinafter referred to as the "World

Trade company") to obtained short-term loan from Bank of Shanghai Jiangpu in 2000. It is

agreed in the contract that the capital amount wasRmb 4.05 million with annual interest rate

6.045%. Chinese electronic industrial Shanghai company and Shanghai electrical products

Co. Ltd. (hereinafter referred to as "products company") , which were both subsidiary

companies of Nanjing Electronics Information Industrial Corporation provided security for

the loan. After the expiration of the contract, World Trade company could not afford to repay

the loans. In Shanghai Yangpu District people's court's verdict "(2001) Yang JingChu

No.630", it judged World Trade companyto repay the loan,Shanghai electrical products Co.

Ltd. bore joint liability. Therefore Property Company confirmed Rmb4.05 million provisions.

In 2009 property company repaid Rmb 607,500.00, the repayment was not occurred in year

2010, 2011 2012. Up to 31st, December 2012, the outstanding amount was Rmb

3,442,500.00.

(5) Longgang JINGWAH Electronics Co., Ltd. (hereinafter referred to as the

"Longgang JINGWAH"), a wholly owned subsidiary of JINGWAH electronic Limited, which is

a subsidiary of Nanjing Electronics Information Industrial Corporation, signed a mold

processing contract with Jiangsu kingnation electronic Molding Co. Ltd. (hereinafter referred

to as the "Jiangsu Kaizhi") on 23rd, July 2009, agreeing Shenzhen JINGWAH plastic limited

company to sell mould to Jiangsu Kaizhi. In 2011 the Jiangsu Kaizhisued JINGWAH

electronic Limited to the courts, appealing for Rmb 900,000.00 compensation for its losses

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caused by quality problems of the mould. Longgang JINGWAH has signed an agreement in

2012 with the Jiangsu Jinmao law firm, transferring risk and returns of Shenzhen JINGWAH

Internet electronic limited company'sRmb 426,253.59accounts receivable of Jiangsu

kingnation electronic Molding Co. to Jiangsu Jinmao law firm. The law firm was granted the

right to claim for the account from Jiangsu Kaizhi, and promise not to held responsible of

JINGWAH Internet Electronics Co., Ltd. and Longgang JINGWAH.

8) Eleventh Institute of Electronic

On 8th, December 2007, HuiHuang silicon energy (Zhenjiang) Co., Ltd. signed

construction contract with Chengdu Ai De Company, agreeing Chengdu Engineering

Limited to contract the installation and construction work of ingot plant water system,

compressed air and argon system of No. 9 building. On 28th, July 2009, HuiHuang silicon

energy (Zhenjiang) Co., Ltd. was absorbed by Zhenjiang huaantai Silicon Technology Co.,

Ltd. On 18th, August 2010, water leakage accident caused by flange cracking of circulating

cooling water pipein the ingot plant water systemof Zhenjiang huantai Silicon Technology

Co., Ltd. No. 9 building caused loss on casted silicone material, processing fee and

processing fees of on-line coating in a total amount of Rmb 7.38 million. Zhenjiang huantai

Silicon Technology Co., Ltd. and Peoples Insurance Company of China Wuxi branch

commissioned Shanghai failure analysis and safety evaluation center to make"Failure

analysis report ", in which stated that the reason of cracking is that the chemical composition

did not meet the requirements of 304 stainless steel technology, made its corrosion

resistance decreased, resulting in susceptibility to intergranular corrosion, intergranular

corrosion cracking in the role of the media, resulting in leakage. Since Zhenjiang huantai

Silicon Technology Co., Ltd. bought insurance for all properties from Peoples Insurance

Company of China Wuxi branch, the amount of compensation for the accident was

determined Rmb 4.4 million after consultation between the two sides, Zhenjiang huaantai

Silicon Technology Co., Ltd. issued a certificate for equity transfer to Peoples Insurance

Company of China Wuxi Branch. Peoples Insurance Company of China Wuxi branch and

sued Chengdu Engineering Limited for Rmb 4.4 million compensation, and apply for the

property preservation to the people's court, Zhenjiang City Intermediate People's Court

freezed Rmb 5 million bank deposits on the account of Chengdu aide Engineering Limited.

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Up to the financial report date, the case was in process of the first trial.The first

exchange of evidence was conducted, formal trial has not begun.

3. Other Contingencies

1) China National Electronics Import & Export Corp.

At 03:30, 4th, December2011, "Jinshanling" ship, which was belonged to China

National Electronics Import and Export Corporationsank accidentally, the maritime

department implemented compulsory removal of "Jinshanling", in accordance with article 40

of "the people's Republic of China Maritime Traffic Safety Law" .China Electronics Import

and Export Corporation confirmed liquidation of fixed assets on the ship on 31st, July 2012 .

On 24th, November 2011, Chinese Electronics Import and Export Corporation insured

for this property from Peoples Insurance Company of China, the period was one year, from

24th, November 2011 to 23rd, November2012, the value of the insurance was Rmb 24

million.The insurance fee wasRmb 180,000.00, The insurance note indicated that the

insured party was Zhejiang HeYi shipping Limited, the first beneficiary was China

Electronics Import and Export Corporation.the relevant insurance compensation could only

be applied after the identification made in the report by Marine Bureau issued identification

report.

2) CEC CoreCast Corporation Limited

Up to 31st, December 2012, CEC CoreCast Corporation Limited had outstanding

guarantee of Rmb 1,102,415.00 and outstanding credit of USD 23,847,293.42.

3) The Eleventh Electronics Design & Research Institute of IT Co., Ltd.

Up to 31st, December 2012, The Eleventh Electronics Design & Research Institute of IT

Co., Ltd. had outstanding guarantee of Rmb 69,445,196.00 in The third branch of Chengdu

City China Construction Bank Corpand outstanding guarantee of RMB 82,897,972.89 in

Bank of China Sichuan Province Branch.

4) China Electronic Systems Engineering Corp.

China Electronic Systems Engineering Corp. signed "loan restructuring agreement"

with Chinese Import & Export Bank; the company was the guarantor of the agreement. The

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agreed amount of the principle was Rmb 253.2 million, which was the total amount of capital

and interests of previous loan, and the interest rate was 3.51%. China Electronic Systems

Engineering Corp. mortgaged the usage right of land with a building attached located in

No.8 Xiaotun Road, Fengtai District, Beijing, the total area of which was 9509.055 m².

According to the contract, the loan ought to be returned before Aprail 2007. Up to 31st,

December 2012, the loan has expired.

The loan stated above was used for Saudi Arabia project, the detailed massage is in

Note 10-1

5) CEC Zhenhua

Up to 31st, December 2012, the company owned commercial acceptance bill, which

was endorsed or discounted but not matured, of Rmb 23,420,825.50.

6) China Electronics Financial Co., Ltd.

Up to 31st, December 2012, the outstanding amount of guarantees that China

Electronics Financial Co., Ltd. provided for the project of the company was Euro 936,700.00,

the total guaranteed amount was Euro 1.5 million, and the expiration date is March 2033.

On 31st, December 2012, China Electronics Financial Co., Ltd. issued guarantee letter for

Beijing electric Ruida Electronics Technology Co. Ltd., Wuhan Zhongyuan Electronic

Information Company, Great Wall Internet system application Co. Ltd. and Shenzhen

Huaming Computer Co. The amount of the guarantee was Rmb 17,899,418.63.

X. Events subsequent to the balance sheet date

1. The parent company

(1) According to the “reorganization notice of China Electronic Information Industry

Group Co., Ltd. and the rainbow group"(state owned assets supervision and administration

reform No. [2012]1174), issued by state owned assets supervision and Administration

Commission of the State Council on 31st, December 2012, the rainbow group integrated

into the company for free, and it will be included in the consolidation range of the

consolidated financial statements since 1st, January 2013.

(2) On 18th, March 2013, the company and China Inport & Export Bank signed "loan

repayment agreement" (CLP (property) in [2013] No. 28), regarding to the Rmb 198 million

principle and related interest under "loan restructuring agreement" signed by three parties in

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June 2012, in which agreed exemption of the interest payable, compound interest and

punitive interest from loan restructuring date, June 2012, to the date of validation of this

agreement. China Electronic Systems Engineering Corporation would pay Rmb 198 million

principle by three installment within two years, (return Rmb 60 million within 10 days after

validation of this agreement, Rmb 70 million within one year and the remaining part within 2

years, the company continued to bear joint guarantee of the liability.

2. China Electronics Technology Development Co. Ltd.

One subsidiary of China Electronics Technology Development Co., Ltd, Beihai

Industrial Park Development Co. listed 50% of held shares of Guangxi electric future

investment properties Co at Rmb 141,410,000.00 on 17th, December 2012. On 28th,

January 2013, the listed notice expired, Guangxi Pu Fang Cci Capital Ltd was the only

company tending to accept, and the process of capital change is still pending.

3. China Software

(1)Through its subsidiary which isChina Software Information services Ltd. in 2013 for

the first time of shareholders' meeting, China Software Information Services Limited

registered capital decreased from 10,000.00 million to 9,620.00 million, the decrease parts

as four individual shareholders’second phase of the registration subscribed capital,

Company holds 100% equity interest after change,China software Information service Co.,

Ltd. has been completed the change of business procedureson March 8, 2013.

(2) on January 7, 2013 Board of Directors considered and approved on the company

complies with the conditions of non-public offering of stock motion, to be non-public offering

of A shares, the non-public offering is expected to raise funds not exceeding 65,000.00

million, earmarked for the China software Golden Tax core business platform to promote R

& D projects with tax and corporate services to expand the China software information

security and cloud services capabilities to enhance data security product development and

industrialization projects, the non-public offering of shares still need the approval by China

Securities Regulatory Commission.

4. Great Wall Technology

February 2013, It is reported from Shenzhen CEC Great Wall Energy Limited ("Great

Wall energy") was informed that it received a notification letter from Bankruptcy Court: In

F-135

view of the proposed reorganization parties interested in price of buying the assets from

Saikang but application failed to obtain consent from creditor banks, Saikang applicant to

the bankruptcy court hearing, court agreed with the original Saikang bankruptcy protection

procedure (according to Chapter 11 bankruptcy law)itturns into bankruptcy liquidation

(Chapter 7 bankruptcy Law press). Subsequently, Saikang's assets will be handed over to

the trustee of assets under management.

5. CEC Panda

January 16, 2013, a subsidiary of CEC Panda which is CEC Nanjing Electronics

Information Industrial Corporation sued Shanghai Huadong Electronics Lighting Company

Limited (hereinafter referred to as "Huadong Electronics Lighting") payment of 313,369.00

Yuan and the corresponding interest payment of 48,034.00 Yuan, litigation costs borne by

the defendant. Shanghai Hongkou District People's Court has accepted, it is currently in

pre-litigation mediation stage, it has been pending. Huadong Electronics Lighting Limited is

a customer of a subsidiary named Nanjing Huadong Electronics Specialty Lighting Co. Ltd

of CEC Panda (hereinafter referred to as " Huadong special light "), the Huadong

Electronics specialty lighting is canceledcurrently , Provision for bad debts of Huadong

Electronics Lighting is transferred to CEC Panda lighting Limited. Currently the case is still

pending; the amount of loss cannot be expected, the amount based upon the original

amount of provision for bad debts.

6. Zhenhua Technology

According to resolution of 7thmeeting of 6th termsBoard of Directorsfor Zhenhua

Technology held on February 6, 2013, Company intends number of non-public offering of no

more than 170 million shares of stock, its parent company China Zhenhua Electronics

Group Co., Ltd. Owned 100% stock right to Red Cloud Electronics, Appliances Heroes,

Hualian Electronics and Xintian Power and some cash to subscribe for its involvement, no

more than nine other specific investors to subscribe in cash. Raise cash to invest in

multilayer chip inductors production capacity transformation projects, organic and bottom

electrode chip tantalum capacitor production line construction project, the film chip resistors

production line construction project and lithium-ion battery production line technological

transformation projects, such as the four expansion projects and supplement business

F-136

capital. The non-public offering of shares still needs approval by China Securities

Regulatory Commission.

XI. Related parties and related party transactions

1.Parent company information

2. Subsidiary information:

See note VII- 1Preparation of consolidated financial statements.

3. Joint ventures and associated undertakings information:

See noteVIII-15-Long-term equity investment.

4. Other related party of the enterprise

F-137

5. Related party transactions

1 On selling goods

F-138

2 On purchasing materials

F-139

(3) Other transactions

(4) Unsettled payment

F-140

F-141

XII. Commitment Issues

1. Great Wall Information

March 25, 2012, 15th meeting of 5th terms of Board of Directors get through plan for the

subsidiary guarantees , August 29, 2012, 17th meeting of 5th terms of Board of Directors get

through to adjusting the subsidiary guarantees a resolution. September 14th 2012, the company

held first Extraordinary General Assembly considered and approved the proposal on adjusting

for the subsidiary guarantees. It agreed to provide guarantees to entire three hundred million

Yuan for Hunan Great Wall Information Financial Equipment Co. Ltd for one year. Provide

financing guarantees fifty million Yuan entire term of one year for Changsha Xiangji sea-Shield

Technology Co. Ltd. Provide financing guarantees fifty million Yuan entire term of one year for

F-142

the Hunan Great Wall Medical Technology Co. Ltd. Guaranteed two hundred million Yuan

financing the entire term of three years for Changsha CEC software Park Co., Ltd. Mainly for

financing working are capital loans, project loans, issuance of bankers' acceptances and letters

of credit and guarantees. At the end of December 31, 2012, the actual amount of the guarantee

is 9,001 million.

1. Sander electronic

As of December 31, 2012, SED electronics subsidiary company of the SED Wuxi Real

Estate Development Company Limited and its subsidiaries Wuxi Fuda Real Estate

Development Company Limited has already signed the terms of the large contract awarding

contract spending a total of 89085476.19 RMB ten thousand Yuan , details are as follows:

2. Great Wall Technology

have been concluded not to perform or not completely perform foreign investment

contract and related financial expenditure

Up to December 31, 2012 Great Wall computer still have signed a contract but did

not pay the provisions of the major foreign investment spending a total of 141,15.35 million

yuan details are as follows

2. Large contract awarding contract that is preparing to perform or has been

concluded

1 Up to December 31, 2012 the large contract awarding contract spending that has

been signed but not paid of The Great Wall computer added up to 526, 26, ten thousand

yuan,

F-143

details are as follows

(2) Up to December 31, 2012 the large contract awarding contract spending that has

been signed but not paid of The Great Wall development added up to 526, 26, ten thousand

yuan,details are as follows

3.Leasing contracts which have been signed or is ready to fulfill and its financial

impact of each of the Group's office

4. CEC-Panda

1 Operating lease commitments

According to the irrevocable operating lease contracts have been concluded Future

minimum lease payments are summarized as follows

F-144

(2) Capital spending commitments

(3) Conventions large construction contract expenses

XIII. Other important matters that need to be disclosed

1) Great Wall Group

(1) Shenzhen ExcelStor and HongKong ExcelStor were termination of the cooperation with

Hitachi Global Storage Technologies in 2008. Shenzhen ExcelStor and HongKong ExcelStor

began to clean up the underlying assets and large-capacity storage devices (HDD) business,

debt and staffs from 2008. Production and management has basically stopped due to 2009,

Shenzhen ExcelStor has entered liquidation proceedings in 2012. HongKong ExcelStor

expected to liquidation begins in 2013.

(2) According to the China Banking Regulatory Commission through that" the General Office

of China Banking Regulatory Commission about the Great Wall of China financing company

license issues related notice " (Bank Supervision [2005] No. 2), Great Wall of China financing

company was not reached requirements of " financing companies management approach", the

new certificate does not have the redemption conditions, and therefore cannot carry out financial

activities. Previous years have been full impairment of long-term investment is not included in the

scope of consolidation. According to the China Electronic Information Industry Group Co., Ltd.

,through "Great Wall of China Finance equity ( capital contribution ) free transfer issues

instructions" ( CEC -owned [ 2010 ] No. 509 ) , the State-owned Assets Supervision and

Administration Commission , " The Great Wall of China state-owned property financing company

free transfer issues related to approval " (State property right[ 2011 ] No. 21) and the " Great Wall

F-145

of China Banking Regulatory Commission on China financial corporate debt restructuring plan

and share transfer matters approved " ( Yin Jian Fu [ 2011 ] No. 59 ) and other documents , the

Great Wall a subsidiary of China Great Wall Group will transfer 100% of property rights to China

Railway Construction Corporation . Company has completed the change of business procedures

on March 28, 2012 and related transformation will complete within this year.

2) China Electronic Import and Export Corporation (CEIEC)

"Jinshanling" which is subordinate to China Electronics Import and Export Corporation sink

the ship since the accident occurred at 03:00am on December 4, 2011. According to the

maritime sector basis on "Maritime Traffic Safety Law" for relevant provisions of Article 40,

Maritime Sector was salvage Clear "Jinshanling" with coercive measures, China Electronics

Import and Export Corporation Fixed asset in liquidation processing for "Jinshanling" on July 31,

2012.

3. China Electronics Import and Export Corporation insured for the assets with the

Chinese People's Insurance Company on November 24, 2011. The insurance period of one

year, insurance period from November 24, 2011 to November 23, 2012, the insured value of

24,000,000 yuan, premium is 180,000 yuan, insurance policy is marked by name of Zhejiang

Marine Corporation, and the first beneficiary belongs to China Electronics Import and Export

Corporation; Related insurance claims identification needs the report issue from Maritime

Bureau and then in order to obtain the corresponding compensation from insurance company.

3) China Ritar

Company to resolve and settle with Beijing Blue Wave Property Management Ltd. (referred

to as Blue Wave Company) about disputes of property No. 5 Wan Hong Road, Chaoyang District

Beijing, Company paid 31,370,175.64 Yuan to Blue Wave Company. It is recorded in

non-operating expenses. Include according to Beijing Municipal higher People's Court civil

mediation (2011) Gao Min Zhong Zi No. 2634, company completely settled the dispute paid to

the Blue Wave about 40,000,000.00 Yuan; Withdraw all properties from Blue Wave Company

and total value of 9,071,018.00 Yuan. The valuation has been recognizing with Beijing center

Assets Appraisal Co., Ltd. Assessment center Appraisal Report No. (2012) No. 061; Both sides

agreed profit and loss during the transition to the Blue Wave's 2,000,000.00 Yuan, As well as

enjoy the actual operations income of 1,754,905.15 Yuan and operating expenses of 196,098.79

Yuan during the transition.

F-146

4) Shanghai Belling

Company own a subsidiary which is Shanghai Belling Microelectronics Manufacturing Co.,

Ltd. (hereinafter referred to as "Belling Microelectronics") was breaking out of fire on September

8, 2012. Belling Microelectronics insured with insurance institutions for a "property all risks" and

"machine damage insurance", the insured amount was 28,210 million; while also insuring the

"business interruption insurance" with the insurance institutions, the insured amount is 50 million,

Loss cause from fire coverage by insurance institutions. By the end of December 31, 2012,

Belling Microelectronics all inventories and fixed assets book value were 8,718 million. By the

day of financial statements were approved, Belling microelectronics production operations has

not been restored, fire insurance claims are still in progress, the actual damage and the amount

of claims are not confirmed yet.

5) CEC Panda

(1) 2011 Annual General Assembly resolutions for CEC subsidiary of Nanjing Electronics

Information Industrial Corporation held on May 31, 2012 , through its provide guarantees

for controlled subsidiary which is Nanjing Electronics Information Industrial Corporation of

RMB 18,000.00 million in bond financing with the deadline to June 30, 2013 . Second

Extraordinary General Meeting of Nanjing Electronics Information Industrial Corporation

held on December 28,2011 resolution to providing guarantees of RMB 12,000.00 million in

financing to Nanjing Electronics Information Industrial Corporation , guarantees valid until 30

June 2013 ; Provide RMB 7,000.00 million in financing secured to Nanjing Electronics

Information Industrial Corporation , guarantee is valid until June 30, 2013 . Annual year

2009 General Assembly resolution Nanjing Electronics Information Industrial Corporation,

held byNanjing Electronics Information Industrial Corporation. Provide financing insured

RMB 5,000.00 million and 6,000.00 million and 1,500.00 million to Nanjing Panda

Electronics Manufacturing Co., Ltd., Nanjing Huage Plastic Industry Co., Ltd., Nanjing

Panda Mechanical Manufacturing Co., Ltd with the guarantee is valid until June 30, 2013

(2)CEC Panda’s subsidiary company which is Nanjing Electronics Information

Industrial Corporationholding 167,350,000 tradable shares of Nanjing Electronics

Information Industrial Corporation (representing 25.55% of the total share capital)as

guarantee for Nanjing Panda Handa Technology Co. Ltd borrowing from China Electronics

F-147

Financing Company Limited, Jiangsu Branch of Bank of Communications Co., Ltd. and

China construction Bank, Nanjing Branch of the composition of the central gate of

700,000,000 Yuan(the period of two years) to provide collateral security. Nanjing Electronics

Information Industrial Corporation has been in the China Securities Depository and Clearing

Corporation Limited Shanghai Branch completed of collateral security shares registered on

November 28, 2011.

(3) CEC Panda subsidiary company which is Nanjing Electronics Information

Industrial Corporation is non-public offering of shares to actual control of CEC Panda etc.

which is including no more than ten specific object, the total funds raised no more than

132,000 million. Among them, CEC Panda intends to subscribe for 20,000 million in cash for

non-public offering of A shares. The non-public offering of shares related matters has gained

the sixth meeting of the Board of Directors held at the November 7, 2012, Third

Extraordinary General Meeting in 2012, First A Shareholders Class Meeting in 2012 and first

H shareholders Class Meeting for approval in 2012. The non-public offering approved

programs and related matters still need the approval by the State Council, the SASAC and

China Securities Regulatory Commission.

(4) On October 24, 1994, Nanjing Electronics Information Industrial Corporation which

a subsidiary of CEC Panda signed a “contract on Nanjing Electronics Information Industrial

Corporation operates Zhenhua audio equipment factory in Nanjing agreement," with

Xuanwu Xiaolingwei Street Industrial Company. According to the agreement, Company

contracted to operate for Zhenhua packaging materials plant in Nanjing (hereinafter referred

to as “Zhenhua packaging materials plant " ), the contract period was 30 years. From 1

January 1993 to 31 December 2022 , Xuanwu Xiaolingwei street industrial company do not

participate in the distribution of profits, gains and losses, Zhenhua packaging materials plant

are responsible for its own profit and loss . Zhenhua packaging materials plant to pay

operating fee to Xuanwu Xiaolingwei industrial plant since 1993. The operating fee was

30.00 million and then increments 20.00 million each year until 2022 so far. The actual

agreement was provision to 1999. September 21, 2000 , Zhenhua packaging materials plant

and Xuanwu Xiaolingwei Street Industrial Company signed a " double- cross on the transfer

of the right to operate the plant agreement " Zhenhua packaging materials plant in southern

courtyard 8,680.20 square meter separate plant ( including 4,850.60 square meter double

F-148

cross plant a ) transfer the operating rights to the Xuanwu Xiaolingwei Street Industrial

Company. This agreement offset Zhenhua packaging materials plant in the future should be

turned over to the contract operating costs until 31 December 2005. From 2006 to date, the

parties have not contract new agreement of plant transfer, so Xuanwu Xiaolingwei Street

Industrial company have been free to use since then. Nanjing Electronics Information

Industrial Corporation intends to consult on the issue of operation contract fee and right of

operating plant will be negotiating with the district government.

(6) In mid of April 2007, the CEC Panda subsidiary which is CEC Panda Shanghai ,

Shanghai CEC Property Co., Ltd. ( hereinafter referred to as "property company" ) and

Shanghai He Netcom Communications Equipment Co., Ltd. ( hereinafter referred to as " He

Network Company " ) signed a “letter of intent”“cooperation agreement and power of

attorney ”.China Electronics Industry Shanghai Company agreed Property Company

transfer the right of building whuch located in the Waigaoqiao Free Trade Zone Meisheng

Road 27 Disto building to the He Network company, He Network Company Carry on this

company and Property Company’s main debt ; China Electronics Industry corporation and

Property Company entrusted Shanghai He network to carry out the operation and

management of Disto Building . Since May 1, 2007, Building Disto’s rental income divided by

half to the Property Company and He network company. In mid of May 2008 ,CEC Panda ,

Property Company, He network entered into a transfer agreement with Shanghai Monte

Sheng Telecommunications Technology Services Limited ( hereinafter referred to as "Monte

Sheng " ) "cooperation agreement and power of attorney ," the agreement and the

supplemental agreement signed with He network cooperation transfer of the cooperation

agreement with Monte Sheng company. Management rights of Disto building owned by

Monte Sheng . End of December 31, 2012, according to the agreement Monte Sheng

Electronics Industry Shanghai China to be repaid with the property’s outstanding debt is

completed; ownership of the building has not been transferred to Monte Sheng Company.

Management of Disto Building belongs to Monte Sheng Company.

(7) Shenzhen ExcelStor and ExcelStor Great Wall termination of the cooperation with

Hitachi Global Storage Technologies in 2008, Shenzhen ExcelStor and ExcelStor Great Wall

began to clean up the underlying assets and large-capacity storage devices (HDD) business,

debt and staffs from 2008, production and management of the company has basically

stopped in 2009, Shenzhen ExcelStor has entered liquidation proceedings since 2012.

F-149

ExcelStor Great Wall is expected to begin liquidation in 2013.

6) Great Wall Technology

Shenzhen ExcelStor and ExcelStor Great Wall termination of the cooperation with

Hitachi Global Storage Technologies in 2008, Shenzhen ExcelStor and ExcelStor Great Wall

began to clean up the underlying assets and large-capacity storage devices (HDD) business,

debt and staffs from 2008, production and management of the company has basically

stopped in 2009, Shenzhen ExcelStor has entered liquidation proceedings since 2012.

ExcelStor Great Wall is expected to begin liquidation in 2013.

7) Great Wall Development

(1)Non-public offering of A shares plans

The company intends raise funds through offering non-public shares proceed intelligent

way to relocate the mobile communication terminal expansion projects, the international

Smart meters measure terminal and the management system project, high-end medical

electronic equipment and component manufacturing projects and other related projects. The

funds raised are expected to be invested projects with total investment of RMB 69,151.62

million and the number of the non-public offering of shares of no more than 1.75 million

shares. China Securities Regulatory Commission issued subject to compliance with the

conditions prescribed securities investment fund management companies, securities

companies, trust and investment companies, financial companies, insurance institutional,

investors and qualified foreign institutional investors, domestic institutional investors and

other individuals which are no more than 10 specific objects. These non-public issues of

shares are not being transferred within twelve months since the day of subscription.

(2) Company capital restructuring of Jie Rong mould

Jie Rong mould due to business development needs of the proposed changes to the

Sino-foreign co-operative joint venture's restructuring. Board of Directors through by

telecommunication voting shares of the company considered the proposal on the

restructuring of capital increasing for Jie Rong mould on December 28, 2012.Combinationo

original cooperation contract in the enterprise restructuring Jie Rong mould can retain a 10%

stock in conventions. End of June 30, 2012, cause the net asset audit, evaluation, etc.,

companies need unilaterally capital increasing for 23,629,157 yuan. After the capital

increased, the company invested a total of 34,667,328 Yuan, and holding 10% stock in Jie

Rong mould. The capital increasing of 23,629,157.00 yuan has been paid on January 23,

2013.

F-150

XIV. Approval of the financial statements

The financial statements were approved and authorised for issue by the board of

directors of the Company on 18 April 2013

China Electronics Corporation

18 April 2013

F-151

F-152

4 Interim Report 2013 中期報告

China Electronics Corporation Holdings Company Limited

中國電子集團控股有限公司

中國電子集團控股有限公司（「本公司」）董事會（「董事會」）謹此呈報本公司及其附屬公司（「本集團」）截至2013年6月30日止六個月的未經審核簡明綜合中期財務資料如下：

綜合收益表

The board of directors (the “Board”) of China

Electronics Corporat ion Holdings Company

Limited (the “Company”) hereby presents the

unaudited condensed consolidated interim financial

information of the Company and its subsidiaries

(the “Group”) for the six months ended 30 June

2013 as follows:

CONSOLIDATED INCOME STATEMENT

Unaudited

未經審核Six months ended 30 June

截至6月30日止六個月2013 2012

2013年 2012年Note HK$’000 HK$’000

附註 千港元 千港元

Revenue 收入 4 728,341 611,317

Cost of sales 銷售成本 (398,618) (378,643)

Gross profit 毛利 329,723 232,674

Other gains – net 其他收益－淨額 5 13,485 21,981

Selling and marketing costs 銷售及市場推廣成本 (25,690) (25,422)

Administrative expenses 行政開支 (160,314) (94,492)

Operating profit 經營溢利 157,204 134,741

Finance income – net 融資收入－淨額 6 3,444 813

Profit before taxation 除稅前溢利 7 160,648 135,554

Taxation 稅項 8 (24,184) (21,691)

Profit for the period 期內溢利 136,464 113,863

Attributable to owners of

the Company

歸屬於本公司權益持有者136,464 113,863

Dividends 股息 9 50,747 –

HK cents HK cents

港仙 港仙

Earnings per share 每股盈利 10

– Basic －基本 8.07 6.73

– Diluted －攤薄 8.07 6.73

F-153

China Electronics Corporation Holdings Company Limited

中國電子集團控股有限公司

5Interim Report 2013 中期報告

CONSOLIDATED STATEMENT OF 綜合全面收益表COMPREHENSIVE INCOME

Unaudited

未經審核Six months ended 30 June

截至6月30日止六個月

2013 2012

2013年 2012年

HK$’000 HK$’000

千港元 千港元

Profit for the period 期內溢利 136,464 113,863

Other comprehensive income

for the period:

期內其他全面收益：

Items that may be reclassified

subsequently to profit or loss:

期後可能重分類至

溢利或虧損的項目：

Exchange differences on

translation of foreign operations

換算海外業務的

匯兌差額 14,536 (3,229)

Total comprehensive income

for the period

期內全面收益總額151,000 110,634

Attributable to owners of

the Company

歸屬於本公司權益持有者151,000 110,634

F-154

6 Interim Report 2013 中期報告

China Electronics Corporation Holdings Company Limited

中國電子集團控股有限公司

CONSOLIDATED BALANCE SHEET 綜合資產負債表

30 June 31 December

2013 2012

2013年6月30日 2012年12月31日

(Unaudited) (Audited)

（未經審核） （經審核）

Note HK$’000 HK$’000

附註 千港元 千港元

ASSETS 資產Non-current assets 非流動資產

Property, plant and equipment 物業、廠房及設備 11 19,080 21,210

Intangible assets 無形資產 11 8,761 3,671

Deferred tax assets 遞延稅項資產 55,921 41,950

Available-for-sale financial assets 可供出售金融資產 2,511 2,467

86,273 69,298

Current assets 流動資產Inventories 存貨 276,035 308,185

Trade and other receivables 貿易及其他應收款項 12 654,971 494,604

Cash and cash equivalents 現金及現金等價物 521,900 476,619

1,452,906 1,279,408

Total assets 資產總額 1,539,179 1,348,706

EQUITY AND LIABILITIES 權益及負債Equity attributable to owners of the

Company

本公司權益持有者應佔

權益Share capital and premium 股本及溢價 289,171 889,171

Other reserves 其他儲備 28,656 (320,599)

Retained earnings 保留溢利 588,228 237,230

Total equity 權益總額 906,055 805,802

Liabilities 負債Non-current liabilities 非流動負債

Deferred tax liabilities 遞延稅項負債 4,816 –

Current liabilities 流動負債Trade and other payables 貿易及其他應付款項 13 627,053 541,671

Short term bank loans 短期銀行貸款 1,255 1,233

628,308 542,904

Total liabilities 負債總額 633,124 542,904

Total equity and liabilities 權益及負債總額 1,539,179 1,348,706

Net current assets 流動資產淨值 824,598 736,504

Total assets less current liabilities 總資產減流動負債 910,871 805,802

F-155

China Electronics Corporation Holdings Company Limited

中國電子集團控股有限公司

7Interim Report 2013 中期報告

CONSOLIDATED STATEMENT OF 綜合權益變動表CHANGES IN EQUITY

於本公司2013年6月20日召開的股東特別大

會上，股東通過決議案以批准下列事項：

i) 將本公司股份溢價賬由872,255,000

港 元 削 減 6 0 0 , 0 0 0 , 0 0 0港 元 至

272,255,000港元;

ii) 將削減股份溢價賬產生之進賬轉撥至

本公司之其他儲備內之實繳盈餘賬;

Unaudited

未經審核

Attributable to owners of the Company

本公司權益持有者應佔

Share

capital

Share

premium

Other

reserves

Retained

earnings

Total

equity

股本 股份溢價 其他儲備 保留溢利 權益總額Note HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

附註 千港元 千港元 千港元 千港元 千港元

At 1 January 2012 於2012年1月1日 16,916 872,255 (321,238) 39,646 607,579

Total comprehensive income

for the period

期內全面收益總額

– – (3,229) 113,863 110,634

At 30 June 2012 於2012年6月30日 16,916 872,255 (324,467) 153,509 718,213

At 1 January 2013 於2013年1月1日 16,916 872,255 (320,599) 237,230 805,802

Total comprehensive income

for the period

期內全面收益總額

– – 14,536 136,464 151,000

Transfer of share premium

to contributed surplus

轉撥股份溢價至

實繳盈餘

(i) & (ii)

– (600,000) 600,000 – –

Elimination of accumulated

losses of the Company

撇銷本公司累計

虧損

(iii)

– – (214,534) 214,534 –

Special dividend 特別股息 (iv) – – (50,747) – (50,747)

At 30 June 2013 於2013年6月30日 16,916 272,255 28,656 588,228 906,055

At a special general meeting of the Company held on 20

June 2013, resolutions were passed by the shareholders

to approve the followings:

i) the share premium account of the Company be

reduced from HK$872,255,000 to HK$272,255,000

by the amount of HK$600,000,000;

ii) transfer of the credit arising from the reduction

of the share premium account to the contributed

surplus account (included in “other reserves”) of the

Company;

F-156

8 Interim Report 2013 中期報告

China Electronics Corporation Holdings Company Limited

中國電子集團控股有限公司

CONSOLIDATED STATEMENT OF 綜合權益變動表CHANGES IN EQUITY

iii) 動用實繳盈餘賬之進賬額撇銷本公

司於2012年12月31日之累計虧損共

214,534,000港元；及

iv) 自實繳盈餘賬向於2013年10月2日名列

本公司股東名冊之本公司股東以現金

派付總額50,746,800港元（每股0.03港

元）之特別股息。

iii) using the amount then standing to the credit of the

contributed surplus account of the Company to

eliminate the accumulated losses of the Company as

at 31 December 2012 totaling HK$214,534,000; and

iv) payment of a special dividend of an aggregate amount

in cash of HK$50,746,800 (representing HK$0.03 per

share) out of the contributed surplus account of the

Company to the shareholders of the Company whose

names appear on the register of members of the

Company on 2 October 2013.

F-157

China Electronics Corporation Holdings Company Limited

中國電子集團控股有限公司

9Interim Report 2013 中期報告

CONDENSED CONSOLIDATED 簡明綜合現金流量表CASH FLOW STATEMENT

Unaudited

未經審核Six months ended 30 June

截至6月30日止六個月

2013 2012

2013年 2012年

HK$’000 HK$’000

千港元 千港元

Net cash generated from

operating activities

經營活動產生之現金淨額

44,926 97,331

Net cash used in investing

activities

投資活動所用之現金淨額

(7,448) (16,469)

Net cash generated from/(used in)

financing activities

融資活動產生╱（所用）之

現金淨額 10,000 (23,430)

Effect of exchange rate changes 匯率變動之影響 (2,197) 209

Net increase in cash and

cash equivalents

現金及現金等價物

增加淨額 45,281 57,641

Cash and cash equivalents

at 1 January

於1月1日之現金

及現金等價物 476,619 329,453

Cash and cash equivalents

at 30 June

於6月30日之現金

及現金等價物 521,900 387,094

Analysis of balances of

cash and cash equivalents:

現金及現金等價物

之結餘分析：Cash and bank balances 現金及銀行結餘 521,900 387,094

F-158

10 Interim Report 2013 中期報告

China Electronics Corporation Holdings Company Limited

中國電子集團控股有限公司

NOTES TO THE CONDENSED CONSOLIDATED 簡明綜合中期財務資料附註INTERIM FINANCIAL INFORMATION

1 編製基準

簡明綜合中期財務資料乃根據香港聯

合交易所有限公司證券上市規則附錄

16所載之適用披露規定及香港會計師

公會頒佈之香港會計準則（「香港會計

準則」）第34號「中期財務報告」之規定

而編製。

本簡明綜合中期財務資料應連同本集

團根據香港財務報告準則（「香港財務

報告準則」）編製之截至2012年12月31

日止年度之年度財務報表一併閱讀。

2 主要會計政策

除以下所述外，編製簡明綜合中期財務

資料所採用之會計政策與編製本集團

截至2012年12月31日止年度之年度財

務報表所採用者一致。

(a) 須於2013年1月1日開始之財政年

度首次強制應用的新訂及經修訂

準則及詮釋，對本集團並無重大影

響，或目前與本集團不相關。

1 Basis of preparation

The condensed consol idated inter im f inancial

information have been prepared in accordance with

the applicable disclosure requirements of Appendix

16 to the Rules Governing the Listing of Securities

on The Stock Exchange of Hong Kong Limited and

with Hong Kong Accounting Standard (“HKAS”) 34

“Interim Financial Reporting” issued by the Hong Kong

Institute of Certified Public Accountants.

The condensed consol idated inter im f inancial

information should be read in conjunction with the

annual financial statements of the Group for the year

ended 31 December 2012, which have been prepared

in accordance with Hong Kong Financial Reporting

Standards (“HKFRS”).

2 Principal accounting policies

Except as descr ibed be low, the account ing

policies used in the preparation of the condensed

consol idated inter im f inancia l informat ion are

consistent with those used in the annual financial

statements of the Group for the year ended 31

December 2012.

(a) New and amended standards, and interpretations

mandatory for the first time for the financial year

beginning 1 January 2013 have no material

impact on the Group or are not currently relevant

to the Group.

F-159

China Electronics Corporation Holdings Company Limited

中國電子集團控股有限公司

11Interim Report 2013 中期報告

NOTES TO THE CONDENSED CONSOLIDATED 簡明綜合中期財務資料附註INTERIM FINANCIAL INFORMATION

2 主要會計政策（續）

(b) 以下已頒佈但尚未於2013年1月1

日開始的財政年度生效且並未提早

採納之與本集團相關之新訂準則及

準則修訂：

香港會計準則

第32號

（修訂）

金融工具：呈列金融

資產與金融負債

之抵銷（自2014年

1月1日起生效）

香港財務報告

準則第10號

及第12號和

香港會計

準則第27號

（修訂）

投資實體（自2014年

1月1日起生效）

香港財務報告

準則第9號

金融工具（自2015年

1月1日起生效）

香港財務報告

準則第7號及

第9號（修訂）

強制生效日期和

過渡性披露（自

2015年1月1日起

生效）

管理層目前正在評估以上新訂準則及

準則修訂對本集團財務狀況及表現之

影響。

計提中期所得稅支出時所採用的稅率為

適用於預計年度總溢利的所得稅率。

2 Principal accounting policies (Continued)

(b) The following new standards and amendments

to standards that are relevant to the Group have

been issued but are not effective for the financial

year beginning 1 January 2013 and have not

been early adopted:

HKAS 32

(amendments)

Financial instruments:

Presentation on assets

and liabilities offsetting

(effective from 1 January

2014)

HKFRS 10,

HKFRS 12 and

HKAS 27

(amendments)

Investment entities (effective

from 1 January 2014)

HKFRS 9 Financial instruments

(effective from 1 January

2015)

HKFRS 7 and

HKFRS 9

(amendments)

Mandatory effective date

and transition disclosures

(effective from 1 January

2015)

Management is currently assessing the financial

impact of the above new standards and amendments

to standards to the Group’s financial position and

performance.

Tax charges for the interim periods are accrued using

the tax rate that would be applicable to the expected

total annual earnings.

F-160

12 Interim Report 2013 中期報告

China Electronics Corporation Holdings Company Limited

中國電子集團控股有限公司

NOTES TO THE CONDENSED CONSOLIDATED 簡明綜合中期財務資料附註INTERIM FINANCIAL INFORMATION

3 估計

在編製本簡明綜合中期財務資料時，管

理層須作判斷、估計及假設從而影響會

計政策應用及資產和負債、及收入與支

出的呈報金額。實際結果可能與此等估

計不儘相同。

於編製該等簡明綜合中期財務資料時，

管理層就應用本集團之會計政策而作

出之重大判斷以及估計不穩定因素的

主要來源，與該等於截至2012年12月

31日止年度的綜合財務報表內所採用

的一致，惟下列除外:

於本期間內，本公司董事基於本集團現

時業務計劃及財務狀況重新審視成立

於中華人民共和國（「中國」）之主要附

屬公司北京中電華大電子設計有限責

任公司（「華大電子」）的股息政策，華

大電子的若干保留溢利將分派予其中

國境外的中間控股公司。因此，以本公

司董事估計于可預見將來分派的溢利

為基礎，於本期間就有關遞延稅項負債

作出撥備。

3 Estimates

The preparation of the condensed consolidated

interim financial information requires management to

make judgments, estimates and assumptions that

affect the application of accounting policies and the

reported amounts of assets and liabilities, income

and expense. Actual results may differ from these

estimates.

In preparing this condensed consolidated interim

financial information, the signif icant judgments

made by management in applying the Group’s

accounting policies and the key sources of estimation

uncertainty were the same as those that applied to the

consolidated financial statements for the year ended

31 December 2012 except for the following:

During the current period, the directors of the

Company reassessed the dividend policy of its major

subsidiary established in the People’s Republic of

China (“PRC”), CEC Huada Electronic Design Co., Ltd

(“Huada Electronics”), based on the Group’s current

business plan and financial position, certain retained

earnings generated by Huada Electronics would be

distributed to its non-PRC registered intermediate

holding company and as such, deferred tax liabilities

in this respect was provided in the current period to

the extent that such earnings are estimated by the

directors of the Company to be distributed in the

foreseeable future.

F-161

China Electronics Corporation Holdings Company Limited

中國電子集團控股有限公司

13Interim Report 2013 中期報告

NOTES TO THE CONDENSED CONSOLIDATED 簡明綜合中期財務資料附註INTERIM FINANCIAL INFORMATION

4 收入及分部資料

(a) 收入

(b) 營運分部

管理層已根據董事（主要營運決策者）已審閱作評估表現及分配資源用的報告，確定營運分部。

董事認為本集團經營之業務以單一分部營運及管理，故無披露營運分部資料。

按地區分佈而言，本集團接近100%之收入來自於中國市場且超過90%之非流動資產位於中國。

5 其他收益－淨額

4 Revenue and segment information

(a) Revenue

Unaudited

未經審核Six months ended 30 June

截至6月30日止六個月

2013 2012

2013年 2012年

HK$’000 HK$’000

千港元 千港元

Integrated circuits

products

集成電路產品

728,341 611,317

(b) Operating segments

Management has determined the operating

segments based on the reports reviewed by the

directors (the chief operating decision maker) that

are used to assess performance and allocate

resources.

The directors consider that the Group’s operations

are operated and managed as a single segment,

accordingly no operating segment information is

presented.

In terms of geographical location, nearly 100% of

the Group’s revenue is attributable to the market

in the PRC and over 90% of the Group’s non-

current assets are located in the PRC.

5 Other gains – net

Unaudited

未經審核Six months ended 30 June

截至6月30日止六個月

2013 2012

2013年 2012年

HK$’000 HK$’000

千港元 千港元

Government grants 政府補助 13,000 24,229

Exchange losses 匯兌虧損 (539) (319)

Others 其他 1,024 (1,929)

13,485 21,981

F-162

14 Interim Report 2013 中期報告

China Electronics Corporation Holdings Company Limited

中國電子集團控股有限公司

NOTES TO THE CONDENSED CONSOLIDATED 簡明綜合中期財務資料附註INTERIM FINANCIAL INFORMATION

6 融資收入－淨額

7 除稅前溢利

本集團之除稅前溢利已扣除╱（計入）以下各項：

6 Finance income – net

Unaudited

未經審核Six months ended 30 June

截至6月30日止六個月

2013 2012

2013年 2012年HK$’000 HK$’000

千港元 千港元

Interest income on short term

deposits

短期存款利息收入

3,480 1,323

Interest on loans 貸款利息 (36) (510)

3,444 813

7 Profit before taxation

The Group’s profit before taxation has been arrived at

after charging/(crediting) the following:

Unaudited

未經審核Six months ended 30 June

截至6月30日止六個月

2013 2012

2013年 2012年HK$’000 HK$’000

千港元 千港元

Depreciation of property,

plant and equipment

物業、廠房及設備折舊

3,228 3,376

Amortisation of intangible

assets

無形資產攤銷

5,093 4,862

Research and development

costs

研究及開發成本

82,966 86,166

Written-down of inventories to

net realisable value

撇減存貨至可變現淨值

183 15,235

Impairment/(Reversal of

impairment) provision for

trade receivables

貿易應收款項之減值

撥備╱（撥回）

52,664 (9,423)

Operating lease expenses on

property

物業之經營租賃開支

7,538 5,244

F-163

China Electronics Corporation Holdings Company Limited

中國電子集團控股有限公司

15Interim Report 2013 中期報告

NOTES TO THE CONDENSED CONSOLIDATED 簡明綜合中期財務資料附註INTERIM FINANCIAL INFORMATION

8 稅項

(a) 由於本集團於截至2013年6月30日

止六個月於香港並無產生任何應課

稅溢利，故並無就香港利得稅作出

撥備（2012年：無）。

(b) 根據中國企業所得稅法，華大電子

自2008年1月1日起之適用法定稅

率為25%。然而，由於華大電子被

確定為「高新科技企業」，因此自

2008年1月1日起至2013年12月31

日華大電子享受15%之優惠稅率。

(c) 根據中國企業所得稅法的有關規

定，中國境內之外商投資企業向其

境外投資者分派自2008年1月1日

起產生的溢利作為股息，該等股息

需要徵收10%的預扣所得稅。

8 Taxation

Unaudited

未經審核Six months ended 30 June

截至6月30日止六個月

2013 2012

2013年 2012年

HK$’000 HK$’000

千港元 千港元

Current taxation 本期間稅項

– PRC corporate income tax －中國企業所得稅 32,471 29,827

Deferred taxation 遞延稅項

– PRC corporate income tax －中國企業所得稅 (13,103) (8,136)

– Withholding tax on

undistributed profits

(Note (c))

－未分配溢利之預扣所得稅

（附注(c)）

4,816 –

(8,287) (8,136)

24,184 21,691

(a) No provision for Hong Kong profits tax had

been made as the Group did not generate any

assessable profit in Hong Kong for the six months

ended 30 June 2013 (2012: nil).

(b) In accordance with the corporate income tax

laws of the PRC, the applicable statutory tax

rate of Huada Electronics is 25% from 1 January

2008. However, Huada Electronics qualified as

a “High/New Technology Enterprise” and thus

was granted a 15% preferential tax rate from 1

January 2008 to 31 December 2013.

(c) According to the relevant regulations of the

corporate income tax laws of the PRC, when

a foreign investment enterprise distr ibuted

dividends out of the profits earned from 1

January 2008 onwards to its overseas investors,

such dividends are subject to withholding tax at a

rate of 10%.

F-164

16 Interim Report 2013 中期報告

China Electronics Corporation Holdings Company Limited

中國電子集團控股有限公司

NOTES TO THE CONDENSED CONSOLIDATED 簡明綜合中期財務資料附註INTERIM FINANCIAL INFORMATION

9 股息

董事會不建議派付截至2013年6月30日

止六個月之中期股息（2012年：無）。

經本公司股東於2013年6月20日批准，

本公司將自其實繳盈餘賬向於2013年

10月2日名列本公司股東名冊之本公司

股東以現金派付總額50,746,800港元

（每股0.03港元）之特別股息。

10 每股盈利

每股基本及攤薄盈利乃根據下列數據

計算：

(a) 截至2013年6月30日止六個月，本

公司並無任何未發行潛在普通股

（2012年：無）。因此，每股攤薄盈

利與每股基本盈利相等。

9 Dividends

The Board does not recommend the payment of

interim dividend for the six months ended 30 June

2013 (2012: nil).

As approved by the shareholders of the Company

on 20 June 2013, the Company will pay a special

d iv idend of an aggregate amount in cash of

HK$50,746,800 (representing HK$0.03 per share) out

of the contributed surplus account of the Company

to the shareholders of the Company whose names

appear on the register of members of the Company

on 2 October 2013.

10 Earnings per share

The calculation of the basic and diluted earnings per

share is based on the following data:

Unaudited

未經審核Six months ended 30 June

截至6月30日止六個月

2013 2012

2013年 2012年

Profit for the period attributable

to owners of the Company

(HK$’000)

本公司權益持有者

應佔期內溢利（千港元）

136,464 113,863

Weighted average number

of ordinary shares for the

purposes of basic and

diluted earnings per share

用以計算每股基本及攤薄

盈利之普通股加權平均

數目

1,691,560,000 1,691,560,000

Earnings per share (HK cents) 每股盈利（港仙）

– Basic －基本 8.07 6.73

– Diluted (Note (a)) －攤薄（附註(a)） 8.07 6.73

(a) The Company did not have any potential ordinary

shares outstanding for the six months ended 30

June 2013 (2012: nil). Diluted earnings per share

is therefore equal to basic earnings per share.

F-165

China Electronics Corporation Holdings Company Limited

中國電子集團控股有限公司

17Interim Report 2013 中期報告

NOTES TO THE CONDENSED CONSOLIDATED 簡明綜合中期財務資料附註INTERIM FINANCIAL INFORMATION

11 物業、廠房及設備和無形資產

於截至2013年6月30日止六個月內，本

集團用於添置物業、廠房及設備之成本

為991,000港元（2012年：8,886,000港

元）。

於截至2013年6月30日止六個月內，

本集團用於添置無形資產之成本為

10,074,000港元（2012年：8,906,000

港元）。

12 貿易及其他應收款項

本集團之銷售大部份之信貸期為30日

至135日。其餘銷售於緊隨貨品交付時

到期。貿易及其他應收款項包括貿易應

收款項（扣除減值撥備）646,032,000港

元（2012年12月31日：483,969,000港

元），其賬齡分析如下：

11 Property, plant and equipment and intangible

assets

During the six months ended 30 June 2013, the

Group had additions to property, plant and equipment

of HK$991,000 (2012: HK$8,886,000).

Dur ing the six months ended 30 June 2013,

the Group had additions to intangible assets of

HK$10,074,000 (2012: HK$8,906,000).

12 Trade and other receivables

The majority of the Group’s sales are with credit terms

of 30 days to 135 days. The remaining amounts are

due immediately after the delivery of goods. Included

in trade and other receivables are trade receivables

(net of provision for impairment) of HK$646,032,000

(31 December 2012: HK$483,969,000) and their

ageing analysis is as follows:

30 June 31 December

2013 2012

2013年6月30日 2012年12月31日

(Unaudited) (Audited)

（未經審核） （經審核）

HK$’000 HK$’000

千港元 千港元

Current to 30 days 30日內 273,762 241,603

31-60 days 31日至60日 136,100 81,632

Over 60 days and within 1 year 60日以上及1年內 233,067 158,580

Over 1 year 1年以上 3,103 2,154

646,032 483,969

F-166

18 Interim Report 2013 中期報告

China Electronics Corporation Holdings Company Limited

中國電子集團控股有限公司

NOTES TO THE CONDENSED CONSOLIDATED 簡明綜合中期財務資料附註INTERIM FINANCIAL INFORMATION

13 貿易及其他應付款項

貿易及其他應付款項包括貿易應付款項

229,309,000港元（2012年12月31日：

243,889,000港元），其賬齡分析如下：

14 經營租賃承擔

本集團根據不可解除之廠房及辦公室

物業之經營租賃而須於未來支付之最

低租賃款項總額如下：

13 Trade and other payables

Included in trade and other payables are trade

payables of HK$229,309,000 (31 December 2012:

HK$243,889,000) and their ageing analysis is as

follows:

30 June 31 December

2013 2012

2013年6月30日 2012年12月31日

(Unaudited) (Audited)

（未經審核） （經審核）

HK$’000 HK$’000

千港元 千港元

Current to 30 days 30日內 60,315 78,516

31-60 days 31日至60日 72,194 76,376

Over 60 days 60日以上 96,800 88,997

229,309 243,889

14 Operating lease commitments

The Group’s future aggregate minimum lease

payments under non-cancellable operating leases for

factories and office premises are as follows:

30 June 31 December

2013 2012

2013年6月30日 2012年12月31日

(Unaudited) (Audited)

（未經審核） （經審核）

HK$’000 HK$’000

千港元 千港元

Not later than one year 1年內 12,803 13,649

In the second to fifth year 第2年至第5年內 12,376 18,352

25,179 32,001

F-167

China Electronics Corporation Holdings Company Limited

中國電子集團控股有限公司

19Interim Report 2013 中期報告

NOTES TO THE CONDENSED CONSOLIDATED 簡明綜合中期財務資料附註INTERIM FINANCIAL INFORMATION

15 或有負債

於2013年6月30日，本集團並無任何重

大或有負債（2012年12月31日：無）。

16 關聯人士交易及結餘

於期內本集團於日常業務過程中與關

聯人士進行了下列各項重大交易：

(a) 與受中國電子信息產業集團有限公司（「中國電子集團」）共同控制之公司之重大交易

* 於 2 0 1 3年 4月，本公司向其直

接控股公司China E lect ron ics

Co r po r a t i on (BV I ) Ho ld i ngs

Company Limited（「CEC (BVI)」）

取得貸款10,000,000港元；該貸款

年利率為2.2%，並須按要求隨時償

還。

15 Contingent liabilities

The Group did not have any material contingent

liability at 30 June 2013 (31 December 2012: nil).

16 Related party transactions and balances

The Group entered into the fol lowing material

transactions in the ordinary course of business with

related parties during the period:

(a) Significant transactions with companies

under common control of China Electronics

Corporation Limited (“CEC”)

Unaudited

未經審核Six months ended 30 June

截至6月30日止六個月

2013 2012

2013年 2012年

HK$’000 HK$’000

千港元 千港元

Sales of products 銷售產品 65,369 35,957

Purchase of goods

and services

採購貨品及服務

239,201 270,236

Interest received 收取利息 1,089 715

Rental paid 支付租金 557 569

Loan from CEC (BVI)* CEC (BVI)貸款* 10,000 –

* In Apr i l 2013, the Company obta ined a

HK$10,000,000 loan from China Electronics

Corporation (BVI) Holdings Company Limited

(“CEC (BVI)”), the immediate holding company of

the Company. The loan bears an interest rate of

2.2% per annum and is repayable on demand.

F-168

20 Interim Report 2013 中期報告

China Electronics Corporation Holdings Company Limited

中國電子集團控股有限公司

NOTES TO THE CONDENSED CONSOLIDATED 簡明綜合中期財務資料附註INTERIM FINANCIAL INFORMATION

16 關聯人士交易及結餘（續）

(b) 與受中國電子集團共同控制之公司之重大結餘

除存款及CEC (BVI)貸款外，上述關

聯人士結餘為無抵押、免息並根據

合同條款結算。

(c) 主要管理人員酬金

17 期後事項

於2013年7月5日，本公司與中國電子

集團訂立權益轉讓協議，據此，本公司

有條件同意收購而中國電子集團有條

件同意出售中國電子集團全資附屬公

司中國電子科技開發有限公司之100%

股本權益，代價為人民幣6億元。

16 Related party transactions and balances

(Continued)

(b) Significant balances with companies under

common control of CEC

30 June 31 December

2013 2012

2013年6月30日 2012年12月31日(Unaudited) (Audited)

（未經審核） （經審核）HK$’000 HK$’000

千港元 千港元

Trade receivables 貿易應收款項 65,708 16,744

Other receivables 其他應收款項 – 265

Deposits 存款 99,228 98,661

Trade payables 貿易應付款項 133,638 227,568

Loan from CEC (BVI) CEC (BVI)貸款 10,000 –

Other payables 其他應付款項 41,429 3,701

Except for deposits and loan from CEC (BVI),

the above balances with related parties were

unsecured, interest-free and settled according to

the contract terms.

(c) Key management compensation

Unaudited

未經審核Six months ended 30 June

截至6月30日止六個月

2013 2012

2013年 2012年HK$’000 HK$’000

千港元 千港元

Salaries, allowances and

benefits in kind

薪金、津貼及實物福利

2,544 1,879

Contributions to

retirement schemes

退休計劃供款

135 88

2,679 1,967

17 Subsequent events

On 5 July 2013, the Company and CEC entered into

an equity transfer agreement pursuant to which the

Company has conditionally agreed to acquire and

CEC has conditionally agreed to sell 100% equity

interest in China Electronics Technology Development

Co., Ltd, a wholly-owned subsidiary of CEC, at a

consideration of RMB600 million.

F-169

China Electronics Corporation Holdings Company Limited

中國電子集團控股有限公司

21Interim Report 2013 中期報告

致中國電子集團控股有限公司董事會

（於開曼群島註冊成立及於百慕達繼續經營之有限公司）

引言本核數師（以下簡稱「我們」）已審閱列載於第4至20頁的簡明綜合中期財務資料，此簡明綜合中期財務資料包括中國電子集團控股有限公司（「貴公司」）及其子公司（合稱「貴集團」）於2013年6月30日的綜合資產負債表與截至該日止六個月期間的相關綜合收益表、綜合全面收益表、綜合權益變動表和簡明綜合現金流量表，以及主要會計政策概要及其他附註解釋。香港聯合交易所有限公司證券上市規則規定，就中期財務資料編製的報告必須符合以上規則的有關條文以及香港會計師公會頒佈的香港會計準則第34號「中期財務報告」。貴公司董事須負責根據香港會計準則第34號「中期財務報告」編製及列報該等簡明綜合中期財務資料。我們的責任是根據我們的審閱對該等簡明綜合中期財務資料作出結論，並按照委聘之條款僅向整體董事會報告，除此之外本報告別無其他目的。我們不會就本報告的內容向任何其他人士負上或承擔任何責任。

TO THE BOARD OF DIRECTORS OF

C H I N A E L E C T R O N I C S C O R P O R AT I O N

HOLDINGS COMPANY LIMITED

(incorporated in the Cayman Islands and continued in Bermuda with limited liability)

Introduction

We have reviewed the condensed consolidated

interim financial information set out on pages

4 to 20, which comprises the consol idated

balance sheet of China Electronics Corporation

Holdings Company Limited (the “Company”)

and its subsidiaries (together, the “Group”) as

at 30 June 2013 and the related consolidated

income statement, consolidated statement of

comprehensive income, consolidated statement

of changes in equity and condensed consolidated

cash flow statement for the six-month period then

ended, and a summary of significant accounting

policies and other explanatory notes. The Rules

Governing the List ing of Securit ies on The

Stock Exchange of Hong Kong Limited require

the preparation of a report on interim financial

information to be in compliance with the relevant

provisions thereof and Hong Kong Accounting

Standard 34 “Interim Financial Reporting” issued

by the Hong Kong Institute of Certified Public

Accountants. The directors of the Company are

responsible for the preparation and presentation

of this condensed consolidated interim financial

information in accordance with Hong Kong

Account ing Standard 34 “Inter im F inancia l

Reporting”. Our responsibility is to express a

conclusion on this condensed consolidated interim

financial information based on our review and to

report our conclusion solely to you, as a body, in

accordance with our agreed terms of engagement

and for no other purpose. We do not assume

responsibility towards or accept liability to any other

person for the contents of this report.

REPORT ON REVIEW OF

CONDENSED CONSOLIDATED

INTERIM FINANCIAL INFORMATION

簡明綜合中期財務資料審閱報告

F-170

22 Interim Report 2013 中期報告

China Electronics Corporation Holdings Company Limited

中國電子集團控股有限公司

審閱範圍我們已根據香港會計師公會頒佈的香

港審閱準則第2410號「由實體的獨立

核數師執行中期財務資料審閱」進行

審閱。審閱中期財務資料包括主要向

負責財務和會計事務的人員作出查

詢，及應用分析性和其他審閱程序。審

閱的範圍遠較根據香港審計準則進行

審核的範圍為小，故不能令我們可保

證我們將知悉在審核中可能被發現的

所有重大事項。因此，我們不會發表審

核意見。

結論按照我們的審閱，我們並無發現任何

事項，令我們相信簡明綜合中期財務

資料在各重大方面未有根據香港會計

準則第34號「中期財務報告」編製。

羅兵咸永道會計師事務所執業會計師

香港，2013年8月29日

Scope of Review

We conducted our review in accordance with Hong

Kong Standard on Review Engagements 2410,

“Review of Interim Financial Information Performed

by the Independent Auditor of the Entity” issued

by the Hong Kong Institute of Certified Public

Accountants. A rev iew of inter im f inancia l

information consists of making inquiries, primarily

of persons responsible for financial and accounting

matters, and applying analytical and other review

procedures. A review is substantially less in scope

than an audit conducted in accordance with Hong

Kong Standards on Auditing and consequently

does not enable us to obtain assurance that we

would become aware of all significant matters that

might be identified in an audit. Accordingly, we do

not express an audit opinion.

Conclusion

Based on our review, nothing has come to

our attention that causes us to believe that

the condensed consolidated interim financial

information is not prepared, in all material respects,

in accordance with Hong Kong Accounting

Standard 34 “Interim Financial Reporting”.

PricewaterhouseCoopers

Certified Public Accountants

Hong Kong, 29 August 2013

F-171

37中國電子集團控股有限公司 2012年年報

Independent Auditor’s Report獨立核數師報告

獨立核數師報告

致中國電子集團控股有限公司全體股東

（於開曼群島註冊成立及於百慕達繼續經營之有

限公司）

本核數師已審核列載於第40頁至第98頁之中國電子集團控股有限公司（「貴公司」）及其附屬公司

（統稱「貴集團」）之綜合財務報表，此綜合財務報

表包括於2012年12月31日之綜合及公司資產負債表與截至該日止年度之綜合收益表、綜合全面收

益表、綜合權益變動表及綜合現金流量表，以及重

大會計政策概要及其他附註解釋資料。

董事就綜合財務報表須承擔之責任

貴公司之董事須負責根據香港會計師公會頒佈之

香港財務報告準則及按照香港《公司條例》的披

露規定編製綜合財務報表以令綜合財務報表作出

真實而公平的反映，及落實其認為編製綜合財務

報表所必要的內部監控，以使綜合財務報表不存

在由於欺詐或錯誤而導致的重大錯誤陳述。

INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF CHINA ELECTRONICS CORPORATION HOLDINGS COMPANY LIMITED(incorporated in the Cayman Islands and continued in Bermuda with limited liability)

We have audited the consolidated financial statements of China Electronics Corporation Holdings Company Limited (the “Company”) and its subsidiaries (together, the “Group”) set out on pages 40 to 98, which comprise the consolidated and company balance sheets as at 31 December 2012, and the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

DIRECTORS’ RESPONSIBILITY FOR THE CONSOLIDATED FINANCIAL STATEMENTS

The directors of the Company are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants and the disclosure requirements of the Hong Kong Companies Ordinance, and for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

F-172

38 China Electronics Corporation Holdings Company Limited Annual Report 2012

Independent Auditor’s Report獨立核數師報告

核數師之責任我們的責任是根據我們的審核對該等綜合財務報

表作出意見，並根據百慕達1981年《公司法》第90條僅向全體股東報告我們的意見，除此之外不可用作其他用途，而我們不會就本報告之內容對

任何其他人士負上或承擔任何責任。

我們已根據香港會計師公會頒佈之香港審計準則

進行審核。這些準則要求我們遵守道德規範，並規

劃及執行審核，以合理確定此等綜合財務報表是

否不存有任何重大錯誤陳述。

審核涉及執行程序以獲取有關綜合財務報表所載

金額及披露資料之審核憑證。所選定之程序取決於

核數師之判斷，包括評估由於欺詐或錯誤而導致

綜合財務報表存有重大錯誤陳述之風險。在評估

該等風險時，核數師考慮與該公司編製綜合財務

報表以作出真實而公平的反映相關之內部監控，

以設計適當之審核程序，但並非為對該公司之內

部監控之效能發表意見。審核亦包括評價董事所

採用之會計政策之合適性及所作出之會計估計之

合理性，以及評價綜合財務報表之整體列報方式。

我們相信，我們所獲得之審核憑證足以充份和適

當地為我們的審核意見提供基礎。

AUDITOR’S RESPONSIBILITY

Our responsibility is to express an opinion on these consolidated financial statements based on our audit and to report our opinion solely to you, as a body, in accordance with section 90 of the Companies Act 1981 of Bermuda and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

We conducted our audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of consolidated financial statements that give a true and fair view in order to design audit 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. An audit also includes 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 consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

F-173

39中國電子集團控股有限公司 2012年年報

Independent Auditor’s Report獨立核數師報告

意見我們認為，該等綜合財務報表已根據香港財務報

告準則真實兼公平地反映　貴公司與　貴集團於

2012年12月31日之財務狀況，及　貴集團截至該日止年度之溢利及現金流量，並已按照香港《公

司條例》之披露規定妥為編製。

羅兵咸永道會計師事務所執業會計師

香港，2013年2月25日

OPINION

In our opinion, the consolidated financial statements give a true and fair view of the state of affairs of the Company and of the Group as at 31 December 2012, and of the Group’s profit and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards and have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance.

PricewaterhouseCoopersCertified Public Accountants

Hong Kong, 25 February 2013

F-174

40 China Electronics Corporation Holdings Company Limited Annual Report 2012

Consolidated Income Statement綜合收益表

Year ended 31 December截至12月31日止年度

2012 20112012年 2011年

Note HK$’000 HK$’000附註 千港元 千港元

Revenue 收入 5 1,155,632 995,111Cost of sales 銷售成本 7 (703,904) (665,832)

Gross profit 毛利 451,728 329,279Other gains – net 其他收益－淨額 6 28,679 31,244Selling and marketing costs 銷售及市場推廣成本 7 (57,310) (41,289)Administrative expenses 行政開支 7 (200,768) (189,287)

Operating profit 經營溢利 222,329 129,947Finance income – net 融資收入－淨額 10 3,194 1,282

Profit before taxation 除稅前溢利 225,523 131,229Taxation 稅項 11 (27,939) (16,570)

Profit for the year 本年度溢利 197,584 114,659

Attributable to owners of the Company

歸屬於本公司權益持有者12 197,584 114,659

Dividends 股息 13 – –

HK cents HK cents港仙 港仙

Earnings per share 每股盈利 14– Basic －基本 11.68 6.78

– Diluted －攤薄 11.68 6.78

F-175

41中國電子集團控股有限公司 2012年年報

Consolidated Statement of Comprehensive Income綜合全面收益表

Year ended 31 December截至12月31日止年度

2012 20112012年 2011年

HK$’000 HK$’000千港元 千港元

Profit for the year 本年度溢利 197,584 114,659Other comprehensive income for

the year:本年度其他全面收益：

Exchange differences on translation of financial statements of foreign operations

換算海外業務賬目的 匯兌差額 639 20,133

Total comprehensive income for the year

本年度全面收益總額198,223 134,792

Attributable to owners of the Company

歸屬於本公司權益持有者198,223 134,792

F-176

42 China Electronics Corporation Holdings Company Limited Annual Report 2012

Consolidated Balance Sheet綜合資產負債表

載於第40頁至第98頁之財務報表經董事會於2013年2月25日批准及授權刊發，並由下列人士代表簽署﹕

31 December 31 December2012 2011

2012年12月31日 2011年12月31日Note HK$’000 HK$’000附註 千港元 千港元

ASSETS 資產Non-current assets 非流動資產

Property, plant and equipment 物業、廠房及設備 15 21,210 16,988Intangible assets 無形資產 16 3,671 4,281Deferred tax assets 遞延稅項資產 11 41,950 28,560Available-for-sale financial assets 可供出售金融資產 18 2,467 2,467

69,298 52,296

Current assets 流動資產Inventories 存貨 19 308,185 268,457Trade and other receivables 貿易及其他應收款項 20 494,604 404,672Cash and cash equivalents 現金及現金等價物 21 476,619 329,453

1,279,408 1,002,582

Total assets 資產總額 1,348,706 1,054,878

EQUITY AND LIABILITIES 權益及負債Equity attributable

to owners of the Company本公司權益持有者 應佔權益

Issued equity 已發行權益 22 889,171 889,171Other reserves 其他儲備 23 (320,599) (321,238)Retained earnings 保留溢利 237,230 39,646

Total equity 權益總額 805,802 607,579

Liabilities 負債Current liabilities 流動負債

Trade and other payables 貿易及其他應付款項 24 541,671 422,629Short term bank loans 短期銀行貸款 25 1,233 24,670

Total liabilities 負債總額 542,904 447,299

Total equity and liabilities 權益及負債總額 1,348,706 1,054,878

Net current assets 流動資產淨值 736,504 555,283

Total assets less current liabilities 總資產減流動負債 805,802 607,579

The financial statements on pages 40 to 98 were approved and authorised for issue by the board of directors on 25 February 2013 and are signed on its behalf by:

Rui Xiaowu 芮曉武 Xie Qinghua 謝慶華Director 董事 Director 董事

F-177

43中國電子集團控股有限公司 2012年年報

Balance Sheet資產負債表

載於第40頁至第98頁之財務報表經董事會於2013年2月25日批准及授權刊發，並由下列人士代表簽署﹕

31 December 31 December2012 2011

2012年12月31日 2011年12月31日Note HK$’000 HK$’000附註 千港元 千港元

ASSETS 資產Non-current assets 非流動資產

Property, plant and equipment 物業、廠房及設備 15 1,031 591Investments in subsidiaries 附屬公司投資 17 658,429 658,429

659,460 659,020

Current assets 流動資產Trade and other receivables 貿易及其他應收款項 20 3,278 739Cash and cash equivalents 現金及現金等價物 21 78,737 94,779

82,015 95,518

Total assets 資產總額 741,475 754,538

EQUITY AND LIABILITIES 權益及負債Equity 權益

Share capital 股本 22 889,171 889,171Other reserves 其他儲備 23 61,672 61,672Accumulated losses 累計虧損 (214,534) (200,770)

Total equity 權益總額 736,309 750,073

Liabilities 負債Current liabilities 流動負債

Trade and other payables 貿易及其他應付款項 24 5,166 4,465

Total equity and liabilities 權益及負債總額 741,475 754,538

Net current assets 流動資產淨值 76,849 91,053

Total assets less current liabilities 總資產減流動負債 736,309 750,073

The financial statements on pages 40 to 98 were approved and authorised for issue by the board of directors on 25 February 2013 and are signed on its behalf by:

Rui Xiaowu 芮曉武 Xie Qinghua 謝慶華Director 董事 Director 董事

F-178

44 China Electronics Corporation Holdings Company Limited Annual Report 2012

Consolidated Statement of Changes in Equity綜合權益變動表

Attributable to owners of the Company本公司權益持有者應佔

Issued Other

Retained earnings/

(accumulated Totalequity reserves losses) equity

已發行權益 其他儲備保留溢利╱（累計虧損） 權益總額

HK$’000 HK$’000 HK$’000 HK$’000千港元 千港元 千港元 千港元

At 1 January 2011 於2011年1月1日 889,171 (341,371) (75,013) 472,787Total comprehensive income 全面收益總額 – 20,133 114,659 134,792

At 31 December 2011 於2011年12月31日 889,171 (321,238) 39,646 607,579

At 1 January 2012 於2012年1月1日 889,171 (321,238) 39,646 607,579Total comprehensive income 全面收益總額 – 639 197,584 198,223

At 31 December 2012 於2012年12月31日 889,171 (320,599) 237,230 805,802

F-179

45中國電子集團控股有限公司 2012年年報

Consolidated Cash Flow Statement綜合現金流量表

Year ended 31 December截至12月31日止年度

2012 20112012年 2011年

Note HK$’000 HK$’000附註 千港元 千港元

Cash flows from operating activities

經營活動之 現金流量

Cash generated from operations 經營產生之現金 26 219,168 97,107Interest paid 支付利息 (546) (1,646)Income tax paid 支付所得稅 (28,530) (24,968)

Net cash generated from operating activities

經營活動產生之 現金淨額 190,092 70,493

Cash flows from investing activities

投資活動之現金流量

Interest received 收取利息 3,740 2,928Purchase of property, plant and

equipment and intangible assets購買物業、廠房及設備和 無形資產 (20,655) (15,016)

Proceeds on disposal of property, plant and equipment

出售物業、廠房及 設備所得款項 14 6,359

Proceed on disposal of an associate 出售聯營公司所得款項 – 1,323

Net cash used in investing activities 投資活動所用之現金淨額 (16,901) (4,406)

Cash flows from financing activities

融資活動之現金流量

Proceeds from bank loans 銀行貸款所得款項 1,233 24,670Repayment of bank loans borrowed 償還銀行貸款 (24,670) (24,670)

Net cash used in financing activities

融資活動所用之 現金淨額 (23,437) –

Net increase in cash and cash equivalents

現金及現金等價物 增加淨額 149,754 66,087

Effect of foreign exchange rate changes

匯率變動之 影響 (2,588) (3,919)

Cash and cash equivalents at beginning of the year

年初之現金及 現金等價物 329,453 267,285

Cash and cash equivalents at end of the year

年終之現金及 現金等價物 21 476,619 329,453

F-180

46 China Electronics Corporation Holdings Company Limited Annual Report 2012

Notes to the Consolidated Financial Statements綜合財務報表附註For the year ended 31 December 2012 截至2012年12月31日止年度

1. 一般資料中國電子集團控股有限公司（「本公司」）為一家於

開曼群島註冊成立，並於百慕達繼續經營的有限責

任公司。本公司股份在香港聯合交易所有限公司上

市。本公司的註冊辦事處地址為Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda。

本公司之最終控股公司為中國電子信息產業集團

有限公司（「中國電子集團」）（一家於中華人民共

和國（「中國」）成立之企業）。

本公司及其附屬公司（統稱「本集團」）的主要業

務是集成電路之設計、研發及銷售。

2. 重大會計政策概要

編製本綜合財務報表所採用的主要會計政策載列

如下。除另有指明者外，此等政策一直貫徹應用於

所有呈報之年度。

2.1 編製基準

(a) 符合香港財務報告準則及上市規則

綜合財務報表乃根據香港會計師公會頒佈之香港

財務報告準則（「香港財務報告準則」）而編製。該

等綜合財務報表亦遵守香港聯合交易所有限公司

證券上市規則（「上市規則」）所載之適用披露規

定。綜合財務報表是按歷史成本常規法編製。

1. GENERAL INFORMATION

China Electronics Corporation Holdings Company Limited (the “Company”) was incorporated in the Cayman Islands and continued in Bermuda with limited liability. The Company has its shares listed on The Stock Exchange of Hong Kong Limited. The address of the Company’s registered office is Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda.

The ultimate holding company of the Company is China Electronics Corporation Limited (“CEC”), which is established in the People’s Republic of China (“PRC”).

The principal activities of the Company and its subsidiaries (collectively the “Group”) are the design, research and development and sale of integrated circuits.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

2.1 Basis of preparation

(a) Compliance with HKFRS and Listing Rules

The consolidated financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRS”) issued by the Hong Kong Institute of Certified Public Accountants. These consolidated financial statements also comply with the applicable disclosure requirements of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”). The consolidated financial statements have been prepared under the historical cost convention.

F-181

47中國電子集團控股有限公司 2012年年報

Notes to the Consolidated Financial Statements綜合財務報表附註

For the year ended 31 December 2012 截至2012年12月31日止年度

2. 重大會計政策概要（續）

2.1 編製基準（續）

(a) 符合香港財務報告準則及上市規則（續）

編製符合香港財務報告準則的綜合財務報表須使

用若干關鍵之會計估算，管理層在運用本集團的

會計政策過程中亦須行使其判斷。對本綜合財務

報表而言涉及高度判斷或複雜性的事項，或涉及

重要範疇的假設及估算，在附註4中披露。

(b) 新訂準則、準則修訂及詮釋

於截至2012年12月31日止年度內，本集團已採納下列與其業務有關及於2012年1月1日起之會計期間生效之香港會計準則（「香港會計準則」）及香港

財務報告準則之修訂：

香港會計準則 第12號（修訂）

所得稅

香港財務報告準則

第7號（修訂）披露－金融資產轉移

採納該等對準則之修訂不會對本集團於本年度之

業績或財務狀況構成重大影響。

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)

2.1 Basis of preparation (Cont'd)

(a) Compliance with HKFRS and Listing Rules (Cont'd)

The preparation of consolidated financial statements in conformity with HKFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 4.

(b) New standards, amendments to standards and interpretations

During the year ended 31 December 2012, the Group had adopted the following amendments to Hong Kong Accounting Standards (“HKAS”) and HKFRS that are relevant to its operations and effective for the accounting period beginning on 1 January 2012:

HKAS 12 (amendment)

Income Taxes

HKFRS 7 (amendment)

Disclosure – Transfer of Financial Assets

The adoption of such amendments to standards did not have any significant effect on results or financial position of the Group for the current year.

F-182

48 China Electronics Corporation Holdings Company Limited Annual Report 2012

Notes to the Consolidated Financial Statements綜合財務報表附註For the year ended 31 December 2012 截至2012年12月31日止年度

2. 重大會計政策概要（續）

2.1 編製基準（續）

(b) 新訂準則、準則修訂及詮釋（續）

於授權刊發本綜合財務報表當日，已頒佈但尚未

生效之新訂或經修訂香港會計準則及香港財務報

告準則、以及對香港會計準則及香港財務報告準

則之修訂如下：

香港會計準則 第1號（修訂）

財務報表呈列 （自2013年1月1日起生效）

香港會計準則第19號 （2011年修訂）

僱員福利 （自2013年1月1日起生效）

香港會計準則第27號（2011年修訂）

獨立財務報表 （自2013年1月1日起生效）

香港會計準則第28號（2011年修訂）

聯營公司及合營公司 （自2013年1月1日起生效）

香港會計準則第32號 （修訂）

金融工具：呈列－金融資產 與金融負債之抵銷 （自2014年1月1日起生效）

香港財務報告準則 第7號（修訂）

金融工具：披露－金融資產 與金融負債之抵銷 （自2013年1月1日起生效）

香港財務報告準則 第9號

金融工具 （自2015年1月1日起生效）

香港財務報告準則 第10號，香港財務 報告準則第11號及 香港財務報告準則 第12號（修訂）

過渡指引 （自2013年1月1日起生效）

香港財務報告準則 第10號

綜合財務報表 （自2013年1月1日起生效）

香港財務報告準則 第11號

合營安排 （自2013年1月1日起生效）

香港財務報告準則 第12號

於其他實體之權益之披露 （自2013年1月1日起生效）

香港財務報告準則 第13號

公允值計量 （自2013年1月1日起生效）

本集團並無提早採納任何此等新訂或經修訂香港

會計準則及香港財務報告準則、以及對香港會計準

則及香港財務報告準則之修訂。管理層目前正在

評估該等修訂對本集團財務狀況及表現之影響。

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)

2.1 Basis of preparation (Cont'd)

(b) New standards, amendments to standards and interpretations (Cont'd)

At the date of authorisation of this consolidated financial statements, the following new or revised HKAS and HKFRS, and amendments to HKAS and HKFRS have been issued but are not yet effective:

HKAS 1 (amendment)

Presentation of Financial Statements (effective from 1 January 2013)

HKAS 19 (revised 2011)

Employee Benefits (effective from 1 January 2013)

HKAS 27 (revised 2011)

Separate Financial Statements (effective from 1 January 2013)

HKAS 28 (revised 2011)

Associates and Joint Ventures (effective from 1 January 2013)

HKAS 32 (amendment)

Financial Instruments: Presentation – Offsetting Financial Assets and Financial Liabilities (effective from 1 January 2014)

HKFRS 7 (amendment)

Financial Instruments: Disclosures – Offsetting Financial Assets and Financial Liabilities (effective from 1 January 2013)

HKFRS 9 Financial Instruments (effective from 1 January 2015)

HKFRS 10, HKFRS 11 and HKFRS 12 (amendment)

Transition Guidance (effective from 1 January 2013)

HKFRS 10 Consolidated Financial Statements (effective from 1 January 2013)

HKFRS 11 Joint Arrangements (effective from 1 January 2013)

HKFRS 12 Disclosure of Interests in Other Entities (effective from 1 January 2013)

HKFRS 13 Fair Value Measurement (effective from 1 January 2013)

The Group did not early adopt any of these new or revised HKAS and HKFRS, and amendments to HKAS and HKFRS. Management is currently assessing the financial impact of these revisions to the Group’s financial position and performance.

F-183

49中國電子集團控股有限公司 2012年年報

Notes to the Consolidated Financial Statements綜合財務報表附註

For the year ended 31 December 2012 截至2012年12月31日止年度

2. 重大會計政策概要（續）

2.2 綜合賬目

(a) 附屬公司

附屬公司指本集團有權管控其財政及營運政策的

所有實體（包括特殊目的實體），一般附帶超過半

數投票權的股權。在評定本集團是否控制另一實

體時，目前可行使或可兌換的潛在投票權的存在

及影響均予考慮。

於年內所收購或出售的附屬公司將自收購生效日

期起或直至出售生效日期止（視情況而定）計入綜

合財務報表（惟共同控制下收購之附屬公司採用

合併會計法原則入賬除外）。

除附註2.2(c)所述對共同控制下的合併採用合併會計法外，收購會計法乃用作本集團業務合併的

入賬方法。收購的對價根據於交易日期所給予資

產、所產生的負債及發行的股本權益的公允值計

算。所轉讓的對價包括或有對價安排所產生的任

何資產或負債的公允值。相關交易收購成本於產

生時確認為費用。在業務合併中所購買可識別的

資產以及所承擔的負債及或有負債，始初按彼等

於收購日期的公允值計量。就個別收購之收購基

準而言，本集團可按公允值或按非控制性權益應

佔被收購方資產淨值的比例，計量被收購方的非

控制性權益。轉讓的對價、被收購方任何非控制性

權益以及之前於被收購方之任何權益在收購日期

的公允值之總和超過所收購可識別資產淨值的公

允值的數額記錄為商譽。若轉讓的對價、被收購方

任何非控制性權益以及之前於被收購方之任何權

益在收購日期的公允值之總和低於所收購可識別

資產淨值的公允值，該差額直接在綜合收益表確

認。

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)

2.2 Consolidation

(a) Subsidiaries

Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.

The subsidiaries acquired or disposed of during the year will be included in the consolidated financial statements from the effective date of acquisition or up to the effective date of disposal (except for acquisition of subsidiaries under common control which are accounted for using the principles of merger accounting), as appropriate.

Apart from the application of merger accounting on those common control combination as disclosed in Note 2.2(c) below, the purchase method of accounting is used to account for business combination by the Group. The consideration transferred for an acquisition is the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related transaction costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets. The excess of the aggregate of consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired is recorded as goodwill. If the aggregate of consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition date fair value of any previous equity interest in the acquiree is less than the fair value of the identifiable net assets acquired, the difference is recognised directly in the consolidated income statement.

F-184

50 China Electronics Corporation Holdings Company Limited Annual Report 2012

Notes to the Consolidated Financial Statements綜合財務報表附註For the year ended 31 December 2012 截至2012年12月31日止年度

2. 重大會計政策概要（續）

2.2 綜合賬目（續）

(a) 附屬公司（續）

集團內公司間之交易、結餘及未實現交易收益予

以對銷。未實現虧損亦予以對銷。附屬公司之會計

政策於綜合財務報表中已按需要作出改變，以確

保與本集團所採納之政策一致。

在本公司之資產負債表中，附屬公司投資乃按成

本扣除減值虧損撥備列賬（附註2.7）。成本按因或有對價之修訂對對價之改變作出調整。成本亦包

括投資的直接歸屬成本。附屬公司業績由本公司

按已收股息及應收股息計入本公司之收益表內。

(b) 與非控制性權益進行的交易

本集團將其與非控制性權益進行之交易視為與集

團股東進行之交易。向非控制性權益進行購置，

所支付的對價之公允值與集團應佔所收購資產淨

值之賬面值的差額於權益中記賬。向非控制性權

益進行的出售，所得盈虧亦於權益中記賬。

(c) 共同控制下的合併

本集團以合併會計法核算共同控制下收購之附屬

公司。

於合併會計法下，當共同控制下的合併發生時，綜

合財務報表包括被合併實體或業務的財務報表，

猶如被合併的實體或業務在開始處於控制方的控

制下就已經被合併。

從控制方的角度，被合併的實體或業務的資產淨值

以賬面值合併。在共同控制下的合併中產生的商

譽或收購方應佔被收購方可辨認資產、負債及或

有負債的公允值超過收購成本的金額不予確認。

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)

2.2 Consolidation (Cont'd)

(a) Subsidiaries (Cont'd)

Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated. Accounting policies of subsidiaries have been changed where necessary in the consolidated financial statements to ensure consistency with the policies adopted by the Group.

The investments in subsidiaries are stated at cost less provision for impairment losses in the Company’s balance sheet (Note 2.7) . Cost is adjusted to reflect changes in consideration arising from contingent consideration amendments. Cost also includes direct attributable costs of investment. The results of subsidiaries are accounted for by the Company in the Company’s income statement to the extent of dividend received and receivable.

(b) Transactions with non-controlling interests

The Group treats transactions with non-controlling interests as transactions with shareholders of the Group. For purchases from non-controlling interests, the difference between the fair value of consideration paid and the Group’s share of the carrying value of net assets acquired is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

(c) Common control combination

Merger accounting is used to account for the acquisition of subsidiaries under common control by the Group.

Under merger accounting, the consolidated financial statements incorporate the financial statements of the combining entities or businesses in which the common control combination occurs as if they had been combined from the date when the combining entities or businesses first came under the control of the controlling party.

The net assets of the combining entities or businesses are combined using the existing book values from the controlling parties’ perspective. No amount is recognised in consideration for goodwill or excess of acquirers’ interest in the net fair value of acquiree’s identifiable assets, liabilities and contingent liabilities over cost at the time of common control combination.

F-185

51中國電子集團控股有限公司 2012年年報

Notes to the Consolidated Financial Statements綜合財務報表附註

For the year ended 31 December 2012 截至2012年12月31日止年度

2. 重大會計政策概要（續）

2.2 綜合賬目（續）

(c) 共同控制下的合併（續）

綜合收益表包括每一個被合併實體或業務於其最

早呈列日期披露或合併實體或業務開始受到共同

控制時（以較遲者為準）的業績，而不考慮共同控

制下的合併生效日期之因素。

綜合財務報表中的比較數字，已假設被合併實體

或業務已於先前呈列之資產負債表日或開始受到

共同控制時（以較遲者為準）合併已發生之基準呈

列。

這些實體採用統一的會計政策。集團內被合併實

體或業務之間的所有交易、結餘及未實現交易收

益在合併賬目中對銷。

共同控制下的合併發生的交易成本（包括專業服

務費、註冊費、提供資訊予股東的成本，將先前個

別業務合併產生的成本或損失等），於發生時計入

當期開支。

被合併實體之股本與收購所付之對價之公允值的

差額於綜合財務報表中的合併儲備中列示。

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)

2.2 Consolidation (Cont'd)

(c) Common control combination (Cont'd)

The consolidated income statement includes the results of each of the combining entities or businesses from the earliest date presented or since the date when the combining entities or businesses first came under common control, whichever is shorter and regardless of the effective date of the common control combination.

The comparative amounts in the consolidated financial statements are presented as if the entities or businesses had been combined at the previous balance sheet dates or when they first came under common control, whichever is shorter.

A uniform set of accounting policies is adopted by those entities. All inter-group transactions, balances and unrealised gains on transactions between combining entities or businesses are eliminated on consolidation.

Transaction costs, including professional fees, registration fees, costs of furnishing information to shareholders, costs or losses incurred in combining operations of the previously separate businesses, etc., incurred in relation to the common control combination is recognised as an expense in the period in which it is incurred.

The difference between the share capital of entities combined and the fair value of consideration paid has been recorded in the merger reserve in consolidated financial statements.

F-186

52 China Electronics Corporation Holdings Company Limited Annual Report 2012

Notes to the Consolidated Financial Statements綜合財務報表附註For the year ended 31 December 2012 截至2012年12月31日止年度

2. 重大會計政策概要（續）

2.3 分部報告

營運分部之呈報方式與提供予主要營運決策者之

內部報告一致。負責分配資源及評估營運分部的表

現之主要營運決策者為作出策略決定之董事會。

2.4 外幣換算

(a) 功能貨幣及列賬貨幣

本集團旗下各實體財務報表內之項目乃以該實體

營運所在主要經濟環境所使用之貨幣（「功能貨

幣」）計算。綜合財務報表以港元呈報，港元為本

公司的功能貨幣及本集團的列賬貨幣。

(b) 交易及結餘

外幣交易採用交易日期的匯率換算為功能貨幣。

結算此等交易產生的匯兌盈虧及將以外幣計值的

貨幣資產和負債按年終匯率換算產生的匯兌盈虧

在綜合收益表確認。

與借貸和現金及現金等價物有關的匯兌盈虧在綜

合收益表內的「融資收入╱（成本）－淨額」中呈

列。所有其他匯兌盈虧在綜合收益表內的「其他收

益╱（虧損）－淨額」中呈列。

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)

2.3 Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the board of directors that makes 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 the currency of the primary economic environment in which the entity operates (“functional currency”). The consolidated financial statements are presented in Hong Kong dollars, which is the Company’s functional and the Group’s presentation currency.

(b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the consolidated income statement.

Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the consolidated income statement within “finance income/(costs) – net”. All other foreign exchange gains and losses are presented in the consolidated income statement within “other gains/(losses) – net”.

F-187

53中國電子集團控股有限公司 2012年年報

Notes to the Consolidated Financial Statements綜合財務報表附註

For the year ended 31 December 2012 截至2012年12月31日止年度

2. 重大會計政策概要（續）

2.4 外幣換算（續）

(c) 集團內公司

就呈報綜合財務報表而言，功能貨幣與列賬貨幣

不同的所有集團實體成員（當中沒有成員的貨幣

列為嚴重通脹貨幣）的業績和財務狀況按以下方

法換算為列賬貨幣：

－ 每份呈報的資產負債表內的資產和負債按

該資產負債表日期的收市匯率換算；

－ 每份收益表內的收入和開支按平均匯率換

算（除非此匯率並不代表交易日期匯率的

累計影響的合理約數，則收支項目按交易

日期的匯率換算）；及

－ 所有由此產生的匯兌差額在其他全面收益

中確認。

在處理綜合賬目時，換算海外實體的淨投資所產

生的匯兌差額列入其他全面收益。

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)

2.4 Foreign currency translation (Cont'd)

(c) Group companies

For the purpose of presenting consolidated financial statements, the results and financial position of all the group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency 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;

– income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and

– all resulting exchange differences are recognised in other comprehensive income.

On consolidation, exchange differences arising from the translation of the net investment in foreign entities are taken to other comprehensive income.

F-188

54 China Electronics Corporation Holdings Company Limited Annual Report 2012

Notes to the Consolidated Financial Statements綜合財務報表附註For the year ended 31 December 2012 截至2012年12月31日止年度

2. 重大會計政策概要（續）

2.5 物業、廠房及設備

物業、廠房及設備按歷史成本減折舊及減值虧損

後列賬。歷史成本包括收購該項目直接應佔之開

支。

資產之其後發生之成本只有在與該項目有關之未

來經濟利益有可能流入本集團及項目成本能可靠

計量時，方會計入資產賬面值或確認為一項獨立

資產（視乎情況而定）。所有其他維修及保養成本

在其產生之財務期間內於綜合收益表支銷。

物業、廠房及設備之折舊乃以直線法計算，按其估

計可使用年期分攤成本，有關估計可使用年期如

下：

－ 租賃物業裝修 5年或租約年期（以較短者為準）

－ 廠房及機器 5至10年－ 車輛 5至10年－ 傢俬及裝置 5年

資產的剩餘價值及可使用年期在每個結算日進行

檢討及調整（如適用）。

若資產的賬面值高於其估計可收回價值，其賬面

值即時撇減至可收回價值（附註2.7)。

出售或報廢的盈虧按所得款項與相關資產賬面值

的差額釐定，並在綜合收益表內的「其他收益╱

（虧損）－淨額」中確認。

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)

2.5 Property, plant and equipment

Property, plant and equipment are stated at historical cost less depreciation and impairment losses. 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 the Group and the cost of the item can be measured reliably. All other repairs and maintenance costs are charged in the consolidated income statement during the financial period in which they are incurred.

Depreciation of property, plant and equipment is calculated using the straight-line method to allocate their costs over their estimated useful lives, as follows:

– Leasehold improvements 5 years (or over the lease term, whichever is shorter)

– Plant and machinery 5-10 years– Motor vehicles 5-10 years– Furniture and fixtures 5 years

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

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 (Note 2.7) .

Gains and losses on disposals or retirement are determined by comparing the proceeds with the carrying amount of the asset and are recognised within “other gains/(losses) – net” in the consolidated income statement.

F-189

55中國電子集團控股有限公司 2012年年報

Notes to the Consolidated Financial Statements綜合財務報表附註

For the year ended 31 December 2012 截至2012年12月31日止年度

2. 重大會計政策概要（續）

2.6 無形資產

電腦軟件

所購入的電腦軟件使用許可權乃根據購入特定軟

件及使該軟件達到可使用所產生之成本予以資本

化。該等成本乃在其估計可使用年期（一至三年）

內予以攤銷。

2.7 於附屬公司及非金融資產投資之減值

沒有確定使用年期之資產（例如商譽）無需攤銷，

但每年須就減值進行測試。各項資產，當有事件出

現或情況改變顯示賬面值可能無法收回時須就減

值進行檢討。減值虧損按資產之賬面值超出其可

收回價值之數額確認。可收回價值以資產之公允

值扣除銷售成本或使用價值兩者之較高者為準。

為評估減值，資產按可分開識別現金流量（現金

產生單位）的最低層次分類。除商譽外，已減值的

非金融資產在每個結算日均就減值是否可以撥回

而進行檢討。

當從附屬公司收到股息而股息超過該附屬公司在

股息宣佈期間之全面收益總額時，或若於獨立財

務報表中，附屬公司投資之賬面值超過應佔被投

資方於其綜合財務報表之淨資產（包括商譽）之賬

面值時，則必須對有關附屬公司投資進行減值測

試。

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)

2.6 Intangible assets

Computer software

Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over their estimated useful lives of one to three years.

2.7 Impairment of investments in subsidiaries and non-financial assets

Assets that have an indefinite useful life, for example goodwill, are not subject to amortisation and are tested annually for impairment. Assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each balance sheet date.

Impairment testing of the investments in subsidiaries is required upon receiving dividends from these investments if the dividend exceeds the total comprehensive income of the subsidiary in the period the dividend is declared or if the carrying amount of the investment in the separate financial statements exceeds the carrying amount in the consolidated financial statements of the investee’s net assets including goodwill.

F-190

56 China Electronics Corporation Holdings Company Limited Annual Report 2012

Notes to the Consolidated Financial Statements綜合財務報表附註For the year ended 31 December 2012 截至2012年12月31日止年度

2. 重大會計政策概要（續）

2.8 金融資產

2.8.1 分類

本集團將金融資產項目劃分為兩類別：貸款及應

收款項以及可供出售金融資產。分類方法乃取決

於金融資產之購入目的劃分。管理層於始初確認

時為其金融資產分類。

(a) 貸款及應收款項

貸款及應收款項為具有固定或可釐定付款且沒有

在活躍市場上報價的非衍生金融資產。此等項目

包括於流動資產內，但若到期日由結算日起計超

過一年者，則分類為非流動資產。本集團之貸款及

應收款項包括資產負債表中之「貿易及其他應收款

項」及「現金及現金等價物」（附註2.10及2.11)。

(b) 可供出售金融資產

可供出售金融資產為非衍生金融資產，乃指定須

列入此類別或不屬於任何其他類別之金融資產。

此等項目包括於非流動資產內，除非管理層計劃

於結算日起計一年內出售有關投資，則分類為流

動資產。

2.8.2 確認及計量

按照一般市場規定或慣例購入及出售的金融資產

在交易日予以確認－交易日指本集團承諾購入或

出售該資產之日期。所有金融資產投資始初按公

允值加交易成本確認。對於某些可供出售金融資

產而然，如果沒有可以引用的市場價格、合理估計

的公允值區間較大和無法合理估計多種假設的可

能性時，則以成本列賬。當從投資收取現金流量

的權利經已到期或經已轉讓，而本集團已將擁有

權之絕大部份風險和回報轉讓時，金融資產即終

止確認。可供出售金融資產其後按公允值列賬。

貸款及應收款項以實際利息法按攤銷成本列賬。

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)

2.8 Financial assets

2.8.1 Classification

The Group classifies its financial assets into two categories: loans and receivables and available-for-sale financial assets. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

(a) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 1 year after the balance sheet date, which are classified as non-current assets. The Group’s loans and receivables comprise “trade and other receivables” and “cash and cash equivalents” in the balance sheet (Notes 2.10 and 2.11).

(b) Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives financial assets that are either designated in this category or not classified in the other category. They are included in non-current assets unless management intends to dispose of the investment within 1 year of the balance sheet date, which are classified as current assets.

2.8.2 Recognition and measurement

Regular way purchases and sale of financial assets are recognised on the trade-date – the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets. However, for available-for-sale financial assets that do not have a quoted market price, the range of reasonable fair value estimates is significant and the possibilities of the various estimates cannot be reasonably assessed, is stated at cost. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Available-for-sale financial assets are subsequently carried at fair value. Loans and receivables are carried at amortised cost using the effective interest method.

F-191

57中國電子集團控股有限公司 2012年年報

Notes to the Consolidated Financial Statements綜合財務報表附註

For the year ended 31 December 2012 截至2012年12月31日止年度

2. 重大會計政策概要（續）

2.8 金融資產（續）

2.8.2 確認及計量（續）

可供出售金融資產之公允值變動於其他全面收益

中確認，直至金融資產售出或釐定出現減值。來自

可供出售金融資產的股息，當本集團收取有關款

項的權利確定時，在綜合收益表內確認為「其他收

益╱（虧損）－淨額」之一部份。可供出售證券採

用實際利息法計算的利息在綜合收益表內確認為

「其他收益╱（虧損）－淨額」之一部份。

當可供出售證券被售出或減值時，於權益中確認

的累計公允值調整列入收益表內。

2.8.3 金融資產減值

集團將於每個結算日評估金融資產或一組金融資

產是否出現減值的客觀證據。所有減值虧損於綜

合收益表確認。對於分類為可供出售金融資產， 公允值若大幅度或長期跌至低於其成本，會被視

為金融資產已經顯示減值的跡象。若金融資產存

在此等證據，累計虧損－按收購成本與當時公允值

的差額，減該金融資產之前在收益表及於權益確

認的任何減值虧損計算並在收益表確認。可供出

售股權投資之減值虧損將不會於往後期間撥回。

貸款及應收款項之減值虧損回撥應不能導致該資

產超過在不確認任何減值情況下之已攤銷成本。

貿易及其他應收款項之減值測試載於附註2.10。

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)

2.8 Financial assets (Cont'd)

2.8.2 Recognition and measurement (Cont'd)

Changes in fair value of available-for-sale financial assets are recognised in other comprehensive income until the financial asset is disposed of or determined to be impaired. Dividend income from available-for-sale financial assets is recognised in the consolidated income statement as part of “other gains/(losses) – net” when the Group’s right to receive payments is established. Interest on available-for-sale securities calculated using the effective interest method is recognised in the consolidated income statement as part of “other gains/(losses) – net”.

When available-for-sale securities are sold or impaired, the accumulated fair value adjustments recognised in equity are included in the income statement.

2.8.3 Impairment of financial assets

The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired. All impairment loss is recognised in the consolidated income statement. In the case of available-for-sale financial assets, a significant or prolonged decline in the fair value below its cost is considered as an indicator that the financial asset is impaired. If any such evidence exists, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in income statement and in equity, is recognised in the income statement. Impairment losses recognised on available-for-sale equity instruments are not subsequently reversed. For loans and receivables, impairment loss is reversed to the extent that the amortised cost would have been had the impairment not been recognised. Impairment testing of trade and other receivables is described in Note 2.10.

F-192

58 China Electronics Corporation Holdings Company Limited Annual Report 2012

Notes to the Consolidated Financial Statements綜合財務報表附註For the year ended 31 December 2012 截至2012年12月31日止年度

2. 重大會計政策概要（續）

2.9 存貨

存貨按成本及可變現淨值兩者的較低者列賬。成

本採用加權平均法釐定。製成品及在製品的成本

包括設計成本、原材料、直接勞工、分包商製造成

本、其他直接成本和相關的生產經常開支（依據

正常營運能力）。存貨成本不包括借貸成本。可變

現淨值為在日常業務過程中的估計銷售價，扣除

適用的可變動銷售開支。

2.10 貿易及其他應收款項

貿易應收款項為在日常業務過程中就商品銷售或

服務執行而應收客戶的款項。如貿易及其他應收

款項的收回預期在一年或以內，其被分類為流動

資產；否則分類為非流動資產。貿易及其他應收

款項始初按公允值確認，其後以實際利息法按攤

銷成本扣除減值撥備計量。當有客觀證據證明本

集團將無法按應收款項的原有條款收回所有款項

時，即就貿易及其他應收款項設定減值撥備。債

務人出現重大財務困難、債務人可能破產或進行

財務重組，以及拖欠或逾期付款，均被視為是應

收款項顯示減值的跡象。撥備金額為應收款項之

賬面值與按原實際利率折現估計未來現金流量之

現值之差額。應收款項的賬面值透過使用撥備賬

戶削減，而有關的撥備數額則在收益表內的「行政

開支」中確認。如應收款項無法收回時，會於應收

款項撥備賬戶中予以撇銷。之前已撇銷的應收款

項如其後收回，回撥金額將於收益表內的「行政開

支」中確認。

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)

2.9 Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted-average method. The cost of finished goods and work in progress comprises design costs, raw materials, direct labour, manufacturing cost of subcontractors, other direct costs and related production overheads (based on normal operating capacity). It excludes borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.

2.10 Trade and other receivables

Trade receivables are amounts due from customers for merchandise sold or services performed in the ordinary course of business. If collection of trade and other receivables is expected in 1 year or less, they are classified as current assets. If not, they are presented as non-current assets. Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade and other receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulty of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the receivable is impaired. The amount of the provision is the difference between the receivable’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the receivable is reduced through the use of an allowance account, and the amount of the provision is recognised in the income statement within “administrative expenses”. When the receivable is uncollectible, it is written off against the allowance account for receivables. Subsequent recoveries of amounts previously written off are credited against “administrative expenses” in the income statement.

F-193

59中國電子集團控股有限公司 2012年年報

Notes to the Consolidated Financial Statements綜合財務報表附註

For the year ended 31 December 2012 截至2012年12月31日止年度

2. 重大會計政策概要（續）

2.11 現金及現金等價物

現金及現金等價物包括現金、銀行及其他財務機

構通知存款及原到期日為3個月或以下的其他短期高流動性投資。

2.12 股本

普通股歸類為權益。與發行新股或購股權直接有

關之成本，以除稅淨額沖減發行收入後於權益中

列示。

2.13 政府補助

當能夠合理地保證政府補助將可收取，而集團將

會符合所有附帶條件時，則政府補助按其公允值

確認入賬。與資產有關之政府補助列入非流動負

債，並按有關資產之估計可使用年期以直線法在

綜合收益表中確認。與開支項目有關之政府補助

遞延入賬，並按該開支及補助之間之合理關係在

補助之成本發生的期間在綜合收益表中確認為收

入。

2.14 貿易應付款項

貿易應付款項為在日常業務過程中就購買供應商

提供的商品或服務而應支付的責任。如貿易應付

款項的支付日期在一年或以內，其被分類為流動

負債；否則分類為非流動負債。貿易應付款項始初

按公允值確認，其後以實際利息法按攤銷成本計

量。

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)

2.11 Cash and cash equivalents

Cash and cash equivalents includes cash on hand, deposits held at call with banks and other financial institutions and other short-term highly liquid investments with original maturities of 3 months or less.

2.12 Share capital

Ordinary shares are classified as equity. Costs directly attributable to the issue of new shares or share options are shown in equity as a deduction, net of tax, from the proceeds.

2.13 Government grants

Government grants are recognised at their fair values where there is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions. Grant relating to an asset is included in non-current liabilities, which is credited to the consolidated income statement on a straight-line basis over the expected useful life of the related asset. Grant relating to an expense item is deferred and recognised as income in the consolidated income statement over the period necessary to match with the cost that it is intended to compensate.

2.14 Trade payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade payables are classified as current liabilities if payment is due within 1 year or less. If not, they are presented as non-current liabilities. Trade payables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method.

F-194

60 China Electronics Corporation Holdings Company Limited Annual Report 2012

Notes to the Consolidated Financial Statements綜合財務報表附註For the year ended 31 December 2012 截至2012年12月31日止年度

2. 重大會計政策概要（續）

2.15 借貸

借貸始初按公允值並扣除產生的交易成本確認。

借貸其後按攤銷成本列賬；所得款項（扣除交易

成本）與贖回價值的任何差額以實際利息法於借

貸期間內在收益表確認。

除非本集團有無條件權利將負債的結算遞延至結

算日後最少一年，否則借貸分類為流動負債。

2.16 當期及遞延稅項

稅項開支包括當期和遞延稅項。稅項在綜合收益

表中確認，但與直接在權益中確認的項目有關者

則除外。在該情況下，稅項亦在權益中確認。

當期所得稅支出根據本公司及其附屬公司營運及

產生應課稅收入的國家於結算日已頒佈或實質頒

佈的稅務法例計算。管理層就適用稅務法例詮釋所

規限的情況定期評估報稅的狀況，並在適當情況

下根據預期須向稅務機關支付的稅款設定撥備。

遞延稅項以負債法就資產和負債的稅基與資產和

負債在綜合財務報表的賬面值之暫時差異確認。

然而，若遞延稅項來自在交易（不包括業務合併）

中對資產或負債的始初確認，而在交易時不影響

會計盈虧或應課稅盈虧，則不予確認。遞延稅項採

用在結算日已頒佈或實質頒佈，並預期在變現有

關之遞延稅項資產或償付遞延稅項負債時適用之

稅率（及法例）而釐定。

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)

2.15 Borrowings

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 1 year after the balance sheet date.

2.16 Current and deferred taxation

The taxation expense comprises current and deferred taxation. Tax is recognised in the consolidated income statement, except to the extent that it relates to items recognised directly in equity. In this case, the tax is also recognised in equity.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred taxation is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred taxation is not recognised for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred taxation is determined using tax rates (and laws) that have been enacted or substantively enacted at the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.

F-195

61中國電子集團控股有限公司 2012年年報

Notes to the Consolidated Financial Statements綜合財務報表附註

For the year ended 31 December 2012 截至2012年12月31日止年度

2. 重大會計政策概要（續）

2.16 當期及遞延稅項（續）

倘日後應課稅溢利很有可能抵銷可動用之暫時差

異，暫時差異方會確認為遞延稅項資產。

遞延稅項就附屬公司投資產生之暫時差異作出撥

備，但假若本集團可以控制暫時差異之撥回時間；

而暫時差異在可預見將來很有可能不會撥回者除

外。

2.17 撥備

本集團因已發生的事件而須要承擔現有的法律或

推定責任；很有可能需要付出資源以償付有關責

任及金額已經可靠估計情況下確認撥備。不就未

來營運虧損確認撥備。

如有多項類似責任，是否需要為償付而付出資源，

則需根據該責任類別整體考慮。即使在同一責任

類別所包含的其中某一個項目付出資源的可能性

極低，仍須確認撥備。

撥備採用稅前利率折現預期需償付有關責任的開

支的現值計量，該利率反映當時市場對金錢時間

值和有關責任特定風險的評估。因時間流逝而增

加的撥備確認為利息開支。

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)

2.16 Current and deferred taxation (Cont'd)

Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

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

2.17 Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not recognised for future operating losses.

Where there are a number of similar obligations, the likelihood that an outflow of resources will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow of resources with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense.

F-196

62 China Electronics Corporation Holdings Company Limited Annual Report 2012

Notes to the Consolidated Financial Statements綜合財務報表附註For the year ended 31 December 2012 截至2012年12月31日止年度

2. 重大會計政策概要（續）

2.18 僱員福利

(a) 退休金責任

本集團為香港之合資格僱員設立一項強制性公積

金計劃（「強積金計劃」）。該強積金計劃乃一項定

額供款計劃，其資產由獨立信託管理基金持有。本

集團於強積金計劃之供款規定為僱員薪金之5%，並於產生時列作開支。

本集團在中國營運之附屬公司須根據相關法例及

法規，向由中國有關地方政府機關管理之職工退

休計劃供款。對該等退休計劃之供款於產生時計

入收益表。本集團並無法律或推定責任作進一步

供款。

(b) 僱員休假權益

僱員在年假之權益在僱員應享有時確認，本集團

為截至結算日止僱員已提供之服務而產生之年假

之估計負債作出撥備。

僱員之病假及產假權益不予確認，直至僱員正式

休假為止。

(c) 獎勵計劃

當本集團因為僱員已提供之服務而產生現有法律

或推定支付獎勵之責任，而責任金額能可靠估計

時，則將獎勵之預計成本確認為負債。

利潤分享及獎勵計劃之負債預期須在一年內償

付，並根據在償付時預期會支付之金額計算。

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)

2.18 Employee benefits

(a) Pension obligations

The Group operates a mandatory provident fund scheme (“MPF Scheme”) for the eligible employees in Hong Kong. The MPF Scheme is a defined contribution scheme, the assets of which are held in separate trustee – administered funds. The Group’s contributions to MPF Scheme are set at 5% of employees’ salaries and are expensed as incurred.

The Group’s subsidiaries operating in the PRC have to make contribution to staff retirement scheme managed by local government authorities in accordance with the relevant rules and regulations. Contributions to these schemes are charged to the income statement as and when incurred. The Group has no legal or constructive obligations to pay further contributions.

(b) Employee leave entitlements

Employee entitlements to annual leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave as a result of services rendered by employees up to the balance sheet date.

Employee entitlements to sick leave and maternity leave are not recognised until the time of leave.

(c) Bonus plans

The expected cost of bonuses is recognised as a liability when the Group has a present legal or constructive obligation for payment of bonus as a result of services rendered by employees and a reliable estimate of the obligation can be made.

Liabilities for profit sharing and bonus plans are expected to be settled within 1 year and are measured at the amounts expected to be paid when they are settled.

F-197

63中國電子集團控股有限公司 2012年年報

Notes to the Consolidated Financial Statements綜合財務報表附註

For the year ended 31 December 2012 截至2012年12月31日止年度

2. 重大會計政策概要（續）

2.18 僱員福利（續）

(d) 以股份形式之報酬

所獲取僱員服務之公允值乃參照已授出購股權於

授出日之公允值釐定，不包括任何非市場服務及

表現歸屬條件之影響，並確認為開支及於權益中

作出相應遞增（購股權儲備）。非市場歸屬條件

包括在計算有關預期可予歸屬購股權數目之假設

內。列作開支總金額將於歸屬期間（指定歸屬條件

必須達成期間）內確認為支出。於結算日，本公司

均會修訂其預期可予歸屬之購股權數目之估計，

並於綜合收益表內確認修訂原來估計數字之影響

（如有）及對權益作相應調整。

行使購股權時，早前已確認之購股權儲備數額將

轉換為股本（面值）及股份溢價。倘購股權於歸屬

期間後被註銷或於屆滿日期時仍未獲行使，早前

已確認之購股權儲備數額將轉入保留溢利。

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)

2.18 Employee benefits (Cont'd)

(d) Share-based compensation

The fair value of the employee services received is determined by reference to the fair value of the share options granted at the grant date, excluding the impact of any non-market service and performance vesting conditions, and is recognised as an expense with a corresponding increase in equity (share option reserve). Non-market vesting conditions are included in assumptions about the number of share options that are expected to vest. The total amount expensed is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At balance sheet date, the entity revises its estimates of the number of share options that are expected to vest. It recognises the impact of the revision of original estimates, if any, in the consolidated income statement, and a corresponding adjustment to equity.

At the time when the share options are exercised, the amount previously recognised in share option reserve will be transferred to share capital (nominal value) and share premium. When the share options are cancelled after the vesting period or are still not exercised at the expiry date, the amount previously recognised in share option reserve will be transferred to retained earnings.

F-198

64 China Electronics Corporation Holdings Company Limited Annual Report 2012

Notes to the Consolidated Financial Statements綜合財務報表附註For the year ended 31 December 2012 截至2012年12月31日止年度

2. 重大會計政策概要（續）

2.19 或有負債

或有負債乃因已發生的事件而可能產生的責任，

並僅視乎日後會否出現一項或多項非本集團可完

全控制的不可確定事件而確認其存在。或有負債

亦可因已發生的事件而產生的現有責任，但由於

未能肯定是否需要付出資源或未能可靠地估計有

關責任的金額而不予確認。

或有負債並不確認為撥備，但於財務報表附註中

披露。當資源流出的可能性有變而導致可能付出

資源，或有負債將確認為撥備。

2.20 收入確認

收入包括銷售產品已收或應收對價之公允值，扣

除增值稅、退貨、回扣及折扣。收入於產品已交付

予顧客，而顧客已接受產品或產品質量檢查期屆

滿時及合理地確定能收取有關應收款項時確認。

利息收入按尚未收回之本金及適用之利率以時間

比例基準而確認。

股息收入於其獲派付之權利確立時確認入賬。

2.21 經營租賃

凡擁有權的絕大部份風險及回報乃歸出租人所有

的租賃，均歸類為經營租賃。根據經營租賃需支付

之款項（扣除出租人給予之任何獎勵），乃於租賃

期內以直線法在綜合收益表內確認為費用。

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)

2.19 Contingent liabilities

A contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group. It can also be a present obligation arising from past events that is not recognised because it is not probable that outflow of resources will be required or the amount of obligation cannot be measured reliably.

A contingent liability is not provided for as a provision but is disclosed in the notes to the financial statements. When a change in the probability of an outflow of resources occurs so that the outflow is probable, they will then be recognised as a provision.

2.20 Revenue recognition

Revenue comprises the fair value of the consideration received or receivable for the sale of goods, net of value-added tax, returns, rebates and discounts. Revenue is recognised when the goods are delivered to customers, the customers have accepted the goods or the product quality inspection time period has lapsed and collectability of the related receivables is reasonably assured.

Interest income is recognised on a time-proportion basis, taking into account the principal amounts outstanding and the interest rates applicable.

Dividend income is recognised when the right to receive payment is established.

2.21 Operating leases

Leases in which substantially all the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the consolidated income statement on a straight-line basis over the period of the lease.

F-199

65中國電子集團控股有限公司 2012年年報

Notes to the Consolidated Financial Statements綜合財務報表附註

For the year ended 31 December 2012 截至2012年12月31日止年度

2. 重大會計政策概要（續）

2.22 研究及開發成本

研究成本於產生時列作開支。當能證明能符合以

下所有各項條件時，投放於設計和測試中的可識

別和獨特軟件產品的直接開發成本可確認為無形

資產：

－ 在技術上完成該軟件產品以使其可供使用

是可行的；

－ 管理層有意圖完成並使用或出售該軟件產

品；

－ 有能力使用或出售該軟件產品；

－ 可證實該軟件產品如何產生很有可能出現

的未來經濟利益；

－ 有足夠的技術、財務和其他資源完成開發

該軟件產品；及

－ 該軟件產品在開發期內應佔的開支能可靠

地計量。

可資本化成為軟件產品成本的直接成本包括軟件

開發的員工成本和適當比例的相關經常開支。與

維護電腦軟件程序有關的成本在產生時確認為開

支。

不符合以上條件的其他開發成本在產生時確認為

開支。過往確認為開支的開發成本不會在往後期

間確認為資產。

確認為資產的電腦軟件開發成本乃以直線法按估

計不超過三年之可使用年期攤銷。

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)

2.22 Research and development costs

Research costs are expensed as incurred. Development costs that are directly attributable to the design and testing of identifiable and unique software products are recognised as intangible assets when the following criteria are met:

– it is technically feasible to complete the software product so that it will be available for use;

– management intends to complete the software product and use or sell it;

– there is an ability to use or sell the software product;

– it can be demonstrated how the software product will generate probable future economic benefits;

– adequate technical, financial and other resources to complete the development of the software product are available; and

– the expenditure attributable to the software product during its development can be reliably measured.

Directly attributable costs that are capitalised as part of the software product cost includes employee costs for software development and an appropriate portion of relevant overheads. Costs associated with maintaining computer software programmes are recognised as an expense as incurred.

Other development costs that do not meet these criteria are recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.

Computer software development costs recognised as assets are amortised using straight-line method over their estimated useful lives, which does not exceed three years.

F-200

66 China Electronics Corporation Holdings Company Limited Annual Report 2012

Notes to the Consolidated Financial Statements綜合財務報表附註For the year ended 31 December 2012 截至2012年12月31日止年度

2. 重大會計政策概要（續）

2.23 股息分派

董事會建議派付之末期股息於資產負債表權益部

份內歸類為保留溢利的單獨分配，直至末期股息

獲股東於股東週年大會批准為止。當此等股息已

由董事會宣派及股東批准，則確認為負債。

3. 財務風險管理3.1 財務風險因素

本集團之經營活動承受各種不同財務風險：外匯

風險、現金流量及公允值利率風險、信貸風險及

流動資金風險。管理層對該等風險進行管理及監

察，確保能按時有效地採取適當措施。

(a) 外匯風險

本集團承受外匯風險之原因是本集團之若干業務

活動以外幣結算。本集團之業務主要面臨就人民

幣兌港元及美元兌人民幣匯率變動產生之外匯風

險。外匯風險因未來商業交易及已確認之資產及

負債以相關實體功能貨幣以外之其他貨幣計值而

產生。另外，人民幣兌換外幣須遵守中國政府頒佈

之外匯管制法規。

為了管理來自未來商業交易及已確認之資產及負

債之外匯風險，本集團於適時利用遠期合約對沖

主要外幣的預期現金流量。

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)

2.23 Dividend distribution

Final dividends proposed by the board of directors are classified as a separate allocation of retained earnings within the equity section of the balance sheet, until they have been approved by the shareholders in an annual general meeting. When these dividends have been declared by the board of directors and approved by the shareholders, they are recognised as a liability.

3. FINANCIAL RISK MANAGEMENT

3.1 Financial risk factors

The Group’s activities expose it to a variety of financial risks: foreign exchange risk, cash flow and fair value interest rate risk, credit risk and liquidity risk. The management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

(a) Foreign exchange risk

The foreign exchange risks of the Group occurred due to the fact that the Group had some business activities denominated in foreign currencies. The Group’s business activities are primarily exposed to foreign exchange risk in respect of Renminbi (“RMB”) against Hong Kong dollar (“HK dollar“) and United States dollar (“US dollar”)against RMB. Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities that are denominated in a currency that is not the entity’s functional currency. In additions, the conversion of RMB into foreign currencies is subject to the rules and regulations of foreign exchange control promulgated by the PRC government.

To manage its foreign exchange risk arising from future commercial transactions and recognised assets and liabilities, the Group uses forward contracts, when appropriate, to hedge anticipated cash flows in major foreign currencies.

F-201

67中國電子集團控股有限公司 2012年年報

Notes to the Consolidated Financial Statements綜合財務報表附註

For the year ended 31 December 2012 截至2012年12月31日止年度

3. 財務風險管理（續）

3.1 財務風險因素（續）

(a) 外匯風險（續）

倘人民幣兌港元升值╱貶值5%，而所有其他變數均不變，則截至2012年12月31日止年度之除稅後溢利會增加╱減少109,000港元（2011年：增加╱減少545,000港元），主要由於換算以人民幣持有之現金及現金等價物時產生之外匯收益或虧損所

致。

倘美元兌人民幣升值╱貶值5%，而所有其他變數均不變，則截至2012年12月31日止年度之除稅後溢利會增加╱減少3,947,000港元（2011年：增加╱減少3,931,000港元），主要由於換算以美元持有之現金及現金等價物時產生之外匯收益或虧損

所致。

由於本集團少於10%之外幣交易以其他貨幣計值，故董事認為有關以其他貨幣計值之交易之外

匯風險甚微。因此，並無就此等貨幣呈列敏感性分

析。

(b) 現金流量及公允值利率風險

除存放於銀行及其他財務機構之存款外，本集團

並無重大之附息資產。於2012年12月31日，存放於銀行及其他財務機構之存款之平均年利率為

1.42%（2011年：1.18%）。不時頒佈利率之任何變動對本集團之業績並無重大影響。

影響本集團業績及經營現金流量之利率風險主要

來自銀行借貸。銀行借貸均為定息，並使本集團承

擔公允值利率風險。由於本集團銀行借貸均為短

期貸款，因此不時頒佈利率之任何變動對本集團

之業績並無重大影響。

3. FINANCIAL RISK MANAGEMENT (Cont'd)

3.1 Financial risk factors (Cont'd)

(a) Foreign exchange risk (Cont'd)

If RMB had strengthened/weakened by 5% against HK dollar with all other variables held constant, post-tax profit for the year ended 31 December 2012 would have been HK$109,000 higher/lower (2011: HK$545,000 higher/lower), mainly as a result of foreign exchange gains or losses on translation of RMB denominated cash and cash equivalents.

If US dollar had strengthened/weakened by 5% against RMB with all other variables held constant, post-tax profit for the year ended 31 December 2012 would have been HK$3,947,000 higher/lower (2011: HK$3,931,000 higher/lower), mainly as a result of foreign exchange gains or losses on translation of US dollar denominated cash and cash equivalents.

As less than 10% of the Group’s foreign currency transactions are denominated in other foreign currencies, the directors are of the view that foreign exchange risk in relation to transactions denominated in other foreign currencies is low. Therefore, no sensitivity analysis for these currencies is presented.

(b) Cash flow and fair value interest rate risk

Other than deposits held in banks and other financial institutions, the Group does not have significant interest-bearing assets. The average rate on deposits held in banks and other financial institutions at 31 December 2012 was approximately 1.42% (2011: 1.18%) per annum. Any change in the interest rate from time to time is not considered to have significant impact to the Group’s performance.

The Group’s interest rate risk which affects its results and operating cash flows mainly arises from bank borrowings. The bank borrowings were at fixed rates and expose the Group to fair value interest rate risk. As all the Group’s bank borrowings were short term loans and any change in the interest rate from time to time is not considered to have significant impact to the Group’s performance.

F-202

68 China Electronics Corporation Holdings Company Limited Annual Report 2012

Notes to the Consolidated Financial Statements綜合財務報表附註For the year ended 31 December 2012 截至2012年12月31日止年度

3. 財務風險管理（續）

3.1 財務風險因素（續）

(c) 信貸風險

本集團並無高度集中之信貸風險。信貸風險因現

金及現金等價物和貿易及其他應收款項而產生。

於結算日面對之最高信貸風險為其賬面值。本集

團已定下程序及政策，確保交易方之信貸質素為

可以接受水平。

本集團所有於銀行及其他財務機構之存款均存於

並無重大信貸風險之優質財務機構。

就貿易及其他應收款項而言，交易對手之信貸質

素透過考慮其財務狀況、信貸記錄及其他因素而

作出評估。個別信貸限額按照信貸質素評估而訂

定。鑒於穩定之還款記錄，董事認為該等交易對手

拖欠款項之風險並不大。有關信貸風險之進一步

詳情載於附註20內。

(d) 流動資金風險

本集團採納審慎之流動資金風險管理，包括透過

維持足夠營運資金、充裕之已承諾借貸備用額以

提供充足可供動用資金及處理市場平倉之能力。

鑒於相關業務多變之特性，本集團通過確保足夠

可供動用之已承諾借貸備用額，藉以維持資金供

應之靈活性。

3. FINANCIAL RISK MANAGEMENT (Cont'd)

3.1 Financial risk factors (Cont'd)

(c) Credit risk

The Group has no significant concentrations of credit risk. Credit risk arises from cash and cash equivalents and trade and other receivables. The maximum exposure to credit risk at the balance sheet date is their carrying value. The Group has policies and procedures in place to ensure they are made to counterparties with acceptable credit quality.

All the Group’s deposits with bank and other financial institution are placed in high quality financial institutions without significant exposure to credit risk.

For trade and other receivables, the credit quality of the counterparties is assessed by taking into account their financial position, credit history and other factors. Individual credit limits are set based on the assessment of the credit quality. Given the constant repayment history, the directors are of the opinion that the risk of default by these counterparties is not significant. Further disclosure on credit risk are set out in Note 20.

(d) Liquidity risk

Prudent liquidity risk management, including maintaining sufficient working capital, the availability of funding through an adequate amount of committed borrowing facilities and the ability to close out market positions is adopted. Due to the dynamic nature of the underlying businesses, the Group maintains flexibility in funding by ensuring sufficient committed borrowing facilities are available.

F-203

69中國電子集團控股有限公司 2012年年報

Notes to the Consolidated Financial Statements綜合財務報表附註

For the year ended 31 December 2012 截至2012年12月31日止年度

3. 財務風險管理（續）

3.1 財務風險因素（續）

(d) 流動資金風險（續）

下表載列本集團及本公司將結算之金融負債，此

乃按照相關到期組別，根據由結算日至合約到期

日之剩餘期間進行分析。於表中披露之金融負債

金額乃根據合約之未貼現現金流量計算。

3.2 資本風險管理

本集團實行資本管理是要確保本集團之實體將可

持續經營，並透過優化債務及權益結餘為權益持

有人帶來最大回報。本集團整體策略保持與以前

年度一致。

本集團之資本結構包括債務（包括銀行借貸），及

本公司權益持有者應佔權益（包括已發行權益及

儲備）。

本集團採用資本負債比率監察資本風險。此比率

乃以債務淨額除以資本總額計算。債務淨額按借

貸總額減現金及現金等價物計算。資本總額按綜

合資產負債表所列示之權益加債務淨額計算。

3. FINANCIAL RISK MANAGEMENT (Cont'd)

3.1 Financial risk factors (Cont'd)

(d) Liquidity risk (Cont'd)

The table below analyses the Group’s and the Company’s financial liabilities by maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are based on the contractual undiscounted cash flows of the financial liabilities.

31 December 31 December2012 2011

Within 1 year 一年內 2012年12月31日 2011年12月31日HK$’000 HK$’000千港元 千港元

Group 本集團Short term bank loans 短期銀行貸款 1,293 26,316Trade and other payables 貿易及其他應付款項 385,973 319,510

387,266 345,826

Company 本公司Trade and other payables 貿易及其他應付款項 3,317 3,069

3.2 Capital risk management

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

The capital structure of the Group consists of debts, which includes bank borrowings, and equity attributable to owners of the Company, which comprises issued equity and reserves.

The Group monitors capital risk using a gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings less cash and cash equivalents. Total capital is calculated as equity, as shown in the consolidated balance sheets, plus net debt.

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70 China Electronics Corporation Holdings Company Limited Annual Report 2012

Notes to the Consolidated Financial Statements綜合財務報表附註For the year ended 31 December 2012 截至2012年12月31日止年度

3. 財務風險管理（續）

3.2 資本風險管理（續）

本集團之策略是保持以最低資本風險營運。於

2012年12月31日，本集團之現金及現金等價物超過借貸475,386,000港元（2011年：304,783,000港元）。董事認為本集團面對之資本風險甚低。

3.3 公允值估計

以公允值計量之金融工具按其可觀察公允值程度

分類為下列一至三級：

• 第一級公允值計量乃自相同資產或負債於活

躍市場中之報價（未經調整）得出。

• 第二級公允值計量乃除第一級所包括之報

價外，自資產或負債可直接（即價格）或間接

（自價格衍生）觀察之輸入數據得出。

• 第三級公允值計量乃以使用計入並非根據可

觀察市場數據之資產或負債之輸入數據（無

法觀察之輸入數據）之估值技術得出。

於2012年及2011年12月31日，本集團沒有以公允值計量之金融工具，因此並無任何第一級、第二級或

第三級金融工具。

3. FINANCIAL RISK MANAGEMENT (Cont'd)

3.2 Capital risk management (Cont'd)

The Group’s strategy is to maintain an operation with minimal capital risk. As at 31 December 2012, the Group’s cash and cash equivalents exceeded its borrowings by HK$475,386,000 (2011: HK$304,783,000). The directors are of the opinion that the Group’s capital risk is low.

3.3 Fair value estimation

Financial instruments measured at fair value are grouped into Levels 1 to 3, based on the degree to which the fair value is observable, as follows:

• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active market for identical assets or liabilities.

• Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

At 31 December 2012 and 2011, the Group had no financial instrument measured at fair value and hence did not have any Level 1, Level 2 or Level 3 financial instrument.

F-205

71中國電子集團控股有限公司 2012年年報

Notes to the Consolidated Financial Statements綜合財務報表附註

For the year ended 31 December 2012 截至2012年12月31日止年度

4. 主要會計估計及判斷

4.1 所得稅及遞延稅項

本集團須於不同司法權區繳納所得稅。於釐定所

得稅項撥備之金額時，需作出估計及判斷。於日常

業務過程中存在交易及計算均難以確定其最終之

稅務釐定。倘該等事項之最終稅務結果有別於始

初確認之金額，該等差異的釐定將對當期之所得

稅及遞延稅項撥備產生影響。

根據中國企業所得稅法，自2008年1月1日起，對在中國成立的公司向其海外投資者分派的股息徵

收10%的預扣稅。本集團並無就預期由中國附屬公司保留且不會於可預見未來分派出中國境外

約482,000,000港元（2011年：268,000,000港元）的溢利撥備遞延稅項負債。

4.2 貿易應收款項減值

管理層審閱其貿易應收款項有否客觀減值證據。

債務人出現重大財務困難、債務人可能破產或進

行財務重組，以及拖欠或逾期付款，均被視為是應

收款項有客觀減值證據。在釐定減值時，管理層需

判斷有否可觀察資料顯示債務人的還款能力有重

大變動，或有否對債務人業務所在的市場及經濟

環境構成不利影響的重大變動。如有客觀減值證

據，管理層判斷有否減值虧損應確認為開支。

本集團於2012年12月31日的貿易應收款項減值撥備為4,335,000港元（2011年：19,295,000港元）。

4. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

4.1 Income tax and deferred taxation

The Group is subject to income tax in different jurisdictions. Estimation and judgment is required in determining the amount of the provision for income tax. There are transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. Where the final tax outcome of these matters is different from the amounts that were initially recognised, such differences will impact on the income tax and deferred taxation provisions in the period in which such determination is made.

In accordance with the enterprise income tax laws in the PRC, a 10% withholding tax will be levied on the dividend declared by the companies established in the PRC to their foreign investors starting from 1 January 2008. No deferred tax liability has been provided by the Group for the earnings of approximately HK$482,000,000 (2011: HK$268,000,000) expected to be retained by the subsidiaries in the PRC and not to be remitted out of the PRC in the foreseeable future.

4.2 Impairment of trade receivables

Management reviews its trade receivables for objective evidence of impairment. Significant financial difficulty of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered as objective evidence that a receivable is impaired. In determining this, management makes judgments as to whether there is observable data indicating that there has been a significant change in the payment ability of the debtor, or whether there have been significant changes with adverse effect on the market and economic environment in which the debtor operates. Where there is objective evidence of impairment, management makes judgments as to whether an impairment loss should be recognised as an expense.

Provision for impairment of trade receivables of the Group at 31 December 2012 is HK$4,335,000 (2011: HK$19,295,000).

F-206

72 China Electronics Corporation Holdings Company Limited Annual Report 2012

Notes to the Consolidated Financial Statements綜合財務報表附註For the year ended 31 December 2012 截至2012年12月31日止年度

5. 收入及分部資料

(a) 收入

(b) 營運分部

管理層已根據董事（主要營運決策者）已審閱作評

估表現及分配資源用的報告，確定營運分部。

董事認為本集團經營之業務以單一分部營運及管

理，故無披露營運分部資料。

按地區分佈而言，本集團接近100%之收入來自於中國市場且超過90%之非流動資產位於中國。

按地區分類之非流動資產總額如下：

5. REVENUE AND SEGMENT INFORMATION

(a) Revenue

Year ended 31 December截至12月31日止年度

2012 20112012年 2011年

HK$’000 HK$’000千港元 千港元

Integrated circuits products 集成電路產品 1,155,632 995,111

(b) Operating segments

Management has determined the operating segments based on the reports reviewed by the directors (the chief operating decision maker) that are used to assess performance and allocate resources.

The directors consider that the Group’s operations are operated and managed as a single segment, accordingly no operating segments information is presented.

In terms of geographical location, nearly 100% of the Group’s revenue is attributable to the market in the PRC and over 90% of the Group’s non-current assets are located in the PRC.

Total non-current assets by location are as follows:

31 December 31 December2012 2011

2012年12月31日 2011年12月31日HK$’000 HK$’000千港元 千港元

PRC 中國 26,112 22,908Hong Kong 香港 1,236 828

27,348 23,736Deferred tax assets 遞延稅項資產 41,950 28,560

Total non-current assets per consolidated balance sheet

於綜合資產負債表之 非流動資產總額 69,298 52,296

F-207

73中國電子集團控股有限公司 2012年年報

Notes to the Consolidated Financial Statements綜合財務報表附註

For the year ended 31 December 2012 截至2012年12月31日止年度

6. 其他收益－淨額

截至2011年12月31日止年度，本集團以人民幣1,100,000元（相當於約1,323,000港元）之對價將其持有之聯營公司全部權益出售予獨立第三方並

確認出售收益1,053,000港元。

7. 按性質劃分之費用列作銷售成本、銷售及市場推廣成本和行政開支

之費用分析如下：

6. OTHER GAINS – NET

Year ended 31 December截至12月31日止年度

2012 20112012年 2011年

HK$’000 HK$’000千港元 千港元

Government grants 政府補助 30,737 28,772Share of loss of an associate 分佔聯營公司虧損 – (253)Gain on disposal of an associate 出售聯營公司收益 – 1,053Gain on disposal of property,

plant and equipment出售物業、廠房及 設備收益 14 619

Exchange (losses)/gains 匯兌（虧損）╱收益 (717) 585Others 其他 (1,355) 468

28,679 31,244

For the year ended 31 December 2011, the Group disposed of its entire interest in an associate to an independent third party at a consideration of RMB1,100,000 (equivalent to approximately HK$1,323,000) and recognised gain on disposal of HK$1,053,000.

7. EXPENSES BY NATUREExpenses included in cost of sales, selling and marketing costs and administrative expenses are analysed as follows:

Year ended 31 December截至12月31日止年度

2012 20112012年 2011年

HK$’000 HK$’000千港元 千港元

Depreciation and amortisation expenses (Notes 15 and 16)

折舊及攤銷費用 （附註15及16） 16,982 14,363

Employee benefit expenses (Note 8) 僱員福利開支（附註8） 126,810 101,462Changes in inventories of finished goods

and work in progress製成品及在製品 存貨變動 (60,729) (16,165)

Raw materials and consumables used 所用原材料及消耗品 731,534 652,642Research and development costs 研究及開發成本 163,355 138,969(Reversal of)/Impairment provision for

trade receivables (Note 20）貿易應收款項之減值 （撥回）╱撥備（附註20） (14,905) 14,071

Write-down of inventories to net realisable value (Note 19）

撇減存貨至可變現淨值 （附註19） 21,001 8,345

Operating lease expenses on property 物業之經營租賃開支 11,289 7,572Auditor’s remuneration 核數師酬金 1,909 1,585

F-208

74 China Electronics Corporation Holdings Company Limited Annual Report 2012

Notes to the Consolidated Financial Statements綜合財務報表附註For the year ended 31 December 2012 截至2012年12月31日止年度

8. 僱員福利開支

(a) 本集團為其香港合資格僱員設立強積金計

劃。本集團對強積金計劃之供款為僱員薪

金之5%，並於產生時列作開支。

(b) 本公司在中國之附屬公司根據中國法例及

規例參與定額供款退休計劃。中國有關地

方政府機構負責該等中國退休僱員之退休

金責任。該等中國附屬公司對退休計劃作

出供款並於產生時列作開支。

8. EMPLOYEE BENEFIT EXPENSES

Year ended 31 December截至12月31日止年度

2012 20112012年 2011年

HK$’000 HK$’000千港元 千港元

Salaries, allowances and benefits in kind 薪金、津貼及實物福利 116,441 92,812Contributions to retirement schemes

(Notes (a) and (b))退休計劃供款 （附註(a)及(b)） 10,369 8,650

126,810 101,462

(a) The Group operates a MPF Scheme for the eligible employees in Hong Kong. The Group’s contributions to MPF Scheme are set at 5% of employees’ salaries and are expensed as incurred.

(b) The Company’s PRC subsidiaries participate in defined contribution retirement scheme based on laws and regulations in the PRC. The local government authority of the PRC is responsible for the pension liabilities to these retired employees in the PRC. These PRC subsidiaries made contributions to retirement schemes in the PRC and are expensed as incurred.

F-209

75中國電子集團控股有限公司 2012年年報

Notes to the Consolidated Financial Statements綜合財務報表附註

For the year ended 31 December 2012 截至2012年12月31日止年度

9. 董事及僱員酬金

(a) 董事酬金

各董事於截至2012年12月31日止年度之酬金載列如下：

* 於2012年8月24日獲委任。

** 於2012年8月24日辭任。

*** 於2012年11月1日獲委任。

**** 於2012年11月1日辭任。

年內，本集團並無向本公司董事支付任何酬金作為

加盟本集團或加盟時之獎勵或作為離任之補償。

年內亦無本公司董事放棄任何酬金。

9. DIRECTORS’ AND EMPLOYEES’ EMOLUMENTS

(a) Directors’ emoluments

The remuneration of each director for the year ended 31 December 2012 is set out below:

Name of director 董事姓名

Fees 袍金

Salaries, allowances

and benefits in kind

薪金、津貼及實物福利

Pension scheme

contributions退休金計劃

供款

Discretionary bonus

酌情花紅Total 合計

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000千港元 千港元 千港元 千港元 千港元

Rui Xiaowu 芮曉武 – – – – –Zhao Guiwu 趙貴武 – – – – –Xie Qinghua* 謝慶華* – 108 28 – 136Fan Qingwu** 范卿午** – 346 76 640 1,062Liu Jinping 劉晉平 200 – – – 200Chan Kay Cheung 陳棋昌 200 – – – 200Qiu Hongsheng*** 邱洪生*** 33 – – – 33Wong Po Yan**** 黃保欣**** 167 – – – 167Yin Yongli 尹永利 200 – – – 200

800 454 104 640 1,998

* Appointed on 24 August 2012.

** Resigned on 24 August 2012.

*** Appointed on 1 November 2012.

**** Resigned on 1 November 2012.

During the year, no emoluments were paid by the Group to the directors of the Company as an inducement to join or upon joining the Group or as compensation for loss of office. None of the directors of the Company had waived any emoluments during the year.

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76 China Electronics Corporation Holdings Company Limited Annual Report 2012

Notes to the Consolidated Financial Statements綜合財務報表附註For the year ended 31 December 2012 截至2012年12月31日止年度

9. 董事及僱員酬金（續）

(a) 董事酬金（續）

各董事於截至2011年12月31日止年度之酬金載列如下：

* 於2011年8月5日獲委任。

** 於2011年8月5日辭任。

(b) 五名最高薪酬人士

年內應付予本集團薪酬最高之五名人士之酬金如

下：

9. DIRECTORS’ AND EMPLOYEES’ EMOLUMENTS (Cont'd)

(a) Directors’ emoluments (Cont'd)

The remuneration of each director for the year ended 31 December 2011 is set out below:

Name of director 董事姓名

Fees 袍金

Salaries, allowances

and benefits in kind

薪金、津貼及

實物福利

Pension scheme

contributions退休金計劃

供款

Discretionary bonus

酌情花紅

Total 合計

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000千港元 千港元 千港元 千港元 千港元

Rui Xiaowu* 芮曉武* 244 – – – 244Xiong Qunli** 熊群力** 394 – – – 394Zhao Guiwu 趙貴武 200 – – – 200Fan Qingwu 范卿午 – 520 88 480 1,088Liu Jinping 劉晉平 200 – – – 200Chan Kay Cheung 陳棋昌 200 – – – 200Wong Po Yan 黃保欣 200 – – – 200Yin Yongli 尹永利 200 – – – 200

1,638 520 88 480 2,726

* Appointed on 5 August 2011.

** Resigned on 5 August 2011.

(b) Five highest paid individuals

The emoluments payable to the five individuals whose paid were the highest in the Group during the year are as follows:

Year ended 31 December截至12月31日止年度

2012 20112012年 2011年

HK$’000 HK$’000千港元 千港元

Salaries, allowances and benefits in kind 薪金、津貼及實物福利 3,549 3,413Bonuses 花紅 8,195 4,145Contributions to retirement schemes 退休計劃供款 237 228

11,981 7,786

F-211

77中國電子集團控股有限公司 2012年年報

Notes to the Consolidated Financial Statements綜合財務報表附註

For the year ended 31 December 2012 截至2012年12月31日止年度

9. 董事及僱員酬金（續）

(b) 五名最高薪酬人士（續）

五名最高薪酬人士包括本公司的一名（2011年：一名）董事而彼等之酬金介乎以下範圍：

年內，本集團並無向五名最高薪酬人士支付任何

酬金作為加盟本集團或加盟時之獎勵或作為離任

之補償。

10. 融資收入－淨額

9. DIRECTORS’ AND EMPLOYEES’ EMOLUMENTS (Cont'd)

(b) Five highest paid individuals (Cont'd)

The emoluments of the five highest paid individuals included one (2011: one) director of the Company and their emoluments were within the following bands:

Number of individuals人數

2012 20112012年 2011年

HK$1,000,001 – HK$1,500,000 1,000,001港元－1,500,000港元 1 1HK$1,500,001 – HK$2,000,000 1,500,001港元－2,000,000港元 – 4HK$2,000,001 – HK$2,500,000 2,000,001港元－2,500,000港元 1 –HK$2,500,001 – HK$3,000,000 2,500,001港元－3,000,000港元 2 –HK$3,000,001 – HK$3,500,000 3,000,001港元－3,500,000港元 1 –

5 5

During the year, no emoluments were paid by the Group to the five highest paid individuals as an inducement to join or upon joining the Group or as compensation for loss of office.

10. FINANCE INCOME – NET

Year ended 31 December截至12月31日止年度

2012 20112012年 2011年

HK$’000 HK$’000千港元 千港元

Interest income on short term deposits 短期存款利息收入 3,740 2,928Interest on bank loans 銀行貸款利息 (546) (1,646)

3,194 1,282

F-212

78 China Electronics Corporation Holdings Company Limited Annual Report 2012

Notes to the Consolidated Financial Statements綜合財務報表附註For the year ended 31 December 2012 截至2012年12月31日止年度

11. 稅項

(a) 由於本集團於本年度內於香港並無產生任

何應課稅溢利，故並無就香港利得稅作出

撥備（2011年：無）。

(b) 根據中國企業所得稅法，北京中電華大電子

設計有限責任公司（「華大電子」）自2008年1月1日起之適用法定稅率為25%。然而，由於華大電子被確定為「高新科技企業」，

因此自2008年1月1日起至2013年12月31日華大電子享受15%之優惠稅率。

(c) 本集團除稅前溢利之稅項開支與按各自適

用法定稅率所計算之理論稅項之對賬如下：

11. TAXATION

Year ended 31 December截至12月31日止年度

2012 20112012年 2011年

HK$’000 HK$’000千港元 千港元

Current taxation 本年度稅項

– PRC enterprise income tax －中國企業所得稅 41,288 22,955Deferred taxation 遞延稅項 (13,349) (6,385)

27,939 16,570

(a) No provision for Hong Kong profits tax had been made as the Group did not generate any assessable profit in Hong Kong during the year (2011: nil).

(b) In accordance with the enterprise income tax laws in the PRC, the applicable statutory tax rate of CEC Huada Electronic Design Co., Ltd (“Huada Electronics”) is 25% from 1 January 2008. However, Huada Electronics qualified as a “High/New Technology Enterprise” and thus was granted a 15% preferential tax rate from 1 January 2008 to 31 December 2013.

(c) Reconciliation between the taxation expense on the Group’s profit before taxation and the theoretical taxation that would arise using the respective applicable statutory tax rates are as follows:

Year ended 31 December截至12月31日止年度

2012 20112012年 2011年

HK$’000 HK$’000千港元 千港元

Profit before taxation 除稅前溢利 225,523 131,229

Calculated at respective applicable statutory tax rates

按各自適用法定稅率 計算之稅項 57,739 33,542

Effect of tax concession 稅項減免之影響 (24,179) (14,412)Research and development

costs additional deductions研究及開發 成本額外扣除 (8,701) (5,567)

Expenses not deductible for taxation purposes

不可扣稅 開支 372 520

Utilisation of previously unrecognised tax losses 使用早前未確認的稅項虧損 – (17)Tax losses for which no deferred tax

asset was recognised (Note (d))並無確認遞延稅項資產之 稅項虧損（附註(d)） 2,708 2,504

Taxation expense 稅項開支 27,939 16,570

F-213

79中國電子集團控股有限公司 2012年年報

Notes to the Consolidated Financial Statements綜合財務報表附註

For the year ended 31 December 2012 截至2012年12月31日止年度

11. 稅項（續）(d) 遞延稅項

年內遞延稅項資產之變動如下：

於綜合資產負債表列示之金額包括以下項目：

遞延稅項資產乃就結轉之稅項虧損而被確認，惟

以有可能透過未來之應課稅溢利變現有關稅項利

益為限。於本年內，本集團並未就可結轉以抵銷未

來應課稅溢利之虧損16,263,000港元（2011年：12,992,000港元）確認遞延稅項資產2,708,000港元（2011年：2,504,000港元）。

11. TAXATION (Cont'd)

(d) Deferred taxation

The movements in the deferred tax assets during the year are as follows:

Impairment of

inventories 存貨減值

Salary and welfare

payables應付職工

薪酬

Deferredgovernment

grants遞延

政府補助Others其他

Total 合計

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000千港元 千港元 千港元 千港元 千港元

At 1 January 2011 於2011年1月1日 1,504 6,755 11,201 1,539 20,999Exchange differences 匯兌差額 101 343 560 172 1,176Credited to the income statement 抵免收益表 1,252 409 211 4,513 6,385

At 31 December 2011 於2011年12月31日 2,857 7,507 11,972 6,224 28,560

At 1 January 2012 於2012年1月1日 2,857 7,507 11,972 6,224 28,560Exchange differences 匯兌差額 10 5 24 2 41Credited to the income statement 抵免收益表 3,150 1,649 7,727 823 13,349

At 31 December 2012 於2012年12月31日 6,017 9,161 19,723 7,049 41,950

The amounts shown in the consolidated balance sheet include the following:

31 December 31 December2012 2011

2012年12月31日 2011年12月31日HK$’000 HK$’000千港元 千港元

Deferred tax assets to be recovered after more than 12 months

將於12個月後收回之 遞延稅項資產 737 2,939

Deferred tax assets to be recovered within 12 months

將於12個月內收回之 遞延稅項資產 41,213 25,621

41,950 28,560

Deferred tax assets are recognised for tax losses carrying-forwards to the extent that the realisation of the related tax benefit through the future taxable profits is probable. During the year, the Group did not recognise deferred tax assets of HK$2,708,000 (2011: HK$2,504,000) in respect of losses amounting to HK$16,263,000 (2011: HK$12,992,000) that can be carried forward against future taxable income.

F-214

80 China Electronics Corporation Holdings Company Limited Annual Report 2012

Notes to the Consolidated Financial Statements綜合財務報表附註For the year ended 31 December 2012 截至2012年12月31日止年度

12. 本公司權益持有者應佔虧損

截至2012年12月31日止年度，本公司權益持有者應佔綜合溢利中，為數13,764,000港元（2011年：10,808,000港元）的虧損已於本公司之獨立財務報表內處理。

13. 股息董事會不建議派付截至2012年12月31日止年度之末期股息（2011年：無）。

14. 每股盈利每股基本及攤薄盈利乃根據下列數據計算：

(a) 截至2012年12月31日止年度，本公司並無任何未發行潛在普通股（2011年：無）。因此，每股攤薄盈利與每股基本盈利相等。

12. LOSS ATTRIBUTABLE TO OWNERS OF THE COMPANY

The consolidated profit attributable to owners of the Company for the year ended 31 December 2012 included a loss of HK$13,764,000 (2011: HK$10,808,000) which has been dealt with in the separate financial statements of the Company.

13. DIVIDENDS

The board of directors does not recommend the payment of final dividend for the year ended 31 December 2012 (2011: nil).

14. EARNINGS PER SHARE

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

Year ended 31 December截至12月31日止年度

2012 20112012年 2011年

Profit for the year attributable to owners of the Company (HK$’000)

本公司權益持有者 應佔之年度溢利 （千港元） 197,584 114,659

Weighted average number of ordinary shares for the purposes of basic and diluted earnings per share

用以計算每股基本 及攤薄盈利之普通股 加權平均數目 1,691,560,000 1,691,560,000

Earnings per share (HK cents) 每股盈利（港仙）

– Basic －基本 11.68 6.78– Diluted (Note (a)) －攤薄（附註(a)） 11.68 6.78

(a) The Company did not have any potential ordinary shares outstanding for the year ended 31 December 2012 (2011: nil). Diluted earnings per share is therefore equal to basic earnings per share.

F-215

81中國電子集團控股有限公司 2012年年報

Notes to the Consolidated Financial Statements綜合財務報表附註

For the year ended 31 December 2012 截至2012年12月31日止年度

15. 物業、廠房及設備(a) 本集團

折舊開支中26,000港元（2011年：29,000港元）已計入銷售及市場推廣成本，及7,312,000港元（2011年：5,610,000港元）已計入行政開支。

與租賃物業相關的11,289,000港元租金（2011年：7,572,000港元）已計入收益表之租賃開支。

15. PROPERTY, PLANT AND EQUIPMENT

(a) Group

Leasehold improvements租賃物業裝修

Plant and machinery廠房及機器

Motor vehicles車輛

Furniture and fixtures

傢俬及裝置Total合計

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000千港元 千港元 千港元 千港元 千港元

At 1 January 2011 於2011年1月1日Cost 成本 5,131 33,645 5,334 492 44,602Accumulated depreciation 累計折舊 (2,180) (18,833) (1,931) (405) (23,349)

Net book amount 賬面淨值 2,951 14,812 3,403 87 21,253

Year ended 31 December 2011 截至2011年12月31日 止年度

Opening net book amount 年初賬面淨值 2,951 14,812 3,403 87 21,253Exchange differences 匯兌差額 114 873 146 4 1,137Additions 添置 134 3,469 2,194 180 5,977Disposals 出售 – (5,737) – (3) (5,740)Depreciation 折舊 (1,585) (2,950) (1,064) (40) (5,639)

Closing net book amount 年末賬面淨值 1,614 10,467 4,679 228 16,988

At 31 December 2011 於2011年12月31日Cost 成本 5,433 23,583 7,872 677 37,565Accumulated depreciation 累計折舊 (3,819) (13,116) (3,193) (449) (20,577)

Net book amount 賬面淨值 1,614 10,467 4,679 228 16,988

Year ended 31 December 2012 截至2012年12月31日 止年度

Opening net book amount 年初賬面淨值 1,614 10,467 4,679 228 16,988Exchange differences 匯兌差額 (8) (17) (1) (1) (27)Additions 添置 3,177 7,674 701 35 11,587Depreciation 折舊 (2,273) (4,713) (285) (67) (7,338)

Closing net book amount 年末賬面淨值 2,510 13,411 5,094 195 21,210

At 31 December 2012 於2012年12月31日Cost 成本 8,609 28,606 8,572 702 46,489Accumulated depreciation 累計折舊 (6,099) (15,195) (3,478) (507) (25,279)

Net book amount 賬面淨值 2,510 13,411 5,094 195 21,210

Depreciation expense of HK$26,000 (2011: HK$29,000) has been charged to selling and marketing costs and HK$7,312,000 (2011: HK$5,610,000) in administrative expenses.

Lease rental expenses amounting to HK$11,289,000 (2011: HK$7,572,000) relating to the lease of property are included in the income statement.

F-216

82 China Electronics Corporation Holdings Company Limited Annual Report 2012

Notes to the Consolidated Financial Statements綜合財務報表附註For the year ended 31 December 2012 截至2012年12月31日止年度

15. 物業、廠房及設備（續）

(b) 本公司

15. PROPERTY, PLANT AND EQUIPMENT (Cont'd)

(b) Company

Leasehold improvements

Motor vehicles

Furniture and fixtures Total

租賃物業裝修 車輛 傢俬及裝置 合計HK$’000 HK$’000 HK$’000 HK$’000千港元 千港元 千港元 千港元

At 1 January 2011 於2011年1月1日Cost 成本 220 1,176 250 1,646Accumulated depreciation 累計折舊 (220) (1,146) (175) (1,541)

Net book amount 賬面淨值 – 30 75 105

Year ended 31 December 2011 截至2011年12月31日止年度Opening net book amount 年初賬面淨值 – 30 75 105Exchange differences 滙兌差額 – (1) 4 3Additions 添置 – 544 71 615Disposals 出售 – – (3) (3)Depreciation 折舊 – (102) (27) (129)

Closing net book amount 年末賬面淨值 – 471 120 591

At 31 December 2011 於2011年12月31日Cost 成本 220 1,877 325 2,422Accumulated depreciation 累計折舊 (220) (1,406) (205) (1,831)

Net book amount 賬面淨值 – 471 120 591

Year ended 31 December 2012 截至2012年12月31日止年度Opening net book amount 年初賬面淨值 – 471 120 591Exchange differences 滙兌差額 – (1) 1 –Additions 添置 – 701 13 714Depreciation 折舊 – (237) (37) (274)

Closing net book amount 年末賬面淨值 – 934 97 1,031

At 31 December 2012 於2012年12月31日Cost 成本 220 2,578 329 3,127Accumulated depreciation 累計折舊 (220) (1,644) (232) (2,096)

Net book amount 賬面淨值 – 934 97 1,031

F-217

83中國電子集團控股有限公司 2012年年報

Notes to the Consolidated Financial Statements綜合財務報表附註

For the year ended 31 December 2012 截至2012年12月31日止年度

16. 無形資產－本集團16. INTANGIBLE ASSETS – GROUP

Computersoftware電腦軟件HK$’000千港元

At 1 January 2011 於2011年1月1日Cost 成本 24,850Accumulated amortisation 累計攤銷 (20,895)

Net book amount 賬面淨值 3,955

Year ended 31 December 2011 截至2011年12月31日止年度Opening net book amount 年初賬面淨值 3,955Exchange differences 匯兌差額 11Additions 添置 9,039Amortisation 攤銷 (8,724)

Closing net book amount 年末賬面淨值 4,281

At 31 December 2011 於2011年12月31日Cost 成本 35,121Accumulated amortisation 累計攤銷 (30,840)

Net book amount 賬面淨值 4,281

Year ended 31 December 2012 截至2012年12月31日止年度Opening net book amount 年初賬面淨值 4,281Exchange differences 匯兌差額 (34)Additions 添置 9,068Amortisation 攤銷 (9,644)

Closing net book amount 年末賬面淨值 3,671

At 31 December 2012 於2012年12月31日Cost 成本 44,183Accumulated amortisation 累計攤銷 (40,512)

Net book amount 賬面淨值 3,671

F-218

84 China Electronics Corporation Holdings Company Limited Annual Report 2012

Notes to the Consolidated Financial Statements綜合財務報表附註For the year ended 31 December 2012 截至2012年12月31日止年度

17. 附屬公司投資－本公司

(a) 主要附屬公司於2012年及2011年12月31日之詳情如下：

(b) 應收附屬公司款項屬準權益性質，均為無

抵押、免息，且無固定還款期。

17. INVESTMENTS IN SUBSIDIARIES – COMPANY

31 December 31 December2012 2011

2012年12月31日 2011年12月31日HK$’000 HK$’000千港元 千港元

Investments – unlisted equity interests, at cost

投資－非上市股權， 按成本值 646,729 646,729

Amounts due from subsidiaries (Note (b)) 應收附屬公司款項（附註(b)） 11,700 11,700

658,429 658,429Less: provision for impairment 減：減值撥備 – –

658,429 658,429

(a) Particulars of the principal subsidiaries at 31 December 2012 and 2011 are as follows:

Name 名稱

Place of establishment and type of legal entity 成立地點及公司性質

Principal place of operation and activities 主要經營地點及業務

Registered and paid-in capital 註冊及實收

資本Interest held 所持權益

CEC Integrated Circuit (Beijing) Co., Ltd

中電集成電路（北京） 有限公司

PRC, limited liability company

中國，有限責任公司

PRC, design, research and development and sale of integrated circuits

中國，集成電路之設計、 研發及銷售

US$12,000,000 12,000,000美元

100% (Directly)（直接）

Huada Electronics華大電子

PRC, limited liability company

中國，有限責任公司

PRC, design, research and development and sale of integrated circuits

中國，集成電路之設計、 研發及銷售

RMB50,000,000 人民幣50,000,000元

100% (Directly)（直接）

(b) The amounts due from subsidiaries are quasi-equity in nature, unsecured, interest-free and with no fixed term of repayment.

F-219

85中國電子集團控股有限公司 2012年年報

Notes to the Consolidated Financial Statements綜合財務報表附註

For the year ended 31 December 2012 截至2012年12月31日止年度

18. 可供出售金融資產－本集團

可供出售金融資產指在中國成立之非上市公司的

股權，由於沒有可以引用的市場價格、合理估計的

公允值區間較大和無法合理估計多種假設的可能

性，其於結算日以成本減減值撥備計量。

19. 存貨－本集團

確認為開支並計入銷售成本之存貨成本為

670,805,000港元（2011年：636,477,000港元）。

為數21,001,000港元（2011年：8,345,000港元）之存貨撥備已計入銷售成本。

20. 貿易及其他應收款項

18. AVAILABLE-FOR-SALE FINANCIAL ASSETS – GROUP

Available-for-sale financial assets represent unlisted equity interest in companies established in the PRC and are measured at costs less impairment at balance sheet date, as these assets do not have a quoted market price, the range of reasonable fair value estimates is significant and the possibilities of the various estimates cannot be reasonably assessed.

19. INVENTORIES – GROUP

31 December 31 December2012 2011

2012年12月31日 2011年12月31日HK$’000 HK$’000千港元 千港元

Work in progress 在製品 84,852 49,244Finished goods 製成品 223,333 219,213

308,185 268,457

The cost of inventories recognised as expense and included in cost of sales amounted to HK$670,805,000 (2011: HK$636,477,000).

Provision for inventories of HK$21,001,000 (2011: HK$8,345,000) has been charged to cost of sales.

20. TRADE AND OTHER RECEIVABLES

Group 本集團

Company本公司

31 December 31 December 31 December 31 December2012 2011 2012 2011

2012年12月31日 2011年12月31日 2012年12月31日 2011年12月31日HK$’000 HK$’000 HK$’000 HK$’000千港元 千港元 千港元 千港元

Trade receivables 貿易應收款項 488,304 417,770 – –Less: provision for impairment

(Note (c))減：減值撥備 （附註(c)） (4,335) (19,295) – –

483,969 398,475 – –Other receivables from related

parties (Note 29)其他應收關聯人士 款項（附註29） 265 134 2,807 218

Prepayments and deposits 預付款項及按金 7,507 2,723 469 513Other receivables 其他應收款項 2,863 3,340 2 8

494,604 404,672 3,278 739

F-220

86 China Electronics Corporation Holdings Company Limited Annual Report 2012

Notes to the Consolidated Financial Statements綜合財務報表附註For the year ended 31 December 2012 截至2012年12月31日止年度

20. 貿易及其他應收款項（續）

於2012年及2011年12月31日，本集團及本公司之貿易及其他應收款項之賬面值與其公允值相若。

所有貿易及其他應收款項均於一年內到期、並沒有

計息及無抵押。計入貿易應收款項結餘內之應收

關聯人士貿易款項為16,744,000港元（2011年：16,239,000港元）（附註29）。

本集團及本公司於2012年及2011年12月31日之貿易及其他應收款項按貨幣劃分如下：

(a) 本集團之銷售大部份之信貸期為30日至135日。其餘銷售於緊隨貨品交付時到期。於

2012年12月31日，貿易應收款項（扣除減值撥備）之賬齡分析如下：

20. TRADE AND OTHER RECEIVABLES (Cont'd)

At 31 December 2012 and 2011, the carrying amounts of trade and other receivables of the Group and the Company approximate their fair values.

All trade and other receivables were due within 1 year, non interest-bearing and unsecured. Included in the balance of trade receivables are trade receivables from related parties of HK$16,744,000 (2011: HK$16,239,000) (Note 29).

Trade and other receivables of the Group and the Company at 31 December 2012 and 2011 are denominated in the following currencies:

Group 本集團

Company本公司

31 December 31 December 31 December 31 December2012 2011 2012 2011

2012年12月31日 2011年12月31日 2012年12月31日 2011年12月31日HK$’000 HK$’000 HK$’000 HK$’000千港元 千港元 千港元 千港元

Renminbi 人民幣 493,238 399,727 369 231US dollar 美元 541 3,420 – –HK dollar 港元 825 1,525 2,909 508

494,604 404,672 3,278 739

(a) The majority of the Group’s sales are with credit terms of 30 days to 135 days. The remaining amounts are due immediately after the delivery of goods. At 31 December 2012, the ageing analysis of the trade receivables (net of provision for impairment) are as follows:

31 December 31 December2012 2011

2012年12月31日 2011年12月31日HK$’000 HK$’000千港元 千港元

Current to 30 days 30日內 241,603 270,29831 – 60 days 31日至60日 81,632 24,256Over 60 days and within 1 year 60日以上及1年內 158,580 102,117Over 1 year 1年以上 2,154 1,804

483,969 398,475

F-221

87中國電子集團控股有限公司 2012年年報

Notes to the Consolidated Financial Statements綜合財務報表附註

For the year ended 31 December 2012 截至2012年12月31日止年度

20. 貿易及其他應收款項（續）

(b) 於2012年12月31日，已逾期但並無減值之貿易應收款項為107,542,000港元（2011年：73,335,000港元）。此等貿易應收款項乃與某些近年並無拖欠款項記錄之信譽較

好客戶有關，其賬齡分析如下：

貿易及其他應收款項內之其他類別並無包

含減值資產。

(c) 本集團貿易應收款項減值撥備之變動如下：

20. TRADE AND OTHER RECEIVABLES (Cont'd)

(b) The trade receivables which were past due but not impaired amounted to HK$107,542,000 at 31 December 2012 (2011: HK$73,335,000). These related to a number of customers with high reputation for whom there is no recent history of default, the ageing analysis of these trade receivables are as follows:

31 December 31 December2012 2011

2012年12月31日 2011年12月31日HK$’000 HK$’000千港元 千港元

Within 30 days 30日內 23,753 30,25731 – 60 days 31日至60日 35,735 29,137Over 60 days and within 1 year 60日以上及1年內 45,900 12,137Over 1 year 1年以上 2,154 1,804

107,542 73,335

The other classes within trade and other receivables do not contain impaired assets.

(c) Movements in the provision for impairment on the Group’s trade receivables are as follows:

31 December 31 December2012 2011

2012年12月31日 2011年12月31日HK$’000 HK$’000千港元 千港元

Beginning of the year 年初 19,295 4,692(Reversal of)/Impairment provision 減值（撥回）╱撥備 (14,905) 14,071Exchange difference 匯兌差額 (55) 532

End of the year 年末 4,335 19,295

F-222

88 China Electronics Corporation Holdings Company Limited Annual Report 2012

Notes to the Consolidated Financial Statements綜合財務報表附註For the year ended 31 December 2012 截至2012年12月31日止年度

21. 現金及現金等價物

於2012年12月31日，短期存款之實際年利率為1.42%（2011年：1.18%）。於2012年12月31日，該等存款之到期日均為90日內。

22. 已發行權益╱股本(a) 已發行權益－本集團

21. CASH AND CASH EQUIVALENTS

Group 本集團

Company本公司

31 December 31 December 31 December 31 December2012 2011 2012 2011

2012年12月31日 2011年12月31日 2012年12月31日 2011年12月31日HK$’000 HK$’000 HK$’000 HK$’000千港元 千港元 千港元 千港元

Cash 現金

At banks and on hand 銀行結存及現金 218,637 167,756 3,355 9,567At other financial institutions 其他財務機構結存

– A related party (Note 29) －關聯人士 （附註29） 46,864 29,874 46,864 24,670

265,501 197,630 50,219 34,237

Short term deposits 短期存款

At banks 銀行結存 159,321 63,017 3,853 11,202At other financial institutions 其他財務機構結存

– A related party (Note 29) －關聯人士 （附註29） 51,797 68,806 24,665 49,340

211,118 131,823 28,518 60,542

476,619 329,453 78,737 94,779

The effective interest rate on short term deposits at 31 December 2012 was 1.42% (2011: 1.18%) per annum. The maturity days of these deposits at 31 December 2012 were all within 90 days.

22. ISSUED EQUITY/SHARE CAPITAL

(a) Issued equity – Group

Number of shares Issued equity股份數目 已發行權益

’000 HK$’000千股 千港元

At 1 January 2011 and at 31 December 2011

於2011年1月1日及 於2011年12月31日 1,691,560 889,171

At 1 January 2012 and at 31 December 2012

於2012年1月1日及 於2012年12月31日 1,691,560 889,171

F-223

89中國電子集團控股有限公司 2012年年報

Notes to the Consolidated Financial Statements綜合財務報表附註

For the year ended 31 December 2012 截至2012年12月31日止年度

22. 已發行權益╱股本（續）

(a) 已發行權益－本集團（續）

(i) 股份數目反映本公司每股面值0.01港元之已發行及繳足普通股。

(ii) 於2003年12月10日，中國電子集團、本公司及本公司當時的控股股東W insan International Holdings Limited簽訂一份買賣協議。根據該協議，本公司收購中國電

子集團於深圳桑菲消費通信有限公司（「桑

菲」）的65%股本權益（「收購事項」），所涉及的對價已透過發行本公司6,500,000,000股股份予中國電子集團之方式支付。收購

事項已於2004年9月24日完成，並被視作一項反收購。就會計涵義而言，桑菲被視作收

購人，而本公司及其當時的附屬公司則被

視作被桑菲收購。因此，確認為本集團已發

行權益的金額（包括股本及股份溢價）乃按

緊接收購事項完成前桑菲的已發行權益加

收購本公司及其當時之附屬公司的成本而

釐定。

22. ISSUED EQUITY/SHARE CAPITAL (Cont'd)

(a) Issued equity – Group (Cont'd)

(i) The number of shares reflect the Company’s ordinary share of HK$0.01 each issued and fully paid.

(ii) On 10 December 2003, CEC, the Company, the Company’s then holding company, Winsan International Holdings Limited entered into a sale and purchase agreement. Pursuant to the agreement, the Company acquired CEC’s 65% equity interest in Shenzhen Sang Fei Consumer Communications Company Limited (“Sang Fei”) (the “Acquisition”) and the consideration was satisfied by the issuance of the Company’s 6,500,000,000 shares to CEC. The Acquisition was completed on 24 September 2004 and has been accounted for as a reverse acquisition. For accounting purpose, Sang Fei was regarded as the acquirer while the Company and its then subsidiaries were deemed to have been acquired by Sang Fei. Accordingly, the amount recognised as issued equity of the Group, which consisted of share capital and share premium, has been determined by adding to the issued equity of Sang Fei immediately before the completion of the Acquisition the cost of the acquisition of the Company and its then subsidiaries.

F-224

90 China Electronics Corporation Holdings Company Limited Annual Report 2012

Notes to the Consolidated Financial Statements綜合財務報表附註For the year ended 31 December 2012 截至2012年12月31日止年度

22. 已發行權益╱股本（續）

(a) 已發行權益－本集團（續）

(iii) 於2009年9月9日收購華大電子全部股本權益（「華大收購」）完成後，本公司已按每

股0.91港元之價格向當時之華大電子股東配發及發行合共608,000,000股股份（入賬列作繳足）作為對價股份。該總對價為

553,280,000港元，分別呈列於2009年之本公司獨立財務報表之股本增加6,080,000港元及股份溢價增加547,200,000港元。就會計涵義而言，華大收購中發行給中國華大

集成電路設計集團有限公司（「中國華大」）

之393,680,000股股份已按香港會計指引第5號所述之合併會計法原則在呈列時視為已於先前呈列之資產負債表日已發行，其

總對價呈列於本集團綜合財務報表之期初

本集團已發行權益增加358,249,000港元。發行餘下之214,320,000股股份給當時之其他華大電子股東則採用與非控制性權益進

行的交易之入賬方法處理，其總對價呈列

為本集團於2009年9月9日已發行權益增加195,031,000港元。

(b) 股本－本公司

22. ISSUED EQUITY/SHARE CAPITAL (Cont'd)

(a) Issued equity – Group (Cont'd)

(iii) Upon the completion of the acquisition of the entire equity interests of Huada Electronics (“Huada Acquisition”) on 9 September 2009, 608,000,000 shares were allotted and issued, credited as fully paid, to the then shareholders of Huada Electronics as consideration shares at a price of HK$0.91 per share. The total consideration amounting to HK$553,280,000 was presented as an increase in share capital of HK$6,080,000 and increase in share premium of HK$547,200,000 in the separate financial statements of the Company in 2009. For accounting purpose, the 393,680,000 shares issued to China Integrated Circuit Design Corp., Ltd (“China Huada”) as part of the Huada Acquisition were presented as if they had been issued at the previous balance sheet dates presented using the principles of merger accounting as prescribed in Hong Kong Accounting Guideline 5, and the opening balance of the issued equity of the Group had been increased by HK$358,249,000 in the consolidated financial statements of the Group. The remaining 214,320,000 shares issued to the other then shareholders of Huada Electronics were accounted for as transactions with non-controlling interests, and the total consideration of HK$195,031,000 was presented as an increase in the issued equity of the Group on 9 September 2009.

(b) Share capital – Company

Ordinary share of

HK$0.01 each

每股面值0.01港元之普通股

Authorised

Issued and

fully paid Share capital

Share

premium Total

法定 已發行及繳足 股本 股份溢價 合計’000 ’000 HK$’000 HK$’000 HK$’000

千股 千股 千港元 千港元 千港元

At 1 January 2011 and

at 31 December 2011

於2011年1月1日及

於2011年12月31日 30,000,000 1,691,560 16,916 872,255 889,171

At 1 January 2012 and

at 31 December 2012

於2012年1月1日及

於2012年12月31日 30,000,000 1,691,560 16,916 872,255 889,171

F-225

91中國電子集團控股有限公司 2012年年報

Notes to the Consolidated Financial Statements綜合財務報表附註

For the year ended 31 December 2012 截至2012年12月31日止年度

23. 其他儲備本集團

(a) 資本儲備

資本儲備指桑菲收到外幣實收資本而產生之匯兌

差額。

(b) 盈餘儲備

根據中國法律及法規，以及企業之公司章程，本公

司在中國之附屬公司須計提若干法定基金，分別

為一般儲備基金及企業發展基金，均自根據按中

國內地企業適用之會計原則及相關財務法規而編

製之國內法定賬目計算之稅後但未計提股息分派

之溢利中提取。此等中國附屬公司須將其稅後溢

利最少10%分配至儲備基金，直至該儲備基金結餘達至其註冊資本之50%為止。此等撥款由董事會酌情釐定。一般儲備基金僅在有關當局批准後

始可用作抵銷累計虧損或增加資本。企業發展基

金可用於擴大生產或增加資本。

23. OTHER RESERVES

Group

Capital reserve 資本儲備

Surplus reserve 盈餘儲備

Translation reserve 匯兌儲備

Merger reserve 合併儲備

Other reserves 其他儲備

Total 合計

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000千港元 千港元 千港元 千港元 千港元 千港元

Note (a) Note (b) Note (c) Note (d)附註(a) 附註(b) 附註(c) 附註(d)

At 1 January 2011 於2011年1月1日 930 16,309 38,125 (327,605) (69,130) (341,371)Currency translation differences 貨幣換算差額 – – 20,133 – – 20,133Reclassification 重新分類 (930) – – – 930 –

At 31 December 2011 於2011年12月31日 – 16,309 58,258 (327,605) (68,200) (321,238)

At 1 January 2012 於2012年1月1日 – 16,309 58,258 (327,605) (68,200) (321,238)Currency translation differences 貨幣換算差額 – – 639 – – 639

At 31 December 2012 於2012年12月31日 – 16,309 58,897 (327,605) (68,200) (320,599)

(a) Capital reserve

Capital reserve represented the exchange differences arising from foreign currencies received for Sang Fei’s paid-in capital.

(b) Surplus reserve

According to the laws and regulations of the PRC and enterprise’s articles of association, the Company’s PRC subsidiaries are required to provide for certain statutory funds, namely, general reserve fund and enterprise expansion fund, which are appropriated from profit after taxation but before dividend distribution based on the local statutory accounts prepared in accordance with accounting principles and relevant financial regulations applicable to enterprises established in the PRC. These PRC subsidiaries are required to allocate at least 10% of its profit after taxation to the reserve fund until the balance of such fund has reached 50% of its registered capital. Such appropriations are determined at the discretion of the board of directors. The general reserve fund can only be used, upon approval by the relevant authority, to offset accumulated deficit or increase capital. Enterprise expansion fund can be used to expand production or to increase capital.

F-226

92 China Electronics Corporation Holdings Company Limited Annual Report 2012

Notes to the Consolidated Financial Statements綜合財務報表附註For the year ended 31 December 2012 截至2012年12月31日止年度

23. 其他儲備（續）本集團（續）

(c) 合併儲備

合併儲備指在共同控制下發行給中國華大對價股

份之公允值與收購中國華大持有之64.75%華大電子實收資本之差額。

(d) 其他儲備

在其他儲備中確認之金額包括出售Sang Fei (BVI) Company Limited及其附屬公司前之已發行權益與本公司股本及股份溢價之差額，加上於出售完成

後分佔桑菲之其他儲備；及因收購華大電子非控

制性權益之權益而發行予華大電子非控制性權益

之對價股份之公允值與集團應佔所收購華大電子

之資產淨值賬面值之差異。

本公司

根據百慕達1981年公司法，本公司之實繳盈餘可於該條例第54條所訂明之若干情況下分派予股東。

23. OTHER RESERVES (Cont'd)

Group (Cont'd)

(c) Merger reserve

Merger reserve represents the difference between the fair value of the consideration shares issued to China Huada and the 64.75% of paid-in capital of Huada Electronics acquired from China Huada under common control.

(d) Other reserves

The amount recognised in other reserves includes the difference between the issued equity immediately before the disposal of Sang Fei (BVI) Company Limited and its subsidiaries and share capital and share premium of the Company, plus other reserve shared from Sang Fei upon the completion of the disposal; and the difference between the fair value of consideration shares issued to non-controlling interests of Huada Electronics for the acquisition of their interest in Huada Electronics and the Group’s share of the carrying value of net assets of Huada Electronics acquired.

Company

Contributed surplus實繳盈餘HK$’000千港元

At 1 January 2011 and at 31 December 2011

於2011年1月1日及 於2011年12月31日 61,672

At 1 January 2012 and at 31 December 2012

於2012年1月1日及 於2012年12月31日 61,672

Under the Companies Act 1981 of Bermuda, the contributed surplus of the Company is distributable to shareholders in certain circumstances as specified in section 54 thereof.

F-227

93中國電子集團控股有限公司 2012年年報

Notes to the Consolidated Financial Statements綜合財務報表附註

For the year ended 31 December 2012 截至2012年12月31日止年度

24. 貿易及其他應付款項

(a) 該款項為因本集團研究及開發項目而從地方

政府機關收取之各種補助。此補助將按該開

支及補助之間之合理關係在補助之成本發生

之期間確認為收入。

於2012年12月31日，本集團貿易應付款項之賬齡分析如下：

24. TRADE AND OTHER PAYABLES

Group 本集團

Company本公司

31 December 31 December 31 December 31 December2012 2011 2012 2011

2012年12月31日 2011年12月31日 2012年12月31日 2011年12月31日HK$’000 HK$’000 HK$’000 HK$’000千港元 千港元 千港元 千港元

Trade payables 貿易應付款項 243,889 218,966 – –Other payables from

related parties (Note 29)其他應付關聯人士

款項（附註29） 3,701 3,701 – –Salary and welfare payables 應付職工薪酬 72,536 61,492 3,317 3,008Deferred government grants

(Note (a))遞延政府補助 （附註(a)） 131,488 79,813 – –

Current income tax liabilities 當期所得稅負債 14,771 2,013 – –Other taxes payables 其他應付稅項 7,615 19,930 25 33Other payables and

accrued expenses其他應付款項及 預提費用 67,671 36,714 1,824 1,424

541,671 422,629 5,166 4,465

(a) Amount represents various subsidies granted by and received from local government authorities for financing various research and development projects conducted by the Group. These subsidies will be recognised as income over the period necessary to match with the cost that they are intended to compensate.

At 31 December 2012, the ageing analysis of the Group’s trade payables are as follows:

31 December 31 December2012 2011

2012年12月31日 2011年12月31日HK$’000 HK$’000千港元 千港元

Current to 30 days 30日內 78,516 133,76331 – 60 days 31日至60日 76,376 25,739Over 60 days 60日以上 88,997 59,464

243,889 218,966

F-228

94 China Electronics Corporation Holdings Company Limited Annual Report 2012

Notes to the Consolidated Financial Statements綜合財務報表附註For the year ended 31 December 2012 截至2012年12月31日止年度

24. 貿易及其他應付款項（續）計入貿易應付款項結餘內之應付關聯人士貿易款

項為227,568,000港元（2011年：167,452,000港元）（附註29）。

於2012年及2011年12月31日，本集團及本公司之貿易及其他應付款項之賬面值與其公允值相若。

25. 短期銀行貸款－本集團

於2012年12月31日，銀行貸款須於一年內償還及按平均借貸年利率6.00%（2011年：6.56%）計息。

短期銀行貸款均以人民幣計值，而其賬面值與其

公允值相若。

於2012年12月31日，本集團尚未動用之已承諾銀行借貸備用額為72,763,000港元（2011年：49,340,000港元）。

24. TRADE AND OTHER PAYABLES (Cont'd)

Included in the balance of trade payables are trade payables to related parties amounted to HK$227,568,000 (2011: HK$167,452,000) (Note 29).

At 31 December 2012 and 2011, the carrying amounts of trade and other payables of the Group and Company approximate their fair values.

25. SHORT TERM BANK LOANS – GROUP

31 December 31 December2012 2011

2012年12月31日 2011年12月31日HK$’000 HK$’000千港元 千港元

Unsecured 無抵押 1,233 24,670

The bank loans at 31 December 2012 were repayable within one year and bear interest at the average borrowing rate of 6.00% per annum (2011: 6.56%).

The short term bank loans are all denominated in Renminbi and their carrying amounts approximate their fair values.

The Group has undrawn committed banking facilities of HK$72,763,000 at 31 December 2012 (2011: HK$49,340,000).

F-229

95中國電子集團控股有限公司 2012年年報

Notes to the Consolidated Financial Statements綜合財務報表附註

For the year ended 31 December 2012 截至2012年12月31日止年度

26. 經營產生之現金

27. 承擔經營租賃承擔

本集團及本公司根據不可解除之廠房及辦公室物

業之經營租賃而須於未來支付之最低租賃款項總

額如下：

26. CASH GENERATED FROM OPERATIONS

Year ended 31 December截至12月31日止年度

2012 20112012年 2011年

HK$’000 HK$’000千港元 千港元

Profit before taxation 除稅前溢利 225,523 131,229Adjustments for: 調整：

Depreciation of property, plant and equipment

物業、廠房及 設備折舊 7,338 5,639

Amortisation of intangible assets 無形資產攤銷 9,644 8,724Interest income 利息收入 (3,740) (2,928)Interest expenses 利息支出 546 1,646Share of loss of an associate 分佔聯營公司虧損 – 253Gain on disposal of an associate 出售聯營公司收益 – (1,053)Gain on disposal of property,

plant and equipment出售物業、廠房及 設備收益 (14) (619)

239,297 142,891Changes in working capital 營運資金變動

Inventories 存貨 (39,728) (7,820)Trade and other receivables 貿易及其他應收款項 (89,932) (131,933)Trade and other payables 貿易及其他應付款項 109,531 93,969

Cash generated from operations 經營產生之現金 219,168 97,107

27. COMMITMENTS

Operating lease commitments

The Group and the Company’s future aggregate minimum lease payments under non-cancellable operating leases for factories and office premises are as follows:

Group 本集團

Company本公司

31 December 31 December 31 December 31 December2012 2011 2012 2011

2012年12月31日 2011年12月31日 2012年12月31日 2011年12月31日HK$’000 HK$’000 HK$’000 HK$’000千港元 千港元 千港元 千港元

Not later than one year 1年內 13,649 5,874 1,689 1,375In the second to fifth year 第2年至第5年內 18,352 1,380 39 1,252

32,001 7,254 1,728 2,627

F-230

96 China Electronics Corporation Holdings Company Limited Annual Report 2012

Notes to the Consolidated Financial Statements綜合財務報表附註For the year ended 31 December 2012 截至2012年12月31日止年度

28. 或有負債於2012年12月31日，本集團並無任何重大或有負債（2011年：無）。

29. 關聯人士交易及結餘

除於本綜合財務報表其他部份已披露的交易及結

餘外，於本年度內本集團於日常業務過程中與關

聯人士進行了下列各項重大交易：

(a) 與受中國電子集團共同控制之公司之重大交易

28. CONTINGENT LIABILITIES

The Group did not have any material contingent liability at 31 December 2012 (2011: nil).

29. RELATED PARTY TRANSACTIONS AND BALANCES

In addition to those transactions and balances disclosed elsewhere in the consolidated financial statements, the Group entered into the following material transactions in the ordinary course of business with related parties during the year:

(a) Significant transactions with companies under common control of CEC

Year ended 31 December截至12月31日止年度

2012 20112012年 2011年

HK$’000 HK$’000千港元 千港元

Sales of products 銷售產品 101,099 60,775Purchase of goods and services 採購貨品及服務 584,997 489,637Interest received 收取利息 1,235 1,164Rental paid 支付租金 941 564

F-231

97中國電子集團控股有限公司 2012年年報

Notes to the Consolidated Financial Statements綜合財務報表附註

For the year ended 31 December 2012 截至2012年12月31日止年度

29. 關聯人士交易及結餘（續）

(b) 與受中國電子集團共同控制之公司之重大結餘

除存款為附息外，上述關聯人士結餘為無抵押、

免息並根據合同條款結算。

(c) 與聯營公司之交易

29. RELATED PARTY TRANSACTIONS AND BALANCES (Cont'd)

(b) Significant balances with companies under common control of CEC

31 December 31 December2012 2011

2012年12月31日 2011年12月31日HK$’000 HK$’000千港元 千港元

Trade receivables 貿易應收款項 16,744 16,239Other receivables 其他應收款項 265 134Deposits 存款 98,661 98,680Trade payables 貿易應付款項 227,568 167,452Other payables 其他應付款項 3,701 3,701

Other than the deposits which is interest bearing, the above balances with related parties were unsecured, interest-free and settled according to the contract terms.

(c) Transactions with an associate

Year ended 31 December截至12月31日止年度

2012 20112012年 2011年

HK$’000 HK$’000千港元 千港元

Sales of products 銷售產品 – 29,904

F-232

98 China Electronics Corporation Holdings Company Limited Annual Report 2012

Notes to the Consolidated Financial Statements綜合財務報表附註For the year ended 31 December 2012 截至2012年12月31日止年度

29. 關聯人士交易及結餘（續）

(d) 主要管理人員酬金

29. RELATED PARTY TRANSACTIONS AND BALANCES (Cont'd)

(d) Key management compensation

Year ended 31 December截至12月31日止年度

2012 20112012年 2011年

HK$’000 HK$’000千港元 千港元

Salaries, allowances and benefits in kind 薪金、津貼及實物福利 2,864 3,527Contributions to retirement schemes 退休計劃供款 152 130

3,016 3,657

F-233

F-234

F-235

F-236

F-237

F-238

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Report on CEC Industry

CCID Consulting Co., Ltd.

December 2013

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Table of Content

I. OVERVIEW 7

1. Overview of China’s Information Industry Development

1.1 Industry Scale and Growth 7

1.2 Industry Structure 7

2. Characteristics of China’s Information Industry

2.1 Industry scale grows steadily, with the growth rate slowing 8

2.2 Software industry continues to grow fast, and the industry structure trends to be more

software-orientated 9

2.3 Investment in fixed assets in electronic information industry slows 9

2.4 Export and import of China’s electronic information industry increase slightly 9

II. INTEGRATED CIRCUITRY (IC) MARKET 10

1. Overview of Integrated circuitry (IC) in the PRC

1.1 Definition & Category 10

1.2 Market Size 10

1.3 Market Structure 11

2. Competitive Landscape

3. Downstream Market Key Product Analysis

3.1 Smart Card 14

3.2 Hard Disc Magnetic Head 15

3.3 Metering System 15

3.4 Payment Terminal Product 16

4. Growth Drivers

4.1 Industrial policy environment continues to be favourable 16

4.2 Strategic emerging industry is accelerating 19

4.3 Downstream industry demand boom, and IC market potential is tremendous 19

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III NEW TYPE DISPLAY MARKET 21

1. Overview of new type display market in PRC

1.1 Definition & Category 21

1.2 Market Size 21

1.3 Market Structure 22

2. Competitive Landscape

3. Growth Drivers

IV. SOFTWARE & SERVICES MARKET 31

1. Overview of Integrated Circuitry (IC) Market in PRC.

1.1 Definition & Category 31

SOFTWARE SUPPORT AND MAINTENANCE 32

NETWORK PRODUCT SUPPORT AND MAINTENANCE 32

INFORMATION MANAGEMENT OUTSOURCING 33

1.2 Market Size 33

1.3 Market Structure 34

2. Competitive Landscape

3. Growth Drivers

3.1 "Four modernizations synchronization" improves informatization level; national policy continuous

to be favorable 37

3.2 Convergence of industry and information technology continues to deepen; “smart city” stimulates

investment 38

3.3 Strategic emerging technology leads great technology revolution, driving industry upgrading 39

V. COMPUTER MARKET 40

1. Overview of China’s computer market in PRC.

1.1 Definition & Category 40

1.2 Market Size 41

1.3 Market Structure 41

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2. Competitive Landscape

3. Growth Drivers

3.1. Market driving force of ultrabooks gradually appears 43

3.2 Influence of e-commerce channels are gradually enhanced 43

3.3 Old and new technology alternating promotes the upgrading of products 44

3.4 Tablets and other intelligent terminals’ influence on PC industry is gradually strengthened 44

VI ELECTRONIC PRODUCT TRADE 45

1. Overview of electronic product trade in PRC.

1.1 Definition & Category 45

1.2 Sales volume of electronic product in PRC. 45

2. Export of Electronic Products in the PRC

2.1 Major Export Products 47

2.2 Export Features 49

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Figure List Figure 1 2008 2015 China’s Information Industry Scale and Growth ...................... 7

Figure 2 2012 2015 China’s Information Industry Sub-indsutry Scale .................... 8

Figure 3 2008 2017 China’s IC Market Size and Growth Rate (by sales revenue)

.......................................................................................................................... 11

Figure 4 2012 2017 China’s IC Market Product Structure.................................. 12

Figure 5 2012 2017 China’s IC Market Application Structure ............................. 13

Figure 6 2008 2017 China’s New Display Market Growth and Forecast ............ 21

Figure 7 2012 2015 China’s New Display Market Product Structure ................. 22

Figure 8 2012 2015 China’s New Display Market Application Structure............. 24

Figure 9 2012 2015 China’s LCD Production’s Proportion in the World ........... 25

Figure 10 2012 China’s LCD Display Market Product Structure (By Size) ............ 26

Figure 11 2012 China’s LCD Panel Market Brand Structure ................................. 27

Figure 12 2008 2017 China’s Software and Service Market Size and Growth Rate

(By Sales Revenue) .......................................................................................... 34

Figure 13 2012 2015 China’s Software and Service Market Product Structure . 35

Figure 14 2012 2015 China’s Software and Service Market Application Structure

.......................................................................................................................... 36

Figure 15 2010 2017 China’s Computer Market Size and Growth Rate (By sales

revenue)............................................................................................................ 41

Figure 16 2012 2015 China’s Computer Market Product Structure (By Sales

Revenue ........................................................................................................ 41

Figure 17 2008 2012 China’s Electronic Information Manufacturing Size and

Growth (By Sales Output) ................................................................................. 46

Figure 18 2012 Electronic Information Manufacturing Industry Structure ............. 47

Figure 19 2012 China’s Main Electronic Information Product Export Structure .... 48

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Table ListTable 1 Policies of China’s IC Industry .................................................................. 18

Table 2 CCID Consulting’s Definition on China’s Software Product Market .......... 31

Table 3 3 Level Categories of Operating Service .................................................. 32

Table 4 3 Level Categories of Outsourcing Service .............................................. 33

Table 5 2012 China’s Computer Parallel Sales Structure ..................................... 42

Table 6 CCID Consulting’s Definition on China’s Electronic Information

Manufacturing Industry ..................................................................................... 45

Table 7 2012 China’s Main Electronic Information Product Export and Growth

Situation ............................................................................................................ 48

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I. Overview

1. Overview of China’s Information Industry Development

2012 is a pivotal year for the “12th five- year”. It is also a critical year for adjustment

and restructuring of China’s information industry. The industry scale continues to expand,

and there is differentiation between the growth of main economic operating indices. The

software industry continues to maintain fast growth, and the growth rate of the electronic

information manufacturing industry had a slight fall. The telecom industry remains stable.

Investment declines substantially, and structure adjustment further deepened.

1.1 Industry Scale and Growth

In 2012, sales revenue of China’s information industry reached 12 trillion yuan, a year

–on-year an increase of 16.6%. The growth rate is a slight decline compared with that of

2011. From 2013 to 2015, China’s information industry is expected to achieve faster

growth. It is expected that the sales revenue of China’s information industry will exceed 18

trillion yuan by 2015, with 15.5% CAGR in the next 3 years.

Figure 1 2008 2015 China’s Information Industry Scale and Growth

Source MIIT, CCID Consulting arrange, Dec., 2013

1.2 Industry Structure

Sales revenue of the software industry reached 1.5 trillion yuan in 2012, a growth rate

of 35.5%, accounting for 20.8% of the revenue of the entire information industry, an

66966

69905 86875 103257

120404138110

159363185405

14.4%

4.4%

24.3%

18.9%

16.6%14.7% 15.4% 16.3%

0%

5%

10%

15%

20%

25%

30%

020000400006000080000

100000120000140000160000180000200000

2008 2009 2010 2011 2012 2013 2014 2015

Sales Revenue(100 M yuan)Growth Rate

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8

increase of 2.9% compared with that of 2011. Sales revenue of the electronic information

manufacturing industry that is above designated size amounted to 8.5 trillion yuan, a

growth rate of 13%, accounting for 70.3% of the industry share, a decrease of 2.2%

compared with that of 2011.

Looking at the entire industry structure from 2013 to 2015, CCID Consulting forecasts

that the electronic information industry will continue to be in a dominant position. At the

same time, the electronic information industry will become increasingly software-oriented

and the industry share of the software industry will gradually increase. The industry share

of the telecom industry will decline in the next 3 years due to its slowing growth rate.

Figure 2 2012 2015 China’s Information Industry Sub-indsutry Scale

Source CCID Consulting, Dec., 2013

2. Characteristics of China’s Information Industry

2.1 Industry scale grows steadily, with the growth rate slowing

In 2012, sales revenue of China’s information industry exceeded 12 trillion yuan, a

year-on-year growth of 16.6%, but the growth rate decreased slightly compared with

18.9% of 2011. Looking at sub-industries, the electronic information industry grew by

13.0%, decreasing by 4.1% compared with that of 2011, which is a major contributing

factor in the slowing of the industry growth rates.

70.30% 68.80% 67.30% 65.40%

20.80% 23.00% 25.30% 27.90%

8.90% 8.20% 7.40% 6.70%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2012 2013 2014 2015

Electronic Information Manufacturing Industry Software Indsutry Telecom Industry

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2.2 Software industry continues to grow fast, and the industry structure

trends to be more software-orientated

The industry share of China’s software industry continues to increase. The industry is

becoming more software-orientated. Looking at the industry share of the software industry

in China’s electronic information industry, the sales revenue of software industry

accounted for 20.8% of the entire information industry in 2012. The Industry share

demonstrated continual increase year-on-year.

2.3 Investment in fixed assets in electronic information industry slows

Although the strong rise of electronic information industry in China’s Midwest has a

positive effect to drive industry investment, the “reindustrialization” strategy of developed

countries, and the increased pressure of cost and ecology in East China which contributed

to a decline in industry investment, will continue to influence the growth of investment of

China’s electronic information industry. In 2012, completed investments in fixed assets of

projects valued above 5 million yuan in China’s electronic information industry reached

959.2 billion yuan, an increase of 5.7%, but the growth rate fell 45.8% compared with that

of the year before, and 14.3% lower compares with general industry investment in the

corresponding period.

2.4 Export and import of China’s electronic information industry increase

slightly

In 2012, the export and import of China’s electronic information industry increased

slightly, totaling 1.1868 trillion USD, an increase of 5.1%, a fall of 6.4% in growth rate

compared with that year, and 1.1% lower than the growth rate of the national commodity

foreign trade. The electronic information industry export and import accounted for 30.7%

of national foreign trade value. In particular, export amounted to 698 billion USD, an

increase of 5.6%, a fall of 6.3% in growth rate compared with that of the year before, 2.3%

lower than national foreign trade export growth rate. Import accounted for 34.1% of

national foreign trade value. Import amounted to 488.8 billion USD, an increase of 4.5%, a

fall of 6.5% in growth rate compared with last year, but 0.2 higher than national foreign

trade import growth rate, accounting for 26.9% of national foreign trade import value.

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II. Integrated circuitry (IC) Market

1. Overview of Integrated circuitry (IC) in the PRC

1.1 Definition & Category

An IC (Integrated circuit) or a microcircuit, microchip, or chip in electronics is a small

electronic circuit (mainly comprising semiconductor devices and passive components,

etc.), usually made in a semiconductor wafer fabrication surface.

The IC market can be divided into various application fields: the consumer IC market,

the computer integrated IC market, the network communications IC market, the industrial

control IC market, etc. Consumer IC means ICs used in household appliances and toys,

etc.. Computer ICs are used in desktop PCs, notebooks, servers and peripherals.

Network communication ICs are applied to a variety of network and communication

equipment. Industrial control ICs are used in various industrial production equipment,

control system and all kinds of instruments and meters.

ICs can also be divided into to different product categories: Analog IC, ASICs, ASSPs,

CPU, DSP, Embedded CPU, Logic IC, Memory, MCU, and Microperipherals, etc.

1.2 Market Size

Due to the continued effects of the global economic recession, China's electronic

products export growth is restrained. The growth rate of bulk electronic machines in which

ICs are widely applied is slowing. Other than increased growth in mobile smart devices,

sales of other products are stable with a slight decline. In 2012, China's IC market size

was 855.86 billion yuan, with the growth rate at 6.1%. However, this growth rate is still

significantly higher than that of the global market generally.

Looking ahead to 2013 and with the improvement of global economic situation,

electronic product demand which relies on export is expected to increase in China. OEM

will speed up procurement and will build up inventory. It is predicted that in 2013, China's

IC market can achieve a growth rate of 7.2%. In the next five years, the development of IC

market will continue to grow modestly.

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Figure 3 2008 2017 China’s IC Market Size and Growth Rate (by sales revenue)

Source CCID Consulting, Dec., 2013,

1.3 Market Structure

1.3.1 Product Structure

In terms of product structure, memory products still occupy the largest market share.

In 2012, its market share reached 20.2%, decreasing by 1.2% compared with that of 2011.

The reason for this decrease is that, after the previous price adjustment of DRAM

products, Taiwan manufacturers withdrew from the product areas, and other

manufacturers also gradually adjusted production capacity. Even though prices

rebounded, PC sales volume continues to decline, and memory products’ market share

has decreased as the PC market sales growth slowed. On the other side, in the more

prosperous NAND flash market, major manufacturers have also adjusted their distribution

capacity, and product competition is intense. In a volatile market, the average price is

driven slightly lower. Moreover, with the emergence of various specialized highly

integrated chips, and the rapid growth of the mobile intelligent devices in particular, the

market growth rate for ASSPs remains above 10% and its market share continues to

increase.

5972.9 5676.07349.5

8065.6 8558.6 9174.79930.2

10788.111737.5

12782.1

6.2%-5.0%

29.5%

9.7%6.1%

7.2% 8.2% 8.6% 8.8% 8.9%

-15%

-5%

5%

15%

25%

35%

45%

0

2000

4000

6000

8000

10000

12000

14000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Sales revenue(100 M yuan)Growth rate

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According to our forecasts, from 2013 to 2015, Analog IC, ASSPs, DSP, Embedded

CPU, Logic IC, and other products will maintain a higher growth rate. Generally, in the

future, analog IC, ASSPs, embedded CPU, and other products will enjoy accelerated

growth, and their market share will also increase accordingly.

Figure 4 2012 2017 China’s IC Market Product Structure

Source CCID Consulting, Dec., 2013,

1.3.2 Application Structure

In relation to application structure, the computer market, the communication market

and the consumer electronics market are still China's main application markets for ICs.

Their total market share accounts for 87.2% of the overall market. In relation to

development speed, thanks to the increasing demands of mobile intelligent devices for

network communication IC, such as mobile AP, touch screen control chip, baseband and

rf, the network communication market has become the leading submarket in China's IC

market in 2012. The decline of global computer production volume has directly led to the

decline of China's computer IC market growth. In 2012, the share of computer IC market

fell further to 42.7%, the market growth in this area was only 1.2%.

According to our forecasts, from 2013 to 2015, the computer market, the network

communication market and the consumer electronics market will be the top three

submarkets in terms of market share. However, influenced by downstream demand and

economic structure adjustments, the industrial control market, the automotive electronics

market and the network communication market will retain a higher growth rate, whilst the

16.0% 16.5% 17.1% 17.6%2.8% 2.7% 2.6% 2.5%

18.3% 19.2% 20.4% 21.8%

17.3% 16.6% 15.7% 14.8%1.8% 1.8% 1.8% 1.8%4.8% 5.0% 5.3% 5.6%4.5% 4.5% 4.5% 4.5%

20.2% 19.8% 19.4% 18.9%2.8% 2.8% 2.7% 2.7%

11.5% 11.1% 10.5% 9.8%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2012 2013 2014 2015

Analog IC ASICs ASSPs CPU

DSP Embedded CPU Logic IC Memory

MCU Microperipherals

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growth rates of computer and consumer electronics fields will be relatively low. Although

the growth rates of the different fields are very different, the bases of the market sizes are

relatively stable, and IC application structures will not change much in the coming three

years.

Figure 5 2012 2017 China’s IC Market Application Structure

Source CCID Consulting, Dec., 2013,

2. Competitive Landscape

The sales volume ranking of the top 4 enterprises in China’s IC market is stable.

However, the growth rates of each enterprise are different. As a whole, in 2012, the

market shares of American and Korean vendors increased, while the market shares of

European vendors and Japanese vendors continued to decrease. Individually, Intel’s

market growth slowed down due to influence from the computer market, with its market

share falling to 18.6% and its sales growth being only 2.8%. Because AMD focuses on

one product line and its market share of the mobile devices market is relatively small, its

performance was much more affected, with a decrease of 6.7% in sales and a decline of

market position. Qualcomm became the biggest winner in the market, driven by the

increase of sales volume of portable intelligence devices such as smart phones and

tablets, with an increase of 36.2% in sales - its market rank improved from No. 10 to No. 8.

Samsung’s market share improved lightly because of its complete product line and its

rapid growth in the mobile internet products field.

7.4% 8.0% 8.6% 9.3%

42.7% 41.0% 38.8% 36.4%

2.1% 2.2% 2.3% 2.5%

22.4% 23.6% 25.2% 26.9%

22.1% 22.0% 22.2% 22.3%

3.3% 3.1% 2.8% 2.6%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2012 2013 2014 2015

Industrial control Computer Automotive electronics

Network communication Consumer electronics Others

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3. Downstream Market Key Product Analysis

3.1 Smart Card

A “Smart Card” is also known as the integrated circuit card. It embeds the entire IC

chip in a plastic substrate, and this is then further encapsulated into a card, with its

appearance being similar to magnetic cards.

For China’s smart card market, 2012 was a year full of opportunities and challenges.

Whether in the financial IC card market or the social security card market which were

started quickly, or the health care card market and the mobile payment card market which

are gaining momentum, both domestic and foreign enterprises in the smart card field are

facing a good opportunities for development. At the same time, the difficult road to the

financial IC card security certification and the battle for standardization of mobile payment

have brought some challenges for domestic enterprises’ competition for market share in

these rapidly developing markets. In 2012, the sales volume of China’s smart card market

reached 1.75 billion copies, a growth rate of 11.9%; the sales volume is 9.52 billion yuan,

representing a year-on-year increase of 16.7%. The major reason why the growth rate of

smart card sales revenue is higher than that of the sales volume is mainly due to the

issuing of the double interface cards whose single price is relatively higher. In the future,

driven by the rapid growth of the fields of financial IC cards, social security cards, and

mobile phone cards, China's smart card market will grow rapidly. By 2017, sales volume of

China’s smart card market is expected to reach 3.03 billion pieces, with sales revenue

hopefully reaching 30.66 billion yuan.

For the product structure of smart card chip category, whether calculated by sales

volume or sales revenue, the CPU card accounted for more than 90% of the market share.

From the point of application structure, China’s smart card application fields mainly

include: mobile communication cards, mobile phone payment cards, financial IC cards,

social security cards, health care cards, second generation ID cards, electronic passports,

transportation cards, cable TV CA cards, and USB Keys, etc. From the perspective of

sales volume, the biggest shipments in domestic smart card market comes from the

mobile communication card market. In terms of sales revenue, the USB Key market has

the largest sales revenue share. In the coming three years, mobile communication cards

will still be the cards with the largest volume of card issuance, and the financial IC card

market, the social security card market, the health care card market, and the mobile

phone payment card market in the next few years will grow rapidly. Other areas will

maintain growth momentum.

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3.2 Hard Disc Magnetic Head

The hard disk magnetic head is the key component for the hard disk to read data. Its

main function is to convert the magnetic information stored on the hard disk into electrical

signal and transport it outwards, and its working principle is to use special materials of

resistance to read and write the data on the disc with magnetic field changes. The quality

of the hard disk magnetic head is a deciding factor in the hard disk’s storage density.

According to data from MIIT, in 2012, the sales output value (above a designated size)

of China's electronic information industry is 8.5044 trillion yuan, with an increase of 12.6%.

Computer output reached 350 million units, a year-on-year increase of 10.5%. The

shipped products accounted for 80% of the world's total output, placing China comfortably

at first place globally. Benefitting from rapid development of the computer manufacturing

industry, the hard drive magnet head, being an important computer part in the process of

manufacturing, also gained rapid development in the market.

In 2010, the iPad released by Apple Inc. has became the “catalyst” for the

development of China’s tablet production growth. In daily life, more and more people are

beginning to choose tablets as their main mobile computing device. With constantly

emerging new applications and services, tablets quickly merged into and changed the

public’s living, working and entertaining style. However, at present, most of the computer

products such as tablets and ultrabooks adopt solid-state drives, and hard disk magnetic

heads are not included in the configuration list for the above-mentioned products.

Compared with the national computer output, tablet production maintains a high growth

rate, but the proportion is still relatively small. As an important component for computers,

hard disk magnetic heads will continue to maintain steady growth in the market in the

future.

3.3 Metering System

Driven by smart meters and other measuring application products, the metering

system product market experienced rapid growth in 2012. The national smart grid is in a

period of all-round construction from 2011 to 2015. In the future, the smart grid will be a

distribution system and will be able to manage a variety of power sources. End users

could return the electric power produced by wind turbines and solar panels to the

electricity grid, and therefore communication with the grid has changed from being

originally unidirectional to bidirectional, and the management system can measure the

electrical equipment load and capability of the power grid power supply, and conduct

real-time calculation of rate pricing. The main difference between the traditional power

grid and the smart power grid is the adoption of the MCN or MPU, or wireless transceiver

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and sensors in the system, and the usage of bidirectional communication. In the future,

the smart grid could have the level of intelligence and interaction of the internet. New

watt-hour meters and electricity measurement instruments, as major measurement tools

of the smart grid, will realize large-scale popularization and application. In relation to

market performance, the market shares of Ningbo Sanxing Electric Co., Ltd., Holley

Metering Limited., Shenzhen Kaifa Technology Co, Ltd., and Zhejiang CHINT Instrument

& Meter Co., Ltd (CHINT METER) are relatively higher than their competitors. Taking the

benefit from downstream meter product application, the market size of metering system in

the future will continue to maintain good growth.

3.4 Payment Terminal Product

In 2012, the payment terminal product market maintained healthy and stable growth.

According to the analysis of several authoritative international financing institutions,

although indicators of China’s bank card holdings rate and the percentage of bank card

consumption of total retail sales of society are much lower than those of developed

countries and middle-income countries, the continued development of China's economy,

increase of personal income levels and comprehensive personal financial demand and

changes in settlement concepts will project the development of China's credit card

business into a high-speed growth stage. China has became the largest greatest potential

credit card market in the world. According to relevant data projections, by 2013 the credit

card market in China will be the second largest market of credit and loans after the

mortgage credit product market, accounting for more than 20% of total retail credit profits

and about 15% of the total amount of bank profits. The rapid development of China's

credit card industry will be a powerful impetus for the rapid development of the payment

terminal product market represented by the POS payment terminal product market.

4. Growth Drivers

4.1 Industrial policy environment continues to be favourable

Because the IC industry is highly important for national economy and national

security, China’s government pays much attention to the development of the IC industry,

and has taken a number of preferential measures. In January 2011, the State Council

formally issued the “Notice on further encouragement of the development of software

industry and integrated circuit industry“ (Guo Fa [2011] No. 4), which clearly states that

the government will “continue to implement the National No.18 Files. If any relevant

policies are inconsistent with this policy, this policy should prevail". In particular, policy

support for the IC industry extends to packaging, testing, equipment, materials and other

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upstream and downstream industrial chain enterprises. It can be seen that the No. 4 File

is an expansion and extension of the No.18 File. China further enhanced policy support

for the IC industry.

In addition to the state council, other ministries and related departments also issued a

series of policies to encourage the development of the IC industry. For example, in

February 2008, the Ministry of Finance and State Administration of Taxation issued

the ”Notice on Several Preferential Policies of Enterprise Income Tax” (Caishui [2008] No.

1 File), which outlines the enterprise income tax discounts to IC manufacturing enterprises

whose investment is more than 8 billion yuan or whose IC line width is less than 0.25 um.

In August 2010, the Ministry of Finance, together with the National Development and

Reform Commission, the General Administration of Customs, and the State Bureau of

Taxation, jointly issued the “Notice on major projects of science and technology import tax

policies” (Caishui [2010] No. 28), which stated that major science and technology special

projects shall be exempted from customs duties and import VAT. In 2011, the State

Bureau of Taxation of Ministry of Finance issued the “Notice on the issue of small

profit-making enterprise income tax preferential policies” (Caishui [2011] No. 117 File),

which provides for the calculation of taxable income amount at a reduced rate of 50%, and

provides that enterprises pay income tax at a reduced rate of 20%. In April 2012, The

State Bureau of Taxation of Ministration of Finance issued the "Notice on further

encouragement of the development of software industry and integrated circuit industry

enterprise income tax” (Caishui [2012] No. 27 File), which points out that integrated circuit

manufacturing enterprises whose line width is less than 0.8 microns (including), after

identification, before December 31, 2017, could enjoy “2 deduction and 3 halvings”

calculated from the profit-making year. IC production enterprises whose line width is less

than 0.25 microns or whose investment is more than 8 billion yuan should (after

identification) pay income tax at a reduced rate of 15%. Those ones among them having

an operation period of 15 years or more before December 31, 2017, could enjoy “5

deduction and 5 halvings” calculated from the profit-making year. New IC design

enterprises (after identification) before December 31, 2017, could enjoy “2 deduction and

3 halvings” calculated from the profit-making year. Key design enterprises in the state

planning layout can enjoy a low tax of 10%. With the promulgation and implementation of

the preferential encouraging policies, the future of the domestic IC industry policy

environment will be better. The development of the IC industry will eventually lead to the

development of the IC market.

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Table 1 Policies of China’s IC Industry

Date of Issue Policy Department File No.

June,2000

“Several policies to encourage development of software industry and IC

industry”

The State Council Guofa(2000)NO. 18

Sept.,2000

“Tax policies to encourage software industry and IC industry development”

State Bureau of Taxation of

Ministration of Finance

Caishui[2000]NO.25

March,2002

“Tax policies to further encourage software industry

and IC industry development”

State Bureau of Taxation of

Ministration of Finance

Caishui 2002 NO.70

March,2002

“Identification and Management Measures of IC Design Enterprises and

Products”

MII, State Bureau of Taxation

Xinbulianchan(2002)NO.86

March,2005

“Temporary measures of special fund for IC industry research and development”

Ministration of Finance, MII,

NDRC, Caijian[2005]NO.132

Dec.,2007

“Management measures on electronic information industry development”

Ministration of Finance, MII Caijian[2007]NO.866

Jan.,2008

“The Notice on Several Preferential Policies of Enterprise Income Tax”

State Bureau of Taxation of

Ministration of Finance

Caishui 2008 NO.1

Aug.,2010

“Notice on major projects of science and technology

import tax policies”

Ministration of Finance, MOST, NDRC, General Administration of Customs, State

Bureau of Taxation

Caishui 2010 NO.28

2011 “Notice on the issue of small

profit-making enterprise income tax preferential

policies”

State Bureau of Taxation of

Ministration of Finance

Caishui[2011]NO.117

Jan.,2011

“Notice on further encouragement of the

development of software industry and integrated

circuit industry”

The State Council Guofa(2011)NO.4

Nov.,2011 “Notice on return of IC

enterprises’ final VAT tax credits of equipment

purchasing”

State Bureau of Taxation of

Ministration of Finance

Caishui 2011 NO.107

April., 2012

“Notice on further encouragement of the

development of software industry and integrated

circuit industry enterprise income tax”

State Bureau of Taxation of

Ministration of Finance

Caishui[2012]NO.27

Source CCID Consulting, Dec., 2013,

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4.2 Strategic emerging industry is accelerating

In July 2012, the State Council officially released the “Notice on the 12th five-year

national strategic emerging industry development planning printed and distributed by the

State Council” (Guofa [2012] No. 28 File), which further clarifies the development of the

targets, direction, main tasks, major projects and policies and measures of the seven

strategic emerging industries, including the new generation of information technology,

energy conservation and environmental protection, biological industry, high-end

equipment manufacturing industry, new energy, new materials and new energy vehicles.

The next generation of information technology mainly includes high-performance

integrated circuits, as well as the “internet of things”, triple play, new display, a new

generation of mobile communications, and next generation internet, etc. China’s speeding

up of the encouragement of strategic emerging industries not only directly benefits the

integrated circuit industry, but also accelerates the development of integrated circuits by

pulling together a range of downstream application markets.

4.3 Downstream industry demand boom, and IC market potential is

tremendous

Rapid growth of the downstream industry is one of the main driving factors for the

development of the IC market in China. For future development, there is continual

demand for the major domestic IT products. Demand in the fields of computers, desktop

computers, notebook computers, monitors, printers and the manufacture of other products

will continue to surge. Demand for traditional products (such as TVs, audio systems, laser

DVs) is also growing at a steady rate. Expansion of network communications, the

touchscreen mobile phone market, camera phone market and GPS market has led to an

era of changing phones. With the rapid development of the domestic automobile industry,

automotive electronics industry will also need a large number of IC products. At the same

time, driven by emerging development philosophies, such as low carbon economy, IC

products applicable to green energy, intelligent energy management, electric vehicles and

other emerging fields became the hot spots. Emerging applications’ sustained rapid

development and has became an important source to support the continued positive

growth of the IC market.

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Looking at the application structure, computer, industrial control, automotive

electronics, network communications, consumer electronics and other fields are still the

main integrated circuit application markets in China. Demand for auto electronic products

has been particularly prominent in recent years. At present, China's automobile industry

has entered into a high speed growth stage, with more than 1000 domestic enterprises

engaging in automobile electronics products. Foreign automotive electronics suppliers

also set up a large number of production joint ventures in China. At the same time, the

electronic products’ proportion of the total cost of the car production has gradually

increased. In the future, the automobile electronic field’s demand for integrated circuit

products will continue to increase. From the point of demand growth rate, automotive

electronics, network communications, industrial control, consumer electronics will be the

rapid growing areas of demand for IC products. In addition to the above emerging markets,

traditional application fields will also maintain stable growth momentum.

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III New Type Display Market

1. Overview of new type display market in PRC

1.1 Definition & Category

New display technologies include liquid crystal display (LCD), plasma display (PDP),

organic light emitting diode (OLED) and laser display, etc. In this report, China’s new

display market refers to the demands occurring in China within the scope of the LCDs,

OLED panels, PDP panels and laser display devices, mainly covering manufacturing

fields of liquid crystal TVs, notebooks, LCDs, mobile phones, tablets, plasma TVs, laser

projections, and other areas of terminal products.

1.2 Market Size

In recent years, China's new display market scale has experienced rapid expansion

led by the rapid growth of the electronic information products manufacturing industry. In

2012, China's new display market scale reached 555.06 billion yuan, a year-on-year

increase of 19.3%, beyond the global average growth rate. At present, China is still the

world's biggest new display market, with a market share of nearly 50% in the global

market.

Figure 6 2008 2017 China’s New Display Market Growth and Forecast

Source CCID Consulting, Dec., 2013,

25603424.3

3932.44651.9

5550.66560.8

7715.59104.3

10689.8

12623.5

33.8%

14.8%18.3% 19.3% 18.2% 17.6% 18.0% 17.4% 18.1%

0%

20%

40%

60%

0

2000

4000

6000

8000

10000

12000

14000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Market Size (100M Yuan) Growth Rate(%)

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With the continuing development of digital technology, multimedia technology and mobile Internet technology, the application fields of the new display continue to expand, and the new domestic urbanization, upgrade of consumption and other factors also bring huge market potential to the terminal display products market. In the future, the domestic new display market still presents a momentum of rapid development. It is expected that in the next five years, the market average annual compound growth rate will be about 17.9%, and will reach 1.26235 trillion yuan.

1.3 Market Structure

1.3.1 Product Structure

Currently, liquid crystal display (LCD), due to its stable and efficient performance and rapidly falling cost, is still the mainstream of new display technology. In 2012, liquid crystal displays had a 90.9% market share. The OLED, as an emerging flat-panel display technology, is paid more attention increasingly by panel manufacturers and end products manufacturers. In 2012, OLED panel market size reached 66.336 million pieces, and the sales revenue was about 14.59 billion yuan, a year-on-year increase of 81.2%. In recent years, under the background of rapid development of LCD and OLED industry, the PDP competitive advantage gradually disappeared. The PDP display market is also atrophic. In 2012, China’s PDP display market was about 11 billion yuan, a fall of 25.8% compared with that of the last year. In addition, other new display technologies (such as laser display) continue to develop, with expanding application fields and increasing market share year on year.

Figure 7 2012 2015 China’s New Display Market Product Structure

Source CCID Consulting, Dec., 2013,

90.9% 90.7% 89.7% 88.6%

2.6% 3.0% 3.6% 4.5%

2.0% 1.5% 1.3% 1.1%

4.5% 4.8% 5.4% 5.8%

80%

100%

2012 2013 2014 2015

LCD OLED PDP Others

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1 LCD

In the future, LCD will still be the mainstream technology of new type display in the

field. As the industry and the product application mature, the LCD market growth tends to

be stable with a relatively rapid growth rate. In the next 3 years, the compound growth rate

will be about 17.3%. In terms of product application, in the future LCD will be applied in

various sizes of display terminals, with a trend towards large size and high definition.

Smart phones will became the main demand for LCDs.

2 OLED

As the proportion of smart phones amongst mobile phones is becoming increasingly

higher, and the expanding application field of OLED display in smart phones and the fact

that China’s OLED industry investment and production will reach its peak in the coming 3

years, it is expected that China’s OLED display market will maintain continuous fast

growth. It is projected that the average annual compound growth rate will reach 41.5% in

the next three years, and the market demand will reach 165 million by 2015. In terms of

sales, the proportion of AMOLED will be higher, thus the growth rate of sales revenue is

higher than that of sales volume. It is expected that in 2015, China’s OLED panel market

scale will reach 41.37 billion yuan.

3 PDP

In China, the PDP display market is becoming a niche market as it is being squeezed

by the liquid crystal display market. In the future, as liquid crystal display (LCD) cost

continues to fall, PDP display market will gradually shrink. PDP display mainly applies in

the field of flat TV, especially in the field of large size flat TV. Since the PDP display has a

certain technical advantages in the field of 3D TV, the rising of 3D TV also gave some

space for the PDP display market. In the next three years, PDP display market will show a

trend of slow decline, but still remain a market size of ten billion yuan or so.

4 Laser Display

In addition to LCD, OLED and PDP, other new display market shares are also

experiencing year on year increases. This is due to the popularization and application of

laser display products. Laser display has the feature of energy conservation and

environmental protection. Its cost is low, especially in the large size application field.

Based on the current situation of laser display which is still in the early stage of

industrialization, in the next three years, laser display market’s average annual compound

growth rate will be about 33.5%.

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1.3.2 Application Structure

New display technology is mainly used in the fields of flat-screen televisions,

computer monitors, notebook computers, mobile phones, tablets and other end products.

According to the panel sales revenue, flat-panel televisions are still the main application,

accounting for 37.4%. In 2012, China’s flat-panel TV production volume reached 140

million units and LCD TV accounts for 98.6% of this volume. TPV Technology, an affiliate

of CEC, has a global market share of 35% for PC Monitors and ranks No.3 in LCD TV

shipments globally.

Figure 8 2012 2015 China’s New Display Market Application Structure

Source CCID Consulting, Dec., 2013,

1 Flat-panel TV

Flat panel TVs mainly refers to LCD TVs and plasma TVs. LCD TVs are currently mainstream in the market. As traditional CRT TV gradually withdraws from the market, flat-panel TVs have become the largest black electrical product by sales volume. With the global TV industry structure adjustment and continuous advance of China's domestic demand policy, flat-panel TV production volume continues to shift to China. The development of the flat-panel TV industry has made great strides in China. In 2012, China’s flat-panel TV production volume reached 140 million units, with LCD TV amount accounting for 98.6%. As China's LCD TV production volume continues to increase globally, the growth rate of production volume of LCD TVs in China will increase faster than the global average. In 2013-2015, we expect China's LCD TV panel market’s average annual compound growth rate will reach 20.4%, higher than the global average growth rate. It is expected in 2015, the market demand of China's LCD TV panels will reach 225 million units.

36.0% 36.2% 35.5% 34.0%

22.8% 23.6% 24.0% 26.4%

21.2% 21.5% 21.0% 20.0%

13.9% 12.4% 11.0% 10.3%2.3% 3.0% 4.6% 5.2%3.8% 3.3% 3.9% 4.1%

0%

20%

40%

60%

80%

100%

2012 2013 2014 2015

Flat-panel TV Mobile phone Notebook Display Tablet Others (navigator, digital camera, MP4, etc.)

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Figure 9 2012 2015 China’s LCD Production’s Proportion in the World

Source CCID Consulting, Dec., 2013

From the perspective of product size structure, large size and ultra large size are the

future development trends for LCD TV. Driven by features of intelligent interactive TV, 3D

video, ultra-thin narrow frame design and straight down type LED backlight, large size

LCD TV market shares began to grow quickly. In 2012, liquid crystal TV above 40 inches

in size accounted for more than half of the LCD TV market.

Along with the trend of large size displays, high definition displays are also the trend

of the future. IGZO technology has became the development trend of LCD technology

with lower power loss (close to OLED). The thickness is only 25% higher than that of

OLED, with full high definition resolution and 4K ultra-high resolution level. Sharp is the

leader of IGZO technology research. IGZO technology has been put into mass production

and is being trialed on large size LCD panels.

In terms of intelligence, as hardware technology and software content are upgraded,

more and more liquid crystal TVs can carry full open operating systems. A smart TV

integrates web search, IP TV, video on demand, recording, digital music, network news,

and video telephone functions and will became the third intelligent terminal after the

computer and mobile phone. "Content + hardware" is crucial to the future of smart TV

market competition.

50.2% 52.1% 53.6% 54.3%

49.8% 47.9% 46.4% 45.7%

0%

20%

40%

60%

80%

100%

2012 2013 2014 2015

China Others

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2 Liquid Crystal Display (LCD)

As new products and technology, such as LED backlight and large size LCD,

continue to be popularized and the DIY computer market transforms from CRT display to

LCD display, the growth of China's LCD market remains stable. In 2012, global production

volume reached 140 million units. From the point of product size, 19-22 inches will

continue to be the mainstream over the next few years.

Figure 10 2012 China’s LCD Display Market Product Structure (By Size)

Source CCID Consulting, Dec., 2013

3 Other Application

Small and medium size TFT - LCD panel is mainly used in notebook computers,

smart phones, and tablets, etc .Among them, the smart phone is the fastest grower in

shipments of LCD panel. In 2012, China's mobile phone production reached 1.18 billion

units, becoming the second largest market of new type display panel demand, accounting

for about 23.7%. Within this, smart phones accounted for more than 60%. China became

the world's largest producer of smart phones. It is worth mentioning that OLED has 4% of

the permeability in the field of mobile phone.

2. Competitive Landscape

New display belongs to the fund and technology-intensive industry, with higher

barriers to entry. And the degree of monopoly in this industry is relatively concentrated.

New display market competition, at present in China, is still led by a few companies from

South Korea, Japan, China Taiwan and China mainland. In the LCD field, LGD, Samsung,

AUO, CMO, Sharp, Beijing Oriental, CSOT, CEC Panda together account for nearly 80%

of China's market share. In the OLED field, the current domestic market is mainly led by

15", 11.0%

17", 13.4%

19", 32.3%

22", 31.2%

Others, 12.1%15"

17"

19"

22"

Others

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Samsung, Ritdisplay, Pioneer, Visionox, and Rainbow. For AMOLED panel products,

Samsung is in the dominant position. In China, enterprises, such as Visionox and

Rainbow, are mainly producers of PMOLED products. In PDP display field, there are

overseas vendors Panasonic and Samsung, and domestic vendors Changhong and

Hisense. These four companies account for almost all domestic market share. In the field

of laser display, there are overseas vendors Mitsubishi, SONY, Samsung and LG, and

domestic vendors Phoebus Vision and Appotronics. All of these vendors have sped up the

layout of China’s market, and are trying to grab future development opportunities.

Presently and for the next five years, LCD will continue to dominate China's new

display market. LCD market structure generally determines the competitive landscape of

the whole market.

Nanjing CEC Panda LCD Technology Co., Ltd., an affiliate of CEC, is involved in

building the “Nanjing LCD Valley” together with Jiangsu Provincial Government and

Nanjing Municipal Government. The “6th generation production line” TFTLCD panel

production line project, which is already in production, introduced technologies of the “10th

generation production line”, including ultraviolet light vertical alignment technology, veneer

complex technology, green materials, energy saving and pollution-free processing, etc.,

and is the most advanced “6th generation production line” LCD panel production line in the

world. In addition, a more advanced generation of LCD panel production line is under

construction.

Figure 11 2012 China’s LCD Panel Market Brand Structure

Source CCID Consulting, Dec., 2013

LGD20.4%

Samsung14.6%

AUO13.7%

CMO11.4%

Beijing Oriental8.9%

CSOT3.8%Sharp

4.0%IVO

3.6%

CEC Panda 2.3%

Tianma1.9%Others

12.4%

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3. Growth Drivers

1 As the world's largest producer of electronics, China provides large

amounts of downstream demand for new display

At present, China has already become the world's largest electronics production base.

China’s production volumes of flat-panel TVs, notebooks, monitors, and mobile phones,

digital cameras/video cameras, MP3s / MP4s and other personal portable consumer

electronic products rank high globally. Shipments of mobile phones, computers, and

flat-panel TVs reach more than 50% of the world. Displays, as interpersonal interaction

interface, play a more and more important role in the realization of e-products function and

accordingly China became the world's biggest new display market. With the global

electronic information industry’s continuous and accelerating transfer to China, China's

position as an electronic product manufacturing power will also be increasingly prominent,

and thus provides a broad application market space for new display products such as

LCD and OLED.

2 New urbanization and smart city construction provide rare opportunities to

new display market expansion

“Report to the Eighteenth National Congress of the Communist Party of China” was

clearly put forward "to adhere to the new path of urbanization with China’s characteristics",

and "to realize city informatization level improvement”. At present, China has entered the

ranks of middle-income countries, but the urbanization rate is far lower than in developed

countries, being in the midst of an accelerating development stage. At the same time,

many cities also take "smart city" construction as an important means of restructuring.

This makes new urbanization and urban informatization construction the greatest potential

for stimulating investment and consumption. Information display terminals, intelligent

network terminal, flat TV, and home PC new display technology products have widely

penetrated different areas of construction of urban public and all fields of personal family

application. Urbanization and smart city construction will have a wider demand on the new

display. Combined with the national subsidies, such as "home appliances to the

countryside" policy, rural markets will became more important growth areas of the new

display market in the future.

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29

3 Trend of large size, high definition, and intelligence lead display terminal

upgrading

With the increasing demand of multimedia entertainment terminal function, there

are higher requirements on displays. Large size, high-definition, and intelligence have

become the main trends in the development of electronic products. Liquid crystal display

above 20 inches has replaced 17 inch and 19 inch products, and has gradually become

the mainstream of the market. The mainstream LCD TV size is upgrading from 32 to 42

inches or more. At the same time, the demand of high-definition and full high-definition

products is rising because of superior visual enjoyment. Along with the development of

digital technology and multimedia technology, and the popularization of smart TV, a new

era of upgraded display terminal. This will continue to support growth in the domestic new

display market.

4 The rapid development of mobile Internet drives the rapid popularity of

smart display terminal

With continuous innovation development of broadband wireless mobile

communication technology and web application technology, mobile Internet services and

applications have become another driving force after the broadband technology.

Meanwhile, carriers of mobile Internet realization, smart terminals (such as smart phones),

tablets and e-books have also entered into a period of rapid development. In 2012,

production volume of China’s smart phone reached 570 million units, accounting for 48.2%

of China's mobile phone production volume. In the future, the proportion will gradually

increase. Driven by the rapid growth of intelligent mobile terminals, new displays, as its

interactive media link, has a broader market space.

5 Broad technology application prospects have become important support

of new display market

Currently, LCD technology is very mature. OLED, laser display and other new display

are still in the early stage of industrialization. Their technology features which are different

from that of LCD also give rise to the wider application space. For example, OLED flexible

display is an important development direction for display products in the future. With the

development of information consumption and wearable devices, flexible display is

expected to be the next growing point in the market after LCD. Laser display has the

characteristics of high-resolution, three-dimension, and true color, etc. New application of

laser projectors, laser TVs, laser motion-picture machines, and laser display splicing walls

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will be the highlight of new display market in the future. In addition, the further

development of 3D display technology and touch technology also continue to expand the

application range of the new display. All kinds of emerging applications provide important

support to the growth of new display market in the future.

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IV. Software & Services Market

1. Overview of Integrated Circuitry (IC) Market in PRC.

1.1 Definition & Category

In this report, software and services market mainly includes software product market and IT service market. China’s market sales volume does not include China Hong Kong, Macao and Taiwan region, unless noted otherwise.

1.1.1 Software Product Market

According to the level and function of software product in computer system, CCID Consulting divided China’s software products into 3 categories—platform software, information security product and application software.

Table 2 CCID Consulting’s Definition on China’s Software Product Market

Software productmarket

Platformsoftwar

e

Operating system Windows, Linux, Unix, other OS

Database management system System

management software

Network management software, storage management software, virtualization software, other software

Development tool

Other platform software

Middleware

Information

security

Network security Information encryption and identity authentication

Network security products

Firewall, VPN, IDS, IPS, UTM

Intranetsecurity

Content security, terminal security, security management platform

Application

software

Personalapplicationsoftware

Translation software, education software, entertainment software, office software suite, graphic processing software, and others

Enterpriseapplicationsoftware

Business management software, PLM, collaborative management software, project management software, BI, GIS, enterprise information management, and others

Industry application software Source CCID Consulting, Dec., 2013

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Note 1: The data on software product market do not include embedded software products market;Note 2: Business management software includes FM/ERP/CRM/SCM/HRM/EAM, etc.; Note 3: Industry application software is special application software only applicable to one or a few related industries, and does not have universal applicability. For example, special application software in billing/clearing/online billing/business analysis/unified prepaid phone platform industries; railway transportation management information system (TMIS), and urban road traffic command system, etc.; government business vertical management system, such as social security system, financial management system, and tax management system, etc.

1.1.2 IT Service Market

CCID Consulting’s scope of advise for IT Service means IT services that are support based services or subcontracted or outsourced services, which helps users to realize their target and service through utilizing the IT system.

Operating service: A collection of services to help users utilizing their IT system, to support business operations and services and realize users’ own target. This is a kind of supporting services running through the whole life cycle of IT system, with specific forms of consulting, system integration, investment security, training, product support and maintenance, etc.

Table 3 3 Level Categories of Operating Service

Operatingservice

IT Consulting

Business management consulting

Informatization consulting

Performance evaluation improvement

SI Application development

Product integration

IT investment guarantee service

IT project supervision

IT system review

IT training

Basic training

Certification Training

Professional training

IT support and maintenance

Hardware support and maintenance

Software support and maintenance

Network product support and maintenance

Source CCID Consulting, Dec., 2013

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Outsourcing service: collection of services that use IT systems to help users to

complete a process or task, supporting for their own goals. This is a user task-oriented

contracting type service. Its specific form includes business task-oriented process

outsourcing and IT outsourcing for IT tasks.

Table 4 3 Level Categories of Outsourcing Service

OutsourcingService

BPO

Call center outsourcing

Data processing outsourcing

Information management outsourcing

ITO IT system management outsourcing

Application system outsourcing

Source CCID Consulting, Dec., 2013

1.2 Market Size

Influenced by the European debt crisis, the recovery of the global economy has

slowed down. The unemployment rates of developed countries remain high, and the

individual demand market is sluggish. The regulation and control of macro regulation is

faced with a more complicated situation. At the same time, volatility of international

financial market and commodity prices is seen, and the pressure of global inflation is still

large. Under a background of increasing uncertainty, the growth rate for developed

countries has slowed or stagnates or may even be negative. The development engine of

the global economy as a whole begins to turn to Asia and other emerging economies.

With cloud computing, mobile Internet and other new technology’s wide application, a

new space of global software and service technology and market for development has

been created. The continuous emergence of new models, new forms, and new concepts

enriches and expands the connotation and denotation of software and services, bringing

new ideas and injecting new vitality into industry development and continues to promote

the revolutionary development of the whole industry, driving the rapid development of

global industry and market.

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In 2012, China's software and services market have achieved good performance.

The overall market size reached 412.444 billion yuan, with a year-on-year growth of

19.4%. In the next five years, it is projected that new technologies, such as cloud

computing, internet, mobile Internet, big data, and social network and strategic emerging

industries policies will create good conditions for the software and services market. It is

predicted that, by 2017, the market size will exceed 1 trillion yuan.

Figure 12 2008 2017 China’s Software and Service Market Size and Growth

Rate(By Sales Revenue)

Source CCID Consulting, Dec., 2013

1.3 Market Structure

1.3.1 Product Structure

In terms of product structure, the IT services market share increased year by year. In

2012, China’s IT service market size reached 252.071 billion yuan, a year-on-year

increase of 20.6%, accounting for 61.1% of the entire software and services market, a 0.6%

improvement since 2011. Due to influence of the global economy, the growth rate of

outsourcing business fell. This caused the overall market growth to be less than that of

2011, but still higher than that of the software product market in the same period. The

trend of service in the industrial structure is more remarkable.

2117.722434.48

2890.3 3453.524124.44

4928.185920.61 7155.47

8668.68 10542.7

14.9% 15.0%18.7% 19.5% 19.4% 19.5% 20.1% 20.9% 21.1% 21.6%

0%

10%

20%

30%

0

3000

6000

9000

12000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Market Size (100M Yuan)Growth Rate

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Figure 13 2012 2015 China’s Software and Service Market Product Structure

Source CCID Consulting, Dec., 2013

1.3.2 Parallel Structure

In 2012, in terms of parallel structure, telecom, government, manufacturing and

banks were the main software and services markets in China. The market share of these

four in total could account for more than half of the market. According to the forecast of

CCID Consulting, from 2013 to 2015, although the growth rates of different fields are very

different, due to relatively stable bases of different market size, parallel structure changes

are minor.

61.1% 61.5%61.9% 62.4%

38.9% 38.5%38.1% 37.6%

0%

20%

40%

60%

80%

100%

2012 2013 2014 2015

IT service Software product

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Figure 14 2012 2015 China’s Software and Service Market Application

Structure

Source CCID Consulting, Dec., 2013

3.00% 3.00% 3.10% 3.20%2.7% 2.8% 2.90% 2.90%

15.2% 15.6% 16.00% 16.50%

5.5% 5.5% 5.40% 5.30%1.10% 1.10% 1.10% 1.00%5.70% 5.80% 5.90% 6.00%

6.20% 6.00% 5.80% 5.60%0.80% 0.80% 0.80% 0.70%2.50% 2.50% 2.40% 2.40%1.50% 1.50% 1.40% 1.30%0.90% 0.80% 0.80% 0.80%1.80% 1.80% 1.80% 1.80%1.10% 1.10% 1.10% 1.00%1.60% 1.60% 1.50% 1.50%

12.30% 12.50% 12.60% 13.00%

1.20% 1.20% 1.10% 1.00%2.60% 2.60% 2.60% 2.50%

14.80% 15.00% 15.10% 15.30%

16.20% 15.90% 15.80% 15.50%

3.20% 3.00% 2.80% 2.70%

0%

20%

40%

60%

80%

100%

2012 2013 2014 2015Others ManufacturingGovernment SecurityPost BankingLogistics SanitationPetroleum and petrochemical Coal and other energyMedia CirculationScientific Research EducationTransportation ConstructionFamily TelecomElectric Power Insurance

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2. Competitive Landscape

Currently, the main leader of China’s IT services market are mainly overseas

enterprises and domestic large-scale IT service providers, such as IBM, Digital China,

Neusoft, Accenture, HP, etc. China National Software & Service Co., Ltd, AsiaInfo Linkage,

and BAOSIGHT are the potential benefiters, as their development will track along with the

development of the market and they are potential leaders of the future.

Among the main manufacturers in the software market in China, multinational

companies including Microsoft, IBM, SAP and ORACLE, have an overwhelming

advantage. Yonyou is the only domestic manufacturer in this camp. Neusoft, Inspur, and

Digital China are in the challenger position. China National Software & Service Co., Ltd,

an affiliate of CEC, is in a leading position in China for basic software, and its performance

is worth watching.

3. Growth Drivers

3.1 "Four modernizations synchronization" improves informatization level;

national policy continuous to be favorable

Hu Jintao, on behalf of the 17th central committee, delivered a report entitled

“Unswervingly in the path of socialism with Chinese characteristics, strive to build a

well-off society in an all-round way“ during the opening ceremony of the 18th CPC

National Congress. This report states: "adhere to the new industrialization, informatization,

urbanization and agricultural modernization with Chinese characteristics, to promote

convergence of informatization and industrialization, benign interaction of industrialization

and urbanization, and coordination of urbanization and agricultural modernization, and to

promote the synchronization development of industrialization, informatization,

urbanization and agricultural modernization." This is a strategic decision based on the

scientific analysis of importance, correlation and existing problems of "new four

modernizations". "Four modernizations synchronization" is a whole system.

Industrialization creates supply, urbanization creates demand, and agricultural

modernization provides support and guarantee for industrialization and urbanization.

Informatization pushes forward the other three, and Its position is particularly important. In

terms of national strategy, the policy of "four modernizations synchronization” puts

informatization at unprecedented importance.

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In 2012, on the basis of comprehensive research, professional survey and extensive

deliberation, MIIT compiled and issued "12th five year plan on software and information

technology services development", which identified ten key developing focuses and eight

major projects, to be put forward “by the end of the 12th five-year (2015), to realize a

business income of 4 trillion yuan, with the average annual growth of more than 24.5%,

software exports of $60 billion, more than 6 million staff, and more than 10 leading

enterprises whose annual revenue are over $10 billion”. Additionally, there should be

three to five enterprises whose sizes are of hundred billion yuan. Leaders of information

departments of provinces and cities are in the process of making plans accordingly and

carrying out implementation. Local related companies are following with full passion.

3.2 Convergence of industry and information technology continues to

deepen; “smart city” stimulates investment

A “smart city” is seen as the best combination of urbanization and informatization

has become one of the most popular key words in the capital market after the citing of

“four modernization synchronous” in the 18th CPC National Congress, and will lead to a

high-speed growth period. The smart city industry refers to the sum of industries, industry

body and industry environment that are generated from the construction and operation of

a smart city. Local governments have given a number of policy supports. It is expected

that during the “12th five year” period, the total investment in the smart cities will reach 900

billion yuan, and technologies for “internet of things”, cloud computing, and GIS for public

service, management and decision support will receive deeper and wider application.

Local governments are making plans related to smart city and smart city investment.

For example, Guangzhou is implementing the "861 project" with a 39.5 billion yuan

investment for boosting smart city agglomeration. Wuhan, as a demonstration of smart

cities approved by the MOST, in August 2012 reviewed and approved the “General

Planning and Design of Wuhan Smart City”. It is expected that the total investment of

smart city construction will be more than 81.7 billion yuan, 53 billion yuan from social

capital. In the next eight years, it will drive the industrial added value of 1.12 trillion yuan.

In the "twelfth five-year" period, Tianjin plans to invest 280 billion yuan to vigorously

promote the triple play and convergence of industry and information technology, speeding

up the development of new generation of information technology industry of internet of

things and cloud computing to construct a “Smart Tianjing”.

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Urbanization is the largest development potential in China for the next several

decades. Informatization represents advanced productivity, and smart cities, as the

combination of the two, drive investment and creates domestic demands whilst achieving

self development. It will surely create a huge space necessary for the scale enlargement

and transformation and upgrading of China’s software and information service industry.

3.3 Strategic emerging technology leads great technology revolution,

driving industry upgrading

At present, the emerging technologies of cloud computing, “internet of things”, mobile

Internet and big data are booming. Applications and promotion of these high and new

technology not only create products and services, but also create new business models,

leading China's software and information service industry to achieve leapfrog

development.

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V. Computer Market

1. Overview of China’s computer market in PRC.

1.1 Definition & Category

The computer market mainly includes desktop PCs, laptops and tablet computers.

Desktop PCs could be classified into two categories by users: enterprise users and

individual and family users. In this report, CCID Consulting divides desktop PCs into two

categories of brand-name computers and the compatible PCs as according to product

manufacturing characteristics. “Brand-name computers” refer to the PCs that have clear

origins, manufacturers, registered trademarks or trademarks, and whose mean monthly

shipments are more than 5,000 units. “Compatible PCs” refer to self-assembly PCs with

no registered trademarks or trademarks bought by dealers or end users from the retail

market; namely, DIY products. Local brand-name PCs developed in a certain area have

registered trademark or trademark signs, but whose mean monthly shipments are less

than 5,000 sets, are classified into the category of DIY products, because their assembly

method are similar than that of DIY products.

Laptops mainly include traditional laptops (notebook PCs) and ultrabooks, not

including ultra-mobile PCs, such as netbooks, UMPC and MIDs. CCID Consulting, based

on the difference in product purchase methods and usage, classified laptops into two

categories: home computers and business computers. Business computers are mainly

purchased by social organizations or groups by bidding or similar methods of group

purchase, and the computers are used in an industrial, corporate or office environment.

Home computers are mainly purchased individually by families and individuals, and are

used for family and personal life, entertainment, and study or work.

Tablets mainly refer to the small and portable personal computing equipment with a

screen size range of 7-10 inches, using color display as its major screen and input device,

with no keyboard or no need for an external keyboard. It carries an operating system, and

provides support for multiple wireless connections and application programs.

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1.2 Market Size

Figure 15 2010 2017 China’s Computer Market Size and Growth Rate (By sales revenue)

Source CCID Consulting, Dec., 2013

1.3 Market Structure

1.3.1 Product Structure

Figure 16 2012 2015 China’s Computer Market Product Structure (By Sales

Revenue

Source CCID Consulting, Dec., 2013

1867.5

2158.52249.8 2284.4 2406.7 2481.7 2546.22 2599.69

15.6%

4.2%

1.5%

5.4%3.1% 2.6% 2.1%

0%

10%

20%

0

1000

2000

3000

2010 2011 2012 2013 2014 2015 2016 2017

Market Size (100M Yuan)Growth Rate

32.50% 27.80%26.50% 24.50%

56.40% 58.10%57.40% 57.40%

11.10% 14.00% 16.10% 18.10%

0%

20%

40%

60%

80%

100%

2012 2013 2014 2015

Desktop PC Laptop Tablet

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1.3.2 Parallel Market

Table 5 2012 China’s Computer Parallel Sales Structure

Parallel Market 2012 Sales Volume

10,000 setShare

Bank 143.1 2.3%

Insurance 40.2 0.6%

Security 45.1 0.7%

Telecom 233.8 3.7%

Post 47 0.8%

Transportation 157.1 2.5%

Electric Power 58.2 0.9%

Petroleum & Petrochemical

65.2 1.0%

Coal and other energy sources

29.1 0.5%

Logistics 80.1 1.3%

Circulation 88.5 1.4%

Manufacturing 318.4 5.1%

Architecture 78.2 1.2%

Scientific Research 119.8 1.9%

Media 55.1 0.9%

Health 110.6 1.8%

Government 518.2 8.2%

Education 620.2 9.9%

Family 3016.1 47.9%

Others 475.6 7.6%

Total 6299.6 100.0%

Source CCID Consulting, Dec., 2013

2. Competitive Landscape

In China’s desktop PC market, Lenovo is at the forefront. Multinational vendors, such

as HP and DELL put more effort on China’s market and their competitiveness is higher

than other domestic vendors, respectively rank No. 2 and No. 3, providing pressure on

Lenovo. Founder and Tongfang are respectively ranking NO.4 and NO. 5 in the market in

the second camp. Haire, Great Wall, ACER and HASEE are the followers.

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Amongst competition in China’s laptops market, Lenovo, HP, DELL, ACER and Asus

are in the leading position. Toshiba and Sony are challengers. Samsung’s and HASEE’s

performance is worth watching. Followers in the market include Haire, Founder, Tongfang

and Great Wall Computer, an affiliate of CEC. Great Wall Computer is the R&D

manufacturer of Great Wall 0520CH, the first senior Chinese micro computer. It is in a

leading position domestically in the field of information security and independent

controlled products, such as independent R&D of desktops based on domestically

produced processors.

In China’s tablet market, Apple and Samsung are leaders. Lenovo and E Ren E Ben

are on the challenge position. Asus’s market performance is to be expected. Onda and

Huawei are in the position of followers.

3. Growth Drivers

3.1. Market driving force of ultrabooks gradually appears

More and more consumers are taking a rational approach in the pursuit of notebook

computer performance. They are willing to sacrifice an unnecessary part of performance

for portability of notebook computers. This not only makes lightweight portable devices

more popular, but is also driving laptops to become even more lightweight and portable.

Manufacturers are launching a range of ultra-light laptops to match the changing needs of

consumers. Following further price adjustment of ultrabook laptops, the driving force of

the ultrabook market growth has gradually appeared.

3.2 Influence of e-commerce channels are gradually enhanced

E-commerce became an effective channel for vendors for selling, because of the

formation of customers’ buying habit of purchasing digital products from e-stores, and the

booming of electric business platforms such as JD. Com, Newegg.cn, Tmail.com, GOME,

and Suning.com. The price war between vendors spreads from offline to online. Led by

Suning, online and offline prices have gradually converged. 3C stores have also

expanded to the e-commerce field. For example, GOME has formed a 2-brand layout of

GOME online mall and Coo8. At the same time, 3C stores also invest heavily in electricity

distribution warehousing link to narrow the gap between the e-commerce companies.

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3.3 Old and new technology alternating promotes the upgrading of

products

As for product structure, with the appearance of Windows and Ivy Bridge platforms,

many computer vendors begin to gradually increase the investment on this new

technology. Old products of netbooks and onboard video cards gradually faded from

people’s view. In April 2012, Intel released Ivy Bridge. The 22 nm craft and 3 - D tri-gate

transistors of the new products promotes the CPU core operation capacity and reduces

power consumption at the same time. As for graphics cards, notebooks equipped with

double graphics switching functions and core graphics began to expand in usage, and

were sought after by gamers and users who have high demands in image processing

capabilities, winning a place in the market.

As for commercial ultrabooks, big vendors introduced products with the technologies

of Intel® Small Business Advantage and vPro, levering the commercial ultrabook market.

With the introduction of Windows 8, innovation in the technology of notebooks greatly

improved the performance of these products. Major vendors introduced traditional

notebooks carrying touch experience and touchable notebooks for tablet users. The

speed of new product introduction is accelerating and the products entered into a period

of renewal.

3.4 Tablets and other intelligent terminals’ influence on PC industry is

gradually strengthened

Tablets using iOS and Andorid operating system will maintain high speed growth

momentum. In domestic markets, tablets accounts for nearly 20% of the entire computer

market, with increasing influence to the PC market. Change in users’ habits, such as

touch operation, posed a higher requirement on PC vendors.

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VI Electronic Product Trade

1. Overview of electronic product trade in PRC.

1.1 Definition & Category

According to CCID Consulting, the electronic product trade refers to the sale of

electronic information products, mainly relating to two parts: domestic sales and exports.

Table 6 CCID Consulting’s Definition on China’s Electronic Information Manufacturing Industry

China’s electronic information

manufacturing industry

Communication equipment manufacturing industry

Electronic computer manufacturing industry

Home audio and video equipment manufacturing industry

Electronic components manufacturing industry

Electronic devices manufacturing industry

Electronic mechanical and electrical industry

Radio and television equipment manufacturing industry

OthersSource CCID Consulting, Dec., 2013

1.2 Sales volume of electronic product in PRC.

(1) Sales Volume domestic + export

In 2012, China electronic information manufacturing industry products sales

experienced slight decline under the effect of various domestic and international factors,

including the spread of the European debt crisis, weakening of the U.S. economic

recovery, falling growth rates of emerging economies, rising domestic production costs,

and appreciating RMB. In 2012, China's electronic information industry sales value

reached 8.4619 trillion yuan, with an increase of 13.0%. The growth rate dropped by 4.1%

compared with that of 2011.

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Figure 17 2008 2012 China’s Electronic Information Manufacturing Size and

Growth (By Sales Output)

Source MIIT, CCID Consulting Arrange, Dec., 2013

(2) Industry Structure Looking at the industry share, computers, communications equipment, electronic

components, electronic devices and household audiovisual electronic devices are still the

main fields of electronic information manufacturing sales. With the improving industrial

structure, the industry share of the electronic component market, electronic device market

and electronic material market sees continual increase. In 2012, sales output of electronic

components, electronic devices, electronic measuring instruments and electronic special

equipment of China’s electronic information manufacturing industry (above designated

size) reached 39.4%, an increase of 0.7% over the previous year. The industry share of

the basic fields continues to increase.

51253.151305.0 63945.0

74909.2 84619.0

138110.0159363.0

185405.0215811.4

251636.1

12.8%

0.1%

24.6%

17.1%

13.0%

14.7% 15.4% 16.3% 16.4% 16.6%

0%

5%

10%

15%

20%

25%

30%

0

50000

100000

150000

200000

250000

300000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Size(100 M Yuan) Growth Rate

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Figure 18 2012 Electronic Information Manufacturing Industry Structure

Source MIIT, CCID Consulting Arrange, Dec., 2013

2. Export of Electronic Products in the PRC

2.1 Major Export Products

The export sales of a range of electronic and information products in 2012 saw a

year-on-year rise. The growth rates of exports sales of electronic components and

electronic materials are ranked at the top two.

Communicationequipment

manufacturingindustry, 16.1%

Radarmanufacturingindustry, 0.4%

Radio and televisionequipment

manufacturingindustry, 0.9%

Electroniccomputer

manufacturingindustry, 26.7%

Home audio and video equipment manufacturingindustry, 6.3%

Electronic devices manufacturingindustry, 16.5%

Electroniccomponents

manufacturingindustry, 17.4%

Electronicmeasuringinstruments

manufacturingindustry, 2.0%

Electronic special equipment

manufacturingindustry, 3.6%

Electronicelectrical and mechanical

manufacturingindustry, 7.6%

Others,2.5%

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Table 7 2012 China’s Main Electronic Information Product Export and Growth Situation

Product Name Exports ($100 M) Year-on-Year Growth

Change of Growth

Communicationequipment 1493 14.8% -11.8%

Radio and televisionequipment

119 15.9% 3.1%

Electronic devices 891 17.7% 6.7%

Computer 2382 3.8% -1.8% Electronic

components 906 2.8% -12.4%

Electronicinstruments and

equipment279 4.7% -6.9%

Home appliance 857 9.5% 1.6% Electronicmaterials 53 17.1% 9.8%

Total 6980.0 5.5% -6.3% Source General Administration of Customs, CCID Consulting Arrange, Dec., 2013

Figure 19 2012 China’s Main Electronic Information Product Export Structure

Source General Administration of Customs, CCID Consulting Arrange, Dec., 2013

Communicationequipment

21.4%

Radio and televisionequipment

1.7%

Electronicdevices12.8%

Computer34.0%

Electroniccomponents

13.0%Electronic

instruments and equipment

4.0%Home appliance

12.3%

Electronicmaterials

0.8%

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2.2 Export Features

1 General trade exports growth slows, and processing trade exports fell

General trade export of electronic information production reached $122.9 billion, with

the growth rate of 2.8%, which is 2.8% lower than the average growth rate. Processing

trade exports reached $496.5 billion, with 0.6% year-on-year decline. Bonded

warehousing transit goods, free aid and other donations between countries and

international organizations grew rapidly, with the growth rate at 121.4%, 63.0% and 157.4%

respectively.

2 Domestic enterprises export has faster growth, and foreign invested

enterprises exports relatively slower growth

Domestic enterprises export reached 155 billion US dollars, a year-on-year increase

of 25.2%. Among them, the growth of private enterprises export was outstanding, with

exports of $102.5 billion, a year-on-year increase of 47.8%. Foreign-funded enterprises’

overall exports was $543 billion, with an increase of 1.0%. Among them, exports by

wholly foreign-owned enterprises was $416.2 billion, with a decline of 3.0%. Sino-foreign

joint venture enterprises’ export reached $120.9 billion, an increase of 18.2%.

Chinese-foreign cooperative enterprises’ export was $5.9 billion, with a 4.5% year-on-year

decline.

3 Situations for major trading partners are different; exports to emerging

market grow faster

The growth rate of export to Hong Kong and South Korea was noticeable higher than

the average growth rate. Growth was relatively slower for exports to US, Japan and

Netherlands. Growth was relatively faster for the exports to emerging markets, such as

Thailand, Indonesia and Vietnam, with growth rates of 21.7%, 11.7% and 32.3%

respectively. Exports to the European market were relatively weak, such as Germany,

France and Italy, etc.. The exports sales are in decline, with rates of 15.5%, 21.7% and

37.9% respectively.

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4 Export growth of major provinces and cities is slow, and that of some

Midwest provinces and cities grow faster

The export sales of Guangdong, Jiangsu, Shanghai, Zhejiang and Tianjin ranked in

the Top 5, reaching $291.3, $141.7, $95.9, $24.2 and $21.1 billion respectively, with

year-on-year growth rates of 6.8%, -0.1%, -4.6%, -2.3% and 4.6% respectively. Other

than Guangdong, the export growth rates of the remaining four cities were lower than the

average level. The growth rates for Sichuan, Henan, Chongqing and Shanxi were higher,

being 50.8%, 184.8%, 155.7% and 236.7% respectively.

PRINCIPAL OFFICES OF THE ISSUER AND THE COMPANY

ISSUER COMPANY

China Electronics Corporation Holdings Company LimitedRoom 3403, 34th Floor, China Resources Building

26 Harbour RoadWanchai

Hong Kong

China Electronics CorporationNo. 27 Wanshou Road

Haidian DistrictBeijing 100846

PRC

PRINCIPAL PAYING AGENT, REGISTRAR,TRANSFER AGENT AND CMU LODGING AGENT

TRUSTEE

BNP Paribas Securities Services, Hong Kong Branch21/F PCCW Tower

Taikoo Place979 King’s Road

Quarry BayHong Kong

BNP Paribas Trust Services (Hong Kong)Limited

21/F PCCW TowerTaikoo Place

979 King’s RoadQuarry BayHong Kong

LEGAL ADVISORS TO THE ISSUER AND THE COMPANY

As to Hong Kong law As to PRC law As to Bermuda law

Freshfields Bruckhaus Deringer11th Floor

Two Exchange SquareHong Kong

Fangda Partners21/F, China World Tower

No. 1 Jianguomenwai Ave.Beijing 100004

PRC

Conyers Dill & Pearman2901 One Exchange Square

8 Connaught PlaceCentral

Hong Kong

LEGAL ADVISORS TO THE JOINT LEAD MANAGERS

As to Hong Kong law As to PRC law

Linklaters10th Floor

Alexandra HouseCharter RoadHong Kong

Jingtian & Gongcheng34/F, Tower 3, China Central Place

77 Jianguo RoadChaoyang District

Beijing 100025PRC

LEGAL ADVISOR TO THE TRUSTEE

As to Hong Kong law

Mayer Brown JSM16th – 19th FloorsPrince’s Building10 Chater Road

CentralHong Kong

INDEPENDENT AUDITOR OF THE ISSUER INDEPENDENT AUDITOR OF THE COMPANY

PricewaterhouseCoopers22/F Prince’s Building

CentralHong Kong

Wuyige Certified Public Accountants LLP15th Floor, Xueyuan International Building

1 Zhichun RoadHaidian DistrictBeijing 100083

PRC