[PDF] Stock code : Sole Sponsor, Sole Global Coordinator, Sole Bookrunner and Sole Lead Manager

1 (Incorporated in the Cayman Islands with limited liability) Stock code : 6133 Sole Sponsor, Sole Global Coordinator, S...

Project smart_E_v3.ai 1 11/6/2015 16:42:04

Vital Mobile Holdings Limited 維太移動控股有限公司

Vital Mobile Holdings Limited 維太移動控股有限公司 (Incorporated in the Cayman Islands with limited liability)

Stock code : 6133

GLOBAL OFFERING

Vital Mobile obile Holdings Limited 移動控股有限公司維太移動控股有限公司

CMY

Sole Sponsor, Sole Global Glob Coordinator, Sole Bookrunner and Sole Lead Manager

IMPORTANT

IMPORTANT: If you are in any doubt about any of the contents of this prospectus, you should obtain independent professional advice.

Vital Mobile Holdings Limited 維太移動控股有限公司 (Incorporated in the Cayman Islands with limited liability)

GLOBAL OFFERING Number of Offer Shares under the Global Offering

Number of Hong Kong Public Offer Shares Number of International Placing Shares

: :

Offer Price

Nominal value Stock code

: :

212,500,000 Shares comprising 204,000,000 New Shares and 8,500,000 Sale Shares (subject to the Over-allotment Option) 21,250,000 Shares (subject to re-allocation) 191,250,000 Shares comprising 182,750,000 New Shares and 8,500,000 Sale Shares (subject to re-allocation and the Over-allotment Option) Not more than HK$3.06 per Offer Share and expected to be not less than HK$2.22 per Offer Share, plus brokerage of 1%, SFC transaction levy of 0.0027% and Stock Exchange trading fee of 0.005% (payable in full on application in Hong Kong dollars and subject to refund) HK$0.10 per Share 6133

Sole Sponsor, Sole Global Coordinator, Sole Bookrunner and Sole Lead Manager

Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsibility for the contents of this prospectus, 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 prospectus. A copy of this prospectus, having attached thereto the documents specified in the paragraph headed “Documents delivered to the Registrar of Companies” in the section headed “Documents delivered to the Registrar of Companies and available for inspection” in Appendix V to this prospectus, has been registered by the Registrar of Companies in Hong Kong as required by Section 342C of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong). The Securities and Futures Commission and the Registrar of Companies in Hong Kong take no responsibility for the contents of this prospectus or any other document referred to above. The final Offer Price is expected to be fixed by agreement between the Sole Global Coordinator (on behalf of the Underwriters) and our Company (for ourselves and on behalf of the Selling Shareholder) on the Price Determination Date, which is expected to be on or around Friday, 19 June 2015 and in any event, not later than Tuesday, 23 June 2015. The Offer Price will not be more than HK$3.06 and is currently expected to be not less than HK$2.22. If, for any reason, the final Offer Price is not agreed by Tuesday, 23 June 2015 between the Sole Global Coordinator (on behalf of the Underwriters) and our Company (for ourselves and on behalf of the Selling Shareholder), the Global Offering will not proceed and will lapse. The Offer Shares have not been and will not be registered under the U.S. Securities Act and may not be offered, sold pledged or transferred, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act and in accordance with any applicable U.S. state securities laws. The Offer Shares are being offered and sold only outside the United States in offshore transactions in reliance on Regulation S. The obligations of the Hong Kong Underwriters under the Hong Kong Underwriting Agreement are subject to termination by the Sole Global Coordinator (on behalf of the Hong Kong Underwriters) if certain grounds for termination arise prior to 8:00 a.m. on the Listing Date. Such grounds are set out in the subsection headed “Underwriting — Grounds for termination” in this prospectus.

16 June 2015

EXPECTED TIMETABLE (1) Latest time to complete electronic applications under the HK eIPO White Form service through the designated website www.hkeipo.hk (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11:30 a.m. on Friday, 19 June 2015 Application lists of the Hong Kong Public Offering open (3) . . . . . . . . . 11:45 a.m. on Friday, 19 June 2015 Latest time for lodging WHITE and YELLOWApplication Forms and giving electronic application instructions to HKSCC(4) . . . . . . . . . . . 12:00 noon on Friday, 19 June 2015 Latest time to complete payment of HK eIPO White Form applications by effecting internet banking transfer(s) or PPS payment transfer(s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12:00 noon on Friday, 19 June 2015 Application lists of the Hong Kong Public Offering close (3) . . . . . . . . . 12:00 noon on Friday, 19 June 2015 Expected Price Determination Date (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Friday, 19 June 2015 Announcement of the Offer Price, the levels of indication of interest in the International Placing, the level of applications in respect of the Hong Kong Public Offering and basis of allocation under the Hong Kong Public Offering to be published on the website of the Stock Exchange at www.hkexnews.hk (6) and our Company’s website at www.vital-mobile.com (7) and in the South China Morning Post (in English) and the Hong Kong Economic Times (in Chinese) on or before . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thursday, 25 June 2015 Results of allocations in the Hong Kong Public Offering (with successful applicants’ identification document numbers, where appropriate) to be available through a variety of channels as described in the subsection headed “How to apply for the Hong Kong Public Offer Shares — Publication of Results” in this prospectus from . . . . . . . . Thursday, 25 June 2015 Results of allocations in the Hong Kong Public Offering to be available at www.tricor.com.hk/ipo/result with a “search by ID” function on . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thursday, 25 June 2015 Despatch of share certificates in respect of wholly or partially successful applications pursuant to the Hong Kong Public Offering on or before (8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thursday, 25 June 2015 Despatch of HK eIPO White Form e-Auto Refund payment instructions/refund cheques in respect of wholly successful (in the event that the final Offer Price is less than initial price per Hong Kong Public Offer Share payable on application) and wholly or partially unsuccessful applications pursuant to the Hong Kong Public Offering on or before (9) . . . . . . . . . . . . . . . . . . . . . . . Thursday, 25 June 2015 Dealings in the Shares on the Stock Exchange to commence on . . . . . . . . . . . . . . . . . Friday, 26 June 2015

–i–

EXPECTED TIMETABLE (1) Notes: (1)

All times and dates refer to Hong Kong local times and dates except as otherwise stated. Details of the structure of the Global Offering, including the conditions of the Hong Kong Public Offering, are set out in the section headed “Structure and conditions of the Global Offering” of this prospectus. If there is any change in this expected timetable, an announcement will be published in the South China Morning Post (in English) and the Hong Kong Economic Times (in Chinese).

(2)

You will not be permitted to submit your application to the HK eIPO White Form Service Provider through the designated website at www.hkeipo.hk after 11:30 a.m. on the last day for submitting applications. If you have already submitted your application and obtained a payment reference number from the designated website prior to 11:30 a.m., you will be permitted to continue the application process (by completing payment of application monies) until 12:00 noon on the last day for submitting applications, when the application lists close.

(3)

If there is a “black” rainstorm warning or a tropical cyclone warning signal number eight or above in force in Hong Kong at any time between 9:00 a.m. and 12:00 noon on Friday, 19 June 2015, the application lists will not open and close on that day. Please refer to the subsection headed “Effect of bad weather on the opening of the application lists” in the section headed “How to apply for the Hong Kong Public Offer Shares” of this prospectus. If the application lists do not open and close on Friday, 19 June 2015, the dates mentioned in this section headed “Expected timetable” may be affected. A press announcement will be made by us in such event.

(4)

Applicants who apply by giving electronic application instructions to HKSCC should refer to the subsection headed “How to apply for the Hong Kong Public Offer Shares — Applying by giving electronic application instructions to HKSCC via CCASS” in this prospectus.

(5)

The Price Determination Date, being the date on which the final Offer Price is to be determined, is expected to be on or around Friday, 19 June 2015 and in any event, not later than Tuesday, 23 June 2015. If, for any reason, the final Offer Price is not agreed by Tuesday, 23 June 2015 between the Sole Global Coordinator (on behalf of the Underwriters) and us (for ourselves and on behalf of the Selling Shareholder), the Global Offering will not proceed and will lapse.

(6)

The announcement will be available for viewing on the “Main Board — Allotment of results” page on the website of the Stock Exchange at www.hkexnews.hk.

(7)

None of the websites or any of the information contained on those websites form part of this prospectus.

(8)

Applicants who apply for 1,000,000 Hong Kong Public Offer Shares or more on WHITE Application Form or through HK eIPO White Form and have provided all information required may collect share certificates (if applicable) and refund cheques (if applicable) in person from our Hong Kong Branch Share Registrar, Tricor Investor Services Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong from 9:00 a.m. to 1:00 p.m. on Thursday, 25 June 2015 or any other date as notified by us in the newspapers as the date of despatch of share certificates/e-Auto Refund payment instructions/refund cheques. Applicants being individuals who opt for personal collection must not authorize any other person to make their collection on their behalf. Applicants being corporations for personal collection must attend by sending their authorised representatives each bearing a letter of authorization from his corporation stamped with the corporation’s chop. Both individuals and authorised representatives (if applicable) must produce, at the time of collection, evidence of identity acceptable to our Hong Kong Branch Share Registrar, Tricor Investor Services Limited. Applicants who have applied on YELLOW Application Forms may not collect their share certificates, which will be deposited into CCASS for credit of their designated CCASS Participants’ stock accounts or CCASS Investor Participant stock accounts, as appropriate. Uncollected share certificates and refund cheques will be despatched by ordinary post to the addresses specified in the relevant applications at the applicants’ own risk. Further information is set out in the section headed “How to apply for the Hong Kong Public Offer Shares” of this prospectus.

(9)

e-Auto Refund payment instructions/refund cheques will be issued in respect of wholly or partially unsuccessful application and also in respect of successful applications in the event that the final Offer Price is less than the initial price per Hong Kong Public Offer Share payable on application. Part of your Hong Kong identity card number/passport number or, if you are joint applicants, part of the Hong Kong identity card number/passport number of the first-named applicant, provided by you may be printed on your refund cheque, if any. Such data would also be transferred to a third party to facilitate your refund. Your banker may require verification of your Hong Kong identity card number/passport number before encashment of your refund cheque. Inaccurate completion of your Hong Kong identity card number/ passport number may lead to delay in encashment of your refund cheque or may invalidate your refund cheque. Further information is set out in the section headed “How to apply for the Hong Kong Public Offer Shares” of this prospectus.

Share certificates are expected to be issued on Thursday, 25 June 2015 but will only become valid certificates of title provided that the Global Offering has become unconditional in all respect and neither of the Underwriting Agreements has been terminated in accordance with its terms. Investors who trade Shares on the basis of publicly available allocation details prior to the receipt of share certificates or prior to the share certificates becoming valid certificates of title do so entirely at their own risk.

– ii –

CONTENTS

IMPORTANT NOTICE TO INVESTORS This prospectus is issued by our Company solely in connection with the Hong Kong Public Offering and the Hong Kong Public Offer Shares and does not constitute an offer to sell or a solicitation of an offer to buy any security other than the Hong Kong Public Offer Shares. This prospectus may not be used for the purpose of, and does not constitute, an offer to sell or a solicitation of an offer to buy in any other jurisdiction or in any other circ*mstances. No action has been taken to permit a public offering of the Offer Shares or the distribution of this prospectus in any jurisdiction other than Hong Kong. The distribution of this prospectus and the offering of the Offer Shares in other jurisdictions are subject to restrictions and may not be made except as permitted under the applicable securities laws of such jurisdictions pursuant to registration with or authorisation by the relevant securities regulatory authorities or an exemption therefrom. You should rely only on the information contained in this prospectus and the Application Forms to make your investment decision. We have not authorised anyone to provide you with information that is different from what is contained in this prospectus. Any information or representation not included in this prospectus must not be relied on by you as having been authorised by us, the Sole Global Coordinator, the Sole Bookrunner, the Sole Lead Manager, the Sole Sponsor, any of the Underwriters, any of our or their respective directors or any other persons or parties involved in the Global Offering. Please note that the totals set forth in the tables in this prospectus may differ from the sum of individual items in such tables due to rounding. Page Expected timetable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

iii

Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Forward-looking statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Risk factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Information about this prospectus and the Global Offering . . . . . . . . . . . . . . . . . . . . . . . . .

Waivers from strict compliance with the requirements under the Listing Rules . . . . . . . . . . .

Directors and parties involved in the Global Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Corporate information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

– iii –

CONTENTS Page Industry overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

History, development and reorganisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

105

Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

119

Connected transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

164

Relationship with Controlling Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

166

Substantial shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

187

Cornerstone investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

188

Directors, senior management and employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

192

Share capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

200

Financial information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

204

Future plans and use of proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

250

Underwriting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

252

Structure and conditions of the Global Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

262

How to apply for the Hong Kong Public Offer Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

271

Appendix I

—

Accountants’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

I-1

Appendix II

—

Unaudited pro forma financial information . . . . . . . . . . . . . . . . . . . . . .

II-1

Appendix III —

Summary of the constitution of the Company and the Companies Law . . .

III-1

Appendix IV —

Statutory and general information . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

IV-1

Appendix V

Documents delivered to the Registrar of Companies and available for inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

V-1

—

– iv –

SUMMARY

This summary aims at giving you an overview of the information contained in this prospectus. Because this is a summary, it does not contain all the information that may be important to you. You should read this prospectus in its entirety, including our financial statements and the accompanying notes, before you decide to invest in the Offer Shares. There are risks associated with any investment. Some of the particular risks in investing in the Offer Shares are set out in the section headed “Risk Factors” in this prospectus. You should read that section carefully before you decide to invest in the Offer Shares. Various expressions used in this summary are defined in the sections headed “Definitions” and “Glossary” of this prospectus. BUSINESS OVERVIEW We are one of the leading ODM smartphone suppliers in the PRC targeting overseas markets. According to the Frost & Sullivan Report, we ranked the fourth amongst the PRC smartphone exporter on ODM basis in terms of export shipment volume Note which accounted for approximately 2.5% of the total China smartphone export volume in 2014. We are primarily engaged in developing, designing, production management and sale of mobile handsets to markets covering more than 25 countries, excluding China. Our products are sold by our customers under their own or authorised brand names. Our customers include various top local branded mobile handset suppliers, telecommunication operators and trading companies in South Asia, South East Asia, Europe, North America, South America, Africa and other parts of Asia. The table below sets out the breakdown of our revenue by geographical locations of our customers for the periods indicated:

2012

South Asia Southeast Asia Hong Kong Other parts of Asia Europe South America North America Africa Total

Revenue RMB’000 441,716 117,585 16,659 59,083 1,340 7,188 4,628 15,380

Percentage of total revenue % 66.6 17.7 2.5 8.9 0.2 1.1 0.7 2.3

663,579

100.0

For the year ended 31 December 2013 Percentage of Revenue total revenue RMB’000 % 356,055 26.0 357,607 26.1 827 0.1 230,013 16.8 234,640 17.1 124,787 9.1 64,968 4.8 – – 1,368,897

100.0

2014 Revenue RMB’000 183,008 93,727 500,331 174,961 259,877 203,920 424,465 75,894

Percentage of total revenue % 9.5 4.9 26.1 9.1 13.6 10.6 22.2 4.0

1,916,183

100.0

Notes: (1) South Asia includes India and Bangladesh. (2) Southeast Asia includes Philippines, Thailand, Vietnam, Malaysia and Indonesia. (3) Sales to Hong Kong mainly comprised of sales to certain mobile trading companies incorporated in Hong Kong who sell branded mobile handsets to various countries including but not limited to Philippines, Vietnam, Thailand, Malaysia, India, Indonesia, Korea and Pakistan. (4) Other parts of Asia includes Taiwan, Yemen, Pakistan, Dubai, Israel, Nepal, Sri Lanka and Turkey. (5) Europe includes France, Romania, Spain, Russia, Portugal and Italy. (6) South America includes Brazil, Chile and Venezuela. (7) North America includes USA, Mexico and Honduras. (8) Africa includes South Africa, Algeria and Morocco. (9) During the Track Record Period, approximately 2.2%, 9.8% and 7.8% of the total revenue is attributed to those of Sanctioned Countries and Russia (where certain Sanctioned Persons are located).

Note: According to Frost & Sullivan, global mobile handset shipment reached 1,890.0 million units in 2014. China has been responsible for a large proportion of the global handset production. The export volume of mobile handsets in China represented approximately 69.3% of the global mobile handset production in 2014. While the market is highly fragmented (i.e. the largest ODM smartphone exporter accounted for 4.3% of the total smartphone export volume in 2014), the Group’s export volume accounted for 2.5% of the total PRC smartphone export volume in 2014. Approximately 81.9% of the smartphone export volume from China in 2014 was attributable to smartphone brand owners and OEM suppliers. The remaining 18.1% was attributable to exports by smartphone suppliers on ODM basis. The Chinese market of smartphone export on ODM basis remains large and representative.

–1–

SUMMARY In 2011, our revenue was mainly derived from the sale of feature phones to South Asia. We launched smartphones in late 2011 and started to change our focus from feature phones to smartphones which were expected to attract higher profit margin than feature phones. We strived to increase our sales of smartphone in South Asia (i.e. India) and Southeast Asia in 2012 and subsequently diversified to Europe and South America in 2013. For the year ended 31 December 2014, we have further increased our sales to North America, South America and Africa as a result of increase in demand of 3G smartphones as well as the launch of our 4G smartphones and we strategically diversified our market into these regions to expand our customer base. The aggregate sales amount attributable to Asia (including South Asia, Southeast Asia, Hong Kong and other parts of Asia) remained stable for the years ended 31 December 2013 and 2014 which amounted to approximately RMB944.5 million and RMB952.0 million respectively. However, there were significant changes in sales by geographical segments within Asia. Sales to Hong Kong increased significantly from approximately RMB0.8 million for the year ended 31 December 2013 to approximately RMB500.3 million for the year ended 31 December 2014, whereas sales to South Asia and Southeast Asia have decreased significantly by approximately 48.6% and 73.8% for the year ended 31 December 2014 as compared to the same period in 2013. This was primarily due to our increase in sales to mobile handset trading companies in Hong Kong which in turn sell such products to various countries, primarily Southeast Asia (including, among others, Thailand and Vietnam). Our Group has adopted temporary measures of diverting our sales to customers in Hong Kong from Southeast Asia due to certain specific considerations in 2014. Such decision was in response to the anti-China protests and riots in Vietnam in May 2014 and to various political events in Thailand during 2014. We reduced direct sales to these countries to minimize our risk of potential delay or default in payments. Instead, we increased sales to mobile handset trading companies in Hong Kong which, based on our previous industry experience, are reliable and with good reputation in having extensive sales network in Southeast Asian countries. Such decision was intended to maintain our market share and positioning in Southeast Asia while minimizing our credit risk exposure. The decrease in sales made to South Asia was primarily due to feature phones being more common than smartphones in countries like India and Bangladesh, while we have changed our product offerings to 3G and 4G smartphones but the sales of our 4G smartphones in South Asia has yet to reach a significant volume. We, however, expect our revenue contribution from South Asia will increase in 2015 following the further establishment of 4G mobile network infrastructure in more cities in India by the second half of 2014. Following our successful expansion of customer base and commencement of business relationship in 2014 with a new customer in India being a leading local telecommunication operator, we expect our sales volume in India will increase in 2015 and South Asia will remain to be our key markets. Other than the above, the increase in revenue generated from Hong Kong was also resulted from selling of certain slow inventory products to a well-established mobile handset supplier in Hong Kong who supplies its own branded mobile handsets and trades mobile handsets of various third party brands to primarily Southeast Asia countries, east Europe and Dubai area, in which this Hong Kong customer has a well penetrated distribution network. For further details regarding the above, please refer to the subsection headed “Business — Geographical analysis” in this prospectus. OUR BUSINESS MODEL Design of mobile handsets mainly involves hardware, software, mechanical and circuitry design for producing a mobile handset to maximize the compatibility of various hardware, software and components of a mobile handset with specified functions as well as outlook design of the products. We outsource our processing and assembly processes to our EMS providers while providing raw material, production process design, technical support and onsite supervising personnel to monitor the production schedule and product quality. We

–2–

SUMMARY provide one-stop services from design to delivery to our customers for affordable smartphone with advanced functionality, quality and aesthetic. Our business model is illustrated in the following diagram: R&D and design, marketing and sales orders

Customization and development

Production management

Export arrangements and delivery

Logistic companies, warehouse awaiting export

R&D and design Project specification /inception for tailored design and development

Product Roadmap

Sourcing/Production process design and management/ Production and quality supervision

Referrals

Exhibitions

Existing customers

Sending over designs and prototype for customer’s confirmation

After-sale technical consultation

End consumers After-sale maintenance service

Arrangement for export custom clearance Customer

Third party EMS providers Feedbacks

Arrangement for product certification by third party testing labs

After-sale services12

• •

Logistic company to deliver to transit port

Branded mobile handset supplier or telecommunication operators or trading companies in overseas countries

Mass processing and assembly Packaging

Quotations & Orders Customer to arrange import custom clearance

Customer confirm design

Conducted by us Upon receipt of deposit

Conducted by third party

For further information, please refer to the subsection headed “Business — Our Business Model” in this prospectus. OUR PRODUCTS During the Track Record Period, our primary products include smartphones and feature phones. A smartphone is a mobile device which combines the function of a mobile handset and a conventional personal computer with functionality beyond making phone calls and sending text messages. A smartphone runs on an operating system which provides configuration options for the user to install and use various third-party applications (APPs). A smartphone is usually more advanced in computing capability and connectivity than basic feature phones. A feature phone typically provides voice calling and text messaging functionality, in addition to basic multimedia and internet capabilities, and other services offered by the user’s wireless service provider. As compared with smartphones, feature phones have limited web access, and a rather limited ability to run third-party applications. Below is the our revenue by product type breakdown during the Track Record Period:

Smartphones Feature phones Smartphone component packs Mobile device components Total

2012 Percentage of total Sales Revenue revenue Volume RMB’000 % ‘000 units 311,735 46.9 634 351,489 53.0 2,576

Average Selling Price RMB 492 136

For the year ended 31 December 2013 2014 Percentage Average Percentage of total Sales Selling of total Sales Revenue revenue Volume Price Revenue revenue Volume RMB’000 % ‘000 units RMB RMB’000 % ‘000 units 1,242,092 90.7 2,185 568 1,717,971 89.7 3,362 4,780 0.3 46 104 – – –

Average Selling Price RMB 511 –

–

121,528

8.9

322

377

196,277

10.2

408

481

355

0.1

178

497

0.1

249

1,935

0.1

126

663,579

100.0

3,212

207 1,368,897

100.0

2,555

536 1,916,183

100.0

3,896

492

Notes: (1) Since 2013, at the request by our customers, we sold certain component packs of smartphones (semi knock-down (SKDs) for mobile handsets which include hardware components such as display modules, camera modules, audio, sensors, etc.) that are assembled and packaged by our customer(s) after being imported to their country(ies), as they consider the importation of finished electronic devices attracts higher taxes than those of components in the relevant country(ies). (2) Mobile device components refer to spare mobile components and parts purchased by our customers for providing after-sale maintenance services to their end users.

–3–

SUMMARY We design and offer mobile handsets with a wide range of technical specifications to meet our customers’ needs in different parts of the world. We offer mobile handsets adopting various mobile communication standards including 2G, 3G and 4G in GSM, CDMA, EVDO, WCDMA and LTE, etc. with different operating frequency applicable to different countries and regions. Below is the breakdown of our sales by mobile communication standards during the Track Record Period:

2012 Percentage of total Sales Revenue revenue Volume RMB’000 % ‘000 units

Average selling price RMB

For the year ended 31 December 2013 2014 Percentage Average Percentage of total Sales selling of total Sales price Revenue revenue Volume Revenue revenue Volume RMB’000 % ‘000 units RMB RMB’000 % ‘000 units

Average selling price RMB

2G 3G 4G Others

351,489 311,735 – 355

53.0 46.9 – 0.1

2,576 634 – 2

136 4,780 492 1,363,620 – – 178 497

0.3 99.6 – 0.1

46 2,507 – 2

104 – 544 1,152,263 – 761,985 249 1,935

– 60.1 39.8 0.1

– 2,658 1,112 126

– 434 685 15

Total

663,579

100.0

3,212

207 1,368,897

100.0

2,555

536 1,916,183

100.0

3,896

492

Note: Sales of 3G products include both smartphones sales and smartphone components packs sales.

From 2011 to 2012, we were in the transition period shifting our product focus from feature phones to smartphones (which were expected to attract higher profit margin than feature phones). In 2013 and 2014, with (i) the improvement in the 3G infrastructure in emerging markets and (ii) our successful diversification into markets with higher demand for smartphones such as France, North America and South America, we successfully shifted our product mix consisting of over 99.0% of sales in smartphones and smartphone component packs. Our revenue was substantially increased by a CAGR of approximately 69.9% from 2012 to 2014 as a result of the increase in sales volume of smartphones. OUR COMPETITIVE STRENGTHS We set out our competitive strengths as follows: • We are one of the leading smartphone ODM suppliers targeting overseas markets with strategic focus on the emerging countries • We have established long-term relationship with worldwide customers • We focus on high value adding ODM services with a robust business model • We have strong R&D and adaptive design capabilities to cater for technology development trends and customers’ needs • We have an experienced, stable and dedicated management team OUR CUSTOMERS We have cultivated long-term relationship up to 7 years with our worldwide customers. We have designed for and supplied mobile handsets to various top local branded mobile handset suppliers and telecommunication operators (directly or through their authorised agents) as well as trading companies who sell the mobile handsets under their own or authorised brands such as Karbonn in India, Archos in France and Cherry in Philippines. As at 31 December 2014, three of our top ten customers have been our customers for over four years. The revenue attributed to our largest customer amounted to approximately RMB215.0 million, RMB257.4 million and RMB385.9 million for each of the three years ended 31 December 2014 which accounted for approximately 32.4%, 18.8% and 20.1% of our total revenue for the corresponding period respectively. The revenue attributed to our five largest customers amounted to approximately RMB457.2 million, RMB835.1 million and RMB1,171.4 million for each of the three years ended 31 December 2014 which accounted for approximately 68.9%, 61.0% and 61.1% of our total revenue for the corresponding periods respectively.

–4–

SUMMARY OUR SUPPLIERS We purchased mobile chipsets from global leading chipset providers such as Qualcomm and Mediatek during the Track Record Period and we are often selected by major mobile chipset suppliers such as Qualcomm as their alpha partners for their newly developed mobile chipsets. Alpha partners refer to cooperative partners of the chipset maker to design, develop and manufacture mobile handsets using newly developed chipsets to be launched for the purpose of formulating the reference designs of mobile handsets. Such reference designs are technical blueprints of a system to be published by the chipset manufacturer and intended for mobile handset suppliers to make reference to in adopting the new chipset. Our other suppliers are communication and electronic technology companies in China, located mainly in Beijing, Shanghai, Zhejiang Province and Guangdong Province. During the Track Record Period, the purchase from our largest supplier amounted to approximately RMB45.6 million, RMB269.7 million and RMB237.9 million for each of the three years ended 31 December 2014, representing approximately 8.2%, 21.3% and 14.1% of the total purchase of the Company for the corresponding periods. The purchase from our five largest suppliers amounted to approximately RMB158.9 million, RMB492.1 million and RMB908.1 million for each of the three years ended 31 December 2014, representing approximately 28.5%, 38.8% and 53.9% of the total purchase of each relevant periods respectively. OUTSOURCING We strategically adopt an asset light business model. We source raw materials and deliver to our EMS providers who are responsible for product processing and assembly. We provide our EMS providers with production instruction and software design packs to be readily and directly applied on the SMT lines, and utilise their equipment and human resources to assemble our mobile handsets according to our design and technical specifications. We also assign onsite quality control managers and technical supervisors for production management, technical support and quality check. We engage reliable EMS providers to ensure consistency in quality of our products. Benywave Technology maintained long-term relationship with one of the EMS providers who is the second largest mobile handset EMS manufacturers worldwide 2013 (in terms of market share based on shipment according to Frost & Sullivan) for more than five years, and we continue to maintain such relationship after the Split. During the Track Record Period, we entered into outsourcing agreements with six EMS providers, each for a term of two years. In 2014 prior to the Split, we procured services from four of these EMS providers and approximately 60.6% of the subcontracting costs was attributable to the above major EMS providers. After the Split, we continued to engage three out of these four EMS providers. We entered into outsourcing agreements with each of these three EMS providers for a term of two years at similar terms adopted prior to the Split. For the three months ended 31 March 2015, approximately 58.7% of the subcontracting costs were attributable to the above mentioned major EMS providers. OUR STRATEGIES We aim to execute the following strategies to further enhance our position as a leading ODM smartphone supplier targeting overseas markets: • Strengthen our R&D capabilities • Broaden our customer base and further diversify in global markets which include, for example, South America, Africa, North America and South Asia • Establish representative offices and strategic partnership in our key overseas market • Expand our product features and offering, including for example, wearable devices with mobile telecommunication function, “smart home” devices and health care management products BACKGROUND OF THE SPLIT Our principal subsidiary Benywave Wireless is a company split from Benywave Technology which engaged in both the PRC Business (which has been primarily engaged in developing, designing, production management and selling of mobile telecommunications devices and its related components and accessories under its self-owned brands, targeting the PRC market) and the Overseas Business (which has been primarily

–5–

SUMMARY engaged in developing, designing, production management and selling of mobile telecommunication devices on ODM basis and its related components and accessories, targeting overseas markets) during the Pre-split Period. Since 2010, our management considered that the PRC Business and the Overseas Business were different in business model, target customers, pricing and settlement and has started to delineate and separate their operations and management. In July 2014, Benywave Technology was split into two legal entities with the already existing Benywave Technology assuming the PRC Business whereas the newly established entity under the Split, namely Benywave Wireless, assuming the Overseas Business and being the principal subsidiary of the Group for the Listing. For further details, please refer to the subsection headed “Relationship with Controlling Shareholders — Delineation of Business” in this prospectus. Considering the differences in, among others, business model, target customers, pricing and settlement between the Excluded Group and the Group, the Directors are of the view that there is a proper delineation between the business of our Group and that of the Excluded Group, as a result of which, we believe there is no competition between the business of the Excluded Group and the business of our Group in all material respects. As such, we are of the view that the Controlling Shareholders and the Directors (including the independent non-executive Directors) do not have an interest in a business apart from the business of our Group which competes or is likely to compete, directly or indirectly, with the business of our Group in all material respects. For more details, please refer to the subsection headed “Relationship with Controlling Shareholders — Delineation of Business” in this prospectus. SUMMARY FINANCIAL INFORMATION The following tables set forth our summary consolidated income statement and consolidated statements of financial position during the Track Record Period prepared in accordance with IFRS, amendments and interpretations issued by the HKICPA, which are extracted from our consolidated financial statements included in the Accountants’ Report set out in Appendix I to this prospectus. Since the Overseas Business was carried out by Benywave Technology prior to the Split, to the extent the assets, liabilities, income and expenses that are directly attributable to the Overseas Business, such items are included in the financial statements of our Group throughout the Pre-Split Period up to 31 August 2014. To the extent the assets, liabilities, income and expenses are common to the Overseas Business and the PRC Business, these items are allocated between the Overseas Business and the PRC Business on a reasonable basis according to the nature of the items during the Pre-Split Period up to 31 August 2014. Income and expenses (other than certain R&D expenses, administrative expenses and income tax expenses), assets and liabilities have been identified by the management of our Group using a specific identification method. Certain R&D expenses and administrative expenses have been allocated by budgeted revenue and headcount respectively between the Overseas Business and PRC Business. Income tax expenses were calculated based on the tax rate of the Overseas Business as if it was a separate tax payer prior to the Split. The amounts allocated to the Overseas Business are included in the financial statements of our Group throughout the Pre-Split Period up to 31 August 2014. Also, prior to the Split, bank and cash generated by and the retained earnings of the Overseas Business were maintained in the same bank account of those of the PRC Business of Benywave Technology. After the completion of the Split, our Group opened its own bank accounts and as at 31 December 2014, our Group had cash and cash equivalents of RMB10.4 million in its own bank accounts and its major operating subsidiary Benywave Wireless has share capital of RMB100,000,000. During the Pre-Split Period, the funds provided for or withdrawn from Benywave Technology were presented as movements in the special reserve earnings of the Overseas Business while there are no cash and cash equivalents balance for Overseas Business. Accordingly, there were no cash received/paid directly by our Group in connection with its operating, investing and financing activities during the Pre-Split Period. For details, please refer to the subsection headed “Financial Information — Basis of Preparation” in this prospectus.

–6–

SUMMARY Summary information on consolidated statements of profit or loss and other comprehensive income The following table summarises the consolidated statement of profit or loss and other comprehensive income data from the Financial Statements during the Track Record Period, details of which are set out in Appendix I to this prospectus:

2012

Year Ended 31 December 2013 Percentage of Total Revenue Amount RMB’000 %

Amount RMB’000

Percentage of Total Revenue %

663,579 79,499

100.0 12.0

1,368,897 148,221

35,759

5.4

82,873

Revenue Gross profit Profit and total comprehensive income for the year attributable to equity holders of the Company

2014 Amount RMB’000

Percentage of Total Revenue %

100.0 10.8

1,916,183 260,234

100.0 13.6

6.1

156,225

8.2

Gross profit and gross profit margin The following tables set out our Group’s gross profit and gross profit margin for by product types during the Track Record Period: For the year ended 31 December 2012 2013 2014 Gross profit Gross profit Gross profit Gross profit margin Gross profit margin Gross profit margin RMB’000 % RMB’000 % RMB’000 % Smartphones Feature phones Smartphone component packs Mobile device components Total

38,070 41,321 – 108 79,499

12.2 11.8 – 30.4 12.0

128,566 377 19,159 119 148,221

10.4 7.9 15.8 23.9 10.8

236,366 – 23,728 140 260,234

13.8 – 12.1 7.2 13.6

The following table sets forth, for the periods indicated, a breakdown of our cost of sales by nature:

2012 Percentage of Amount Cost of Sale RMB’000 %

For the year ended 31 December 2013 Percentage of Amount Cost of Sale RMB’000 %

2014 Percentage of Amount Cost of Sale RMB’000 %

Raw materials Subcontracting costs Write down of inventories Warranty Others

537,960 42,247 2,675 (4,796) 5,994

92.1 7.2 0.5 (0.8) 1.0

1,142,684 50,292 2,960 3,874 20,866

93.6 4.1 0.3 0.3 1.7

1,505,073 92,625 2,472 10,854 44,925

90.9 5.6 0.1 0.7 2.7

Total

584,080

100.0

1,220,676

100.0

1,655,949

100.0

–7–

SUMMARY Consolidated Statements of Cash Flows For the year ended 31 December 2012 2013 2014 RMB’000 RMB’000 RMB’000 Operating cash flows before movements in working capital Net cash generated from (used in) operating activities Net cash generated from (used in) investing activities Cash generated from financing activity Net cash generated by (used in) Overseas Business/ net increase (decrease) in cash and cash equivalents Net (return to) contribution from Benywave Technology Effect of pledged bank deposits

33,692 114,506 1,893 –

89,451 175,193 (155) –

185,715 (170,100) (7,866) 4,116

116,399 (116,399) –

175,038 (175,038) –

(173,850) 184,825 (535)

Cash and cash equivalents at the end of the year

–

10,440

Selected Consolidated Balance Sheets Items For the years ended 31 December 2012 2013 2014 RMB’000 RMB’000 RMB’000 309 340 208 113,732 114,571 540,221 (65,462) (158,497) (242,965) 48,270 (43,926) 297,256 48,579 (43,586) 297,464

Non-current assets Current assets Current liabilities Net current assets (liabilities) Net assets (liabilities)

Negative equity and net liabilities for the year ended 31 December 2013 Benywave Wireless (which assumed the Overseas Business of Benywave Technology upon the Split) generated profit in the amount of RMB35.8 million, RMB82.9 million and RMB156.2 million for each of the three years ended 31 December 2014 respectively. Such profit historically belonged to Benywave Technology as a single legal entity, and are regarded as non-distributable profit of our Group and treated as special reserve. Further, the cash generated by the Overseas Business and the PRC Business are maintained in the same bank account of Benywave Technology as one single entity before the Split. All cash generated by Benywave Wireless (while in fact was in the bank accounts of Benywave Technology historically) is treated and deemed to be transferred from Benywave Wireless to Benywave Technology. Corresponding to such cash outflow, the same amount is debited to the special reserve of Benywave Technology for accounting treatment purpose. At the end of each reporting period, reserves mainly comprised of special reserve which represents the net return to or contribution from equity holders of the Company, which is the sum of the net profit in respect of Overseas Business retained in Benywave Technology and the net funding generated from Overseas Business received by Benywave Technology or net funding paid by Benywave Technology to Overseas Business. The positive balance of reserves at the end of the reporting period indicates the accumulated profit retained in Benywave Technology as well as the accumulated funding provided by Benywave Technology exceeds the cash generated from Overseas Business during the year retained by Benywave Technology; while the negative balance indicates the cash generated from Overseas Business during the year retained by Benywave Technology exceeds accumulated profit retained in Benywave Technology as well as the accumulated funding provided by Benywave Technology. As of 31 December 2013, we recorded net current liabilities of approximately RMB43.9 million and negative equity of approximately RMB43.6 million, indicating the cash generated from the Overseas Business during the year retained by Benywave Technology exceeds accumulated profit retained in Benywave Technology as well as the accumulated funding provided by Benywave Technology. The net liabilities and net current liabilities were not resulted from loss making or cash outflow arisen from our operations. As the net current liability and negative equity is as a result of an accounting treatment for the purpose of the Split, our

–8–

SUMMARY Directors confirm the Overseas Business and our Group has sufficient working capital prior to and after the completion of the Split, and all the current account balances (including trade payables to a related party) are settled prior to the Listing. We operate independently from Benywave Technology and we are able to fund our operations with our own cash generated from our operations as well as the assets assumed from Benywave Technology upon completion of the Split. Our Directors confirm and the Sole Sponsor concurs, based on the cash generated from our operations and the estimated net proceeds from the Listing, we will have sufficient working capital for at least 12 months following the date of this prospectus. Net cash outflow from operating activities for the year ended 31 December 2014 We recorded cash outflow from operating activities of RMB170.1 million for the year ended 31 December 2014. Our net cash outflow from operating activities were primarily due to the i) increase in trade and other receivables of approximately RMB354.9 million as (a) we granted credit terms to an increasing number of more customers to expand our customer base and to increase our competitiveness and (b) we granted approval to some of our customers an extended credit period on a case-by-case basis at the request of our customers to cater for their needs at the specific time after taking into account of various factors including among others, the length of relationship and historical credit record, (ii) increase in inventories of RMB56.6 million as more raw materials were kept to meet the increasing sales volume and (iii) decrease in deposits received from customers of RMB39.1 million. As over 90% of the relevant trade receivables were collected as at the Latest Practicable Date, our Directors confirm and the Sole Sponsor concurs, based on the cash generated from our operations, our quick cash conversion cycle during the Track Record Period and the estimated net proceeds from the Listing, we will have sufficient working capital for at least 12 months following the date of this prospectus. WE MAY BE SUBJECT TO HIGHER ENTERPRISE INCOME TAX WHICH MAY HAVE SIGNIFICANT IMPACT ON OUR GROUP’S NET PROFIT MARGIN Our principal subsidiary Benywave Wireless is a company split from Benywave Technology which engaged in both PRC Business and Overseas Business during the Pre-split Period. The standard statutory enterprise income tax rate under the PRC laws is 25%, whereas the relevant applicable tax rate for Benywave Technology is 15% as it has been recognised as a high technology enterprise. Given the PRC Business is less profitable than the Overseas Business and Benywave Technology recorded tax loss during the Pre-Split Period, with reference to its financial statements and its tax filings made in accordance with the relevant PRC tax laws, Benywave Technology were hence not required to pay taxes during the Pre-split Period. Notwithstanding the foregoing, given Benywave Wireless which assumes the Overseas Business recorded net profit before tax at approximately RMB42.1 million, RMB97.5 million and RMB193.7 million for each of the three years ended 31 December 2014 (based on its audited accounts prepared based on IFRS), an enterprise income tax rate of 15% has been provided for in the financial statements of Benywave Wireless during the Pre-split Period and 25% has been provided for in the financial statements of Benywave Wireless after the Split, and resulted in profit after tax in the amount of RMB35.8 million, RMB82.9 million and RMB156.2 million respectively. After the Split, Benywave Wireless only engages in Overseas Business and becomes the principal subsidiary of our Group and it will be subject to standard statutory enterprise income tax at a rate of 25% unless certain exemptions for high technology enterprises are granted which would lower the applicable tax rate to 15%. As a newly set up entity, Benywave Wireless can only apply to become a “New and High Technology Enterprise” after one year of operations and hence before obtaining such qualification, its applicable statutory enterprise income tax rate would be 25%. For the investors’ reference, assuming Benywave Wireless was subject to statutory enterprise income tax rate of 25% for each of the three years ended 31 December 2014, its net profit after tax would amount to approximately RMB31.6 million, RMB73.1 million and RMB140.5 million during the relevant periods respectively. BUSINESS ACTIVITIES IN SANCTIONED COUNTRIES We have had product sales in connection with certain Sanctioned Countries, namely, Yemen, Venezuela and Russia (where certain Sanctioned Persons are located), and we will continue to carry on such business activities in connection with these Sanctioned Countries. The amount of total revenue generated from sales to these Sanctioned Countries for each of the three years ended 31 December 2014 represented approximately 2.2%, 9.8% and 7.8% of our total revenue for the same periods, respectively. As advised by DLA Piper, our legal advisers as to International Sanctions laws, our Group’s business activities in Yemen, Venezuela and

–9–

SUMMARY Russia (where certain Sanctioned Persons are located) during the Track Record Period are not sanctioned activities under the International Sanctions laws and do not implicate the applicability of International Sanctions laws on our Group, or any person or entity, including our Group’s investors, the Stock Exchange, the HKSCC and the HKSCC Nominees. Please refer to the subsection headed “Business — Business activities in Sanctioned Countries” in this prospectus for details of our operations and business activities in those countries, our various undertakings to the Stock Exchange and relevant internal control procedures. We confirm that, save as disclosed above, our Group did not have, during the Track Record Period and up to the Latest Practicable Date, any business activities in connection with any countries, governments, entities or individuals sanctioned by the U.S., the EU, the United Nations or Australia, including, without limitation, any government, individual or entity that is the subject of any OFAC administered sanctions. RECENT DEVELOPMENTS AND NO MATERIAL ADVERSE CHANGE Although the legal process of the Split was completed on 22 July 2014, the Overseas Business and the PRC Business have been separated and delineated from all material respects since 2010, hence the Split was in substance a legal process to reflect the practical state of facts and provide a separate legal entity for each of the two businesses already delineated and has no material impact on our Group’s operations and financial position. Our Directors expect our Group to maintain the same cost structure as the cost of sales and selling and distribution expenses of our Group have been recorded separately from the PRC Business during the Pre-split Period up to 31 August 2014 and will continue to be recorded separately after the Split. The total sharing of costs between our Group and the PRC Business accounted for approximately 14.9%, 10.6% and 9.7% of the total operating costs, excluding raw materials for our Group for each of the two years ended 31 December 2013 and for the eight months ended 31 August 2014 respectively, such sharing of costs have ceased by 31 August 2014 (shortly after obtaining the Customs Declaration Certificate (海關報關單位註冊登記證書) by Benywave Wireless) except for the connected transactions as set out in the section headed “Connected Transactions” of this prospectus. Taking into account the proportion of R&D costs and administrative expenses actually incurred after the Split up to 31 December 2014 to our Group’s total revenue during the relevant period, our Directors expect that there would be no material change in the proportion of the R&D costs and the administrative expenses to our total revenue as a result of the Split. Save as the expected change in the applicable enterprise income tax rate as mentioned in the subsection headed “We may be subject to higher enterprise income tax which may have significant impact on our Group’s net profit margin” above, given there has been no material change of the cost structure of our Group after the Split, our Directors expect the operating profit margin of our Group will be maintained at a similar level as those during the Pre-split Period up to 31 August 2014. Based on our unaudited management accounts, our sales for the four months ended 30 April 2015 remained stable whereas the gross profit and gross profit margin increased as compared to the corresponding period in 2014. This is a net-off effect of the decreases in sales, gross profit and gross profit margin for the two months ended 28 February 2015 as compared to the previous corresponding period, and the gradual pick up performance in subsequent months up to April 2015. The decreases for the two months ended 28 February 2015 were primarily because of (i) the gradual decrease in average selling price of 3G products with the progression of its product life cycle, increase in competition in the 3G product market and upcoming popularity of 4G mobile handsets. In particular, certain 3G smartphone products we sold for the two months ended 28 February 2015 were repeated orders of long aged designs which were sold at low average selling prices; (ii) decrease in sales of our smartphone component packs as the relevant customer which we supplied smartphone component packs during the Track Record Period was acquired by a multinational technology company and as our management foresee potential changes in its mobile business segment on its development plan we have intentionally decreased sales to such customer to avoid any uncertainties arising from its internal restructuring; and (iii) there had been large orders of products delivered in December 2014 rather than in January 2015 which reduced the products delivered and revenue recognized in January 2015 as compared to the previous corresponding period. The overall increases in gross profit and gross profit margin for the four months ended 30 April 2015 as compared to the previously corresponding period was mainly due to the increase in sales of 4G products and the launch of our new 2015 4G smartphone models, which achieved higher gross profit margin than 3G products.

– 10 –

SUMMARY Up to 30 April 2015, there was no significant increase in costs of sales or other costs subsequent to 31 August 2014 as compared to the Pre-Split Period. Based on our unaudited management accounts, our sales, gross profit and gross profit margin for the eight months ended 30 April 2015 increased as compared to the corresponding period in 2014. These increases were mainly due to our increase in total sales volume and increase in sales of 4G products which has higher average selling price than 3G products. According to Frost & Sullivan, although the standard of 5G has been released, it is still at a conceptual stage and its commercialisation is expected to take certain years taking into account that it took around eight years to upgrade from 3G to 4G. Global subscription for LTE has reached 497.0 million in 2014 and is expected to grow at a CAGR of approximately 31.8% to 1,976.4 million in 2019. Save as the above, our Directors confirm that there has been no material change in the industry in which we operate or to our business, our business model, cost and revenue structures or financial condition, operational or trading position since 31 December 2014 that would materially affect the information shown in our financial statements as set forth in Appendix I to this prospectus. LISTING EXPENSES We incurred listing expenses of approximately RMB12.5 million for the year ended 31 December 2014 in connection with the Global Offering, which were charged to our profit and loss accounts as expenses. Listing expenses (excluding commission and incentive fees (if any) to be payable to the Underwriters, the SFC transaction levy and the Stock Exchange trading fee) paid or payable by our Company are estimated to be approximately RMB14.7 million for the year ending 31 December 2015 in connection with the Global Offering, of which approximately RMB11.2 million will be charged to our profit and loss accounts as expenses and approximately RMB3.5 million will be capitalised. Our Directors do not expect such expenses to have a material adverse impact on our financial results for the year ending 31 December 2015. FUTURE PLAN AND USE OF PROCEEDS The aggregate net proceeds from the Global Offering (after deducting underwriting fees and estimated expenses in connection with the Global Offering and assuming an Offer Price of HK$2.64 per Share, being the mid-point of the indicative range of the Offer Price of HK$2.22 to HK$3.06 per Share, and assuming the Over-allotment Option is not exercised) will be approximately HK$500.3 million. Our Directors intend to apply the net proceeds from the Global Offering as follows:

HK$ in approximate

Amounts RMB equivalent in approximate

Percentage of total amount of the net proceeds

Use of proceeds

227.6 million

180.5 million

45.5%

•

135.1 million

107.1 million

27.0%

•

62.5 million 25.0 million

49.6 million 19.8 million

12.5% 5.0%

• •

50.0 million

39.7 million

10.0%

•

purchasing raw materials to expand our raw material sourcing capacity setting up overseas representative offices and / or establishing partnership with top local branded mobile handset suppliers or telecommunication operators in our key markets expanding our research and development capabilities setting up a new quality testing laboratory, employing additional quality testing personnel and purchasing additional quality testing equipments general working capital

For details on how we plan to apply the net proceeds from the Global Offering, please refer to the section headed “Future Plans and Use of Proceeds” of this prospectus.

– 11 –

SUMMARY RISK FACTORS There are certain risks relating to investment in the Offer Shares, among which the relatively material risks include (i) we operate in the mobile handset industry characterized by rapid technological changes and any delay by us in rolling out new and competitive mobile handsets will reduce our revenue; (ii) we may be unable to respond to rapidly changing new trends and customer preferences for mobile handsets in a cost and time efficient manner and our competitiveness will drop; (iii) we rely on third party EMS providers to process and assemble all of our products to meet our orders and we have less control over the time, process and costs of the production process and (iv) we may be subject to higher enterprise income tax which will reduce our profitability. For details and discussions of the risks, please refer to the section headed “Risk Factors” of this prospectus. DIVIDEND POLICY We have not declared any dividends during the Track Record Period. The recommendation of the payment of dividend is subject to the absolute discretion of our Board, and, after listing, any declaration of final dividend for the year will be subject to the approval of our Shareholders. Our Directors may recommend a payment of dividend in the future after taking into account our operations, earnings, financial condition, cash requirements and availability, capital expenditure and future development requirements and other factors as it may deem relevant at such time. Any declaration and payment as well as the amount of the dividend will be subject to our constitutional documents and the Companies Law, including the approval of our Shareholders. For details of our dividend policy, please refer to the subsection headed “Financial Information — Dividend Policy” in this prospectus. GLOBAL OFFERING STATISTICS The Global Offering consists of (i) 21,250,000 Offer Shares for subscription by the public in Hong Kong (assuming that the Over-allotment Option is not exercised) and (ii) 191,250,000 Offer Shares comprising 182,750,000 New Shares and 8,500,000 Sale Shares (subject to re-allocation and the Over-allotment Option under the International Placing). If the Over-allotment Option is exercised, our Company will be issuing up to 235,875,000 New Shares.

Market capitalisation of our Shares (2) Unaudited pro forma adjusted net tangible assets per Share (3)

Based on the maximum Offer Price of HK$3.06 per Offer Share

Based on the minimum Offer Price of HK$2.22 per Offer Share

HK$2,601.0 million HK$1.13

HK$1,887.0 million HK$0.93

Notes: 1. All statistics in this table are based on the assumption that the Over-allotment Option is not exercised and no options are granted under the Share Option Scheme. 2. The market capitalisation is calculated based on 850,000,000 Shares expected to be in issue immediately following completion of the Global Offering and the Capitalisation Issue and assuming that the Over-allotment Option is not exercised. 3. The unaudited pro forma adjusted net tangible assets per Share is calculated after making the adjustments referred to in Appendix II headed “Unaudited pro forma financial information” to this prospectus and on the basis of a total of 850,000,000 Shares in issue immediately following completion of the Global Offering and the Capitalisation Issue and assuming that the Over-allotment Option is not exercised.

– 12 –

DEFINITIONS

In this prospectus, the following expressions shall have the meanings set out below unless the context requires otherwise. “Application Form(s)”

WHITE application form(s), YELLOW application form(s) and GREEN application form(s), or where the context so requires, any of such forms as used in the Hong Kong Public Offering

“Articles” or “Articles of Association”

the articles of association of our Company, conditionally adopted on 9 June 2015 and as amended from time to time, a summary of which is contained in Appendix III to this prospectus

“associate(s)”

has the meaning ascribed to it under the Listing Rules

“Benywave Technology”

北京百納威爾科技有限公司 (Beijing Benywave Technology Co., Ltd.*), a wholly foreign-owned enterprise established in the PRC on 7 July 2004 and a wholly-owned subsidiary of Vital Profit

“Benywave Technology Group”

Benywave Technology and its subsidiaries or any of them

“Benywave Wireless”

北京百納威爾無線通信設備有限公司 (Beijing Benywave Wireless Communication Co., Ltd.*), a wholly foreign-owned enterprise established in the PRC on 22 July 2014 and the operating subsidiary of our Group

“Board” or “our Board”

the board of Directors

“Business Day”

any day (other than a Saturday, Sunday or public holiday) on which banks in Hong Kong are generally open for normal banking business

“BVI”

British Virgin Islands

“Capitalisation Issue”

the issue of 645,999,000 new Shares to be made upon the capitalisation of certain sums standing to the credit of the share premium account of our Company upon completion of the Global Offering as referred to in the section headed “Further information about our Group — Resolutions of our Shareholders” in Appendix IV to this prospectus

“Cayman Legal Advisers”

Conyers Dill & Pearman, our legal advisers as to the laws of the Cayman Islands

“CCASS”

the Central Clearing and Settlement System established and operated by HKSCC

“CCASS Clearing Participant”

a person admitted to participate in CCASS as a direct clearing participant or general clearing participant

“CCASS Custodian Participant”

a person admitted to participate in CCASS as a custodian participant

“CCASS Investor Participant”

a person admitted to participate in CCASS as an investor participant

– 13 –

DEFINITIONS “CCASS Participant”

a CCASS Clearing Participant, a CCASS Custodian Participant or a CCASS Investor Participant

“China” or “PRC”

People’s Republic of China excluding, for the purpose of this prospectus, Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan

“close associate(s)”

has the meaning ascribed to it under the Listing Rules

“Companies Law”

the Companies Law, Cap. 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands as amended, supplemented or otherwise modified from time to time

“Companies Ordinance”

the Companies Ordinance (Chapter 622 of the Laws of Hong Kong) as amended, supplemented or otherwise modified from time to time

“Companies (Winding Up and Miscellaneous Provisions) Ordinance”

the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong) as amended, supplemented or otherwise modified from time to time

“Company”, “the Company” or “our Company”

Vital Mobile Holdings Limited (維太移動控股有限公司), an exempted company with limited liability incorporated in the Cayman Islands on 12 August 2014

“connected person(s)”

has the meaning ascribed to it under the Listing Rules

“Controlling Shareholder(s)”

has the meaning ascribed to it under the Listing Rules, and in the context of our Company, means Winmate, Ms. Rong, Mr. Ni and Rong Personal Trust Nominee

“core connected person(s)”

has the meaning ascribed to it under the Listing Rules

“Core Trust”

The Core Trust Company Limited, a trust company incorporated under the laws of Hong Kong and an Independent Third Party

“CSRC”

China Securities Regulatory Commission of the PRC (中國證券監督管理委員會)

“Deed of Indemnity”

the deed of indemnity dated 9 June 2015 given by the Founders and Winmate in favour of our Company

“Deed of Non-Competition”

the deed of non-competition and undertaking dated 9 June 2015 entered into by the Founders, Winmate, Benywave Technology and Tianyu in favour of our Company (for ourselves and for the benefit of our subsidiaries)

“Director(s)”

the director(s) of our Company

“EIT Law”

the PRC Enterprise Income Tax Law (中華人民共和國企業所得稅法), enacted by the NPC in March 2007 and effective on 1 January 2008, and its implementation rules

– 14 –

DEFINITIONS “Eligible Employee(s)”

employee(s) (whether full time or part time), including any executive Director, its subsidiaries or any Invested Entity

“emerging markets”

for the purpose of this prospectus only, the markets of India, Bangladesh, Sri Lanka, Philippines, Thailand, Vietnam, Malaysia, Indonesia, Yemen, Pakistan, Dubai, Israel, Nepal, Brazil, Romania, Spain, Russia, Portugal, Turkey, Chile, Venezuela, Mexico, Honduras, South Africa, Morocco and other fast-growing developing countries

“EU”

the European Union

“Excluded Group”

Benywave Technology Group and Tianyu Group collectively

“Favor Gain”

Favor Gain Enterprises Limited, a company incorporated on 2 April 2008 under the laws of the BVI with limited liability, which is owned as to 96.9% by WPPE and 3.1% by WPX and holding 7% interests in the Company

“FIE”

foreign investment enterprise established in the PRC under the laws of the PRC

“Founders”

Ms. Rong and Mr. Ni

“Frost & Sullivan”

Frost & Sullivan (Beijing) Inc., Shanghai Branch Co.

“Frost & Sullivan Report”

the industry report prepared by Frost & Sullivan issued in June 2015 on the mobile phone industry

“GEM”

the Growth Enterprise Market of the Stock Exchange

“Global Offering”

the Hong Kong Public Offering and the International Placing

“GREEN Application Form(s)”

the application form(s) to be completed by the HK eIPO White Form Service Provider

“Group” or “our Group” or “we” or “us”

our Company and its subsidiaries or any of them, or where the context so requires, including the Overseas Business carried on by Benywave Technology prior to the Split, as if such Overseas Business was operated by our Group throughout the relevant period

“Haitong International Capital” or “Sole Sponsor”

Haitong International Capital Limited, a licensed corporation to conduct Type 6 (advising on corporate finance) of the regulated activity for the purpose of SFO, being the sole sponsor to the Global Offering

– 15 –

DEFINITIONS “Haitong International Securities” or Sole Global Coordinator, or “Sole Bookrunner” or “Sole Lead Manager” or “Stabilising Manager”

Haitong International Securities Company Limited, a licensed corporation to carry on Type 1 (dealing in securities), Type 3 (leveraged foreign exchange trading) and Type 4 (advising on securities) regulated activities for the purpose of SFO, being the sole global coordinator, sole lead manager, sole bookrunner and the stabilising manager of the Global Offering

“HK eIPO White Form”

the application of Hong Kong Public Offer Shares for issue in the applicant’s own name by submitting applications online through the designated website at www.hkeipo.hk

“HK eIPO White Form Service Provider”

the HK eIPO White Form service provider designated by the Company, as specified on the designated website at www.hkeipo.hk

“HK$”

Hong Kong dollars, the lawful currency of Hong Kong

“HKICPA”

The Hong Kong Institute of Certified Public Accountants

“HKSCC”

Hong Kong Securities Clearing Company Limited

“HKSCC Nominees”

HKSCC Nominees Limited

“Hong Kong” or “HK”

the Hong Kong Special Administrative Region of the PRC

“Hong Kong Branch Share Registrar”

Tricor Investor Services Limited, our Hong Kong branch share registrar

“Hong Kong Legal Advisers”

Messrs. Li, Wong, Lam & W. I. Cheung, our legal advisers as to Hong Kong laws

“Hong Kong Public Offer Shares”

21,250,000 new Shares (subject to re-allocation) being initially offered by our Company for subscription in the Hong Kong Public Offering, as described under the section headed “Structure and conditions of the Global Offering” of this prospectus

“Hong Kong Public Offering”

the issue and offer of the Hong Kong Public Offer Shares for subscription in Hong Kong at the Offer Price (plus brokerage, Stock Exchange trading fee and SFC transaction levy) on and subject to the terms and conditions described in this prospectus and the Application Forms

“Hong Kong Underwriters”

the Underwriters of the Hong Kong Public Offering, whose names are set out under the subsection headed “Underwriting — Hong Kong Underwriters” in this prospectus

– 16 –

DEFINITIONS “Hong Kong Underwriting Agreement”

the underwriting agreement dated 15 June 2015 and entered into by, among others, our Company, the Sole Global Coordinator and the Hong Kong Underwriters relating to the Hong Kong Public Offering

“IFRS”

International Financial Reporting Standards, as issued by the International Accounting Standards Board

“Independent Third Party(ies)”

individual(s) or company(ies) which is/are independent from and not connected with (within the meaning of the Listing Rules) any directors, chief executives and substantial shareholders of our Company or any of its subsidiaries and any of their respective associates

“International Placing”

the placing of the International Placing Shares at the final Offer Price to professional, institutional and other investors, as described under the section headed “Structure and conditions of the Global Offering” of this prospectus

“International Placing Shares”

the 182,750,000 New Shares and 8,500,000 Sale Shares initially offered by our Company and the Selling Shareholder for subscription and purchase under the International Placing, subject to re-allocation and the exercise of the Over-allotment Option, as described under the section headed “Structure and conditions of the Global Offering” of this prospectus

“International Sanctions”

sanctions-related laws and regulations issued by the U.S., the EU, the United Nations or Australia

“International Underwriters”

the Underwriters of the International Placing, who are expected to enter into the International Underwriting Agreement

“International Underwriting Agreement”

the underwriting agreement expected to be entered into on or around the Price Determination Date by, among others, our Company, the Selling Shareholder, the Sole Global Coordinator and the International Underwriters relating to the International Placing

“Invested Entity”

any entity in which the Group holds any equity interest

“ISO”

International Standard Organization

“Latest Practicable Date”

10 June 2015, being the latest practicable date prior to the printing of this prospectus for the purpose of ascertaining certain information contained in this prospectus

“Listing”

the listing of our Shares on the Stock Exchange

“Listing Committee”

the listing sub-committee of the Stock Exchange

“Listing Date”

the date on which dealings in our Shares first commence on the Main Board, which is expected to be on or about 26 June 2015

– 17 –

DEFINITIONS “Listing Rules”

the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (as amended, supplemented or otherwise modified from time to time)

“M&A Rules”

the PRC Rules on Merger and Acquisition of Domestic Enterprises by Foreign Investors 《 ( 關於外國投資者併購境內企業的規定》) issued by MOFCOM, along with SASAC, SAT, SAIC, CSRC and SAFE on 8 August 2006 and amended on 22 June 2009

“Main Board”

the stock market (excluding the option market) operated by the Stock Exchange, independent from and operated in parallel with the GEM

“Memorandum” or “Memorandum of Association”

the memorandum of association of our Company adopted on 12 August 2014, as amended from time to time, a summary of which is contained in Appendix III to this prospectus

“MOFCOM”

the PRC Ministry of Commerce (中華人民共和國商務部), or its predecessor, the Ministry of Foreign Trade and Economic Cooperation, as appropriate to the context

“Mr. Ni”

Mr. Ni Gang (倪剛), husband of Ms. Rong and one of our Controlling Shareholders

“Ms. Rong”

Ms. Rong Xiuli (榮秀麗), our chairperson and executive Director, and one of our Controlling Shareholders

“NDRC”

the PRC National Development and Reform Commission (中華人民共和國國家發展和改革委員會)

“New Share(s)”

204,000,000 new Shares initially being offered by us for subscription under the Global Offering and up to 235,875,000 new Shares to be offered for subscription in the event the Over-allotment Option is exercised, each a “New Share”

“NPC”

The PRC National People’s Congress (中華人民共和國人民代表大會)

“OFAC”

the United States Department of Treasury’s Office of Foreign Assets Control

“Offer Price”

the offer price per Offer Share (exclusive of brokerage of 1%, Stock Exchange trading fee of 0.005% and SFC transaction levy of 0.0027%) at which the Offer Shares are to be subscribed or purchased pursuant to the Global Offering

“Offer Shares”

the Hong Kong Public Offer Shares and the International Placing Shares

– 18 –

DEFINITIONS “Option(s)”

option(s) to subscribe for Shares granted pursuant to the Share Option Scheme

“Option Grantee(s)”

participant(s) who accepted the offer of the grant of any Option in accordance with the terms of the Share Option Scheme, or (where the context so permits) a person entitled to any such Option in consequence of the death of the original Option Grantee

“Option Offer”

the offer of the grant of an Option made in accordance with the Share Option Scheme

“Option Offer Date”

the date on which the Board makes an Option Offer to any Participant

“Over-allotment Option”

the option expected to be granted by our Company under the International Underwriting Agreement to the International Underwriters, exercisable by the Sole Global Coordinator (on behalf of the International Underwriters), pursuant to which our Company may be required to allot and issue up to an aggregate of 31,875,000 additional new Shares at the Offer Price representing 15% of the initial number of Offer Shares offered under the Global Offering, at the Offer Price to, among other things, cover the over-allocations (if any) in the International Placing, as described in the section headed “Structure and conditions of the Global Offering” of this prospectus

“Overseas Business”

the business of developing, designing, production management and selling of mobile telecommunication devices on ODM basis and its related components and accessories, targeting global markets excluding the PRC

“overseas markets”

for the purpose of this prospectus, global market excluding China

“Participant(s)”

participants under the Share Option Scheme and as defined in the subsection headed “Statutory and General Information – Share Option Scheme” in Appendix IV to this prospectus and, for the purposes of the Share Option Scheme, the Option(s) may be granted to any company wholly-owned by one or more persons belonging to any of the above classes of participants

“PBOC”

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

“PRC Business”

the business of developing, designing, production management and selling of mobile telecommunications equipment and consumer electronics under self-owned brands and its related components and accessories, targeting the PRC market

“PRC Company Law”

Company Law of the PRC* 《 ( 中華人民共和國公司法》) (as amended, supplemented or otherwise modified from time to time)

“PRC GAAP”

generally accepted accounting principles in the PRC

“PRC Government” or “Chinese Government” or “State”

the central government of the PRC, including all governmental subdivisions (including provincial, municipal and other regional or local government entities) and instrumentalities thereof, or where the context require, any of them

– 19 –

DEFINITIONS “PRC Legal Advisers”

Commerce & Finance Law Offices, our legal advisers as to the PRC laws

“PRC Premises”

Zone A, 4th Floor, No. 55, Jiachuang Second Road, Zhongguancun Science Park, OPTO-Merchatronics Industrial Park, Tongzhou District, Beijing, China, an office of our Group, which is leased from a connected person

“Pre-split Period”

period from 1 January 2012 (commencement of the Track Record Period) to 21 July 2014 (the date immediately prior to the Split)

“Price Determination Date”

the date, expected to be on or around 19 June 2015 but in any event not later than 23 June 2015, on which the Offer Price will be determined for the purposes of the Global Offering

“Regulation S”

Regulation S under the US Securities Act

“Renminbi” or “RMB”

Renminbi, the lawful currency of the PRC

“Reorganisation”

the pre-listing reorganisation of our Group, further details of which are described under the subsection headed “History, development and reorganisation — Reorganisation” in this prospectus

“Rong Family Members”

the spouse, children, parents and siblings of Ms. Rong

“Rong Personal Trust”

the revocable discretionary trust set up by Ms. Rong for herself, Rong Family Members and other designated persons as beneficiaries

“Rong Personal Trust Nominee”

the company, which is a wholly-owned subsidiary of the Rong Personal Trust Trustee, which will hold the Shares under Rong Personal Trust, and which as at the date of establishment of Rong Personal Trust, shall be Selected Elites Limited, a company incorporated under the laws of BVI and a wholly-owned subsidiary of Core Trust

“Rong Personal Trust Trustee”

the professional trustee appointed by Ms. Rong to manage Rong Personal Trust which as at the date of establishment of Rong Personal Trust, shall be Core Trust

“RSU(s)”

the restricted share unit(s) to be granted under the RSU Scheme

“RSU Scheme”

the restricted share unit scheme conditionally adopted by our Company, further details of which are described in the section headed “RSU Scheme” in Appendix IV to this prospectus

“RSU Scheme Nominee”

the company, which is a wholly-owned subsidiary of the RSU Scheme Trustee, which will hold the Shares underlying the RSU(s) in accordance with the RSU Scheme, which as at the date of adoption of RSU Scheme, shall be Wisdom Managements Worldwide Limited, a company incorporated under the laws of BVI and a wholly-owned subsidiary of Core Trust

– 20 –

DEFINITIONS “RSU Scheme Trustee”

the professional trustee appointed by the Board to assist with the administration and vesting of RSU(s) under the RSU Scheme which, as at the date of adoption of RSU Scheme, shall be Core Trust

“SAFE”

State Administration of Foreign Exchange of the PRC* (中華人民共和國國家外滙管理局)

“SAFE Circular No. 37”

the PRC Circular on Relevant Issues concerning Foreign Exchange Administration of Overseas Investment and Financing and Round-trip Investment by Domestic Residents via Special Purpose vehicles 《 ( 國家外匯管理局關於境內居民通過特殊目的公司境外投融資及返程投資外匯管理有關問題的通知》) promulgated by SAFE on 4 July 2014

“SAFE Circular No. 75”

the PRC Circular Regarding Foreign Exchange Control For Fundraising And Offshore-Domestic Investments By Domestic Residents Through Special Purpose Vehicles 《 ( 國家外匯管理局關於境內居民通過境外特殊目的公司融資及返程投資外匯管理有關問題的通知》) promulgated by SAFE on 21 October 2005

“SAIC”

State Administration of Industry and Commerce of the PRC (中華人民共和國國家工商行政管理總局)

“Sale Share(s)”

8,500,000 Shares to be offered for purchase by Favor Gain at the Offer Price under the International Placing, each a “Sale Share”

“Sanctioned Countries”

countries which are the targets of economic sanctions as administered by the U.S., the EU, the United Nations and Australia, such as Yemen and Venezuela

“Sanctioned Person(s)”

certain person(s) and entity(ies) listed on OFAC’s Specially Designated Nationals and Blocked Persons List or other restricted parties lists maintained by the EU, the United Nations or Australia

“SASAC”

State-owned Assets Supervision and Administration Commission of the State Council of the PRC (中華人民共和國國務院國有資產監督管理委員會)

“SAT”

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

“Selling Shareholder”

Favor Gain, which offers the Sale Shares for purchase under the International Placing

“SFC”

the Securities and Futures Commission of Hong Kong

“SFO”

the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), as amended, supplemented or otherwise modified from time to time

“Share(s)”

ordinary share(s) with par value of HK$0.10 each in the share capital of our Company

– 21 –

DEFINITIONS “Shareholder(s)”

holder(s) of our Share(s)

“Share Option Scheme”

the share option scheme conditionally adopted by our Company, further details of which are described in the section headed “Statutory and General Information” in Appendix IV to this prospectus

“Sino-Foreign Equity JV”

a sino-foreign equity joint venture enterprise established in the PRC under the laws of PRC

“Split”

the split by continued existence of Benywave Technology into two separate legal entities, namely Benywave Technology and Benywave Wireless, with the original Benywave Technology retaining the PRC Business and the new entity Benywave Wireless taking over the Overseas Business according to the Split Agreement

“Split Agreement”

the agreement dated 29 April 2014 entered into between Benywave Technology and Benywave Wireless pursuant to which, inter alia, (i) Benywave Technology shall be split into two separate legal entities; (ii) its assets and liabilities shall be split up as agreed, and (iii) the Overseas Business, including all the rights and obligations of Benywave Technology under the then existing contracts to which Benywave Technology is a party and which relates to the Overseas Business, shall be succeeded by Benywave Wireless under the laws of PRC

“State Council”

the State Council of the PRC

“Stock Borrowing Agreement”

the stock borrowing agreement expected to be entered into between Winmate and the Sole Global Coordinator on or about the same date as the International Underwriting Agreement

“Stock Exchange” or “HKEx”

The Stock Exchange of Hong Kong Limited

“Subscription Price”

the price per Share at which an Option Grantee may subscribe for the Shares on the exercise of an Option

“subsidiary(ies)”

has the meaning ascribed to it under the Listing Rules

“substantial shareholder(s)”

has the meaning ascribed to it under the Listing Rules

“Takeovers Code”

the Hong Kong Codes on Takeovers and Mergers and Share Repurchases, as approved by the SFC and as amended, supplemented or otherwise modified from time to time

“Tianyu”

北京天宇朗通通信設備股份有限公司 (Beijing Tianyu Communication Equipment Co. Ltd.*) (formerly known as 北京市天宇朗通通信設備有限責任公司), a joint stock limited company established in the PRC on 16 April 2002 beneficially and wholly-owned by the Founders

“Tianyu Group”

Tianyu and its subsidiaries or any of them

– 22 –

DEFINITIONS “Track Record Period”

the period comprising the three financial years of our Group ended 31 December 2014

“Trading Day(s)”

day(s) on which the Stock Exchange is open for the trading of securities

“Underwriters”

the Hong Kong Underwriters and the International Underwriters

“Underwriting Agreements”

the Hong Kong Underwriting Agreement and the International Underwriting Agreement

“United States” or “US” or “USA”

the United States of America, its territories, its possessions and all areas subject to its jurisdiction

“US Securities Act”

the United States Securities Act of 1933, as amended, supplemented or otherwise modified from time to time

“USD”, “US dollars” or “US$”

United States dollars, the lawful currency of the United States

“VAT”

value-added tax

“Vital BVI”

Vital Mobile Limited, a company incorporated on 27 June 2014 under the laws of the BVI with limited liability and holding 100% interests in Vital HK

“Vital HK”

Vital Mobile (HK) Limited, a company incorporated on 4 July 2014 under the laws of Hong Kong with limited liability and holding 100% interests in Benywave Wireless

“Vital Profit”

Vital Profit Technology Inc., a company incorporated on 21 December 2001 under the laws of the BVI with limited liability and holding 100% interests in Benywave Technology

“WFOE”

a wholly foreign-owned enterprise established in the PRC under the laws of PRC

“WHITE Application Form(s)”

the application form(s) for use by the public who require(s) such Hong Kong Offer Shares to be issued in the applicant’s own name

“Winmate”

Winmate Limited, a company incorporated on 2 April 2008 under the laws of the BVI with limited liability, which is owned as to 90% by Ms. Rong and 10% by Mr. Ni and is one of our Controlling Shareholders

“WP”

WPPE and WPX collectively

“WPPE”

Warburg Pincus Private Equity X, L.P., a private equity fund

“WPX”

Warburg Pincus X Partners, L.P., a private equity fund

– 23 –

DEFINITIONS “YELLOW Application Form(s)

the application form(s) for use by the public who require(s) such Hong Kong Offer Shares to be deposited directly into CCASS

“%”

per cent.

In this prospectus, the English names of the PRC nationals, entities, departments, facilities, certificates, titles, etc. marked “*” are translations of their Chinese names and are for identification purposes only. If there is any inconsistency, the Chinese names shall prevail. For the purpose of illustration only and unless otherwise specified in this prospectus, amounts denominated in RMB have been translated into HK$ at the rate of RMB1.00 = HK$1.2607. No representation is made that the RMB amounts could have been, or could be, converted into HK$ at such rates or at any other rate on such date or on any other date. Unless expressly stated or otherwise required by the context, all data contained in this prospectus are as at the Latest Practicable Date. Unless otherwise specified, all references to any shareholding in our Company in this prospectus assume no exercise of the Over-allotment Option and any options which may be granted under the Share Option Scheme. Certain amounts and percentage figures included in this prospectus have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures preceding them.

– 24 –

GLOSSARY

This glossary contains certain definitions and technical terms in this prospectus which relate to our business and the industries and sectors that we operate in. As such, some terms and definitions may not correspond to standard industry definitions or usage of such terms. “2G”

acronym for second generation of mobile communication standards, a digital mobile communications standard allowing for voice calls and limited data transmission, and for the purpose of this prospectus, it also includes 2.75G

“3C”

also referred to as CCC, acronym for China Compulsory Certification, the certification for commodity inspection and safety certification for electrical equipment

“3G”

acronym for third generation of mobile communication standards, a mobile communications standard providing mobile phones, computers, and other portable electronic devices with wireless access to the internet

“4G”

acronym for fourth generation of mobile communication standards, a mobile communications standard intended to replace 3G, allowing wireless internet access at a much higher speed

“ANATEL”

National Telecommunication Agency in Brazil who is authorised to issue regulations to be observed in the certification and approval processes of the telecommunications products

“ASEAN countries”

members of the Association of South East Asian Nations (ASEAN), including Indonesia, Malaysia, Philippines, Singapore, Thailand, Brunei, Cambodia, Laos, Myanmar and Vietnam

“BIS”

The Bureau of Indian Standards, which operates a product certification scheme by which it grants licences to manufacturers covering practically every industrial discipline, including electronic products

“CAGR”

compound annual growth rate

“CDMA”

acronym for Code Division Multiple Access, a continuous digital transmission technology that uses a coding system to mix discrete voice signals together during transmission and then separates the signals at the end of transmission

“CE”

a marking which indicates a product’s conformity with the mandatory requirements stipulated by the European Commission Directives relating to safety, health and environmental protection for products sold in the European market

“chipset(s)”

a combination of various integrated circuits (semiconductor devices or chips) that perform different functions within a handset, including baseband, radio frequency, power management, etc.

– 25 –

GLOSSARY “EMS”

acronym for electronic manufacturing service

“EMS provider(s)”

manufacturer(s) or subcontractor(s) who offer EMS services, and for the purpose of this prospectus, it refers to such service providers who process and assemble products for our Group

“EVDO”

acronym for Evolution Data Optimized, a telecommunications standard for the wireless transmission of data through radio signals, typically for broadband internet access

“FCC”

acronym for the Federal Communications Commission, an independent U.S. government agency which regulates interstate and international communications by radio, television, wire, satellite and cable in all 50 states, the District of Columbia and the U.S. territories

“feature phone”

a mobile phone that incorporates features such as the ability to access the internet and store and play music but lacks the advanced functionality of a smartphone

“GSM”

acronym for Global System for Mobile Communications, a standard to describe protocols for second generation (2G) digital cellular networks used by mobile phones

“hardware”

mechanical devices, such as the central processing unit, monitor, modem, printers, disk drives that comprise a computer system and are capable of performing communication, computation and control functions

“IC”

acronym for integrated chip

“ICASA”

acronym for Independent Communications Authority of South Africa, the regulator for South African communications, broadcasting and postal services sector

“IMEI”

acronym for International Mobile Station Equipment Identity, a number which uniquely identifies an individual mobile station

“internet”

a specific global system of interconnected networks that use the standard protocol to link devices worldwide

“LCD”

liquid crystal display, a technology used for flat panel display, which is an electronic display device that operates by applying a varying electronic voltage to a layer of light-polarising liquid crystal trapped in cells between two transparent polarising sheets, thereby inducing changes in its optical properties

“LTE”

a 4G mobile communications standard, an acronym for Long-Term Evolution, is a standard for wireless communication of high-speed data for mobile phones and data terminals

– 26 –

GLOSSARY “mAh”

milliampere-hour, a unit of electric charge

“NBTC” or “NTC”

acronym for National Broadcasting and Telecommunications Commission, successor of and formerly known as NTC, which is a single converged regulator for telecoms and broadcasting sectors of Thailand

“NCC”

acronym for National Communications Commission of Taiwan, which is the regulatory authority of telecommunications services and type approval

“ODM”

acronym for original design manufacturer, a business model that designs and manufactures a product which is specified and eventually branded by another company for sale

“OEM”

an original equipment manufacturer who manufactures products or components that are purchased by another company and retailed under that purchasing company’s brand name

“OGS”

One Glass Solution, a touchscreen technology which reduces the thickness of display

“OTA”

acronym for Over-the-Air, a technology that enables remote management of data and applications through air interface

“PCB”

acronym for printed circuit board, used to mechanically support and electrically connect electronic components using conductive pathways, tracks or signal traces etched from copper sheets laminated onto a non-conductive substrate

“R&D”

research and development

“roadmap”

a plan or strategy with specific technology solutions intended to achieve a particular goal

“RoHS”

acronym for restriction of hazardous substances directive, restricts the use of six hazardous materials in the manufacture of various types of electronic and electrical equipments

“SKD”

acronym for semi knock-down, hardware components including display modules, mobile handset motherboard PCBAs and mobile handset casings

“smartphone”

a mobile device which combines the function of a mobile handset and a conventional personal computer with functionality beyond making phone calls and sending text messages. It runs on an operating system which provides configuration options for the user to install and use various third-party applications (APPs)

– 27 –

GLOSSARY “SMT”

acronym for surface-mount technology, a method for constructing electronic circuits in which the components are mounted directly onto the surface of printed circuit boards

“software”

computer program that instructs the operation of computer hardware

“TD-LTE”

acronym for Time-division Long-Term Evolution, a 4G telecommunications technology and standard

“TD-SCDMA”

acronym for Time Division Synchronous Code Division Multiple Access, an air interface found in UMTS mobile telecommunications networks in China as an alternative to WCDMA

“UL”

a global independent safety science company which provides safety-related certification, validation, testing, inspection, auditing, advising and training services

“UMTS”

acronym for Universal Mobile Telecommunications System, a 3G mobile cellular system for networks based on the GSM standard

“WCDMA”

acronym for Wideband CDMA, an air interface standard found in 3G mobile telecommunications networks

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FORWARD-LOOKING STATEMENTS This prospectus contains certain statements that are “forward-looking” and uses forward-looking terminology such as “anticipate”, “believe”, “expect”, “may”, “plan”, “consider”, “ought to”, “should”, “would”, “shall”, “will” and the negative of these terms and other similar expressions, as they relate to us. Those statements include, among other things, the discussion of our growth strategy and the expectations of our future operations, liquidity and capital resources, which reflect our management’s current view with respect to future events based on the beliefs of our management and assumptions made by and information currently available to our management, and are subject to certain risks, uncertainties and factors, including the risk factors described in the section headed “Risk Factors” of this prospectus. Potential investors of the Offer Shares are cautioned that reliance on any forward-looking statement involves risk and uncertainties and that, any or all of those assumptions could prove to be inaccurate and as a result, the forward-looking statements based on those assumptions could also be incorrect. As a result of these and other risks, uncertainties and assumptions, the forward-looking events and circ*mstances discussed in this prospectus might not occur in the way we expect or at all. In light of these, the inclusion of forward-looking statements in this prospectus should not be regarded as representations or warranties by us that our Group’s plans and objectives will be achieved and these forward-looking statements should be considered in light of various important factors, including those set forth in the section headed “Risk Factors” of this prospectus. We do not intend to update these forward-looking statements in addition to our on-going disclosure obligations pursuant to the Listing Rules or other requirements of the Stock Exchange. Investors should not place undue reliance on such forward-looking information.

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RISK FACTORS

You should carefully consider all of the information set out in this prospectus, including the risks and uncertainties described below before making an investment in the Offer Shares. You should pay particular attention to the fact that we are incorporated in the Cayman Islands and that a substantial part of our Group’s operations are conducted in the PRC and are governed by a legal and regulatory environment that differs from that prevailing in other countries. Our business, financial condition and results of operations could be materially and adversely affected by any of these risks. The trading price of the Shares could decline due to any of these risks, and you may lose all or part of your investment. RISKS RELATING TO OUR BUSINESS We operate in the mobile handset industry characterized by rapid technological changes and any delay by us in rolling out new and competitive mobile handsets will reduce our revenue The mobile handset industry is characterized by rapid technological developments, frequent new product introductions and ever-changing industry and regulatory standards. Future technological developments in the mobile handset and mobile telecommunication industries may reduce or inhibit the market acceptance of our existing and future mobile handsets. Our success depends substantially on our ability to enhance our technologies and develop and introduce new handsets which anticipates changing market needs and technologies. We have incurred and will continue to incur significant costs in researching and developing new handsets and enhancements. Although we have not experienced any substantial delays in rolling out new mobile handsets in the past, we cannot assure that delay in rolling out new mobile handsets will not happen in the future. If we fail to roll out new handsets or enhancements to existing handsets promptly, our revenue will drop. Our competitors may from time to time launch new mobile handsets with innovative features which may replace or shorten our mobile handset life cycles and end-users may delay their decisions to buy our handsets. As a result, we will need to increase our investment in R&D of new handsets and enhancements but we may not have sufficient resources for such investment. Even if we continue to develop new mobile handsets and enhancements, we cannot ensure their market acceptability as this depends on various factors and some of which may be beyond our anticipation or control. We may be unable to respond to rapidly changing new trends and customers’ preferences for mobile handsets in a cost and time efficient manner and our competitiveness will drop We need to respond to changes in customers’ preferences for mobile handsets and in turn the preferences of their end-users as well as their demand for features. The competitiveness of our handsets depends on our ability to introduce, on a cost and time efficient manner, new, innovative and appealing handsets, enhance existing handsets with added features and respond to new or anticipate future needs among end-users. We need to identify and understand the key market trends and user segments and address the ever-changing needs in different user segments timely and proactively. In order to do so, we must obtain and evaluate feedbacks from end-users via our customers from time to time. If we are unable to collect or evaluate them and develop cost effective and appealing mobile handsets, we may not be able to attract new or retain existing customers and our competitiveness will drop.

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RISK FACTORS We rely on third party EMS providers to process and assemble all of our products to meet our orders We do not have our own production plants and outsource all the processing and assembly work to six independent third party EMS providers during the Track Record Period. We rely on these EMS providers to process and assemble our mobile handsets. We provide our EMS providers with production instruction and software design packs to be readily and directly applied on the SMT lines, and utilise their equipment and human resources to assemble our mobile handsets according to our design and technical specifications. Moreover, although we maintain more than five years long-term relationship with certain well established EMS providers and entered into outsourcing agreements with them for two years, the agreements entered into are not exclusive in nature. For each of the three years ended 31 December 2014, the outsourcing fees to our largest EMS provider amounted to approximately RMB26.0 million, RMB28.1 million and RMB45.0 million, respectively, representing approximately 52.6%, 47.7% and 49.2% of our total outsourcing fees incurred. Hence, our manufacturing model poses a number of risks as we do not have full control over the processing and assembly of quality handsets at reasonable prices and meet our customers’ demand, which, if we fail to do, would have a negative impact on our business, financial position, operation results, cash flows and prospects. These risks include: •

interruptions to the operations of our EMS providers due to strikes, lockouts, work stoppages or other forms of labour shortage or unrest, breakdown or failure of equipment, earthquakes, floods and other natural disasters as well as accidents and the need to comply with the directives of relevant governmental authorities, which may result in delay of completing our orders

•

insufficient quality controls or failures in the quality controls of our EMS providers, which may result in damage to our customers’ reputation and hence their drop in placing orders with us or product liability claims

•

significant adverse changes in the financial or business conditions of our EMS providers, which may result in our failure to deliver our products on time

•

performance by our EMS providers below expected levels of output or efficiency

•

the possibility that our competitors will engage our EMS providers, directly or indirectly, and thereby reduce the manufacturing capacity available to us

•

although we have entered into confidentiality and leakage prevention clauses with our EMS providers in our outsourcing agreements, we cannot guarantee no misappropriation or leakage of our intellectual property by our EMS providers

Also, if we fail to maintain good relationship with them, and if we fail to resort to other EMS providers at similar or more favourable terms within a short period of time, our profit may be adversely affected. We have a limited operating history and track record under a new and standalone legal entity We have only been operating as a separate legal entity since July 2014. Although the Overseas Business commenced in 2007 and the operations and management of the PRC Business and the Overseas Business have been delineated and separated by our management since 2010, it was not until July 2014 that Benywave Technology was split into two legal entities. With Benywave Technology assuming the PRC Business, the newly established Benywave Wireless assumed the Overseas Business and became the principal subsidiary of our Group.

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RISK FACTORS Although Benywave Wireless entered into separate agreements with the suppliers and EMS providers at the terms substantially similar to those of the previous agreements entered into with Benywave Technology after the Split for a term of one year and two years respectively, if we are not able to agree such similar terms with the suppliers and EMS providers in the future, our costs may be increased which would adversely affect our competitiveness in offering our products, and result in decrease in our sales and profit margin. If we fail to maintain an effective quality control system, in particular quality checks on products processing and assembly by our EMS providers, our business may be adversely affected One mobile handset is assembled with many components and parts, and malfunction of any of the components may result in breakdowns or malfunction of the mobile device. We also rely on EMS providers to process and assemble our products. If we fail to maintain an effective quality control system, we may fail to detect problematic components, parts or defective finished products. We may replace these components or instruct the EMS provider to reassemble the device, it may be costly and time consuming. It may then result in increased production costs, delays in delivery of products, delays in our collection of payment as well decrease in sales orders. Further, if any malfunction of components or parts of mobile phones occurs or it is misused by end users, such as malfunction of batteries, such mobile devices may overheat and cause explosion or accidents. Although we require quality certificates from our battery suppliers, we cannot assure you that no malfunction would occur. If such accident or malfunction occurs, the end user may claim against our overseas customers who may in turn claim against us and/or reduce placing orders with us. To the best information and knowledge of our Directors, we have not encountered any material product quality issues and there had been no material accident occurred for our products during the Track Record Period. One of our major mobile chip suppliers may change its current fees charged on royalties from its existing and future licensees and sub-licensees in China upon the closure of an investigation case by NDRC for its violation of the Anti-Monopoly Law in China and may cause uncertainties on the Group’s royalty fees in the future During the Track Record Period, Benywave Technology has been a sub-licensee of one of our suppliers. Pursuant to a licensing agreement, we are required to pay royalty fees for certain mobile chipsets supplied by them, with reference to the quantity of mobile handsets sold which are equipped with certain model of components supplied by them. Benywave Wireless became a separate sub-licensee of the relevant supplier at similar terms of the relevant licensing agreement after the Split. NDRC has lately issued an Administrative Sanction Decision in February 2015 stating that the relevant supplier has been charging royalty fees at an unfair rate by abusing its dominant position in the market which violated the Anti-Monopoly Law in China and imposed a fine of RMB6.088 billion. The relevant supplier has agreed to implement a rectification plan that modifies certain of its business practices in China which fully satisfies the requirements of the NDRC’s order. Under the rectification plan, the relevant supplier will not sell the baseband chips to its customers conditional upon such customer signing a license agreement with terms that the NDRC found to be unreasonable or not challenging unreasonable terms in its license agreement. The relevant supplier continues to supply mobile chips to the Group but due to the above incident, we have not yet received invoices from the supplier for certain royalty expenses payable for the year ended 31 December 2014. Our total royalty expenses incurred amounted to approximately RMB5.1 million, RMB19.6 million and RMB43.2 million for each of the three years ended 31 December 2014 respectively. Out of these royalty expenses, approximately RMB5.1 million, RMB19.6 million and RMB30.0 million for each of the three years ended 31 December 2014 were based on actual invoices received from the relevant supplier. The relevant

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RISK FACTORS supplier assigns its independent auditors to carry out necessary audit review procedures on its licensees and sub-licensees including our Group to verify that the royalty fees paid and payable to it from time to time are sufficient. As at the Latest Practicable Date, our Directors were not aware of any disputes arising between our Group and the relevant supplier in relation to our royalty fees paid. The remaining royalties of approximately RMB13.2 million for the year ended 31 December 2014 was accrued with reference to historical royalties and other related expenses incurred and at rates indicated by the relevant supplier. Based on the above, our Directors consider that our Group had duly paid and/or provided for sufficient royalty fees during the Track Record Period. Notwithstanding the above, foreseeing the rectification plan that the relevant supplier is carrying out under the requirements of the NDRC, the Directors consider there may be changes to the royalty fees payable in relation to the use of mobile chips purchased from this supplier in the future. Further, although our supplier assigns its independent auditors to carry out necessary audit review procedures on its licensees and sub-licensees including our Group to verify that the royalty fees paid and payable to the relevant supplier from time to time are sufficient and the Directors were not aware of any disputes arising between our Group and the relevant supplier in relation to our royalty fees paid as at the Latest Practicable Date, we cannot assure you that there would not be any disputes arising from royalty fees and other related expenses paid or payable by the Group to the relevant supplier in the future. Also, in the event of any further increase in royalties chargeable on the raw materials we use for our products due to technology advancement, our cost of sales may be increased and our profit margin would be adversely affected. We may face intellectual property infringement claims which could negatively impact our business We may face intellectual property infringement claims or otherwise become aware of potentially relevant patents and other intellectual property rights held by other parties. In addition, if our customers face any intellectual property infringement claims in the future, they may still require us to indemnify them for products marketed under their brand names. If such claims are brought against our customers and regardless of whether our customers have merits, we would need to spend a significant amount of money defending these claims. As a result, we may need to bear significant legal costs and may need to pay for damages. We may also be subject to an injunction to refrain from using such intellectual property and all these could negatively impact our business as well as our reputation in the market. To the best information and knowledge of our Directors, we have not received any complaint from our customers alleging any potential claims relating to infringement of intellectual properties of third parties. There may be sudden shortage in supply of certain raw materials and components which may lead to delay in fulfilment of orders or unavailability of mobile models developed Display modules, camera modules and mobile chips (such as baseband processor ICs) are important components of our mobile handsets, in particular, smartphones. For each of the three years ended 31 December 2014, the total amount of purchases of display modules, camera modules and baseband processor ICs amounted to approximately RMB206.9 million, RMB599.7 million and RMB826.3 million respectively, representing approximately 37.2%, 47.3% and 49.1% of the total purchases of the corresponding periods respectively. Some raw materials and components (such as mobile chips) are supplied mainly by a few suppliers worldwide. We generally purchase these raw materials directly from the manufacturers or from electronic component trading companies with whom we have long-term relationships. Although we check the availability of the raw materials or components when we provide quotes to our customers, there is a few months’ gap between the timing of our quotation and the placing of orders for these components. If there is a sudden shortage or delay in supply of the relevant raw materials or components, it could delay the fulfilment of our

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RISK FACTORS orders. If the relevant raw materials or components are no longer available, we may fail to supply certain mobile models we have developed, and additional R&D resources may be needed to modify certain specifications of the mobile phones to the use of alternative raw materials or components of other brands. We may find it difficult, costly and time-consuming to find alternative supply of these materials and components, or to change handset design to use alternative raw materials and components. We cannot assure that we could source a sufficient quantity of high quality components used in our products at reasonable costs. Our supply of handsets to our customers will be disrupted and our customers may request for discounts and our profit will be reduced and reputation will be adversely affected. No material supply shortage has occurred during the Track Record Period that resulted in any losses or claims to our Group. We rely completely on third party agencies for transportation of our handsets to our customers which results in various uncertainties and risks We rely entirely on our third party agencies to deliver products who rely on a combination of land, sea and air transport. If these transportation means are being disrupted by strikes, weather, lock-outs or other events, it could interrupt our supply to our customers and could substantially impair our business operations. Although we have insurance policies covering losses incurred during transits of the products, we may need to bear the relevant risks according to the terms agreed with our customers, we may suffer losses if the insurance coverage is insufficient. We rely on certain major customers and their ability to maintain or improve market shares in their respective markets For each of the three years ended 31 December 2014, our top five customers accounted for approximately RMB457.2 million, RMB835.1 million and RMB1,171.4 million of our revenue respectively, which accounted for approximately 68.9%, 61.0% and 61.1% of our total revenue during the corresponding periods. We do not enter into long term contracts with our major customers due to the nature of our industry. If any one or more of these top customers substantially reduce their orders with us or our product price decreases, there is no assurance that we will be able to make up for the reduction in business by securing orders of similar volumes or at all from other customers and our profitability may drop. Our profitability highly correlates with our customers’ business performance. If our customers fail to maintain their existing market share, our sales will decrease correspondingly. Also, we would need time to identify new customer to compensate for the drop in business. Therefore, any risks which could have negative impact on our major customers could in turn have negative impact on our business. These include seasonality of the mobile handset industry, failure of their handsets in gaining market acceptance and their inability to manage growth efficiently. We recorded net cash outflow from operating activities for the year ended 31 December 2014 We recorded net cash outflow from operating activities of RMB170.1 million for the year ended 31 December 2014. Our net cash outflow from operating activities were primarily due to the i) increase in trade and other receivables of approximately RMB354.9 million as (a) we granted credit terms to an increasing number of customers to expand our customer base and to increase our competitiveness and (b) we granted approval to some of our customers for an extended credit period on a case-by-case basis at the request of our customers to cater for their needs at the specific time after taking into account of various factors including, among others, the length of relationship and historical credit record, ii) increase in inventories of RMB56.6 million as more raw materials were kept to meet the increasing demand of our products and iii) decrease in deposits received from customers of RMB39.1 million. Although over 90% of the relevant trade receivables were collected as at the Latest Practicable Date, we cannot assure that we will not record negative operating

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RISK FACTORS cash flows in the future. If we continue to record net operating cash outflows in the future, our working capital may be constrained which may materially and adversely affect our business, financial condition, results of operations and growth prospects. Our profitability, cash flow and financial position may be adversely affected due to credit risks of our customers since more credit terms were granted We may grant credit period to customers based an our management’s assessment of various factors and aspects of the customer. During the Track Record Period, we have generally granted credit terms from 60 to 90 days to certain customers, in particular for those customers in markets where we would like to expand as a result of negotiation with our customers. Although we maintain credit insurance to cover 90% of the losses incurred for business risks, political risk, delay in payments, winding up of debtors, we may suffer losses which are not covered by our insurance and subject to specific insured amount approved by the insurance company for the relevant customers. Also, exceptional extension of payment or credit term may be granted upon application by our customers due to specific reasons, including depreciation of currency or temporary exchange control. We cannot assure that we will be able to fully recover receivables from our customers, or their settlement will be made on a timely basis. In the event that the settlement from our customers is not made in full or not on a timely basis, our profitability, cash flow and financial position will be adversely affected. For details of the credit insurance we maintain, please refer to the subsection headed “Business — Insurance” in this prospectus. We may be subject to higher enterprise income tax and this will reduce our profitability Our principal subsidiary Benywave Wireless is a company split from Benywave Technology which engaged in both the PRC Business and the Overseas Business during the Pre-split Period. The statutory enterprise income tax rate under the PRC laws is 25%, whereas the relevant applicable tax rate for Benywave Technology is 15% as it has been recognised as a high technology enterprise. Given the PRC Business is less profitable than the Overseas Business and Benywave Technology recorded tax loss during the Pre-Split Period with reference to its financial statements and its tax filings made in accordance with the relevant PRC tax laws, Benywave Technology was hence not required to pay taxes during the Pre-split Period. Notwithstanding the foregoing, given Benywave Wireless which assumes the Overseas Business recorded net profit before tax at approximately RMB42.1 million, RMB97.5 million and RMB193.7 million for each of the three years ended 31 December 2014 (based on its audited accounts prepared based on IFRS), an enterprise income tax rate of 15% has been provided for in the financial statements of Benywave Wireless during the Pre-split Period and 25% has been provided for in the financial statements of Benywave Wireless after the Split, and resulted in profit after tax in the amount of RMB35.8 million, RMB82.9 million and RMB156.2 million respectively. After the Split, Benywave Wireless only engages in the Overseas Business and becomes the principal subsidiary of our Group and it will be subject to statutory enterprise income tax at a rate of 25% unless certain exemptions for high technology enterprises are granted which would lower the applicable tax rate to 15%. As a newly set up entity, Benywave Wireless can only apply to become a “New and High Technology Enterprise” after one year of operations and hence before obtaining such qualification, its applicable statutory enterprise income tax rate would be 25%. For the investors’ reference, assuming Benywave Wireless was subject to 25% of statutory enterprise income tax for each of the three years ended 31 December 2014, its net profit after tax would amount to approximately RMB31.6 million, RMB73.1 million and RMB140.5 million during the relevant periods respectively.

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RISK FACTORS Our gross profit margin fluctuated during the Track Record Period and our gross profit margin may fluctuate in the future We recorded gross profit margin of 12.0%, 10.8% and 13.6% for each of the three years ended 31 December 2014, respectively. The decrease in profit margin from 2012 to 2013 was primarily due to, including among others, the decrease in average selling price of our products due to market competition, and the smartphones we supplied for the year ended 31 December 2013 were of better functionality with more advanced technology as compared to those we supplied during the year ended 31 December 2012 and hence involved higher raw material costs. The increase in profit margin from 2013 to 2014 was primarily due to an increase in sales of 4G mobile handsets which had higher margin than those of 3G products in 2014. The changes in our gross margin may be subject to the introduction of new products, transition of technology, costs of the raw materials as well as competitiveness of the product when they reach their mature stage during the product life cycle. Hence, our profit margin may fluctuate from time to time. Our mobile handsets are subject to quality and safety standards and failure to comply with these standards may adversely affect our business Our mobile handsets are subject to quality and safety standards in various jurisdictions where our customers operate. In India, for instance, it is required under the local laws and regulations that the Specific Absorption Rate (SAR) of all mobile handsets in India shall be less than a certain prescribed percentage, failing which, the mobile handsets will not be permitted to be imported into India. Mobile handsets imported to the EU should meet the CE and RoHS standards. Our customers are responsible for the import custom clearance in their countries and they would notify us of the relevant standards and certifications needed. We supply products based on the standards required and obtain necessary certifications for our customers according to the applicable product quality standard at the prototyping stage prior to commencement of mass production. In the event that there is any unanticipated change of standard after the commencement of mass production and we fail to offer our products complying with the new standards, we may incur significant costs in modifying the design and re-producing the finished good which will have material negative impact on our sales and profit. No failure to meet product quality standard incident has occurred during the Track Record Period. We maintain inventories of raw materials and components of mobile handsets and our inventories may become obsolete Our Group typically places orders for raw materials and components on an order-by-order basis though we keep certain amount of inventories and components, work-in-progress and finished products where we consider necessary as our sales volume increases. Our inventories may become obsolete due to rapid technological change in our industry and short mobile handsets’ life cycle and our financial results could be adversely affected. If there is corporate consolidation among our mobile handset carriers or customers, our business may be adversely affected If our customers consolidate as a result of major acquisitions or mergers, their bargaining power may increase as a result of their increased size. We may face stronger pricing pressure accordingly. Also, if there are companies within the new group after consolidation which could take up our role of providing them with mobile handsets, our business will suffer. Although we have not encountered these types of situations in the past, we cannot assure you that this may not happen in the future and if so, our business may be adversely affected.

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RISK FACTORS Challenges or downturn in economic conditions or political and regulatory uncertainties of emerging markets may affect the demand for our products which could adversely affect our sales or growth The major markets of our mobile handsets are concentrated in the emerging markets. During the Track Record Period, our total revenue attributable to the emerging markets accounted for approximately RMB602.4 million, RMB1,011.0 million and RMB827.0 million respectively, which represents approximately 90.8%, 73.9% and 43.2% of our total revenue in the corresponding periods respectively. These emerging markets are characterized with challenges or downturn in economic conditions as well as political and regulatory uncertainties and could seriously hinder our sales and growth. Mobile handsets are consumer products, the demand for which is highly dependent on the economic conditions of our markets. If any of our major markets suffer from economic turmoils or depreciation of local currencies against US Dollars (in which most of our sales are denominated), the demand for our products would drop and our business would be adversely affected. We also need to exercise extra caution when dealing with customers in countries under unstable political conditions. For example, in response to the anti-China protests and riots in Vietnam in May 2014, we had to assess the local political conditions closely and closely monitored the status of receipt of payment from customers in Vietnam. We have not encountered any loss due to such circ*mstances, but we cannot assure you that our business would not be adversely affected when encountering political instability in countries where our customers situate. Due to our international business operations, we are subject to laws and regulations of the various countries or territories in which we conduct our business. The legal, political and business environments affecting our business are evolving, inconsistent across various jurisdictions and often lack clarity or predictability, which increases our compliance costs and legal risks. Subsequent legislation, regulation, litigation, court rulings or other events could expose us to increased costs, liability and risks of reputational damage. Further, uncertainty in the business and legal environment in foreign countries to which our business activities are related may affect our business and limit our ability to enforce our rights. We do not have long-term purchase commitments from our customers, which may lead to significant uncertainty and volatility within our turnover We neither have long-term purchase nor exclusive contracts with our customers as our customer would place order to buy a specific model for a certain quantity. If our competitors succeeded in marketing mobile handsets to them by, for example, offering more favourable terms or more appealing models, or our handsets turn out to be less popular than expected, we may lose our customers and may not be able to find another customer who will purchase similar quantity of handsets from us and thus our profit will drop. We may be subject to possible product returns and product liability claims which may reduce our profitability We only accept product returns if there is manufacture or design defect or the product specification deviates from our customers’ specification. Our mobile handset may have quality issues or undetected defects or errors or a mismatch of customer with the actual specifications in particular when new models or versions are launched. These may be due to product design, software, components or manufacture. For products having issues other than manufacture or design defect, we provide on-site service to all our customers, but if we failed to rectify the issue on site, our customers may return the products to us. For products with manufacture or design defect or failing to meet customers’ specifications, our customers may also return the products to us, where we may try to re-sell the products to other customers who accept such products specification at lower prices. We may encounter losses if we fail to fix the products with quality problem or mitigate our losses by re-selling the products.

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RISK FACTORS Further, if our mobile handsets fail to meet the required standard or are alleged to cause health hazards to end-users, our customers may need to recall their products. We may also be subject to product liability claims. If any product liability claims are brought against our customers and regardless of whether our customers have merits, we would need to spend a significant amount of money defending these claims. As a result, we may need to bear significant legal costs and pay substantial damages. No product was recalled during the Track Record Period, and to the best information and knowledge of our Directors, we have not received any complaints or requests for product recalls during the Track Record Period. However, we cannot assure you that we may not face product recalls in the future. Furthermore, we currently do not have insurance coverage to protect us from these claims in our market worldwide. Even if we have insurance coverage, we may still incur significant costs in excess of our available insurance coverage and product returns and liability claims could significantly reduce our profitability. We may have difficulty in recruiting and retaining highly skilled technical personnel and senior management necessary to maintain the creativity of our research and development and this will reduce the market acceptability of our products Our continued success depends greatly on the contribution of our highly skilled technical and senior management personnel, and it would take a long time and would be difficult to find replacement as their supply is scarce. We need to hire, assimilate, retain and leverage the skills of the qualified engineers and other highly skilled personnel to conduct research and development of our new handsets. We also need capable and experienced senior managers to develop our business globally and oversee human resources management internally at high level. We may not be as successful as our competitors in hiring, assimilating, retaining and utilizing these highly skilled personnel. If we are not able to recruit and retain highly skilled technical personnel with the required experience, our growth and competitiveness will be adversely affected. We rely on our key management personnel and may not be able to attract and retain talented personnel We have been operating our business with reliance on our key management personnel. Among our senior management, Ms. Rong, our chairperson, has been important to our business success and growth. Her education, experience, management skills and business insight has led our business through the years with notable success. Furthermore, our key management personnel, in particular our chief executive officer, Mr. Rong Shengli and our vice president in charge of R&D Mr. Pei Hongan, both of them have proven to be highly valuable in contributing to our success and continued growth. We cannot assure you that one or more of these key personnel may stay with us in the future and it could be time consuming and difficult to find their replacement. If we failed to attract, hire, assimilate and retain competent and experienced personnel, our business could be adversely affected. We could be adversely affected as a result of our operations in certain countries that are subject to evolving economic sanctions of the U.S. government, the United Nations Security Council, the European Union and other relevant sanctions authorities The U.S. and other jurisdictions or organizations, including the EU, the United Nations and Australia, have comprehensive or broad economic sanctions targeting the Sanctioned Countries, Russia (where certain Sanctioned Persons are located), and Sanctioned Persons. During the Track Record Period, we had product sales in certain of the Sanctioned Countries, namely, Yemen and Venezuela, and Russia (where certain Sanctioned Persons are located), and our revenue derived therefrom in aggregate accounted for approximately 2.2%, 9.8% and 7.8% respectively, of our revenue for each of three years ended 31 December 2014 respectively. We will continue to carry out such business activities in connection with such Sanctioned Countries and Russia (where certain Sanctioned Persons are located). For details of the business operations in

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RISK FACTORS the Sanctioned Countries and Russia (where certain Sanctioned Persons are located), please refer to “Business — Business activities in Sanctioned Countries”. We undertake to the Stock Exchange that we will not use the proceeds from the Global Offering, as well as any other funds raised through the Stock Exchange, to finance or facilitate, directly or indirectly, activities or business with, or for the benefit of, the Sanctioned Countries, Russia (where certain Sanctioned Persons are located), or Sanctioned Persons or any other government, individual or entity sanctioned by the U.S., the EU, the United Nations, Australia or Hong Kong, including, without limitation, any government, individual or entity that is the subject of any OFAC sanctions. We also undertake to the Stock Exchange that we will not enter into sanctionable transactions that would expose us or the relevant persons to risks of being sanctioned. If we breach any of these undertakings to the Stock Exchange after the Listing, it is possible that the Stock Exchange may delist our Shares. In order to ensure our compliance with these undertakings to the Stock Exchange, we will continuously monitor and evaluate our business and take measures to protect the interests of our Group and our Shareholders. For details of our internal control procedures, please refer to “Business — Business activities in Sanctioned Countries — Our undertakings and internal control procedures”. As a Group with operations based in China, we will comply with all PRC laws and applicable laws in the jurisdictions where we have operations. We will also seek to prevent our transactions in relation to the Sanctioned Countries and Russia (where certain Sanctioned Persons are located) from being subject to sanctions under the laws of the U.S., the EU, the United Nations, Australia or Hong Kong, and avoid doing business with any Sanctioned Persons. However, to the extent such sanctions are imposed on our Company, our business and Shareholders’ interests could be affected. We cannot predict the interpretation or implementation of government policy at the U.S. federal, state or local levels or any policy by the EU, the United Nations, Australia and other applicable jurisdictions with respect to any current or future activities by us or our affiliates in the Sanctioned Countries, Russia (where certain Sanctioned Persons are located) and/or with Sanctioned Persons. We have no present intention to undertake any future business that would cause us, the Stock Exchange, HKSCC, HKSCC Nominees, or our Shareholders or investors to violate or become a target of sanctions laws of the U.S., the EU, the United Nations, Australia or Hong Kong. However, we can provide no assurances that our future business will be free of risk under sanctions implemented in these jurisdictions or that our business will conform to the expectations and requirements of the U.S. authorities or the authorities of any other government that do not have jurisdiction over our business but nevertheless assert the right to impose sanctions on an extraterritorial basis. Our business and reputation could be adversely affected if the authorities of the U.S., the EU, the United Nations, Australia or any other jurisdictions were to determine that any of our activities constitutes a violation of the sanctions they impose or provides a basis for a sanctions designation of our Company. In addition, because many sanctions programs are evolving, new requirements or restrictions could come into effect which might increase scrutiny on our business or result in one or more of our business activities being deemed to have violated sanctions, or being sanctionable. In addition, certain U.S. state and local governments and universities have restrictions on the investment of public funds or endowment funds, respectively, in companies that are members of corporate groups with activities in certain Sanctioned Countries. As a result, concern about potential legal or reputational risk associated with our historical and on-going operations in the Sanctioned Countries could also reduce the marketability of the Offer Shares to particular investors, which could affect the price of our Offer Shares and Shareholders’ interests in us, despite our commitment not to direct the proceeds from the Global Offering to dealings with sanctioned parties. Before investing in our Shares, you should consider if such investment would expose you to any of the International Sanctions law risk arising from your nationality or residency. Any of these events could have an adverse effect on the value of your investment in us.

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RISK FACTORS Our revenue is predominately in US dollar and fluctuation in the US dollar and RMB may expose us to foreign currency risk, while the fluctuations in the US dollar and foreign currency of our key markets may adversely affect our business We face foreign currency risk as our principal revenue is denominated in US dollars and our expenditures mainly involve Renminbi. The value of Renminbi against the US dollar and other currencies fluctuates and is affected by, among other things, changes in PRC’s and international policies and economic conditions. If there are any significant fluctuations in the exchange rate of the US dollar against the Renminbi in the future, our financial conditions and results may be adversely affected. RISKS RELATING TO OUR INDUSTRY We operate in a highly competitive mobile handset industry and we may not be able to effectively compete with other industry players The mobile handset industry is highly competitive. We face intense competition especially when our suppliers launch new mobile chips and other components as the technology develops. Our competitors are mainly mobile handset design houses in China and if they can relatively allocate more resources to R&D than us, we may not be able to respond adequately and timely to cater for technological developments and customer requirements. In addition, we compete in various product lines in terms of price, product quality, customer design especially the thickness of the handsets, sales and technical support. If we lose our competitiveness in any of these aspects, our business will be adversely affected. We also face strong price competition. If our competitors are relatively more sizable and have more resources to maintain their pricing relatively lower to attract new end-users and to increase their market share, we could be under pressure to reduce our price and our profitability will drop. Our future growth depends partly on the continued growth of the mobile handset industry in emerging market and if this market growth becomes stagnant, our business will not further penetrate into existing and new markets We sell our mobile handsets to our customers mainly in the emerging markets. Currently, the growth of market share of mobile handsets in the emerging markets remains relatively high, compared to that in developed countries. However, if this growth rate reduces or even becomes stagnant, we could not continue to infiltrate into these markets and increase our market share. We are highly dependent on the mobile handset market, which is characterized by short product life cycles, fluctuations in demand and seasonality, any of which could adversely impact our business or financial results Our financial performance greatly depends on the growth of the mobile handset market which has been historically characterized by rapid technological changes, evolving industry standards, changing customer needs and all these have shortened the product life cycles. New technology and customer needs may render our existing handsets less competitive or even obsolete. The average product life cycle for the products we offered during the Track Record Period was approximately 7.8 months. We cannot assure you that we will be able to anticipate and respond to future market demand in a timely manner. We are also subject to risks related to new handset and application launches, delay in new handset development and roll out.

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RISK FACTORS In addition, our handsets are designed and manufactured to conform to the industry standard to enhance interoperability. Therefore, our handsets are highly dependent on the evolving industry standard which we have no control and may not be able to anticipate. For example, our customers follow industry guidelines in the specifications and in turn we also follow such standard. We have no control on such standard and the demand for such products can change so quickly that we may not anticipate. The functionality of our handsets also depends on third party communications infrastructure and networks over which we have no control. Any limitations on the capacity or availability of such infrastructure would limit our customers’ handset functionality and in turn reduce the demand for our handsets. If the long-term growth of the mobile handset market does not occur as we expect, our business cannot continue to grow and our revenue and operation results may drop. RISKS RELATING TO THE PRC Political and economic policies of the PRC government could affect our Group’s business Before its adoption of the economic reforms and open policy in late 1970s, the PRC had been primarily a planned economy. With the commencement of the PRC government’s effort to reform the Chinese economy in 1978, the PRC government introduced changes to its economic system, as well as the government structure. These reforms have led to significant economic growth and progress in social development. Although the PRC government still owns a significant portion of the productive assets in China, economic reform policies have placed much emphasis on creating autonomous enterprises and the utilization of market mechanisms. Factors that may cause the PRC government to modify, delay or even discontinue the implementation of certain reform measures include political changes and political instability and such economic factors as changes in rates of national and regional economic growth, unemployment and inflation. Our Directors anticipate that the PRC government will continue to further implement these reforms, further reduce government interference on enterprises, and rely more on free market mechanisms for the allocation of resources, bring positive effect on our overall and long-term development. Any changes in the political climate, economic and social situation, the laws, regulations and policies of the PRC arising therefrom, may have an adverse effect on the present or future operations of our Group. With our business and operations substantially based in the PRC, our operations and financial results could be adversely affected by the restrictive or austere policies introduced by the PRC government. We may not be able to capitalise on economic reform measures adopted by the PRC government. We cannot assure you that the PRC government will not impose economic and regulatory controls that may adversely affect our Group’s business, financial position and results of operations. Introduction of new laws or changes to existing laws by the PRC government may adversely affect our business Our business and operations in the PRC are governed by the legal system of the PRC. The legal system in the PRC is based on statutory law. Under this system, prior court decisions may be cited for references but do not have binding precedential effect. Accordingly, the outcome of dispute resolution may not be consistent or predictable as in other common law jurisdictions.

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RISK FACTORS Interpretation and enforcement of the PRC laws and regulations, including those regulating the mobile handset industry and foreign investments may be subject to changes in policies and political environment. Different regulatory authorities may have different interpretation and enforcement of the mobile handset industry policies and foreign investment policies, which requires companies to meet the policies requirements issued by relevant regulatory authorities from time to time, and obtain approvals and complete filings in accordance with the relevant regulatory authorities’ interpretation and enforcement of such policies. If there are any future changes in applicable laws, regulations, administrative interpretations or regulatory documents, or stricter enforcement policies by the relevant PRC regulatory authorities, more stringent requirements could be imposed on the industries we are currently engaged in. Compliance with such new requirements could impose substantial additional costs or otherwise have a material adverse effect on our business, financial condition and results of operations. In addition, if we fail to meet such new rules and requirements relating to approval, construction, environmental or safety compliance of our operations, we may be ordered by the relevant PRC regulatory authorities to change, suspend construction of or closure of the relevant production facilities. Alternatively, these changes may also relax some requirements, which could be beneficial to our competitors or could lower market entry barriers and increase competition. As a result, our business, financial condition and results of operations could be materially and adversely affected. In addition, since the PRC economy is developing at a faster pace than its legal system and the PRC laws and regulations regarding the mobile handset industry and foreign investments are relatively new and evolving, there may be uncertainties as to whether and how existing laws and regulations will apply to certain circ*mstances or events, and until the development of the legal system is kept abreast of economic reforms and development in the PRC, such uncertainties are likely to remain. We cannot assure you that introduction of new laws and amendments to existing laws by the PRC government may not adversely affect our profitability and prospects. For details of some of the relevant PRC laws and regulations to which our Group is currently subject, please refer to the subsection headed ‘‘Regulations — Regulatory overview’’ in this prospectus. Government control on currency conversion and changes in the exchange rate between RMB and other currencies could negatively affect our financial condition, operations and our ability to pay dividends RMB is not currently a freely convertible currency and our Group needs to convert RMB into foreign currency for payment of dividends, if any, to Shareholders. Our PRC subsidiaries are subject to the PRC rules and regulations on currency conversion. In the PRC, SAFE regulates the conversion of RMB into foreign currencies. Foreign invested enterprises (‘‘FIEs’’) are required to apply to SAFE or its local branches for Foreign Exchange Registration Certificates. Under relevant PRC foreign exchange laws and regulations, payment of current account items, including profit distributions and interest payment are permitted to be made in foreign currencies without prior government approval but are subject to certain procedural requirements. Strict foreign exchange control continues to apply to capital account transactions, which must be approved by and/or registered with SAFE. We cannot assure you that the PRC regulatory authorities will not impose further restrictions on foreign exchange transactions for current-account items, including payment of dividends. Furthermore, in 2005, China revalued the exchange rate of the RMB to the US dollars and abolished the RMB to peg solely to the US dollars as applied in the past. Instead, it is pegged against a basket of currencies which can rise or drop by as much as 0.3% each day. We cannot assure you that in the future China will not revalue RMB or permit its substantial appreciation. Any increase in the value of RMB may adversely affect the growth of the PRC economy and competitiveness of various industries in the PRC, including the industries in which our Group operates, which could in turn affect the financial condition and operations of our Group. Currently, substantially all of our revenue, expenses and bank loans are denominated in Renminbi, however we cannot guarantee that our financial portfolio will be free from any foreign currencies denominated securities or investments in the future.

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RISK FACTORS The global financial crisis in 2008 has adversely affected the United States, the European countries and other world economies. Although there are signs of recovery in the global and Chinese economy, there can be no assurance that any such recovery is sustainable. The ongoing uncertainties in the global investment environment may cause fluctuations in exchange rates which may in turn adversely affect the value of our net assets, earnings or any declared dividends. Also, any unfavourable movement in the exchange rate or the value of US dollars may lead to an unfavourable exposure to foreign exchange losses, which could in turn materially and adversely affect our financial condition and results of operations. Distribution and transfer of funds may be subject to restrictions under the PRC law Our Company is a holding company incorporated in the Cayman Islands and does not have any business operations other than investments in the subsidiaries. Our Company relies entirely on the dividend payments from our subsidiaries. Under the PRC laws, dividends from our subsidiary in the PRC may only be paid out of distributable after-tax profit, less any recovery of accumulated losses and allocations to statutory funds which are not available for distribution as cash dividends. Any distributable profit that are not distributed in a given year will be retained and made available for distribution in subsequent years. The calculation of distributable profit under PRC accounting principles is different in many respects from Hong Kong accounting principles. Distributions by our subsidiaries in the PRC to our Company may be subject to governmental approval and taxation. These requirements and restrictions may affect our ability to pay dividends to our Shareholders. Any transfer of funds from our Company to our subsidiaries in the PRC, either as a shareholder loan or as an increase in registered capital, is subject to registration and/or approval granted by PRC governmental authorities. These limitations on the free flow of funds between our Company to subsidiaries in the PRC could restrict our ability to act in response to changing market conditions in a timely manner. Furthermore, members of our Group may obtain credit facilities from banks in the future which restrict them from paying dividends to their Shareholders, which may have an adverse impact on their ability to pay dividends to their Shareholders. PRC tax law may affect tax exemptions on dividends received by our Company and Shareholders and increase our enterprise income tax rate Our Company is incorporated under the laws of the Cayman Islands and holds interests in our PRC subsidiaries through a number of subsidiaries incorporated in BVI and Hong Kong. The PRC Enterprise Income Tax Law 《 ( 中華人民共和國企業所得稅法》) and its implementation rules were enacted on 16 March 2007 and 6 December 2007 respectively, and both of which have become effective as at 1 January 2008. If our Company is deemed to be a non-PRC tax resident enterprise without an office or premises in the PRC, a withholding tax at the rate of 10% will be applicable to any dividends paid to our Company, unless our Company is entitled to reduction or elimination of such tax, including by tax treaties. Under the Arrangement between the Mainland and HKSAR for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income 《 ( 內地和香港特別行政區關於所得稅避免雙重徵稅和防止偷漏稅的安排》), such dividend withholding tax rate is reduced to 5% if a Hong Kong tax resident enterprise owns over 25% of equity interests in the PRC company distributing the dividends. Pursuant to the Administrative Measures for Non-Residents Enjoying Tax Treaty Benefits (Trial Implementation) 《 ( 非居民享受稅收協定待遇管理辦法（試行）》) released by the State Administration of Taxation on 24 August 2009 and took effect on 1 October 2009, Vital HK needs to obtain approval from the State Administration of Taxation in order to enjoy the preferential withholding tax rate of 5% in accordance with the above double taxation arrangement. Any new enactment of PRC tax law affecting tax exemptions on dividends may reduce the amount of dividends that could be distributed to our Company and Shareholders.

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RISK FACTORS In addition, the PRC Enterprise Income Tax Law provides that, if an enterprise incorporated outside the PRC has its “de facto management organisation” located within the PRC, such enterprise may be recognised as a PRC tax resident enterprise and thus may be subject to statutory enterprise income tax at the rate of 25% on its worldwide income. Substantially all members of our management are located in the PRC, we may be deemed as a PRC tax resident enterprise and therefore subject to a statutory enterprise income tax rate of 25% on our worldwide income, excluding the dividends received directly from another PRC tax resident. As a result of these changes described above, our historical operating results will not be indicative of our operating results for future periods and the value of the Shares will be adversely affected. RISKS RELATING TO THE GLOBAL OFFERING The interests of our Controlling Shareholders may differ from those of our other Shareholders Immediately following the Global Offering, our Controlling Shareholders will be deemed to be interested in 66.88% of our outstanding Shares on a fully diluted basis, or approximately 58.2% if the Sole Global Coordinator (on behalf of the International Underwriters) exercises the Over-allotment Option in full. The interests of our Controlling Shareholders may differ from the interests of our other Shareholders. If the interests of our Controlling Shareholders conflict with the interests of our other Shareholders, or if our Controlling Shareholders choose to cause us to pursue strategic objectives that conflict with the interests of our other Shareholders, those Shareholders may be disadvantaged by the actions that our Controlling Shareholders choose to cause us to pursue. Our Controlling Shareholders may have significant influence in determining the outcome of any corporate transaction or other matter submitted to the Shareholders for approval, including mergers, consolidations and the sale of all, or substantially all, of our assets, election of directors, and other significant corporate actions. Our Controlling Shareholders has/have no obligation to consider our interests or the interests of our other Shareholders. Relating to the business of the Excluded Group, the Founders, Winmate, Benywave Technology and Tianyu have entered into Deed of Non-Competition for our protection. There has not been any prior public market for the Shares and an active trading market may not develop An active trading market for the Shares may not develop and the trading price of the Shares may fluctuate significantly. Prior to the Global Offering, there has been no public market for the Shares. The Offer Price range has been determined through negotiation between our Company and the Sole Global Coordinator (for itself and on behalf of the Underwriters) and the final Offer Price may not be indicative of the price at which the Shares will be traded following the completion of the Global Offering. In addition, there is no assurance that an active trading market for the Shares will develop, or, if it does develop, that it will be sustained following completion of the Global Offering, or that the trading price of the Shares will not decline below the Offer Price. The trading volume and share price of the Shares may fluctuate The trading price of the Shares may also be subject to significant volatility in response to, among others, the following factors: •

variations in our operating results

•

changes in the analysis and recommendations of securities analysts

•

announcements made by us or our competitors

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RISK FACTORS •

changes in investors’ perception of our Group and the investment environment generally

•

developments in the mobile handset industry

•

changes in pricing made by us or our competitors

•

the liquidity of the market for the Shares

•

general economic and other factors

The price and trading volume of the Shares may be highly volatile. Factors such as variations in our revenue, earnings and cash flow, announcements of new technologies, strategic alliances or acquisitions, industrial or environmental accidents suffered by us, loss of key personnel, changes in ratings by financial analysts and credit rating agencies, litigation or fluctuations in the market prices for the merchandise sold could cause large and sudden changes in the volume and price at which the Shares will trade. In addition, the Stock Exchange and other securities markets have from time to time experienced significant price and volume fluctuations that are not related to the operating performance of any particular company. These fluctuations may also materially and adversely affect the market price of the Shares. Future sales of substantial amounts of the Shares in the public market may adversely affect the prevailing market price of the Shares Except for the Shares issued in the Global Offering, our Company has agreed with the Sole Global Coordinator not to issue any of the Shares or securities convertible into or exchangeable for the Shares during the period beginning from the date of this prospectus and continuing through the date which is six months from the date on which dealings in the Shares commence on the Stock Exchange, except with the prior written consent of the Sole Global Coordinator. Further, the Shares held by our Controlling Shareholders are subject to certain lock-up undertakings for periods commencing on the date of this prospectus and up to 12 months after the Listing Date. The Sole Global Coordinator may, in its discretion, waive or terminate these restrictions. Please refer to the subsection headed ‘‘Underwriting — Underwriting arrangements and expenses — Hong Kong Public Offering’’ in this prospectus for a more detailed discussion of restrictions that may apply to future sales of the Shares. After these restrictions lapse, the market price of the Shares may decline as a result of sales of substantial amounts of the Shares or other securities relating to the Shares in the public market, the issuance of the new Shares or other securities relating to the Shares, or the perception that such sales or issuances may occur. This may also materially and adversely affect our ability to raise capital in the future at a time and at a price we deem appropriate. You may experience immediate dilution and may experience further dilution if we issue additional Shares in the future The issue price of our Shares in this Global Offering is substantially higher than the adjusted book value per Share of our outstanding Shares. Therefore, purchasers of the Offer Shares will experience immediate and substantial dilution and the existing shareholders of our Company will experience a material increase in the adjusted book value per Share of our Shares they own. In addition, we may consider offering and issuing additional Shares in the future for expansion of our business or to the extent that our Shares are issued upon the exercise of Options. In this regard, you may experience further dilution in the net tangible asset book value per Share if we issue additional Shares in the future at a price which is lower than the net tangible book value per Share.

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RISK FACTORS There can be no guarantee as to the accuracy of facts and other statistics contained in this prospectus with respect to the economies and the industry in which we operate Certain facts and other statistics in this prospectus are derived from various sources including various official government publications and communications with various official government agencies. Whilst our Directors and the Sole Sponsor have exercised reasonable care to ensure that such facts and statistics presented are accurately reproduced from their respective sources, the quality or reliability of such source materials cannot be guaranteed and have not been prepared or independently verified by us, the Sole Sponsor, the Underwriters or any of their respective directors, affiliates or advisers. Therefore we make no representation as to the accuracy of such facts and statistics, which may not be consistent with other information compiled within or outside the PRC. Due to possibly flawed or ineffective collection methods or discrepancies between published information, market practice and other problems, the official government statistics and unofficial statistics referred to or contained in this prospectus may be inaccurate or may not be comparable to statistics produced for other publications or purposes and should not be relied upon. Furthermore, there is no assurance that they are stated or compiled on the same basis or with the same degree of accuracy as may be the case elsewhere. In all cases, investors should give consideration as to how much weight or importance they should attach to, or place on, such facts or statistics.

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INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING DIRECTORS’ RESPONSIBILITY FOR THE CONTENTS OF THIS PROSPECTUS This prospectus, for which our Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Companies (Winding Up and Miscellaneous Provisions) Ordinance, the Securities and Futures (Stock Market Listing) Rules (Chapter 571V of the Laws of Hong Kong) and the Listing Rules for the purpose of giving information with regard to us. Our Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief: •

the information contained in this prospectus is accurate and complete in all material respects and not misleading or deceptive;

•

there are no other matters the omission of which would make any statement herein or in this prospectus misleading; and

•

all opinions expressed in this prospectus have been arrived at after due and careful consideration and are founded on basis and assumptions that are fair and reasonable.

INFORMATION AND REPRESENTATION We have not authorised anyone to provide any information or to make any representation not contained in this prospectus. You should not rely on any information or representation not contained in this prospectus as having been authorised by us, the Sole Global Coordinator, the Sole Bookrunner, the Sole Lead Manager, the Sole Sponsor, the Underwriters or any of our or their respective directors, officers or representatives or any other person involved in this Global Offering. No representation is made that there has been no change or development reasonably likely to involve a change in our affairs since the date of this prospectus or imply that the information contained in this prospectus is correct as at any date subsequent to the date of this prospectus. PROFESSIONAL TAX ADVICE RECOMMENDED Potential investors in the Global Offering are recommended to consult their professional advisers if they are in any doubt as to the taxation implications in relation to subscribing for, purchasing, holding or disposing of, and dealing in our Shares (or exercising rights attaching to them). It is emphasized that none of us, the Sole Global Coordinator, the Sole Bookrunner, the Sole Lead Manager, the Sole Sponsor, any of the Underwriters, any of their respective directors, agents, advisers, employees, personnel or any other persons or parties involved in the Placing accepts responsibility for any tax affairs or liabilities of any person resulting from the subscription for, purchase, holding or disposing of, dealing in our Shares, or the exercise of any rights attaching to our Shares. OTHER INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING Issuer

Vital Mobile Holdings Limited

The Global Offering

The Global Offering of (i) initially 21,250,000 New Shares for subscription by the public in Hong Kong (assuming that the Over-allotment Option is not exercised) and (ii) initially 182,750,000 New Shares and 8,500,000 Sale Shares for subscription or sale (subject to re-allocation and the Over-allotment Option) under the International Placing. If the Over-allotment Option is exercised, our Company will be issuing up to 235,875,000 New Shares.

Selling Shareholder

Favor Gain

Offer price range

Not more than HK$3.06 and not less than HK$2.22 per Share

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INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING Share borrowing arrangements in connection with settlement

The Stabilising Manager or any person acting for it may borrow from Winmate up to 31,875,000 Shares equivalent to the maximum number of Share to be issued on a full exercise of the Over-allotment Option.

Over-allotment Option

Up to 31,875,000 additional new Shares to be issued by our Company.

Procedure for application for Hong Kong Public Offer Shares

Please refer to the section headed “How to Apply for the Hong Kong Public Offer Shares” of this prospectus and on the relevant Application Forms.

Conditions of the Hong Kong Public Offering

Details of the conditions of the Hong Kong Public Offering are set out in the paragraph headed “Conditions of the Global Offering” under the section headed “Structure and conditions of the Global Offering” of this prospectus.

Lock-up undertakings by our Company and the Controlling Shareholders

Please refer to the subsections headed “Underwriting — Undertakings to the Stock Exchange under the Listing Rules” and “Underwriting — Undertakings pursuant to the Hong Kong Underwriting Agreement” of this prospectus.

Stamp duty

Dealings in the Shares registered on our Company’s Hong Kong branch register of members will be subject to Hong Kong stamp duty. The current ad valorem rate of Hong Kong stamp duty is 0.1% on the higher of the consideration for or the market value of the Shares and it is charged on the purchaser on every purchase and on the seller on every sale of the Shares. In other words, a total stamp duty of 0.2% is currently payable on a typical sale and purchase transaction involving the Shares. Transfers of the Shares registered on our principal register of members in the Cayman Islands will not be subject to the Cayman Islands stamp duty unless our Company holds an interest in land in the Cayman Islands.

Application for listing on the Stock Exchange

Application has been made to the Listing Committee for the granting of the listing of, and permission to deal in, our Shares in issue and to be issued pursuant to the Global Offering (including any Shares which may be issued pursuant to the exercise of the Over-allotment Option), the Capitalisation Issue and any Shares which fall to be issued pursuant to the exercise of the options granted under the Share Option Scheme. No part of the Share or the loan capital of our Company is listed on or dealt in on any other stock exchange and no such listing or permission to list is being or proposed to be sought in the near future.

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INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING Restrictions on offers and offers for sale

No action has been taken to permit a public offering of the Offer Shares in any jurisdiction other than Hong Kong, or the distribution of this prospectus in any jurisdiction other than Hong Kong. Accordingly, this prospectus may not be used for the purpose of, and does not constitute, an offer or invitation in any jurisdiction or in any circ*mstance in which such an offer or invitation is not authorised or to any person to whom it is unlawful to make such an offer or invitation.

Eligibility for CCASS

Subject to the granting of the listing of, and permission to deal in, our Shares on the Stock Exchange and compliance of the stock admission requirements of HKSCC, our Shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the Listing Date or any other date as determined by HKSCC. Settlement of transactions between participants of the Stock Exchange is required to take place in CCASS on the second Business Day (as defined in the Listing Rules) after any Trading Day. You should seek the advice of your stockbroker or other professional adviser for details of those settlement arrangements as such arrangements will affect your rights and interests. All necessary arrangements have been made for the Shares to be admitted into CCASS. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time.

Language

If there is any inconsistency between this prospectus and the Chinese translation of this prospectus, this prospectus shall prevail. Translated English names of Chinese laws and regulations, government authorities, institutions, natural persons or other entities included in this prospectus and for which no official English translation exists are unofficial translations for your reference only.

– 49 –

WAIVERS FROM STRICT COMPLIANCE WITH THE REQUIREMENTS UNDER THE LISTING RULES

In preparation for the Listing, we have sought the following waivers from strict compliance with the relevant provisions of the Listing Rules: MANAGEMENT PRESENCE IN HONG KONG Rule 8.12 of the Listing Rules provides that a new applicant applying for a primary listing on the Stock Exchange must have a sufficient management presence in Hong Kong, which normally means that at least two of the applicant’s executive directors must be ordinarily resident in Hong Kong. The core operations of the Group are conducted in the PRC and all of our Company’s executive Directors are based in the PRC. Our Company considers that it would be practically difficult and commercially unnecessary to either relocate our executive Directors who are based in the PRC to Hong Kong or to appoint an additional executive Director who is ordinarily resident in Hong Kong. Our Company further considers that the Group’s management is best able to attend to its functions by being based in the PRC and remains close to our operations. Accordingly, our Company does not, and for the foreseeable future will not, have a sufficient management presence in Hong Kong for the purpose of satisfying the requirements under Rule 8.12 of the Listing Rules. We have applied for, and the Stock Exchange has granted, a waiver from strict compliance with the requirements set out in Rule 8.12 of the Listing Rules and the following arrangements have been made for maintaining regular and effective communication with the Stock Exchange. (i)

Authorized representatives

Our Company has appointed two authorized representatives pursuant to Rule 3.05 of the Listing Rules, who will act as the Company’s principal channel of communication with the Stock Exchange and ensure that our Company complies with the Listing Rules at all times. The two authorized representatives are Ms. Rong and Mr. Hon Kwok Ping Lawrence (“Mr. Hon”), Ms. Rong is our chairperson and executive Director. Mr. Hon is our independent non-executive Director. Ms. Rong ordinarily resides in the PRC. Mr. Hon ordinarily resides in Hong Kong. They can be readily contactable by phone, facsimile and/or email to deal promptly with enquiries from the Stock Exchange. Both authorized representatives are authorized to communicate on behalf of our Company with the Stock Exchange. In addition, all of our Directors who are not ordinarily resident in Hong Kong possess or will be able to apply for valid travel documents for traveling to Hong Kong and will be able to meet with the relevant members of the Stock Exchange with a reasonable period, when required. (ii)

Compliance Adviser and other professional advisors

Our Company will, in compliance with Rule 3A.19 of the Listing Rules, retain the services of Haitong International Capital to act as our compliance adviser (the “Compliance Adviser”) who will, among other things, act as our Company’s additional channel of communication with the Stock Exchange in addition to the Company’s authorized representatives, for a period commencing on the Listing Date until the date on which we distribute our annual report for the first full financial year following the Listing. The contact person of the Compliance Adviser will be fully available to respond to enquiries from the Stock Exchange.

– 50 –

WAIVERS FROM STRICT COMPLIANCE WITH THE REQUIREMENTS UNDER THE LISTING RULES

Furthermore, we will also appoint other professional advisors (including legal advisors and accountants) after the Listing to assist us in dealing with any questions which may be raised by the Stock Exchange and to ensure that there will be sufficient communication with the Stock Exchange. (iii) Contact with other Directors Both authorized representatives have means of contacting the other Directors promptly at all times as and when the Stock Exchange wishes to contact the Directors on any matters. To enhance communication among the Stock Exchange, the authorized representatives and our Directors, our Company has implemented a policy whereby (a) each Director shall provide his/her mobile phone number, office phone number, facsimile number and email address to the authorized representatives and to the Stock Exchange; and (b) in the event that a Director expects to travel and be out of office, he/she will have to provide the phone number of the place of his accommodation to the authorized representatives. In addition, each of our Company, the authorized representatives and our Directors undertakes to inform the Stock Exchange promptly if there are any changes to their contact details. (iv) Meetings with the Stock Exchange Meetings between the Stock Exchange and our Directors can be arranged through our Company’s authorized representatives or the Compliance Adviser, or directly with our Directors within reasonable period. Our Company will inform the Stock Exchange promptly in respect of any change in our Company’s authorized representatives and Compliance Adviser. (v)

Principal place of business We maintain a principal place of business in Hong Kong.

– 51 –

DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING DIRECTORS Name

Residential address

Nationality

Rong Xiuli (榮秀麗) (Chairperson)

Room 201, Unit Jia Tower No. 54 Ying Hai Zhuang Yuan No. 37, One Liangshuihe Street Yizhuang Economic and Technological Development Area Daxing District, Beijing, PRC

Chinese

Rong Shengli (榮勝利)

Room 102, Unit Yi Tower No. 54 Ying Hai Zhuang Yuan No. 37, One Liangshuihe Street Yizhuang Economic and Technological Development Area Daxing District, Beijing, PRC

Chinese

Flat A, 24/F, Block 1 Cavendish Heights 33 Perkins Road Wanchai, Hong Kong

British

Hon Kwok Ping, Lawrence (韓國平)

1A, Block 4 Yar Chee Villas Chi Fu Road Pokfulam Hong Kong

Chinese

Lam Yiu Kin (林耀堅)

House B, Louisette No. 20 Stanley Beach Road Stanley Hong Kong

Chinese

Tsang Yat Kiang (曾溢江)

Flat B, 2/F No. 3-3A La Salle Road Kowloon Tong Kowloon, Hong Kong

Chinese

Executive Directors

Non-executive Director Tang Shun Lam (鄧順林)

Independent non-executive Directors

For detailed information of our Directors, please refer to the section headed “Directors, Senior Management and Employees” of this prospectus.

– 52 –

DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING PARTIES INVOLVED Sole Sponsor

Haitong International Capital Limited 22/F, Li Po Chun Chambers 189 Des Voeux Road Central Hong Kong

Sole Global Coordinator, Sole Bookrunner and Sole Lead Manager

Haitong International Securities Company Limited 22/F, Li Po Chun Chambers 189 Des Voeux Road Central Hong Kong

International Underwriters

Haitong International Securities Company Limited 22/F, Li Po Chun Chambers 189 Des Voeux Road Central Hong Kong RHB OSK Securities HK Limited 12/F World-wide House 19 Des Voeux Road Central Hong Kong Convoy Investment Services Limited Unit C, 24/F, @CONVOY 169 Electric Road North Point Hong Kong Astrum Capital Management Limited 11/F, 122 QRC 122–126 Queen’s Road Central Hong Kong

– 53 –

DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING Hong Kong Underwriters

Haitong International Securities Company Limited 22/F, Li Po Chun Chambers 189 Des Voeux Road Central Hong Kong RHB OSK Securities HK Limited 12/F World-wide House 19 Des Voeux Road Central Hong Kong Convoy Investment Services Limited Unit C, 24/F, @CONVOY 169 Electric Road North Point Hong Kong Bright Smart Securities International (H.K.) Limited 10/F, Wing On House 71 Des Voeux Road Central Hong Kong Astrum Capital Management Limited 11/F, 122 QRC 122–126 Queen’s Road Central Hong Kong

Legal advisers to the Company

As to Hong Kong law Li, Wong, Lam & W. I. Cheung 22nd Floor, Infinitus Plaza 199 Des Voeux Road Central Hong Kong As to PRC law Commerce & Finance Law Offices 6th Floor, NCI Tower A12 Jianguomenwai Avenue Chaoyang District Beijing, 100022 The PRC As to Cayman Islands law Conyers Dill & Pearman Cricket Square Hutchins Drive PO Box 2681 Grand Cayman KY1-1111 Cayman Islands

– 54 –

DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING As to Indian law Saikrishna & Associates Advocates A-2E, CMA Tower Second Floor Sector – 24, Noida–201301 NCR, India As to U.S. law Nixon Peabody LLP 437 Madison Avenue New York, NY 10022-7039 212-940-3000 As to International Sanctions law DLA Piper 17th Floor, Edinburgh Tower The Landmark, 15 Queen’s Road Central Hong Kong Legal advisers to the Sole Sponsor and the Underwriters

As to Hong Kong law Deacons 5th Floor Alexandra House 18 Chater Road Central Hong Kong As to PRC law Jingtian & Gongcheng 34/F, Tower 3, China Central Place 77 Jianguo Road, Chaoyang District Beijing the PRC

Auditor and reporting accountants

Deloitte Touche Tohmatsu Certified Public Accountants 35/F., One Pacific Place 88 Queensway Hong Kong

Property valuer

DTZ Debenham Tie Leung Limited 16th Floor Jardine House Central Hong Kong

Receiving bank

Standard Chartered Bank (Hong Kong) Limited 15/F, Standard Chartered Tower 388 Kwun Tong Road Hong Kong

– 55 –

CORPORATE INFORMATION Registered office

Cricket Square Hutchins Drive PO Box 2681 Grand Cayman, KY1-1111 Cayman Islands

Principal place of business and operating head office in China

4th Floor, No.55 Jiachuang Second Road Zhongguancun Science Park OPTO-Merchatronics Industrial Park Tongzhou District Beijing China

Place of business in Hong Kong

Suite 16B, 16/F W Square 314–324 Hennessy Road Wanchai, Hong Kong

Company’s website

www.vital-mobile.com (information contained in this website does not form part of this prospectus)

Company secretary

Chui Man Lung, Everett (HKICPA, ACCA) Room 1220, 12/F Leighton Centre 77 Leighton Road Causeway Bay Hong Kong

Authorised representatives

Rong Xiuli Room 201, Unit Jia Tower No. 54 Ying Hai Zhuang Yuan No. 37, One Liangshuihe Street Yizhuang Economic and Technological Development Area Daxing District, Beijing, PRC Hon Kwok Ping, Lawrence 1A, Block 4 Yar Chee Villas Chi Fu Road Pokfulam Hong Kong

Audit committee

Lam Yiu Kin (Chairman) Tsang Yat Kiang Hon Kwok Ping, Lawrence

– 56 –

CORPORATE INFORMATION Remuneration committee

Tsang Yat Kiang (Chairman) Hon Kwok Ping, Lawrence Lam Yiu Kin Rong Xiuli

Nomination committee

Tsang Yat Kiang (Chairman) Hon Kwok Ping, Lawrence Lam Yiu Kin Rong Xiuli

Risk management committee

Hon Kwok Ping, Lawrence (Chairman) Rong Xiuli Rong Shengli

Compliance adviser

Haitong International Capital Limited 22/F, Li Po Chun Chambers 189 Des Voeux Road Central Hong Kong

Principal share registrar

Codan Trust Company (Cayman) Limited Cricket Square, Hutchins Drive PO Box 2681, Grand Cayman KY1-1111 Cayman Islands

Hong Kong Branch Share Registrar

Tricor Investor Services Limited Level 22, Hopewell Centre 183 Queen’s Road East Hong Kong

Principal bankers

Shanghai Commercial Bank 35/F, Gloucester Tower The Landmark 15 Queen’s Road Central Hong Kong China Everbright Bank No.25 Taipingqiao Ave Everbright Center Xicheng District, Beijing PRC

– 57 –

INDUSTRY OVERVIEW

This section contains information and statistics related to the mobile handsets industry in certain overseas market in general. We commissioned Frost & Sullivan, an independent market research firm, as an industry consultant to prepare the industry report (the “Frost & Sullivan Report”). We have exercised reasonable care in selecting and reproducing such information. We have derived such information and statistics partly from publicly available government and other third-party sources and the Frost & Sullivan Report, which have not been independently verified by us, the Sole Sponsor, the Sole Global Coordinator, the Sole Bookrunner and the Sole Lead Manager, any of the Underwriters, any of our or their respective directors, officers, representatives or affiliates, or any other party involved in the Global Offering and no representation is given as to its accuracy. We believe that the sources of information is appropriate and have no reason to believe that such information is false or misleading or that any fact has been knowingly omitted that would render such information false or misleading. SOURCE OF INFORMATION Frost & Sullivan We commissioned Frost & Sullivan to conduct analysis of global and PRC smartphone ODM markets and other economic data and to prepare the Frost & Sullivan Report. We have agreed to pay a fee of approximately RMB840,000 for the Frost & Sullivan Report, which will be paid prior to the Listing. Our Directors are of the view that the payment of the fee does not affect the fairness of conclusions drawn in the Frost & Sullivan Report. Frost & Sullivan is an independent global consulting firm founded in 1961 in New York. It offers industry research and market strategies and provides growth consulting and corporate training. Its industry coverage includes automotive and transportation, chemicals, materials and food, commercial aviation, consumer products, energy and power systems, environment and building technologies, healthcare, industrial automation and electronics, industrial and machinery, and technology, media and telecom. Frost & Sullivan Report The Frost & Sullivan Report includes information on Global and China smartphone ODM market data. Frost & Sullivan has conducted detailed primary research which involved discussing the status of the industry with certain leading industry participants. Frost & Sullivan has also conducted secondary research which involved reviewing company reports, independent research reports and data based on its own research database. Frost & Sullivan has obtained the figures for the estimated total market size from historical data analysis plotted against macroeconomic data as well as considered the above-mentioned industry key drivers. Several assumptions were adopted in compiling and preparing the report: (a) China social, economic and political environment is likely to remain stable in the forecast period; and (b) related industry key drivers are likely to drive the market in the forecast period. OVERVIEW OF GLOBAL MOBILE CELLULAR PHONE MARKET As a result of the mobile technology innovation, the number of mobile cellular subscriptions, including both voice and data, has experienced a stable growth during 2010 to 2014. The global mobile cellular subscription increased to 6,938.4 million in 2014 from 5,290.1 million in 2010, with a CAGR of 7.0%. As a result of the improvement of mobile network coverage in developing countries and the upgrade of wireless transmission network to 3G/4G, the mobile-cellular subscription is anticipated to continue its steady growth and to achieve a CAGR of 4.3% from 2014 to 2019.

– 58 –

INDUSTRY OVERVIEW OVERVIEW OF GLOBAL SMARTPHONE MARKET The number of global smartphone user grew at a CAGR of 42.1% during the period from 2010 to 2014. The growth will stabilise at a CAGR of 12.0% during the period from 2014 to 2019. The number of smartphone user is expected to reach 3,094.4 million in 2019. The total value of the global smartphone market grew at a CAGR of 34.8% during the period from 2010 to 2014 and reached USD357.3 billion in 2014. It is expected to grow at a CAGR of 6.6% during the period from 2014 to 2019 and reach USD491.6 billion in 2019. The total shipment of smartphones grew from 320.9 million units in 2010 to 1,227.5 million units in 2014, representing a CAGR of 39.9%. The total shipment of smartphone worldwide is forecast to reach 2,289.4 million units in 2019, representing a CAGR of 13.3% during the period from 2014 to 2019. Global Trend of Smartphone Operating System The smartphone operating system market has changed significantly in the past five years. Symbian and Blackberry OS has declined significantly. The operating system is largely dominated by Android system and the iOS system. Over the forecast period from 2015 to 2019 as set out in the chart below, Android is projected to extend its lead by a significant proportion and will maintain as the most adopted operating system in smartphone. Smartphone Shipment by Operating System (Global), 2010–2019E In million units 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 Andriod Symbian iOS Blackberry OS Microsoft Others (Bada, Linux, Palm OS, etc.)

2010 74.0 120.9 48.2 43.0 12.8 21.9

2011 238.0 81.3 95.7 53.8 6.9 20.1

2012 442.1 29.3 136.6 33.4 24.8 39.1

2013 751.8 2.9 153.1 26.3 39.0 2.0

2014 986.4 0.0 192.7 5.8 41.2 1.4

2015E 1,164.0 0.0 229.9 6.0 46.8 0.5

2016E 1,345.5 0.0 266.9 6.5 53.4 2.1

2017E 1,521.8 0.0 304.8 7.1 60.5 1.3

2018E 1,674.0 0.0 335.9 7.7 67.1 2.3

2019E 1,834.7 0.0 370.2 8.2 74.5 1.8

Source: Frost & Sullivan

Global Trend of Smartphone Average Selling Price (ASP) The worldwide smartphone average selling price (ASP) remained relatively stable during the period from 2010 to 2012. The ASP gradually declined from USD348.6 in 2011 to USD291.1 in 2014. Such decline was largely driven by competition from new vendors entering the market and increasing popularity among mobile users. Regional smartphone vendors have been dedicated to develop low-cost smartphones to generate brand awareness among customers and capture the market share against international brands. The competition among the regional/local brands and the international brands is expected to continue and the worldwide smartphone ASP is expected to continue trending downward during 2015 to 2019.

– 59 –

INDUSTRY OVERVIEW Smartphone Average Selling Price (Global), 2010–2019E In USD 400 350

336.8

348.6

332.5 305.8

300

291.1

276.2

261.3

250

245.1

229.4

214.7

200 150 100 50 0 2010

2011

2012

2013

2014

2015E

2016E

2017E

2018E

2019E

Source: Frost & Sullivan

Global smartphone market has been dominated by high end smartphone markets since 2010. Mid end smartphone market started soaring since Samsung launched series of mid end smartphones in 2011, followed with various players entering affordable smart device market. Strong demand for affordable and international quality smartphones globally would definitely drive the fast growth of mid and low end market in the coming years. Growth of high end market would be slower comparing to the other two markets. Smartphone Shipment by Product Ends (Global), 2010–2019E CAGR 14–19E

Million Units 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

320.9

495.8

705.3

975.0

1,227.5

2,289.4

19.1%

25.7%

28.9%

27.4%

28.2%

22.3%

39.9%

39.8%

39.0%

47.8%

48.5%

34.4%

25.8%

31.3%

32.9%

32.8%

29.9%

2010

2011

2012

2013

2014

2019E

46.5%

13.3%

8.1%

18.0%

11.2%

Low*

Mid*

High*

* High end: retail price above 550 USD; Mid end: retail price above 150 USD less than 550 USD; Low end: retail price below 150 USD

Local brand smartphone led the growth of global smartphone market from 2010 to 2014 with 64.3% CAGR. Total local brand smartphone shipment excluding global and China leading brands (including those companies which have already entered international markets) is forecasted to reach 588.6 million units in 2019 with 20.7% CAGR from 2014. Global market share of local brands increased from 4.5% in 2011 to 18.7% in 2014 and is expected to increase to 25.7% in 2019. With the emergence of China smartphone vendors in international markets, growing competition are foreseeable in regional markets for local brand owners especially in developing countries. ODM providers who are well experienced in competing with China smartphone vendors would be a good choice for local brand selecting partners under the industry trend of outsourcing the ODM process.

– 60 –

INDUSTRY OVERVIEW Global Smartphone penetration rate The smartphone penetration rate worldwide had grown significantly since 2010. More than half of the mobile phone users in Western Europe and North America were using smartphones in 2011. Future growth in these markets will be driven by migration to LTE devices from 2G & 3G devices. It is forecasted that the penetration rate in the mature markets will reach over 70% in 2019. The smartphone penetration rate in the emerging markets including Central & East Europe (“C & E Europe”), Central & Latin America (“C & Latin America”) and Asia Pacific although had grown significantly from approximately 11% – 16% in 2010 to approximately 31% – 36% in 2014. It is forecasted to increase further to approximately 51% – 53% in 2019 driven largely by improving telecommunication infrastructure and the increase in affordability of smartphones as a result of improved economic conditions in these emerging markets and lower smartphone ASP. Smartphone Penetration Rate (Regional Market), 2010–2019E

90% 80% 70% 51.7% 50.9% 45.2% 43.2%

40% 30% 20% 10% 0%

68.3%

73.0%

72.5%

71.4%

58.8% 57.4%

60% 50%

68.4% 66.8%

65.5% 62.1%

81.2%

78.5%

76.6%

74.3% 70.3%

72.5%

16.0% 12.6%

26.0% 22.2%

20.6% 16.9%

31.3% 27.7%

35.3% 33.1%

43.1% 42.8%

39.6% 37.9%

40.1%

46.2% 45.6%

52.3% 50.0%

49.8% 47.9%

51.8%

48.1% 43.1%

35.8%

31.6%

26.5%

21.2%

16.0%

11.3%

2010

2011

2012

Western Europe

2013

North America

2014

2015E

C & E Europe

Source: Frost & Sullivan

– 61 –

2016E

2017E

C & Latin America

2018E

2019E

Asia Pacific

INDUSTRY OVERVIEW OVERVIEW OF SMARTPHONE MARKET IN EMERGING MARKETS (EX-CHINA) Emerging market (Ex-China) smartphone shipment grew significantly from 2010 to 2014 with a CAGR of 51.5%. The penetration rate is expected to increase in these markets for two key reasons (1) the network infrastructure now under construction will become fully operational in the coming years (2) according to the research conducted by Frost & Sullivan, the consumers’ intention to buy a new smartphone in the next two years will increase because of the increase in affordability of smartphone. It is expected that the shipment of smartphone will grow at a CAGR of 16.6% during the period from 2014 to 2019. It is forecasted that in 2019, the shipment of smartphone to these regions will reach 1,151.9 million units, representing approximately 50.3% of global smartphone shipment in the same year. Smartphone Shipment (Emerging Market excl. China), 2010-2019E

CAGR 16.6% In millions units 1,400 1,151.9

1,200 1,044.3 1,000

923.4

CAGR 51.5% 794.0

800 665.5 600

534.1 391.0

400 253.1 200

101.5

166.6

0 2010

2011

2012

2013

2014

2015E

2016E

2017E

2018E

2019E

Source: Frost & Sullivan

ORIGINAL DESIGN MANUFACTURER (ODM) Global Smartphone ODM Market Overview A smartphone is a mobile phone with internet access abilities running independent operating system and installed intelligent software (APPs). A smartphone is usually more advanced in computing capability and connectivity than basic feature phones. By focusing on product R&D and technology innovation in smartphone development process, ODM is embedded with higher value added services as compared to EMS. ODM focuses more on hardware design, particularly on i) logic and circuitry design; and ii) mechanism design, which are considered the two core activities of ODM providers. In contrast, EMS providers focuses more on labor-intensive assembly process with little or no design and other technological capabilities. Some EMS have grown in size in recent years and are now capable of handling designs and development of smartphone for multiple clients.

– 62 –

INDUSTRY OVERVIEW Smartphone ODM Process Product Specifications Confirmed

Hardware Logic and Circuit Design

Compliance to Telecom Authority Requirements

Hardware Mechanism Design

Design Verification

Feature Design Software and Hardware Testing

Software Design Interface of Software/Hardware

Co-Verification

Software Development

System Installation

Testing and Field Testing Related to hardware design Software only

Qualified for Terminal Market

Source: Frost & Sullivan

Global ODM Smartphone Trend In recent years, increasing number of smartphone brand owners and new entrants are turning to ODM for cost reduction and efficiency in product development in both mature and emerging markets. After a stable development in 2010 and 2011, smartphone ODMs has been gaining market share of total smartphone shipment from 2011 onward. It is expected in 2019, total number of shipment of smartphone manufactured on ODM basis will represents approximately 28.5% of the global smartphone shipment, a significant increase from 18.2% in 2010. Shipment of ODM Smartphones (Global), 2010–2019E CAGR 17.9%

In million Units

652.5

700 580.2

600 500

499.1

CAGR 49.1%

423.8 357.8

400 287.9

300

225.1

200 100

136.2 58.3

76.0

2010

2011

0 2012

2013

2014 2015E 2016E 2017E 2018E 2019E

Source: Frost & Sullivan

– 63 –

INDUSTRY OVERVIEW Shipment of ODM Smartphone (Emerging Market Excluding China), 2010–2019E In millions Units 400

CAGR 25.8%

300

277.6 248.6

CAGR 57.0% 205.9

200 154.0 119.8 88.1

100 62.3 14.5

21.0

32.0

2010

2011

2012

0 2013

2014

2015E

2016E

2017E

2018E

2019E

Emerging market ODM smartphone shipment has increased to 88.1 million units in 2014 from 14.5 million units in 2010 representing a CAGR of 57.0% benefiting from the continuous demand from central and east Europe. Future growth would be strongly driven by the strong demand from India, Brazil and ASEAN countries. CAGR from 2014 to 2019 is predicted to reach 25.8% which lead the market to 277.6 million units in 2019. Regional ODM Smartphone Trend India smartphone ODM market is believed to be the fastest growing market. It grew at a CAGR of 99.7% from 2010 to 2014 and is expected to grow at a CAGR of 55.0% from 2014 to 2019. ODM smartphone shipment in India is expected to reach 33% market share of total regional smartphone market in 2019 from less than 10% in 2009. Thailand is a matured regional smartphone market comparing with other ASEAN countries. Its smartphone penetration rate reached 49% in 2013 and it is expected to reach 77% by 2019. ODM smartphone shipment in Thailand is expected to increase to over 23% market share of total regional smartphone market in 2019 from around 8% in 2009. Taiwan market is more receptive to ODM products than many other countries in the region. The legacy in ODM PCs in the past is believe to be the foundation of its fast growing ODM smartphone market in recent years. Taiwan smartphone ODM market grew at a CAGR of 49.5% from 2010 to 2014 and it is expected to grow at a CAGR of 5.0% from 2014 to 2019. ODM smartphone shipment in Taiwan is expected to reach around 18% market share of total regional smartphone market in 2019 from around 13% in 2010. Philippines smartphone ODM market leads the ASEAN market with CAGR at 148.8% from 2010 to 2014 and is expected to grow at a CAGR of 50.7% from 2014 to 2019. ODM smartphone shipment in Philippines is expected to account for 22% of the total regional smartphone market in 2019 from less than 1% in 2009. As one of most important economy in South America, Brazil ODM smartphone market grew at a CAGR of 136.0% from 2010 to 2014 reaching 12.4 million units. It is expected that the total shipment of ODM smartphone in Brazil will reach 54.9 million in 2019, representing a CAGR of 34.7% from 2014 to 2019. Local Branded Mobile Phone Suppliers in Our Key Markets Karbonn is the third largest homegrown smartphone vendor in India. In 2014, Karbonn ranked the fourth in India’s smartphone market with a market share of 8%, trailing foreign vendor Samsung and two other homegrown vendor Micromax and Lava. Considering the relatively low standard of living in India, competitively priced smartphones will certainly attract increasing number of smartphone users. Fly Mobiles is a European mobile phone company operating in Russia, Ukraine, India and UK. In 2014 it ranked first in terms of market share in Russia market.

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INDUSTRY OVERVIEW Archos, the French consumer electronics company founded in 1988 listed in NYSE Euronext, launched their first smartphone in 2013 with the help of ODM, fast grasped 5% market share, ranked the third largest homegrown smartphone brand after Alcatel and Wiko in 2014. Cherry Mobile, the largest homegrown smartphone vender in Philippines with 23% market share in 2014 ranked the first in Philippines market, has won market through selling value-for-money mobile phone. Cherry Mobile has revolutionized Philippines mobile technology with the help of ODM. With only four models launched in 2009, Cherry is providing more than 100 handsets, making it the leading Dual SIM brand in the country. True Group is the third largest telecommunication operator in Thailand with premium 3G and LTE service. True-branded smartphones have a 3% market share, being the second largest homegrown smartphone vender in Thailand providing 3G and LTE enabled products at affordable price. Future growth of True is predictable for their smartphones in-depth integrated with their outstanding connectivity service. BLU Products, founded in 2009, took about 1% market share of the entire Latin American smartphone market in 2014 and ranked as the third largest local smartphone vendors. With nearly 8 million mobile devices sold in 2013 covering 40 countries, BLU is believed to be one of the fastest-growing mobile phone providers in the world. CCE, an importer and distributor in Brazil market founded in 1964, was acquired by Lenovo in 2012. CCE started consumption electronic products business since 2006 partnering with Intel, Microsoft and Qualcomm on PC business. CCE took about 1% market share of Brazilian smartphone market and became the largest homegrown smartphone vendors following global vendors Samsung, Motorola, LG, Nokia and Apple. Key growth drivers for smartphone ODM industry According to Frost & Sullivan report, key drivers from both demand and supply side will fully support the sustainable growth of smartphone ODM industry. Global ODM smartphone market is forecast to grow at a CAGR of 17.8% over the period 2014 to 2019. Global smartphone shipment is expected to reach 2.3 billion units in 2019. ODM smartphone shipment is expected to reach 652.5 million units in the same year, representing approximately 28.5% of the global shipment. Continuous growing demand of smartphone and the increasing adoption of ODM generate drivers from demand side for smartphone ODM industry. Smartphone manufacturers are turning to ODM for lower fixed cost and more efficient products design and development. Besides, new entrants in smartphone market are also embracing ODM initiatively to open up regional market. Meanwhile, full development in both value chain and supply chain contribute to the drivers from supply side. Well established global logistics help shorten the lead time which dramatically benefits ODM’s profitability. Key entry barriers for new smartphone ODMs Smartphone ODM requires high design technology capability especially in hardware design, circuitry design and integration of software and hardware. Besides, fast reaction to technological innovation from upper stream is strongly required in ODM industry, which places certain barrier for new market entrants with limited experience in research and development. Also, smartphone ODM involves an entire process from procurement to delivery. With shorter lead time required by customers, supply chain integration can also be an entry barrier. In addition, key customers for smartphone ODM, including mobile phone companies, telecom operators and channel distributors, are usually cautious on vendor selection. It may take around two years for an ODM to become a qualified vendor. Long-term and stable relationship that has been established between the existing ODM and its customers may create certain difficulty for late comers.

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INDUSTRY OVERVIEW CHINA SMARTPHONE ODM COMPETITIVE LANDSCAPE China Smartphone ODM Market Overview Global mobile handset shipment recorded a double-digit growth from 2009 to 2014 and reached 1,890.0 million units in 2014. As one of the major consumption market of global handsets, China has also been responsible for a large proportion of the handset production, representing approximately 69.3% of the global handset production in 2014. The Group’s export volume accounted for 2.5% of total smartphone export volume of the PRC in 2014. The export volume from China increased from 604.8 million units in 2009 to 1,309.8 million units in 2014, representing a CAGR of 16.7%. The advancement in technological capabilities has transformed China from a production base to a regional hub that also provides a high value-added manufacturing services, i.e. product design, research and development. China Handset Export Volume over Global Handset Shipment CAGR 09-14

Million Units 1,200.0

1,420.6

1,619.5

1,738.1

1,821.8

1,890.0

10.4%

45.7%

41.4%

30.7%

0.3%

46.4%

34.7%

49.6%

65.3%

69.3%

50.4%

53.6%

54.3%

2009

2010

2011

100% 80% 60% 40% 20%

58.6%

17.7%

0% 2012

2013

China Handset Export Volume

Others

2014

Source: Frost & Sullivan

Despite high growth rate of domestic consumption for smartphones, the intensive price competition in domestic market drives China smartphone vendors to diversify to other fast growing overseas markets, especially emerging market, for attractive margin. In 2014, approximately 81.9% of the smartphone export volume from China was attributable to smartphone brand owners and OEM suppliers. The remaining 18.1% was attributable to exports by smartphone suppliers on ODM basis. Meanwhile, a number of China’s ODM providers are also exploring overseas opportunities with outstanding industry experience to help local kings to win regional market and exploring the same business model as the Group. As the Group provides smartphone ODM service only, its market position is compared with other key players in the smartphone ODM industry in the PRC at the table below.

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INDUSTRY OVERVIEW China Smartphone ODM Export Ranking No.

Company Name

1 2 3 4 5 6 7

Competitor A Competitor B Competitor C The Group Competitor D Competitor E Competitor F

Export Volume 2014 (Million units)

market share 2014 (Note)

Export Volume 2013 (Million units)

market share 2013 (Note)

6.5 4.4 4.2 3.8 3.1 2.1 1.9

4.3% 2.9% 2.8% 2.5% 2.0% 1.4% 1.2%

5.6 3.3 2.9 2.2 2.7 1.6 1.2

4.6% 2.8% 2.4% 1.8% 2.2% 1.4% 0.8%

Source: Frost & Sullivan Note: Market share represents the Group or the competitor’s total annual export volume in terms of total smartphone export volume of the PRC in the respective years.

Our competitive advantages over other China smartphone ODMs Our competitive advantages over other China smartphone ODMs are (1) our strong product design capacity that enables us to accommodate to a vast customers base with widely diversified product specifications, (2) our strategic and long term partnership with our suppliers and EMS providers which greatly enhances our supply chain efficiency and generates high inventory turnover rate, enabling us to process bulk orders of larger volume than our competitors, and (3) by focusing on overseas market, we are one of the earliest China mobile handset ODM exporters to establish cooperative relationship with leading regional brand-owners, the local kings, that gives us the first mover advantage and create an entry barrier for new entrant. We have a strong R&D team with approximately 64 experienced engineers who are able to design smartphone for most of the widely adopted wireless communication system including GSM, CDMA, EVDO, W-CDMA and LTE. We are among the few ODMs in the PRC that are qualified to partner with chipset supplier to develop reference design projects. For details, please refer to the “Business — Research, Development and Design” in this Prospectus. It is our strategy to focus on the high value added process of ODM chain i.e. the hardware and software design, and outsource most of the manufacturing process to EMS which are more capital intensive. Through this outsourcing strategy, we have established long term partnership with one of the EMS providers who is the second largest mobile handset EMS providers in 2013, which gives us the flexibility in handling orders from different customers with different product specification and order size. The Directors believe that this strategy also enables us to capitalise on the economy of scale of these EMS to achieve better efficiency in terms of production time and costs. Consequently we are able to achieve higher profit margin. We began supplying to overseas market in 2007. We are one of the pioneers of mobile handset ODMs from China to distribute our products overseas. We benefit from this first mover advantage to establish long term partnership with several leading regional brand-owners, the local kings. It is also believed by our Directors that this long term partnership gives us significant lead time ahead of our competitors, which creates an entry barrier for our competitors to newly enter the same market.

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INDUSTRY OVERVIEW Price trend of key components The key components of smartphones include mobile chipset, camera module, display modules and touch panel, etc. According to the F&S report, the key raw material price for 3G and 4G or LTE smartphones has been trending downward in the past three years and is expected to decrease further in 2015 to 2017. The tables below set out the trend of prices of key components per unit in USD for 3G and LTE smartphones. Price of key components for affordable 3G smartphones, 2011-2017E

Price of key components for entry level LTE smartphones, 2014-2017E

USD per unit of the respective component

15 Display Display+touch pannel

27 10 Touch pannel

7 Chipset (BB+AP)

6 2011

19 7 4

8 Camera Module

23 11

2012

2013

2014

4 2

2015 2016E 2017E

Chipset (BB+AP)

14 10

Camera Module

2014

2015

2016E

2017E

Our component suppliers The most important component in a smartphone is its chipset being a combination of various integrated circuits (semiconductor devices or chips) that performs different functions within the handset. There are 2 leading mobile chipset providers in the market place, Qualcomm and MediaTek. Qualcomm is one of the world-leading provider of wireless technology and services with 64.0% market shares in global cellular baseband processor in 2013. It offers wireless chipset and software technology including CDMA, UMTS, GSM and LTE, as well as providing support for both 3G and 4G networks and devices. It secured the first place in both cellular baseband processor and smartphone applications processor segments, and remained the world’s third largest fabless semiconductor producer in 2013. MediaTek is a leading provider of integrated circuit design, specializing in wireless communications and multimedia. It took the second place in cellular baseband processor market with a share of 12% and the smartphone applications processor market with 10% of value sales. Other key components include display models, OGS touch panel and camera module. Our key suppliers for display and touch panel include (i) a group member of a listed company whose shares are listed on the Main Board which supplies high quality LCD panel with its headquarter in Hong Kong and its production facilities in the PRC and (ii) a group member of Shenzhen O-Film Tech Co., LTD., a listed company whose shares are listed on the Shenzhen Stock Exchange who is primarily engaged in providing capacitive touch panel, camera module provider in the PRC. Our key supplier for camera module is a group member of a listed company whose shares are listed on the Main Board which is an integrated optical device manufacturer and optical display system solutions provider.

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REGULATIONS This section sets out summaries of certain aspects of the laws and regulations which are relevant to our Group’s operations and business. REGULATORY OVERVIEW We are based in the PRC and our principal subsidiary is set up and split from a wholly foreign owned entity in the PRC. We are primarily engaged in developing, designing, production management and sale of mobile handsets to overseas markets covering more than 25 countries in South Asia, South East Asia, North America, South America and other parts of Asia, where our products are sold by our customers under their own or authorised brand names. We do not have our own manufacturing plant and outsource all the processing and assembling process to third party EMS providers. We do not sell our products directly to the retail consumers but instead deliver our products to our customers primarily on free-on-board (at Hong Kong ports) terms in accordance with our customers’ specifications for shipment worldwide. Free-on-board means our Group, as seller, pays for transportation of our products to the port of shipment plus loading costs while our customers, as buyers, pay the cost of freight transport, insurance, unloading and transportation from the arrival port to the final destination. The passing of risks occurs when our products are loaded on board at the port of shipment. Our titles in property and risk of the products sold to overseas customers are passed to the overseas customers when the products are delivered to the forwarder located in Hong Kong. Some customers may designate us to deliver our products to their office in Hong Kong where the title and passing of risks occurs when our products reach their office. We are responsible for the administrative procedures for the export of most of the products outside China, where our customers were responsible for the procedures for customs entries of the products into their local countries and payment of import duties, if any. Many countries require various product certifications or markings on packaging when electronic or telecommunication products are imported to their countries, as well as imposing product liabilities on importers or local product suppliers. Our customers would hence specify manufacturing standards and/or certifications or markings required for the products to be supplied by us. In the above connection, we set out below relevant laws and regulations relating to our set-up (including the Split) and principal operations in the PRC. We also set out below certain laws and regulations in Hong Kong, EU, U.S., India, Taiwan, Thailand and Philippines to where the sales attributable accounted for more than 70% of our total revenue during the Track Record Period. To the best information and knowledge of our Directors, our customers in Hong Kong export most of their products to other countries. PRC LAWS AND REGULATIONS This section sets out summaries of PRC laws and regulations, which are relevant to our Group’s operations and business. REGULATIONS ON FOREIGN INVESTMENT IN INDUSTRIES Guidance Catalogue of Industries for Foreign Investment Investment in the PRC conducted by foreign investors and foreign-owned enterprises shall comply with the Guidance Catalogue of Industries for Foreign Investment 《 ( 外商投資產業指導目錄（2015年修訂）》(the “Catalogue”), which was amended and promulgated by the MOFCOM and the NDRC on 10 March 2015. The Catalogue became effective on 10 April 2015 and contains specific provisions guiding market access of foreign capital, stipulating in detail the areas of entry pertaining to the categories of encouraged industries, restricted industries and prohibited industries. Any industry not listed in the Catalogue is a permitted industry. According to the Catalogue, “development and manufacture of the third generation and subsequent mobile communication cellphones, base stations, core network equipment and network testing equipment”, which comprises of one important part of our business, falls within the category of encouraged industry, while the ODM services provided by us falls within the category of permitted industry.

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REGULATIONS Wholly Foreign-owned Enterprises Law The Law of the People’s Republic of China on Wholly Foreign-owned Enterprise 《 ( 中華人民共和國外資企業法》) (the “Wholly Foreign-owned Enterprises Law”), which was promulgated by the Standing Committee of the NPC on 12 April 1986 and amended on 31 October 2000, is the fundamental legal basis for PRC government to administer wholly foreign-owned enterprises. According to the Wholly Foreign-owned Enterprises Law, to establish a wholly foreign-owned enterprise, an investor shall make an application to the department in charge of foreign trade under the State Council or the organs authorised by the State Council. In the event of a separation, merger or other major change, a wholly foreign-owned enterprise shall report to and seek approval from the authorities in charge of examination and approval, and register the change with the Industry and Commerce Administration authorities. The foreign investor in any wholly foreign-owned enterprise may remit abroad profit lawfully earned from the enterprise and other income and funds lawfully obtained following the liquidation of the enterprise. IP LAW Trademark Law Under the Trademark Law of the PRC 《 ( 中華人民共和國商標法》), which was last amended on 30 August 2013, any of the following acts shall be deemed to be an infringement of the exclusive right to use a registered trademark: (1)

Using a trademark that is identical with a registered trademark on the same goods without the licencing of the registrant of the registered trademark;

(2)

Using a trademark that is similar to a registered trademark on the same goods, or using a trademark that is identical with or similar to the registered trademark on similar goods without the licencing of the registrant of the registered trademark, which is likely to cause confusion;

(3)

Sale of any goods that have infringed the exclusive right to use any registered trademark;

(4)

Counterfeit or unauthorised production of the label of another’s registered trademark, or sale of any such label that is counterfeited or produced without authorisation;

(5)

Change of any trademark of a registrant without the registrant’s consent, and selling goods bearing such replaced trademark on the market;

(6)

Providing, intentionally, convenience for activities infringing upon others’ exclusive right of trademark use, and facilitating others to commit infringement on the exclusive right of trademark use; or

(7)

Other acts that have caused any other damage to another’s exclusive right to use a registered trademark.

In the event where any of the above mentioned acts infringe the right to the exclusive use of a registered trademark, the infringer would be imposed a fine and/or ordered to cease the infringement acts immediately, and/or to pay the infringed party compensation. All the trademarks we have are protected by the Trademark Law.

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REGULATIONS Patent Law According to the Patent Law of the PRC 《 ( 中華人民共和國專利法》) amended on 27 December 2008 and the Detailed Rule for the Implementation of Patent Law amended on 9 January 2010 《 ( 中華人民共和國專利法實施細則》), patent is divided into three categories: invention patent; utility model patent and design patent. The purpose of setting up the category of invention patent is intended to protect new technical solution for a product, e.g. a process or an improvement thereof. The purpose of setting up the category of utility model patent is intended to protect new technical solution in relation to a product’s shape, structure or a combination thereof, which is fit for practical use. The purpose of setting up the category of design patent is intended to protect new design of a product’s shape, pattern or a combination thereof as well as its combination with the colour and the shape or pattern of a product, which creates an aesthetic feeling and is fit for industrial application. To pledge a patent right, the pledgor and the pledgee shall jointly handle the registration of pledge at the administrative department for patent under the State Council. Invention Patent The applicant for invention patent must prove that the subject matter product possesses novelty, creativity and practical applicability. The grant of invention patent is subject to disclosure and publication. Normally, the patent administrative authority publishes the application within 18 months after it is filed and if it meets the requirements of this Law in its preliminary review, which may be shortened upon request by the applicant. The patent administrative authority conducts a substantive review within three years from the date the application is filed. The term of protection is 20 years from the date of application. Once the invention patent right is granted, unless otherwise permitted by law, no individuals or entities are permitted to engage in the manufacture, use, offering for sale, sale or import of the patented product, or use the patented method or otherwise engage in the use, offering for sale, sale or import of the product directly derived from applying the patented method, without the licencing of the patentholder. Utility Model Patent The applicant for utility model patent must prove that the subject matter product possesses novelty, creativity and practical applicability. Utility patent is granted and registered upon application unless there are reasons for the patent administrative authority to reject the application after its preliminary review. The utility model patent is subject to the disclosure and publication upon application. The term of protection is 10 years from the date of application. Once the utility patent right is granted, unless otherwise permitted by law, no individuals or entities are permitted to engage in the manufacture, use, offering for sale, sale or import of the patented product, or use the patented method or otherwise engage in use, offering for sale, sale or import of the product directly derived from applying the patented method, without the licencing of the patent holder. Design Patent The applicant for design patent protection must prove that the subject that for matter product is not identical to a prior design. The application procedure and term of protection is the same as that for utility patent. Once a design patent is granted, no individuals or entities are permitted to engage in the manufacture, offering for sale, sale or import of the product protected by such design patent, without the licencing of the patent holder. Accordingly, the use and pledge of our patents should comply with the Patent Law.

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REGULATIONS Copyright Law Under the Copyright Law of the PRC which was last amended on 26 February 2010, “Works” mentioned in this Law shall include works of literature, art, natural science, social science, engineering technology. Where the copyright is pledged, the pledger and the pledgee shall handle the registration of pledge at the copyright administrative department of the State Council. Accordingly, the use and pledge of our copyrights should comply with the Copyright Law. DIVIDEND DISTRIBUTION The principal regulations governing distribution of dividends by wholly foreign-owned enterprises include: •

PRC Company Law of 1993 《 ( 公司法》), as most recently amended on 28 December 2013;

•

Wholly Foreign-Owned Enterprise Law of PRC, promulgated and effective on 31 October 2000; and

•

Wholly Foreign-Owned Enterprise Law Implementation Rules, promulgated and effective on 12 April 2001, as amended on 1 March 2014.

Under the current regulatory regime in China, foreign-invested enterprises in China may distribute dividends only from their accumulated profit, if any, calculated in accordance with PRC accounting standards and regulations. After making up for any deficit in prior years pursuant to the PRC laws, a wholly foreign-owned enterprise in China is required to set aside at least 10% of its after-tax profit calculated in accordance with PRC accounting standards and regulations each year as its general reserves until the cumulative amount of such reserves reaches 50% of its registered capital. These reserves are not distributable as cash dividends. The board of directors of a wholly foreign-owned enterprise has the discretion to allocate a portion of its after-tax profit to its staff welfare and bonus funds, which is likewise not distributable to its shareholders except in the event of a liquidation of the wholly foreign-owned enterprise. Pursuant to the Announcement of the State Administration of Taxation and the State Administration of Foreign Exchange on Issues Concerning the Tax Record-filing on External Payments for Trade in Services and Other Items 《 ( 國家稅務總局、國家外匯管理局關於服務貿易等項目對外支付稅務備案有關問題的公告》), promulgated on 9 July, 2013 and effective from 1 September, 2013, any domestic institution or individual that makes a single payment in the amount of more than USD 50,000 to offshore institutions or individuals, such as dividends obtained by offshore institutions or individuals from China, shall complete tax record-filing with the respective competent local branches of the SAT. As foreign-invested enterprises, our wholly-own subsidiary in the PRC should make dividend distributions pursuant to the laws above. FOREIGN EXCHANGE Pursuant to the Foreign Exchange Administration Regulation of the PRC 《 ( 中華人民共和國外匯管理條例》) promulgated on 29 January 1996, as amended on 14 January 1997 and 5 August 2008, and various regulations issued by the SAFE and other relevant PRC government authorities, the Renminbi is freely convertible only with respect to current account items, such as trade-related receipts and payments, interest and dividends. Capital account items, such as direct equity investments, loans and repatriations of investments, require the prior approval of the SAFE or its local branches for the conversion between Renminbi and foreign

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REGULATIONS currency. Payments for transactions that take place within the PRC must be made in Renminbi. Foreign exchange transactions under the capital account are still subject to restrictions and require approvals from, or registration with, the SAFE and other relevant PRC governmental authorities, or their respective competent local branches. According to Regulations on Foreign Exchange Administration over Direct Investment Made by Foreign Investors in China 《 ( 外國投資者境內直接投資外匯管理規定》), promulgated on 10 May, 2013 by SAFE and effective from 13 May, 2013, direct investment made by foreign investors in China (the “Direct Investment in China”) shall refer to the activities whereby foreign investors (including overseas institutions and individuals) establish FIEs or projects (hereinafter referred to as the “FIE”) in China. Direct Investment in China shall be administrated by registration. Such foreign investors involved in Direct Investment in China shall go through registration with the SAFE or its local branches (hereinafter collectively referred to as the “Foreign Exchange Bureau”). Banks shall process business relating to the Direct Investment in China based on the registration information provided by Foreign Exchange Bureaus. A FIE shall be registered with the relevant Foreign Exchange Bureau right after its establishment. The FIE shall update the registration with the Foreign Exchange Bureau if subsequently it increases or reduces its capital, transfers its equity or undergoes other capital changes. The FIE shall unregister with the Foreign Exchange Bureau if it is subsequently dissolved or converted to a non-FIE. On 30 March 2015, the SAFE promulgated the Circular of the State Administration of Foreign Exchange on Reforming the Management Approach regarding the Settlement of Foreign Exchange Capital of Foreign-invested Enterprises 《 ( 國家外匯管理局關於改革外商投資企業外匯資本金結匯管理方式的通知》) (“SAFE Circular No. 19”), which came into effect from 1 June 2015. According to SAFE Circular No. 19, the foreign exchange capital of foreign-invested enterprises shall be subject to the Discretional Foreign Exchange Settlement (“Discretional Foreign Exchange Settlement”). The Discretional Foreign Exchange Settlement refers to the foreign exchange capital in the capital account of an FIE for which the rights and interests of monetary contribution has been confirmed by the local foreign exchange bureau (or the book-entry registration of monetary contribution by the banks) can be settled at the banks based on the actual operational needs of the FIE. The proportion of Discretional Foreign Exchange Settlement of the foreign exchange capital of an FIE is temporarily determined as 100%. Furthermore, SAFE Circular No. 19 stipulates that the use of capital by foreign-invested enterprises shall follow the principles of authenticity and self-use within the business scope of enterprises. The capital of an FIE and capital in Renminbi obtained by the FIE from foreign exchange settlement shall not be used for the following purposes: 1.

directly or indirectly used for the payment beyond the business scope of the enterprises or the payment prohibited by relevant laws and regulations;

directly or indirectly used for investment in securities unless otherwise provided by relevant laws and regulations;

directly or indirectly used for granting the entrust loans in Renminbi (unless permitted by the scope of business), repaying the inter-enterprise borrowings (including advances by the third party) or repaying the bank loans in Renminbi that have been sub-lent to the third party; and

paying the expenses related to the purchase of real estate that is not for self-use (except for the foreign-invested real estate enterprises).

In 15 February 2012, SAFE issued the Circular of the State Administration of Foreign Exchange on Domestic Individuals Participating in Overseas Listed Companies’ Employee Share Incentive Plans 《 ( 國家外匯管理局關於境內個人參與境外上市公司股權激勵計劃外匯管理有關問題的通知》) (匯發[2012]7號), or SAFE Circular No. 7, which became effective upon circulation.

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REGULATIONS According to SAFE Circular No. 7, domestic individuals who are granted shares or share options by an overseas listed company under the share incentive plans are required, through the domestic company of such overseas listed company or other qualified domestic agents, to register with SAFE and complete certain other procedures related to the share incentive plans. Pursuant to SAFE Circular No. 7, ‘‘Domestic individuals’’ include both the PRC nationals and foreign nationals who have resided within China for one full year on a continuous basis except foreign diplomats in China and representatives of any international organisation in China; and ‘‘Domestic companies’’ comprise of overseas listed companies which are registered in China, branches (including representative offices) of overseas listed companies in China, and the Chinese parent, subsidiary or partnership enterprise which has a controlling or actual controlling relationship with the overseas listed company. Foreign exchange income from the sale of shares or dividends distributed by the overseas listed company shall be remitted into the domestic special foreign exchange account that is opened by the domestic company or its domestic agency and then may be remitted to a foreign currency account of such Domestic individual or be exchanged into Renminbi. For the purpose of completion of the above transaction procedures, a domestic agent and a foreign entrusted entity are required to be appointed. The domestic agent, which can be domestic companies participating in the employee share incentive plans or a third-party domestic entity that is able to provide asset custodian services, will be responsible for making the application, opening the bank accounts and managing the remittance and transfer of funds. The foreign entrusted entity shall be responsible for the exercise, purchase and sale of shares or interests as well as the transfer of funds. Our employees, our PRC RSU holders or our PRC share option holders, who fall into the scope of Domestic individuals and have been or will be granted share options, will be subject to the provisions under SAFE Circular No. 7 upon the listing of the Shares on the Stock Exchange. If we, our PRC RSU holders or our PRC share option holders fail to comply with such rules in the future, we, our PRC RSU holders or our PRC option holders may be subject to fines and other legal or administrative sanctions. SAFE Circular No. 75 (repealed) and SAFE Circular No. 37 On 21 October 2005, the SAFE issued SAFE Circular No. 75, the Notice of the State Administration of Foreign Exchange on the Administration of Foreign Exchange Involved in the Financing and Return on Investment Conducted by PRC Residents via Special Purpose Vehicles outside the PRC 《 ( 國家外匯管理局關於境內居民通過境外特殊目的公司融資及返程投資外匯管理有關問題的通知》), which became effective as of 1 November 2005. SAFE Circular No. 75 and the related implementation rules state that PRC residents, whether natural or legal persons, must register with the relevant local SAFE branch prior to establishing or taking control of an offshore entity established for the purpose of overseas equity financing with onshore assets or equity interests held by them. The term ‘‘PRC natural person residents’’ as used in the SAFE Circular No. 75 includes all PRC citizens and all other natural persons, including foreigners, who habitually reside in China for economic benefits. PRC residents are required to complete registration alteration formalities with the local SAFE branch upon (i) transfer of equity interests or assets of an onshore enterprise to the offshore entity, or (ii) subsequent overseas equity financing by such offshore entity. PRC residents are also required to complete registration alteration or filing with the local SAFE branch within 30 days as of the occurrence of any material change in the shareholding or capital of the offshore entity, such as changes in share capital, share transfers and long-term equity or debt investments, and provision of security. PRC residents who have already incorporated or gained control of offshore entities that have made onshore investment in China before SAFE Circular No. 75 was promulgated must register their shareholding in the offshore entities with the local SAFE branch on or before 31 March 2006.

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REGULATIONS Under SAFE Circular No. 75, PRC residents are further required to repatriate back into PRC all of their dividends, profit or capital gains obtained from their shareholdings in the offshore entity within 180 days as of their receipt of such dividends, profit or capital gains. The registration and filing procedures under SAFE Circular No. 75 are prerequisites for other approval and registration procedures necessary for capital inflow from the offshore entity, such as inbound investments or shareholder loans, or capital outflow to the offshore entity, such as the payment of profit or dividends, liquidating distributions, equity sale proceeds, or the return of funds upon a capital reduction. SAFE Circular No. 37, the Notice of the State Administration of Foreign Exchange on the Administration of Foreign Exchange Involved in the Investment and Financing and Return on Investment Conducted by PRC Residents via Special Purpose Vehicles 《 ( 國家外匯管理局關於境內居民通過特殊目的公司境外投融資及返程投資外匯管理有關問題的通知》), promulgated and effective on 4 July 2014, replaces SAFE Circular No. 75. According to Item 10 “The Registration of the Special Purpose Vehicles by PRC Resident Individuals”, the Appendix 1 “Operating Guidelines for the Business Involved in the Foreign Exchange Administration of Round-trip Investment” of the SAFE Circular No. 37, PRC Resident Individuals shall only register for the (first layer) SPV directly established or controlled by the applicant. Whereas in the process of Reorganisation, no change has occurred to Winmate which is the first layer SPV directly established by Ms. Rong and Mr. Ni, therefore Ms. Rong and Mr. Ni do not need to make amendments to their Registration of their special purpose vehicles. THE 2006 M&A RULES In 8 August 2006, MOFCOM, together with the SASAC, the SAT, the SAIC, the CSRC and the SAFE issued the M&A Rules, which became effective on 8 September 2006 and was amended on 22 June 2009. An acquisition under the M&A Rules can be either an equity acquisition or an asset acquisition. An equity acquisition is an acquisition of equity interest in a PRC domestic company or the subscription of registered capital of a PRC domestic company by foreign investors for the purpose of converting such PRC domestic company into a FIE. An asset acquisition is the acquisition of a PRC domestic company’s assets (i) by a FIE for the purpose of controlling such assets and use them in business operations, or (ii) by foreign investors, through contract, in order to establish a FIE for the purpose of conducting business operations. LABOUR PROTECTION According to the Labour Law of the PRC 《 ( 中華人民共和國勞動法》) effective as of 1 January 1995, enterprises and institutions shall establish and perfect its system of work place safety and sanitation, strictly abide by state rules and standards on work place safety and sanitation, educate employees of work place safety and sanitation. Work place safety and sanitation facilities shall comply with state-fixed standards. The enterprises and institutions shall provide employees with work place safety and sanitation conditions which are in compliance with state stipulations and relevant articles of labour protection. The Labour Contract Law of the PRC 《 ( 中華人民共和國勞動合同法》) was promulgated on 29 June 2007, which became effective on 1 January 2008 and was amended on 28 December 2012. This law governs the employment relationships between employers and employees, and the conclusion, performance and termination of, and the amendment to, employment contracts. To establish an employment relationship, a written employment contract must be signed within one month from the date on which the employee commences work. If an employer fails to enter into a written employment contract with an employee within one year from the date on which the employment relationship is established, it shall pay the employee twice his/her salary for each month and rectify the situation by subsequently entering into a written employment contract with the employee.

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REGULATIONS In addition, the PRC Labour Contract Law requires employers to provide remuneration packages which are not lower than the respective local minimum standards. The PRC Employment Promotion Law 《 ( 中華人民共和國就業促進法》), which took effect from 1 January 2008 and was amended on 24 April 2015, stipulates that employees shall have equal opportunities to employment without discrimination in terms of ethnicity, race, gender, religious belief, communicable disease and rural residence, and may not be discriminated against in hiring or in their employment terms. Enterprises are also required to provide employees with vocational training. Administrative authorities at the county level or above are responsible for implementing policies to promote employment. According to the Regulation on Work-Related Injury Insurance 《 ( 工傷保險條例》), which took effect from 1 January 2004 and was last amended on 20 December 2010, employers should pay work-related injury insurance fees for their employees. Under the Interim Measures Concerning the Maternity Insurance of Enterprises Employees 《 ( 企業職工生育保險試行辦法》) effective from 1 January 1995, employers should pay maternity insurance fees for their employees. Under the Interim Regulations Concerning the Levy of Social Insurance Fees 《 ( 社會保險費徵繳暫行條例》) promulgated on 22 January 1999 and the Interim Measures Concerning the Administration of the Registration of Social Insurance 《 ( 社會保險登記管理暫行辦法》) promulgated on 19 March 1999 and the PRC Social Insurance Law 《 ( 中華人民共和國社會保險法》), which came into effect on 1 July 2011, employers in the PRC are required to register social insurance with the local social insurance authorities, and make contributions to the basic pension insurance fund, basic medical insurance fund and unemployment insurance fund for their employees. According to the Regulation Concerning the Administration of Housing Provident Fund 《 ( 住房公積金管理條例》) promulgated on 3 April 1999 and amended on 24 March 2002, employers in the PRC shall register with the housing provident fund management centre. Employers will then need to open housing provident fund accounts with entrusted banks for their employees and contribute to the fund at a rate of not less than 5% of the employee’s average monthly salary in the preceding year. Pursuant to the laws and regulations above, our wholly-owned subsidiary in the PRC should establish employment relationships legally, register social insurance and housing provident fund for their employees and pay the required fund/fees in full and on time. TAXATION Enterprise Income Tax The EIT Law of the PRC 《 ( 中華人民共和國企業所得稅法》) and Implementation Rules for the EIT Law of the PRC 《 ( 中華人民共和國企業所得稅法實施條例》), both of which became effective on 1 January 2008, subject to preferential tax policies, impose a statutory enterprise income tax rate of 25% on both domestic and foreign invested enterprises. A resident enterprise is subject to enterprise income tax for the income derived from both inside and outside the territory of the PRC. If an organisation or establishment is deemed as a non-resident enterprise in the PRC, it is subject to enterprise income tax for the income derived from such organisation or establishment in the PRC and the income derived from outside the PRC but with actual connection with such organisation or establishment in the PRC. For a non-resident enterprise which has not set up an organisation or establishment in the PRC, or has set up an organisation or establishment but the income derived has no actual connection with such organization or establishment, its income derived in the PRC will be subject to enterprise income tax. With respect to a high and new technology enterprise that needs key support by the State, the tax levied on its income shall be at a reduced rate of 15%.

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REGULATIONS On 26 December 2007, the State Council promulgated the Notice of the State Council on Transitional Preferential Policy For Implementing Enterprise Income Tax 《 ( 國務院關於實施企業所得稅過渡優惠政策的通知》), whereby enterprises enjoying preferential tax rates under the relevant tax laws and administrative regulations and the enterprises income preferential tax policy as stipulated by competent documents with administrative regulation force are subject to the following measures for transition: (1)

Since 1 January 2008, enterprises enjoying the existing tax preferential policy with lower tax rate will gradually transit to the statutory tax rate within five years from the implementation of the EIT Law. Among them, for enterprises enjoying enterprise income tax rate of 15%, the tax rate of 18%, 20%, 22%, 24% and 25% will take effect in 2008, 2009, 2010, 2011 and 2012, respectively; for enterprises enjoying enterprises income tax rate of 24%, the tax rate of 25% takes effect from 2008 onwards.

(2)

Since 1 January 2008, enterprises enjoying fixed-term preferential tax treatment under relevant enterprises income tax laws and regulations, such as the “2 years tax exemption and 3 years 50% tax reduction” and the “5 years tax exemption and 5 years 50% tax reduction” will continue to enjoy the preferential tax treatment until expiry of the relevant fixed term according to relevant tax law, administrative regulations and preferential measures stipulated in the relevant document after the promulgation of the EIT Law. For enterprises not yet enjoyed preferential tax treatment, as profit have not yet been realised, the relevant term for enjoying preferential tax treatment shall be calculated commencing from 2008.

The enterprises entitled to benefit from the transitional preferential policies referred to above shall be enterprises established prior to 16 March 2007 that are registered with an administrative authority such as the Administration of Industry and Commerce. For details, the projects eligible to benefit from transitional preferential policies and the scope of such policies are defined in the annex attached to the above-mentioned notice. Withholding Tax on Dividend Income Under the EIT Law and its implementation rules, PRC income tax at the rate of 10% is applicable to dividends payable to investor that are regarded as ‘‘non-resident enterprise’’ (‘‘non-resident enterprise’’ shall refer to an enterprise, which is established in accordance with the laws of foreign countries (regions) and with its “de facto management organisation” located outside China, but has an establishment or a place in China; or an enterprise, though having no establishment or place in China, derives income that is sourced from China) to the extent such dividends are sourced within China. Similarly, any gain realised on the transfer of Shares by such investors is also subject to 10% PRC withholding income tax if such gain is regarded as income derived from sources within China. However, for FIEs from countries or regions that have signed bilateral tax treaty with China, the withholding tax rate may be lower depending on the terms of the applicable tax treaty. According to the Arrangement between the Mainland and Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income 《 ( 內地和香港特別行政區關於對所得稅避免雙重徵稅和防止偷漏稅的安排》), effective from 8 December 2006 and issued by the SAT, the withholding tax rate for dividends paid by a PRC enterprise to a Hong Kong enterprise is 5% if the Hong Kong enterprise owns at least 25% equity interests of the PRC enterprise; otherwise, the withholding tax rate for dividend is 10%.

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REGULATIONS Further, pursuant to the Circular of State Administration of Taxation on Printing and Issuing the Administrative Measures for Non-resident Individuals and Enterprises to Enjoy the Treatment Under Taxation Treaties 《 ( 關於印發〈非居民享受稅收協定待遇管理辦法（試行）〉的通知》 (國稅發[2009]124號), which became effective on 1 October 2009, the preferential tax rate under the relevant tax treaties does not automatically apply. Approvals from or filing at the competent local tax authorities are required before an enterprise can enjoy the relevant preferential tax treatments relating to dividends under the relevant taxation treaties. In addition, in accordance with the Notice of the State Administration of Taxation on How to Understand and Determine the ‘‘Beneficial Owners’’ in the Relevant Taxation Treaties 《 ( 關於如何理解和認定稅收協定中「受益所有人」的通知》) (國稅函[2009]601號) issued by the SAT on 27 October 2009, the PRC tax authorities must evaluate whether an applicant (income recipient) can be qualified as a ‘‘beneficial owner’’ under the relevant taxation treaties on a case-by-case basis, and in conducting such evaluation, the taxation authorities must examine the substance rather than the form of the relevant case. The Notice of the State Administration of Taxation on Issues Relating to the Administration of the Dividend Provision in Tax Treaties 《 ( 國家稅務總局關於執行稅收協定股息條款有關問題的通知》) (國稅函 [2009]81號) promulgated on 22 February 2009 by the SAT, states that the corporate recipient of dividends distributed by the PRC enterprises must satisfy the direct ownership thresholds at all times during the 12 consecutive months preceding the receipt of the dividends. However, the EIT Law also stipulates that if (i) an enterprise distributing dividends is domiciled in China or (ii) capital gains are realised from the transfer of equity interests in enterprises in China, then such dividends or capital gains are treated as PRC-sourced income. If our Company is deemed as a PRC resident enterprise for tax purpose by PRC tax authorities, then (i) any dividends we pay to our non-resident overseas Shareholders and (ii) any capital gains realised by our non-resident Shareholders from transfer of our equity interests in a PRC enterprise may be regarded as PRC-sourced income and be subject to a PRC withholding tax rate of 10%. URBAN MAINTENANCE AND CONSTRUCTION TAX AND EDUCATION SURCHARGE According to the Circular of the State Council on Unifying the System of Urban Maintenance and Construction Tax and Education Surcharge Paid by Domestic and Foreign-invested Enterprises and Individuals (《國務院關於統一內外資企業和個人城市維護建設稅和教育費附加制度的通知》), which was promulgated on 18 October 2010 and effective from 1 December 2010, the Tentative Regulations of the PRC on Urban Maintenance and Construction Tax 《 ( 中華人民共和國城市維護建設稅暫行條例》) promulgated in 1985 and the Tentative Provisions on the Collection of Education Surcharge 《 ( 徵收教育費附加的暫行規定》) promulgated in 1986 by the State Council shall be applicable to foreign-invested enterprises, foreign enterprises and foreign individual. Pursuant to the Tentative Regulations of the PRC on Urban Maintenance and Construction Tax, which was promulgated on 8 February 1985 and effective from 1 January 1985, and the Circular of the State Administration of Taxation on Issues Concerning the Collection of the Urban Maintenance and Construction Tax 《 ( 國家稅務局關於城市維護建設稅徵收問題的通知》), which was promulgated on 12 March 1994 and effective on and after 1 January 1994, any unit or individual subject to consumption tax, value-added tax and business tax shall also be required to pay urban maintenance and construction tax. Payment of urban maintenance and construction tax shall be based on the consumption tax, value-added tax and business tax which a taxpayer actually pays and shall be made simultaneously when the consumption tax, value-added tax and business tax are paid. Furthermore, the rate of urban maintenance and construction tax shall be 7%, 5% and 1% for a taxpayer in a city, in a county town or town and in a place other than a city, county town or town, respectively.

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REGULATIONS In accordance with the Tentative Provisions on the Collection of Education Surcharge 《 ( 徵收教育費附加的暫行規定》), which was last revised on 20 August 2005, all institutions and individuals who pay consumption tax, value-added tax and business tax shall also be required to pay education surcharge. The education surcharge is 3% of the amount of value-added tax, business tax and consumption tax actually paid by each institution or individual, and the education surcharge shall be paid simultaneously with value-added tax, business tax and consumption tax, excluding the institutions who pay rural educational undertaking surcharge pursuant to the Circular of the State Council on Raising Funds for Rural Schools 《 ( 國務院關於籌措農村學校辦學經費的通知》) (國發[1984]174號). On 7 November 2010, the Ministry of Finance has issued a notice to unify the Local Education Surcharge Policy 《 ( 關於統一地方教育費附加政策有關問題的通知》) (財政[2010]98號). The notice clarifies that the Local Education Surcharge will be applied to foreign invested enterprises, foreign enterprises and individuals at a standard rate of 2% on the value-added tax, business tax and consumption tax liabilities. VALUE-ADDED TAX AND BUSINESS TAX Pursuant to the Interim Regulations on Value-Added Tax of PRC 《 ( 中華人民共和國增值稅暫行條例》), which was last amended by the State Council on 5 November 2008 and effective from 1 January 2009 and its Detailed Implementation Rules on the Interim Regulations on Value-Added Tax of PRC 《 ( 中華人民共和國增值稅暫行條例實施細則》) issued by the Ministry of Finance and SAT on 15 December 2008, which became effective on 1 January 2009 and was amended on 1 November 2011, all enterprises and individuals engaged in the sales or importation of goods, and provision of processing, repairing and replacement services, within the territory of the PRC shall pay value-added tax at the following rates: (1)

For taxpayers selling or importing goods other than those specified in items (2) and (3) of below, the tax rate shall be 17%.

(2)

For taxpayers selling or importing the following goods, the tax rate shall be 13%: (a)

grains, edible vegetable oils;

(b)

tap water, heating gas, cooling gas, hot water, coal gas, liquefied petroleum gas, natural gas, methane gas, coal/charcoal products for household use;

(c)

books, newspapers, magazines;

(d)

feeds, chemical fertilisers, agricultural chemicals, agricultural machinery and plastic film for farming; and

(e)

other goods as specified by the State Council.

(3)

For taxpayers exporting goods, the tax rate shall be 0%, unless otherwise specified by the State Council.

(4)

The rate of value-added tax levied on small-scale taxpayers shall be 3%.

Pursuant to the Interim Regulations on Business Tax of PRC 《 ( 中華人民共和國營業稅暫行條例》) amended by the State Council on 10 November 2008 and effective from 1 January 2009 and its Detailed Implementation Rules on the Interim Regulations on Business Tax of PRC 《 ( 中華人民共和國營業稅暫行條例實施細則》) which were issued by the Ministry of Finance and SAT on 18 December 2008 and which became effective on 1 January 2009, the business tax rate on provision of taxable service, transfer of intangible asset, and sale of immovable properties ranges from 3% to 20%.

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REGULATIONS Pursuant to the Circular of the Ministry of Finance and the SAT on the Inclusion of Railway Transport Industry and Postal Service Industry in the Pilot Collection of VAT in Lieu of Business Tax 《 ( 財政部、國家稅務總局關於將鐵路運輸和郵政業納入營業稅改增值稅試點的通知》) (SAT Circular No. 106) and its appendices, issued by the Ministry of Finance and the SAT on 2 December 2013 and amended on 19 May 2015, enterprises which operate transportation, postal service and partial modern service shall, according to the SAT Circular No. 106 and its appendices, pay value-added tax and do not need to pay business tax any more. Our wholly-owned subsidiary in the PRC falls within the category of the enterprises which operate modern service and do not have to pay business tax any more. TAX COLLECTION FOR SHARE TRANSFER BY NON-PRC RESIDENT ENTERPRISES The Notice on Strengthening Administration of Enterprise Income Tax for Share Transfers by Non-PRC Resident Enterprises 《 ( 國家稅務總局關於加強非居民企業股權轉讓所得企業所得稅管理的通知》) or SAT Circular No. 698 was issued by the SAT on 10 December 2009 with retroactive effect from 1 January 2008. On 3 February 2015, SAT issued the Announcement of the State Administration of Taxation on Several Issues concerning the Enterprise Income Tax on the Indirect Transfers of Properties by Non-Resident Enterprises (《國家稅務總局關於非居民企業間接轉讓財產企業所得稅若干問題的公告》) or SAT Announcement 7. SAT Announcement 7 annulled and replaced the relevant provisions of Circular 698 regarding to the indirect transfer of the equity interests in a PRC resident enterprise. Pursuant to SAT Announcement 7, if a non-PRC resident enterprise transfers its equity interests of an offshore enterprise which directly or indirectly owns Chinese properties (“Taxable Properties”) by conducting arrangement without reasonable commercial purpose, such transfer shall be deemed as direct transfer of Taxable Properties. Factors that may be taken into consideration when determining whether there is a “reasonable commercial purpose” include the value constitution of the transferred equity, offshore taxable situation of the transaction, the offshore structure’s economic essence and duration, trading fungibility and, etc. Our wholly-owned subsidiary in the PRC shall pay their taxes and surcharges in full and on time pursuant to the laws and regulations above. SPLIT General Requirements Pursuant to the PRC Company Law, and the Provisions of the Ministry of Foreign Trade and Economic Cooperation and the State Administration for Industry and Commerce on Merger and Split of Foreign-Invested Enterprises 《 ( 關於外商投資企業合併與分立的規定》) promulgated and effective on 22 November 2001, the split of a company may be in the form of split by continued existence and split by dissolution. Split by continued existence refers to the split of a company into two or more companies, with that the original company continuing to exist and one or more new companies established. Split by dissolution refers to the split of a company into two or more companies, with that the original company dissolved and two or more new Companies established. The split of Benywave Technology took the form of split by continued existence, with Benywave Technology continuing to exist and Benywave Wireless, a new company, established. The resolution of shareholders on the split of a company shall be adopted by the shareholders representing more than two thirds of the voting rights. The property of the company shall be divided upon the split by continued existence/split by dissolution. The balance sheet and a list of property of the company shall be prepared for the split thereof.

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REGULATIONS The company shall notify its creditors within 10 days after the resolution on split is made, and shall publish an announcement in newspapers within 30 days. The announcement shall include the arrangements for the debts of the original company after the split. The creditors shall, within 30 days upon receipt of the written notice, or in the case of not receiving the written notice, within 45 days after the public announcement (“Announcement Period”), be entitled to request the company to repay the debts or provide guaranty. The companies after the split shall bear joint and several liabilities for the debts of the original company, unless otherwise agreed upon prior to the split by the company and its creditors in a written agreement concerning the settlement of debts. After the split, the companies shall complete/update registration with Industry and Commerce Administration authorities. For the form of split by continued existence, the newly-established company shall apply for a name pre-approval (“名稱預先核准”) prior to the application of its registration, according to Regulations of the People’s Republic of China on the Registration Administration of Companies 《 ( 中華人民共和國公司登記管理條例》), promulgated by the State Council on 24 June 1994 and latest amendments on 19 February 2014, effective on 1 March 2014. Special Procedures for FIEs The split of a FIE shall seek the approval from the authority that approved the establishment of the enterprise. A FIE to be split shall submit the following documents to the approval authority: (1)

Written application for split signed by the legal representative of the FIE;

(2)

Resolution of the top governing body of the FIE regarding the split thereof;

(3)

Agreement on the split of the FIE concluded by the companies proposed to continue to exist or to be newly established after the split;

(4)

Contracts and articles of association of the FIE;

(5)

Photocopy of the approval certificate and business license of the FIE;

(6)

Capital verification report issued by a statutory capital verification agency of China for the FIE;

(7)

Balance sheet and property list of the FIE;

(8)

Name list of the creditors of the FIE;

(9)

Contracts and articles of association of the Companies resulting from the split;

(10) Name lists of the members of the top governing bodies of the Companies resulting from the split; and (11) Other documents to be submitted as required by the examination and approval authorities. The approval authority shall, within 45 days upon receipt of the above documents, give a preliminary reply in writing on whether or not to approve the split.

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REGULATIONS Where the creditors of the FIE to be split do not raise any objection after the Announcement Period, the FIE to be split shall submit the following documents to the approval authority: (1)

Copy of announcement on the split of the FIE made by the FIE in a newspaper;

(2)

Copy of the Notice to Creditors and the replies of the creditors;

(3)

Statement of the FIE describing its plans on handling the debts of the original FIE; and

(4)

Other documents to be submitted as required by the approval authority.

The approval authority shall, within 30 days of receiving the required documents, decide whether or not to approve the split of the FIE. For the form of split by continued existence, the FIE continuing to exist shall update the Approval Certificate for a Foreign-Invested Enterprise with the approval authority, and the newly-established FIE shall acquire the Approval Certificate for a Foreign-Invested Enterprise from the approval authority. HONG KONG LAWS AND REGULATIONS IMPORT AND EXPORT According to section 9 of the Telecommunication Ordinance (Chapter 106 of the Laws of Hong Kong) (the “Telecommunication Ordinance”), save under and in accordance with a permit granted by the Communications Authority, no person shall import into Hong Kong or export therefrom any radiocommunications transmitting apparatus unless he is the holder of a licence authorizing him to deal in the course of trade or business in such apparatus. Further, according to section 8(1)(c) of the Telecommunication Ordinance, no person shall in Hong Kong or on board any ship, aircraft or space object that is registered or licensed in Hong Kong deal in the course of trade or business in apparatus or material for radiocommunications or in any component part of any such apparatus or in apparatus of any kind that generates and emits radio waves whether or not the apparatus is intended, or capable of being used, for radiocommunications unless with the appropriate licence granted or created by the Communications Authority. However, pursuant to section 5(1)(b)(ii) of the Telecommunications (Telecommunications Apparatus) (Exemption from Licensing) Order (Chapter 106Z of the Laws of Hong Kong), no such licence shall be required if the apparatus is used or is capable of being used (i) other than as a mobile earth station; and (ii) meets the relevant technical criteria set out in the Telecommunication Ordinance and tolerates interference from other telecommunications apparatus or any telecommunications system authorized under the Telecommunication Ordinance. Imports of mobile handsets into Hong Kong are tax-free. INDIAN LAWS AND REGULATIONS Importer Exporter Code Pursuant to the Foreign Trade (Development and Regulation) Act, 1992 (the “Foreign Trade Act”), no person is permitted to make any import or export except under an importer-exporter code (an “IEC”) number granted by the Director General of Foreign Trade (the “DGFT”). Section 8(1)(a) of the Foreign Trade Act provides that any contravention of any law relating to central excise, customs, foreign exchange or other economic laws as may be notified by the Central Government is ground for the suspension/cancellation of the IEC number.

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REGULATIONS The obligation of obtaining an IEC number, in our case, rests with the Group’s customers. The Group is not legally obligated to obtain an IEC number since it neither imports any goods into India, nor does it export any goods out of India. The Research and Development Cess Act, 1986 The Research and Development Cess Act, 1986 (“R&D Act”) imposes a cess on all payments made for the import of technology, in order to incentivize the commercial application of indigenously developed technology. The rate of cess is to be notified from time to time by the Central Government, but cannot exceed five per cent. Nonpayment of the cess may attract a penalty of up to ten times the amount in arrears. The liability to pay cess is on the person importing technology and does not extend to the Group. Our Directors confirm our products supplied to India during the Track Record Period fulfilled this requirement. Product Safety A.

International Mobile Equipment Identity and Electronic Serial Number

The Groupe Speciale Mobile Association (the “GSM Association”) is an association which focuses on ensuring mobile services work globally, thereby enhancing their value to individual users and national economies. Membership to this association is voluntary and upon payment of a stipulated amount of fee. Majority of the countries which use GSM technology are a member of this association. In this regard, the GSM Association issued a non-binding IMEI Allocation and Approval Guidelines dated October 31, 2013, whereby it laid down guidelines for members part of the GSM Association with respect to allocation of a unique international mobile equipment identity (the “IMEI”) identifying an individual mobile station in a GSM network. The mobile equipment manufacturer which manufactures mobile devices under its own brand name, and/or the brand owner, is required to register with the GSM Association and obtain a ‘Type Allocation Code’ (“TAC”) for each different device model. The TAC is, in-turn, used to create the IMEI code. The IMEI code consists of a number of fields totaling 15 digits. All digits have the range of zero to nine coded as a binary coded decimal. The GSM Association maintains a unique system known as the IMEI database which is global central database containing basic information on the IMEI ranges of GSM devices that are in use across the GSM networks of the world. This IMEI database is also activated and updated every 15 days in the equipment identity register (“EIR”) of telecom service providers. The Department of Telecommunications, Ministry of Communications and Information Technology, Government of India, issued a directive (No. 20-40/2006-BS-III(Pt.)/(Vol. I) dated October 6, 2008, in the interest of national security to all access service providers to make provision for an EIR so that all cellular phones without IMEI or ESN or invalid IMEI or ESN are not processed and rejected. The Department of Commerce, Ministry of Commerce and Industry, Government of India has issued a notification (No. 14/ 2009-2014, New Delhi) on October 14, 2009 which prohibits import of ‘Mobile Handsets’ (classified under ITC (HS) Code ‘8517’) without IMEI numbers or with all-Zeroes IMEI. As the Company neither manufactures mobile devices under its own brand name nor is the brand owner of the mobile devices it manufactures, it is not required to register with the GSM Association and obtain a TAC.

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REGULATIONS B.

Electronics and Information Technology Goods (Requirements for Compulsory Registration) Order

The Department of Electronics and Information Technology, Ministry of Communications and Information Technology, Government of India has issued Electronics and Information Technology Goods (Requirements for Compulsory Registration) Order, 2012 pursuant to the powers conferred on it by the Bureau of Indian Standards Act, 1986 (“Registration Order”). It stipulates that no person shall by himself or through any person on his behalf manufacture or store for sale, import, sell or distributive goods which do not conform to the specified standards and do not bear a self-declaration after obtaining registration from BIS. The specified standard applicable to mobile handsets is “Information Technology Equipment Safety General Requirements” (No. IS 13252:2010). Substandard or defective goods which do not conform to the specified standard shall be deformed beyond use by the manufacturer and disposed of as scrap. The Department of Electronics and Information Technology and the BIS are empowered by the Registration Order to randomly select samples of registered electronic goods to ascertain whether these goods conform to the specified standard. The Government of India is in the process of enforcing further higher standards for electromagnetic fields radiation for mobile handsets. An office memorandum (no. 32-7/2010) dated November 17, 2011 has stipulated that specific absorption rate (“SAR”) level for mobile handsets shall be limited to 1.6 Watt/Kg, averaged over a 6 minutes period and taken over a volume containing a mass of 1 gram of human tissue. Mobile handset manufactured and sold in India or imported from other countries shall be checked for compliance of SAR level. All cell phone handsets sold in the market in India shall comply with relevant standards of the BIS and shall be with hand free devices. SAR value information of the mobile handset shall be made available on the manufacturer’s website and in the handset’s manual. Further, the information on SAR values shall be made available to the customer at the point of sale. The BIS has recently circulated draft standards (LITD 13/T-160 dated July 9, 2014) seeking comments and suggestions from stakeholders (and other interested persons) such that these standards may be adopted as ‘National Standards’. Few of the important guidelines stipulated in the said draft are as follows: (a)

Each handset shall be indelibly and clearly marked with the following information: (i)

The mobile terminal shall be marked with the manufacturer’s brand identification mark and model;

(ii)

Each individual mobile terminal shall be allocated a unique ‘International Mobile Station Equipment Identity (IMEI)’.The IMEI number of the device shall be available in the latest updated IMEI database of the GSMA. The Handset IMEI shall not be with all zeroes. For the case of CDMA the mobile handset shall have a valid & unique Electronic Serial Number (ESN) or Mobile Equipment Identifier (MEID) number;

(iii) Mobile phones shall display all the IMEI no. (GSM/UMTS/LTE) or MEID/ESN(CDMA) by way of request using the MMI string code *#06#; (iv) In case of mobile handset having more than one SIM, if each SIM is associated with its own transceiver, then each transceiver/SIM slot shall have its own associated IMEI number. Therefore, a dual SIM phone should have two IMEI numbers; a three SIM phone should have 3 IMEI numbers, etc.

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REGULATIONS (b)

In case of a dual SIM device with one transceiver, the device shall display two unique IMEI numbers. Each additional SIM slot/transceiver shall add one unique IMEI/MEID/ESN number to be displayed.

(c)

In case of dual transceiver (Dual technology, GSM & CDMA) device with single SIM device, the device shall display two unique IMEI & MEID/ESN numbers. Each additional SIM slot/transceiver shall add one unique IMEI/MEID/ESN number to be displayed.

Anti-dumping and Customs Duty The Customs Tariff Act, 1975 as amended in 1995, and (i) the Customs Tariff (Identification, Assessment and Collection of Anti-dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995, and (ii) Customs Tariff (Identification, Assessment and Collection of Countervailing Duty on Subsidized Articles and for Determination of Injury) Rules, 1995 framed thereunder form the legal basis for anti-dumping and anti-subsidy investigations and for the levy of anti-dumping and countervailing duties. Pursuant to the Customs Tariff Act, 1975, where any article is exported from any country or territory to India at less than its normal value, then, upon the importation of such article into India, the central government of India may impose an anti-dumping duty not exceeding the margin of dumping in relation to such article. The normal value of an article is the comparable price at which the articles under complaint are sold, in the ordinary course of trade, in the domestic market of the exporting country or territory. If the normal value cannot be determined by means of the domestic sales, the following two alternative methods may be employed to determine the normal value: (a) comparable representative export price to an appropriate third country, and (b) constructed normal value, i.e. the cost of production in the country of origin with reasonable addition for administrative, selling and general costs and reasonable profit. A dumping investigation can normally be initiated only upon receipt of a written application by or on behalf of the “domestic industry”, i.e. the Indian producers of the like articles as a whole. The Customs Act, 1962 is the basic legislation for levy and collection of customs duty in India. It contains various provisions relating to imports and exports of goods and merchandize as well as baggage of persons arriving in India. The main purpose of Customs Act, 1962 is the prevention of illegal imports and exports of goods. As the Group is not responsible for the import of its products into India, the compliance obligations under the Customs Act does not extend to the Group. Consumer Protection Product liability in India is mainly governed by the Consumer Protection Act, 1986 (the “CPA”), by imposing liability on manufacturers, wholesalers, distributors and vendors for injury to a person or property caused by dangerous or defective products. The CPA imposes strict liability on a manufacturer, in case of supply of defective goods by him, and a service provider, in case of deficiency in rendering of its services. The terms “defect” and “deficiency” are given a broad interpretation and cover any kind of fault, imperfection or shortcoming in the quality, quantity, potency, purity or standard. “Manufacturer” has been described as a person who makes or manufactures any goods or parts or does not make or manufacture any goods but assembles parts thereof made or manufactured by others or puts or causes to be put his own mark on any goods made or manufactured by any other manufacturer. Given that the Company merely procures processing and assembling of devices for its customers like Karbonn, and such devices are sold in India under the customer’s brand-name, the risk that the Company (or the Group) being regarded as a ‘manufacturer’ under the CPA is remote.

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REGULATIONS EU LAWS AND REGULATIONS Product Safety There is extensive European Union legislation governing consumer protection, product safety and product liability implemented at national level in all Member States. For example, The General Product Safety Directive 2001/95/EC (the “GPSD”) is designed to apply a high level of product safety for all products. It applies to any product intended for consumers or likely to be use by consumers placed on the EU market in so far as there are no specific EU provisions with the same objective governing the safety of the products concerned. The GPSD provides that producers are obliged to place only safe products on the market. In determining whether a product is considered safe under the GPSD, various factors are taken into account including the following: (i) national safety standards, (ii) guidelines from the European Commission on product safety, (iii) product safety codes of good practice in force in the sector concerned, (iv) the state of the art and technology and (v) reasonable consumer expectations concerning safety. The GPSD further provides that national governments must appoint local authorities to carry out market surveillance to ensure that safety standards are implemented. Besides, the Directive 1999/5/EC on Radio and Telecommunications Terminal, which shall be repealed and replaced by the Directive « RED » n°2014/53/EU from 13 June 2016, applies to the products that use the radio frequency spectrum, e.g. mobile handsets. It specifies in detail the essential the product must meet in order for the manufacturer to affix the CE marking. The essential requirements entail ensuring the health and safety of users, as well as protection requirements with respect to electromagnetic compatibility, and an efficient use of the spectrum so as to avoid harmful interference. Technical documents must enable the assessment of the conformity of the product with the requirements of the Directive, and the copies of which shall be kept by the manufacturer or their authorized representatives in the European Community for the period of ten years after the last product has been placed on the market. Once the necessary steps have been successfully completed, the logo must be affixed to the product. EU legislation restricts the use of hazardous substances in electrical and electronic equipment. Since 2 January 2013, the RoHS Directive 2011/65/EU from 8 June 2011 lays down rules on the restriction of the use of six hazardous substances in electrical and electronic equipment (EEE) with a view to contributing to the protection of human health and the environment, including the environmentally sound recovery and disposal of waste EEE. For this purpose, the Directive states that Member States shall ensure that new electrical and electronic equipment put on the European market does not contain lead, mercury, cadmium, hexavalent chromium, polybrominated biphenyls (PBB) or polybrominated diphenyl ethers (PBDE). The Directive rules the list of restricted substances and their maximum concentration values tolerated by weight in hom*ogeneous materials. With respect to the Directive, Member States shall also ensure that when placing EEE on the market, —

manufacturers ensure that it has been designed and manufactured in accordance with the requirements set out in the Directive (i);

—

importers place only EEE that complies with this Directive on the Union market (ii).

Consumer Protection The Liability for Defective Products (the “Directive 85/374/EEC”), a directive issued by the Council of the EU and published on 7 August 1985, states that producers shall be held liable for damage caused by defects in their products to their product consumers. The Directive 85/374/EEC is important for all sellers in the EU as any defect in the goods leading to damage, defined as death or personal injury or damage to any item of property, can give rise to liability on parties in the chain between the manufacturer and sale of the defective goods.

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REGULATIONS Import licensing All Members States of the EU have adopted a common trade policy towards imports from third countries. The EU has a relatively liberal import regime. In general, import licensing is not required for products entering an EU Member State, except for certain categories of sensitive products like agricultural goods, tobacco, weapons, etc., products governed by quantitative restrictions (i.e. quotas) and surveillance. Currently no license of importation is required for mobile handsets. Import duties One of the most important aspects of the EU trade policy is that the EU is a customs union. The same import duties are charged on imports from third countries regardless of the country of entry. The main principles of custom law are regulated at EU level. If tariff is common to all EU members, VAT rates vary from one state member to another. As the Group sells its product FOB, it is not responsible for payment of import duties. Excise duties The EU applies a tax on a limited numbers of goods such as alcohol, tobacco, fuel. Those Excise duties are specific to each good. No Excise duties are levied currently on mobile handset. Tariff Products imported into the EU are distinguished according to the 8-digit level of the Combined Nomenclature which lists the duty rates applicable to each product. The customs authorities in all 27 Member States must apply the Common Customs Tariff on imports. The tariffs vary from 0% to 45%, depending of the corresponding good and its country of origin. Mobile handsets benefit from a 0% rate on current regulation. Non-Tariff measures In addition to tariffs, the EU has a tradition of making significant use of various non-tariff measures to restrict imports. Non-tariff barriers include not only quantitative restrictions but also regulatory barriers. Specific examples of the quantitative restrictions include import quotas, voluntary export restraints and licensing, while examples of the regulatory barriers include prohibitions for health and safety reasons. Anti-dumping, anti-subsidy and safeguard measures are another important form of trade instruments that lead to restrictions on trade and generally affect the whole European community. Mobile handsets are not subject to non-tariff measures. Therefore, the Group has not been subject to any non-tariff measures. It is impossible to know if EU will establish such non-tariff measures on mobile handset in the future. If EU implements non-tariff measures on mobile handset the Group could be limited in the infiltration into EU markets. VAT VAT is an indirect tax on goods and services which is borne by the end consumer and applied to the value added at each stage of the supply chain. The EU adopted a common regulation on VAT taxation, but each State member determines its own rate. Because this tax is borne by the end consumer the rate variation does not impact business exchanges. VAT is due by the local entities that import the good. Because the Group sells its products FOB, it has no VAT obligations.

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REGULATIONS Anti-dumping Pursuant to the Council Regulation (EC) No. 1225/2009 of 30 November 2009 (the “Council Regulation”), the European Commission is responsible for investigating into allegations of dumping within the EU. It usually conducts an investigation either upon receipt of a complaint from producers of the product within the EU or on its own initiative. The investigation must show that (i) there is dumping pursuant to article 2 of the Council Regulation by exporting producers in the country/countries concerned; (ii) material injury has been suffered by the industry concerned within the EU; (iii) there is a causal link between the dumping and injury found; and (iv) the imposition of measures is not against the interest of the EU. If the investigation comes to the conclusion that the above four conditions have been met, EU authorities may decide to impose anti-dumping measures on imports of the product concerned. These measures can be duties or price undertakings. The duties are paid by the importer in the EU and collected by the national customs authorities of the respective EU countries. Exporting producers may submit to the European Commission “undertakings” agreeing to sell at a price adequate to eliminate the injurious effects of the dumping, or to cease exports at dumped prices. If their offer is accepted, anti-dumping duties will not be imposed on imports. The European Commission is not obliged to accept an offer of an undertaking. To the best information and knowledge of our Directors, we are not aware of any anti-dumping measures imposed on imports of mobile handsets into EU. Any of such measures, if imposed, would be borne by our customers who are the importer of the products. US LAWS AND REGULATIONS Jurisdictional Limitations on Liability As advised by our legal advisers as to the U.S. laws, since our Group does not sell products directly to overseas retail consumers but instead manufactures products according to our customers’ requirements and specifications and deliver our products to our customers primarily on free-on-board terms or ex-factory terms, our Group is not exposed to liabilities with respect to the U.S. law and regulations set out below for reasons set out in more detail below. The Due Process Clause of the Fourteenth Amendment to the U.S. Constitution (the “Fourteenth Amendment”) allows a state to exercise personal jurisdiction over a non-resident defendant only if that defendant has certain minimum contacts with the forum state. The two broad jurisdictional concepts that must be considered when analyzing whether personal jurisdiction exists are “general” and “specific” jurisdiction. As explained below, our Company likely will not be found to have sufficient contacts to satisfy either concept. “General jurisdiction” requires a defendant to defend a lawsuit unrelated to its contacts with a forum if the defendant has had continuous and systematic general business contacts with the state in the U.S. Alternatively, a court may have “specific jurisdiction” over a non-resident defendant when that defendant has purposefully directed its activities at residents of that state, and the litigation results from alleged injuries that arise out of or relate to those activities. More specifically, with respect to general jurisdiction, our legal advisers as to U.S. laws are of the opinion that our Company will likely not be considered to have the kind of continuous and systematic general business contacts with a U.S. forum needed to support the exercise of general jurisdiction. To be subject to general jurisdiction, a defendant must have a continuous and systematic business presence in the forum state. The continuous and systematic contacts test is a difficult one to meet, requiring extensive contacts between a defendant and a forum. Our Company is not registered nor licensed to do business in any state in the U.S.; does not have any offices or places of business in the U.S.; does not own or lease real property in the U.S.; does not maintain any bank accounts in the U.S.; and does not have any employees in the U.S. Most significantly, our Company does not sell directly to any consumers in the U.S.

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REGULATIONS The exercise of specific jurisdiction under the Fourteenth Amendment is proper only where the defendant’s contacts proximately result from actions by the defendant itself that create a “substantial connection” with the forum state. A plaintiff seeking to exercise personal jurisdiction over a defendant must establish that the defendant took affirmative action, purposefully targeted at the forum state, with the intent to serve that market, rather than the U.S. market as a whole. Thus, while our Company’s products are indeed exported to the North America and therefore placed into the U.S. stream of commerce, our Company does not purposefully direct any products to any particular U.S. state because it does not have a direct relationship or contract with any U.S. distributor, nor does our Company have any role in creating or controlling the distribution network in the U.S. for our products. Taken together with the fact that our Company completes all of our transactions in China and/or Hong Kong and does not exercise control over the destinations of our products, our legal advisers as to U.S. laws are of the opinion that our Company likely will not be seen as purposefully availing ourselves of any U.S. forum state. A more detailed analysis as to the inapplicability of the U.S. laws to our Company in respect of (i) importation; (ii) product safety; (iii) anti-dumping; and (iv) import tariffs and duties are set out below. Importation Our Company does not sell products directly to retail customers in the U.S., and therefore it does not import products into the U.S. Instead, our Company delivers our products to our overseas customers located outside the territorial U.S. primarily on free-on-board terms (at PRC ports or Hong Kong ports) or ex-factory terms in accordance with our overseas (non-U.S.) customers’ specifications. Under these circ*mstances, our legal advisers as to U.S. laws are of the opinion that the U.S. laws and regulations relating to import would not apply to our Company directly. Our Company does sell to other companies who distribute our mobile handsets within the United States and offer them for import at U.S. ports of entry. These companies are then responsible for compliance with all applicable U.S. regulations. See 47 C.F.R. § 2.909(b); 19 U.S.C. § 1484. As otherwise indicated herein, our Company does facilitate compliance with some U.S. import regulations, such as certification by the FCC. Our purchasers who seek to offer our mobile handsets for import into the United States must accurately declare these mobile handsets to the U.S. Customs and Border Protection and indicate compliance with rules issued by the FCC. See 19 U.S.C. §§ 1484, 1592. In particular, they must show that our mobile devices have been tested, certified and issued an FCC device ID number for all identical devices. 47 C.F.R. §§ 2.803, 2.1204. Product Safety In the United States, there are two separate and distinct bodies of law that govern product safety for the protection of end users: product liability law and product safety regulations. The first, products liability law, governs private litigation of product accidents. Exposure to United States products liability law is broad and allows consumers to sue the party who designed, manufactured, sold, or supplied an offending product. Based upon the analysis of personal jurisdiction, which is set forth above, our legal advisers as to U.S. laws believe that it is unlikely that our Company can be subject to United States jurisdiction and therefore will likely not be held to U.S. standards for products liability law. Nevertheless, for a full understanding of the issues faced by our Company, the following is an overview of United States’ laws as it relates to products liability. A.

Products Liability Background

There are four basic theories of recovery when dealing with a product alleged to be defective: strict products liability, negligence, breach of warranty, and tortious misrepresentation. Strict products liability is generally the most common cause of action asserted in lawsuits involving allegedly defective products. This is

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REGULATIONS because, unlike negligence, strict products liability wrongs do not depend on the degree of carefulness by the defendant. The analysis depends solely on the product and whether it was defective at the time it left the hands of the manufacturer. Negligence actions, on the other hand, require a plaintiff to show that (1) the defendant owed the plaintiff a duty of due care, (2) the defendant breached that duty by furnishing a defective product, and (3) the defendant’s breach caused the plaintiff’s injury. The duty to exercise reasonable care involves every phase of getting the product to the public, from its design to its packaging and by the failure to provide adequate instructions for its safe use. The breach of warranty cause of action is governed by contract law. The law that governs the sale of goods is Article 2 of the Uniform Commercial Code (the “UCC”). The UCC has been adopted in every state of the U.S. Under the UCC, there are two kinds of warranties: express and implied. An express warranty can be created by a representation by the seller, or by showing a sample of a product to the buyer where the buyer reasonably assumed that a second shipment of the same quality as the first would be provided. An implied warranty, on the other hand, is presumed to exist unless the buyer clearly and unambiguously disclaims it in writing as part of the sales agreement. Finally, misrepresentation claims are similar to warranty in that it seeks to hold a party liable for misrepresenting a material fact about the product which causes either damage or injury. The rules governing misrepresentation claims can be either statutory, and come in the form of consumer protection state laws, or judge-made rules, both of which vary from jurisdiction to jurisdiction in the U.S. B.

Product Safety Regulatory Background

The second body of law is product safety law. The law of product safety is regulatory law and it is administered primarily by the Consumer Product Safety Commission (the “CPSC”), an administrative agency of the United States federal government that regulates certain classes of products sold to the public. The CPSC has jurisdiction over the safety and labeling of consumer products pursuant to three major statutes: (i) the Consumer Product Safety Act (the “CPSA”), (ii) the Consumer Product Safety Improvement Act (the “CPSIA”), and (iii) the Federal Hazardous Substances Act (the “FHSA”). The CPSIA, passed in 2008, constituted a significant overhaul of consumer product safety laws in the United States and was designed to enhance federal and state efforts to improve the safety of all products imported into or distributed within the United States. Products imported into the U.S. which fail to comply with CPSIA’s requirements are subject to confiscation and the importer and/or distributor in the U.S. is subject to civil penalties and fines, as well as possible criminal prosecution. However, while the CPSC works closely with U.S. custom agents, its jurisdiction does not extend beyond the territorial limits of the United States. Under the CPSIA, a “general conformity certification” is required for any consumer product imported into the U.S. that is subject to a consumer product safety rule under the CPSA or is subject to any other rule, standard, regulation, or ban issued by the CPSC pursuant to the CPSA or any other statute. The requirement applies to all manufacturers and importers of goods. Those parties must certify that their products comply with all applicable consumer product safety rules and similar rules, bans, standards, and regulations under any law administered by the CPSC. Such laws include the CPSA, Flammable Fabrics Act, FHSA, and Poison Prevention Act and must be furnished to United States Customs and to the CPSC upon request. The FHSA regulates the safety warnings for “hazardous substances” (as defined in the FHSA) which are required to bear: (i) cautionary labeling to warn the consumer of the hazard(s) associated with the use of the product so as to enable the consumer to safely use and store the product; (ii) first aid instructions where applicable; and (iii) the statement, “Keep out of reach of children.”

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REGULATIONS While regulatory actions can be directed against entities involved in the chain of production and distribution of products, including foreign-based manufacturers, the court in which the claim is brought must possess proper jurisdiction over a non-resident defendant. Our legal advisers as to U.S. laws are of the opinion that our Company, for the same reasons as described above, will likely not have exposure with respect to product safety. C.

Particular Safety Requirements for Mobile Handsets

Most specific regulatory requirements applicable to mobile handsets are issued and enforced by the FCC. The FCC requires that all mobile handsets be tested and certified to comply with various radiofrequency regulations, 47 C.F.R. §§ 15.201, 15.212, as well as for radiation emission limits, 27 C.F.R. §§ 2.902, 2.908, 2.1091. Currently, the FCC limits public radiation exposure from mobile handsets to a Specific Absorption Rate (“SAR”) level of 1.6 watts per kilogram (1.6 W/kg). 47 C.F.R. §§ 2.1091 The Food and Drug Administration also has authority pursuant to the Radiation Control for Health and Safety Act of 1968 to regulate all electronic devices for emission of radiation, including mobile handsets. See 21 U.S.C. §§ 360hh et seq. However, the FDA has not issued a specific regulation to control the radiation emission of mobile handsets, relying instead on the FCC standard. See U.S. Governmental Accountability Office, Telecommunications – Exposure and Testing Requirements for Mobile Phones Should Be Reassessed (July 2012), available at http://www.gao.gov/assets/600/592901.pdf; Laura Grasso, Cellular Telephones and the Potential Hazards of RF Radiation, 3 Va. J.L. & Tech. 2, 20-24 (1998). There are also specific rules that apply to various components of mobile devices. In particular, batteries are regulated by several acts and regulations. For example, the U.S. has restricted the import and use of mercury in all batteries through the Mercury-Containing and Rechargeable Battery Management Act of 1996 (the “Battery Act”). The Battery Act added specific uniform federal regulations for disposition of batteries which replaced the state-by-state ad hoc regulation for disposing of Ni-Cd rechargeable batteries and other common rechargeable batteries. (See 42. U.S.C. §§ 14322–23; see also Universal Waste Rule (Hazardous Waste Management System; Modification of the Hazardous Waste Recycling Regulatory Program), 60 FR 25492-01 (May 11, 1995)). The CPSC has jurisdiction to enforce some of these requirements that may apply to mobile handset batteries, particularly those under the FHSA. However, the CPSC has not issued specific rules applicable to mobile handsets. D.

California Specific Statutes and Regulations

In addition to the regulatory scheme imposed at the federal level and managed by the CPSC, state regulations may also control the distribution of imported products into the U.S. California’s Safe Drinking Water and Toxic Enforcement Act of 1986 (commonly known as the “Proposition 65”) requires that a warning be given before any manufacturer or distributor knowingly exposes anyone in California to any of approximately 800 chemicals identified by the state as a carcinogen and/or a reproductive toxicant. Cadmium, cobalt, lead, lead compounds, mercury, nickel and various phthalates are among the chemicals so regulated. This statute and the related regulations apply to all consumer products sold in California, and may include mobile device batteries containing mercury, nickel or other regulated chemicals. The statute requires specific warnings to consumers for any exposures that may occur from handling a product. Proposition 65 may be enforced by the California governmental authorities or by private citizens and may result in fines of up to US$2,500 per day, per each item sold, in addition to the payment of all legal fees and expenses incurred by the enforcer.

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REGULATIONS As with federal regulatory actions, state regulations can be directed against entities involved in the chain of production and distribution of products, including foreign-based manufacturers, as long as the state court possess proper jurisdiction over a non-resident defendant. Our legal advisers as to U.S. laws are of the opinion that our Company, for the same reasons as described above, will likely not have exposure with respect to state specific regulations. Anti-Dumping Because our Company does not directly import any products into the United States, our legal advisors as to U.S. laws are of the opinion that the U.S. anti-dumping laws do not apply directly to our Company. There are a range of trade laws in the United States which address the issue of imports which may injure or threaten U.S. industries. Under anti-dumping laws (Title VII of the Tariff Act of 1930), the USITC (U.S. International Trade Commission), conducts investigations into whether dumping or subsidization is occurring in products brought into the U.S. market. Whether an item is being dumped or not is assessed on the basis of whether it is being sold at less than fair value in the United States. This means that it is being sold below the producer’s sales price in its home market, or at a price which is lower than the cost of production. Subsidization occurs when a government provides countervailable financial assistance to benefit, production, manufacture and/or export of a good. There is first an assessment made by the Commerce Department that dumping or subsidization is occurring, together with a calculation of the estimated margin of dumping or amount of subsidy, and then the USITC is called upon to determine whether or not there is a material injury or threat to U.S. industry. If such a threat is found, Commerce will issue an antidumping duty and/or countervailing duty order. When such an order is imposed, U.S. Customs and Border Protection is instructed to assess special duties on products subject to the order at the time of their import. After an order has been issued, there is an automatic “sunset” review, no later than five years after the order is issued, which is conducted to assess whether a revocation of the order would lead to the continuation or recurrence of dumping or subsidies and of material injury within a reasonably foreseeable time. In addition to anti-dumping and subsidization investigations, there is a special China safeguards investigation which may also be conducted by USITC. Under this law, the Commission determines whether articles from China are being imported into the United States in such increased quantities or under such conditions as to cause or threaten to cause market disruption to the domestic producers of like or directly competitive products. If the Commission makes an affirmative determination, it proposes a remedy. The Commission sends its report to the President and the U.S. Trade Representative. The President makes the final remedy decision Import Tariffs and Duties Because our Company does not directly import any products into the United States, our legal advisors as to U.S. laws are of the opinion that the U.S. tariff regulations do not apply directly to our Company. Currently the United States does not impose any duties on any mobile handset devices, other than those derived directly or indirectly from Cuba or North Korea. See U.S. International Trade Commission, Harmonized Tariff Schedule, Sect. XVI, Ch. 85, ¶¶ 8517.11.0000, 8517.12.00. There are a number of provisions of U.S. trade law which may allow or result in modification of these duties. While provisions that were specific to the PRC have now expired, see 19 U.S.C. §§ 2451, 2451a, 2451b(c), sections of general application may still be relevant. Sections 201 through 204 of the Trade Act of

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REGULATIONS 1974 (the ‘‘Trade Act’’), 19 U.S.C. §§ 2251 et seq., provide the authority and procedures for the U.S. President to take various actions to facilitate a domestic industry’s adjustment to import competition. For example, if the International Trade Commission determines that an article is being imported in such increased quantities as to cause substantial injury or threaten domestic producers of similar products or products in direct competition with the imported article, the U.S. President may make positive adjustments to import competition and provide greater economic and social benefits to the domestic industry such as increase or impose a duty, or a tariff rate quota. TAIWAN LAWS AND REGULATIONS Importation In accordance with Telecommunications Act (the “TCA”), importation of mobile phones requires prior National Communications Commission (the “NCC”) approval as to each brand and model to be imported. The quantities of devices of each model imported by model number shall be reported to the Ministry of Transportation and Communications for its reference. Before a new model of mobile phones may be imported into Taiwan, a qualified importer shall apply for import permit pursuant to the Administrative Regulations on the Controlled Telecommunications Radio-Frequency Devices (the “CTRFD”). Manufacturers or importers wishing to import mobile phones into Taiwan shall first apply for an approval certificate issued for each brand name and model number of mobile phones. As such, either the Company as the manufacturer or its customer in Taiwan as the importer shall apply for the approval certificate. Upon granting, a compliance approval certificate will be issued by the NCC to the particular model of mobile phones approved. Once a compliance approval certificate is issued by the NCC, massive importation later on of the same model mobile phones will not require separate import permit provided that import permit will be necessary for different brand or different model. The import permit may be applied for by an offshore manufacturer for the offshore manufacturer to authorize importation by other Taiwan importers according to the CTRFD. For importation of semi-end products, materials or parts of mobile phones which are regarded as a controlled telecommunications radio-frequency device, the same procedure as importing mobile phones shall be followed. Product Safety Under the TCA, before mobile phones may be imported and distributed into Taiwan, each model of the mobile phones shall be certified to have conformed to the technical specifications in accordance with technical specifications prescribed and approved by the NCC. Any import or distribution of mobile phones failing to comply with such requirements will be subject to a fine of not less than NT$30,000 and not more than NT$300,000. The fine are payable by the importer or distributor of mobile phones. The Company as a manufacturer shall however not be treated as an importer or distributor under Taiwan laws, and thus it is not under any obligations to pay any fine. The technical specification requirements for 4G, 3G, and 2G mobile phones are prescribed in Administration of Mobile Broadband Businesses Mobile Station, Regulations for Administration of the Third Generation Mobile Communications Business, and Technical Specifications for GSM900 and DCS1800 Mobile Phones respectively. According to PLMN01 GSM900 and DCS1800 Mobile Equipment Technical Specifications as amended 9 May 2012, the Head and Trunk SAR of handsets shall not exceed 2.0Watt/Kg, and a label of such limit and the actual SAR testing value shall be placed on handset, carton and in the user’s manual. The model approval process and documents required are prescribed in the Compliance Approval

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REGULATIONS Regulations of Telecommunications Terminal Equipment (the “CARTTE”). According to Article 16 of the CARTTE, the certificate holder shall refer to the label format printed on the certificate to produce type approval labels or DoC labels, and affix or emboss the labels on the certified equipment before it is offered for sale. Consumer Protection Offshore designers and manufacturers of mobile phones for distribution in Taiwan shall be regarded as business operators under the Consumer Protection Law (the “CPL”), and therefore be jointly liable together with the associated Taiwan business operators for damages sustained by consumers if the mobile phones designed or manufactured are not in compliance with the requirements under the CPL. Mobile phones, including all end products, semi-end products, materials or parts, manufactured for importation into Taiwan are required to meet and comply with the contemporary technical and professional standards of the reasonably expected safety pursuant to the CPL and Enforcement Rules of CPL. For any possible danger to lives, bodies, health or properties of consumers which may be resulted from using or possessing a product, a warning and the methods for emergency handling of such danger shall be labeled at a conspicuous place. Business operators violating the safety and warning requirements and thus causing injury to consumers or third parties shall be liable therefor. For goods imported or distributed that will endanger the safety and health of the consumers, or goods imported or distributed without conspicuous warning labels or descriptions of the methods for emergency handling of such danger, the relevant business operators shall immediately recall such goods according to the CPL. When an imported commodity is introduced for sale in Taiwan, the imported goods shall be accompanied with labels and instructions in Chinese, the contents of which shall not be less comprehensive than the contents of such labels or pamphlets required in the place of their origin according to the CPL. Business operators shall ensure the accuracy of the contents of advertisem*nts and their obligations to consumers shall not be less than what is stated in the advertisem*nts. If a warranty is given, such warranty shall be in writing with contents of warranties, period of the warranties and the method for calculating commencement of such warranty period, name and address of the manufacturer or distributor, and date of the transaction, etc. stated. Failure to comply with the warranty requirements, will subject the business operators fines pursuant to the CPL. When in the opinion of the government agency that the goods or services provided by business operators have endangered or will endanger the lives, bodies, health or property of consumers, such government agency may order such business operators to immediately cease the design, production, manufacturing, processing, importation, distribution of such goods or the rendering of such services, or take other necessary measures. As the use of smartphones becomes popular in Taiwan, there is dramatic increase of consumer disputes arising telecommunication services rendered. At the end of 2013, NCC set up the Telecommunication Consumer Mediation Center (the “TCMC”) to receive and mediate complaints of consumers in order to secure protection of interests of consumers. For disputes among mobile phone manufacturers, distributors and consumers, the submission of such disputes to the TCMC is recommended to avoid unnecessary litigation. As the Company designs and manufactures mobile phones for distribution in Taiwan, it shall be regarded as a business operator for the purpose of the CPL and is subject to the obligations and liabilities set out thereunder.

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REGULATIONS Anti-dumping Importation of any product into Taiwan at a price under its normal value and thereby causing or threatening to cause material injury to domestically produced products or creating material hindrance to the establishment of the domestic industry concerned shall be subject to anti-dumping duties, in addition to customs duties, pursuant to the Customs Act, Foreign Trade Law and the Regulations Governing the Implementation of the Imposition of Countervailing and Anti-Dumping Duties (the “CADD”). The term “normal value” referred to above means the comparable domestic selling price in the country of exportation or origin in the ordinary course of trade. In the absence of such a domestic selling price, the comparable selling price exported to an appropriate third country, or the constructed price consisting of the cost of production in the country of origin plus a reasonable amount for administrative, selling, and other expenses, and normal profit will be the basis for comparison. The determination of “causing or threatening to cause material injury” will be assessed pursuant to the CADD. An anti-dumping complaint shall be filed with the Ministry of Finance (the “MOF”). The MOF will take charge to investigate on the comparison between normal price and selling price, and the International Trade Commission will be responsible to determine whether any injury is sustained. The final determination on whether anti-dumping duties should be imposed is to be rendered by the Tariff Commission. The whole processes will take not more than 260 days which may be extended up to an additional 130 days if necessary. As the characteristic type and size of industries and companies in Taiwan, antidumping matters are focused on steal products, paper products, shoes, cement, chemical and other products. The imported products which are now subject to antidumping duties, according to MOF’s announcements, are towels, shoes and boots, benzoyl peroxide, rongalite, portland cement, SUS 300 series flat-rolled products of stainless steel. There is no precedent existed with respect to investigation or antidumping duties imposing against end or semi-end products of mobile phones so far. In the circ*mstances, the likelihood that the mobile phones manufactured by the Company shall be subject to anti-dumping measures in Taiwan seems remote so far. Import Tariff and Business Tax Importation of mobile phones shall be subject to business tax. Pursuant to the Value-added and Non-value-added Business Tax Act, business tax levied on imported goods will be collected by Customs at the time of importation and calculated based on the total of taxable value and import tariffs. In addition to the business tax, pursuant to the Foreign Trade Act, a trade promotion service fee will be payable for imported goods at 0.04% based on cost, insurance and freight value of the imported goods. The business tax and trade promotion service fees are payable by the importer of mobile phones. The Company as a manufacturer shall however not be treated as an importer under Taiwan laws, and thus it is not under any obligations to pay any business tax and trade promotion service fees. THAI LAWS AND REGULATIONS Regulations on Import of Mobile Phones The Radio Communications Act B.E. 2498 (as amended) imposes a general prohibition on manufacturing, possessing, using, exporting, importing, or trading any radio communication equipment, unless one has been granted a license to engage in such activity by the authorized licensing officer, or unless a the Minister has promulgated a general licensing exemption to engage in some or all of the aforementioned activities, in respect of a particular category of equipment (section 6). Equipment that has type approval can be

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REGULATIONS imported, exported, and traded freely; otherwise, a license would be required. If particular equipment to be imported into Thailand does not yet have type approval, it would be necessary for the first importer to become licensed to import and trade such equipment, and to complete the type approval process. Applications for type approval are to be made by manufacturers, dealers, or importers of the equipment, who are responsible for such equipment, be they individuals of Thai nationality or juristic persons under Thai law. As a foreign company, however, the Company is not eligible to apply for type approval. So, type approval would need to be obtained by another party that is eligible to apply, such as a Thai importer or dealer. In the absence of type approval, licence requirements would be broadly applicable, as noted above. NBTC administers the type approval process. Such is granted after sample equipment (e.g. a mobile phone) undergoes testing for compliance with the applicable technical standards, as adopted by the NBTC. Product Safety and Consumer Protection As noted, mobile phones must meet the applicable standards specified above. In addition, Thailand has a number of laws relevant to product safety and consumer protection. Beyond the Civil and Commercial Code, which provides for, inter alia, general tort liability under its Section 420, product liability and dangerous goods are handled under three primary laws. These include the Consumer Case Procedure Act B.E. 2551 (as amended), the Unsafe Goods Liability Act B.E. 2551, and the Consumer Protection Act B.E. 2522 (as amended). Under the Consumer Case Procedure Act, in a case in which a consumer sues a business operator for a defects in particular goods, if the court determines that such defects existed at the time of delivery of such goods and that it is impossible to repair the goods to normal working condition, or if despite being repaired, the goods may still cause danger to life, body, or health of a consumer using such goods, the court has the power to order the business operator to replace the goods for the consumer instead of repairing them, taking into account the nature of the goods that may be replaceable, the behavior of the business operator, as well as honesty of the consumer (section 41). The law also provides a mechanism by which adjustment can be made if the consumer has benefited from the use of the goods and has caused damage to the goods. In addition, if the business operator sued is not the producer or importer of the goods, the court is to issue an order joining the producer or importer to the case, and the court has the power to hold such party jointly liable for the obligation owed to the consumer by the first-mentioned business operator. If the act upon which the complaint is based arises from the business operator’s willful act to unfairly take advantage of the consumer or intent to cause damage to the consumer, or with gross negligence, indifference to damage to be caused to the consumer, or act in breach of responsibility as a professional or business person who is usually trusted by the public, then the court also has the power to award punitive damages, in addition to actual damages as awarded by the court, as may be deemed appropriate, taking into account such circ*mstances as damage suffered by the plaintiff, benefit received by the business operator, the financial condition of the business operator, relief by the business operator from the damage, and the consumer’s contribution to the damage (section 42). The court has the power to determine punitive damages up to two times the actual damages (as determined by the court). However, if the actual damages determined by the court are THB50,000 or less, the court has the power to determine punitive damages up to no more than five times the actual damages. In addition, if the court makes a determination that particular goods on the market may be dangerous to the life, body, or health of consumers, and no other preventative measures are available, the court can order a business operator to announce and recall the dangerous goods, at the business operator’s expense, for correction or replacement (section 43). If this is not possible, the court can order the business operator to pay the price of the goods, taking account the condition of the goods at the time of the recall, and the honesty of the business operator. The court can also order the business operator not to sell any remaining goods of concern,

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REGULATIONS and to withdraw such goods not yet sold to consumers, until they have been corrected or replaced so that they are safe. If this is not possible, the court may issue an order prohibiting the business operator from producing or importing such goods and, if it is suspected that the business operator may continue offering the remaining goods for sale, order the business operator to destroy the remaining goods. Under the Unsafe Goods Liability Act, all business operators can be held jointly liable for damages suffered by a party, from unsafe goods sold to the consumer (section 5). This applies regardless of whether the damages arise due to intention and/or negligence of the business operators. There are certain exceptions for abnormal/inappropriate use or storage of the goods, and if the damaged party had knowledge that the goods were unsafe (sections 6–7). In addition to compensation under relevant sections of the Civil and Commercial Code, the court can award compensation for damage to mental health, body, health, and/or hygiene of the damaged party (section 11). In the event the injured party dies, such injured party’s husband, wife, children, or descendants shall have rights to compensation for damage to mental health. Further, if it is found that the business operator has produced, imported, or sold goods (i) despite being aware that the goods were unsafe, (ii) whilst being unaware that the goods were unsafe, due to gross negligence, or (iii) despite being aware that the goods were unsafe after production, but importing or selling the unsafe goods without taking appropriate action to prevent damage from occurring, then the court can also award punitive damages up to twice the actual damages. In considering this, the Court is to weigh a variety of factors, including the severity of damage sustained by the injured party, the business operator’s awareness of the danger of the goods, the time period over which the business operator concealed the danger of the goods, the actions taken by the business operator after becoming aware that the goods were unsafe, the benefit received by the business operator, the business operator’s financial condition, the business operator’s efforts to alleviate the harm that occurred, and the responsibility of the injured party with respect to the injury. The Consumer Protection Act provides five broad categories of protection for consumers — the right to receive correct and sufficient information and description as to the quality of goods or services, the right to enjoy freedom in the choice of goods or services, the right to expect safety in the use of goods or services, the right to a fair contract, and the right to have an injury considered and compensated according to law (section 4). To this end, goods must be labelled accurately, the labels must contain the information required by the Act, and the labels otherwise conform to the requirements of the Act (sections 30–35). Advertisem*nts must not be unfair to consumers, must not cause damage to society as a whole, and must otherwise meet the requirements of the Act (sections 22–29). There are also requirements for consumer contracts and receipts, where applicable (sections 35 bis-35 novem). Among these, if a business operator sells any goods or provides any service with a promise to provide a guarantee contract for the consumer, such guarantee contract must be made in writing, signed by the business operator (or its agent), and delivered to the consumer together with the goods or services (as applicable). The Consumer Protection Board is to consider complaints it receives from consumers, has the authority to conduct inspections of goods and/or places of business, and is empowered to order business operators to prove claims they have made (sections 10, 20, & 28). In the case of breach of any of the requirements of the Act, the Consumer Protection Board can order business operators to take corrective action. The Consumer Protection Board may also make announcements or otherwise publicise information on goods or services that may cause damage to consumers or that are prejudicial to their rights, including the names of such goods and the names of the responsible companies (section 10). In addition, when there is reasonable cause to suspect that any goods may be harmful to consumers, the Consumer Protection Board may order the business operator concerned to carry out testing or, if the business operator fails to comply or otherwise delays, without justification, arrange for testing itself, at the business operator’s expense (section 36). If the result of the testing indicates that the goods may be harmful to consumers, and if the harm cannot be prevented by labelling, the Consumer Protection Board can prohibit the sale of such goods and/or can order the business operator to modify the goods. In the event the goods cannot be modified or if the Consumer Protection Board doubts that the business operator would willingly cease selling the goods, it may order the business operator to destroy the goods, or

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REGULATIONS arrange for their destruction itself, at the business operator’s expense. In cases of necessity and urgency, the Consumer Protection Board can prohibit the sale of goods, pending results of testing. Whenever the Consumer Protection Board acts to prohibit the sale of particular goods, such order is to be published in the Government Gazette. Where the Consumer Protection Board thinks fit to institute legal proceedings in response to infringement of a consumer’s rights, or in response to receipt of a complaint from a consumer whose right was infringed, and the Consumer Protection Board is of the opinion that the institution of such legal proceedings will be beneficial to the consumers as a whole, there is a process by which the Consumer Protection Board can initiate civil and or criminal proceedings (section 39). Associations with appropriate objectives can also initiate such proceedings (sections 40–41). The Act also specifies various criminal penalties for a business operator’s non-compliance with different sections of the Act; these include fines and/or imprisonment. The Civil and Commercial Code, the Consumer Case Procedure Act, the Unsafe Goods Liability Act, and the Consumer Protection Act do not contain exemptions for foreign business operators with no presence in Thailand. Moreover, the Penal Code provides that whoever commits an offense within the Kingdom of Thailand shall be punished according to the law (section 4). It goes on to provide that whenever any offense is partially committed within the Kingdom of Thailand, or by the nature of the Commission of which, the consequence resulting therefrom should occur within the Kingdom of Thailand, or it could be foreseen that the consequence would occur within the Kingdom of Thailand, it shall be deemed that such offense was committed within the Kingdom of Thailand (section 5). Thus, the Company is subject to these laws. Import Tariff on Mobile Phones (HS Code 8517.12) For goods imported under HS code 8517.12 (“telephones for cellular networks or for other wireless networks”), the Customs Tariff Decree B.E. 2530 sets a ceiling rate of 5%, which aligns with the basic WTO rate. However, by notification of the Ministry of Finance, goods falling within this HS code are exempt from import duty, in line with the WTO Information Technology Agreement, to which Thailand is party. Import duty exemption for goods imported under this HS code is also provided under a number of Free Trade Agreements (“FTAs”), such as the ASEAN-Australia-New Zealand FTA, the ASEAN-China FTA, the ASEAN-India FTA, the ASEAN-Japan FTA, the ASEAN-Korea FTA, the ASEAN Trade in Goods Agreement, the Agreement on the ASEAN Industrial Cooperation Scheme, the Thai-Australia FTA, the Agreement on Exemption and Reduction of Customs Duty for the Goods Originating in Japan, the Thai-New Zealand FTA, and the Thai-Peru FTA. Where import duty must be paid, such is to be paid by the importer of the goods. Since the Company does not import any goods into Thailand, the Company shall have no obligation under Thai laws to pay any import duty to the Customs Department. Anti-Dumping Duty on Mobile Phones (HS Code 8517.12) No antidumping measures are presently effective with respect to goods falling within HS code 8517.12, originating from any country. In the circ*mstances, the Company is not subject to any antidumping measures on goods falling within HS code 8517.12 under Thai law. PHILIPPINE LAWS AND REGULATIONS Philippine laws are generally territorial in nature. This means that Philippine laws are generally applicable only to acts performed within the Philippines. For the Philippine laws to be applicable to the Company, the Company must be “doing business” in the Philippines.

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REGULATIONS Doing Business in the Philippines The phrase “doing business in the Philippines” has a technical meaning and is defined under the Foreign Investments Act of 1991 (“FIA”) as follows: (a)

soliciting orders from customers in the Philippines;

(b)

soliciting service contracts from customers in the Philippines;

(c)

opening domestic offices, whether called “liaison” offices or branches;

(d)

appointing representatives or distributors domiciled in the Philippines or who in any calendar year stay in the country for a period or periods totaling 180 days or more;

(e)

participating in the management, supervision or control of any domestic business, firm, entity or corporation in the Philippines; and

(f)

any other act or acts that imply a continuity of commercial dealings or arrangements and contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to, and in progressive prosecution of commercial gain or of the purpose and object of the business organization.

The phrase “doing business” does not include the following acts: (a)

mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business, and/or the exercise of rights as such investor;

(b)

having a nominee director or officer to represent its interests in such corporation; and

(c)

appointing a representative or distributor domiciled in the Philippines which transacts business in its own name and for its own account.

The Implementing Rules and Regulations of the FIA further exclude from the definition of “doing business” the following: a.

publication of a general advertisem*nt through any print or broadcast media;

maintaining a stock of goods in the Philippines solely for the purpose of having the same processed by another entity in the Philippines;

consignment by a foreign entity of equipment with a local company to be used in the processing of products for export;

collecting information in the Philippines; and

performing services auxiliary to an existing isolated contract of sale which are not on a continuing basis.

In addition to the activities listed as “doing business” in the FIA, Philippine courts apply a two-fold test (the “Mentholatum Test”) to determine whether a foreign corporation is “doing business” in the Philippines: 1.

The maintenance or continuation within the Philippines of the body or substance of the business or enterprise for which it was organized; and

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REGULATIONS 2.

The existence of acts which imply the continuity of commercial dealings and arrangements, and contemplates, to that extent, the performance of acts or works or the exercise of some of the functions normally incident to, and in progressive prosecution of, the purpose or object of the organization.

Based on the Mentholatum Test, “doing business” in the Philippines covers transactions or series of transactions in pursuit of the main business of the foreign corporation and done with intent to continue such main business in the Philippines. Thus, should a foreign company such as the Group engages in activities falling under the phrase “doing business” as listed under the FIA or as determined by the Mentholatum Test, it is necessary to secure a primary license from the Philippine Securities and Exchange Commission (“SEC”). Based on the given factual background, the Group is not “doing business” in the Philippines for the following reasons: (1)

No active solicitation is made by the Group. It is the Philippine customer that places the purchase orders for the mobile phones;

(2)

The transaction between the Group and the Philippine customer is performed abroad and not within the Philippines because: (a) the products are manufactured abroad, (b) the orders are received and processed abroad, (c) the delivery is to FOB Hong Kong/China port, and (d) the payment is remitted and made abroad. Hence, the entire transaction is performed and consummated outside the Philippines. The fact that the order was initiated in the Philippines on an unsolicited basis does not render the Company as a foreign entity doing business in the Philippines;

(3)

More importantly, the sale of the mobile phones to the Philippine customer is consummated upon delivery by the Group to the Hong Kong/China port. Under Philippine law, ownership is transferred to the Philippine customer upon delivery to the Hong Kong/China port. The “FOB” feature of the sale transaction gives rise to the prima facie presumption on the situs of transfer of ownership. This prima facie presumption is further bolstered by the fact that it is the Philippine customer who arranges the importation of the mobile phones from the Hong Kong/China port to the Philippines. It is also the Philippine customer who obtains all the necessary permits, licenses, and approvals from the relevant Philippine government agencies. Clearly, the intention of the parties is to transfer ownership at the time delivery at the Hong Kong/China port;

(4)

the Group is independent from the Philippine customer. The Philippine customer conducts business under its own name and not as a mere representative of the Company. As mentioned above, the FIA provides that the appointment of a representative or distributor domiciled in the Philippines conducting business under its own name and for its own account does not constitute as “doing business” in the Philippines. The mobile phones are labelled, packaged and sold under the Philippine customer’s brand name. It is the Philippine customer and not the Group that has control over the price, payment terms, and other marketing and distribution strategies of the sale of the mobile phones to Philippine end users. Therefore, the Group has no role in the sale, marketing, and distribution to the end users in the Philippines; and

(5)

In relation to paragraph (4) above, there is no “act” by the Group that would imply pursuing commercial dealings or arrangements in the Philippines. There is no body or substance of the business established in the Philippines since the processing of the order, manufacture of the mobile phones and the delivery to the Philippine customer are all done abroad.

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REGULATIONS Based on the above, it is clear that the Group will not be deemed as “doing business” in the Philippines. Accordingly, Philippine laws are not applicable to the Group. A more detailed analysis as to the inapplicability of the Philippine laws to the Group in respect of (i) importation; (ii) product safety and customer protection; (iii) anti-dumping; and (iv) import tariff and obligation to pay related governmental fees are set out below. Importation Pursuant to Act No. 3846 (The Radio Control Law), and Republic Act 7925 (The Public Telecommunications Policy Act of the Philippines), the National Telecommunications Commission issued Memorandum Circular No. 08-08-2004, and Memorandum Circular No. 08-08-2004A to regulate the purchase, sale, lease and/or retail of mobile phone units, parts and accessories thereof, in the interest of the public. Memorandum Circular No. 08-08-2004A provides two general prohibitions on the importation, sale, and retail of mobile phones to wit: “No person shall engage in the business of a MPD (Mobile Phone Dealer), MPSD (Mobile Phone Supplier/Distributor) and MPRR (Mobile Phone Retailer/Reseller) without first securing the necessary accreditation/permit/registration certificate from the Commission.” “No person or entity shall purchase, sell, retail and/or resell mobile phones, including parts and accessories without a valid MPD Permit/MPRR Registration Certificate issued by the Commission.” The prohibitions show that the obligation to register and obtain permits for the purchase/importation, sale and retail of mobile devices rest with the importer, distributor, dealer of said devices, i.e. such obligation rests on the Philippine customer and not on the Group. The arrangement between the Group and its Philippine customer is that of a sale whereby the Group ships the mobile phones to the Philippine customer on FOB Hong Kong/China shipping terms; consequently, the mobile phones are considered sold upon delivery to the specified Hong Kong/China port. Thus, by the time the mobile phones enter the Philippine jurisdiction, it is already the Philippine customer that owns the mobile phones and logically this is why it is the Philippine customer and not the Group who is responsible for the importation of the mobile phones. The Group is not engaged in the importation of mobile phones into the Philippines because it has already transferred ownership of the goods before the goods even reach Philippine jurisdiction. Therefore, Philippine regulations on importation are imposed on and are applicable to the Philippine customer and not on the Group. Product Safety and Customer Protection Republic Act No. 7394 or the Consumer Act of the Philippines (the “Consumer Act”) is the act intended to protect the interest of the consumer, promote his general welfare and to establish standards of conduct for business and industry. Article 97 of the Consumer Act provides that any manufacturer, producer, importer, whether Filipino or foreign shall be liable to consumers for any defect resulting from the design, manufacture, assembly, packaging and insufficient warnings on the use and hazards of the use of any of their products. A manufacturer or importer shall not be considered as liable under the Consumer Act if it can prove that it did not “place the product” in the Philippine market. Article 4 of the Consumer Act, on the other hand, states that when the goods are manufactured, assembled or processed for another person who attaches his own brand name to the consumer products, and then the latter shall be deemed the “manufacturer.” The pertinent provisions of Articles 4 and 97 of the Consumer Act taken together leads to the conclusion that since the Philippine customer attaches his own brand name to the mobile phones being sold in the Philippine market, then it is the Philippine customer and not the Group that is considered by law to be the “manufacturer” within the purview of the Consumer Act. Furthermore, because of the FOB Hong Kong/China arrangement, title passes from the Group to the Philippine customer at the point of shipment, i.e. Hong Kong/China, the Consumer Act will not apply to the Group considering that the Group was not responsible in “placing the product on the market.”

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REGULATIONS Anti-dumping Republic Act No. 8752, also known as the Anti-Dumping Act of 1999 (the “Anti-Dumping Act”), revised Section 301, Part 2, Title II, Book 1 of the Tariff and Customs Code of the Philippines granted the Tariff Commission, the power to impose, under certain circ*mstances, a special anti-dumping duty on products, commodities or articles imported into the country. Anti-dumping duty refers to a special duty imposed on the importation of a product, commodity or article of commerce into the Philippines at less than its normal value when destined for domestic consumption in the exporting country, which is the difference between the export price and the normal value of such product, commodity or article. A final determination that the importation of a product, commodity or article is in violation of the Anti-Dumping Act results to the imposition of an anti-dumping duty on such products from the exporting country. An anti-dumping duty is adopted through the issuance of a Department Order describing the product, country, duration and the rate to be imposed on any such importation. The duration of the anti-dumping duty shall not exceed 5 years from the date of its imposition, or from the date of the most recent review. The liability for duties, taxes, fees and other charges attaching on importation constitutes a personal debt due from the importer to the government that can be discharged only by payment in full of all duties, taxes, fees and other charges legally accruing. It is the importer/consignee, the Philippine customer, who is personally liable for the payment of all duties, taxes and fees, including any anti-dumping duty that may be imposed on the importation of the mobile phones. The antidumping duty is a liability of the importer and must be settled prior to the release of the goods by the Bureau of Customs. In the event that there is an allegation of a violation of the Anti-Dumping Act, the only possible participation of the Group would be in relation to the investigation to be conducted by the Tariff Commission whereby the Group being a producer/exporter will be given due notice that an investigation is being conducted and will be given the opportunity to submit evidence to dispute the claim of an anti-dumping violation. Import Tariff and Related Governmental Fees Section 101 of the Tariff and Customs Code of the Philippines provides: Section 101. Imported Articles Subject to Duty. — All articles, when imported from any foreign country into the Philippines, shall be subject to duty upon each importation, even though previously exported from the Philippines, except as otherwise specifically provided for in this Code or in other laws. Import duty and taxes are due when importing goods into the Philippines. The valuation method is CIF (Cost, Insurance and Freight), which means that the import duty and taxes payable are calculated on the complete shipping value, which includes the cost of the imported goods, the cost of freight, and the cost of insurance. In addition to duty, imports are subject to sales tax (VAT), and customs processing fees. The liability for payment of import duties is on the importer/consignee. The release of the goods from the customs bureau is contingent on the payment of such applicable duties and taxes. The mobile phones manufactured by the Group are delivered on an FOB Hong Kong/China port basis. As mentioned earlier, the goods are considered sold upon delivery at Hong Kong/China port and it is at the point of delivery that ownership and risk of loss over the goods is transferred to the buyer, the Philippine customer. Consequently, by the time the mobile phones enter the Philippines, ownership has already been vested with the Philippine customer and, therefore, it is the Philippine customer who shall be solely responsible for the shipping and importation of the mobile phones into the Philippines. Consequently, it is the Philippine customer who shall be responsible for the payment of the import duties, taxes and fees that may be assessed in the processing and release of the mobile phones.

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REGULATIONS COMPLIANCE WITH LAWS AND REGULATIONS As to product quality and safety, most of our customers would require us to supply our products in compliance with their specific safety standards. In order to ensure that our products meet our customers’ stringent requirements on product quality and safety, we maintain quality control procedures for our raw materials used for production, our finished products supplied to our customers and our components sold. Our quality control personnel supervises the implementation of a comprehensive quality control system at various stages of production on site at our EMS providers and we sent our products for quality testing to obtain the product quality certificates required by our customers where necessary. The table below shows a list of the standards implemented or specific requirements for mobile handsets or consumer electronic products in certain jurisdictions and we supply products satisfying these standards accordingly: Jurisdictions

Standards

Authority and scope

RoHS

RoHS is acronym for directive on the restriction of the use of certain hazardous substances in electrical and electronic equipment, which is adopted by the EU.

Thailand

Compliance with CE standards is mandatory as required by the National Broadcasting and Telecommunications Commission (the “NBTC”) of Thailand. An NTC ID number will be granted upon application for accreditation of compliance with CE standards by the NBTC. The NTC ID number shall be marked on IMEI label, label on the gift box and the carton of the products for identification.

Taiwan

NCC

NCC stands for National Communications Commission of Taiwan, which is the regulatory authority of telecommunications services and type approval. Each model will be granted a unique number to be labelled on IMEI label and gift box of the product after testing and accreditation by institutions authorised by the NCC.

India

BIS

Under the Bureau of Indian Standards Act, 1986, BIS establishes Indian Standards in relation to any article or process and amends, revises or cancels the standards so established as may be necessary, by a process of consultation involving consumers, manufacturers, Government and regulatory bodies, technologists, scientists and testing laboratories through duly constituted committees. According to the BIS, among others, all the new design of mobile handsets in India shall comply with the Specific Absorption Rate (SAR) values of 1.6 W/kg averaged over 1 gram of human tissue with effect from 1 September 2012, failing which, the mobile handsets will not be permitted to be imported into India. The information on SAR values should be made available to the end-consumer at the point of sale.

The U.S.A

FCC

FCC Rules are adopted by FCC and apply to among others, IT equipment.

– 103 –

REGULATIONS Jurisdictions

Standards

Authority and scope

Philippines

NTC

NTC stands for National Telecommunications Commission, which is the regulatory authority responsible for the regulation of telecommunications equipment and services in the Philippines. Mobile phones, which fall under the general category of customer premises equipment, are subject to type approval/type acceptance by the NTC. The mobile phone shall be marked by a tamper proof label prescribed by the regulations, containing, among others, the type approval number issued by the NTC.

Our legal compliance personnel manage the process of obtaining, updating and renewing various permits and licenses required for our operations in China, as well as review the contracts to be entered into by us in various aspects of our operations. We have received no allegations on PRC or overseas regulatory non-compliance, or material quality complaints, or allegations for intellectual property rights infringements, or litigations against our Group or our Directors during the Track Record Period and up to the Latest Practicable Date. Accordingly, our Directors consider that our Group is not exposed to material liabilities as a result of any such overseas laws and regulations. To the best knowledge of the Directors, the Group has complied with the applicable laws and regulations referred to in this section in all material respects during the Track Record Period and there is no material litigation or claim known to the Directors to be pending or threatened by or against the Group. IMPACT OF INTERNATIONAL SANCTIONS LAWS During the Track Record Period, we had exported mobile handsets in the ordinary course of business to customers in Sanctioned Countries, namely, Yemen and Venezuela, and also certain customers in Russia (where certain Sanctioned Persons are located). In light of our Group’s sale of products to customers in the Sanctioned Countries and Russia (where certain Sanctioned Persons are located), we have appointed DLA Piper, an international law firm, to determine whether our sale of products to the Sanctioned Countries and Russia (where certain Sanctioned Persons are located) during the Track Record Period violate the International Sanctions. As advised by DLA Piper, our legal advisers as to International Sanctions laws, our Group’s historical sales and other business activities in Yemen, Venezuela and Russia (where certain Sanctioned Persons are located) during the Track Record Period are not sanctioned activities under International Sanctions laws and do not implicate the applicability of the relevant sanctions laws on our Group, or any, person or entity, including our Group’s investors, the Stock Exchange, the HKSCC and the HKSCC Nominees. For details on our business activities in the Sanctioned Countries and Russia (where certain Sanctioned Persons are located) and impact of sanctions laws, please refer to the section headed “Business — Business Activities in Sanctioned Countries” in this prospectus.

– 104 –

HISTORY, DEVELOPMENT AND REORGANISATION ORIGIN AND OUR HISTORY Ms. Rong, one of our Founders, worked for a mobile handset distribution business in mid 1990s. Seeing the potential demand, growth and development of mobile handsets in the PRC, Ms. Rong and Mr. Ni with their personal savings established Tianyu in 2002 with Mr. Rong Shengli and Ms. Liu Fang to engage in mobile handsets business. To develop the R&D capability of our Founders’ mobile handset business, Benywave Technology was established as a Sino-Foreign Equity JV in PRC in July 2004, owned as to 65% by Tianyu and 35% by Vital Profit (a BVI company held by an Independent Third Party). Following the establishment of Benywave Technology, the entire equity interest in Tianyu and Vital Profit were acquired by our Founders in December 2004 and September 2005, respectively. In 2006, Tianyu registered the trademark “天語” and obtained approval for producing GSM and CDMA mobile handsets following the liberalization of the issue of licenses for sale of mobile handsets by PRC government. In 2006, our Founders considered that it would be more cost-effective to outsource the assembling of mobile handsets to third party EMS providers and hence terminated its manufacturing operations. Foreseeing the potential in mobile handsets market in emerging markets, since 2007, Benywave Technology commenced exporting mobile handsets through the well established mobile handset distributors and telecom operators in India who were willing to outsource the design and manufacture of the mobile handset to Benywave Technology. In 2008, Favor Gain (a company owned by WP) agreed to invest conditionally in Benywave Technology through Vital Profit subject to the completion of reorganisation pursuant to which all the mobile handset related business of Tianyu shall be carried out by Benywave Technology and Tianyu shall not conduct business in competition with or relates to Benywave Technology. Hence, Benywave Technology has gradually taken up all the mobile handset related business from Tianyu except that Tianyu still holds certain trademarks used by Benywave Technology for its own branded mobile handsets business in the PRC. For details, please refer to the subsection headed “WP Investment” in this prospectus below. Our overseas sales volume has grown substantially from 1.1 million units in 2007 to 4.3 million units in 2009. In 2010, our management decided to delineate and separate our overseas operations from the PRC operations as they serve different customer base under a different business model due to difference in market dynamic, each requiring a dedicated team of management and R&D staff to operate. In 2014, Benywave Technology was split into two legal entities in accordance with the PRC Company Law and the Provisions of the Ministry of Foreign Trade and Economic Co-operation and the State Administration for Industry and Commerce on Merger and Split of Foreign Invested Enterprises 《 ( 對外貿易經濟合作部、國家工商行政總局關於外商投資企業合併與分立的規定》). With Benywave Technology assuming the PRC Business, the newly established entity Benywave Wireless assumed the Overseas Business and became the principal subsidiary of our Group. OUR MILESTONES The key milestones of the development of our Group and the Excluded Group (before the Split) are as follows: Year

Events

2002

Establishment of Tianyu by our Founders and other parties which was primarily engaged in trading of mobile handsets in the PRC

– 105 –

HISTORY, DEVELOPMENT AND REORGANISATION Year

Events

2004

Establishment of Benywave Technology by Tianyu and Vital Profit (a BVI company owned by an Independent Third Party) primarily engaged in R&D and manufacturing of mobile handsets on ODM basis with own manufacturing plant for PRC market The Founders acquired 100% of the equity interest in Tianyu

2005

The Founders acquired 100% of the equity interest in Vital Profit

2006

•

Ceased to operate self-owned manufacturing plant and commenced to outsource all the assembling of mobile handsets to third party EMS providers

•

Tianyu registered the trademark “天語” and obtained approval for producing GSM and CDMA mobile handsets following the liberalization of the issue of licenses for sale of mobile handsets by PRC government

2007

Commenced Overseas Business by exporting mobile handsets (feature phones) on ODM basis to India

2008

•

Favor Gain completed its investment in Benywave Technology through Vital Profit and mobile phone related business was transferred from Tianyu to Benywave Technology

•

Benywave Technology became the principal operating subsidiary of the Tianyu Group

2011

Succeeded in developing and design of smartphones and commenced supplying smartphones

2012

•

Overseas Business commenced to switch product focus from feature phones to smartphones

2013

•

Became one of the leading ODM smartphone suppliers in the PRC for overseas markets

2014

•

Split of Benywave Technology into two legal entities in 2014 where Benywave Technology assumed the PRC Business and the newly established Benywave Wireless assumed the Overseas Business

•

Incorporation of our Company and set up of offshore structure for the Listing

•

Benywave Wireless which assumed the Overseas Business became the principal subsidiary of our Group

– 106 –

HISTORY, DEVELOPMENT AND REORGANISATION FIRST EQUITY TRANSFER IN 2007 In May 2007, in anticipation of forthcoming investment by Favor Gain in Vital Profit, Tianyu transferred its entire 65% equity interest in Benywave Technology to Vital Profit for the sum of US$2,192,800. Consequently, Vital Profit became the owner of 100% equity interest in Benywave Technology and Benywave Technology was changed from a Sino-Foreign Equity JV into a WFOE. SECOND EQUITY TRANSFER IN 2007 In August 2007, to enjoy the then preferential PRC governmental policies in favour of sino-foreign enterprises as compared to wholly-foreign owned entities, Vital Profit transferred 65% equity interest in Benywave Technology back to Tianyu for the sum of USD2,192,800. Consequently, Benywave Technology was changed from a WFOE into a Sino-Foreign Equity JV with Vital Profit holding 35% of its equity interest and Tianyu holding 65% of its equity interest. CAPITAL INCREASE IN 2007 In October 2007, the registered capital of Benywave Technology was increased from RMB28,000,000 to RMB200,000,000. The total increased capital in the sum of RMB172,000,000 was contributed as to RMB127,800,000 by Tianyu and the remaining RMB44,200,000 by Vital Profit. Consequently, the total capital contribution made by Tianyu to Benywave Technology was RMB146,000,000 (73%) and the total capital contribution made by Vital Profit to Benywave Technology was RMB54,000,000 (27%). Immediately after the capital increase in 2007, the corporate structure of Benywave Technology was as follows:

Ms. Rong 90%

Mr. Ni 90%

10%

Tianyu (PRC)

10%

Vital Profit (BVI)

73%

27% Benywave Technology (PRC)

WP INVESTMENT In April 2008, Tianyu, Vital Profit, Benywave Technology, Ms. Rong, Mr. Ni, WPPE and WPX entered into a framework agreement pursuant to which WPPE and WPX agreed to invest up to RMB525,000,000 in Tianyu, Vital Profit and Benywave Technology by subscribing for shares in Vital Profit. Such investment was subject to (amongst other things) the following conditions: (i)

on or before 31 December 2008, the business of Tianyu, Vital Profit and Benywave Technology and its subsidiaries, primarily consisting of the development, design, distribution and sale of mobile telecommunications equipment and consumer electronics, software development in respect of such equipment and consumer electronics, shall be transferred to and carried out by Benywave Technology;

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HISTORY, DEVELOPMENT AND REORGANISATION (ii)

on or before 31 December 2008, Tianyu or its subsidiaries will not carry on any business or transaction or activity which competes with or relates to Benywave Technology; and

(iii) on or before 31 December 2008, all proprietary assets of Tianyu and its subsidiaries (including trademarks) shall be licensed exclusively to Benywave Technology. In May 2008, Winmate was acquired by Ms. Rong and Mr. Ni as their investment holding company for holding shares in Benywave Technology. Winmate was owned as to 90% thereof by Ms. Rong and 10% thereof by Mr. Ni. Pursuant to the said framework agreement, Ms. Rong, Mr. Ni, Vital Profit, Winmate and Favor Gain (a company owned by WPPE and WPX, funds managed by Warburg Pincus LLC, a global private equity firm) entered into an ordinary share subscription agreement dated 18 June 2008 under which Favor Gain agreed to subscribe for up to 972,222 ordinary shares of Vital Profit for US Dollars equivalent of RMB525,000,000. It was agreed that the subscription proceeds shall be used by Vital Profit for its capital contribution to Benywave Technology, for its own working capital and for the development of Benywave Technology’s business or other use as unanimously approved by the board of Vital Profit. The said subscription was duly completed in June 2008 whereupon Vital Profit issued 972,222 ordinary shares to Favor Gain representing 8.861% of its issued share capital after allotment and the shareholding of the Founders (through Winmate) in Vital Profit was reduced to 91.139%. Pursuant to the a capital increase and share transfer agreement entered into by Tianyu and Vital Profit in May 2008, it was agreed that the registered capital of Benywave Technology shall be increased from RMB200,000,000 to RMB680,000,000 and that the whole of the increased capital in the sum of RMB480,000,000 shall be contributed by Vital Profit. On 16 July 2008, the registered capital of Benywave Technology was increased from RMB200,000,000 to RMB680,000,000. After such capital increase, Tianyu held 21% and Vital Profit held 79% of the total capital contribution of Benywave Technology. Under the said ordinary share subscription agreement, Vital Profit, Winmate and the Founders have covenanted with Favor Gain that (amongst other things) Tianyu will not directly or indirectly engage or participate in or be connected with or be interested in any business competing with the business of Vital Profit, Benywave Technology and their subsidiaries. Furthermore, they have also covenanted with Favor Gain that on or prior to 31 December 2008, (amongst other things) (i) the business of Vital Profit, Benywave Technology and Tianyu in the development, design, distribution and sale of mobile telecommunications equipment and consumer electronics, software development in respect of such equipment and consumer electronics shall be carried out by Benywave Technology, (ii) all employment, purchase orders, contracts, receivables, payables, inventory, technology and assets of Tianyu shall be transferred to Benywave Technology; and (iii) all proprietary assets of Tianyu and its subsidiaries (including trademarks) shall be licensed exclusively to Benywave Technology.

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HISTORY, DEVELOPMENT AND REORGANISATION So, immediately following the completion of the said capital contribution by Vital Profit to Benywave Technology, the corporate structure of Benywave Technology was as follows:

Mr. Ni

Ms. Rong 90%

10%

WPPE & WPX

10%

100% Favor Gain (BVI)

Winmate (BVI)

90%

8.861%

91.139% Tianyu (PRC)

Vital Profit (BVI) 79%

21% Benywave Technology (PRC)

Following the completion of the investment by Favor Gain, all the mobile communication device business of Tianyu was shifted to Benywave Technology, and Benywave Technology has been licensed to use the trademarks “天語” and “K-Touch” free of charge. As at the Latest Practicable Date, Tianyu Group was not engaged in any business which might compete with Benywave Technology or our Group. Ms. Rong and Mr. Ni completed the registration for SAFE Circular No. 75 on 7 April, 2008, and subsequently updated the information on 27 June 2008 and on 24 March 2009. SAFE Circular No. 37 replaced SAFE Circular No. 75 on 4 July 2014. Ms. Rong and Mr. Ni are not required to make amendments to this registration under SAFE Circular No. 37. For further details relating to SAFE Circular No. 75 and SAFE Circular No. 37, please refer to the subsection headed “Regulation — SAFE Circular No. 75 (Repealed) and SAFE Circular No. 37” in this prospectus. Details of the share subscription in the Company by Favor Gain (being a spin-off of part of the original investment of Favor Gain in Vital Profit) as described in the subsection headed “Reorganisation” in this prospectus below with analysis are as follows: Shareholding in the Company upon Listing

Use of Date of

Agreement of

investment

consideration

Payment

Cost per

agreement

paid

date

share (1)

US dollars

25 June

(RMB)

equivalent of

2008

11.61

18 June 2008

Premium to the Offer Price

(2), (3) and (4)

454.11%

proceeds

Shareholding

(before the sale

in the

of the Sale

utilized)

Company

Shares)

Business

5.32%

(fully

development

Strategic benefits to the Company

Knowledge and experience in the

RMB525

development of

million

business strategy

– 109 –

HISTORY, DEVELOPMENT AND REORGANISATION Notes: (1)

Upon Listing, the issued share capital of the Company will comprise of 850,000,000 Shares, and Favor Gain shall be entitled to 5.32% (45,220,000 Shares) before the sale of the Sale Shares. Therefore, cost per share will be RMB11.61 (RMB525,000,000/45,220,000 Shares).

(2)

Assuming the Offer Price is fixed at HK$2.64 being the mid-point of the indicative Offer Price range.

(3)

Assuming that RMB ~ HKD exchange rate is RMB1 to HKD1.26.

(4)

The premium is ((RMB11.61 × 1.26)-HKD2.64) ÷ HKD2.64 (i.e. 454.11%)

The investment of Favor Gain in Vital Profit was determined as a result of arm’s length negotiations with reference to a multiple of the valuation of Vital Profit’s interest in Benywave Technology. SPECIAL RIGHTS OF FAVOR GAIN Set forth below is a summary of the principal special rights granted to Favor Gain under the ordinary share subscription agreement dated 18 June 2008 and under the amended articles of association of Vital Profit (collectively “Special Shareholders’ Rights”). On the formation of our Company, the articles of association of our Company contained provisions for shareholders’ protection substantially similar to those provisions set out in the amended articles of association of Vital Profit (including Special Shareholders’ Rights) with a view to preserving the shareholders’ protection for Favor Gain in the Company prior to the Listing. All Special Shareholders’ Rights for preserving the shareholders’ protection for Favor Gain in the Company shall lapse upon Listing. Director’s nomination right

Before Favor Gain had transferred more than 50% of its shares originally subscribed in Vital Profit, Favor Gain had the right to nominate one (1) director onto the board of Vital Profit.

Veto rights

Resolution involving certain matters shall require the approval of all the shareholders or all the directors (as the case may be) of Vital Profit including but not limited to amendment of constitutional documents, mergers and acquisitions, determination of business plans, payment of dividends, restructuring, change in capital, the incurrence of borrowing, guarantee or financing liabilities with an aggregate value of 10% or more of the net assets and change in the principal business activities of Vital Profit and its subsidiaries.

Anti-dilution Protection

If Vital Profit proposes to offer any new shares, it shall first make an offer of such new shares to its existing shareholders on a pro-rata basis.

Listing covenants

Before Vital Profit shall list its shares on any stock exchange, Tianyu shall not list, or plan to list any of its share on any stock exchange and Tianyu shall not carry on any business, transaction or activity which competes with or relates to Benyware Technology for listing on any stock exchange.

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HISTORY, DEVELOPMENT AND REORGANISATION Information rights

Favor Gain shall be entitled to receive periodic unaudited financial information on Vital Profit and its subsidiaries and audited annual consolidated financial statement of Vital Profit and its subsidiaries.

Right of first refusal

A shareholder who wishes to sell its shares in Vital Profit shall provide a right of first refusal to the other shareholders.

FURTHER INFORMATION ON FAVOR GAIN The Company considers that Favor Gain’s investment in Benywave Technology is a pre-IPO investment. Favor Gain is a company owned by WPPE and WPX, funds managed by Warburg Pincus LLC, a global private equity firm. Mr. Tang Shun Lam (鄧順林), our non-executive Director, has been a consultant of Warburg Pincus LLC since 2007. Save as aforesaid, Favor Gain has no other relationship with the Group or connected persons of our Company. Shares held by Favor Gain are not subject to any lock-up after Listing. Such Shares are not considered as part of the public float for purposes of Rule 8.08 of the Listing Rules. Based on the information disclosed in relation to Favor Gain’s investment in this prospectus, Sole Sponsor confirms that such investment is in compliance with the interim guidance and guidance letters on pre-IPO investments issued by the Stock Exchange and such investment has been completed at least 28 clear days before the date of the first submission of the listing application form in respect of the Listing. EQUITY TRANSFER IN 2010 In July 2010, Tianyu transferred its entire 21% equity interest in Benywave Technology to Vital Profit for the sum of RMB184,064,700. Since then, the entire equity interest in Benywave Technology has been owned by Vital Profit, and Benywave Technology has been changed from a Sino-Foreign Equity JV to a WFOE in December 2010. Immediately after the equity transfer in 2010, the corporate structure of Benywave Technology was as follows:

WPPE & WPX

Ms. Rong

Mr. Ni

90%

100% Favor Gain (BVI)

10% Winmate (BVI)

8.861%

91.139% Vital Profit (BVI) 100% Benywave Technology (PRC)

means principally engaged in investment holding means principally engaged in the PRC Business and the Overseas Business

– 111 –

HISTORY, DEVELOPMENT AND REORGANISATION SHAREHOLDING ADJUSTMENT IN 2014 At the time when Favor Gain completed its investment in Benywave Technology via Vital Profit, Vital Profit only owned 79% equity interest in Benywave Technology. Therefore, the 8.861% equity interest of Favor Gain in Vital Profit at that time represented approximately 7% indirect equity interest in Benywave Technology. After the transfer of 21% equity interest in Benywave Technology from Tianyu to Vital Profit, the actual percentage of shareholding of Favor Gain in Vital Profit should be adjusted from 8.861% to 7% and the percentage of shareholding of Winmate in Vital Profit should be 93%. Transfer of shares in Vital Profit by Favor Gain to Winmate to effect such adjustment has been made on 7 August 2014. Following the adjustment of the shareholding in Vital Profit between Winmate and Favor Gain, the corporate structure of Benywave Technology was as follows:

Ms. Rong

WPPE & WPX

Mr. Ni

90%

100% Favor Gain (BVI)

10% Winmate (BVI)

93%

Vital Profit (BVI) 100% Benywave Technology (PRC)

18 subsidiaries (PRC)

means principally engaged in investment holding means principally engaged in the PRC Business and the Overseas Business

REORGANISATION The reorganisation of Benywave Technology in preparation of the Listing consists of (a) the Split; and (b) the subsequent restructuring. (a)

The Split

Since 2010, our management considered that the PRC Business and the Overseas Business were different in business model, target customers, pricing and settlement and has started to delineate and separate their operation and management. For details, please refer to the subsection headed “Relationship with Controlling Shareholders — Delineation of Business” in this prospectus. However, our management had no plan to go for a listing in 2010 when it first started managing the PRC Business and Overseas Business separately. Since our management had mainly focused on product improvement (i.e. feature phones to smartphones and then 4G smartphones) and business expansion and they

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HISTORY, DEVELOPMENT AND REORGANISATION had been able to make clear assessments on the performance of the PRC Business and Overseas Business separately based on the financial records maintained for each of the two businesses from an operational perspective, they did not carry out any major corporate restructuring nor intend to form a new legal entity to carry on the Overseas Business from 2010 to 2012. Having considered that the PRC Business and the Overseas Business have different business model, target markets and customer portfolio which may attract different investor base, the management has started to seek for professional advice since early 2013 for the legal procedures of splitting of the Overseas Business and the PRC Business and assessing whether the financial information of the Overseas Business and the PRC Business can be properly segregated in accordance with international accounting standards for clear cut corporate structure and better delineation between the PRC Business and the Overseas Business so as to enhance flexibility in equity financing as well as loan financing which may be beneficial for the operations of the two businesses. As it takes time for the professional advisors to assess the validity of the reorganisation and the impact on our Group’s business and financials, as well as the carrying out of the requisite legal procedures; and it takes time for Benywave Technology to communicate with the stakeholders, shareholders and regulatory bodies in completing the legal procedure, the reorganisation was not completed until July 2014 after all the procedures have been properly carried out and the business license of Benywave Wireless having been obtained. On 29 April 2014, the board of Benywave Technology has resolved to split Benywave Technology into two separate legal entities, namely Benywave Technology and Benywave Wireless. Benywave Technology would retain the PRC Business only and the new entity Benywave Wireless would focus solely on the Overseas Business. On 29 April 2014, Benywave Technology and Benywave Wireless entered into the Split Agreement in respect of the Split, which sets out the allocation of capital, assets and liabilities. For further details of the Split, please refer to the section headed “Relationship with Controlling Shareholders” of this prospectus. The Split was approved by Beijing Municipal Commission of Commerce (北京市商務委員會) in PRC in July 2014 and Beijing SAIC issued the business licence to Benywave Wireless on 22 July 2014. Benywave Wireless was formally formed on 22 July 2014, with its sole shareholder being Vital Profit. According to the business licence obtained by Benywave Wireless on 22 July 2014, the business scope of Benywave Wireless is software development, the wholesale of communication facilities, communication equipment and components, import and export of goods, import and export of technology and technology promotion service. The registered capital of Benywave Wireless is RMB100,000,000. According to a replacement business license obtained by Benywave Wireless on 5 August 2014, the business scope of Benywave Wireless had been changed to assembling and manufacture of mobile handsets products; research and development of mobile handsets products; software development; the wholesale of communication facilities, communication equipment and components, import and export of goods, import and export of technology and technology promotion service. According to our PRC Legal Advisers, the Split had been properly and legally settled and completed, and all approvals from relevant authorities had been obtained. According to the Split Agreement entered into by Benywave Technology and Benywave Wireless, Benywave Wireless was to assume all rights and obligations relating to the Overseas Business. The assets and liabilities related to the Overseas Business were assumed by and fully recorded in the books and records of Benywave Wireless and the Group. All the liabilities in relation to the unsettled payments for purchases of raw materials were recorded as a trade payable to Benywave Technology as at 31 December 2012 and 31 December 2013. The purchases of raw materials made by Benywave Technology from third party suppliers on behalf of the Overseas Business during the Track Record Period were treated as if Benywave Technology then sold these raw materials to the Overseas Business at the same time. For the unsettled payments as at the year end, it was

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HISTORY, DEVELOPMENT AND REORGANISATION recorded as trade payables owe to Benywave Technology by the Group. As at 31 December 2014, all the trade payables owe to Benywave Technology by the Group have been settled. During the process of the Split, Benywave Technology had to inform all its creditors of the Split and the creditors are entitled to request Benywave Technology to repay the debts or provide guaranty within a certain period of time. No such request had been made during the prescribed period. Under the PRC law relating to the Split, unless otherwise agreed, the liabilities of the entity before the split should be jointly and severally assumed by the entities formed after the split, even if such liabilities are not related to the Overseas Business. Hence, while Benywave Technology was issuing the notice, it has also requested the creditors to confirm and agree to the arrangement under the Split including that Benywave Wireless shall not bear any joint and several liabilities with Benywave Technology. Such confirmation was obtained to protect Benywave Wireless from unforeseen contingent liabilities incurred under the PRC Business in view of i) all the assets and liabilities related to the Overseas Business were assumed by and fully recorded in the books and records of Benywave Wireless and the Group, hence the amounts recorded as at each of the years ended 31 December 2012, 2013 and 2014 have already fully reflected the amount of liabilities the Overseas Business and the Group was entitled to, based on the management's record; ii) Benywave Wireless has entered into new purchase agreements or established direct purchase relationship with its suppliers after the Split, which Benywave Wireless and the Group are responsible for settling the payments to the suppliers. Hence such confirmation from the creditors would help Benywave Wireless to avoid being claimed for liabilities not related to the Overseas Business after the Split. Upon completion of the Split, Benywave Technology shall carry on the PRC Business and Benywave Wireless shall carry on the Overseas Business, and the management, finance and operations of Benywave Technology and Benywave Wireless are delineated. Immediately following the Split and formation of Benywave Wireless, the corporate structure of Benywave Wireless and Benywave Technology was as follows:

Ms. Rong

WPPE & WPX

Mr. Ni

90%

100% Favor Gain (BVI)

10% Winmate (BVI)

93%

Vital Profit (BVI) 100%

100%

Benywave Technology (PRC)

Benywave Wireless (PRC)

18 subsidiaries (PRC) means principally engaged in investment holding means principally engaged in the PRC Business means principally engaged in the Overseas Business

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HISTORY, DEVELOPMENT AND REORGANISATION (b)

Subsequent Restructuring

Our Company was incorporated on 12 August 2014 as the holding company of our Group as well as the listing vehicle. On incorporation, the authorized share capital of our Company was HK$50,000 divided into 500,000 Shares of par value of HK$0.10 each. One subscriber Share was allotted, issued and credited as nil paid to Sharon Pierson as the initial subscriber. On the same day, Sharon Pierson transferred the one Share to Winmate. Furthermore, 92 new Shares and 7 new Shares with par value of HK$0.10 each were issued and allotted to Winmate and Favor Gain respectively pro-rata to their respective shareholdings in Vital Profit. None of the 100 Shares in our Company issued to Favor Gain and Winmate were paid up on allotment. Vital BVI was incorporated on 27 June 2014. On 14 August 2014, our Company was issued with one share therein with par value of US$1.00 each being its entire issued share capital. The one share in Vital BVI so issued to our Company was paid up upon allotment. On 4 July 2014, Vital HK was incorporated and one share was allotted and issued to Billion Well Nominees Limited and was fully paid. On 14 August 2014, Billion Well Nominees Limited transferred the one share in Vital HK to Vital BVI and Vital HK has become a wholly-owned subsidiary of Vital BVI. Upon the establishment of Vital HK in 2014, it applied for the Radio Dealers Licence (Unrestricted) and we may consider utilising such license for sourcing certain raw materials and other liaison work with our overseas customers where our management considers appropriate. On 19 August 2014, Vital HK agreed to acquire the entire equity interest in Benywave Wireless from Vital Profit for the consideration of RMB100,000,000, which was based on the registered capital of Benywave Wireless. For the purpose of such acquisition, Winmate and Favor Gain agreed to lend to the Company the total sum of RMB100,000,000 on a pro-rata basis based on their respective holding of the Shares in the Company. The said transfer was approved by the Management Committee of Beijing Economic-Technological Development Area and Benywave Wireless obtained the Certificate of Approval from Beijing People’s Government on 29 August 2014. Pursuant to a set-off agreement dated 23 September 2014 entered into by Winmate, Favor Gain, our Company, Vital HK, Vital Profit and Benywave Wireless, settlement of the sum of RMB100,000,000 for the said acquisition took place on 23 September 2014 and the said loan of RMB100,000,000 was subsequently waived by Winmate and Favor Gain in favour of the Company. According to our PRC Legal Advisers and our Hong Kong Legal Advisers, the acquisition of the entire equity interest of Vital Profit in Benywave Wireless by Vital HK had been properly and legally completed and settled, and all approvals from the relevant authorities had been obtained.

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HISTORY, DEVELOPMENT AND REORGANISATION Immediately following the transfer of 100% equity interest in Benywave Wireless to Vital HK, the shareholding structure of our Group was as follows:

WPPE & WPX

Ms. Rong

Mr. Ni

90%

100% Favor Gain (BVI)

10% Winmate (BVI)

93% Company (Cayman Islands) 100% Vital BVI (BVI) 100% Vital HK (Hong Kong) 100% Benywave Wireless (PRC)

means principally engaged in investment holding means principally engaged in the Overseas Business

Each of the Cayman Legal Advisers, Conyers Dill & Pearman, the Hong Kong Legal Advisers and the PRC Legal Advisers confirm that the Reorganisation complies with the laws and regulations of the Cayman Islands, BVI, Hong Kong and PRC respectively. Following the Reorganisation, Benywave Technology and its subsidiaries were not consolidated into our Company and do not form part of our Group. These companies will carry on the PRC Business. Please refer to the section headed “Relationship with Controlling Shareholders” of this prospectus for details of the PRC Business. On 26 May 2015, a further 837 Shares were issued by the Company to Winmate at par value. These 837 Shares together with the 93 Shares previously allotted were fully paid up at par value. On 26 May 2015, Winmate transferred to RSU Scheme Nominee by way of gift 50 Shares for the RSU Scheme. On 26 May 2015, Winmate transferred to Rong Personal Trust Nominee by way of gift 136 Shares for the Rong Personal Trust. On 9 June 2015, a further 63 Shares were issued by the Company to Favor Gain at par value. These 63 Shares together with the 7 Shares previously allotted to Favor Gain were fully paid up at par value. On 9 June 2015, the authorized share capital of our Company has been increased from HK$50,000 divided into 500,000 Shares of HK$0.10 each to HK$100,000,000 divided into 1,000,000,000 Shares of

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HISTORY, DEVELOPMENT AND REORGANISATION HK$0.10 each by the creation of an additional 999,500,000 Shares of HK$0.10 each in the capital of our Company, which shall rank pari passu to the existing Shares. Immediately following the abovementioned allotments and issues of Shares and transfers of Shares, the shareholding structure of our Group was as follows:

WPPE & WPX

Mr. Ni

90%

100% Favor Gain 7%

Ms. Rong

10%

Core Trust 100% RSU Scheme Nominee 5%

Winmate 74.4%

100% Rong Personal Trust Nominee 13.6%

Company (Cayman Islands) 100% Vital BVI (BVI) 100% Vital HK (Hong Kong) 100% Benywave Wireless (PRC) means principally engaged in investment holding means principally engaged in the Overseas Business

Up to 212,500,000 Shares (comprising of 8,500,000 Sale Shares and 204,000,000 new Shares) are offered under the Global Offering. Conditional upon the share premium account of the Company being credited on the completion of Global Offering, such sum standing to the credit of the share premium account equivalent to the par value of 645,999,000 Shares shall be capitalised and applied for the allotment of 480,623,256 Shares to Winmate, 45,219,930 Shares to Favor Gain, 32,299,950 Shares to RSU Scheme Nominee and 87,855,864 Shares to Rong Personal Trust Nominee. Favor Gain will sell 8,500,000 Shares to the public upon Listing. Up to 204,000,000 New Shares are offered under the Global Offering.

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HISTORY, DEVELOPMENT AND REORGANISATION The shareholding structure of our Group immediately upon completion of the Capitalisation Issue and the Listing (but excluding Shares that may be issued under the Over-allotment Option) is set out as follows:

WPPE & WPX

Ms. Rong 90%

100% Favor Gain (BVI) 4.32%

Core Trust

Mr. Ni

100%

10% 100% Winmate (BVI) 56.54%

RSU Scheme Nominee 3.8%

Rong Personal Trust Nominee 10.34%

Public 25.0%

Company (Cayman Islands) 100% Vital BVI (BVI) 100% Vital HK (Hong Kong) 100% Benywave Wireless (PRC) means principally engaged in investment holding means principally engaged in the Overseas Business

Immediately upon completion of the Capitalisation Issue and the Listing but excluding Shares that may be issued under the Over-allotment Option, the public will own 212,500,000 Shares, representing approximately 25% of the total issued share capital of our Company. On the date of formation of our Company (on 12 August 2014), the Shares issued to Winmate and Favor Gain ranked pari passu in all respects. The articles of association of our Company adopted by the shareholders of our Company contained provisions for shareholders’ protection (in respect of our Group) substantially similar to those provisions for shareholders protection set out in the amended articles of association of Vital Profit including Special Shareholders’ Rights. Amended and restated articles of association of our Company has been conditionally adopted on 9 June 2015 which will become effective upon Listing. For further details, please refer to the section headed “Summary of the Constitution of the Company and the Companies Law” in Appendix III to this prospectus. All the provisions in the articles of association of our Company adopted on incorporation are replaced by the said amended and restated articles of association of our Company upon Listing and all provisions for Special Shareholders’ Rights are cancelled upon Listing. As at the Latest Practicable Date, there were no outstanding options, warrants and convertible in relation to the Shares.

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BUSINESS OVERVIEW We are one of the leading ODM smartphone suppliers in the PRC targeting overseas markets. According to the Frost & Sullivan Report, we ranked the fourth amongst the PRC smartphone exporters on ODM basis in terms of export shipment volume Note which accounted for approximately 2.5% of the total China smartphone export volume in 2014. We are primarily engaged in developing, designing, production management and sale of mobile handsets to markets covering more than 25 countries, excluding China. Our products are sold by our customers under their own or authorised brand names. Our customers include various top local branded mobile handset suppliers, telecommunication operators and trading companies in South Asia, South East Asia, Europe, North America, South America, Africa and other parts of Asia. We provide a wide range of services including design, product validation, sourcing of components, procurement of processing and assembling, providing technical knowhow for manufacturing and packaging catering for our customers’ needs and/or specifications. Design of mobile handsets mainly involves hardware, software, mechanical and circuitry design for producing a mobile handset to maximize the compatibility of various hardware, software and components of a mobile handset with specified functions as well as outlook design of the products. We outsource our processing and assembly process to our EMS providers while providing raw materials, production process design, technical support and onsite supervising personnel to monitor the production schedule and product quality. OUR COMPETITIVE STRENGTHS We believe that our success to date and our potential for future growth are attributed to a combination of our competitive strengths set out as follows: Leading smartphone ODM supplier targeting overseas markets with strategic focus on the emerging countries We are one of the leading smartphone ODM suppliers in the PRC. Our products are sold by our customers in over 25 countries under their own or authorised brands. According to the Frost & Sullivan Report, we ranked the fourth among all smartphone ODM exporters in the PRC in terms of export shipment volume in 2014 and we accounted for approximately 2.5% of the total China smartphone export volume in 2014. We are primarily engaged in the developing, designing, production management and sale of mobile handsets to overseas markets, particularly to emerging markets with low smartphone penetration rate i.e. central and eastern Europe, central and Latin America and Asia Pacific. We have started exporting our products to the emerging markets since 2007. Our revenue generated from the emerging markets for each of three years ended 31 December 2014 was approximately RMB602.4 million, RMB1,011.0 million and RMB794.5 million respectively, which represents approximately 90.8%, 73.9% and 41.5% of our total revenue in the corresponding years respectively.

Note: According to Frost & Sullivan, global mobile handset shipment reached 1,890.0 million units in 2014. China has been responsible for a large proportion of the global handset production. The export volume of mobile handsets in China represented approximately 69.3% of the global mobile handset production in 2014. While the market is highly fragmented (i.e. the largest ODM smartphone exporter accounted for 4.3% of the total smartphone export volume in 2014), the Group’s export volume accounted for 2.5% by the total PRC smartphone export volume in 2014. Approximately 81.9% of the smartphone export volume from China in 2014 was attributable to smartphone brand owners and OEM suppliers. The remaining 18.1% was attributable to exports by smartphone suppliers on ODM basis. The Chinese market of smartphone export on ODM basis remains large and representative.

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BUSINESS According to the Frost & Sullivan Report, global ODM smartphone shipment increased from 58.3 million units in 2010 to 287.9 million units in 2014, representing a CAGR of 49.1%. It is expected that the market size of ODM smartphone will continue to grow at the CAGR of 17.8% during the period from 2014 to 2019 and will reach 652.5 million units in 2019. ODM smartphones accounted for 18.2% of the global smartphone shipment in 2010 and it is expected to reach 28.5% in 2019. We have been serving the emerging markets since 2007, we believe our strategic focus on the emerging markets has laid a strong foundation and developed a well established client base for us to capture the future growth as ODM smartphones are expected to thrive in the emerging markets. According to the Frost & Sullivan Report, the emerging markets (excluding China) smartphone shipment will continue to grow at 16.6% CAGR from 2014 to 2019. We believe our Group has a wider global presence than our key competitors who are also leading ODM smartphone exporters in the PRC and we plan to continue to expand our geographical coverage in the future. Established long-term relationship with worldwide customers With the foresight of Ms. Rong (one of our Founders) that there would be growing demand in mobile handsets in the emerging markets, we have started with focusing on establishing and maintaining good business relationship with well established customers in India since 2007 who were willing to outsource part of their mobile handset designs and production. We offer mobile handsets on ODM basis with a mission to offer affordable mobile handsets with advanced quality and functionality. We have cultivated long-term relationship with our worldwide customers, including various leading local branded mobile handset suppliers, telecommunication operators and trading companies in various emerging countries including India, Thailand, Philippines, Taiwan, Russia, Americas and so on. During the Track Record Period, we supplied mobile handsets to customers in more than 25 countries. Our customers include various top local branded mobile handset suppliers and telecommunication operators (directly or through their authorised agents) as well as trading companies who sell the mobile handsets under their own or authorised brands such as Karbonn in India, Archos in France and Cherry in Philippines. As at 31 December 2014, three of our top ten customers have been our customers for over four years. In 2014, we have diversified our customer base and increased our revenue derived from Americas (which include South America and North America), following the launch of our LTE smartphones and Windows phones; as well as Africa, as a result of increase in market penetration. According to the Frost & Sullivan Report, western Europe and North America, as mature markets for smartphone, are enjoying the highest penetration rate. More than half of the mobile phone users are using smartphones since 2011. Future growth would primarily be driven by migration to LTE devices from 2G and 3G devices following the completion of the 4G telecommunication infrastructure and increased consumer awareness and adaptation. Comparing with the developed regions, the emerging markets including central and east Europe, central and Latin America and Asia Pacific are much lower in smartphone penetration. Only 30% mobile phone users are using smartphone in the emerging markets in 2014 and it is estimated to reach 50% in 2019 driven by the strong demand for low to mid-end priced smartphones. We believe our long-term relationship with customers being top local mobile handset suppliers and telecommunication operators will best position our Group to capture the growth potential in this market segment. Leveraged on our client portfolio of market leading local branded mobile handset suppliers, we successfully increased our number of customers from 27 in 2011 to 44 in 2014, and broadened our geographical customer base to 25 countries globally.

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BUSINESS Focusing on high value adding ODM services with a robust business model We differentiate ourselves in the market by offering high value adding ODM services ranging from software and hardware design (including PCB designs), sourcing, production management, to designs for castings, packaging and marketing materials. Some of our customers from the emerging markets lack access to latest mobile design and production technology. We help our clients by looking into the products offering from time to time and advise them on the latest market trend so as to strengthen and compliment the product portfolio of our customers. To the best information and knowledge of our Directors, our customers treasure these advice which helps our Group to develop customers’ loyalty. The key components of mobile handsets are mobile chipsets, including baseband processor ICs. According to Frost & Sullivan, when the mobile chipset market enters a supply shortage, it would be difficult for mobile handset suppliers to procure the mobile chipsets they desire. The supply of mobile chipsets affects the timing of producing the mobile handsets and ultimately the launch of products by our customers in their target market. Stable supply of quality mobile chipsets would be one of the keys to success in our business. We maintain long-term and close relationship with our suppliers, which include the top two mobile handset baseband processor suppliers worldwide in 2013 (according to Frost & Sullivan) which enables us to procure the components in a stable manner. To the best information and knowledge of our Directors, our long-term stable relationship with the suppliers is one of the key factors that our customers select our Group as their ODM mobile handset supplier. We strategically adopted an asset light business model. We source raw materials and deliver to our EMS providers who are responsible for product processing and assembly. According to Frost & Sullivan, Benywave Technology has maintained long-term relationship with one of the EMS provider who is the second largest mobile handset EMS provider in 2013 (in terms of market share based on shipment) for more than five years, and we have continued to maintain such relationship after the Split. We strategically choose EMS providers located in Guangdong province, a hub for components and parts for mobile handsets where the raw materials can be sent to our EMS providers within a short period of time, and a place near Hong Kong, an international entrepot to facilitate the overall logistic arrangements for exports. We implement stringent quality control procedures to ensure the quality of products. We assign onsite quality control managers and technical supervisors to supervise the quality check process. We are able to offer products in compliance with various safety and industrial standards, serving the needs of our customers who are located in a wide range of geographical locations. For details, please refer to the subsections headed “Business — Quality Control”, “Business — Outsourcing and Production Management” and “Business — Raw materials and suppliers” of this prospectus. We leverage our low cost structure to design and offer quality products at competitive prices, which we believe is a key contributor to our competitiveness in overseas markets, particularly in the emerging markets. Strong R&D and adaptive design capabilities to cater for technology development trends and customers’ needs We take pride in having a dedicated R&D team consisting of approximately 60 staff led by Mr. Pei Hongan, who has over 11 years of experience in the mobile handset industry. Our R&D team includes experienced electronics, mechanical, software, driver and testing engineers and many of them have stayed with us for more than five years. Our R&D team is highly experienced in the design and development of feature phones and smartphones adopting various mobile communication standards of 2G, 3G and 4G including GSM, CDMA, EVDO, WCDMA, LTE, etc. with different operating frequency and operated in common mobile operating system such as Android and Windows to cater for our customers’ requirements from various geographical regions. During the Track Record Period, our design team provides over 750 designs for our

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BUSINESS customers’ selection. Our highly flexible design and supply chain capabilities, together with our asset light business model allows us to respond swiftly to our customers’ needs. To the best information and knowledge of our Directors, as China has been responsible for a large proportion of the handset production, our PRC based R&D team has been keeping pace with the latest development of the technology. Our R&D team has mastered the designs for 4G smartphones and is capable of offering these products to our clients in both emerging and developed countries. Our R&D team has long experience in designing smartphone with a broad spectrum of specifications, i.e. different wireless communication standards, with chipsets from different suppliers and different settings and many other modules at different price ranges. This flexibility provides us with the advantage of outputting designs that suits a wide range of products at similar price ranges exported to the emerging and developed markets. Our smartphones are installed with advanced hardware and software functionalities, i.e. high definition LCD screen, high resolution camera, high speed internet browsing capability, redesign user interface and the popular mobile applications, i.e. social media, maps, etc. For each of the three years ended 31 December 2014, our R&D costs amounted to approximately RMB13.1 million, RMB16.4 million and RMB22.0 million respectively. We purchased mobile chipsets from global leading chipset providers such as Qualcomm and Mediatek during the Track Record Period and we are often selected by major mobile chipset suppliers such as Qualcomm as their alpha partners for their newly developed mobile chipsets. Mobile chipsets are vital to the overall performance of the smartphones. Our R&D team engages in hardware design such as electronics and circuitry design as well as the software and mechanical design and engineering for producing a mobile handset with the newly developed mobile chipsets. Through our partnership, we gain first hand technical specification of the mobile chipset and therefore are able to master the design and development of smartphones with newly launched mobile chipsets in advance of some smaller mobile handset suppliers in the market. We are capable of providing hardware, software, mechanical and industrial design for producing a mobile handset and are strong at high-speed PCB compatibility design to optimize the compatibility of various hardware, software and components of a mobile handset with specified functions to meet the demand and preferences of our diversed groups of customers. During the Track Record Period, we developed and offered over 750 smartphone models meeting the needs of various customers. We target a quick design-to-deliver cycle which generally takes three to four months for us to develop a new model. We believe that our edge on our R&D and design capabilities enables us to appeal to and quickly adapt to our customers’ needs, maintain business relationships with our existing customers as well as exploring new business opportunities. Experienced, stable and dedicated management team Our executive Directors have extensive experience in mobile handset industry. Ms. Rong, our Founder and chairperson, has approximately 20 years of experience in the mobile handset industry and she was a pioneer in managing the distribution of third party’s mobile handsets, manufacturing, developing and design of mobile handsets in the PRC, which provided her with knowledge and experience that facilitate us in understanding and meeting our customers’ needs. Ms. Rong also established good business network with both upstream and down stream industry players. Mr. Rong, our executive Director and chief executive officer who is mainly responsible for sales and market development, has more than 15 years of industry experience, such as sales and marketing of mobile handsets, general operations management and has focused on overseas markets for more than three years. Our senior management Mr. Pei Hongan, vice president in charge of R&D, has over 11 years of experience in developing and designing mobile handsets. Our chairperson and chief executive officer, together with our sales team, pay frequent visits to our existing and prospective customers to understand and react timely to regional consumers’ needs and preferences.

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BUSINESS The experience of our management team is fundamental to our Group in building a solid foundation for the subsequent development of our business. For details, please refer to the section headed “Directors, Senior Management and Employees” of this prospectus. OUR BUSINESS STRATEGIES We strategically strive for maintaining our Group as a leading mobile handset supplier with design capability targeting overseas markets by enhancing our R&D capabilities, increasing our market penetration in existing markets, expanding our customer base and exploring new overseas markets. We intend to implement the following strategies to capitalise on our strengths so as to enhance our business prospects and profitability: Strengthening our R&D capabilities Our products are well regarded by our customers for their quality and functionalities which is largely attributable to our R&D team’s ability to optimize and integrate the hardware and software used in our products. We strive for providing full range of features with latest technology at competitive prices. We plan to strengthen our R&D capabilities through the followings: —

expanding our R&D team through employment or, if appropriate opportunity arises, through acquiring independent software or hardware design house with experienced engineers who could help enhance our capability in software and hardware optimization, i.e. to improve the performance of the display, audio mobile and camera module which has become popular functionalities to smartphone users when selecting mobile handsets;

—

acquiring additional testing machines for testing of the quality of the raw materials and mobile handsets, which include for example testing equipments for mobile chipsets, display modules, screens, connectivity and durability of mobile handsets to facilitate efficient and cost effective quality testing process while reducing the need and cost to engage external testing labs; and

—

setting up new R&D team to focus on software and hardware development that could cater for the latest trend in wearable devices, smart-home functionality and health-care management. We may, if appropriate opportunities arise, seek co-operation from other smart devices developers to develop hardware or software features to be incorporated in smartphone to enhance our products’ functionality.

Broaden our customer base and further diversify in global markets We aim to broaden our geographical coverage. We intend to replicate our success in other markets and continue to target well established local smartphone branded suppliers and telecommunication operators. Becoming a supplier to these well established enterprises would require experience and consistency in quality and production lead time, however we believe that once they have selected us to be their suppliers after strict assessments, they tend not to switch suppliers so as to ensure consistency in the quality of their products. We plan to increase sales and marketing force to broaden customer base in global markets, which include for example South America, North America, Africa and South Asia. We were successful in increasing our sales revenue from Europe, South America and North America in 2014 as a result of the launch of our LTE products. To this end, we also need to increase our resources on R&D to develop and design smartphone models and software for customers in these markets. We also believe that our capability of offering 4G products enables us to increase our market penetration in both the Americas and Europe. In addition, the mutual cooperative relationship between our alpha partners and us has been beneficial to us in acquiring new customers. We expect the ongoing strong cooperation would facilitate cross customer referrals in markets that our alpha partners have a strong presence, such as in U.S. and Europe.

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BUSINESS To support our strategy to broaden our customer base, we plan to apply part of the use of proceeds as cash reserve for purchasing raw materials. We generally receive 5–20% deposit for our orders and proceeds with purchase of raw materials. It usually takes 60 to 90 days from the sourcing of raw materials to the shipment of finished goods. While our payment term offered by creditors is usually 30 to 60 days and our credit term offered to our customers ranges from fully paid before delivery to 90 days. Our cash conversion cycle is normally two to three months, we believe that the increase in cash reserve for purchasing of raw materials will enable us to take more and longer orders. For further details, please refer to the section headed “Future Plans and Use of Proceeds” of this prospectus. Establishing representative offices and strategic partnership in our key overseas market We sell mobile phones to more than 25 countries. We intend to set up offices in key overseas markets in order to better serve our customers and explore new customers. These overseas representative offices will comprise of R&D teams and sales personnel in geographical regions including India, Southeast Asia and the Americas gradually. We expect these overseas offices will provide timely feedbacks and valuable local knowledge on product designs, market trend, customer preference, etc. These offices will also function as local support for after-sale technical advices to our customers. As we generally offer up to one year warranty of our products and provide technical support and advisory service to our customers who offer after-sale service to their end customers, we believe having business presence in overseas markets would improve the efficiency of our after-sales service and customer coverage in these markets. Below is our stage plan for establishing overseas representative offices: Expected time of establishment of the relevant representative offices

Country/ Location

Number of representative office to be established

By 2015 By 2015 By 2016

U.S. India Southeast Asia

1 1 1

Our management team considers that our long-term relationship with leading branded mobile handset suppliers and telecommunication operators are key to our success in these markets. As the emerging markets start to attract attention from many international brands, our management team has been considering options to solidify our relationship with these leading players in our key markets. We may consider formation of joint venture, acquisition of non-controlling shareholding in our customers or formation of strategic partnership with them to further enhance our relationships and strengthen our presence in the relevant markets. Our Directors will be very selective in the process and will strategically consider a range of matters, including the potential partner’s portfolio, past experience in the industry, shareholding structure, financial conditions and operational compliance. As at the Latest Practicable Date, we did not identify a suitable partner or target for such partnership and our management would explore and consider such opportunities from time to time. Expanding our product features and offering We anticipate there will be an increasing demand for an extension to smartphone peripherals. For example, wearable devices with mobile telecommunication function, “smart home” devices (such as remote control for air-conditioning, lighting, curtains and other electrical appliances) and health care management products will become more popular globally. In order to pro-actively meet our customers’ needs, we will allocate a portion of our resources to developing and designing mobile telecommunication devices that could rate for these functions.

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BUSINESS We plan to allocate additional resources to research on customers’ preferences for new features, develop budget on designing new products and, backup services to support the new features of our products. To develop and design products like smartphones with “smart home” functions efficiently, we plan to seek co-operations from smart home appliances companies in Europe and U.S. to offer compatible set of smart home products together with smartphone featured with smart home controls. We trust the expansion of our smartphone features and product offerings could expand the product portfolios for our customers and offer higher value-added ODM solutions. OUR BUSINESS MODEL The following diagram illustrates our current business model:

R&D and design, marketing and sales orders

Customization and development

Production management

Logistic companies, warehouse awaiting export

R&D and design Project specification /inception for tailored design and development

Product Roadmap

Sourcing/Production process design and management/ Production and quality supervision

Referrals

Exhibitions

Existing customers

Sending over designs and prototype for customer’s confirmation

After-sale services12

After-sale technical consultation

End consumers After-sale maintenance service

Arrangement for export custom clearance Customer

Third party EMS providers Feedbacks

Arrangement for product certification by third party testing labs

Export arrangements and delivery

• •

Logistic company to deliver to transit port

Branded mobile handset supplier or telecommunication operators or trading companies in overseas countries

Mass processing and assembly Packaging

Quotations & Orders Customer to arrange import custom clearance

Customer confirm design

Conducted by us Upon receipt of deposit

Conducted by third party

Notes: R&D and design 1.

We begin by conducting research and development on the latest mobile telecommunication technology. Whenever there are any new software platforms (e.g. Windows Phone of Microsoft), breakthrough development of mobile telecommunication standards (e.g. 4G) or advancement in mobile chipsets, our R&D team will work on the software and hardware integration with an aim to optimize the performance of hardware and software in a mobile handset. We also work on outlook design of the products.

Marketing (product roadmap/exhibitions/referrals) and sales orders 2.

We are capable of offering a wide range of mobile handset with various specifications and functionalities. We formulate and update our product roadmaps from time to time setting out our products offerings which serve as a preview of our newly launched products. For existing customers, we introduce our new models and/or newly acquired capability through emails regularly. Our sales team will conduct face-to-face meetings with customers to introduce our new models. We also participate in various international exhibitions i.e. CES (Consumer Electronics Show) and Mobile World Congress to promote our products.

Customers will communicate with our sales team on the hardware and software specifications on the mobile handset that they are interested in ordering. Customers may order mobile handsets based on existing designs or will request for modifications based on our original design or design for new models.

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BUSINESS 4.

After our sales persons communicate client’s requests with our R&D team, our R&D team will then consult with our sourcing and out sourcing control team and assess the feasibility of the project. Our sourcing and outsource control term will check on the availability of the raw material costs and availability of EMS providers to assess whether we will be able to deliver the products on time.

We quote prices based on a range of factors, including our cost, the quotations of our market competitors and our customer strategies. For models we previously produced, we produce bill of materials for reference and take into account the market price of the raw materials. For models to be developed, we assess the raw materials to be used and take into account the market price of the raw materials. We also consider the outsourcing costs and complexity of the designs and the expected margins for the price setting. Sales invoice or purchase order then follows.

Customization and development 6.

Our sales team is responsible for establishing the project specification (立項書) which sets out the specifications in handsets required by the customer i.e. the operating frequency, hardware platform, mobile chipset, memory, outlook, mobile telecommunication standard, display module, camera module, battery, the brand name to be used, expected size of the order and packaging requirements. The project specifications will be reviewed and approved by the R&D team. The project specification needs to be approved by product manager, project structural manager, sales manager and the general manager. Throughout our internal approval process, our sales team regularly communicates with our customers to ensure consistency with customers’ requirements. We generally require deposit from 5% to 20% from customers before our R&D team commences working on a particular model.

Our R&D team works on hardware and software design and engineering of the products based on the specifications required by our customers. We communicate with and receive feedbacks from customers throughout the whole process of design and development of a product. We arrange delivery of a prototype to be produced by our EMS providers to our customers for their testing and confirmation, or feedbacks. If certain product standard certifications are required and specified by our customers, we will arrange prototypes to be sent to the recognized independent third party laboratories or institutions which issue the relevant certifications. We also design the packaging and prepare the user manuals of the products for our customers’ approval.

Procurement and outsourcing 8.

We are responsible for procuring the necessary raw materials including chipsets, display modules, camera modules, PCB, etc. We usually place orders for raw materials after our customers confirm order with us. We may place order earlier for raw materials which are of longer lead time or prone to supply shortage based on the sales forecast prepared by the sales department.

Upon the approval of the prototype by our customers, we proceed with arranging the necessary raw materials to be delivered to the EMS providers directly. Our EMS providers will conduct quality control on the raw materials and the finished goods. We have our staff on-site to provide production supervision and technical support. We also have quality control staff on-site to monitor the processing, assembly and quality control procedures. Our customer may also send their authorized persons to conduct quality check of the finished goods prior to shipment.

Export arrangements and delivery 10.

After assembly, the finished goods are sent to a third party warehouse we engaged before shipment. We co-ordinate the export clearance and product delivery procedures for our customers. Sales are recognized when the products are delivered.

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BUSINESS After-sale services 11.

Sales are made on outright basis. Only products with defects can be returned.

12.

We offer up to 12 months product warranty for our products subject to negotiation with our customers. In most cases, our customers provide after-sales service to their own customers and the duration of such warranty varies. Upon our client’s request, we may provide 2% to 3% of additional or spare mobile handsets, components and accessories as replacements during the warranty period for the end users. We also offer technical supports services to the after-sales team of our customers.

13.

The lead time from the sales invoice or order date to the delivery date involving total new designs is approximately three to four months. The lead time from the sales invoice or order date to the delivery date involving modified designs based on existing model is approximately one and a half to three months. The lead time from the sales invoice or order date to the delivery date involving repeat orders is approximately one to two months.

PRODUCTS During the Track Record Period, our primary products include feature phones and smartphones. A smartphone is a mobile device which combines the function of a mobile handset and a conventional personal computer with functionality beyond making phone calls and sending text messages. A smartphone runs on an operating system which provides configuration options for the user to install and use various third-party applications (APPs). A smartphone is usually more advanced in computing capability and connectivity than feature phones. A feature phone typically provides voice calling and text messaging functionalities. Some advanced feature phones also have limited multimedia and internet capabilities and other services offered by the user’s wireless service provider. As compared with smartphones, feature phones have limited web access, with limited ability to run third-party applications. We have started exporting feature phones on ODM basis to India since 2007. In 2011, feature phones remained as our primarily products. Foreseeing the increase in demand for smartphones which are expected to attract higher profit margin, we started to change our product focus from feature phones to smartphones in mid-2012. We successfully transited our product focus to smartphones in 2013 where more than 90% of our revenue was attributable to smartphones sales. Our gross margin for the years ended 31 December 2012, 2013 and 2014 were 12.0%, 10.8% and 13.6% respectively. Nowadays, feature phones are generally perceived as low-end mobile handsets whereas smartphones are generally perceived as middle or high-end mobile handsets. Our average selling price for feature phones during the Track Record Period ranged from RMB136 per unit to RMB104 per unit, whereas the average selling price for smartphones ranged from RMB492 per unit to RMB568 per unit during the same period. Most of our products shipped overseas are in complete form. As per our customers’ requests, we also provide semi knock-down (SKDs) for our clients which are located in countries where importation of finished electronic devices attracts much higher taxes than those of components, such as Brazil. Our customers will be responsible for importing the goods into their countries as well as assembling and packaging of the products in their countries.

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BUSINESS Below is the breakdown of our revenue by product types during the Track Record Period:

2012 Percentage of total Sales Revenue revenue Volume ‘000 RMB’000 % units

Average Selling Price RMB

Smartphones Feature phones Smartphone component packs Mobile device components

311,735 351,489

46.9 53.0

634 2,576

–

355

0.1

178

Total

663,579

100.0

3,212

For the year ended 31 December 2013 2014 Percentage Average Percentage of total Sales Selling of total Sales Revenue revenue Volume Price Revenue revenue Volume ‘000 ‘000 RMB’000 % units RMB RMB’000 % units

492 1,242,092 136 4,780

90.7 0.3

2,185 46

121,528

8.9

497

207 1,368,897

Average Selling Price RMB

568 1,717,971 104 –

89.7 –

3,362 –

511 –

322

377

196,277

10.2

408

481

0.1

249

1,935

0.1

126

100.0

2,555

536 1,916,183

100.0

3,896

492

Notes: (1)

Since 2013, at the request by our customers, we sold certain component packs of smartphones (semi knock-down (SKDs) for mobile handsets which include hardware components such as display modules, camera modules, audio, sensors, etc.) that are assembled and packaged by our customer(s) after being imported to their country(ies), as they consider the importation of finished electronic devices attracts higher taxes than those of components in the relevant country(ies).

(2)

Mobile device components refer to spare mobile components and parts purchased by our customers for providing after-sale maintenance services to their end users.

We design and offer mobile handsets with a wide range of technical specifications to meet our customers’ needs in different parts of the world. We offer mobile handsets adopting various mobile communication standards including 2G (the second generation of mobile communication standard), 3G (the third generation of mobile communication standard that allows mobile phones, computers, and other portable electronic devices to access the internet wirelessly defined by the International Telecommunications Union) and 4G (the fourth generation of a mobile communications standard intended to replace 3G, allowing wireless internet access at a much higher speed) in GSM, CDMA, EVDO, WCDMA and LTE, etc. with different operating frequency applicable to different countries and regions. Below is the breakdown of our sales by mobile communication standards during the Track Record Period:

2012 Percentage of total Sales Revenue revenue Volume RMB’000 % ‘000 units

Average selling price RMB

For the year ended 31 December 2013 2014 Percentage Average Percentage of total Sales selling of total Sales Revenue revenue Volume price Revenue revenue Volume RMB’000 % ‘000 units RMB RMB’000 % ‘000 units

Average selling price RMB

2G 3G 4G Others

351,489 311,735 – 355

53.0 46.9 – 0.1

2,576 634 – 2

136 4,780 492 1,363,620 – – 178 497

0.3 99.6 – 0.1

46 2,507 – 2

104 – 544 1,152,263 – 761,985 249 1,935

– 60.1 39.8 0.1

– 2,658 1,112 126

– 434 685 15

Total

663,579

100.0

3,212

207 1,368,897

100.0

2,555

536 1,916,183

100.0

3,896

492

Note: Sales of 3G mobile communication standard include both smartphones sales and smartphone components packs sales.

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BUSINESS From 2011 to 2012, we were in the transition period shifting our product focus from feature phones to smartphones (which were expected to attract higher profit margin than feature phones). In 2013 and 2014, with (i) the improvement in the 3G infrastructure in emerging markets and (ii) our successful diversification into markets with higher demand for smartphones such as France, North America and South America, we successfully shifted our product mix consisting of over 99.0% of sales in smartphones and smartphone component packs. Our revenue was substantially increased by a CAGR of approximately 69.9% from 2012 to 2014 as a result of the increase in sales volume of smartphones. Below are some of the mobile handsets we offer: Smartphone with the following specifications: Platform: Quad Core Frequency: GSM: Band 850/900/1800/1900Mhz WCDMA: Band 900/2100Mhz FDD-LTE: Band 800/1800/2100/ 2600Mhz Size: 145x73x8.8 mm Solution: 5.0" HD Camera: 13M AF + 2M Battery: 2200mAh Memory: 8GB ROM + 1GB RAM Features: BT/Wi-Fi/GPS/G-Sensor, Prox-Sensor, L-Sensor, E-compass Feature phone with the following specifications: Type: Chipset: Network: Screen: Memory: Battery:

Slip and Rotated phone MT6235B EDGE 850/900/1800/1900MHz Super slim 2.4“TFT QVGA 320*240 256Mb+256Mb 900mAh

SALES AND MARKETING As at the Latest Practicable Date, our sales and marketing team consisted of 37 sales personnel led by Mr. Shen Guiping (divided into nine regional sales teams and one support team) and were responsible for sales to customers covering more than 25 countries, excluding China. Sales We are primarily engaged in developing, designing, production management and sales of mobile handsets for overseas markets. Our products are sold by our customers under their own or authorized brand names. According to the Frost & Sullivan Report, we ranked the fourth amongst the PRC smartphone ODMs in terms of shipment volume export from China in 2014.

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BUSINESS We have commenced offering ODM mobile handsets to overseas market since 2007. To the best information and knowledge of the Directors, the penetration rate of mobile handsets with advanced functionalities in emerging markets has been lagging behind those in developed countries, such as North America and western Europe. With the foresight of Ms. Rong (one of our Founders) that there would be growing demand in mobile handsets with advanced functionalities in emerging markets, we started to focus on establishing and maintaining good business relationship with well established customers in Southeast Asia and India. We became one of the pioneers to export feature phones with advanced functionalities in 2007 to these regions and have established long-term relationship with local distributors and network operators. With the emerging popularity of smartphones, we reap the benefit of early establishment of the relationship with these customers and successfully boosted our sales of smartphones to these countries over the Track Record Period. We recorded an increase in revenue from approximately RMB663.6 million in 2012 to RMB1,916.2 million in 2014. Geographical analysis The table below sets out the breakdown of our revenue by the geographical locations of our customers for the periods indicated:

2012

Revenue RMB’000

For the year ended 31 December 2013 Percentage Percentage of total of total revenue Revenue revenue % RMB’000 %

2014

Revenue RMB’000

Percentage of total revenue %

South Asia Southeast Asia Hong Kong Other parts of Asia Europe South America North America Africa

441,716 117,585 16,659 59,083 1,340 7,188 4,628 15,380

66.6 17.7 2.5 8.9 0.2 1.1 0.7 2.3

356,055 357,607 827 230,013 234,640 124,787 64,968 –

26.0 26.1 0.1 16.8 17.1 9.1 4.8 –

183,008 93,727 500,331 174,961 259,877 203,920 424,465 75,894

9.5 4.9 26.1 9.1 13.6 10.6 22.2 4.0

Total

663,579

100.0

1,368,897

100.0

1,916,183

100.0

Notes: (1) (2) (3)

(4) (5) (6) (7) (8) (9)

South Asia includes India and Bangladesh. Southeast Asia includes Philippines, Thailand, Vietnam, Malaysia and Indonesia. Sales to Hong Kong mainly comprised of sales to certain mobile trading companies incorporated in Hong Kong who sell branded mobile handsets to various countries including but not limited to Philippines, Vietnam, Thailand, Malaysia, India, Indonesia, Korea and Pakistan. Other parts of Asia includes Taiwan, Yemen, Pakistan, Dubai, Israel, Nepal, Sri Lanka and Turkey. Europe includes France, Romania, Spain, Russia, Portugal and Italy. South America includes Brazil, Chile and Venezuela. North America includes USA, Mexico and Honduras. Africa includes South Africa, Algeria and Morocco. During the Track Record Period, approximately 2.2%, 9.8% and 7.8% of the total revenue is attributed to those of Sanctioned Countries and Russia (where certain Sanctioned Persons are located).

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BUSINESS In 2011, our revenue was mainly derived from the sales of feature phones to South Asia. We launched smartphones in late 2011 and started to change our focus from feature phones to smartphones which were expected to attract higher profit margin than feature phones. We strived to increase our sales of smartphone in South Asia (i.e. India) and Southeast Asia in 2012 and subsequently diversified to Europe and South America in 2013. For the year ended 31 December 2014, we have further increased our sales to North America, South America and Africa as a result of increase in demand of 3G smartphones as well as the launch of our 4G smartphones and we strategically diversified our market into these regions to expand our customer base. The aggregate sales amount attributable to Asia (including South Asia, Southeast Asia, Hong Kong and other parts of Asia) remained stable for the years ended 31 December 2013 and 2014 which amounted to approximately RMB944.5 million and RMB952.0 million respectively. However, there were significant changes in sales by geographical segments within Asia. Sales to Hong Kong increased significantly from approximately RMB0.8 million for the year ended 31 December 2013 to approximately RMB500.3 million for the year ended 31 December 2014, whereas sales to South Asia and Southeast Asia have decreased significantly by approximately 48.6% and 73.8% for the year ended 31 December 2014 as compared to the same period in 2013. This was primarily due to our increase in sales to mobile handset trading companies in Hong Kong which in turn sell such products to various countries, primarily Southeast Asia (including, among others, Thailand and Vietnam). Our Group has adopted temporary measures of diverting our sales to customers in Hong Kong from Southeast Asia due to certain specific considerations in 2014. Such decision was in response to the anti-China protests and riots in Vietnam in May 2014 and to various political events in Thailand during 2014. We reduced direct sales to these countries to minimize our risk of potential delay or default in payments. Instead, we increased sales to mobile handset trading companies in Hong Kong which, based on our previous industry experience, are reliable and with good reputation in having extensive sales network in Southeast Asian countries. Such decision was intended to maintain our market share and positioning in Southeast Asia while minimizing our credit risk exposure. The decrease in sales made to South Asia was primarily due to feature phones being more common than smartphones in countries like India and Bangladesh, while we have changed our product offerings to 3G and 4G smartphones but the sales of our 4G smartphones in South Asia has yet to reach a significant volume. We, however, expect our revenue contribution from South Asia will increase in 2015 following the further establishment of 4G mobile network infrastructure in more cities in India by the second half of 2014. Following our successful expansion of customer base and commencement of business relationship in 2014 with a new customer in India being a leading local telecommunication operator, we expect our sales volume in India will increase in 2015 and South Asia will remain to be one of our key markets. Other than the above, the increase in revenue generated from Hong Kong was also mainly attributable to a long-term customer (an Independent Third Party), being a well-established mobile handset supplier (since 2014 together with an unlimited company under common control of the shareholders of this Hong Kong customer), who supplies its own branded mobile handsets and trades mobile handsets of various third party brands to primarily Southeast Asian countries, east Europe and Dubai area, in which this Hong Kong customer has a well penetrated distribution network. The relevant Hong Kong customer is also an authorised dealer of a global branded mobile handset supplier in Hong Kong. We produce and supply mobile handsets to this Hong Kong customer on an ODM basis for its own brand from time to time. In 2014, our Group launched certain new products including 4G and 3G smartphones with certain newly introduced mobile chips which were well received by our customers and for the year ended 31 December 2014, our Group has recorded total sales of RMB907.7 million to approximately 20 customers for the sales of smartphones produced with the said two mobile chips. As a result of the expected popularity of these new products, some of our customers made bulk orders and planned to launch these products in 2014 as their flagship models at high prices. However, as some

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BUSINESS of our customers’ end markets, including India, Philippines, France, South America and Bangladesh, had slower adaptation to these new products (at the pricing level) as our customers expected. For better inventory management and maintaining good relationship with our customers, after negotiation and with prior consents from our relevant customers, we have sold the slower inventory products to the relevant Hong Kong customer at normal commercial terms. Such sales to the Hong Kong customer amounted to approximately RMB218.2 million (representing approximately 11.4% of the total revenue for 2014) and all the sales proceeds were collected as at 31 December 2014. Apart from such sales of third party brand mobile handsets, we have also produced and supplied products to the Hong Kong customer on an ODM basis for its own brand products amounted to approximately RMB148.2 million (representing approximately 7.7% of the total revenue for 2014). We had a total of one, one and six trading company customers in Hong Kong for each of the three years ended 31 December 2014 respectively, which accounted for approximately RMB16.7 million, RMB0.8 million and RMB500.3 million, representing approximately 2.5%, 0.1% and 26.1% of the total revenue for each of the three years ended 31 December 2014 respectively. The table below shows the changes in number of our trading company customers in Hong Kong during the Track Record Period: For the year ended 31 December 2012 2013

2014

Number of trading companies in Hong Kong As at the beginning of the period Addition as a customer Cessation as a customer

1 – –

1 5 –

At the end of the period

All of the Hong Kong trading companies are Independent Third Parties. We sold the products at out right basis. Other than two of the Hong Kong customers which we entered into framework agreement relating to sales, we had not entered into any framework agreement with other customers in Hong Kong. Summary terms of these framework agreements have been set out under the subsection headed “Business — Sales and Marketing — Agreements relating to sales” in this prospectus. All sales orders are made by way of purchase orders. Prices and terms are on normal commercial terms. There is no sales target or minimum purchase amount or sales and expansion targets set for Hong Kong customers. Our relationship with the trading companies are seller/buyer relationship. We grant two months credit terms to these customers and payments are usually made by telegraphic transfer. We have no control over these Hong Kong customers and no arrangements for distributing our products. All title and risks relating to the products are passed to the trading companies when the products are delivered to them. Sales are recognized when the products are delivered. Only defective goods can be returned and no return of defective goods occurred during the Track Record Period from these customers. While the revenue attributable to trading companies has increased during the year ended 31 December 2014, our Directors consider our increase in revenue during the Track Record Period was not primarily due to the increase in sales made to trading companies or any accumulation of inventory due to such sales, but as a result of i) the increase in our average selling price from RMB207 per unit to RMB492 per unit as a result of upgrading our product offerings from 2G feature phones to 3G and 4G smartphones; ii) the increase in sales derived from Europe, South America, North America and Africa which were attributable to our successful expansion of customer base in these areas, including among others, top local branded mobile suppliers, while our total revenue derived from Asia region (which included the sales to trading companies) remained relatively flat between the year ended 31 December 2013 and 2014, being approximately RMB944.5 million and 952.0 million respectively; iii) there were no significant trade receivables long outstanding from these trading

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BUSINESS companies as at each of the three years ended 31 December 2014. All of the trade receivables outstanding from these trading companies as at 31 December 2014 were repaid as at the Latest Practicable Date, and to the best information and knowledge of our Directors, it is unlikely that these customers, who are Independent Third Parties, would accumulate any inventory with them. The Sole Sponsor based on its independent due diligence (such as (a) the background searches and physical interviews conducted with the Group’s major customers and trading company customers, for understanding the background of the increase or decrease in sales made to each customer and their independence with the company, as well as (b) considering the major terms between the sales made to the trading companies such as no return policy unless products are defective as well as considering the status of subsequent settlement of the trading companies and the overall growth strategy and financial performance of the Group) concurs with the Directors’ view that the increase in revenue during the Track Record Period is not caused by accumulation of inventory as a result of increase in sales made to trading companies. Our customers Our customers include various top local branded mobile handset suppliers, telecommunication operators and trading companies in India, Southeast Asia, Europe, North America, South America, Africa and other parts of Asia. The revenue attributed to our largest customer amounted to approximately RMB215.0 million, RMB257.4 million and RMB385.9 million for each of the three years ended 31 December 2014 which accounted for approximately 32.4%, 18.8% and 20.1% of our total revenue for the corresponding periods respectively. The revenue attributed to our five largest customers amounted to approximately RMB457.2 million, RMB835.1 million and RMB1,171.4 million for each of the three years ended 31 December 2014 which accounted for approximately 68.9%, 61.0% and 61.1% of our total revenue for the corresponding periods, respectively. Below sets our major customers during the Track Record Period and their background: •

holding company of Karbonn Mobile India Private Limited, a leading mobile phone retailer in India who is primarily engaged in manufacturing and distribution of mobile phones (which ranked the third amongst local brands in terms of market share in India based on smartphone shipment volume in 2014 according to Frost & Sullivan)

•

Top five customer for the years ended 31 December 2012 and 2013

•

another holding company of Karbonn Mobile India Private Limited

•

Top five customer for the year ended 31 December 2012

•

Dees Supreme Company Limited, a mobile handset supplier of a telecommunication carrier in Thailand and its local branded mobile handset retailer

•

Top five customer for the years ended 31 December 2012 and 2013

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BUSINESS •

Cosmic Technologies Inc., a leading mobile phone retailer which operates the business of Cherry mobile in Philippines (which ranked the first amongst local brands in terms of market share in Philippines based on smartphone shipment volume in 2014 according to Frost & Sullivan)

•

Top five customer for the year ended 31 December 2012

•

Venda Electronic Corporation, a mobile handset supplier mainly to telecommunication carriers in Taiwan

•

Top five customer for the years ended 31 December 2012 and 2013

•

Archos S.A., the third largest homegrown mobile handset retailer based in France (in terms of market share in France based on smartphone shipment volume in 2014 according to Frost & Sullivan). It supplies various portable media players and portable data storage devices and smartphones

•

Top five customer for the years ended 31 December 2013 and 2014

•

Everwish Trading Limited (since 2014 together with Premier Trading Company which is under common control of its shareholders), a well-established mobile handset supplier in Hong Kong who supplies its own branded mobile handsets and trades mobile handsets of various third party brands to primarily Southeast Asian countries, east Europe and Dubai area, and has also been an authorised dealer of a global branded mobile handset supplier in Hong Kong

•

Top five customer for the years ended 31 December 2011 and 2014

•

a leading branded mobile phone provider in Latin America who aims to provide affordable, attractive and innovative mobile devices to suit a wide variety of consumer needs

•

Top five customer for the year ended 31 December 2014

•

a leading homegrown smartphone vendor in Brazil who is primarily engaged in manufacturing electronic devices such as mobile handsets

•

Top five customer for the year ended 31 December 2014

•

a branded mobile handsets importer and distributor in Dubai

•

Top five customer for the year ended 31 December 2014

Customers may order mobile handsets based on our existing designs or with certain modifications, or they could request for a new design. If the order is expected to be fulfilled by developing a new model, we will generally require a deposit of 5% to 20% of the contract amount before our R&D team proceed with designing and developing the mobile handset model. Before 2014, we generally require full payment by 60 days letter of credit or payment by telegraphic transfer before the goods are delivered. In 2014, in order to increase our competitiveness, we granted credit terms to more customers. Credit period of 60 days to 90 days were granted to certain major customers as at 31 December 2014. To the best knowledge of our Directors, none of our Directors and their respective close associates or any of the Shareholders holding more than 5% of our Company’s share capital as of the Latest Practicable Date has any interest in any of our five largest customers during the Track Record Period.

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BUSINESS Pricing policy We price our products on cost-plus basis as well as considering product model, market price, market condition and production cost. For models we previously produced, we make reference to material costs and make adjustments for the current market price for the same materials. For models to be developed, we assess the materials cost now and adjust for possible price fluctuation. In both cases, we also take into account of the outsourcing costs and complexity of the designs and the expected margins. Credit control policy We adopt a stringent credit control policy on our accounts receivables. We generally require deposit of 5% to 20% from our customers upon placing the purchase order, particularly if the order is expected to be fulfilled by developing a new model of mobile handset. We generally require full payment by telegraphic transfer or accept up to 60 days letter of credit before the goods are delivered. We also grant credit period to our customers. The credit term must be approved by both of our sales manager and finance manager before the credit terms were granted. Factors to be taken into account for granting such credit terms include, among others, the size, credit worthiness, business relationship as well as potential business opportunities with our customers. During the Track Record Period, we have generally granted credit terms from 60 to 90 days credit period to certain customers, in particular for those customers in markets where we would like to explore. In 2014, we granted credit terms to an increasing number of customers to expand our customer base and to increase our competitiveness. We granted an extended credit period to some of our customers on a case-by-case basis at the request of our customers. The factors we consider include, among others, the length of relationship and historical credit record of our customers. Our trade receivables turnover days are 51.2 days, 7.2 days and 33.0 days for each of the three years ended 31 December 2014 respectively. For the purpose of risk management, we maintain export credit insurance policies to lower our credit risk. As at 31 December 2014, we maintained export credit insurance policy of insured amount of USD100 million with maximum compensation amount of up to US$20 million, covering 90% of the losses incurred for business risks, political risks, delay in payments, winding up of debtors unless otherwise provided under the insurance policy and subject to specific insured amount approved by the insurance company for the relevant customers. The total export credit insurance expenses incurred amounted to approximately RMB94,000, RMB69,000 and RMB800,000 for each of the three years ended 31 December 2014, respectively. We assess impairment of our accounts receivables based on our analysis of collectability and aging status of the receivables from time to time on case-by-case basis. In determining whether impairment is required, we take into account the aging and recoverability of the accounts receivables. During the Track Record Period, we did not make any provision for bad and doubtful debts. Sales recognition, return policy and warranty We recognise our sales upon delivery of the products. The product can only be returned in case of serious quality defect. We offer 12 months warranty for our mobile handsets subject to negotiations with clients. We will charge our customer for repair and maintenance services beyond the warranty period. In most cases, our customers offer after-sales services to their own customers. We may, upon customers’ request, provide 2% to 3% of additional mobile handsets, components and accessories to our customers for

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BUSINESS replacement or repair during the warranty period which they provide to the end users. We also offer technical support services to the after-sales team of our customers. We will liaise with our customers for any alleged quality issue on our products. The products will be sample tested by our quality inspector stationed at the production facility of our EMS provider before shipment. Some of our customers may also send personnel to conduct testing on site. In case our clients request for product return, our engineers will visit the client’s site to conduct checking and solve the problem to the extent possible. If the problem cannot be solved during the warranty period and it is confirmed that there is a design or manufactory defect, the products will then be returned for replacement or repair. If the defect is caused by particular components or parts, we may seek compensation from our suppliers pursuant to the terms of the relevant supply agreements. We have no product recall since our establishment of the Overseas Business. We make provision for potential repair and maintenance costs with reference to the costs of sales of the products that we offer warranty. We reverse the relevant provision shall the costs of repair service not incur in the subsequent year. For each of the three years ended 31 December 2014, the warranty, repair and maintenance accrued and the provisions made amounted to approximately RMB8.6 million, RMB12.5 million and RMB23.3 million, respectively, whereas approximately RMB13.4 million, RMB8.6 million and RMB12.5 million were reversed during the corresponding periods respectively. Seasonality There is no prominent seasonal pattern for our sales in the past few years though we noticed that the sales in the second half of the year is marginally higher than the first half. According to our customers, this may be due to an increase in demand for mobile handsets by mobile handset retailers in preparation for sales of mobile handsets on or around Christmas or specific holidays of various countries. Based on our management’s experience, the sales amount has a more obvious correlation with the timing of the transition of technology of mobile telecommunication standards or upgraded mobile chipsets which lead to launch of new models. Agreements relating to sales Framework agreements We enter into framework agreements with our customers subject to negotiations with our customers. Sales are confirmed by purchase orders and/or commercial invoices. During the Pre-split Period, Benywave Technology entered into legally binding framework agreements with six of its customers (which have been terminated after the Split) and Benywave Wireless entered into legally binding framework agreements with twelve of its customers (the “General Framework Agreements”) who are all Independent Third Parties. Key terms of the effective framework agreements are summarised as follows: Agreement duration:

24 months.

Main provisions and exclusivity:

We supply mobile phone products to the customers on ODM basis for the local market (the “Products”). We agree not to supply the Products to other customers in the local markets.

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BUSINESS We shall indicate our estimated new mobile phone models to our customers on monthly basis. Price:

On prevailing market price to be agreed based on each sales order. The price may include 2% swap free of charge for after-service (i.e. we provide 2% of additional or spare mobile handsets, components and accessories to our customers who may need to replace mobile handsets or accessories to their end users or repair the handsets for their end users during the warranty period provided by our customers).

Warranty:

We provide one year warranty since the delivery date. We shall take no responsibility for any defects caused by misuse, abuse, neglect, improper transportation or storage, improper testing, operations or use, improper maintenance or repair, alteration, modification, tampering, accident, or unusual deterioration or degradation of the product or part thereof due to physical environment beyond the requirement of product specification.

Payment term:

Unless otherwise agreed in the individual purchase orders and/or invoices, a deposit in the amount of 10% of the total sales amount of the relevant orders shall be payable upon the order being made, and the remaining amount shall be payable by telegraphic transfer or 60 days of letter of credit before the Products are delivered.

Sales target and sales return:

No sales target is set as guaranteed performance and there is no agreed terms on sales return.

Grant of license of trade marks:

The customers warrant that they are the registered or authorised licensee of the registered owners of the relevant trademarks and have the right to and thereby license or sub-license us to produce or procure the production of mobile handsets bearing the relevant trademarks.

Product standards and liabilities:

The customers shall inform us of the product standards and/or certifications required in the relevant territory when placing the relevant orders of products with us. We shall supply the products in accordance with relevant standards and obtain the relevant certifications at the instruction of the customer, and upon fulfilment of such obligations, we shall be discharged from all product liabilities or other legal liabilities relating to the sale of products to the customers.

Intellectual property rights:

The proprietary rights in the design of the Products, including among others, the software source codes relating to the design of the Products, shall belong to us.

Other provisions:

The customers are responsible for, among others, (i) obtaining any required import licenses to import products to the relevant territory; (ii) obtaining third party licenses and pay royalties for third party licenses for production of the products and the software installed in the products unless otherwise agreed by the parties.

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BUSINESS Termination clause:

No particular termination clause is agreed. The agreement may be terminated upon mutual agreement between the parties.

If no framework agreement is entered into by us with the customers, we will incorporate the relevant clauses relating to intellectual property rights and the product standards and liabilities into the pro-forma sales invoices. We do not sell our products directly to the retail consumers but instead, we deliver our products to our customers primarily on free-on-board terms (at Hong Kong ports) (FOB Hong Kong) in accordance with our customers’ specifications for shipment worldwide. Free-on-board means our Group, as seller, pay for transportation of our products to the port of shipment plus loading costs while our customers, as buyers, pay the cost of freight transport, insurance, unloading and transportation from the arrival port to the final destination. The passing of risks occurs when our products are loaded on board at the port of shipment. Our titles in property and risk of the products sold to overseas customers are passed to the overseas customers when the products are delivered to the forwarder located in Hong Kong. Some customers may designate us to deliver our products to their offices in Hong Kong where the title and passing of risks occurs when our products reach their offices. We are responsible for the administrative procedures for the export of most of the products from China, where our customers were responsible for the procedures for customs entries of the products into their local countries and payment of import duties, if any. Marketing Sales leads are usually generated through our marketing activities, as well as referrals from our suppliers and customers. We participate in various international exhibitions and trade fairs to showcase our products and increase our exposure in the market. These include for example, International Consumer Electronics Show (CES, a global consumer electronics and consumer technology tradeshow) in Las Vegas and Mobile World Congress in Barcelona, Spain. We also identify potential customers in different countries and regions and proactively seek referrals by our major chip suppliers who have good business connections in global mobile communication industry of our targeted customers. Besides, we are usually introduced to worldwide carriers in industry seminars or supplier bridging summits led by mainstream mobile chipset suppliers. We also arrange training sessions for our sales persons, which include standardized sales procedures, regular training held by chipset and raw material manufacturers, and field study in production facilities. RESEARCH, DEVELOPMENT AND DESIGN Research and Development Team We take pride in having a dedicated R&D team which is consisted of 64 staff led by Mr. Pei Hongan, including experienced electronics, mechanical, software, driver and testing engineers and many of them have stayed with us for more than five years. To ensure the quality of our R&D staff members, we usually require a probation period of six months.

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BUSINESS The breakdown below illustrates the composition of the R&D department by functions as at the Latest Practicable Date: Number of staff

Specific function in R&D department Chief engineer and R&D project managers and team leaders Software application engineers Hardware and PCB layout design engineers Driver engineers Testing engineers Others

6 30 6 8 11 3

Total

Majority of our R&D staff have received a bachelor degree in telecommunications or electrical and electronic engineering discipline. Majority of our R&D engineers are university graduates or vocational programme graduates, and we value their dedication to mobile phone technology R&D and innovative ideas to the design and engineering aspects of mobile phones. To the best information and knowledge of our Directors, as China has been responsible for a large proportion of the handset production, R&D talents in the industry in China keep pace with the latest development of the technology. While the mobile telecommunication technology in the PRC and certain developed countries is ahead of those in many emerging markets, our PRC-based R&D team has been keeping pace with latest development of the technology. Our R&D team has mastered the designs for 4G smartphones and is capable of offering these products to our clients in developed countries. On the other hand, we are also in an advantageous position to design and tailor make mobile handsets with conventional technology and components but is capable of providing the popular functions such as high definition LCD screen, high resolution camera and high speed internet browsing for customers in emerging markets (where 2G or 3G mobile handsets are still in dominant position) with less efforts. Material Technology and technical know-how Whenever there is any newly developed software platform (e.g. Windows Phone of Microsoft), breakthrough development of mobile telecommunication standards (e.g. 4G) or advancement of mobile chipsets, our R&D team works on the software and mechanical design and engineering for producing a mobile handset with an aim to maximize the compatibility of various hardware, software and components of a mobile handset with specified functions. We are now able to design mobile handsets for different systems of 2G, 3G and 4G, mainly including GSM, CDMA, EVDO, W-CDMA and LTE, etc. We can also carry out circuit board design and software development for our mobile handsets and conduct relevant testings. During the Track Record Period, we developed over 750 mobile handset models meeting the needs of various customers. It generally takes two to three months for us to develop a new model for our product roadmap as introductive of our new product to customers or as designs according to our customers’ request. If we are requested to make modifications to existing models to suit customers’ requests, it generally takes one to two months.

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BUSINESS Cooperation with third parties Alpha Project While we source mobile chipsets from various global leading chipset providers to ensure diversity in supplier relationship, we sometimes cooperate with our mobile chipset providers such as Qualcomm in alpha projects, namely, design, development and manufacture of mobile handsets using new chipsets to formulate the reference designs of mobile handsets in application of these newly developed mobile chipsets. These reference designs will be published by the relevant major mobile chipset suppliers to mobile handset manufacturers. The Directors believe that the selection of alpha project partners by the chipset providers is usually based on comprehensive standards of the candidates, including R&D ability, industrial influence and relationship with suppliers. By such cooperation, our engineers will be able to receive the latest information of the new chipset provided by the trainings of the chipset providers, which is beneficial to us in our product development.

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BUSINESS Over-the-Air (OTA) service For enhancing customers’ experience, we have reached a cooperative agreement with Shanghai Guangsheng for providing OTA services to users of specific batches and models of our mobile handsets sold in specific regions, whereby it is possible for us to realize upgrading and pushing contents after sales. Over-the-Air is a technology that enables remote management of data and applications wirelessly. The term of the cooperative agreement is two years and the service fee is RMB0.5 for each successful upgrade with an upper limit of RMB100,000 per year. Design and development process The following chart demonstrates the design and development process of a typical mobile handset product: Project Inception

Product Definition1

Mobile handset motherboard design

Industrial Design

Sourcing of Other Components2

Case Design Software Design

Hardware Design

PCB Layout Design

Single Module Testing

Fail

Mould Production

Design Proof Review3 Fail

Testing OK

PCB Assembly

Assembly and Trial Production

Fail

Complete handset Testing

Conducted by us

Conducted by our EMS provider

OK Mass Production

Conducted by our cooperative mould factories

Notes: 1.

Selection of chipset will be completed in the period of Product Definition. The subsequent R&D will be based on the chipset selected.

Other components include mainly display modules, camera modules, etc. Single module of the components sourced from our suppliers will be tested before assembly.

Design proof will be reviewed by us internally and by our EMS provider in order to confirm the smooth assembling logistics for the design.

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BUSINESS In the project inception stage, we formulate work distribution and R&D timetable will be determined during project inception session. Then project definition will be completed with joint effort of both the sales department and R&D staff. In the core steps of R&D, mobile handset motherboard design comprises of three streams, namely software design, hardware design and PCB layout design, based on the chipset we have planned to use according to customers, requirement of the products. At the same time, case design will be finished for sourcing of suitable mould. Thereafter, assembled trial product will be tested before mass production. In general, it takes 2-3 months from project inception to the mass production stage. As part of the arrangements under the Split, we lease certain large product testing equipment and facilities from Benywave Technology. The leasing fee is discussed and charged on an arm’s length basis. For details, please refer to the section headed “Connected Transactions” of this prospectus. During the Track Record Period, the total research and development expenditures amounted to approximately RMB13.1 million, RMB16.4 million and RMB22.0 million for each of the three years ended 31 December 2014, respectively. We believe that our edge on the R&D and design capabilities enables us to appeal to our customers’ needs, maintain business relationships with our existing customers as well as exploring new business opportunities. OUTSOURCING AND PRODUCTION MANAGEMENT Our management realizes the highest value adding segment in an ODM value chain lies in hardware and software design. We have been focusing on building our core strength in R&D. Our management considers it is important to maintain a robust business model in order to serve our overseas customers with diverse demand in the hardware and software specification. To ensure the optimal performance of our design, we have strict control over the sourcing of key components, i.e. chipsets, camera modules, display modules and audio modules. To the best information and knowledge of our Directors, our strategy to outsource the mass production and assembly process to EMS providers optimizes our strength and maximizes our returns. We provide our EMS providers with production instruction and software design packs to be readily and directly applied on the SMT lines, and utilise their equipment and human resources to assemble our mobile handsets according to our design and technical specifications. We have engaged our EMS providers at the early stage of our product design and development such as producing product samples and formulating suitable production procedures to minimize possibility of production disruption caused by potential technical problem and increase efficiency. We also participate in the production management of the EMS providers, by providing support and solution to any technical problems occurred. We send our quality controls staff to our EMS providers who will sample finished products before shipment to our customers to ensure product quality. For details, please refer to the subsection headed “Quality Control” in this section. During the Track Record Period, we have not had any material product defect which led to product recalls. We also perform monthly stock take at our EMS providers to ensure tight inventory management. We choose our EMS providers based on a series of criteria, including among others: 1) capability to produce high quality products that satisfy diverse specification; 2) the ability to realize different designs; 3) efficient production within minimum production lead time; 4) assurance on security of confidential and commercial-sensitive proprietary information; and 5) competitive price among comparable EMS providers. We outsource the manufacturing to reliable EMS manufacturers to ensure quality of our products. According to Frost & Sullivan, Benywave Technology maintained long-term relationship with one of the EMS providers who is the second largest mobile handset EMS manufacturers worldwide in 2013 (in terms of market share based on shipment) for more than five years, and we maintain such relationship after the Split.

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BUSINESS During the Track Record Period, we have engaged six EMS providers who are all Independent Third Parties. We have entered into framework outsourcing contracts (the “Outsourcing Agreements”) with each of them for a term of two years. Under the Outsourcing Agreements, the EMS providers will manufacture and package the products according to the design and technical specifications provided, by using raw materials and components procured by us. For detailed disclosure of procurement, please refer to the subsection headed “Business — Raw materials and suppliers” in this prospectus. In 2014 prior to the Split, we procured services from four of these EMS providers and approximately 60.6% of the subcontracting costs were attributable to the above major EMS providers. After the Split, we continued to engage three out of these four EMS providers. We entered into Outsourcing Agreements with each of these three EMS providers for a term of two years at similar terms adopted prior to the Split. For the three months ended 31 March 2015, approximately 58.7% of the subcontracting costs were attributable to the above major EMS providers. The table below summarizes the main provisions of the Outsourcing Agreements: Term or duration of agreement

two years, renewable by supplemental or new agreement

Main provisions and exclusivity

The EMS providers will be responsible for both trial production and mass production. The production facilities and testing facilities will be provided by the EMS providers. The materials used for production will be supplied by us prior to production, or purchased by the EMS providers on behalf of us, and the EMS providers will check and accept the raw materials for us. Purchase order containing technical specifications will be placed at least several days before production as specified by different EMS providers. We have the right to amend the specifications of the products and may change production plan. Spillage or write-off of raw materials will be subject to confirmation by both parties, and the cost of which will be deducted from the subcontracting fees. The EMS providers shall confirm the purchase order in written form and produce and deliver products according to the purchase order. The EMS providers shall be liable for late delivery of products and shall notify us of any potential delay of delivery and the reason(s). We will then negotiate for a new date for delivery. The EMS providers shall conduct production independently and shall not assign production to third parties without our written consent.

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BUSINESS Quality Assurance

The EMS providers are required to follow specific standards and procedures of testing the raw materials and products. Underachievement of quality standards over a certain ratio may give rise to starting over of production, such cost will be borne by the EMS providers. The EMS providers shall be liable for the losses of product recalls or product liability claims caused by them.

Confidentiality

Neither party shall illegally obtain, use or disclose the commercial secrets of the other party. The commercial secrets shall be kept confidential in a period of one year or five years after the contract expires.

Price

Pricing shall be determined monthly by the actual delivery amount of products, deducting the cost caused by spillage and write-off of materials, if any, as mutually confirmed by both parties. We may revisit the price and consider adjustment regularly, depending on our contracts with different EMS providers.

Credit term

Usually 60 days.

Termination clause

Either party has the right to terminate the contract if the other party breaches the contract and fails to rectify in time. Either party that has the intention to continue cooperation shall notify the other party in writing 20 days before the expiration date of the contract. A new contract shall be signed after negotiation if the other party also intends to extend such cooperation. Otherwise, the contract shall be deemed as terminated upon expiry. Stocktaking shall be done to determine the amount of stock of remaining materials upon termination of the outsourcing contracts, for returning to us.

During the Track Record Period, our subcontracting costs were approximately RMB42.2 million, RMB50.3 million and RMB92.6 million for each of the three years ended 31 December 2014 respectively. QUALITY CONTROL We adopt strict process control system and effective quality control scheme to maintain a high standard of our products, as the Directors believe that high quality of products is essential for us to maintain long-term relationship with our customers and to build reputation in the industry. Our quality management system has complied with the requirement of GB/T 19001 – 2008/ ISO9001:2008 Quality Management Systems Requirements and awarded a certificate for the design, development, manufacture and service of mobile phone on 17 November 2014, which remains valid for three years.

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BUSINESS We distribute our products to over 25 countries. We are able to offer products in compliance with various safety and industrial standards, including CE, RoHS, FCC, ANATEL, NCC, TA& BV, BIS, ICASA, 3C(CCC), UL, etc. If certain product standard certifications are required and specified by our customers, we will arrange prototypes to be sent to the relevant recognized independent third party laboratories before commencement of mass production. Our customers inform us of the local required standards and certifications when placing orders with us. The table below shows a list of the standards implemented or specific requirements for mobile handsets or consumer electronic products in certain jurisdictions and we supply products satisfying these standards accordingly: Jurisdiction

Standard(s)

Authority and Scope

Europe

CE Marking indicates the conformity with the mandatory requirements stipulated by the European Commission Directives relating to safety, health and environmental protection for products sold in the European market.

RoHS

RoHS is acronym for Directive on the restriction of the use of certain hazardous substances in electrical and electronic equipment, which is adopted by the EU.

The U.S.A

FCC

FCC Rules are adopted by FCC and apply to among others, IT equipment.

Thailand

Brazil

ANATEL

ANATEL is the National Telecommunication Agency in Brazil which is authorised to issue regulations to be observed in the certification and approval processes of the telecommunications products, for ensuring a minimum standard of quality of the telecommunications products marketed in Brazil.

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BUSINESS Jurisdiction

Standard(s)

Authority and Scope

Taiwan

NCC

India

BIS

Under the Bureau of Indian Standards Act, 1986, BIS establishes Indian Standards in relation to any article or process and amends, revises or cancels the standards so established as may be necessary, by a process of consultation involving consumers, manufacturers, Government and regulatory bodies, technologists, scientists and testing laboratories through duly constituted committees. According to the BIS, among others, all the new designs of mobile handsets in India shall comply with the Specific Absorption Rate (SAR) values of 1.6 W/kg averaged over 1 gram of human tissue with effect from 1 September 2012, failing which, the mobile handsets will not be permitted to be imported into India. The information on SAR values should be made available to the end-consumer at the point of sale. For further information, please refer to the subsection headed “Regulations — Indian Laws and Regulations” in this prospectus.

Philippines

NTC

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BUSINESS Jurisdiction

Standard(s)

Authority and Scope

South Africa

ICASA

ICASA is the Independent Communications Authority of South Africa, the regulator for South African communications, broadcasting and postal services sector, which is responsible for the licensing and regulation of electronic communications and broadcasting services.

Other Jurisdictions

3C (CCC) (If no specific standards or certifications are required, we supply our products meeting standards for 3C or CCC)

3C or CCC, namely China Compulsory Certification, is the certification for commodity inspection and safety certification for electrical equipment implemented by the State General Administration of Quality Supervision, Inspection and Quarantine of China.

We also adopt sets of quality control standards for each of raw materials, finished products, achievement of telecommunication standards, accessories, etc. by sampling before shipment from supplier’s warehouse and during our production process. For incoming raw materials and accessories, we have differentiated testing and inspection standards according to their specific projects, types and sources. We codified detailed corporate standards applicable to products of different telecommunication standards, including those of GSM, CDMA, CDMA 1X, WCDMA and LTE, on their interface, electromagnetic compatibility, performance, environmental adaptability, etc. Various kinds of testing will be conducted under certain standards, including structural capability test, hardware stress test, simulated user test, smartphone engineering model test and so on. Our quality staff, including engineers and quality inspectors, station at the production facility of our EMS providers. The engineers provide on-site technical support and coordinate with raw material suppliers and EMS providers in case of quality problems. Our quality inspectors conduct sample quality checks on finished goods to ensure quality controls. We have entered into quality assurance agreements with our EMS providers or included quality requirement provisions in the outsourcing contracts. Under such arrangements, the EMS providers will be responsible for quality checks of the raw materials delivered to our EMS providers. Also, the EMS providers will rectify the products if the defective rate is over 1% at their own cost for raw materials and labour. The EMS providers will also be liable for all the losses caused by them if there is any product recall or claim arising from defective product. According to the agreement, we are entitled to the right to claim compensation for breach of quality provisions.

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BUSINESS If serious product defects occur, for instance, use of wrong material or hardware malfunction, we will send staff on-site to investigate and communicate with customers. Then we will recover our losses from relevant suppliers or EMS providers in accordance with the supply agreement or sub-contract agreement, as the case may be. The average outgoing defective rate of our handsets is approximately 0.3%, 0.2% and 0.3% for each of the three years ended 31 December 2014, respectively. The Directors believe that such average defective rate is below the industrial practice and within the quality control expectation of our Group. During the Track Record Period, we have not received any recall of products from our customers or delays in meeting product delivery schedule. The diagram below illustrates how the quality control scheme functions in a standard flow of our business:

Sourcing of Raw Materials and Accessories Due diligence research on the safety standards and industrial standards of customer’s market Strict criteria in selecting and reviewing suppliers Quality tests on technical specifications of different components conducted by EMS providers

Design and Development

Production

PCB design and debugging according to customers’ requirements with reference to chipset suppliers’ design, mechanical and case design

On-site technical support provided for outsourced manufacturers

Assembly and trial production

Sample testing of produced handsets

Testing of integrated handset before mass production

Review of defective rate of EMS providers and strict criteria of selection

Packaging

After Sales Service

Provision of 2–3% of SWAP

Final check of external experience and accessories

Online/telephone/ personal guidance on proper use of the handset On-site investigation and communication with customer in case of serious quality incident & initiating product recall

RAW MATERIALS AND SUPPLIERS The major raw materials and components we purchase for manufacturing our products include electrical and electronic components such as display modules, camera modules and mobile chips (such as baseband processor ICs), etc. We purchased mobile chipsets from global leading chipset providers such as Qualcomm and Mediatek during the Track Record Period. We adopt stringent criteria in supplier selection. We rate the supplier partners based on product quality, product defect ratio, and their scale of operations to minimize the risk of supply shortage, pricing and logistic arrangement capability. It is our strategy to maintain long-term relationship with our suppliers to maximize our bargaining power in terms of pricing, priority in using their latest products and priority in fulfilling our demand for stock at the time of short supply in the market. We generally enter into framework procurement agreements and quality assurance agreements with our suppliers. Purchases are confirmed by purchase orders placed with our suppliers from time to time. The tables below summarize the main provisions of the framework procurement agreements and the quality assurance agreements:

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BUSINESS Framework Procurement Agreement Term

One year

Main provisions

The suppliers supply certain parts or accessories of mobile devices to us.

Product standard

The technical and quality standards applicable to the raw materials and all of the relevant parts and accessories shall comply with the technical standards specified by us and those promulgated by Ministry of Information Industry of the PRC. Defective products can be fixed, changed and returned.

Payment and credit term

A credit term of 60 days is generally granted. Payment shall be made by telegraph transfer or bank draft.

Transportation and Packaging

The suppliers shall be responsible for fees arising from packaging, insurance, warehousing and transportation to our designated place.

Delivery and inspection

Delivery shall be made to the place designated on the purchase order, with at least one day notice to us. Outgoing inspection report shall be submitted upon arrival. We or our authorised party shall have right to inspect the goods together with the supplier immediately after the products are delivered. In case of failure of such inspection, a notice shall be made to the supplier within 5 days from delivery and all or part of the products can be returned or a discount shall be given subject to negotiation. Defective raw materials can still be returned if found during production.

Warranty and assurance

The suppliers warrant that all the products supplied to us shall be new, complete, unused and comply with our specified quality standards. In case of imported raw materials, certificate of origin, testing and other applicable documents shall be submitted to us. The suppliers also warrant sufficient and timely supply and shall provide necessary training on products to us. In case of serious quality problem, the suppliers shall provide testing to our customer free of charge and make clarifications to the public where necessary.

Confidentiality

Both party are obliged to keep confidential all commercial secrets and all the data, materials or other information received under terms of the agreement.

Breach

The party in breach shall be subject to an amount of 5% of the total amount of the purchase order.

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BUSINESS Assignment and Termination

Assignment of the obligations or rights under the agreement is not allowed unless agreed by the other party in writing. The agreement shall be valid until the obligations thereunder have been fully performed after expiry of the term, unless written notification is made 90 days before expiry.

Quality standards

The suppliers shall comply with our latest corporate technical and quality standards issued from time to time. The suppliers shall also obtain our confirmation on design drawings, technical standards, and samples before production and delivery.

Quality assurance procedures

We shall have access to the factory to assess the inventory management, production facility management, defective product management, testing procedure, hazardous substance disposal and documentation keeping of the suppliers. The suppliers shall rectify according to our suggestions.

Environment protection

The suppliers shall comply with RoHS and the regulations promulgated by PRC government. Prior notice shall be given if any of the hazardous substance defined in RoHS Directives is used. We are entitled to claim all the damages caused by the suppliers’ breach of the Directives.

Records keeping

The suppliers shall submit inspection report to us and ensure traceability of every batch of the products.

Product Inspection

The suppliers shall submit samples for us for inspection and testing before mass production. Products are subject to inspection upon arrival at our EMS provider’s production facility. In case of defective products, the suppliers shall provide alternative products and response within our specified period. The suppliers shall change the products free of charge if the defect is caused by them, and shall bear the cost of disposal of defective products and related staff cost. We are entitled to claim compensation from the suppliers for the other damages caused by the defect.

Compensation of damages

If the defective rate is over 5%, the suppliers shall compensate us the amount of including but not limited to the testing expenses, staff cost, administrative cost, etc. If media exposure is involved, we are entitled to claim reputation damages in addition to our actual losses.

Term and other matters

The agreement shall be valid during the existence of the business relationship between both parties.

Quality Assurance Agreement

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BUSINESS We will place purchase orders at our discretion. The prices will be determined each time an order is placed and subject to arm’s length negotiation with our suppliers. As at 31 December 2014, we have maintained business relationship with all of our top five suppliers for more than three years. They usually grant us a credit term of 30–60 days or may require cash on delivery on rare occasions. During the Track Record Period, the purchase from our largest supplier amounted to approximately RMB45.6 million, RMB269.7 million and RMB237.9 million for each of the three years ended 31 December 2014, representing approximately 8.2%, 21.3% and 14.1% of the total purchase of the Company for the corresponding periods respectively. The purchase from the five largest suppliers amounted to approximately RMB158.9 million, RMB492.1 million and RMB908.1 million for each of the three years ended 31 December 2014, representing approximately 28.5%, 38.8% and 53.9% of the total purchase of each relevant periods respectively. To the best information and knowledge of our Directors, none of our Directors and their respective close associates or any of the Shareholders holding more than 5% of our Company’s share capital as of the Latest Practicable Date has any interest in any of our five largest suppliers during the Track Record Period. Most of our suppliers are communication and electronic technology companies in China, located mainly in Beijing, Shanghai, Zhejiang Province and Guangdong Province. The Directors believe that it is more efficient and economic to source raw materials and components in China as it has a complete industrial chain with abundant supply. According to the Frost & Sullivan Report, the prices of the raw materials generally were in a decreasing trend or remained stable from 2011 to 2013. During the Track Record Period, we have not experienced any substantial fluctuation of price in core materials and components. To the best information and knowledge of our Directors, there may be sudden shortage in supply of certain raw materials or components (such as mobile chips). If there is a sudden shortage in supply of the relevant raw materials or components or there is any delay in supplying of the raw materials or components, it could cause delay in fulfilment of our orders. If the relevant raw materials or components are no longer available, we may stop supplying certain mobile models or modify certain specifications of the mobile phones to adapt to the use of raw materials or components in other brands. We may find it difficult, costly and time-consuming to find alternative supply for these materials and components, or to change handset design to use the alternative materials and components. To minimize the above circ*mstances, we generally purchase these raw materials directly from the manufacturers or from electronic component trading companies with whom we have long-term relationships. When there is any shortage of raw materials or components, the market including our customers are generally aware of such fact and they generally accept delay in supplying of the products or modification of the mobile phone models without resort to any legal proceedings. During the Track Record Period, we had not experienced any shortage of raw materials resulted in any material adverse effect on our business. INVENTORY CONTROL Our inventories consist of raw materials, work-in-progress and finished products. Due to the relatively short product life circle and accelerated product development period resulted from fierce competition in the mobile handset industry, the Directors believe for inventory control it is critical to maintain a benign circle of inventory. We believe the key in inventory control is balancing the risk of stock obsolescence and possible supply shortage of raw materials. We may place order with our suppliers in advance for certain materials which are of longer lead time and prone to shortage based on sales forecast, including motherboard, display modules, camera modules and mobile chips. During the Track Record Period, we have not faced any material shortage of key components.

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BUSINESS Our inventory control information system enables us to check the inventory status on a realtime basis to manage the level of stock. Monthly analysis will be conducted to manage the obsolete inventory by way of depreciation or disposal. Our EMS providers will also conduct stock taking each month together with our onsite staff. We will also send our employees from our headquarter to the EMS providers to participate in stock taking every six months. We carry out physical inventory counts on a monthly basis for better control and management of inventories to ensure the accuracy and completeness of stock-in and stock-out information on record. Provision will be made for inventories which are considered obsolete after taking into account the aging of the inventory items, the movements and usefulness or residual value of the inventories. For each of the three years ended 31 December 2014, we made provision for inventories obsolescence of approximately RMB2.7 million, RMB3.0 million and RMB2.5 million respectively. INTELLECTUAL PROPERTY RIGHTS We have applied trademark of “

” in Hong Kong and the PRC.

As a mobile handset supplier on ODM basis with design capability, we supply mobile handsets to our customers in their own or authorised brands. To manage the risk of infringing third parties’ intellectual property rights, we obtain trademark certificates or license or authorizations to check if our potential customers has the right to authorize us to manufacture products in the relevant trademarks. Third party licences Our products are installed with common operating systems such as Android and Windows. If our customers require any specific third party software to be installed in the products, they will bear the costs. However, these situations seldom occur. If required, we enter into licensing agreements with our suppliers where we are required to pay certain royalties for the mobile handsets assembled with their components. During the Track Record Period, Benywave Technology has been a sub-licensee of one of our suppliers, pursuant to a licensing agreement of which, among others, we are required to pay royalties for certain components supplied by them, with reference to the quantity of mobile handsets sold which are equipped with certain model of components supplied by them. There is no specific term of duration for the licensing agreement. Benywave Wireless became a separate sub-licensee of the relevant supplier at similar terms of the relevant licensing agreement after the Split. China’s National Development and Reform Commission (“NDRC”) has lately issued an Administrative Sanction Decision in February 2015 stating that the relevant supplier has been charging royalty fees at an unfair rate by abusing its dominant position in the market which violated the Anti-Monopoly Law in China and imposed a fine of RMB6.088 billion. The relevant supplier has agreed to implement a rectification plan that modifies certain of its business practices in China and that fully satisfies the requirements of the NDRC’s order. Under the rectification plan, the relevant supplier will not sell the baseband chips to its customers conditioned upon such customer signing a license agreement with terms that the NDRC found to be unreasonable or on the chip customer not challenging unreasonable terms in its license agreement. The relevant supplier continues to supply mobile chips to the Group and however, due to the above incident, we have not yet received invoices from the supplier for certain royalty expenses payable for the year ended 31 December 2014. Our total royalty expenses incurred amounted to approximately RMB5.1 million, RMB19.6 million and RMB43.2 million for each of the three years ended 31 December 2014 respectively. Out of these royalty

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BUSINESS expenses, approximately RMB5.1 million, RMB19.6 million and RMB30.0 million for each of the three years ended 31 December 2014 were paid based on actual invoices received from the relevant supplier. Our supplier assigns their independent auditors to carry out necessary audit review procedures on its licensees and sub-licensees including our Group to verify that the royalty fees paid and payable to the relevant supplier from time to time are sufficient. As at the Latest Practicable Date, our Directors were not aware of any disputes arising between our Group and the relevant supplier in relation to our royalty fees paid. The remaining royalties of approximately RMB13.2 million for the year ended 31 December 2014 was accrued with reference to historical royalties and other related expenses incurred and at rates indicated by the relevant supplier. Based on the above, our Directors consider that our Group had paid and/or provided for sufficient royalty fees timely during the Track Record Period. Notwithstanding the above, foreseeing the rectification plan that the supplier is carrying out under the requirements of the NDRC, the Directors consider there may be changes to the royalty fees payable in relations to the use of mobile chips purchased from this supplier in the future. Further, although our supplier assigned their independent auditors to carry out necessary audit review procedures on its licensees and sub-licensees including our Group to verify that the royalty fees paid and payable to the relevant supplier from time to time were sufficient and the Directors were not aware of any disputes arising between our Group and the relevant supplier in relation to our royalty fees paid as at the Latest Practicable Date, we cannot assure you that there would not be any disputes arising from royalty fees and other related expenses paid or payable by the Group to the relevant supplier in the future. Taking into account that the above royalty fees only represented approximately 0.9%, 1.6% and 2.6% of the total costs of sales for each of the three years ended 31 December 2014, we do not consider any uncertainty arising from the above would cause material adverse impact on the operations or financial performance of our Group. We have also adopted the following policy to manage the risk of infringing third parties’ intellectual property rights: •

softwares downloaded to our products shall be approved by each of the sales manager, R&D project manager and in-house legal respectively, to confirm that the relevant software are properly licensed or self developed; and

•

no artistic works such as songs or music pieces shall be downloaded on our product unless approved by each of the sales manager, R&D project manager and in-house legal respectively, to confirm that proper licenses are obtained from owner of the copyright owner.

For other internal control policies relating to protection or management of risks regarding intellectual properties, please refer to the subsection headed “Business — Internal Control and Risk Management” in this prospectus. During the Track Record Period, we are not aware of any disputes, claims or litigations related to intellectual properties of our Group. COMPETITION Due to rapid advancement of technology and increased expectation of customers for more personalized mobile handsets, the telecommunication and consumer electronics industry is highly competitive. The Directors consider that the industry chain for the production of mobile handsets in China has been highly complete and mature, and the major competitors of our Group are ODM mobile handset suppliers such as Huaqin, Longcheer and Wingtech.

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BUSINESS The Directors believe that the major entry barriers for overseas market are technical ability, customer relationship and supplier relationship. The Directors consider that the technical ability is essential for providing quality products and adapting to rapid market change, and hence very important to establish solid reputation among customers. Our customer relationship is established based on our product quality, short design lead time, which is in turn supported by strong supplier and EMS provider relationship established over the years. The Directors consider these as our Group’s major competitiveness, which distinguish our Group from its competitors. According to the Frost & Sullivan Report, we ranked the fourth amongst the PRC smartphone suppliers on ODM basis in terms of export shipment volume in 2014. Besides, since we do not sell self-branded mobile handsets, we avoid ourselves from direct competition from our competitors in overseas market as our customers would encounter. Our Directors consider this a deliberate strategy and do not plan to make any change in the recent future. We adopt different strategies to remain competitive. For further details, please refer to the subsection headed “Business – Our Business Strategies” in this prospectus. HEALTH, WORK SAFETY, SOCIAL AND ENVIRONMENTAL PROTECTION We are subject to national and local environmental protection laws and regulations in China. As we have engaged EMS providers to take up production of our products, our daily business does not involve manufacturing. Hence our business activities and operations generally do not result in production of any harmful pollutants. For processing the waste materials generated during our business routines (such as fluorescent tubes and toner cartridges), we have entered into Dangerous Waste Materials Commissioned Disposal Contract with an environmental protection technology company who will collect the waste materials at scheduled place and time. Our costs of compliance with the applicable environmental rules and regulations are approximately RMB5,000, RMB4,000 and RMB4,000 for each of the three years ended 31 December 2014 respectively. The expected cost of compliance with applicable environmental rules and regulations for the year ending 31 December 2015 is expected to be approximately RMB4,000. In addition, we have a management system for our working environment, which lists over 60 environmental situations and its control measures. Each listed situation will be analysed from its influence, emergency status, geographic location, responsible department and recorded by its compliance rate and importance. We have obtained certificates for compliance with the requirements of GB/T 24001-2004 idt ISO14001:2004 and GB/T 28001 – 2011/OHSAS 18001:2007 for our environmental management system and occupational health and safety management system respectively on 17 November 2014. Both of the certificates will expire on 16 November 2017. As at the Latest Practicable Date, no administrative sanctions, penalties or punishments were imposed upon us for the violation of any environmental laws and regulations. The Directors confirm that our Group is in compliance with the existing PRC environmental protection laws and regulations, and are not aware of any material breach of them.

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BUSINESS EMPLOYEES As at the Latest Practicable Date, we have 120 staff members in total. Most of them are based in Beijing. The table below shows the breakdown of our employees and staff members by their functions: Number of employees

Functions Sales and Marketing R&D Procurement and Outsourcing Quality Control Human Resources Legal and Compliance Others

37 64 5 5 1 1 7 120

Total Training

It has been our Group’s policy to provide all-round training to its employees. Usually it includes on-board training as well as continuing education opportunities depending on the job function of the employee. The Directors consider that training is crucial to maintain competitiveness in design and development abilities. Hence, the R&D department will hold internal trainings, depending on the intensity of workload, where each employee will have a chance to share his or her professional experience related to personal function with other colleagues. Besides, chipset suppliers will also hold free workshops and trainings regularly, usually once a quarter. Relevant staff will attend the workshops and trainings to keep them abreast with new technologies and technical trend. Also, we arrange training sessions for our sales persons to enhance their knowledge of the relevant products. For details of such training, please refer to the subsection headed “Business — Sales and Marketing — Marketing” in this prospectus. Confidentiality and non-compete undertakings We require our employees to undertake confidentiality and non-compete obligations by contract. Under such contract, each of the employees is bound to keep our technologies and commercial secrets confidential and forbidden from competing with us both during and after his or her term of employment. Also, it is provided in the contract that the intellectual properties and other commercial secrets generated in the process of an employee’s job duties or based on our material and technical conditions or business information shall belong to us. Other employee-related internal rules Apart from the above, we have also implemented other internal rules for better administration of the employees. We have petty cash administration rules. Employees of different ranks are allowed to withdraw cash subject to approval by department head or general manager in an amount ranging from RMB1,000 to RMB20,000 for business trip, occasional procurement and other situations of payment. For management of overtime work and roster, application form and approval by department head and/or CEO is required, and overtime allowances or time-off in lieu will be granted. We have also established work attendance and performance review measures by adopting attendance and holiday management measures, punitive measures for negligence and breach of duty by attendance administrators, post duty system, entry-exit job and job rotation management rules and internship management rules, etc.

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BUSINESS Social insurance and housing provident funds We maintain social insurance and housing provident funds for all of our employees. During the Track Record Period and up to the Latest Practicable Date, we have duly made contributions to the social insurance and housing provident fund for our employees. LICENSE AND PERMITS The Directors believe that we have obtained all material requisite licenses, permits and approvals for our operations. We set out below the material licenses, permits and approvals for our operations: Type of licenses, permits and approvals

Holding entity

Issuing authority

Validity period/Term

Benywave Wireless

Custom of Beijing Economic-Technological Development Area

Long-term effective (effective from 21 August 2014) (No expiry date stated)

The Foreign Trader Registration Benywave Wireless Form (對外貿易經營者備案登記表)

Beijing Municipal Commission of Commerce

Long-term effective (effective from 8 August 2014) (No expiry date stated)

Radio Dealers Licence (Unrestricted) (無線電商牌照（放寬限制）)

Communications Authority of Hong Kong

14 October 2014 to 15 October 2015

Customs Declaration Unit Registration Certificate (海關報關單位註冊登記證書)

Vital HK

Upon the establishment of Vital HK in 2014, we may consider utilising its Radio Dealers License for sourcing certain raw materials and other liaison work with our overseas customers where our management considers appropriate in the future. BUSINESS ACTIVITIES IN SANCTIONED COUNTRIES The U.S. and other jurisdictions, including the EU, Australia and the United Nations, have comprehensive or broad economic sanctions targeting the Sanctioned Countries.

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BUSINESS Sales in the Sanctioned Countries We have had product sales in connection with certain of the Sanctioned Countries, namely, Yemen, Venezuela and Russia (where certain Sanctioned Persons are located). Below sets out the number of customers in the relevant jurisdictions and their backgrounds: Jurisdiction

For the year ended 31 December 2012 2013 2014

Background

Yemen

2 Trading companies of mobile handsets; wholesaler of mobile handsets and telecommunication solution provider

Russia

–

2 Wholesalers focusing on trading of mobile phones and buying agent for branded mobile phones

Venezuela

–

1 Supplier of branded mobile phones under a telecommunication company in Venezuela

Total:

Sales are confirmed by purchase orders and/or commercial invoices with our customers in these jurisdictions. We have entered into framework supply agreements with one customer in Yemen and one customer in Russia, the terms of which are substantially similar to those of General Framework Agreements as set out under the subsection headed “Business — Sales and Marketing” in this prospectus. The following table sets out the sales revenue attributable from each of the Sanctioned Countries and Russia (where certain Sanctioned Persons are located) during the Track Record Period:

Jurisdiction

For the year ended 31 December 2012 2013 2014 Percentage Percentage Percentage of the total of the total of the total Revenue revenue Revenue revenue Revenue revenue RMB’000 % RMB’000 % RMB’000 %

Yemen Russia Venezuela

14,449 – –

2.2 – –

70,031 64,371 –

5.1 4.7 –

43,644 98,797 7,643

2.3 5.1 0.4

Total:

14,449

2.2

134,402

9.8

150,084

7.8

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BUSINESS As advised by DLA Piper, our legal advisers as to International Sanctions laws, based on the following procedures conducted by them, our Group’s business activities in Sanctioned Countries, namely, Yemen, Venezuela and Russia (where certain Sanctioned Persons are located) during the Track Record Period are not sanctioned activities under the International Sanctions laws and do not implicate the applicability of International Sanctions laws on our Group, or any, person or entity, including our Group’s investors, the Stock Exchange, the HKSCC and the HKSCC Nominees: (a)

reviewed documents provided by us that evidence our sales transactions to customers in the Sanctioned Countries and Russia (where certain Sanctioned Persons are located) during the Track Record Period;

(b)

received written confirmation from us that neither our Group nor any of our affiliates has conducted any business dealings in or with any other countries or persons that are the subject of International Sanctions during the Track Record Period; and

(c)

reviewed the list of customers to whom such sales of products have been made during the Track Record Period against the lists of Sanctioned Persons, and confirmed that none of our customers are on such lists.

In relation to our sales to customers in the Sanctioned Countries and Russia (where certain Sanctioned Persons are located) during the Track Record Period, we have not been notified that any sanctions will be imposed on us. None of the contracting parties are specifically identified on the Specially Designated Nationals and Blocked Persons List maintained by the OFAC or other restricted parties lists maintained by the EU, the United Nations and Australia and therefore would not be deemed as sanctioned targets. Our such sales do not involve industries or sectors that are currently subject to specific U.S., EU, the United Nations or Australia sanctions and therefore are not deemed to be prohibited activities under International Sanctions laws and regulations. Taking into account our Group’s business activities in the Sanctioned Countries and Russia (where certain Sanctioned Persons are located) are not sanctioned activities under the International Sanctions laws and do not implicate the applicability of International laws on our Group, or any, person or entity, including our Group’s investors, the Stock Exchange, the HKSCC and the HKSCC Nominees, and in order to maintain sales revenue and to maximise the Shareholders’ interests, we will continue to carry out the above business activities. Our Directors however do not expect any significant increase or decrease in our Group’s sales to the Sanctioned Countries and Russia (where certain Sanctioned Persons are located) upon Listing. The Sole Sponsor, based on the above advice from our PRC Legal Advisers and DLA Piper, is of the view that the risk of sanctions violations as a result of our Group’s sales to Sanctioned Countries and Russia (where certain Sanctioned Persons are located) during the Track Record Period and the expected sales to Sanctioned Countries and Russia (where certain Sanctioned Persons are located) upon Listing is remote. Our undertakings and internal control procedures We undertake to the Stock Exchange that we will not use the proceeds from the Global Offering, as well as any other funds raised through the Stock Exchange, to finance or facilitate, directly or indirectly, activities or business with, or for the benefit of, the Sanctioned Countries, Russia (where certain Sanctioned Persons are located) or any other government, individual or entity sanctioned by the U.S., the European Union, the United Nations or Australia, including, without limitation, any government, individual or entity that is the subject of any OFAC-administered sanctions. In addition, we have no present intention to undertake any future business that would cause us, the Stock Exchange, HKSCC, HKSCC Nominees or our Shareholders to violate or become a target of sanctions laws of the U.S., the European Union, the United Nations or Australia. We will also

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BUSINESS disclose on the respective websites of the Stock Exchange and our Company if we believe that the transactions our Group entered into in the Sanctioned Countries and Russia (where certain Sanctioned Persons are located) would put our Group or our Shareholders and investors to risks of being sanctioned, and in our annual reports or interim reports our efforts on monitoring our business exposure to sanctions risk, the status of future business, if any, in the Sanctioned Countries and Russia (where certain Sanctioned Persons are located) and our business intention relating to the Sanctioned Countries and Russia (where certain Sanctioned Persons are located). If we were in breach of such undertakings to the Stock Exchange, we risk the possible delisting of our Shares on the Stock Exchange. We will continuously monitor and evaluate our business and take measures to protect the interest of our Group and our Shareholders. The following measures have been fully implemented as of the date of this prospectus. •

We will evaluate the sanctions risks prior to determining whether we should embark on any business opportunities in the Sanctioned Countries and/or with Sanctioned Persons. According to our internal control procedures, the risk management committee of our Board needs to review and approve all relevant business transaction documentation from customers or potential customers from Sanctioned Countries and/or with Sanctioned Persons. In particular, the risk management committee of our Board will review the information (such as identity, nature of business, etc.) relating to the counterparty to the contract along with the draft business transaction documentation. The risk management committee of our Board will check the counterparty against the various lists of restricted parties and countries maintained by the U.S., the EU, the United Nations or Australia, including, without limitation, any government, individual or entity that is the subject of any OFAC-administered sanctions which lists are publicly available, and determine whether the counterparty is, or is owned or controlled by, a person located in any of the Sanctioned Countries or a Sanctioned Person. If any potential sanctions risk is identified, we will seek advice from reputable external international legal counsel with necessary expertise and experience in international sanctions law matters. In order to ensure our compliance with those undertakings to the Stock Exchange, our Directors will continuously monitor the use of proceeds from the Global Offering, as well as any other funds raised through the Stock Exchange, to ensure that such funds will not be used to finance or facilitate, directly or indirectly, activities or business with, or for the benefit of, the Sanctioned Countries, Russia (where certain Sanctioned Persons are located) or Sanctioned Persons.

•

The risk management committee of our Board will periodically review our internal control policies and procedures with respect to sanctions law matters. As and when the risk management committee considers necessary, we will retain external international legal counsel with necessary expertise and experience in sanctions law matters for recommendations and advice.

•

If necessary, external international legal counsel will provide training programs relating to the sanctions laws to our Directors, our senior management, our legal department and other relevant personnel to assist them in evaluating the potential sanctions risks in our daily operations. Our external international legal counsel will provide current list of Sanctioned Countries and Sanctioned Persons and entities to our legal department, who will in turn disseminate such information throughout our domestic operations and overseas offices and branches.

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BUSINESS •

To further enhance our existing internal risk management functions, our Board has established a risk management committee. The members of such committee comprise Mr. Hon Kwok Ping, Lawrence, our independent non-executive Director responsible for our Group’s internal control matters, Ms. Rong and Mr. Rong Shengli, each being an executive Director and its responsibilities include, among others, monitoring our exposure to sanctions law risks and our implementation of the related internal control procedures. Our risk management committee will hold at least two meetings each year to monitor our exposure to sanctions law risks. For more information of the risk management committee, please refer to the subsection headed “Internal Control and Risk Management” in this prospectus below.

With regard to the internal control measures set out above, after undertaking relevant due diligence, and subject to the full implementation and enforcement of these measures, the Sole Sponsor is of the view that these measures will provide a reasonably adequate and effective framework to assist our Company in identifying and monitoring any material risk relating to sanctions laws. Our Directors are of the view that these measures will provide a reasonably adequate and effective framework to assist us in identifying and monitoring any material risk relating to sanctions laws. LITIGATION AND LEGAL COMPLIANCE During the Track Record Period, we have not been involved in any material litigation, administrative proceedings or claims. We were only engaged in litigations related to labour disputes with three of our previous employees relating to late payment of wages during the Track Record Period. The cases have been settled and the total amount has been paid to the three employees was RMB67,610. To the best information and knowledge of our Directors, apart from disclosed above, we were not involved in any legal proceedings and not aware of any claims that might threaten us as at the Latest Practicable Date. We have complied with the relevant laws and regulations in all of the material aspects of our business and operations during the Track Record Period. INTERNAL CONTROL AND RISK MANAGEMENT We put in place other various internal control policies and measures to ensure continuing compliance of applicable laws, rules and regulations and to control our business risks on various facets. These facets and measures covered, include among others, the following: For the purpose of controlling and managing various business or financial risks of our Group: –

the management shall meet semi-annually or as called upon by any member of the risk management committee; the risk management committee shall, with reference to the business and operation environment and financial position of our Group as well as the changes in the economic and political conditions, identify potential risks (such as business risks) faced by our Group and to assess such risks and implications to our Group; and the risk management committee shall also design and develop measures to address and mitigate such risks as well as assign designated persons for implementation and subsequently monitor and report of such measures.

The biography profiles of the members of the risk management committee are set out in the section headed “Directors, Senior Management and Employees” of this prospectus.

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BUSINESS For the purpose of compliance of the applicable laws, rules and regulations: –

legal advisers as to Hong Kong law have provided trainings to the Directors and senior management of our Group on the continuing obligation of a listed company in Hong Kong and on directors’ responsibilities and liabilities, and will provide trainings or regular seminars and updates twice a year on the continuing obligation of a listed company in Hong Kong and on directors’ responsibilities and liabilities to directors and senior management after the Listing;

–

we have appointed Haitong International Capital Limited as our compliance adviser with effect from the date of Listing to advise on ongoing compliance with Listing Rules issues and other applicable securities laws and regulations in Hong Kong;

–

we have appointed Mr. Chui Man Lung, Everett as our company secretary in August 2014 and also appointed professional company secretarial firm who will be responsible for company secretarial matters of our Group. Mr. Chui is an experienced financial controller and company secretary. Please refer to the subsection headed “Directors, Senior Management and Employees — Company Secretary” in this prospectus for biography of Mr. Chui. Our Directors believe that our Company will be able to draw on the expertise of both Mr. Chui and the company secretarial firm with respect to compliance with applicable legal requirements;

–

we have an in-house legal who is a qualified PRC lawyer, who is responsible for providing internal legal advises to various departments such as sales, R&D and human resources, etc.;

–

we engage external legal counsel to advise us on particular issues from time to time.

For the purpose of minimising the business risks, we adopt the following policies: –

we conduct due diligence on new customers before starting business relationship with them, which include, among others, obtaining credit reports from search agents, obtaining business license of the customers and conduct site visits to check the existence of the customers and credibility;

–

to manage and reduce the risk of infringing third parties intellectual property rights during the course of business, we adopt the following policies: •

obtain trademark certificates or license or authorizations to check if our potential customers has right to authorize us to manufacture products in the relevant trademarks;

•

softwares loaded to our products shall be approved by each sales manger, R&D project manager and in-house legal who confirms that the relevant software are property licensed or self developed;

•

no artistic works such as songs or music shall be loaded on our product unless approved by each sales manger, R&D project manager and in-house legal who confirms that proper license are obtained from the copyright owner;

•

arrange orientation briefing and/or seminar to be provided by in house legal counsel to management, sales and R&D staff to enhance their legal awareness and knowledge of compliance with laws and regulations in relation to intellectual property rights;

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BUSINESS

–

•

require our employees to undertake confidentiality and non-compete obligations by contract. Under such contract, each of the employees are bound to keep our technologies and commercial secrets confidential and forbidden from competing with us both during and after his or her term of employment. Also it is provided in the contract that the intellectual properties and other commercial secrets generated in the process of an employee’s job duties or based on our material and technical conditions or business information shall belong to us; and

•

incorporate terms in framework agreements with customers and sales invoices requiring our customers to, among others, (i) warrant that it is the registered owner/authorised licensee of the registered owner of the trademarks and (ii) license us for the production of mobile handsets bearing the relevant trademarks for them, (iii) hold us harmless from and against any and all third party claims and any associated costs, including legal costs, arising from the use of the products sold by our customer.

to consult local legal advisers in the relevant jurisdictions for setting up any office or make investment in the relevant jurisdiction.

PROPERTIES Leased properties We do not have self-owned properties. We lease offices from Tianyu, a company controlled by our Controlling Shareholders, for our business operations. We entered into a lease agreement with Tianyu dated 22 July 2014 which takes effect on the Listing Date on normal commercial terms, the summary information for the lease is set out below: Address of leased properties occupied by us 4th Floor, No. 55, Jiachuang Second Road Zhongguancun Science Park, OPTO-Merchatronics Industrial Park, Tongzhou District, Beijing, China

Area (m 2) 1,000

Leased Term

Monthly Rent

Purpose of occupation by us

Three years from the date of Listing

RMB68,200

Office

For further details of the lease, please refer to the section headed “Connected Transactions” of this prospectus.

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BUSINESS INSURANCE Considering the nature of export business and for managing the risk of breach of contract (e.g. breach of letter of credit) by our customers, we maintain export credit insurance with China Export & Credit Insurance Corporation (“CECIC”). The insured credit term is usually one year, covering the risk arising from bankruptcy, insolvency and delay of payment with an insured amount of 90% of the damage caused, the risk of refusal of acceptance of the goods by the buyer with an insured amount of 90% of the damage caused, political risk with an insured amount of 90% of the damage caused and risk arising from letter of credit with an insured amount of 90% of the damage caused. The general overall insured amount is USD 100 million with an upper limit of insurance compensation of USD 20 million. The insured amount of each customer is subject to approval by CECIC and varies. During the Track Record Period, the insurance premium of export credit insurance paid amounted to approximate RMB94,000, RMB69,000, and RMB800,000. We also acquire insurance policies covering losses incurred during the delivery up to a place where we need to bear the relevant risks according to the terms agreed with our customers. During the Track Record Period, the total insurance premiums we have paid amounted to RMB0.31 million, RMB0.87 million and RMB1.0 million for each of the three years ended 31 December 2014. We did claim for any insurance compensation during the Track Record Period. The Directors believe that the insurance coverage is adequate and in line with the industry norm and there is no material risk that has not been covered by our insurance policies.

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CONNECTED TRANSACTIONS CONTINUING CONNECTED TRANSACTIONS We have entered into certain transactions with parties who are connected persons, and these transactions will continue following Listing, thereby constituting continuing connected transactions of our Group under the Listing Rules. EXEMPTED CONTINUING CONNECTED TRANSACTIONS Lease of PRC Premises Pursuant to a lease agreement made between Tianyu as lessor and Benywave Wireless as lessee (the “Lease Agreement”) dated 22 July 2014, Tianyu has let the PRC Premises to Benywave Wireless for carrying on its business (the “Lease”). The term of the Lease Agreement commences on the date of Listing for three years. Any renewal of the Lease Agreement shall have to be negotiated between the parties. Under the Lease Agreement, it is provided that the area of PRC Premises is approximately 1,000 square metres. The monthly rental is RMB68,200 which shall apply throughout the said term of three years. In addition to the rental, unless otherwise agreed, Benywave Wireless shall pay all the utility charges, management fees and other charges relating to its operations. The annual rent under the Lease Agreement was determined with reference to (a) the prevailing market rate and on an arm’s length basis between Benywave Wireless and Tianyu; and (b) the aggregate annual rents payable under the lease agreement made between Tianyu as lessor and Benywave Technology as lessee for the term from 1 January 2014 to 31 December 2014 which covers the PRC Premises. Our property valuer, DTZ Debenham Tie Leung Limited, an Independent Third Party which is a wholly foreign-owned real estate service provider awarded with Grade A National Real Estate Valuation Licence in the Mainland China, considers the rent payable under the Lease was fair and reasonable based on the prevailing market rate. The PRC Premises is used entirely by Benywave Wireless as its office. Our Directors are of the view that the Lease Agreement has been entered into and will be carried out in the ordinary and usual course of business of our Group on normal commercial terms. As such our Directors (including independent non-executive Directors) consider that the terms of the Lease Agreement are fair and reasonable and the entering into the Lease Agreement by Benywave Wireless is in the interests of our Company and our Shareholders as a whole. Tianyu is owned as to 90% by Ms. Rong who is the chairperson and executive director of our Company and as to 10% by Mr. Ni, the spouse of Ms. Rong, each of whom being a connected person of our Company. Pursuant to the Listing Rules, Tianyu is an associate of Ms. Rong and hence a connected person of our Company. As the annual rent under the Lease Agreement payable by Benywave Wireless to Tianyu for each of the 3 years of the term is RMB818,400, and the applicable percentage ratios under Rule 14.07 of the Listing Rules on an annual basis is less than 5% and the annual consideration is less than HK$3.0 million, the above transaction falls below the de minimis threshold under Rule 14A.76(1)(c) of the Listing Rules and is exempt from any reporting, announcement or independent shareholders’ approval requirements under Rule 14A of the Listing Rules.

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CONNECTED TRANSACTIONS Equipment Lease Agreement Pursuant to an equipment lease agreement made between Benywave Technology as lessor and Benywave Wireless as lessee (the “Equipment Lease Agreement”) dated 20 August 2014, Benywave Technology has let certain equipment and facilities (the “Equipment”) to Benywave Wireless for handset testing purpose. The term of the Equipment Lease Agreement commences on 22 July 2014 and expires on 21 July 2017 and both parties may terminate the same with one month prior written notice. Any renewal of the Equipment Lease Agreement shall have to be negotiated between the parties. Under the Equipment Lease Agreement, it is provided that the rental fee for the Equipment is approximately RMB6,453 per month. The rental fee under the Equipment Lease Agreement was determined with reference to (a) the value of the Equipment; and (b) the frequency of use of the Equipment by Benywave Wireless and Benywave Technology. Before the Split, the Equipment is used for testing mobile handset for research and development purpose by Benywave Technology for both its PRC Business and Overseas Business. After the Split, Benywave Wireless is planning to acquire its own R&D equipments within one year upon Listing. Between the short term period from now upto the availability of the new equipments, Benywave Wireless temporarily leased the Equipment from Benywave Technology. Our Directors are of the view that the Equipment Lease Agreement has been entered into and will be carried out in the ordinary and usual course of business of our Group on normal commercial terms. As such our Directors (including independent non-executive Directors) consider that the terms of the Equipment Lease Agreement are fair and reasonable and the entering into the Equipment Lease Agreement by Benywave Wireless is in the interests of our Company and our Shareholders as a whole. Benywave Technology is a wholly-owned subsidiary of Vital Profit, which is owned as to 93% by Winmate, the Controlling Shareholder of our Company and a connected person of our Company. Hence, Benywave Technology is a 30%-controlled company held indirectly by Winmate. Pursuant to the Listing Rules, Benywave Technology is an associate of Winmate and hence a connected person of our Company. As the total rental fee under the Equipment Lease Agreement payable by Benywave Wireless to Benywave Wireless for the 3 years of the term is approximately RMB232,294, and the applicable percentage ratios under Rule 14.07 of the Listing Rules on an annual basis is less than 5% and the annual consideration is less than HK$3.0 million, the above transaction falls below the de minimis threshold under Rule 14A.76(1)(c) of the Listing Rules and is exempt from any reporting, announcement or independent shareholders’ approval requirements under Rule 14A of the Listing Rules.

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RELATIONSHIP WITH CONTROLLING SHAREHOLDERS OVERVIEW Upon the Listing, each of Ms. Rong, Mr. Ni, Winmate and Rong Personal Trust Nominee will be a Controlling Shareholder pursuant to the Listing Rules. The following table sets forth information regarding the ownership of the Shares immediately following the completion of the Capitalisation Issue and Global Offering (without taking into account the Shares that may be issued and allotted pursuant to the exercise of the Over-allotment Option):

Number of Shares owned

Approximate percentage of voting rights

480,624,000 36,720,000 32,300,000 87,856,000 212,500,000

56.54% 4.32% 3.8% 10.34% 25%

850,000,000

100%

Winmate (1) Favor Gain (2) RSU Scheme Nominee (2) Rong Personal Trust Nominee (3) Public

Notes: (1)

Winmate is owned as to 90% by Ms. Rong and as to 10% by Mr. Ni.

(2)

Each of Favor Gain and RSU Scheme Nominee is an Independent Third Party.

(3)

Rong Personal Trust Nominee is wholly-owned by Core Trust in its capacity as trustee of Rong Personal Trust with Ms. Rong as settlor of the trust. Core Trust in its capacity as trustee of a discretionary trust with Ms. Rong as settlor of the trust, Ms. Rong and Mr. Ni are all deemed to be interested in the Shares held by Rong Personal Trust Nominee under the SFO. Ms. Rong is deemed to be so interested by virtue of her being the founder of Rong Personal Trust. Mr. Ni is deemed to be so interested by virtue of him being the spouse of Ms. Rong.

For details, please refer to the section headed “Substantial Shareholders” of this prospectus. OUR CONTROLLING SHAREHOLDERS Ms. Rong is the chairperson of our Company and an executive Director. Mr. Ni is the husband of Ms Rong. Through their 100% interest in Winmate, Ms. Rong and Mr. Ni will together control approximately 56.54% of our entire issued share capital upon the completion of the Capitalisation Issue and the Global Offering (without taking into account the Shares that may be issued and allotted pursuant to the exercise of the Over-allotment Option). Ms. Rong has set up a revocable discretionary trust, Rong Personal Trust, on 31 March 2015. Core Trust, as trustee of Rong Personal Trust, holds the entire issued share capital of Rong Personal Trust Nominee. Rong Personal Trust Nominee, in turn, holds 87,856,000 Shares, representing 10.34% of the entire issued share capital of our Company upon Capitalisation Issue and the Global Offering (without taking into account the Shares that may be issued and allotted pursuant to the exercise of the Over-allotment Option). Core Trust, in its capacity as trustee of Rong Personal Trust, has certain discretion in the administration and investment of Rong Personal Trust. Ms. Rong is the settlor and the protector of Rong Personal Trust, an investment adviser of Rong Personal Trust Nominee and has the power to remove the trustee thereof. The beneficiaries of Rong Personal Trust are Ms. Rong herself, Rong Family Members and other designated persons. For the avoidance of doubt, Core Trust is not a Controlling Shareholder, but is a Connected Person under the Listing Rules.

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RELATIONSHIP WITH CONTROLLING SHAREHOLDERS Our Controlling Shareholders collectively were interested in 568,480,000 Shares, representing approximately 66.88% of the entire issued share capital of our Company as at the Latest Practicable Date. Apart from our Group, the Founders (Ms. Rong and Mr. Ni) and Winmate (through the Excluded Group) and the Excluded Group currently have interests in mobile handset businesses. Whilst the Excluded Group and our Group are in the same industry, we are of the view that there is a proper delineation of the business of our Group which carries on Overseas Business and that of the Excluded Group which carries on PRC Business, as detailed in the paragraph headed “Delineation of Business” below. In addition, the Founders, Winmate, Tianyu and Benywave Technology have entered into a deed of non-competition and undertaking to ensure that there will be no potential competition. For details of the deed of non-competition and undertaking, please refer to the paragraph headed “Deed of non-competition and undertaking” below. The delineation is also reflected from the fact that since 2010, Benywave Technology has carried on the Overseas Business separately from the PRC Business except for certain overlapping transactions, and the Overseas Business was subsequently transferred to our Group in August 2014 upon the completion of the Split and the acquisition of 100% interest in Benywave Wireless by Vital HK from Vital Profit. Please refer to the subsection headed “History, development and reorganisation — Reorganisation” in this prospectus for further details. The Excluded Business The Excluded Group includes Tianyu Group and Benywave Technology Group. Tianyu Group used to engage in research and development and manufacturing of mobile handsets. Following the investment by Favor Gain and in accordance with the ordinary share subscription agreement dated 18 June 2008, Tianyu transferred all its business to Benywave Technology. Vital Profit, Winmate and the Founders have covenanted to Favor Gain that, among other things, Tianyu Group shall carry out no business or transaction or activity which competes with or relates to Benywave Technology. Furthermore, they have also covenanted with Favor Gain that on or prior to 31 December 2008, amongst other things, (i) the business of Vital Profit, Benywave Technology and Tianyu (including but not limited to development, design, distribution and sale of mobile telecommunications equipment and consumer electronics, software development in respect of such equipment and consumer electronics) shall be carried out by Benywave Technology, (ii) all employment, purchase orders, contracts, receivables, payables, inventory, technology and assets of Tianyu shall be transferred to Benywave Technology; and (iii) all proprietary assets of Tianyu and its subsidiaries (including trademarks) shall be licensed exclusively to Benywave Technology. Following the completion of the investment by Favor Gain, all the mobile communication device business of Tianyu was shifted to Benywave Technology, and Benywave Technology has been licensed to use the trademarks “天語” and “K-Touch” free of charge. As at the Latest Practicable Date, Tianyu Group was not engaged in any business which might compete with Benywave Technology or our Group. Hence, it is not included in the Group for the Listing. Prior to the Split, Benywave Technology was engaged in both the PRC Business (which has been primarily engaged in developing, designing, production management and selling of mobile telecommunications devices and its related components and accessories, under its self-owned brands, targeting the PRC market) and the Overseas Business (which has been primarily engaged in developing, designing, production management and selling mobile telecommunication devices on ODM basis and its related components and accessories, targeting overseas markets). Since 2010, our management considered that the PRC Business and Overseas Business were different in, among others, business model, target customers,

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RELATIONSHIP WITH CONTROLLING SHAREHOLDERS pricing and settlement, and have started to delineate and separate their operations and management. For further details of how the businesses are delineated, please refer to the subsection headed “Delineation of Business” in this prospectus below. Benywave Technology has incurred losses of RMB652.7 million and RMB521.3 million respectively for the years ended 31 December 2012 and 2013, attributable to the financial performance of the PRC Business conducted under a business model differs from our Group; and recorded profit of RMB207.3 million for the year ended 31 December 2014 (excluding the financial results of Benywave Wireless after the Split). Below is certain financial information of Benywave Technology for the three years ended 31 December 2014:

Operating results

Revenue of Overseas Revenue of Revenue of

the PRC Business and Business the Group (Overseas Business) the PRC Business

Revenue For the year ended 31 December 2012 2013 RMB’000 RMB’000

2014 RMB’000

4,340,941 (i) 663,579 (ii) 3,677,362 (iii)

5,669,211 (i) 1,916,183 (ii) 3,753,028 (iii)

6,186,245 (i) 1,368,897 (ii) 4,817,348 (iii)

Gross Profit For the year ended 31 December 2012 2013 RMB’000 RMB’000 Gross profit (loss) of the PRC Business and the Overseas Business Gross profit of the Group (Overseas Business) Gross profit (loss) of the PRC Business

(12,144) (i) 79,499 (ii) (91,643) (iii)

87,474 (i) 148,221 (ii) (60,747) (iii)

2014 RMB’000

685,460 (i) 260,234 (ii) 425,226 (iii)

Notes: (i)

Based on audit reports prepared based on PRC GAAP for Benywave Technology for each of the three years ended 31 December 2014 and Benywave Wireless for the year ended 31 December 2014.

(ii)

Based on the Group’s Accountants’ Report set out in Appendix I to this prospectus.

(iii)

Based on the net amount of Note (i) and Note (ii) above.

Considering the differences in, among others, business model, target customers, pricing and settlement between the PRC Business and the Overseas Business, in July 2014, Benywave Technology was split into two legal entities with the already existing Benywave Technology assuming the PRC Business whereas the newly established entity under the Split, namely Benywave Wireless, assuming the Overseas Business and being the principal subsidiary of the Group for the Listing. Benywave Technology Group (after the Split) was hence not included in the Group for the Listing.

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RELATIONSHIP WITH CONTROLLING SHAREHOLDERS Delineation of Business The Excluded Group focuses on the business of developing, designing and selling of mobile telecommunication equipment and consumer electronics under the self-owned brands of the Excluded Group, targeting the PRC market. Our Group focuses on the business of developing, designing and selling mobile telecommunication devices on ODM basis, targeting overseas markets. In respect of the history and development of the Excluded Group and the formation of our Group out of the Excluded Group, please refer to the section headed “History, development and reorganisation” of this prospectus. Different business focus, target market and target customers To the best information and knowledge of our Directors, the Overseas Business and the PRC Business serve different customer base under different business model due to difference in market dynamics. The Excluded Group is primarily engaged in the sale of mobile handsets in China with self-owned brands directly or indirectly to the three state-owned telecom operators in China. This involves marketing and distribution channels and after-sales services throughout China. In contrast to the PRC Business, our Group focuses on the mobile handset markets excluding the PRC, has a more diverse customer base including the branded mobile phone suppliers, regional mobile operators and trading companies. The Directors believe that the diversity of our customer base gives us greater flexibility in product design in both hardware and software which differentiates us from our competitors, and our business thrives on with end-user demand driven market. We are confident that we can replicate our success in new markets as well. Furthermore, as our Group is supplying mobile handsets on ODM basis, our Group does not have to bear the cost of marketing, distribution and the overheads of retail outlets. Our customers provide the after-sales services to end-users and we only provide technical advice and support to them relating to such services. Comparison of the products provided by the PRC Business and Overseas Business Products and technology In January 2009, the PRC government has granted a TD-SCDMA 3G license to one of the main telecommunication operators in the PRC, a 3G telecommunication standard developed in China with an attempt to avoid over-reliance on western technology. Foreseeing a demand of future mobile handsets adopting unique telecommunication standard in the PRC market and considering the majority of sales made to the relevant telecommunication operator by the PRC Business in 2009 as a proportion to its total sales volume, Benywave Technology devoted substantial R&D resources to the PRC market, and designated a separate group of R&D personnel to develop products for the overseas market in response to the significant difference in product standards and specifications and since then continued with such practice. The differentiation in the key telecommunication standards by the overseas market and the PRC market (i.e. TD-SCDMA versus GSM and WCDMA) resulted in the clear separation of R&D team for each of the Overseas Business and the PRC Business together with each of the markets and specification such as language, preferred outlook style of the mobile handset and detailed functions. Furthermore, due to the non-availability of operating systems with standardised applications for the PRC Business (such as Android with standardised Google Play applications and Windows with Windows Phone standardised applications in the PRC), the PRC Business has to employ substantially more resources in software development of applications than Overseas Business, where operation systems with standardised applications are readily available. Please also refer to the subsection headed “Relationship with Controlling Shareholders — Summary table of major differences between the Overseas Business and the PRC Business” in this prospectus for further information.

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RELATIONSHIP WITH CONTROLLING SHAREHOLDERS Components As both the PRC Business and the Overseas Business provide smartphones, the types of components (such as mobile chips, OGS touch panel and camera modules, etc.) needed by the two businesses are similar. However, given there are various differences in the product specifications for the Overseas Business and the PRC Business, including among others, the prevailing telecommunication standard and frequency from time to time, the specifications for these major components at a particular time for the Overseas Business and the PRC Business vary. For example, the mobile chips for telecommunications standards TD-SCDMA and TD-LTD are not applicable for the Overseas Business. There are ancillary and low cost components such as electric resistance and capacitors which are generally applicable for the mobile handsets for the two businesses. Designs Designs for mobile handsets generally include hardware design, software and mechanical designs. Hardware and software designs form the core designs originated from the respective R&D teams of the Overseas Business and the PRC Business. Given the products for the Overseas Business and the PRC Business vary from telecommunication standards (affecting the use of different mobile chips) to software platforms as well as particular features and specifications specified by different customers, the hardware and software designs for the two businesses originated from its R&D vary. Designs also include industrial designs such as outlook designs of the mobile handsets. These designs vary not only from the Overseas Business to the PRC Business, but also from customer to customer. There could be sharing of basic outlook designs between the two businesses before the Split as these sharing were not prohibited before the Split. Sales outlook To the best information and knowledge of our Directors, the sales outlook of the mobile phones provided by the PRC Business is mainly driven by governmental policies. The sales outlook of the mobile phones provided by the Overseas Business is mainly driven by market dynamics. Different business model, pricing policy and settlement arrangements In 2010, the management has decided to delineate and separate their operations and management, as the business models for the PRC Business and Overseas Business have become substantially different, not only in its target customers and geographical market. Please also refer to the subsection headed “Relationship with Controlling Shareholders — Summary table of major differences between the Overseas Business and the PRC Business” in this prospectus for further information. R&D The Overseas Business has designated its own R&D team devoted for overseas product development since 2010, starting with over 30 staff and gradually increased to 65 staff during the Pre-split Period, which mainly include personnel for hardware and software development, mechanical design and software testing. Since 2009 and prior to the Split, the R&D team for Benywave Technology used to consist of four main teams, three for PRC Business and one for Overseas Business, supported by R&D supporting teams, serving functions including software application design, mechanical design testing, software and hardware testing and product branding designs.

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RELATIONSHIP WITH CONTROLLING SHAREHOLDERS While most of the PRC smartphones adopt the Android platform in recent years, the PRC market requires significant in-house software development as Google Play Market which provides ready-to-use essential software and applications for Android users is banned in the PRC market since the exit of Google from the PRC in 2010. Significant software development resources need to be devoted to the PRC Business for creating these essential software as well as producing the required software by the PRC telecommunication operators. While for the Overseas Business, we can simply download these software for installation from Google Play Market and it does not require significant R&D resources for software development and testing. For 2G products, although the telecommunication standards are the same, the software and the motherboard designs and components used for the PRC Business and the Overseas Business were different. The respective main teams of the PRC Business and the Overseas Business have similar level of knowhow and expertise who had been working independently to serve their respective customers and markets. The R&D supporting teams were shared by PRC Business and Overseas Business. However, with over 85% of the supporting personnel responsible for software application design, testing and other functions only serving the PRC Business, the supporting teams were mostly dedicated to the PRC Business since the software application design and testing functions are generally not material to the Overseas Business. For the Overseas Business, customers generally only required installation of common operating systems such as Android or Windows, with readily available software applications provided by customers, which required less software development and compatibility testing. The Overseas Business mainly engaged third party testing labs on product testing and certifications (arranged by its customers) as it is required by most of the countries it exports to. The R&D supporting teams need to conduct frequent software compatibility testing for PRC Business and large amount of sample phones have to be sent to various labs and government testing centers for verification and filing purpose for passing the national standards, 3C standards, standards set by different telecommunication operators as well as sub-standards set by them in each province of the PRC. Numerous in-house pre-testing for meeting these standards are also needed. Correspondingly, not only resources for PRC Business were significantly higher than the Overseas Business, but the R&D process is also different, in particular the materiality of the supporting teams. Although the R&D teams for the Overseas Business and the PRC Business have been segregated, sharing of outlook designs and potential inter-personnel communication on technology and intellectual information by means of conversation between employees were not restricted between the Overseas Business and the PRC Business. While such information is intangible and mostly readily available in public sources such as the internet, the management considered it would be more prudent to share the cost of certain R&D supporting teams mainly dedicated to the PRC Business in case certain information has been verbally shared by certain employees and caused potential benefits in the R&D process of the Overseas Business. Therefore for the supporting teams units which served both Overseas Business and PRC Business such as the testing teams, and the units which have produced R&D results that are possible for intellectual sharing, their costs have been allocated based on the budgeted revenue of Overseas Business and PRC Business proportionally. Different personnel in charge of procurement The management considered the preparation of sourcing schedule was a material part of the operations to ensure the shortest lead time for the production process. As the orders from the customers of the Overseas Business and the PRC Business are substantially different in order quantity per order, i.e. the orders for the Overseas Business come in small batches while those for the PRC Business come in larger quantities. The entire supply chain management for the Overseas Business and the PRC Business have been different. The management has designated separate procurement personnel for the Overseas Business and the PRC Business to prepare the sourcing schedule according to the customers’ orders and suppliers’ quotations since 2009.

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RELATIONSHIP WITH CONTROLLING SHAREHOLDERS Given that the placing of purchase orders is only an administrative function, purchase orders for the Overseas Business and the PRC Business have been placed by the same personnel under Benywave Technology. However, the Overseas Business has kept independent record of its purchases and purchasing prices of raw materials in the financial system. Our Group has already entered into separate purchasing agreements with its suppliers after the completion of the Split. Engaging similar EMS providers but designated different personnel for outsourcing management Due to the fact that both the Overseas Business and the PRC Business outsource its processing and assembly process and there are very limited high quality top tier EMS providers in the PRC which are also used by various domestic or global leading vendors of mobile telecommunication devices, both the PRC Business and the Overseas Business engaged the same or similar EMS providers to ensure product quality in-line with industry leading standard. Notwithstanding the above, during the Pre-split Period, each of the PRC Business and the Overseas Business designated separate personnel to prepare the production schedules, communicate with the relevant EMS providers directly and separately for meeting their respective customers’ needs, as well as stationed different personnel on site to conduct production management including providing technical supports, quality checks and overseeing the process. We provide detailed specifications of products which enables the EMS providers to have a clear understanding of the difference of the products for the overseas market or PRC market. The inventory for the PRC Business and the Overseas Business were real-time monitored by Benywave Technology and the EMS providers in their respective control systems. Benywave Technology kept independent records of the subcontracting costs for each unit of its products on its financial system. Hence, the subcontracting costs for the two businesses were independently and separately recorded since their products were different. The EMS providers are all independent third parties and separate contracts have been entered into by the PRC Business and Overseas Business with the EMS providers independently after the completion of the Split. Separation of human resources, administrative functions and internal control In respect of human resources, employees serving the Overseas Business were clearly distinguished from those serving the PRC Business in the human resources system of Benywave Technology. The management of the PRC Business and the Overseas Business were separately responsible for the recruitment, appraisal and departure of employees serving the PRC Business and the Overseas Business. The qualifications required for the employees serving the PRC Business and the Overseas Business were also different. Employees serving the Overseas Business shall either have prior work experience overseas or have studied abroad, and shall be proficient in English in order to communicate with the overseas customers, whereas no such requirements were expected from an employee serving the PRC Business. Departmental administrative function needs have been fulfilled by the staff of the respective R&D, sub-contracting, procurement and sales teams for each of the Overseas Business and the PRC Business separately. General office administrative function were shared between the two businesses. In respect of internal control, the senior management of each of the PRC Business and the Overseas Business was separately responsible for monitoring the risks associated with its own business through a top down approach from budgeting to the performance of each employee of the Overseas Business and PRC Business respectively, covering each of the areas of business process, financial system, legal and compliance and employees’ conduct and appraisals.

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RELATIONSHIP WITH CONTROLLING SHAREHOLDERS In light of the differences in the business models of the Overseas Business and the PRC Business engaged by Benywave Technology, the management has to and has been able to effectively control and monitor the performances of the PRC Business and Overseas Business separately for decision making purposes, as well as presenting the financial performance information to Favor Gain. Benywave Technology has started to maintain separate financial records for the PRC Business and Overseas Business and adopted stringent practices to calculate the cost and performance of each staff individually, and has recorded revenue and expenses separately for the PRC Business and the Overseas Business in detailed labels. The stringent management system adopted by Benywave Technology has contributed to its legal compliance during the Pre-split Period. This also facilitated the management to maintain a reliable record of the financial performances of the Overseas Business and facilitated the Reporting Accountant to obtain necessary supporting documents in the course of the conducting the audit of our Group. Treasury and cash disbursem*nts Given that the Overseas Business and the PRC Business were carried on under the same entity namely Benywave Technology prior to the Split, the same bank accounts were used for both of the Overseas Business and the PRC Business because the treasury and cash disbursem*nt functions were administrated by this single entity and accordingly, the net cash flows generated from the Overseas Business were kept in the same bank accounts. Although the two businesses shared the same bank account, the management has recorded the direct and indirectly allocated incomes and expenses clearly delineated and independently in the financial system’s Overseas Business sub-ledgers for clear record and assessment of the performances of the Group. As soon as Benywave Wireless was established, it has set up bank account for the Overseas Business to use for its operations and bank balances would present in the Group’s balance sheet since August 2014. Banking facilities For the Overseas Business before the Spit, on the one hand, deposits were generally required when customers place their orders and letter of credits are provided before the products are delivered whereas on the other hand we are granted with the credit terms for sourcing of raw materials. For the PRC Business, Benywave Technology needs to grant credit terms to customers and generally no deposit is required. Also, customers for the Overseas Business tend to place small orders whereas customers for the PRC Business tend to place large orders. Benywave Technology recorded RMB100 million, RMB125 million and RMB264.5 million bank borrowings as at 31 December 2012, 2013 and 2014 respectively which were purposely obtained and utilised for the PRC Business only. Different core management teams Since 2010 and during the Pre-split Period, the Overseas Business and the PRC Business have been managed under substantially different directors and management. The PRC Business and the Overseas Business only shared one executive Director for its operations, being the Chairperson Ms. Rong who was responsible for overseeing strategic direction only and not day-to-day operations. Therefore apart from this one executive director, all the other executive Director and senior management are independent and delineated from the PRC Business. During the Pre-split Period, the other members of the senior management of the Overseas Business are different from the PRC Business. Mr. Rong Shengli has been responsible for general management and business development of the Overseas Business during the Pre-split Period till now. Mr. Shen Guiping, our vice president in charge of sales, has been responsible for the sales and marketing of the overseas market development during the Pre-split Period till now. Mr. Pei Hongan, our vice president in charge of R&D, has been responsible for overseeing R&D for the Overseas Business during the Pre-split Period till now. Mr. Rong Shengli, Mr. Shen Guiping and Mr. Pei Hongan have been and are currently involved in the daily operations of the Overseas Business and have not been involved in the PRC Business during the Pre-split Period up to Latest Practicable Date.

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RELATIONSHIP WITH CONTROLLING SHAREHOLDERS Mr. Tang Shun Lam, our non-executive Director is not a member of the core management team of the Group, as he is only a representative board member from Favor Gain to oversee its investment and has not been involved in day-to-day management of either the PRC Business or the Overseas Business. Mr. Tang Shun Lam joined the Group as a non-executive Director in March 2015 replacing the previous representative board member from Favor Gain who was also a non-executive Director and was not a member of the core management team of the Group without involvement in day-to-day management of either the PRC Business or the Overseas Business. Hence such role of Mr. Tang Shun Lam or his predecessor would not cause overlapping of core management team between the PRC Business and Overseas Business during the Track Record Period and after the Split. After the Listing, Mr. Tang would act as a non-executive Director not overseeing interests for any Shareholder but for all Shareholders as a whole. Summary table of major differences between the Overseas Business and the PRC Business The following table sets forth a brief summary of the major difference between the Overseas Business and the PRC Business previously conducted separately by the Excluded Group before the Split and being conducted separately by our Group and the Excluded Group respectively after the Split. Excluded Group

Our Group

Business focus

—

To market self-branded mobile devices products through two sales channels of PRC telecommunication operators, wholesalers and K-Touch Life House Stores

—

To offer mobile devices on ODM basis to customers in overseas markets under the customer’s own or authorized brand name.

Target market

—

the PRC

—

Regions excluding the PRC (export out of PRC).

Target customers

—

The key customers are primarily the three telecommunication operators.

—

Price and demand driven by governmental policies

The key customers are the branded mobile phone suppliers, regional telecommunication operators and trading companies in the respective countries. Please refer to the section headed “Business” of this prospectus for further details.

—

More diverse customers base.

—

Price and demand driven by market dynamics.

– 174 –

RELATIONSHIP WITH CONTROLLING SHAREHOLDERS

Contract formation

Products and technology

Excluded Group

Our Group

—

Our Group approaches our target customers with our product roadmaps. Alternatively, customers may come to us by referrals.

—

Both parties shall explore and confirm the specifications and external design and also the delivery dates and price of the product, and then the customer shall place orders.

The three operators have comprehensive and strict customization requirements including hardware, software and internal components. Suppliers have to undergo strict selection process.

Operating system and application packs

—

Android with standardised Google Play applications

—

Windows with standardised applications

—

Android with tailor-designed application packs for each telecommunication operator in the PRC Windows with tailor-designed application packs for each telecommunication operator in the PRC

Telecommunication standards

—

GSM (2G)

—

GSM (2G)

—

TD-SCDMA (unique for PRC market) (3G)

—

W-CDMA (3G)

—

CDMA 2000 (3G)

—

W-CDMA (3G) —

FDD-LTE (4G)

—

CDMA 2000 (3G)

—

TD-LTE (unique for PRC market) (4G)

—

FDD-LTE (4G)

—

For the year ended 31 December 2013 and 2014, TD-SCDMA and TD-LTE both being unique for the PRC market accounted for approximately 80% and 90% of the total sales volume of the PRC Business.

– 175 –

RELATIONSHIP WITH CONTROLLING SHAREHOLDERS Excluded Group

Our Group

Customisation

—

Customers set very strict customisation requirements with little flexibility in proposing alternative designs and solutions

—

We can offer various proprietary competitive designs and solutions to our customers for their consideration.

Pricing and Settlement

—

The average credit period provided by Excluded Group to the three operators are generally 30 days. Due to their dominant market positions, the Excluded Group may have to accommodate delay in payment or re-negotiation on price after production.

—

Customers pay us per pre-agreed prices and very rarely can re-negotiation on prices after the order is accepted by us. Our Group generally do not grant credit terms to our customers but normally require full payment or 60 days L/C to be provided before shipment of the products for the two years ended 31 December 2013. Our Group started to grant 60 days credit term to our customers in the year ended 31 December 2014 while purchases insurance policy to cover credit risk to increase our competitiveness for further market penetration. Please refer to the subsection headed “Business — Sales and Marketing — Credit control policy” in this prospectus.

Deposit taken

—

Generally no deposit taken from telecommunication operators

—

Generally 5% to 20% to our customers.

Marketing

—

Marketing of the brands “天語”, “K-Touch”, “Nibiru” or co-brands to indirectly promote the sales to the three operators

—

by attending international exhibitions and frequent client visits

—

Marketing is mainly conducted by attending various conferences held by the three operators and providing product information at the website www.k-touch.cn

– 176 –

RELATIONSHIP WITH CONTROLLING SHAREHOLDERS Excluded Group

Our Group

Product R&D

—

PRC product R&D teams are divided into three dedicated sub-teams to develop products to suit each of the three operators and appeal to PRC customers

—

Overseas products R&D team can develop various types of products tailored for overseas markets of various continents and geographical regions to suit overseas customers’ functional and aesthetic preference

After-sales service

—

Responsible for providing after-sales maintenance through over 700 authorized maintenance points to end users

—

Customers are responsible for providing maintenance to the local end users

—

Our Group only provides after-sales technical advices and support to customers

Core Management (marked with asterisks) and personnel Strategic management

—

Rong Xiuli*

—

Rong Xiuli*

General management

—

Ni Gang*

—

Rong Shengli*

Business development, sales and marketing

—

Liu Shanzhong*

—

Rong Shengli*

—

3 teams, and each led by Cai Baohua, Wang Peng, and Li Lu respectively for serving each of the major telecommunication operators in the PRC

—

Shen Guiping* for serving overseas markets

R&D

—

Tang Yanyu* (left in early 2014)

—

Pei Hongan*

—

Team heads: Pei Yuanqing, Xue Chenyu, Tang Song, Wang Guojiang, Zhang Fengyi, Huang Tao, Wang Yuwen, Du Hongjie

– 177 –

RELATIONSHIP WITH CONTROLLING SHAREHOLDERS Excluded Group

Our Group

Li Qing

Shan Dan

Financial Customer ledger

—

Accounts of customers are grouped under the sub-ledger of PRC customers

—

Accounts of customers are grouped under the sub-ledger of Overseas customers

Sales

—

Booked as “PRC Revenue”

—

Booked as “Overseas Revenue”

Cost directly related to sales to the respective market ie PRC or Overseas

—

Booked as various types of “PRC Revenue related cost”

—

Booked as various types of “Overseas revenue related cost”

Cost indirectly related to the respective market i.e. PRC or Overseas

—

Booked as various types of “Cost allocated to PRC Business”, such as utility costs, depreciation, lease expenses

—

Booked as various types of “Cost allocated to Overseas Business”, such as utility costs, depreciation, lease expenses

Sourcing and out-sourcing

No intention to inject PRC Business As at the Latest Practicable Date, the Founders and Winmate had no intention to inject the PRC Business into our Group. If the Founders and Winmate decide to dispose of the PRC Business or any part thereof in the future, they will grant the right of first refusal to our Group. For details, please refer to the subsection headed “Deed of Non-competition and Undertaking” in this prospectus below. Deed of non-competition and undertaking The Founders, Winmate, Benywave Technology and Tianyu (collectively the “Covenantors”), have entered into a deed of non-competition and undertaking (the “Deed of Non-Competition”) with our Company (for itself and on behalf of its subsidiaries from time to time) to the effect that with effect from the Listing Date, each of them will not and procure that none of their respective associates and subsidiary (for a Covenanter which is a company) other than any member of the Group shall: (i)

whether as principal or agent and whether undertaken directly or indirectly in his/its/their own account or in conjunction with or on behalf of or through any person, firm, body corporate, partnership, joint venture or other contractual arrangement and whether for profit or otherwise, carry on, participate in, acquire, or hold (whether as a shareholder, partner, agent or otherwise) any right or interest or otherwise be interested, involved or engaged in or concerned with, directly or indirectly, any business which competes or may compete with the Overseas Business in any part of the world including but not limited to undertaking the manufacture of mobile telecommunication devices on ODM basis;

(ii)

sell or distribute or cause or allow the sale or distribution of the Excluded Group’s own-branded mobile telecommunication devices to any territory outside the PRC and, in connection therewith, the Covenantors shall procure that in all distribution agreements between any member of Excluded Group and its distributors a clause restricting the sale or distribution of such own-branded mobile telecommunication devices outside PRC shall be incorporated; and

– 178 –

RELATIONSHIP WITH CONTROLLING SHAREHOLDERS (iii) alone or jointly with or on behalf of any person, (a)

induce or attempt to induce any director, employee or consultant of our Group to terminate his/her/its employment or consultancy (as appropriate) with our Group, whether or not such act of that person would constitute a breach of that person’s contract of employment or consultancy with our Group (as appropriate);

(b)

canvass or solicit or attempt to canvass or solicit any order for business which competes or may compete with the Overseas Business; and

(c)

persuade any person who has dealt with our Group or who is in the process of negotiating with our Group in relation to the Overseas Business to cease to deal with our Group, or reduce the amount of business which that person would normally do with our Group or seek to improve their terms of trade with any member of our Group.

Each of the Covenantors further agrees, undertakes to and covenants with our Company (for itself and on behalf of its subsidiaries from time to time) that, with effect from the Listing Date, in the event that he and/or any of his associates or subsidiary (where applicable) (other than any members of the Group) is offered or becomes aware of any investment or commercial opportunity directly or indirectly relating to the Overseas Business in any part of the world including but not limited to supply of mobile telecommunications devices on ODM basis in the PRC (“New Business Opportunity”), he shall promptly notify our Company in writing and refer such New Business Opportunity to our Company for consideration and provide all information which he is aware in relation to such opportunity with a view to assisting our Company in making an informed assessment of such New Business Opportunity. In respect of a New Business Opportunity relating to supply of mobile telecommunication devices on ODM basis to PRC telecom operators for sale within the PRC (“PRC Operators ODM Opportunity”), each of the Covenantors shall not, and shall procure that his associates (collectively, the “Controlled Persons”) or any company directly or indirectly controlled by him (the “Controlled Company”) shall not, invest or participate in such PRC Operators ODM Opportunity, unless such PRC Operators ODM Opportunity shall have been rejected by the Company and the principal terms on which the Covenantor or his Controlled Persons or Controlled Companies shall invest or participate in such PRC Operators ODM Opportunity are no more favourable than those made available to the Company. Furthermore, a Covenantor may only engage in such PRC Operators ODM Opportunity if (a) a written notice is received by the Covenantor from the Company confirming that such PRC Operators ODM Opportunity is not accepted and/or does not constitute an Overseas Business (the “Non-acceptance Notice”); or (b) the Non-acceptance Notice is not received by the Covenantor within 10 days after the proposal of the such PRC Operators ODM Opportunity is received by the Company. The independent non-executive Directors will be responsible for assessing the PRC Operators ODM Opportunity and making the decision as to whether or not to take up any particular PRC Operators ODM Opportunity. The independent non-executive Directors shall consider the financial impact of pursuing the PRC Operators ODM Opportunity offered, whether the nature of the PRC Operators ODM Opportunity is consistent with the Group’s strategies and development plans, the general market conditions of the Overseas Business; if appropriate, the independent non-executive Directors may appoint independent financial and legal advisers to assist in the decision-making process in relation to such PRC Operators ODM Opportunity. In respect of any New Business Opportunity other than PRC Operators ODM Opportunity, each of the Covenantors shall not, and shall procure that Controlled Persons and Controlled Company not to, invest or participate in such New Business Opportunity irrespective of whether such New Business Opportunity shall be taken up by the Company.

– 179 –

RELATIONSHIP WITH CONTROLLING SHAREHOLDERS The Deed of Non-Competition also provides that each of the Covenantors (i) shall absent himself and (where applicable) procure his associate to absent from attending and voting at, and shall not count towards the quorum for, any meeting or part of a meeting at which matters in which he or his associates have a material interest are discussed (including the right of first refusal hereinafter mentioned), unless otherwise expressly requested to attend by the independent non-executive Directors; (ii) shall and (where applicable) procure his associates shall, during the period that the Founders and Winmate and their respective associates, individually or taken as a whole, remain as the Controlling Shareholders, abstain from voting at any general meeting of the Company if there is any actual or potential conflict of interest; and (iii) shall comply with all requisite disclosure requirements. Under the Deed of Non-Competition, the Founders and Winmate grant to our Company a right of first refusal in the event the Founders and Winmate wish to sell the whole or any part of their interest in the Excluded Group or the PRC Business. The Deed of Non-Competition also provides, amongst other things, that: (i)

the independent non-executive Directors shall review, at least on an annual basis, the compliance with the Deed of Non-competition by the Covenantors;

(ii)

the Founders and Winmate shall provide all information necessary for the annual review by the independent non-executive Directors and the enforcement of the Deed of Non-Competition;

(iii) our Company shall disclose decisions on matters reviewed by the independent non-executive Directors relating to the compliance and enforcement of the undertakings by the Covenantors either through the annual report of our Company, or by way of announcement to the public; and (iv) the terms of the Deed of Non-Competition cannot be amended or varied save with the prior approval of the Shareholders (other than the Founders and Winmate and their respective associates who are Shareholders) by an ordinary resolution at a general meeting of our Company. The Deed of Non-Competition and the rights and obligation thereunder shall become effective on the Listing Date. The Deed of Non-Competition will cease to have effect on any of the Covenantors upon occurrence of the earliest of any of the following events or circ*mstances: (i)

our Company decides not to proceed with the Listing despite that approval for the Listing has been granted by the Listing Committee;

(ii)

the day on which the Shares cease to be listed on the Stock Exchange;

(iii) the day on which the Controlling Shareholders and their respective associates (individually or taken as a whole) cease to hold or be interested (directly or indirectly) in 30% or more of the then issued share capital of our Company or cease to be deemed as a Controlling Shareholder and do not have power to control the Board and there is at least one other Shareholder holding more Shares than the Controlling Shareholders and their associates then taken together; or (iv) the day on which the Controlling Shareholders beneficially own or are interested or are deemed to be interested in the entire issued share capital of our Company. Rong Personal Trust Nominee, being one of the Controlling Shareholders, is not one of the Covenantors in the Deed of Non-Competition because it is not involved in the PRC Business or any other business which may compete with the business of the Group. As the nominee of Rong Personal Trust Trustee under Rong Personal Trust, its only role is to hold and dispose of the assets under Rong Personal Trust pursuant to the direction of Rong Personal Trust Trustee. Furthermore, Ms. Rong is the settlor and the protector of Rong

– 180 –

RELATIONSHIP WITH CONTROLLING SHAREHOLDERS Personal Trust, an investment adviser of Rong Personal Trust Nominee and has the power to remove the trustee thereof. The Directors consider that the non-competition undertaking imposed on the Covenantors (including Ms. Rong) under the Deed of Non-Competition (as described in sub-paragraph (i) of the first paragraph under the subsection headed “Deed of Non-competition and Undertaking” in this prospectus above) provides adequate restriction against Ms. Rong indirectly competing with the business of the Group through Rong Personal Trust Nominee. INDEPENDENCE FROM OUR CONTROLLING SHAREHOLDERS Our Directors are satisfied that our Group can function, operate and carry on business independently of our Controlling Shareholders based on the following reasons: Independence of management and directorship The following table presents the details of the Directors and senior management of our Group and their positions in the Excluded Group upon Listing:

Position(s) held in our Group

Position(s) held in the Excluded Group

Ms. Rong

Chairperson and executive Director

Director of Benywave Technology, Vital Profit and Tianyu (Note 1)

Mr. Rong Shengli

Chief executive officer and executive Director

None

Mr. Tang Shun Lam

Non-executive Director

Director of Benywave Technology, Vital Profit and Tianyu (Note 2)

Mr. Hon Kwok Ping Lawrence

Independent non-executive Director

None

Mr. Lam Yiu Kin

Independent non-executive Director

None

Mr. Tsang Yat Kiang

Independent non-executive Director

None

Ms. Gou Lishan

Chief financial officer

None

Notes: (1)

Only performs her duties by overseeing the strategic direction of the Excluded Group and provides no day to day management in the operations of the Excluded Group.

(2)

Mr. Tang Shun Lam was a representative board member from Favor Gain to oversee its investment and was not involved in day-to-day management of either the PRC Business or the Overseas Business before the Listing. After the Listing, Mr. Tang would act as a non-executive Director not overseeing interests for any Shareholder but for all Shareholders as whole. He is not a member of core management team of our Group.

– 181 –

RELATIONSHIP WITH CONTROLLING SHAREHOLDERS

Position(s) held in our Group

Position(s) held in the Excluded Group

Mr. Shen Guiping

Vice president — in charge of sales

None

Mr. Pei Hongan

Vice president — in charge of R&D

None

Save as disclosed above, none of our Directors or members of our senior management holds any position or has any roles or responsibility in the Excluded Group or with our Controlling Shareholders or any associates of our Controlling Shareholders. Our Board of Directors is comprised of two executive Directors, one non-executive Director and three independent non-executive Directors. Our senior management consists of three members. Based on the following, our Directors believe that our Directors and members of our senior management are able to manage our business independently of the Excluded Group and other companies controlled by our Controlling Shareholders: (i)

The majority of the members of our Board and senior management are independent from the Excluded Group and will serve the Group independently from its Controlling Shareholders. In particular, each of Mr. Rong Shengli, Mr. Shen Guiping and Mr. Pei Hongan have continuously been in charge of the management of the Overseas Business as a separate operation within Benywave Technology during the Pre-split Period and they will dedicate their full time and effort in supervising the operations and management of our business.

(ii)

Although Ms. Rong, the chairperson of our Group and our executive Director shall continue to have controlling interest in the Excluded Group, she will have no on-going day-to-day executive duties in the Excluded Group and will only oversee the strategic direction of the Excluded Group. As a result, Ms. Rong is able to devote adequate time and attention to manage our Company as chairperson of the Company and executive Director.

(iii) With three independent non-executive Directors out of a total Board size of six, there will be a sufficiently robust and independent voice on the Board to counter-balance any situation of conflict of interest and protect the interests of our independent Shareholders. (iv) All members of our senior management are full-time employees of our Group and possess solid, sufficient and relevant experience in and understanding of the industry in which our Group is engaged. (v)

Instances of actual or potential conflict of interest have been identified (please refer to the section headed “Connected Transactions” of this prospectus), and minimised (by virtue of the Deed of Non-Competition).

(vi) Save for Ms. Rong, who has a controlling interest in the Excluded Group, and Mr. Tang Shun Lam, who is a director of Tianyu, Vital Profit and Benywave Technology appointed by Favor Gain to oversee the investment of WP, none of our Directors or members of our senior management will be interested or hold any office in the Excluded Group upon the Listing. Both Ms. Rong and Mr. Tang Shun Lam are subject to confidentiality and non-competition undertaking to our Group. (vii) Each of our Directors is aware of his fiduciary duties as a Director of our Company, which require, among other things, that he acts for the benefit and in the best interests of our Company and do not allow any conflict between his duties as a Director and his personal interest.

– 182 –

RELATIONSHIP WITH CONTROLLING SHAREHOLDERS (viii) Connected transactions between our Company and the Excluded Group are subject to the rules and regulations under the Articles of Association and the Listing Rules including the announcement, reporting, review and independent Shareholders’ approval requirements. (ix) A number of protective measures are in place to adequately deal with any potential conflicts of interest between our Company, Ms. Rong, Mr. Ni and Winmate, and to safeguard the interests of our independent Shareholders. Please refer to the subsection headed “Deed of Non-competition and Undertaking” in this section. Operational independence Our Company makes business decision independently. Our Company holds all relevant licenses necessary to carry out our business and has sufficient capital, equipment and employees to operate our business independently. Our Directors are of the view that our Company will continue to be operationally independent of the Excluded Group on the basis that: (i)

Intellectual property rights – trademarks and patents. Our Company is not reliant on the intellectual property rights owned by our Controlling Shareholders, the Excluded Group or their respective associates necessary for the operations of the Overseas Business. As our Group engages in the business of developing, designing and selling of mobile telecommunication devices on ODM basis, our Group does not rely on any of the trademarks owned by the Excluded Group. As the mobile handset market is characterized by rapid technological changes, evolving industry standards and changing customer needs, leading to designs and inventories relating to mobile handsets to become obsolete in a short span of time, and that product requirements and standards for PRC Business and Overseas Business differ substantially, our Group does not rely on any design or invention previously held by Excluded Group. Furthermore, our Group has its own R&D team which will be responsible for providing R&D exclusively to our Group since the Split.

(ii)

Administrative function. Our Company has its own administrative and corporate governance infrastructure (including our own accounting, legal and human resources departments) and we shall be able to carry out all essential administrative function without the support of the Excluded Group, including financial and accounting, human resources, information technology, legal and compliance and general administrative.

(iii) Outsourcing. As at the Latest Practicable Date, our Company entered into separate service agreements with our EMS providers and established independent relationship with terms substantially similar to those entered into by Benywave Technology in terms of the duration of agreement, quality assurance, price determination (determined monthly by the actual delivery amount of products, deducting the cost caused by spillage and write-off of materials, if any, as mutually confirmed by both parties), credit terms, etc. For further details of the terms, please refer to the subsection headed “Business — Outsourcing and production management” in this prospectus. Although the Overseas Business and the PRC Business engaged common EMS providers during the Pre-split Period, and the PRC Business and our Group are likely to engage common EMS providers after the Split, as confirmed by our Directors, these EMS providers are commonly used by vendors of mobile telecommunication devices for providing EMS in the PRC, and they will deal with each of their customers independently on arm’s-length basis. After the Split, Benywave Wireless have generally been able to outsource the sub-contracting process to the EMS providers at similar or no less favourable terms than those outsourced by Benywave Technology. We have also designated outsourcing and quality

– 183 –

RELATIONSHIP WITH CONTROLLING SHAREHOLDERS control personnel specifically for our Overseas Business to manage our outsourcing or to station at our EMS providers to ensure the product quality meets our standard. (iv) Marketing. Prior to the Split, the Overseas Business has its own sales and marketing team consisting of 31 staff led by Shen Guiping, which has always been responsible for serving overseas customers and marketing for Overseas Business. Upon the Split, all these staff has been transferred to Benywave Wireless and will confine to serve our customers from overseas markets. (v)

Property and equipments. Except for the Lease and Equipment Lease Agreement as set out in the subsection headed “Connected Transactions – Exempted Continuing Connected Transactions” in this prospectus, all of the properties used as our principal place of business and office premises and equipment and facilities used for R&D are owned or leased from Independent Third Parties by our Company or our operating subsidiaries. Further, our Directors reasonably believe that our Company can acquire equipments to replace the Equipment under Equipment Lease Agreement within one year after Listing.

(vi) Internal control. Our Group has established a set of internal control procedures to facilitate the effective operations of our business independently from the PRC Business. (vii) Procurement of raw materials. As at the Latest Practicable Date, our Company entered into separate sourcing agreements with our key suppliers with terms substantially similar to those entered into by Benywave Technology in terms of the duration of agreement, payment and credit term, warranty and assurance, quality assurance, etc. As the same for the arrangement before the Split, prices for raw materials after the Split are determined order by order. For further details of the terms, please refer to the subsection headed “Business — Raw materials and suppliers” in this prospectus. Although the Overseas Business and the PRC Business engaged common suppliers prior to the Split, and the Excluded Group and our Group are likely to engage common suppliers for PRC Business and Overseas Business respectively after the Split, as confirmed by our Directors, these suppliers are commonly engaged by mobile communication devices manufacturers and suppliers for supply, and they will deal with each of their customers independently on arms-length basis. In addition, prior to the Split, although the Overseas Business and PRC Business had separate teams to plan and request for sourcing of raw materials and generally negotiate the prices of the components order by order, but purchase orders were administratively placed by Benywave Technology centrally as a single entity. Given there are various differences in the product specifications for the Overseas Business and the PRC Business, including among others, the prevailing telecommunication standard and frequency from time to time, the specifications for major components such as mobile chips, OGS touch panel and camera module at a particular time for the Overseas Business and the PRC Business varies. The prices for these raw materials are negotiated by respective designated procurement personnel of the Overseas Business and the PRC Business order by order. For certain ancillary components such as electric resistance and capacitors which are commonly used by the Overseas Business and the PRC Business, given they are low costs components, the extent of economies of scale enjoyed by Benywave Technology before the Split and Benywave Wireless after the Split are similar, and Benywave Wireless have generally been able to purchase these components at similar or no less favourable terms than those purchased by Benywave Technology. The Group has established its own procurement team to handle procurement and sourcing independent of the PRC Business and Benywave Technology after the Split.

– 184 –

RELATIONSHIP WITH CONTROLLING SHAREHOLDERS (viii) Customers. As set out in the subsection headed “Delineation of Business” in this section above, our target customers and the target customers of the PRC Business and the Excluded Group are entirely different. Our customers are predominantly top local branded mobile device suppliers and telecommunication operators in overseas markets, to whom we have independent access. (ix) R&D. The business model for PRC Business and Overseas Business had been fairly different. PRC Business mainly conducts own brand business under the brand name “K-Touch” in the PRC or “Nibiru” or co-brands with customers. Overseas Business conducts business on ODM basis, where we are primarily engage in developing, designing, production management and sale of mobile handsets to overseas markets, where our products are sold by our customers under their own or authorised brand names. Prior to the Split, the R&D team for Benywave Technology used to consist of four main teams, three for PRC Business and one for Overseas Business, supported by R&D supporting teams, serving functions including software application design, mechanical design testing, software and hardware testing and product branding designs. The R&D supporting teams were shared by PRC Business and Oversees Business but most of the resources were applied on PRC Business. This was mainly because demand from R&D support teams for PRC Business was higher than those of Overseas Business. For example, customers for Overseas Business generally only required the products to be installed with common operating systems such as Android and Windows (or pre-installed software provided by customers), whereas for PRC Business, more resources had to be expended on developing software applications developed for telecommunication operators such as game centre and software applications specifically for own brand mobile phones, where frequent testing for the software compatibility with the system was required. Correspondingly, resources for software testing for PRC Business was higher than Overseas Business. Upon the Split, all the members of the R&D team of Overseas Business consisting of 26 staff were all transferred to Benywave Wireless who have capability to conduct R&D serving the needs of overseas customers. In order to further enhance and assure the manning demand for the R&D for Benywave Wireless, a total of additional 32 staff from the R&D supporting teams consisting of engineers for software application design, mechanical design testing, software and hardware testing and outlook designs were also transferred to Benywave Wireless. The directors are of the view that we hence have independent and sufficient R&D capability for the operations after the Split. Certain continuing connected transactions between our Group and the Excluded Group are set out in the section headed “Connected Transactions” of this prospectus. Notwithstanding, these transactions between our Group and the Excluded Group are not material in value as far as our Group is concerned.

– 185 –

RELATIONSHIP WITH CONTROLLING SHAREHOLDERS Financial independence Our Directors are of the view that our Group will be financially independent of our Controlling Shareholders and any of their respective associates upon the Listing for the following reasons: (i)

Strong financial position

During the Track Record Period, we recorded revenue of approximately RMB663.6 million, RMB1,368.9 million and RMB1,916.2 million for each of the three years ended 31 December 2014 and net profit of approximately RMB35.8 million, RMB82.9 million and RMB156.2 million for the same periods for the Overseas Business. Our Directors believe that the prospects of the Overseas Business are promising and the Group will be able to maintain a strong financial position in the future. (ii)

Ability to raise fund on a stand-alone basis

Our Group believes that we are able to secure loans from banks and other financial institutions without any credit support or guarantees from our Controlling Shareholders, the Excluded Group or their respective associates. With regards to the fundamentals of our Group, our Company is confident that after the Listing, we will be able to obtain credit facilities from financial institutions on a stand-alone basis. As of 30 April 2015, we have obtained banking facilities with a bank for the amount of USD3 million. As such, our Group is satisfied of our capability on carrying on our business financially independently of our Controlling Shareholders and the Excluded Group. As at the Latest Practicable Date, there was no financial assistance, security and/or guarantee provided by our Controlling Shareholders, the Excluded Group or their respective associates in favour of our Group, or vice versa.

– 186 –

SUBSTANTIAL SHAREHOLDERS So far as our Directors are aware, immediately following the completion of the Capitalisation Issue and the Global Offering and assuming that the Over-allotment Option is not exercised, the following persons will have an interest or short position in our Shares or underlying Shares which would fall to be disclosed to us under the provisions of Divisions 2 and 3 of Part XV of the SFO, or be, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circ*mstances at general meetings of any other member of our Group:

Number of and class of securities (1)

Approximate percentage of interest in our Company immediately after the Global Offering

Name of Shareholder

Nature of interest

Winmate

Beneficial owner

480,624,000 (L)

56.54%

Ms. Rong (2)

Interest in a controlled corporation

568,480,000 (L)

66.88%

568,480,000 (L)

66.88%

87,856,000 (L)

10.34%

120,156,000 (L)

14.14%

Founder of a discretionary trust Mr. Ni (2)

Interest in a controlled corporation Spouse of Ms. Rong

Rong Personal Trust Nominee (2)

Beneficial owner

Core Trust (3)

Trustee

Notes: (1)

The letter “L” denotes the person’s long position in such Shares.

(2)

Ms. Rong and Mr. Ni hold 90% and 10% of the entire issued share capital of Winmate respectively. Ms. Rong is the spouse of Mr. Ni, and therefore, Ms. Rong and Mr. Ni are deemed to be interested in the Shares held by Winmate. Further, Rong Personal Trust Nominee holds 87,856,000 Shares representing 10.34% of the entire issued share capital of our Company as nominee of Rong Personal Trust Trustee under Rong Personal Trust. Rong Personal Trust Nominee is wholly-owned by Rong Personal Trust Trustee in its capacity as trustee of Rong Personal Trust with Ms. Rong as settlor of the trust. Rong Personal Trust is a revocable discretionary trust with Ms. Rong as settlor of the trust, Ms. Rong and Mr. Ni are all deemed to be interested in the Shares held by Rong Personal Trust Nominee under the SFO. Ms. Rong is deemed to be so interested by virtue of her being the founder of Rong Personal Trust. Mr. Ni is deemed to be so interested by virtue of him being the spouse of Ms. Rong.

(3)

Core Trust is both RSU Scheme Trustee and Rong Personal Trust Trustee and wholly owns both RSU Scheme Nominee and Rong Personal Trust Nominee. Under the SFO, Core Trust is deemed to be interested in the 32,300,000 Shares and 87,856,000 Shares held by RSU Scheme Nominee and Rong Personal Trust Nominee respectively.

Save as disclosed above, our Directors are not aware of any person who will, immediately following the completion of the Capitalisation Issue and the Global Offering (assuming that the Over-allotment Option is not exercised), have an interest or a short position in the Shares which will be required to be disclosed to our Company and the Stock Exchange under the provisions of Division 2 and 3 of Part XV of the SFO or will be, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circ*mstances at general meetings of any other member of our Group.

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CORNERSTONE INVESTORS THE CORNERSTONE PLACING We and the Sole Global Coordinator entered into cornerstone placing agreements (the “Cornerstone Placing Agreements”, each a “Cornerstone Placing Agreement”) with three cornerstone investors (the “Cornerstone Investors”, each a “Cornerstone Investor”), pursuant to which the Cornerstone Investors who agreed to subscribe for such number of Offer Shares (rounded down to the nearest whole board lot of 1000 Shares) at the Offer Price which may be purchased with an aggregate amount of approximately HK$116.3 million (exclusive of brokerage fee, SFC transaction levy and Stock Exchange trading fee). Assuming an Offer Price of HK2.64 (being the mid-point of the Offer Price range set out in this prospectus), and subject to any adjustments, the total number of Offer Shares subscribed by the Cornerstone Investors would be 44,053,000, representing approximately 20.73% of the Offer Shares, and approximately 5.18% of the issued Shares immediately following the completion of the Global Offering and Capitalization Issue (assuming the Over-allotment Option is not exercised). The following table sets forth certain information regarding the anticipated holding of Offer Shares of the Cornerstone Investors.

Cornerstone Investor Hong Kong Truly Electronics Manufacturing Limited Sun Xu Limited Vast Right Investment Limited Total

Approximate percentage of total issued Shares immediately following the completion of the Global Offering and Capitalization Issue (%) (assuming the (assuming that Over-allotment Over-allotment Option is Option is not exercised) exercised in full)

Maximum investment amount (HK$ million) (1)

Number of Offer Shares subscribed (2)

Approximate percentage of total number of Offer Share initially offered under the Global Offering (%)

38.8 38.8

14,684,000 14,684,000

6.91 6.91

1.73 1.73

1.67 1.67

38.8

14,684,000

6.91

1.73

1.67

116.3

44,053,000

20.73

5.18

5.00

Notes: (1)

The HK$/US$ exchange rate for the calculation of maximum investment amount under the Cornerstone Placing Agreements is HK$7.7534:US$1.00.

(2)

Rounded down to the nearest board lot of 1,000 Shares and assuming an Offer Price of HK$2.64 (being the mid-point of the Offer Price range stated in this prospectus).

Each of the Cornerstone Investors is an Independent Third Party and is independent from each other. The Cornerstone Investors will acquire the Offer Shares pursuant to, and as part of, the International Placing. The Offer Shares will be counted towards the public float or our Company. None of the Cornerstone Investors will have any representation on the Board or be a substantial shareholder of the Company and will not subscribe for any Offer Shares under the Global Offering other than pursuant to the Cornerstone Placing Agreements to which they are parties respectively.

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CORNERSTONE INVESTORS The Offer Shares to be subscribed by the Cornerstone Investors will not be affected by re-allocation of the Offer Shares between the International Placing and the Hong Kong Public Offering in the event of over-subscription under the Hong Kong Public Offering as described in the subsection headed “Structure and Conditions of the Global Offering — Re-allocation” in this prospectus. Details of the actual number of Offer Shares to be allocated to the Cornerstone Investors will be disclosed in the allotment results announcement which is expected to be published by us on or around 25 June 2015. Conditions The subscription obligation of each of the Cornerstone Investors under the Cornerstone Placing Agreement to which it is a party is conditional upon (i) issuance of the offering circular in relation to the International Placing, (ii) the underwriting agreement for the Hong Kong Public Offering and the International Placing being entered into and having become effective and unconditional (in accordance with their respective original terms or as subsequently varied by agreement of the relevant parties thereto); (iii) neither of the aforesaid underwriting agreements having been terminated; (iv) the Listing Committee of the Stock Exchange having granted a listing of, and permission to deal in, the Shares and that such approval or permission having not been revoked; (v) the representations, warranties and undertakings of the relevant Cornerstone Investor in the Cornerstone Placing Agreement to which it is a party are accurate and true in all material respects and that there being no material breach of the Cornerstone Placing Agreement to which it is a party on the part of the Cornerstone Investor and the Company; (vi) the representations and warranties of our Company being accurate and true in all material respects; and (vii) no relevant laws or regulations shall have been enacted or promulgated by any governmental authority which prohibits the consummation of the closing of the Cornerstone Placing Agreement to which it is a party and there shall be no order or injunction of a court of competent jurisdiction in effect precluding or prohibiting consummation of the closing of the Cornerstone Placing Agreement to which it is a party. In the event that the aforesaid conditions are not fulfilled by 31 July 2015 or such other dates as may be agreed between the Company, the Sole Global Coordinator and the Cornerstone Investor, that Cornerstone Placing Agreement shall cease to have effect but without affecting accrued rights or liabilities. RESTRICTIONS ON DISPOSAL OF SHARES BY THE CORNERSTONE INVESTORS Each of the Cornerstone Investors has agreed that without the prior written consent of the Company and the Sole Global Coordinator, it will not, whether directly or indirectly, at any time during the period of six months following the Listing Date (“Cornerstone Investor’s Lock-up Period”), dispose of any of the Shares it has purchased pursuant to the Cornerstone Placing Agreement to which it is a party, save for certain limited circ*mstances, such as transfers to any of its wholly-owned subsidiaries who will be bound by the same obligations of such Cornerstone Investor, including the Cornerstone Investor’s Lock-up Period restriction. After the expiration of the Cornerstone Investor’s Lock-up Period, each of the Cornerstone Investors shall be free to dispose of any Shares but (i) it shall use reasonable endeavour to ensure that any such disposal is strictly in accordance with the Listing Rules and SFO and does not create a disorderly or false market in the Shares and (ii) it shall not knowingly dispose of any Shares to any person, company entity who engages directly or indirectly in a business which compete or is likely to compete with the business of the Group without the prior written consent of the Company and the Sole Global Coordinator.

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CORNERSTONE INVESTORS CORNERSTONE INVESTORS We set forth below brief description of the Cornerstone Investors. Hong Kong Truly Electronics Manufacturing Limited Hong Kong Truly Electronics Manufacturing Limited has agreed to subscribe for such number of Offer Shares (rounded down to the nearest whole board lot of 1,000 Shares) which may be purchased with an aggregate of HK$38.8 million at the Offer Price. Assuming the Offer Price of HK$2.64, being the mid-point of the Offer Prices range set out in this prospectus, the total of Offer Shares that Hong Kong Truly Electronics Manufacturing Limited would subscribe for would be 14,684,000 representing approximately 6.91% of our Offer Shares and approximately 1.73% of our issued Shares immediately following the completion of Global Offering and the Capitalization Issue (assuming that Over-allotment Option is not exercised). Hong Kong Truly Electronics Manufacturing Limited is a trading and investment company incorporated with limited liability in Hong Kong and is an indirect wholly-owned subsidiary of Truly International Holdings Limited. Truly International Holdings Limited is an investment holding company incorporated with limited liability in the Cayman Islands, the shares of which are listed on Main Board (stock code: 00732) since July 1991. Truly International Holdings Limited and its subsidiaries (“Truly Group”) are primarily engaged in the business of the manufacture and sale of liquid crystal display products. Truly Group was our supplier for touch panels and LCD modules for our mobile handsets during the Track Record Period. For each of three years ended 31 December 2014, our aggregate purchases from the Truly Group represented approximately 7.5%, 21.3% and 14.1% of our total purchases during the corresponding periods respectively. It was our second largest supplier for the year ended 31 December 2012 and our largest supplier for the years 31 December 2013 and 2014. We entered into a framework procurement agreement with Truly Group dated 22 September 2014 for a term of one year. All the terms were entered into on arm’s length basis and at normal commercial terms, and are similar to other suppliers of our Group. For summary terms of these agreements, please refer to the sub-section headed “Business – Raw materials and suppliers” in this prospectus. Sun Xu Limited Sun Xu Limited has agreed to subscribe for such number of Offer Shares (rounded down to the nearest whole board lot of 1,000 Shares) which may be purchased with an aggregate of HK$38.8 million at the Offer Price. Assuming the Offer Price of HK$2.64, being the mid-point of the Offer Prices range set out in this prospectus, the total of Offer Shares that Sun Xu Limited would subscribe for would be 14,684,000 representing approximately 6.91% of our Offer Shares and approximately 1.73% of our issued Shares immediately following the completion of Global Offering and the Capitalization Issue (assuming that Over-allotment Option is not exercised). Sun Xu Limited is an investment holding company incorporated in the BVI and is a controlling shareholder of Sunny Optical Technology (Group) Co., Ltd. Sunny Optical Technology (Group) Co., Ltd. is an investment holding company incorporated with limited liability in the Cayman Islands, the shares of which are listed on Main Board (stock code: 2382). Sunny Optical Technology (Group) Co., Ltd and its subsidiaries (“Sunny Optical Group”) are primarily engaged in the design, R&D, manufacture and sales of optical and optical-related products. Sunny Optical Group was our supplier for camera modules for our mobile handsets during the Track Record Period. For each of thetahree years ended 31 December 2014, our aggregate purchases from Sunny Optical Group represented approximately 1.0%, 3.8% and 4.2% of our total purchases during the corresponding periods respectively. It was our top five supplier for the year ended 31 December 2013. We entered into a framework procurement agreement with Sunny Optical Group dated 22 September 2014 for a term of one year. All the terms were entered into on arm’s length basis and at normal commercial terms, and are similar to other suppliers of our Group. For summary terms of these agreements, please refer to the sub-section headed “Business — Raw materials and suppliers” in this prospectus.

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CORNERSTONE INVESTORS Vast Right Investment Limited Vast Right Investment Limited has agreed to subscribe for such number of Offer Shares (rounded down to the nearest whole board lot of 1,000 Shares) which may be purchased with an aggregate of HK$38.8 million at the Offer Price. Assuming the Offer Price of HK$2.64, being the mid-point of the Offer Prices range set out in this prospectus, the total of Offer Shares that Vast Right Investment Limited would subscribe for would be 14,684,000 representing approximately 6.91% of our Offer Shares and approximately 1.73% of our issued Shares immediately following the completion of Global Offering and the Capitalization Issue (assuming that Over-allotment Option is not exercised). Vast Right Investment Limited is an investment holding company incorporated in Hong Kong and wholly-owned by Mr. Cai Rongjun. Mr. Cai Rongjun is the major shareholder of Shenzhen O-Film Tech Co., Ltd, a company incorporated with limited liability under the laws of the People’s Republic of China, the shares of which are listed on the Shenzhen Stock Exchange (stock code: 002456) since August 2010. Shenzhen O-Film Tech Co., Ltd and its subsidiaries (“O-Film Group”) are principally engaged in the manufacture and distribution of optoelectronic components. O-Film Group was our supplier for touch panel for our mobile handsets during the Track Record Period. For each of the three years ended 31 December 2014, our aggregate purchases from O-Film Group represented approximately 0.1%, 1.1% and 9.8% of our total purchase during the corresponding periods respectively. It was our top five supplier in 2013 and 2014. We entered into a framework procurement agreement with O-Film Group dated 22 September 2014 for a term of one year. All the terms were entered into on arm’s length basis and at normal commercial terms, and are similar to other suppliers of our Group. For summary terms of these agreements, please refer to the sub-section headed “Business — Raw materials and suppliers” in this prospectus.

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DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES DIRECTORS The Board of Directors consists of six Directors, including two executive Directors, one non-executive Director and three independent non-executive Directors. The principal functions and duties conferred on our Board include: •

convening and reporting to Shareholder’s general meetings about the state of the Company’s matters and business results;

•

implementing the resolutions passed by our Shareholders in general meetings;

•

setting the Company’s policies and ensuring the policies have been followed;

•

setting and reviewing the Company’s goals and deciding the Company’s action plans and budget proposed by the Company’s management; and

•

formulating proposals for dividend distribution.

The following table sets forth certain information concerning the Directors.

Date of Joining the Company

Date of appointment as a director or senior management of our Group

Brief Description of Roles and Responsibilities

Relationship with other Directors or Members of Senior Management

Name

Age

Position

Ms. Rong Xiuli (榮秀麗)

Chairperson and 12 August executive Director 2014

7 July 2004

Mr. Rong Shengli (榮勝利)

Chief executive 12 August officer and 2014 executive Director

1 October 2008 Responsible for the overall management of the Company’s business operations

Brother of Ms. Rong Xiuli

Mr. Tang Shun Lam (鄧順林)

Non-executive Director

19 March 2015

N/A

19 March 2015

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Providing guidance and supervision regarding the business and operations of the Company

Providing strategic advice to the business and operations of the Company

Sister of Mr. Rong Shengli

DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

Date of Joining the Company

Date of appointment as a director or senior management of our Group

Brief Description of Roles and Responsibilities

Relationship with other Directors or Members of Senior Management

Name

Age

Position

Mr. Hon Kwok Ping, Lawrence (韓國平)

Independent non-executive Director

19 September 2014

Providing independent opinion and judgment to the Board, particularly with regard to the financial aspects of the Company

N/A

Mr. Lam Yiu Kin (林耀堅)

Independent non-executive Director

19 September 2014

Providing independent opinion and judgment to the Board, particularly with regard to the financial aspects of the Company

N/A

Mr. Tsang Yat Kiang (曾溢江)

Independent non-executive Director

19 September 2014

Providing independent opinion and judgment to the Board, particularly with regard to the business aspects of the Company

N/A

Executive Directors Ms. Rong Xiuli (榮秀麗) (“Ms. Rong”), aged 52, is a chairperson of the Company, executive Director and a member of the remuneration committee, nomination committee and risk management committee of the Company. Ms. Rong is the founder of the Group and is currently the chairperson of the Group. She gained experience and network in the mobile handset distribution business in the mid 1990s. She worked for 北京市百利豐通訊器材有限責任公司 (Beijing City Bailifeng Communication Apparatus Co., Ltd.*) which engaged in the sale and agency service of mobile phones and became the chairperson of this company until 2005. Ms. Rong also co-founded Tianyu with Mr. Ni Gang in 2002. She was responsible for sales and marketing, research and development, strategic planning and general management of Tianyu from 2002 to 2008. Ms. Rong was also a director of Benyware Technology since its establishment in 2004 and the chairperson of Benywave Technology from 2008 to 2014. Ms. Rong has ample experience in sales and marketing, distribution, research and development, risk management, personnel and general management. Ms. Rong has approximately 20 years of experience in mobile handset industry. Ms. Rong has extensive knowledge on telecommunications operations and control and deep understanding of the dynamic of telecommunications market in China. Ms. Rong graduated from Hunan University (湖南大學) with a degree in mechanical engineering specialized in internal combustion engine in 1983. Ms. Rong also obtained a master of business administration from China-Europe International Business School (中歐國際工商學院) (previously known as China-Europe Management Institute (中歐國際管理中心)) in 1993. Ms. Rong is a sister of Mr. Rong.

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DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES Mr. Rong Shengli (榮勝利) (“Mr. Rong”), aged 45, is a chief executive officer of the Company, executive Director and a member of the risk management committee of the Company and is responsible for the management and strategic development of our Group. Mr. Rong joined Benywave Technology in 2008 and was the vice chairman of Benywave Technology from October 2008 to July 2014, where he was responsible for the sales and the strategic planning for its Overseas Business. Prior to joining Benywave Technology, Mr. Rong served as marketing manager, regional director and general manager of operational business department of Tianyu and its subsidiaries from 2000 to 2008. Mr. Rong did not have any role in Tianyu since 2008. Mr. Rong has about 15 years of experience in telecommunications industry and management. Mr. Rong obtained a bachelor’s degree from Harbin Engineering University (哈爾濱工程大學) (previously known as Harbin Shipbuilding Engineering Institute (哈爾濱船舶工程學院)) specialized in radio communications in 1992. Mr. Rong also obtained a master of business administration from China-Europe International Business School (中歐國際工商學院) in 1997. Mr. Rong is a brother of Ms. Rong. Mr. Rong was one of the shareholders and a director of 北京榮鑫盛達文化發展有限公司 (Beijing Rongxin Shengda Cultural Development Co. Ltd.*), a domestic enterprise formed under the laws of PRC in 2011 which carried on, among other things, the business of organizing cultural events, undertaking exhibitions and sale of artworks. The business license of this company was revoked in 2013 as an administrative sanction because it did not attend the annual examination in 2012. According to Mr. Rong, this company has ceased to carry on business shortly after its formation due to ill health of his business partner who was responsible for daily operations of this company, and due to inadvertence on the part of the management of this company, the annual examination of this company was overlooked, leading to the revocation of the business license. Mr. Rong confirmed that this company was solvent at the time when it was revoked. After considering that the revocation was due to inadvertent oversight, and that it was an isolated incident which did not involve any fraud or dishonesty, the Directors are of the view, and the Sole Sponsor concurs that Mr. Rong has the character, experience, integrity and the level of competence required of a director under Rules 3.08 and 3.09 of the Listing Rules. Non-executive Director Mr. Tang Shun Lam (鄧順林) (“Mr. Tang”), aged 59, is our non-executive Director. He is a consultant of Warburg Pincus LLC, since 2007. Mr. Tang worked for RDA Microelectronics, Inc., a company listed on NASDAQ Stock Market, from 2010 to January 2015 first as a senior vice president of operations and subsequently as a director and executive chairman. From 1999 to 2007, Mr. Tang was the president, Asia Pacific for Viasystems Group, Inc., a company listed on NASDAQ Stock Market. Mr. Tang was also the non-executive chairman and a director of China Eco-Farming Limited (formerly known as Linefan Technology Holdings Limited) (the shares of which are listed on the GEM, stock code: 8166) from 2008 to 2009 and an independent non-executive director of Asia Coal Limited (formerly known as Wanji Pharmaceutical Holdings Limited) (the shares of which are listed on the Main Board, stock code: 835) from 2003 to 2005. He was the chief executive officer and a director of Coolsand Holdings Co., Ltd. from 2008 to 2012. He received a bachelor of science degree in electrical and electronics engineering from Nottingham University in England in 1979 and a master of business administration from Bradford University in England in 1981. Independent non-executive Directors Mr. Hon Kwok Ping, Lawrence (韓國平) (“Mr. Hon”), aged 67, is an independent non-executive Director and a member of the audit committee, remuneration committee, nomination committee and risk management committee of the Company. Mr. Hon was appointed as accountant, chief accountant, and company secretary in several companies between 1973 and 1984. Mr. Hon was the financial director and deputy managing director in Modern Printing Equipment Ltd., a company of the Buhrmann-Tellerode Group from 1984 to 1994. Mr. Hon was the vice president of Sino-Forest Corporation from 1994 to 1998. Mr. Hon was the

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DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES president and chief executive officer of AgroCan Corp from 1997 to 2003. Mr. Hon served as advisor and financial controller of Courage Marine Group Limited (the shares of which are listed on the Main Board, stock code: 1145) since 2004 and he is currently the director of finance of its group. Mr. Hon has about 42 years of experience in accounting and financial management. Mr. Hon obtained his accounting professional status through the Association of International Accountants, UK. Mr. Hon is a fellow member of HKICPA. Mr. Hon obtained a master of business administration from University of East Asia in Macau in 1991. Mr. Lam Yiu Kin (林耀堅) (“Mr. Lam”), aged 60, is an independent non-executive Director and a member of the audit committee, remuneration committee and nomination committee of the Company. Mr. Lam was the audit partner of PricewaterhouseCoopers from 1993 to 2013. Mr. Lam has been the independent non-executive director of Shanghai Fudan-Zhangjiang Bio-Pharmaceutical Co., Ltd. (the shares of which are listed on the Main Board, stock code: 1349) since 2013. Mr. Lam has been the independent non-executive director of Kate China Holdings Limited (the shares of which are listed on the GEM, stock code: 8125) since 2014. Mr. Lam has been the independent non-executive director of Spring Real Estate Investment Trust (the shares of which are listed on the Main Board, stock code: 1426) since 2015. Mr. Lam has about 40 years of experience in accounting, auditing and business consulting. Mr. Lam is a member of HKICPA, the Association of Chartered Certified Accountants, the Institute of Chartered Accountants in Australia and the Institute of Chartered Accountants in England & Wales. Mr. Lam is currently an adjunct professor in the School of Accounting and Finance of The Hong Kong Polytechnic University, and a member of the finance management committee of the Hong Kong Management Association. Mr. Lam obtained a higher diploma in accountancy from The Hong Kong Polytechnic University in 1975. Mr. Tsang Yat Kiang (曾溢江) (“Mr. Tsang”), aged 66, is an independent non-executive Director and a member of the audit committee, remuneration committee and nomination committee of the Company. Mr. Tsang has been appointed as a director of several companies in PRC and Hong Kong since 1993. Mr. Tsang is a founding member of the group of Lerado Group (Holding) Company Limited (the shares of which are listed on the Main Board, stock code: 1225), where he was the vice chairman from 1998 to 2003. Mr. Tsang has been the director of 中山市高兒萊茵日用制品有限公司 (Zhongshan Chloe Ryan Industrial Co., Ltd.*) since 2006, where he is responsible for strategic and financial planning and business development. Mr. Tsang has more than 20 years of experience in corporate governance and management. Save as disclosed herein, there are no other matters in respect of each of our Directors that is required to be disclosed pursuant to Rule 13.51(2) of the Listing Rules and there are no other material matters relating to each of our Directors that need to be brought to the attention of our Shareholders. SENIOR MANAGEMENT The following table sets forth certain information concerning the Group’s senior management:

Name Ms. Gou Lishan (勾黎杉)

Age 31

Position Chief financial officer

Date of Joining the Group 15 July 2014

– 195 –

Brief Description of Roles and Responsibilities Responsible for the overall financial management of the Company

Relationship with other Directors or Members of Senior Management N/A

DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

Name

Age

Position

Date of Joining the Group

Brief Description of Roles and Responsibilities

Relationship with other Directors or Members of Senior Management

Mr. Pei Hongan (裴洪安)

Vice president — in charge of R&D

1 October 2008

Responsible for N/A the research and development of products of the Company

Mr. Shen Guiping (申貴平)

Vice president — in charge of sales

30 March 2009

Responsible for the overseas marketing sales function of the Company

N/A

Ms. Gou Lishan (勾黎杉) (“Ms. Gou”), aged 31, is a chief financial officer of the Company and is responsible for the finance and accounting controls of the Company. Ms. Gou joined Benywave Technology in 2014 and is currently the chief financial officer of Benywave Wireless. Ms. Gou has about 9 years of experience in accounting and finance. Prior to joining Benywave Technology, Ms. Gou worked for PricewaterhouseCoopers from 2006 to 2008 and Ernst & Young from 2008 to 2011, where she was responsible for audit and consultation functions. Ms. Gou also worked as senior accounting manager in 北京視博數字電視科技有限公司 (Beijing Super TV Co., Ltd.*) from 2011 to 2013. Ms. Gou obtained a bachelor’s degree specialized in accounting from Beijing Technology and Business University (北京工商大學) in 2006. Ms. Gou was licensed as a certified public accountant in the State of Maine from 2011 to September 2014 and in Guam since 2014. Mr. Pei Hongan (裴洪安) (“Mr. Pei”), aged 38, is our vice president — in charge of R&D and is responsible for the research and development of products of the Company. Mr. Pei joined Benywave Technology in 2008 and was the overseas research and development director of Benywave Technology from 2008 to 2014. Mr. Pei is currently the vice president — in charge of R&D of Benywave Wireless. Mr. Pei served as engineer, department manager and product director of Tianyu from 2004 to 2008. Mr. Pei has about 11 years of experience in research and development in the electronics telecommunications device industry. Mr. Pei obtained a bachelor’s degree from 北京信息工程學院 (Beijing Information Technology Institute*) in 1998 and a master’s degree in engineering from Beijing Institute of Technology (北京理工大學) in 2001. Mr. Shen Guiping (申貴平) (“Mr. Shen”), aged 48, is our vice president-in charge of sales and is responsible for the overseas marketing sales function of the Company. Mr. Shen joined Benywave Technology in 2009 and served as overseas sales director of Benywave Technology from 2009 to 2014, where he was responsible for overseas market development. Mr. Shen is currently the vice president-in charge of sales of Benywave Wireless. Prior to joining Benywave Technology, Mr. Shen worked as overseas business development director in Hisense Company Limited from 2001 to 2004, where he was in charge of matters related to overseas business development. Mr. Shen also worked as general manager in Hisense USA Co., Ltd. from 2004 to 2007 and Hisense Communication Co., Ltd. from 2007 to 2009, where he was responsible for local mobile and television business and international sales and marketing. Mr. Shen has about 14 years of experience in overseas business development in telecommunications industry. Mr. Shen obtained a bachelor’s degree from Beihang University (previously known as Beijing University of Aeronautics and Astronautics) in 1988 and a master of business administration from National University of Singapore in 2001.

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DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES COMPANY SECRETARY Mr. Chui Man Lung, Everett (徐文龍) (“Mr. Chui”), aged 51, is a secretary of the Company and he joined the Company on 16 August 2014. Mr. Chui worked for KPMG from 1987 to 1993. Mr. Chui served as the financial controller and company secretary of Yau Lee Holdings Limited (the shares of which are listed on the Main Board, stock code: 406) from 1995 to 2008. Mr. Chui has been appointed as the director of Cen-1 Partners Limited since 2008. Mr. Chui has been the independent non-executive director of Taung Gold International Limited (the shares of which are listed on the Main Board, stock code: 621) since 2010. Mr. Chui has been the director of WKI Group Limited since 2012. Mr. Chui has about 28 years of experience in auditing, accounting and financial management. Mr. Chui is a fellow member of HKICPA and the Association of Chartered Certified Accountants and an associate of the Institute of Chartered Accountants in England and Wales. Mr. Chui obtained a bachelor’s degree from University of Southampton in the United Kingdom in 1986. BOARD COMMITTEES The Company is committed to good standards of corporate governance to enhance the long-term shareholder value. We have established an audit committee, a nominating committee, a remuneration committee and a risk management committee and the committees operate in accordance with terms of reference established by our Board. Audit Committee We have established an audit committee with written terms of reference in compliance with Rule 3.21 of the Listing Rules and the Corporate Governance Code and Corporate Governance Report as set out in Appendix 14 to the Listing Rules. The audit committee currently comprises of Lam Yiu Kin (acting as chairman of the audit committee), Hon Kwok Ping, Lawrence and Tsang Yat Kiang, all of whom are independent non-executive Directors. The primary duties of the audit committee are to review and supervise the financial reporting process and internal control system of our Group. Remuneration Committee We have established a remuneration committee with written terms of reference in compliance with Rule 3.25 of the Listing Rules and the Corporate Governance Code and Corporate Governance Report as set out in Appendix 14 to the Listing Rules. The remuneration committee currently comprises of Tsang Yat Kiang (acting as chairman of the remuneration committee), Hon Kwok Ping, Lawrence and Lam Yiu Kin, all are independent non-executive Directors, and Ms. Rong, who is the chairperson of the Company and an executive Director. The primary duties of the remuneration committee are to evaluate and make recommendations to the Board on the remuneration policy covering the Directors and senior management of our Group. Nomination Committee We have established a nomination committee with written terms of reference in compliance with the Corporate Governance Code and Corporate Governance Report as set out in Appendix 14 to the Listing Rules. The nomination committee currently comprises of Tsang Yat Kiang (acting as chairman of the nomination committee), Hon Kwok Ping, Lawrence and Lam Yiu Kin, all are independent non-executive Directors, and Ms. Rong, who is the chairperson of the Company and an executive Director. The primary duties of the nomination committee are to identify, screen and recommend to the Board appropriate candidates to serve as directors of our Company, to oversee the process for evaluating the performance of the Board and to develop, recommend to the Board and monitor nomination guidelines for our Company.

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DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES Risk Management Committee We have established a risk management committee with written terms of reference. The risk management committee currently comprises of Hon Kwok Ping, Lawrence (acting as chairman of the risk management committee), who is an independent non-executive Director, Rong Shengli, who is the chief executive officer of the Company and an executive Director, and Ms. Rong, who is the chairperson of the Company and an executive Director. The primary duties of the risk management committee are to identify potential risks faced by our Group, to assess such risks and implications to our Group and to formulate policies on risk management matters. COMPENSATION OF DIRECTORS AND SENIOR MANAGEMENT Our Directors and senior management receive compensation in the form of salaries, fees, allowances, benefits in kind and/or discretionary bonuses relating to the performance of our Group. We also reimburse our Directors and senior management for expenses which are necessarily and reasonably incurred for providing services to us or discharging their duties in relation to our operations. The aggregate amount of remuneration (including fees, salaries, discretionary bonus, retirement benefit contribution (including pension), allowances, and other benefits in kind) paid to our Directors for the three years ended 31 December 2014 was approximately RMB1.5 million, RMB1.5 million and RMB1.9 million, respectively. The aggregate amount of fees, salaries, discretionary bonus, retirement benefit contribution (including pension), allowances, and other benefits in kind paid to our five highest paid individuals of our Company, including Directors, for the three years ended 31 December 2014 was approximately RMB2.8 million, RMB3.0 million and RMB3.0 million, respectively. We have not paid any remuneration to our Directors or the five highest paid individuals as an inducement to join or upon joining us or as a compensation for loss of office in respect of the three years ended 31 December 2014. Further, none of our Directors have waived or agreed to waive any remuneration during the same period. Save as disclosed above, no other payments have been paid or are payable, in respect of the three years ended 31 December 2014, by us or any of our subsidiaries to our Directors. Under the arrangements currently in force, we estimate the aggregate of the remuneration and benefits in kind payable to the Directors for the year ending 31 December 2015 to be approximately RMB2.5 million. COMPLIANCE ADVISOR We have appointed Haitong International Capital as our compliance advisor upon the Listing in compliance with Rule 3A.19 of the Listing Rules. Pursuant to Rule 3A.23 of the Listing Rules, our compliance advisor shall advise us under the following circ*mstances: •

before the publication of any regulatory announcement, circular or financial report;

•

where a transaction, which might be a notifiable or connected transaction, is contemplated including share issues and share repurchases;

•

where we proposes to use the proceeds of the Global Offering in a manner different from that detailed in this prospectus or where our business activities, developments or results deviate from any forecast, estimate, or other information in this prospectus; and

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DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES •

where the Stock Exchange makes an inquiry of us regarding unusual movements in the price or trading volume of our Shares.

The term of appointment will commence on the Listing Date and end on the date on which we distribute our annual report in respect of our financial results for the first full financial year commencing after the Listing Date. EMPLOYEES As at the Latest Practicable Date, we employed 120 staff members in total. For a breakdown of our employees by function as at the Latest Practicable Date, please refer to the paragraph headed “Business — Employees” in this prospectus. We consider our relationship with our employees to be good. We believe that our management policies, working environment, development opportunities and employee benefits have contributed to building good employee relations and employee retention. During the Track Record Period, we have not experienced any strikes, work stoppages or significant labour strikes in the past and have not experienced any significant difficulties in recruiting or retaining qualified staff. Employees’ benefits In accordance with the applicable laws and regulations in the PRC, we make contributions to social security scheme and housing provident fund for our employees. As advised by our PRC Legal Advisers, according to confirmations from the relevant authorities, to the best of their knowledge, we have been in compliance in all material respects with applicable employment laws during the Track Record Period.

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SHARE CAPITAL AUTHORIZED AND ISSUED SHARE CAPITAL The following is a description of the authorized and issued share capital of our Company in issue and to be issued as fully paid or credited as fully paid as at the date of this prospectus and immediately after completion of the Capitalisation Issue and the Global Offering (assuming the Over-allotment Option is not exercised): Authorized Share Capital Number of Shares

Authorized share capital

1,000,000,000 Shares of HK$0.10 each

Nominal value (HK$) 100,000,000

Issued and to be issued, fully paid or credited as fully paid: Number of Shares

Nominal value (HK$)

Shares in issue as at the date of this prospectus

1,000 Shares of HK$0.10 each

100

Shares to be issued pursuant to the Capitalisation Issue

645,999,000 Shares of HK$0.10 each

64,599,900

Total number of new Shares to be issued under the Global Offering

204,000,000 new Shares of HK$0.10 each

20,400,000

Total issued Shares on completion of the Global Offering

850,000,000 Shares of HK$0.10 each

85,000,000

ASSUMPTIONS The above table assumes that the Global Offering becomes unconditional and the Shares are issued pursuant to the Global Offering. The above does not take into account any shares which may be issued and/or sold pursuant to the exercise of the Over-allotment Option or any Shares which may be issued or repurchased by our Company pursuant to the general mandates granted to our Directors to issue or repurchase Shares as described below. RANKING The Shares are ordinary shares in the share capital of our Company and rank equally with all Shares currently in issue or to be issued, in particular, will rank in full for all dividends or other distributions declared, made or paid on the Shares in respect of a record date which falls after the date of this prospectus other than the participation in the Capitalisation Issue.

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SHARE CAPITAL CIRc*msTANCES UNDER WHICH GENERAL MEETING AND CLASS MEETING ARE REQUIRED Our Company has only one class of shares, namely ordinary shares, each of which ranks pari passu with the other shares. Pursuant to the Companies Law and the terms of the Memorandum and the Articles, our Company may from time to time by ordinary resolution of shareholders (i) appoint and remove directors, (ii) alter its share capital by way of increase, consolidation, division into different classes, subdivision and cancellation of Shares which have not been taken; (iii) declare dividend, and (iv) approve a voluntary winding-up. In addition, our Company may subject to the provisions of the Companies Law (i) amend its constitutional documents, (ii) change its name, and (iii) reduce its share capital or capital redemption reserve by its shareholders passing a special resolution. For details, please refer to the subsection headed “Summary of the Constitution of the Company and the Companies Law — 2. Articles of Association” in Appendix III to this prospectus. Pursuant to the Companies Law and the terms of the Memorandum and the Articles, all or any of the special rights attached to the Share or any class of Shares may be varied, modified or abrogated either with the consent in writing of the holders of not less than three-fourths in nominal value of the issued Shares of that class or with the sanction of a special resolution passed at a separate general meeting of the holders of the Shares of that class. For more details, please refer to the subsection headed “Summary of the Constitution of the Company and the Companies Law — 2. Articles of Association — (d) Variation of rights of existing shares or classes of shares” in Appendix III to this prospectus. GENERAL MANDATE TO ISSUE SHARES Subject to the conditions stated in the section headed “Structure and conditions of the Global Offering” of this prospectus, our Directors have been granted a general unconditional mandate to allot, issue and deal with any unissued Shares and to make or grant offers, agreements and options (including but not limited to any warrants, bonds, notes and debentures conferring any rights to subscribe for or otherwise receive into Shares) which might require the exercise of such powers, provided that the aggregate nominal value of Shares so allotted or issued or agreed conditionally or unconditionally to be allotted or issued (whether pursuant to an option or otherwise) by the Directors other than pursuant to: (a)

a rights issue;

(b)

an issue of Share upon the exercise of options which may be granted under the Share Option Scheme or similar arrangement or under the Global Offering;

(c)

any scrip dividend scheme or other similar arrangement providing for the allotment and issue of Shares in lieu of the whole or part of a dividend on Shares in accordance with our Articles of Association;

(d)

exercise of any subscription or conversion rights attaching to any warrants or any securities which are convertible into Shares in issue prior to the date of grant of this mandate; or

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SHARE CAPITAL (e)

a specific authority granted by the Shareholders in general meeting, shall not exceed the aggregate of: (i)

20% of the aggregate nominal amount of the share capital of our Company in issue immediately following the completion of the Capitalisation Issue and the Global Offering (without taking into account any Shares which may be allotted and issued pursuant to the exercise of the Over-allotment Option or any Shares which may be allotted and issued pursuant to the exercise of the options that may be granted under the Share Option Scheme); and

(ii)

the aggregate nominal amount of the share capital of our Company which may be purchased by our Company under the general mandate to repurchase Shares referred to in the subsection headed “General Mandate to Repurchase Shares” in this section below.

This general mandate to issue Shares will expire: (a)

at the conclusion of our next annual general meeting; or

(b)

at the end of the period within which our next annual general meeting is required by our Articles of Association or any applicable laws of the Cayman Islands to be held; or

(c)

at the passing of an ordinary resolution of our Shareholders in general meeting revoking, varying or renewing this mandate, whichever is the earliest.

For further details of this general mandate, please refer to the subsection headed “Statutory and General Information — A. Further information about our Group — 5. Resolutions of our Shareholders” in Appendix IV to this prospectus. GENERAL MANDATE TO REPURCHASE SHARES Subject to the conditions stated in the section headed “Structure and conditions of the Global Offering” of this prospectus, our Directors have been granted a general unconditional mandate to exercise all the powers of our Company to repurchase Shares with an aggregate nominal amount of not exceeding 10% of the aggregate nominal amount of our share capital in issue immediately following the completion of the Capitalisation Issue and the Global Offering (without taking into account any Shares which may be allotted and issued pursuant to the exercise of the Over-allotment Option). This general mandate relates only to repurchases made on the Stock Exchange or on any other stock exchange on which the Shares may be listed and which is recognized by the SFC and the Stock Exchange for this purpose, subject to and in accordance with all applicable laws and/or the requirements of the Listing Rules or of any other stock exchange as amended from time to time. A summary of the relevant Listing Rules is set out in the subsection headed “Statutory and General Information — A. Further information about our Group — 6. Repurchases of our own Shares” in Appendix IV to this prospectus. This general mandate to repurchase Shares will expire: (a)

at the conclusion of our next annual general meeting; or

(b)

at the end of the period within which our next annual general meeting is required by our Articles of Association or any applicable laws of the Cayman Islands to be held; or

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SHARE CAPITAL (c)

at the passing of an ordinary resolution of our Shareholders in general meeting revoking, varying or renewing this mandate, whichever is the earliest.

For further details of this general mandate, please refer to the subsection headed “Statutory and General Information — A. Further information about our Group — 5. Resolutions of our Shareholders” in Appendix IV to this prospectus. RSU SCHEME The RSU Scheme was conditionally adopted on 9 June 2015. Please refer to the subsection headed “Statutory and General Information — D. RSU Scheme” in Appendix IV to this prospectus for details. SHARE OPTION SCHEME The Share Option Scheme was conditionally adopted on 9 June 2015. Please refer to the subsection headed “Statutory and General Information — E. Share Option Scheme” in Appendix IV to this prospectus for details.

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FINANCIAL INFORMATION

You should read the following discussion and analysis in conjunction with our consolidated financial information together with the accompanying notes, set forth in Appendix I as to this prospectus. Our consolidated financial statements have been prepared in accordance with IFRS, which may differ in certain material respects from generally accepted accounting principles in other jurisdictions. You should read the whole of Appendix I to this prospectus and not rely merely on the information contained in this section. The following discussion contains certain forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements due to various factors, including those set forth in the sections headed “Forward-Looking Statements” and “Risk Factors”. Unless the context otherwise requires, financial information described in this section is described on a consolidated basis. OVERVIEW We are one of the leading ODM smartphone suppliers in the PRC targeting overseas markets. According to the Frost & Sullivan Report, we ranked the forth amongst the PRC smartphone exporters on ODM basis in terms of export shipment volume Note which accounted for approximately 2.5% of the total China smartphone export volume in 2014. We are primarily engaged in developing, designing, production management and sale of mobile handsets to markets covering more than 25 countries, excluding China. Our products are sold by our customers under their own or authorised brand names. Our customers include various top local branded mobile handset suppliers, telecommunication operators and trading companies in South Asia, South East Asia, Europe, North America, South America, Africa and other parts of Asia. We provide a wide range of services including developing, designing, production management and sale of mobile handsets to suit our customers’ needs and/or specifications. Design of mobile handsets mainly involves hardware, software, mechanical and circuitry for producing a mobile handset to maximize the compatibility of various hardware, software and components of a mobile handset with specified functions as well as outlook design of the products. We outsource our processing and assembly process to our EMS providers while providing raw material, production process design, technical support and onsite supervising personnel to monitor the production schedule and product quality. For each of the three years ended 31 December 2014, our total revenue was approximately RMB663.6 million, RMB1,368.9 million and RMB1,916.2 million, respectively, representing a CAGR of 69.9% over the three years ended 31 December 2014, while our net profit for the year was approximately RMB35.8 million, RMB82.9 million and RMB156.2 million, respectively, representing a CAGR of 108.9% over the three years ended 31 December 2014. We decided to focus on the production of smartphones and start to explore new market and reduced the production of feature phone since 2012 primarily because we look for higher margin to be generated from smartphones. We successfully changed our product mix to selling a majority of smartphone and smartphone components for the two years ended 31 December 2014, which accounted for over 99% of our revenue, experiencing a boost in both of our revenue and net profit thereafter.

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FINANCIAL INFORMATION BASIS OF PREPARATION Our principal subsidiary Benywave Wireless is a company split from Benywave Technology which engaged in both the PRC Business and the Overseas Business during the Pre-split Period. The Overseas Business was operated as a business unit under Benywave Technology prior to the completion of the Split. In July 2014, Benywave Wireless as an entity arising from the Split, has assumed the Overseas Business. The Group comprising the Company and its subsidiaries resulting from the Reorganization is regarded as a continuity entity. The Overseas Business has been under the common control by Ms. Rong and Mr. Ni throughout the Track Record Period. Accordingly, the financial statements of the Group has been prepared on the basis as if the Company had always been the holding company of the Group. The consolidated statements of profit or loss and other comprehensive income, consolidated statements of changes in equity and consolidated statements of cash flows of the Group for each the three years ended 31 December 2014 include the results, changes in equity and cash flows of the Overseas Business as if the Overseas Business had been operated by the Group throughout the Track Record Period. The consolidated statements of financial position of the Group as at 31 December 2012 and 2013 have been prepared to present the assets and liabilities of the Overseas Business, as if the current group structure had been in existence and the Overseas Business had been transferred to the Group on those dates. Principles and factors taken into account When considering the presentation of the financial information of the Overseas Business using the above basis, our Directors have also taken into account the following principles and factors: (a)

the extent to which the Overseas Business has been separately managed and financially controlled within Benywave Technology; and

(b)

the extent to which it is practicable to identify the historical financial information attributable to the Overseas Business.

Prior to the Split, the Overseas Business was separately managed from the PRC Business, and led by the current Group’s senior management team which was fully responsible for Overseas Business. Prior to and subsequent to the Split, the Overseas Business has been led by the current Group’s senior management team. The senior management of the Group exercises full responsibility for establishment and implementation of the business strategies of the Group. Prior to and subsequent to the Split, our senior management has managed the Overseas Business consistent with the following parameters: •

Sales persons for Overseas Business are responsible for sales to customers covering more than 25 countries other than the PRC. Sales team reports to Mr. Shen Guiping (sales director to the Overseas Business unit of Benywave Technology before the Split and vice president — in charge of sales of Benywave Wireless upon the Split), who in turn reports to Mr. Rong Shengli (the vice president of the Overseas Business unit of Benywave Technology before the Split, and chief executive officer of the current Group), who in turn reports to Ms. Rong (a director and founder of Benywave Technology before the Split and the chairperson of the current Group)

•

Overseas Business unit’s sales team is responsible for collecting the receivables from the overseas customers

•

R&D team for Overseas Business headed by Mr. Pei Hongan, our vice president — in charge of R&D who has been responsible for overseeing R&D for the Overseas Business during the Pre-Split Period till now, is responsible for R&D projects serving overseas customers

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FINANCIAL INFORMATION For details of how the Overseas Business and PRC Business were delineated and separately managed from the aspect of sales, R&D, procurement, outsourcing and management, please refer to the subsections headed “Relationship with Controlling Shareholders — Delineation of Business” and “Relationship with Controlling Shareholders — Summary table of major differences between the Overseas Business and the PRC Business” in this prospectus. On such basis, our Directors are of the view that the Overseas Business has been clearly delineated from the PRC Business in terms of the nature of business and management. Assets and liabilities were assigned to the Overseas Business as agreed between the Benywave Technology and Benywave Wireless pursuant to the Split Agreement. Asset and liabilities were assigned to the Overseas Business in so far as they are related to the operations and sales of the Overseas Business based on the allocation method which as consistent with the method adopted during the Track Record Period. The total assets, total liabilities and total equity assigned to the Overseas Business as at 31 August 2014 amounted to approximately RMB365.9 million, RMB90.8 million and RMB275.1 million respectively. The extent of the relevant items in the financial statements of the Overseas Business and the PRC Business can be separately identified are set out in the subsection headed “Basis of preparation of selected items in the Consolidated Statements of Profit or Loss and Other Comprehensive Income during the Pre-split Period up to 31 August 2014” in this section. Since the Overseas Business was carried out by Benywave Technology prior to the Split, to the extent the assets, liabilities, income and expenses that are specifically identified to the Overseas Business, such items are included in the financial information of the Group throughout the Pre-split Period up to 31 August 2014. To the extent the assets, liabilities, income and expenses that are common to the Overseas Business and the PRC Business, these items are allocated between the Overseas Business and the PRC Business on the basis set out below (such items include certain cost relating to supporting function of R&D and administrative expenses) during the Pre-split Period up to 31 August 2014. Items that do not meet the criteria above are not included in the financial information of the Group, such as the bank accounts were not separately managed and financially controlled by Benywave Technology for the Overseas Business prior to the Split because the treasury and cash disbursem*nt functions of the Overseas Business were centrally administrated by Benywave Technology and accordingly, no cash and bank balances were recorded in the financial information of the Group as at 31 December 2012 and 2013. Expenses which are common to the Overseas Business and the PRC Business for the Pre-Split Period up to 31 August 2014 are allocated on the following basis: (1) included in research and development costs for supportive function related cost of approximately RMB22.8 million, representing partial staff costs, product test costs and other expenses were allocated based on percentage of the budgeted revenue of the Overseas Business and percentage of the budgeted revenue of the PRC Business; (2) included in administrative expenses of approximately RMB13.7 million, representing, partial staff costs, sundry office costs and other expenses were allocated based on headcount of the Overseas Business and percentage of the headcount of the PRC Business; and (3) income tax expenses were calculated based on the tax rate of the Overseas Business as if it is a separate taxpayer prior to the Split. Our Directors believe that the method of allocation of the above items presents a reasonable basis of estimating the operating results of the Overseas Business unit as if on a stand-alone basis for the Pre-split Period up to 31 August 2014. Other than certain of the research and development costs, administrative expenses and income tax expenses mentioned above, all other items of the assets, liabilities, income and expenses are specifically identified. For the basis of allocation between the Overseas Business and the PRC Business in respect of the assets, liabilities, income and expenses that are common to the Overseas Business and the PRC Business, please refer to Note 2 to the Accountants’ Report in Appendix I to this prospectus.

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FINANCIAL INFORMATION The Sole Sponsor, based on (a) its independent due diligence conducted as summarised below regarding whether the Overseas Business has been separately managed and financially controlled within Benywave Technology and (b) having considered the reasonableness of the work done by the Reporting Accountants in respect of the allocation basis adopted, including (i) understanding the methodologies adopted by our Directors in preparing the financial information of the Overseas Business, (ii) discussion with the management to understand the basis for determining the items relating to the Overseas Business and (iii) that they have considered the principles and factors such as the Overseas Business has been managed separately and separately financially controlled in overall, and the results of their findings as a whole, the Sole Sponsor concurs with our Directors’ view that (a) the financial information of Benywave Technology based on which the allocations are made is reliable, (b) the Overseas Business has been separately managed and financially controlled within Benywave Technology and (c) the method of allocation of the above items presents a reasonable basis of estimating the operating results of the Overseas Business unit as if on a stand-alone basis for the Pre-split Period up to 31 August 2014. The Sole Sponsor has conducted various independent due diligences procedures to assess whether, and has considered that, the Overseas Business was separately managed and separately financially controlled within Benywave Technology prior to the Split and whether the historical financial information attributable to the Overseas Business was practicably to be identified. The nature of such due diligence procedures included among others, the following: –

discussed with the management teams and specific employees of Benywave Technology, for both the Overseas Business and the PRC Business, to assess whether the key functions and business processes for each of the Overseas Business and the PRC Business were separately managed;

–

discussed with the finance department personnel in charge for each of Benywave Technology and the Group to understand the segregation of accounts between the Overseas Business and the PRC Business; assessed the reliability of the financial system and the audited financial accounts of Benywave Technology; examined the financial system and ledgers of the Overseas Business and the PRC Business, to assess whether items specifically related to the Overseas Business can be identified from the historical financial records during the Track Record Period, sample tested such specifically identified items to ensure they are correctly segregated; understood the basis of allocation and re-performed calculations for relevant amounts for the allocated expenses; as well as considered the fairness of the presentation of the financial statements of the Group during the Pre-split Period;

The Overseas Business and the PRC Business were managed separately and separately financially controlled within Benywave Technology as a whole. Key functions and business processes of the Group including sales team and R&D team were separately managed by different department heads for each of the Oversea Business and the PRC Business. While the bank accounts and treasury functions of the Overseas Business were centrally administrated by Benywave Technology prior to the Split, our Directors consider it does not affect that the two businesses were separately managed and financially controlled as a whole, and therefore the financial statements of the Group should be presented on a stand-alone basis, Segregation of accounts between the Overseas Business and the PRC Business were properly carried out by the management for each of the Overseas Business and the PRC Business, evidently by enabling the review of the financial performance of the Overseas Business and the PRC Business separately, which enables the identification of income and expenses specifically related to the Overseas Business, while income and expenses not directly related to the Overseas Business have been properly and reasonably allocated between the PRC Business and the Overseas Business. Such basis of segregation of accounts and allocation has been audited by the Reporting Accountants and their opinion on the financial information of the Group for the Track Record Period is set out in the Accountants’ Report in Appendix I of this prospectus. Our Directors consider, which the Sole Sponsor concur, that the financial information of our Group is reasonably segregated and allocated, while the audited

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FINANCIAL INFORMATION financial information of Benywave Technology, audited by Da Hua Certified Public Accountants (currently in association with Moore Stephens), is reliable for the understanding of the financial position of Benywave Technology as a whole, despite it was loss making for the two years ended 31 December 2013. After the Split, our Group took a period of time to obtain all of its necessary licenses to operate its business and open its bank accounts. After 31 August 2014, all of the allocation of expenses shared between the Overseas Business and the PRC Businesses has ceased and the Group incurred its own income and expenses which were recorded directly in its own financial statements. Basis of preparation of selected items in the Consolidated Statements of Profit or Loss and Other Comprehensive Income during the Pre-split Period up to 31 August 2014 Revenue Benywave Technology has maintained separate accounting ledgers to record the revenues for PRC Business and Overseas Business. Revenue for Overseas Business is specifically identified from the accounting system indicating overseas sales and customers. Cost of sales Costs of sales were recorded in separate sub-ledgers, and mainly include costs of raw materials, sub-contracting costs, write down of inventories, warranty and others. Raw materials and subcontracting cost could be specifically identified for Overseas Business. Write down of inventories and warranty could be specifically identified based on the models sold by Overseas Business. Overall, costs of sales for Overseas Business can be specifically identified and booked as the costs of sales for Benywave Wireless. Selling and distribution expenses The management extracted the amounts of selling and distribution expense items recorded in separate ledger accounts of the “expenses” sub-ledger that can be specifically identified to the operations of the Overseas Business, such as sales department staff salaries and freight charges. The management reviewed each transaction recorded in selling and distribution expense ledger accounts of Benywave Technology and ensure no expenses were related to the Overseas Business on a transaction-by-transaction basis. Administrative expenses Administrative expenses mainly include staff costs (including salaries and allowances, staff welfare and other staff related expenses) for administrative employees, general office expenses, property management fees, security fees, agency fees, entertainment expenses, and professional fees. The management extracted the amounts of administrative expense items recorded in separate ledger accounts of the “expenses” sub-ledger that can be specifically identified to the operations of the Overseas Business, such as handling fee, staff cost specifically related to Overseas Business, stamp duty tax etc (“Specifically Identified G&A Expenses”).

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FINANCIAL INFORMATION The management reviewed each transaction recorded in administrative expense ledger accounts of Benywave Technology and ensure no expenses other than Specifically Identified G&A Expenses were related to the Overseas Business on a transaction-by-transaction basis. For other expenses, such as staff costs and general office expense, etc., the amount was allocated based on the number of employees providing service to the Overseas Business and PRC Business by reference to the records kept by Benywave Technology. Listing expenses for Overseas Business were specifically identified. Research and development costs Research and development costs mainly include staff costs (including salaries and allowances, staff welfare and other staff related expenses) and testing fee for research and development employees. The management has segregated the research and development departments for different units for clear identified purposes. Separate units were maintained for Overseas Business and PRC Business with some units which performed design and testing for both Overseas Business and PRC Business. Each unit maintained its sub-ledger. The management extracted the amounts of research and development items recorded in separate ledger accounts of the “expenses” sub-ledger that can be specifically identified to the operations of the Overseas Business. Although the R&D teams for the Overseas Business and the PRC Business have been segregated, sharing of outlook designs and potential inter-personnel communication on technology and intellectual information by means of conversation between employees were not restricted between the Overseas Business and the PRC Business. While such information is intangible and mostly readily available in public sources such as the internet, the management considered it would be more prudent to share the cost of certain R&D supporting teams mainly dedicated to the PRC Business in case certain information has been verbally shared by certain employees and caused potential benefits in the R&D process of the Overseas Business. Therefore for the supporting teams units which served both Overseas Business and PRC Business such as the testing teams, and the units which have produced R&D results that are possible for intellectual sharing, their costs have been allocated based on the budgeted revenue of Overseas Business and PRC Business proportionally. Other gain and loss During the Pre-split Period up to 31 August 2014, sales proceeds for Overseas Business are mainly denominated in USD. Purchases for raw materials are denominated and settled mainly in RMB. Sales proceeds for PRC Business are all denominated in RMB whereas purchases for raw materials are denominated in and settled mainly in RMB. Overseas Business is therefore exposed to foreign exchange rate risk and such risk for PRC Business is much lower. Other gains and losses mainly includes exchange difference arising from translation of US dollar and RMB, which are specifically identified for Overseas Business. Taxation Our principal subsidiary Benywave Wireless is a company split from Benywave Technology which engaged in both PRC Business and Overseas Business. The standard statutory enterprise income tax rate under the PRC tax laws is 25%, whereas the relevant applicable tax rate for Benywave Technology is 15% as it has been recognised as a high technology enterprise. Given the PRC Business is less profitable than the Overseas Business and Benywave Technology recorded tax loss during the Pre-split Period with reference to its financial

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FINANCIAL INFORMATION statements and its tax filings made in accordance with the relevant PRC tax laws, Benywave Technology were hence not required to pay taxes during the Pre-split Period. The consolidated statements of financial position of the Group as at 31 December 2012 and 2013 have been prepared to present the assets and liabilities of the Overseas Business, as if the current group structure had been in existence on those dates. Basis of preparation of certain items of consolidated statements of financial position during the Pre-split Period up to 31 August 2014 Property, plant and equipment Property, plant and equipment mainly comprised of office equipments used by the staff for Overseas Business and are specifically identified for Benywave Wireless. Inventories Inventory is mainly comprised of finished goods (including smartphone component parks) and raw materials. Finished goods are specifically identified for those produced for Overseas Business. Although the request for sourcing of raw materials were separately prepared by each of the Sourcing Teams for Overseas Business and PRC Business, the placing of purchase orders for raw material of PRC Business and Overseas Business was made by Benywave Technology as a single entity. Accordingly, it is assumed that the purchases were made from Benywave Technology. For those commonly used raw materials for PRC Business and Overseas Business, it is treated as an asset for the PRC Business and it would only be treated as an asset of the Overseas Business by way of purchasing from Benywave Technology when the relevant raw materials are stock out for the processing and assembling of overseas products. Trade and other receivables Trade receivables arise from revenue generated from Overseas Business were recorded by Benywave Technology in the “sales” sub-ledger and can be specifically identified. Other receivables and prepayments mainly represented value added tax receivable and amount due from staff and can be specifically identified. Trade payables, accruals and other payables, deposits received from customers Purchase of raw materials of PRC Business and Overseas Business was centralised by Benywave Technology. Raw materials were deemed to be acquired by the Overseas Business from Benywave Technology at cost. The balance represents the unsettled amounts for purchases for raw materials used by the Overseas Business with respective value added tax between the external suppliers and Benywave Technology. Accruals and other payables mainly represented staff salaries payable and freight cost payables which were recorded in separate ledger accounts and can be specifically identified. Deposits received from customers arisen from the sales to Overseas Business customers and can be specifically identified. Provision Provision for warranty in respect of the Overseas Business was made and calculated with reference to the customers for Overseas Business and can be specifically identified.

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FINANCIAL INFORMATION Cash and bank balances There was no designated bank accounts maintained by Benywave Technology for Overseas Business and accordingly, no cash and bank balances were recorded in the financial statements of the Group as at 31 December 2012 and 2013. Prior to the completion of the Split, bank and cash generated by the Overseas Business were maintained in the same bank account of those of the PRC Business of Benywave Technology. After the completion of the Split, and the Group opened its own bank accounts and maintains its own bank balances. Consolidated statement of cash flows Benywave Wireless was a business unit of Benywave Technology throughout the Track Record Periods until the Split is consummated in July 2014. During the Pre-split Period and up to 31 August 2014, net cash-flows generated by and the retained profit of the Overseas Business were maintained in the same bank account of those of the PRC Business of Benywave Technology. Accordingly, the funds provided for or withdrawn from Benywave Technology were presented as movements in the equity while there are no cash and cash equivalents balance for the Overseas Business. Accordingly, there were no cash received/paid directly by the Group in connection with its operating, investing and financing activities. After the completion of the Split, the Group successfully opened its own bank account in August 2014, the Group had cash and cash equivalents of RMB10.4 million in its own bank account as at 31 December 2014. Share capital No share capital information is presented as at 31 December 2012 and 2013 because the Company was not yet established at the end of these reporting periods. The share capital of the Company and Benywave Wireless as at 31 December 2014 is HK$10 and RMB100,000,000, respectively. Basis of preparation of the Track Record Period after 31 August 2014 After 31 August 2014, all of the allocation of expenses shared between the Overseas Business and the PRC Businesses has ceased and our Group incurred its own income and expenses which were recorded directly in its own financial statements. Instead of recording the assets and liabilities attributable to the Overseas Business during the Pre-split Period up to 31 August 2014, our Group recorded its own assets and liabilities in its financial statements after 31 August 2014. KEY FACTORS AFFECTING OUR RESULTS OF OPERATIONS Our results of operations have been and will continue to be affected by a number of factors, the most significant of which are set out below: Market demand for our products We provide mobile handsets on ODM basis to our customers in overseas markets. The demand for our products is affected by the level of business activity of our major customers, which is jointly influenced by the level of economic activity in the telecommunication industry and countries where they operate. A decline in the telecommunication industry or an economic downturn in the country that our clients reside could adversely affect the performance of our clients and the demand of our products in turn. Cost of raw materials Our cost of raw material incurred in our cost of sales represented approximately 92.1%, 93.6% and 90.9% of our cost of sales during each of the three years ended 31 December 2014. Our major raw materials used for our products includes various electronic components including display modules, OGS touch panels, camera modules and mobile chipsets, etc.

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FINANCIAL INFORMATION According to the Frost & Sullivan Report, the prices of the raw materials were generally in a decreasing trend or remained stable from 2012 to 2014. During the Track Record Period, we have not experienced any substantial fluctuation of price in sourcing core materials and components. For demonstration purpose, the following sensitivity analysis illustrates the impact of hypothetical fluctuations of our cost of raw materials from our cost of sales on our profit before tax during the Track Record Period. Fluctuations in our cost of materials from our cost of sales are assumed to be 5% and 10%. For the three years ended 31 December

Hypothetical fluctuations

+/-5% RMB’000

+/-10% RMB’000

Increase/decrease in the cost of raw materials Year ended 31 December 2012 Year ended 31 December 2013 Year ended 31 December 2014

+/-26,898 +/-57,134 +/-75,254

+/-53,796 +/-114,268 +/-150,507

Increase/decrease in profit before income tax Year ended 31 December 2012 Year ended 31 December 2013 Year ended 31 December 2014

–/+26,898 –/+57,134 –/+75,254

–/+53,796 –/+114,268 –/+150,507

For each of the three years ended 31 December 2014, our gross profit amounted to approximately RMB79.5 million, RMB148.2 million and RMB260.2 million, respectively. For illustrative purpose, we would have recorded a breakeven in our gross profit if the cost of our raw materials increased by approximately 14.8%, 13.0% and 17.3% respectively from the corresponding period while our revenue maintains at the same amount. Technology change We operate in the mobile handset industry characterized by rapid technological changes and any delay by us in rolling out new and competitive mobile handsets will reduce our revenue. The mobile handset industry is characterized by rapid technological developments, frequent new product introductions and ever-changing industry and regulatory standards. Future technological developments in the mobile handset and mobile telecommunication industries may reduce or inhibit the market acceptance of our existing and future mobile handsets. Our success depends substantially on our ability to enhance our technologies and develop and introduce new handsets which anticipates changing market needs and technologies. We have incurred and will continue to incur significant costs to research and develop new handsets and enhancements. Although we have not experienced any delays in rolling out new mobile handsets in the past, we cannot assure that delay in rolling out new mobile handsets will not happen in the future. If we fail to roll out new handsets or enhancements to existing handsets promptly, our revenue will drop. Our competitors may from time to time launch new mobile handsets with innovative features which may replace or shorten our handset life cycles and end-users may delay their decision to buy our handsets. As a result, we will need to increase our investment in research and development of new handsets and enhancement but we may not have sufficient resources for such investment. Even if we continue to develop new handsets and enhancement, we cannot ensure market acceptability as this depends on various factors and some of which may be beyond our anticipation or control.

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FINANCIAL INFORMATION Changes in customer base Our revenue is affected by our customer base. Our top five customers accounted for approximately 68.9%, 61.0% and 61.1% of our Group’s total revenue for the three years ended 31 December 2014, respectively. Our sales is dependent on the orders from our top five customers which are top mobile handset suppliers and telecommunication operators in India, Thailand, Philippines, France, Taiwan, Hong Kong and many other overseas countries. If any one or more of these top customers substantially reduce their orders with us or our product price decreases, there is no assurance that we will be able to make up for the reduction in business by securing orders of similar volumes or at all from other customers and our profitability may drop. As different customers require different products, changes in our customers profile will continue to affect the relative contribution of our Group’s different types of products to our revenue and gross profit. The fluctuations in foreign exchange rates After the Split, our principal revenue is denominated in US dollars and our expenditures mainly involve US dollars and RMB as we purchase our components from our suppliers. We are therefore exposed to foreign exchange rate risk. Our profit margins will be negatively affected when we are unable to pass any appreciation of the RMB against the US dollars to our customers by raising the selling price of our products in US dollars. Any significant fluctuations in the exchange rates between RMB and US dollars may adversely affect our results of operations. In addition, we are exposed to the risks associated with the currency conversion and exchange rate system in the PRC. Please refer to the subsection headed “Risk Factors — Our revenue is predominately in US dollar and fluctuation in the US dollar and RMB may expose us to foreign currency risk, while the fluctuations in the US dollar and foreign currency of our key markets may adversely affect our business” in this prospectus. Income taxes Our principal subsidiary Benywave Wireless is a company split from Benywave Technology which engaged in both PRC Business and Overseas Business during the Pre-split Period. The standard statutory enterprise income tax rate under the PRC tax laws is 25%, whereas the relevant applicable tax rate for Benywave Technology is 15% as it has been recognised as a high technology enterprise. Given the PRC Business is less profitable than the Overseas Business and Benywave Technology recorded tax loss during the Pre-split Period according to its financial statements and its tax filings made in accordance with the relevant PRC laws, Benywave Technology was hence not required to pay taxes during the Pre-split Period. Notwithstanding the foregoing, given Benywave Wireless which assumes the Overseas Business recorded net profit before tax at approximately RMB42.1 million, RMB97.5 million and RMB193.7 million for each of the three years ended 31 December 2014 (based on its audited accounts prepared base on IFRS), an enterprise income tax rate of 15% has been provided for in the financial statements of Benywave Wireless during the Pre-split Period and 25% has been provided for in the financial statements of Benywave Wireless after the Split, and resulted in profit after tax in the amount of RMB35.8 million, RMB82.9 million and RMB156.2 million, respectively. After the Split, Benywave Wireless only engages in Overseas Business and becomes the principal subsidiary of our Group and it is subject to standard statutory enterprise income tax at a rate of 25% unless certain exemptions for high technology enterprises are granted which would lower the applicable tax rate to 15%. As a newly set up entity, Benywave Wireless can only apply to become a “New and High Technology Enterprise” after one year of operations and hence before obtaining such qualification, its applicable enterprise income tax rate would be 25%. For the investors reference, assuming Benywave Wireless was subject to 25% of income tax for each of the three years ended 31 December 2014, its net profit after tax would be amounted to approximately RMB31.6 million, RMB73.1 million and RMB140.5 million during the relevant periods respectively.

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FINANCIAL INFORMATION CRITICAL ACCOUNTING POLICIES AND ESTIMATES We have identified certain accounting policies that are significant to the preparation of our Group’s financial statements. Some of our accounting policies involve subjective assumptions and estimates, as well as complex judgments relating to accounting items. In each case, the determination of these items requires management judgments based on information and financial data that may change in future periods. When reviewing our financial statements, you should consider: (i) our selection of critical accounting policies; (ii) the judgments and other uncertainties affecting the application of such policies; and (iii) the sensitivity of reported results to changes in conditions and assumptions. We set forth below those accounting policies that we believe are of critical importance to us or involve the most significant estimates and judgments used in the preparation of our Group’s financial statements. Our significant accounting policies, estimates and judgements, which are important for an understanding of our financial condition and results of operations, are set forth in detail in Note 2 and Note 4 to our consolidated financial statements included in the Accountants’ Report in Appendix I to this prospectus. Revenue recognition Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances. Revenue from the sale of goods is recognised when the goods are delivered and titles have passed, at which time all the following conditions are satisfied: •

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

•

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

•

the amount of revenue can be measured reliably;

•

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

•

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

Research and development costs Expenditure on research activities is recognised as an expense in the period in which it is incurred. When no internally-generated intangible asset can be recognised development, expenditure is recognised in profit or loss in the period in which it is incurred. Inventories Inventories are stated at the lower of cost and net realisable value. Cost is calculated using the weighted average method. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.

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FINANCIAL INFORMATION Allowance for inventories The Group makes allowance for inventories based on an assessment of the net realisable value of inventories. Allowances are applied to inventories where events or changes in circ*mstances indicate that the net realisable value is lower than the cost of inventories. The identification of obsolete inventories requires the use of judgment and estimates on the conditions and usefulness of the inventories. Where the expectation is different from the original estimate, such difference will impact carrying value of inventories in the year in which such estimate has been changed. At 31 December 2012, 2013 and 2014, the carrying amounts of inventories are approximately RMB13.4 million, RMB69.4 million and RMB123.5 million, respectively (net of write down of inventories of approximately RMB2.7 million, RMB3.0 million and RMB2.5 million, respectively). Provision for warranties Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle that obligation, and a reliable estimate can be made of the amount of the obligation. When a provision is measured using the cash flows estimated to settle the present value of those cash flows (where the effect of time value of money is material). Provisions for the expected cost of warranty obligations under the relevant sales of goods legislation are recognised at the date of sale of the relevant products, at the directors’ best estimate of the expenditure required to settle the Group’s obligation. Provision for warranty is measured at the management’s best estimate of the Group’s liability under one year warranty period granted on mobile telecommunication devices at the end of each reporting period. Estimated costs related to warranty are accrued at the time of sales based on historical record and adjusted as required to reflect actual costs incurred, as information becomes available. At 31 December 2012, 2013 and 2014, the carrying amounts of provision for warranty are approximately RMB8.6 million, RMB12.5 million and RMB23.3 million, respectively.

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FINANCIAL INFORMATION RESULTS OF OPERATIONS The following table summarises the consolidated statement of profit or loss and other comprehensive income data from the Financial Statements during the Track Record Period, details of which are set out in the Accountants’ Report in Appendix I to this prospectus.

2012 Percentage of Total Amount Revenue RMB’000 %

Year Ended 31 December 2013 2014 Percentage Percentage of Total of Total Amount Revenue Amount Revenue RMB’000 % RMB’000 %

Revenue Cost of sales

663,579 (584,080)

100.0 1,368,897 (88.0) (1,220,676)

Gross profit

79,499

12.0

Other gains and losses Research and development costs Selling and distribution expenses Administrative expenses Listing expenses

(1,009)

(0.2)

(3,139)

(0.2)

(2,235)

(0.1)

(13,122)

(2.0)

(16,397)

(1.2)

(22,047)

(1.1)

(14,196) (9,074) –

(2.1) (1.3) –

(17,858) (13,298) –

(1.3) (0.9) –

(22,847) (6,901) (12,544)

(1.2) (0.4) (0.6)

Profit before tax Income tax expense

42,098 (6,339)

6.4 (1.0)

97,529 (14,656)

7.2 (1.1)

193,660 (37,435)

10.2 (2.0)

Profit and total comprehensive income for the year attributable to equity holders of the Company

35,759

5.4

82,873

6.1

156,225

8.2

148,221

100.0 1,916,183 (89.2) (1,655,949) 10.8

260,234

100.0 (86.4) 13.6

DESCRIPTION OF SELECTED ITEMS IN CONSOLIDATED STATEMENTS OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME Revenue Our revenue mainly represents gross sales generated from the sales of mobile phone products. We recorded approximately RMB663.6 million, RMB1,368.9 million and RMB1,916.2 million for each of the three years ended 31 December 2014, respectively, representing a CAGR of approximately 69.9%. Our main products include smartphone and feature phone. Since 2013, at the request by our customers, we sold certain component pack of smartphones (semi knock-down (SKDs) for mobile handsets which include hardware components such as display modules, camera modules, audio, sensors, etc.) that are ready to be assembled and packaged by our customer(s) after being imported to their country(ies). Our customers also purchase mobile device components from us for use in their after sale services provided to the end users.

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FINANCIAL INFORMATION Our sales of feature phone accounted for approximately 53.0% of our sales in the year ended 31 December 2012. As we started to change our product mix to focus on smartphone in 2012, over 99% of our revenue was derived from the sales of smartphone and smartphone components for the year ended 31 December 2013 and 2014. There were no sales recorded for smartphone components in 2012 as we started to sell components from February 2013. Our sale of mobile device components only constitutes a tiny portion of our revenues, which was approximately 0.1%, 0.1% and 0.1% of our revenue for the three years ended 31 December 2014, respectively. The following table sets forth, for the periods indicated, the breakdown of our revenue by product type: For the years ended 31 December 2012 2013 2014 Percentage Percentage Percentage of total of total of total Revenue revenue Revenue revenue Revenue revenue RMB’000 % RMB’000 % RMB’000 % Smartphones Feature phones Smartphone component packs Mobile device components

311,735 351,489

46.9 53.0

1,242,092 4,780

90.7 0.3

1,717,971 –

89.7 –

–

121,528

8.9

196,277

10.2

355

0.1

497

0.1

1,935

0.1

Total

663,579

100.0

1,368,897

100.0

1,916,183

100.0

Note:

Mobile device components are purchased by our customers for providing after-sale maintenance services to their end users.

The following table sets forth, for the periods indicated, the breakdown of our sales volume and average selling price by product type:

2012 Sales Volume ’000 units

For the years ended 31 December 2013 2014 Average Average selling Sales selling Sales price Volume price Volume RMB ’000 units RMB ’000 units

Average selling price RMB

Smartphones Feature phones Smartphone component packs Mobile device components

634 2,576

492 136

2,185 46

568 104

3,362 –

511 –

–

322

377

408

481

178

249

126

Total

3,212

207

2,555

536

3,896

492

– 217 –

FINANCIAL INFORMATION Below is the breakdown of our sales by mobile communication standards during the Track Record Period:

2012 Percentage Average of total Sales selling Revenue revenue Volume price ’000 RMB’000 % units RMB

For the year ended 31 December 2013 2014 Percentage Average Percentage Average of total Sales selling of total Sales selling Revenue revenue Volume price Revenue revenue Volume price ’000 ’000 RMB’000 % units RMB RMB’000 % units RMB

2G 3G 4G Others

351,489 311,735 – 355

53.0 46.9 – 0.1

2,576 634 – 2

136 4,780 492 1,363,620 – – 178 497

0.3 99.6 – 0.1

46 2,507 – 2

104 – 544 1,152,263 – 761,985 249 1,935

– 60.1 39.8 0.1

– 2,658 1,112 126

– 434 685 15

Total

663,579

100.0

3,212

207 1,368,897

100.0

2,555

536 1,916,183

100.0

3,896

492

Note: Sales for 3G mobile communication standard includes both smartphones sales and smartphone components packs sales.

The following table sets forth the breakdown of our revenue by geographical regions for the periods indicated:

Countries/ Territories

For the year ended 31 December 2012 2013 Percentage Percentage of total of total Revenue revenue Revenue revenue RMB’000 % RMB’000 %

2014

Revenue RMB’000

Percentage of total revenue %

South Asia Southeast Asia Hong Kong Other parts of Asia Europe South America North America Africa

441,716 117,585 16,659 59,083 1,340 7,188 4,628 15,380

66.6 17.7 2.5 8.9 0.2 1.1 0.7 2.3

356,055 357,607 827 230,013 234,640 124,787 64,968 –

26.0 26.1 0.1 16.8 17.1 9.1 4.8 –

183,008 93,727 500,331 174,961 259,877 203,920 424,465 75,894

9.5 4.9 26.1 9.1 13.6 10.6 22.2 4.0

Total

663,579

100.0

1,368,897

100.0

1,916,183

100.0

Notes: (1) (2) (3)

(4) (5) (6) (7) (8) (9)

– 218 –

FINANCIAL INFORMATION In 2011, our revenue was mainly derived from the sales of feature phones to South Asia. We launched smartphones in late 2011 and started to change our focus from feature phones to smartphones which were expected to attract higher profit margin than feature phones. We strived to increase our sales of smartphone in South Asia (i.e. India) and Southeast Asia in 2012 and subsequently diversified to Europe and South America in 2013. For the year ended 31 December 2014, we have further increased our sales to North America, South America and Africa as a result of increase in demand of 3G smartphones as well as the launch of our 4G smartphones and we strategically diversified our market into these regions to expand our customer base. The aggregate sales amount attributable to Asia (including South Asia, Southeast Asia, Hong Kong and other parts of Asia) remained stable for the years ended 31 December 2013 and 2014 which amounted to approximately RMB944.5 million and RMB952.0 million respectively. However, there were significant changes in sales by geographical segments within Asia. Sales to Hong Kong increased significantly from approximately RMB0.8 million for the year ended 31 December 2013 to approximately RMB500.3 million for the year ended 31 December 2014, whereas sales to South Asia and Southeast Asia have decreased significantly by approximately 48.6% and 73.8% for the year ended 31 December 2014 as compared to the same period in 2013. This was primarily due to our increase in sales to mobile handset trading companies in Hong Kong which in turn sell such products to various countries, primarily Southeast Asia (including, among others, Thailand and Vietnam). Our Group has adopted temporary measures of diverting our sales to customers in Hong Kong from Southeast Asia due to certain specific considerations in 2014. Such decision was in response to the anti-China protests and riots in Vietnam in May 2014 and to various political events in Thailand during 2014. We reduced direct sales to these countries to minimize our risk of potential delay or default in payments. Instead, we increased sales to mobile handset trading companies in Hong Kong which, based on our previous industry experience, are reliable and with good reputation in having extensive sales network in Southeast Asian countries. Such decision was intended to maintain our market share and positioning in Southeast Asia while minimizing our credit risk exposure. The decrease in sales made to South Asia was primarily due to feature phones being more common than smartphones in countries like India and Bangladesh, while we have changed our product offerings to 3G and 4G smartphones but the sales of our 4G smartphones in South Asia has yet to reach a significant volume. We, however, expect our revenue contribution from South Asia will increase in 2015 following the further establishment of 4G mobile network infrastructure in more cities in India by the second half of 2014. Following our successful expansion of customer base and commencement of business relationship in 2014 with a new customer in India in 2014 being a leading local telecommunication operator, we expect our sales volume in India will increase in 2015 and South Asia will remain to be one of our key markets. Other than the above, the increase in revenue generated from Hong Kong was also mainly attributable to a long-term customer (an Independent Third Party), being a well-established mobile handset supplier (since 2014 together with an unlimited company under common control of the shareholders of this Hong Kong customer), who supplies its own branded mobile handsets and trades mobile handsets of various third party brands to primarily Southeast Asian countries, east Europe and Dubai area, in which this Hong Kong customer has a well penetrated distribution network. The relevant Hong Kong customer is also an authorised dealer of a global branded mobile handset supplier in Hong Kong. We produce and supply mobile handsets to this Hong Kong customer on an ODM basis for its own brand from time to time. In 2014, our Group launched certain new products including 4G and 3G smartphones with certain newly introduced mobile chips which were well received by our customers and for the year ended 31 December 2014, our Group has recorded total sales of RMB907.7 million to approximately 20 customers for the sales of smartphones produced with the said two mobile chips. As a result of the expected popularity of these new products, some of our customers made bulk orders and planned to launch these products in 2014 as their flagship models at high prices. However, as some

– 219 –

FINANCIAL INFORMATION of our customers’ end markets, including India, Philippines, France, South America and Bangladesh, had slower adaptation to these new products (at the pricing level) as our customers expected. For better inventory management and maintaining good faith relationship with our customers, after negotiation and with prior consents from our relevant customers, we have sold the slower inventory products to the relevant Hong Kong customer at normal commercial terms. Such sales to the Hong Kong customer amounted to approximately RMB218.2 million (representing approximately 11.4% of the total revenue for 2014) and all the sales proceeds were collected as at 31 December 2014. Apart from such sales of third party brand mobile handsets, we have also produced and supplied products to the Hong Kong customer on an ODM basis for its own brand products amounted to approximately RMB148.2 million (representing approximately 7.7% of the total revenue for 2014). Cost of sales Our cost of sales comprises mainly raw materials, subcontracting costs, write-down of inventories, warranty and others. Raw materials are our main cost of sales, accounting for approximately 92.1%, 93.6% and 90.9% of our total cost of sales for each of the three years ended 31 December 2014, respectively, which mainly include purchase costs for display modules, OGS touch panels, mobile chipsets and camera modules. Subcontracting costs mainly represent fees paid to our EMS providers who are directly involved in the processing and assembling of our products. Write-down of inventories were recognized for inventories of which net realisable value fall below the cost. Warranty represents the net effect of provision for repair services for the current period and the reversal of provision made in the previous period as those underlying products pass the one-year warranty period. Others include mould cost and royalties. The following table sets forth, for the periods indicated, a breakdown of our cost of sales by nature: For the year ended 31 December 2012 2013 2014 Percentage Percentage Percentage of Cost of of Cost of of Cost of Amount Sale Amount Sale Amount Sale RMB’000 % RMB’000 % RMB’000 % Raw materials Subcontracting costs Write down of inventories Warranty Others

537,960

92.1

1,142,684

93.6

1,505,073

90.9

42,247

7.2

50,292

4.1

92,625

5.6

2,675 (4,796) 5,994

0.5 (0.8) 1.0

2,960 3,874 20,866

0.3 0.3 1.7

2,472 10,854 44,925

0.1 0.7 2.7

Total

584,080

1,220,676

100.0

1,655,949

100.0

– 220 –

FINANCIAL INFORMATION The following table sets forth, for the periods indicated, a breakdown of our cost of sales by product types: For the year ended 31 December 2012 2013 2014 Percentage Percentage Percentage of Cost of of Cost of of Cost of Amount Sale Amount Sale Amount Sale RMB’000 % RMB’000 % RMB’000 % Smartphones Feature phones Smartphone component packs Mobile device components

273,665 310,168

46.9 53.1

1,113,526 4,403

91.2 0.4

1,481,605 –

89.5 –

–

102,369

8.4

172,549

10.4

247

0.0

378

0.0

1,795

0.1

Total

584,080

100.0

1,220,676

100.0

1,655,949

100.0

Gross profit and gross profit margin For each of three years ended 31 December 2014, our gross profit amounted approximately RMB79.5 million, RMB148.2 million and RMB260.2 million, respectively, and our overall gross profit margin was approximately 12.0%, 10.8% and 13.6%, respectively. Our gross profit margin depends on a combination of factors, including the sales volume of our products, the prices at which we charge for our products, the cost of raw materials as well as subcontracting fees. Our smartphones recorded generally higher gross profit margin than our feature phones during the Track Record Period. The following tables set out our Group’s gross profit and gross profit margin for by product types during the Track Record Period:

2012 Gross profit RMB’000

For the year ended 31 December 2013 2014 Gross Gross profit Gross profit Gross margin profit margin profit % RMB’000 % RMB’000

Gross profit margin %

Smartphones Feature phones Smartphone components packs Mobile device components

38,070 41,321

12.2 11.8

128,566 377

10.4 7.9

236,366 –

13.8 –

–

19,159

15.8

23,728

12.1

108

30.4

119

23.9

140

7.2

Total

79,499

12.0

148,221

10.8

260,234

13.6

Other gains and losses Other gains and losses represent the net foreign exchange losses. We recorded losses of approximately RMB1.0 million, RMB3.1 million and RMB2.2 million for each of the three years ended 31 December 2014, respectively.

– 221 –

FINANCIAL INFORMATION Research and development costs Research and development costs primarily comprise staff cost, product testing cost, service fee, rental expenses and others. Staff costs related to employee benefits to our R&D staff. Product testing costs mainly comprise expenses for performing the relevant functionality and feasibility tests of our new designs. Service fee were paid to professional information technology service provider to support the R&D team when extra manning resource for R&D is needed. Rental expenses were incurred for office space occupied and machines used by our R&D team. Others related to miscellaneous expenses incurred by R&D department. The following table sets forth a breakdown of our research and development costs for the periods indicated:

2012 RMB’000

For the year ended 31 December 2013 2014 % RMB’000 % RMB’000

Staff costs Product test costs Service fees Rental expenses Others

10,715 263 1,211 639 294

81.7 2.0 9.2 4.9 2.2

13,153 1,471 743 587 443

80.2 9.0 4.5 3.6 2.7

14,874 3,422 2,263 659 829

67.5 15.5 10.3 3.0 3.7

Total

13,122

100.0

16,397

100.0

22,047

100.0

Research and development costs amounted to approximately RMB13.1 million, RMB16.4 million and RMB22.0 million for the three years ended 31 December 2014, respectively, which accounted for approximately 2.0%, 1.2% and 1.1% of total revenue during the corresponding periods. Selling and distribution expenses Below is the breakdown of our selling and distribution expenses for the periods indicated:

2012 RMB’000 Staff costs Freight charges Office expenses Marketing expenses Testing expenses Agency fee Others Total

For the year ended 31 December 2013 2014 % RMB’000 % RMB’000

5,430 5,373 2,015

38.3 37.9 14.2

5,840 7,470 1,782

32.7 41.8 10.0

6,326 7,945 1,951

27.7 34.8 8.5

78 924 – 376

0.5 6.5 – 2.6

942 483 1,041 300

5.3 2.7 5.8 1.7

5,065 60 1,177 323

22.2 0.3 5.1 1.4

14,196

100.0

17,858

100.0

22,847

100.0

Our selling expenses consist primarily of staff costs, freight charges, office expenses, marketing expenses, testing expenses, agency fess and others. Staff costs relate to salary payments to sales staff. Freight charges relate to domestic freight fees paid to logistic company we engaged to deliver our products for export. Office expenses relate to office consumables for selling department. Marketing expenses represent expenses

– 222 –

FINANCIAL INFORMATION incurred to promote our products. Testing expenses mainly represent fees collected by the Chinese Government for conducting inspection on export goods. For the five months starting from 1 August 2013, there was a temporary exemption of the fees levied for the inspection of export goods. Such exemption has been extended to 31 December 2014 by Financial Planning Division of the General Administration of Quality Supervision, Inspection, and Quarantine. Agency fees represent fees paid to export agencies in respect of our smartphone component sales. Others relate to depreciation and lease expenses. Our selling expenses amounted to approximately RMB14.2 million, RMB17.9 million and RMB22.8 million for each of the three years ended 31 December 2014, respectively. As a percentage of total revenue, our selling expenses accounted for approximately 2.1%, 1.3% and 1.2% during the respective periods. Administrative expenses Administrative expenses primarily comprise staff costs, stamp duty, handling fees, depreciation, listing fees and others. Staff costs represent the employee benefits paid to administrative staffs. Stamp duty was collected for contracts we signed with our customers. Handling fees were incurred for processing letter of credit and telegraphic transfer we received from our customers. Others relate to miscellaneous expenses incurred by administrative departments. The following table sets forth a breakdown of our administrative expenses for the periods indicated:

2012 RMB’000

For the year ended 31 December 2013 2014 % RMB’000 % RMB’000

Staff costs Stamp duty Depreciation Handling fees Others

2,518 240 872 2,978 2,466

27.8 2.6 9.6 32.8 27.2

2,376 516 727 7,544 2,135

17.9 3.9 5.5 56.7 16.0

3,493 583 396 1,036 1,393

50.6 8.5 5.7 15.0 20.2

Total

9,074

100.0

13,298

100.0

6,901

100.0

Administrative expenses amounted to approximately RMB9.1 million, RMB13.3 million and RMB6.9 million for each of the three years ended 31 December 2014, respectively, which accounted for approximately 1.4%, 1.0% and 0.4% of total revenue during the corresponding periods respectively. Listing expenses Listing expenses represent the legal, professional and other fees with respect to the Listing. We recorded Listing expenses of approximately nil, nil and RMB12.5 million for each of the three years ended 31 December 2014, respectively. Income tax For our subsidiaries in PRC, statutory enterprise income tax were provided at rates of 15% during the Pre-split Period and 25% after the Split. Our effective income tax rate, calculated as income tax expenses for the period divided by profit before income tax for corresponding period was approximately 15.1%, 15.0% and 19.3% for the three years ended 31 December 2014, respectively.

– 223 –

FINANCIAL INFORMATION REVIEW OF HISTORICAL RESULTS OF OPERATIONS Year ended 31 December 2014 compared with year ended 31 December 2013 Revenue Our revenue increased by approximately RMB547.3 million or 40.0% to approximately RMB1,916.2 million for the year ended 31 December 2014 from approximately RMB1,368.9 million for the year ended 31 December 2013, which was primarily due to the launch of our 4G smartphones and the increase in smartphone component pack sales. Our revenue generated from sale of smartphones increased from approximately RMB1,242.1 million for the year ended 31 December 2013 to approximately RMB1,718.0 million for the year ended 31 December 2014, representing an increase of 38.3%. Such increase was mainly attributable to increased sales generated by our 4G products following the launch of our 4G products at the end of 2013 which attracted revenue of approximately RMB762.0 million and sales volume of 1,112,409 units, mainly sold to North America, Hong Kong and other parts of Asia. The revenue from our feature phone business decreased to nil for the year ended 31 December 2014 from approximately RMB4.8 million for the year ended 31 December 2013 as we have ceased to offer feature phone in mid 2013. The revenue from smartphone component packs sales increased by approximately RMB74.8 million from RMB121.5 million for the year ended 31 December 2013 to RMB196.3 million for the year ended 31 December 2014. Such increase was mainly because we only started to sell smartphone component packs from February 2013 which were delivered to our customers in April 2013 and we were only able to attract more purchase orders later in 2014. Cost of sales Cost of sales increased by approximately RMB435.2 million or 35.7% to approximately RMB1,655.9 million for the year ended 31 December 2014 from approximately RMB1,220.7 million for the year ended 31 December 2013. Such increase was mainly due to the increase in purchase costs of raw materials of approximately RMB362.4 million from RMB1,142.7 million for the year ended 31 December 2013 to RMB1,505.1 million for the year ended 31 December 2014 as a result of the increased sales volume. The cost of sales from smartphone business increased by approximately RMB368.1 million from approximately RMB1,113.5 million for the year ended 31 December 2013 to RMB1,481.6 million for the year ended 31 December 2014 as a result of (i) the increased sales volume of smartphones, (ii) the generally higher cost of raw materials of 4G smartphones compared to that of 3G smartphones in 2014 and approximately 33.1% of our total smartphone sales in terms of sales volume were taken by 4G smartphones and (iii) the increase in raw material cost for a portion of 3G chips as a result of the planned chipset newly launched by one supplier were underperformed and replaced by a more expensive one from another supplier to ensure our product quality. Such product cost increased by chipset replacement was an one-off event as we subsequently opted for another type of 3G chips towards the end of 2014 and early 2015. The cost of sales of our feature phone business decreased to nil for the year ended 31 December 2014 from approximately RMB4.4 million for the year ended 31 December 2013 as we have ceased to offer feature phone in mid 2013. The cost of sales from smartphone component packs sales increased by approximately RMB70.1 million from RMB102.4 million for the year ended 31 December 2013 to RMB172.5 million for the year ended 31 December in 2014, which is in line with the increase in sales revenue for the same period.

– 224 –

FINANCIAL INFORMATION Gross profit and gross profit margin As a result of the foregoing, our gross profit rose by approximately RMB112.0 million or 75.6% from approximately RMB148.2 million for the year ended 31 December 2013 to approximately RMB260.2 million for the year ended 31 December 2014. Our gross profit margin increased from 10.8% for the year ended 31 December 2013 to 13.6% for the year ended 31 December 2014. The increase in gross profit margin was mainly due to the increased smartphone gross profit margin contributed by the 4G smartphones. The gross profit for smartphones increased from approximately RMB128.6 million for the year ended 31 December 2013 to approximately RMB236.4 million for the year ended 31 December 2014, where the gross profit margin increased from approximately 10.4% to 13.8% in the same period. The increase in gross profit was primarily due to the increased sales revenue and volume of smartphones attributable to the newly introduced 4G smartphones. The increase in gross profit margin was primarily attributed to the increased 4G smartphone volume as well as its high gross margin, partially offset by decreasing gross margin of 3G smartphones as a result of general trend of decrease in ASP as well as the increase in raw material cost for a portion of 3G Chips as a result of the paused chip set newly launched by one supplier were underperformed and replaced by a more expensive one from another supplier to ensure our product quality. No gross profit and gross profit margin were recorded for feature phone business for the year ended 31 December 2014 as no feature phones were sold in 2014. Gross profit and gross profit margin for feature phones for the year ended 31 December 2013 was RMB0.4 million and 7.9%, respectively. The gross profit for smartphone components packs increased by approximately RMB4.5 million from RMB19.2 million for the year ended 31 December 2013 to RMB23.7 million for the year ended 31 December 2014, which was mainly due to the increase in sales volume. The decrease in gross profit margin for smartphone components packs from 15.8% for the year ended 31 December 2013 to 12.1% for the year ended 31 December 2014 was mainly caused by a discounted price offered to our customers at the year end of 2014 based on our long-term relationship and sales volume. Other gains and losses Other losses decreased from approximately RMB3.1 million for the year ended 31 December 2013 to RMB2.2 million for the year ended 31 December 2014. The change was primarily because US dollar generally depreciated against RMB in 2013 while value of US dollar fluctuates against RMB in 2014 Research and development costs Research and development costs increased by approximately RMB5.6 million or 34.1% to approximately RMB22.0 million for the year ended 31 December 2014 from approximately RMB16.4 million for the year ended 31 December 2013. The increase was primarily due to (i) an increase in product test cost of approximately RMB2.0 million which mainly attributable to the introduction of 4G that involving more tests and higher test costs, (ii) the increase in staff cost of approximately RMB1.7 million as we recruited more staff to support our 4G product development and design and (iii) the increase in service fees of approximately RMB1.5 million due to assigning application development projects to our contracted information technology service providers. Selling and distribution expenses Selling and distribution expenses increased by approximately RMB4.9 million or 27.4% to RMB22.8 million for the year ended 31 December 2014 from RMB17.9 million for the year ended 31 December 2013. The increase was primarily due to an increase in marketing expenses of approximately RMB4.1 million as a result of the gift accessories for promoting our 4G smartphones.

– 225 –

FINANCIAL INFORMATION Administrative expenses Administrative expenses decreased by approximately RMB6.4 million or 48.1% to approximately RMB6.9 million for the year ended 31 December 2014 from approximately RMB13.3 million for the year ended 31 December 2013. The decrease was primarily due to the decrease of handling fees for telegraphic transfer and letter of credit of approximately RMB6.5 million because of the reduced telegraphic transfer and letter of credit received from customers as a result of the credit terms granted to certain customers which is in line with the increase in trade receivables. Such increase is partially offset by the increase in the staff costs of proximately RMB1.1 million due to (i) the appointment of independent non-executive directors and (ii) our increased staff headcount to support our business split and expansion. Listing expenses Listing expenses increased from nil for the year ended 31 December 2013 to approximately RMB12.5 million for the year ended 31 December 2014, which was mainly due to the RMB12.5 million legal, professional and other fees incurred for the Listing were recorded in 2014. Income tax Income tax increased by approximately RMB22.7 million or 154.4% to RMB37.4 million for the year ended 31 December 2014 from RMB14.7 million for the year ended 31 December 2013. The increase was mainly due to (i) our increased taxable income because of the enlarged revenue and (ii) the standard statutory enterprise income tax rate of 25% was applied for profit after the Split since the lower applicable tax rate of 15% had not been granted to our PRC subsidiary yet. Our effective income tax rate was approximately 15.0% and 19.3% for the year ended 31 December 2013 and 2014, respectively. Profit for the year As a result of the foregoing, profit for the year increased by approximately RMB73.3 million or 88.4% to RMB156.2 million for the year ended 31 December 2014 from approximately RMB82.9 million for the year ended 31 December 2013. Our net profit margin increased from approximately 6.1% for the year ended 31 December 2013 to 8.2% for the year ended 31 December 2014 which was mainly due to higher gross profit margin, which was partially offset by the higher income tax expenses as a percentage of revenue. Year ended 31 December 2013 compared to year ended 31 December 2012 Revenue Our revenue increased by approximately RMB705.3 million or 106.3% to approximately RMB1,368.9 million for the year ended 31 December 2013 from approximately RMB663.6 million for the year ended 31 December 2012, which was primarily due to the increase in sales of smartphone after our decision to transform our product mix to focus on smartphones in 2012 and our sales volume of smartphone continued to grow in the year ended 31 December 2013, which together with the smartphone components accounted for 99.6% of our revenue as compared to 46.9% for the year ended 31 December 2012. Our revenue generated from sale of smartphones increased from approximately RMB311.7 million in 2012 to 1,242.1 million in 2013, representing an substantial increase of 298.5%. Such increase was mainly because (i) the increase the popularity of smartphone amongst our customers as the emerging markets start to adopt the 3G mobile technology which resulted in a significant increase in our sales volume from 634,226 for the year ended 31 December 2012 to 2,184,835 for the year ended 31 December 2013; and (ii) the increase in average selling price from RMB492 per unit for the year ended 31 December 2012 to RMB568 per unit for the

– 226 –

FINANCIAL INFORMATION year ended 31 December 2013 of our smartphones as a result of improve of product design and functionality. We have also successfully expanded our customer base and sales volume to certain new markets such as Europe and South America by offering smartphones. The revenue from our feature phone business decreased by 98.6% from RMB351.5 million for the year ended 31 December 2012 to RMB4.8 million for the year ended 31 December 2013. The decrease in revenue was mainly due to the strategic change of our product mix. We started to reduce the production of feature phones after 2012 to embrace the industrial renovation by introducing smartphones to our customers. The sales volume of feature phones dropped from 2,575,593 for the year ended 31 December 2012 to 46,050 for the year ended 31 December 2013. The average selling price for our feature phones also decreased from RMB136 to RMB104 for the same period as we were cleaning out our remaining inventories or fulfilling our remaining orders in the year ended 31 December 2013. The revenue from smartphone component packs sales was approximately RMB121.5 million for the year ended 31 December 2013, and no sales were recorded for the year ended 31 December 2012. We established relationship with our customer in regions where importation of finished electronic devices attracts much higher taxes than those of components and started offering smartphone components from February 2013 to cater their needs. Cost of sales Cost of sales increased by approximately RMB636.6 million or 109.0% to approximately RMB1,220.7 million for the year ended 31 December 2013 from approximately RMB584.1 million for the year ended 31 December 2012. Such increase was mainly due to the increase in purchase costs of raw materials from RMB538.0 million for the year ended 31 December 2012 to RMB1,142.7 million for the year ended 31 December 2013. The substantial increase in purchase costs of raw materials was because (i) the significant increase in our revenue as compared to the year ended 31 December 2012 which resulted in increase of raw material cost and subcontracting fees; (ii) the cost of raw materials we used such as the mobile chips, LCD modules and camera modules for smartphones are generally higher than those for feature phones, and proportion of our sales derived from smartphones have substantially increased, which in turn resulted in substantial increase in cost of sales. The cost of sales from smartphone business increased significantly by RMB839.8 million from RMB273.7 million for the year ended 31 December 2012 to RMB1,113.5 million for the year ended 31 December 2013 as a result of the increasing sales volume of smartphones. The cost of sales from feature phone business decreased by RMB305.8 million from RMB310.2 million for the year ended 31 December 2012 to RMB4.4 million for the year ended 31 December 2013 as a result of the decrease in raw material and subcontracting fees incurred for feature phone, which is in line with the decrease of our sales of feature phones. The cost of sales from smartphone components packs sales increased from nil for the year ended 31 December 2012 to approximately RMB102.4 million for the year ended 31 December 2013, which was in line with the sales of smartphone components for the same period. Gross profit and gross profit margin As a result of the foregoing, our gross profit rose by approximately RMB68.7 million or 86.4% from approximately RMB79.5 million for the year ended 31 December 2012 to approximately RMB148.2 million for the year ended 31 December 2013. Our gross profit margin decreased from 12.0% for the year ended 31 December 2012 to 10.8% for the year ended 31 December 2013, which was mainly due to the decline of gross profit margin in both feature phones and smartphone caused by the decrease in average selling price for due to market competition.

– 227 –

FINANCIAL INFORMATION The gross profit for smartphones increased from approximately RMB38.1 million for the year ended 31 December 2012 to approximately RMB128.6 million for the year ended 31 December 2013, where the gross profit margin decreased from 12.2% to 10.4% in the same period. The increase in gross profit was primarily due to the increased sales volume of smartphones. The decrease in gross profit margin was primarily due to (i) the smartphones we supplied for the year ended 31 December 2013 were of better functionality and more advanced technology as compared to those we supplied during the year ended 31 December 2012 and hence involved higher raw material cost; (ii) there was an expansion in our customer base for smartphones in 2013 and the customers became more familiar with the smartphone market, hence we were less able to charge a higher margin as the smartphone market became more competitive in 2013. The gross profit for feature phones decreased from approximately RMB41.3 million for the year ended 31 December 2012 to approximately RMB0.4 million for the year ended 31 December 2013, and the gross profit margin decreased from 11.8% to 7.9% in the same period. The decrease in gross profit was mainly because we generally ceased offering feature phones in 2013. The decrease in gross profit margin was resulted from cleaning out our residual products. The gross profit and gross profit margin for smartphone components packs for the year ended 31 December 2013 were RMB19.2 million and 15.8%, respectively. No gross profit and gross profit margin for smartphone components were calculated for the year ended 31 December 2012 as no sales were recorded in that period. Other gains and losses Other losses increased by approximately RMB2.1 million to approximately RMB3.1 million for the year ended 31 December 2013 from approximately RMB1.0 million for the year ended 31 December 2012. The increase was mainly due to the depreciation of US dollar value against RMB. Research and development costs Research and development costs increased by approximately RMB3.3 million or 25.2% to approximately RMB16.4 million for the year ended 31 December 2013 from approximately RMB13.1 million for the year ended 31 December 2012. The increase was primarily due to (i) the increase in staff costs of RMB2.4 million as a result of recruiting more R&D staff for 3G products development and the increased amount we shared from Benywave Technology attributable to our enlarged sales revenue to the total sales of Benywave Technology and (ii) the increase in product test costs of RMB1.2 million which is in line with the increase in revenue, which was partially offset by the decrease in service fee of approximately RMB0.5 million as a result of our addition in manning resources. Selling and distribution expenses Selling and distribution expenses increased by approximately RMB3.7 million or 26.1% to approximately RMB17.9 million for the year ended 31 December 2013 from approximately RMB14.2 million for the year ended 31 December 2012. The increase was primarily due to (i) the increase in freight charges amounted to approximately RMB2.1 million, which is in line with the increased sales volume since more products were assigned to our carriers to distribute to our customers and (ii) an agency fee of approximately RMB 1.0 million paid to exporter agencies in respective of smartphone component sales started in 2013.

– 228 –

FINANCIAL INFORMATION Administrative expenses Administrative expenses increased by approximately RMB4.2 million or 46.2% to approximately RMB13.3 million for the year ended 31 December 2013 from approximately RMB9.1 million for the year ended 31 December 2012. The increased was primarily due to the increase in handling fee for letter of credit and telegraphic transfer of approximately RMB4.6 million, which was mainly attributable to the higher bank charges for telegraphic transfer and the increased popularity of telegraphic transfer among our customers. Income tax Income tax increased by approximately RMB8.4 million or 133.3% to RMB14.7 million for the year ended 31 December 2013 from RMB6.3 million for the year ended 31 December 2012. The increase was mainly attributable to the increase in taxable income. Our effective income tax rate was approximately 15.1% and 15.0% for the years ended 31 December 2012 and 2013, respectively. Profit for the year As a result of the foregoing, profit for the year increased by approximately RMB47.1 million or 131.6% to RMB82.9 million for the year ended 31 December 2013 from approximately RMB35.8 million for the year ended 31 December 2012. Our net profit margin increased from approximately 5.4% for the year ended 31 December 2012 to 6.1% for the year ended 31 December 2013 which was mainly due to the increased sales revenue and sales volume from increase in revenue from our existing markets in southeast Asia and our expansion to new markets such as Europe and South America through marketing our smartphones and smartphone components while the operating expenses increased at a slower pace than that of revenue. LIQUIDITY AND CAPITAL RESOURCES Prior to the Split, Overseas Business was operated under Benywave Technology and no separate bank accounts have been maintained by Overseas Business. The treasury and cash disbursem*nt functions of Overseas Business were centrally administrated by Benywave Technology. The bank and cash generated by and the retained profit of the Overseas Business were kept in the bank accounts of Benywave Technology. Accordingly, the funds provided for or withdrawn from Benywave Technology were presented as movements in the equity while there are no cash and cash equivalents balance for the Overseas Business. Accordingly, there were no cash received/paid directly by our Group in connection with its operating, investing and financing activities. After the completion of the Split, we opened our own bank accounts and cash were received/paid directly by our Group. As of 31 December 2014, our material sources of liquidity are bank balances and cash of RMB10.4 million.

– 229 –

FINANCIAL INFORMATION The following table presents selected cash flow data from our consolidated cash flow statements for the years indicated: For the year ended 31 December 2012 2013 2014 RMB’000 RMB’000 RMB’000 Operating cash flows before movements in working capital Net cash generated from (used in) operating activities Net cash generated from (used in) investing activities Cash generated from financing activity

33,692

89,451

185,715

114,506

175,193

(170,100)

1,893 –

Net cash generated by (used in) the Overseas Business/net increase (decrease) in cash and cash equivalents Net (return to) contribution from Benywave Technology Effect of pledged bank deposits Cash and cash equivalents at the end of the year

(155) –

(7,866) 4,116

116,399

175,038

(173,850)

(116,399) –

(175,038) –

184,825 (535)

–

10,440

Operating activities During our Track Record Period, our cash inflow from operating activities was principally from the receipt of sales proceeds for our product sold. Our cash outflow used in operating activities was principally for salary payments and other expenses. Cash generated from operations reflects our profit, adjusted for (i) the cash flow effects of certain income statement items, including depreciation of equipment, foreign exchange gain and loss, write down of inventories and provision for warranty, and (ii) the effects of changes in our working capital, including changes in inventories, trade and other receivables, trade payables for the purchase of inventories as a result of account treatment, accrual and other payables and deposits received from customers. For the year ended 31 December 2014, net cash used in operating activities was approximately RMB170.1 million. Our operating cash flow before working capital adjustments was RMB185.7 million. Negative working capital adjustments reflected (i) an increase in trade and other receivables of approximately RMB354.9 million because (a) we granted credit terms to an increasing number of more customers to expand our customer base and to increase our competitiveness and (b) we granted approval to some of our customers an extended credit period on a case-by-case basis at the request of our customers to cater for their needs at the specific time after taking into account of various factors including among others, the length of relationship and historical credit record, (ii) an increase in inventories of approximately RMB56.6 million and (iii) a decrease in deposits received from customers of approximately RMB39.1 million. Such negative adjustments were partially offset by an increase in trade payables of approximately RMB79.6 million.

– 230 –

FINANCIAL INFORMATION For the year ended 31 December 2013, net cash generated from operating activities was approximately RMB175.2 million. Our operating cash flow before working capital adjustments was RMB89.5 million. Working capital adjustments reflected (i) an increase in trade payables of approximately RMB65.8 million and (ii) a decrease in trade and other receivables of approximately RMB55.5 million, which was partially offset by the increase in inventories of approximately RMB59.0 million. For the year ended 31 December 2012, net cash generated from operating activities was approximately RMB114.5 million. Our operation cash flow before working capital adjustments was approximately RMB33.7 million. Working capital adjustments reflected (i) a decrease in trade and other receivables of approximately RMB67.8 million primarily due to the timing difference to collect payment from customers and some customers using telegraphic transfer instead of letter of credit to settle the payment and (ii) a decrease in inventories of approximately RMB32.5 million, which was partially offset by the decrease in trade payables of approximately RMB44.3 million. Investing activities During the Track Record Period, our cash inflow from investing activities was principally proceeds from disposal of equipment and repayment from a sales director. Our cash outflow used in investing activities was attributable to the purchases of equipment and increase in amount due from a fellow subsidiary. Net cash generated from investing activities for the year ended 31 December 2012 was RMB1.9 million, which was mainly attributable to the repayment of a loan from a sales director. Net cash used in investing activities for the years ended 31 December 2013 was approximately RMB155,000, which was mainly for the purchase of office equipments. Net cash used in investing activities for the year ended 31 December 2014 was approximately RMB7.9 million which was mainly due to the increase in amount due from a fellow subsidiary. Such amounts arose from the centrally administrated treasury and cash disbursem*nt functions and will be settled upon the listing. Financing activities During the Track Record Period, our cash inflow from financing activity was the increase in amount due to a related party. Cash generated from financing activity were approximately nil, nil and RMB4.1 million for the year ended 31 December 2012, 2013 and 2014, respectively.

– 231 –

FINANCIAL INFORMATION NET CURRENT ASSETS (LIABILITIES) The table below sets out our consolidated current assets and current liabilities extracted from the consolidated statements of financial position during the Track Record Period:

As at 31 December 2012 2013 RMB’000 RMB’000

2014 RMB’000

As at 30 April 2015 RMB’000

Current Assets Inventories Trade and other receivables Amount due from a fellow subsidiary Pledge bank deposits Structured deposits Cash and bank balances

13,423 100,309 – – – –

69,413 45,158 – – – –

123,543 397,843 7,860 535 – 10,440

125,668 357,522 – 1,103 250,000 21,004

Total current assets

113,732

114,571

540,221

755,297

Current Liabilities Trade payables Accrual and other payables Deposits received from customers Amount due to a related party Tax liabilities Provision

18,837 2,860 35,161 – – 8,604

84,676 7,406 53,937 – – 12,478

164,289 22,626 14,811 4,116 13,791 23,332

352,320 36,093 14,780 – 15,651 22,859

Total current liabilities

65,462

158,497

242,965

441,703

Net Current assets/(liabilities)

48,270

(43,926)

297,256

313,594

We recorded net current assets of approximately RMB48.3 million, RMB297.3 million and RMB313.6 million as at 31 December 2012 and 2014 and 30 April 2015, respectively. We had net current liabilities of approximately RMB43.9 million as at 31 December 2013. As of 31 December 2013, we recorded net current liabilities of RMB43.9 million and we have recorded negative equity of RMB43.6 million for the same period but these were not caused by loss making or cash outflow arisen from our operations. The net cash generated by Oversea Business being our principal subsidiary for the year ended 31 December 2013 was RMB175.0 million, as all the transactions of the Overseas Business were settled through the current account maintained with Benywave Technology, and all of such cash inflow were paid to Benywave Technology as the bank and cash generated by the Overseas Business were kept in the bank account of Benywave Technology. Given the retained earnings generated by the Overseas Business forms part of the earnings for Benywave Technology as a single legal entity during the Track Record Period, such retained earnings are regarded as part of the retained earnings of Benywave Technology and therefore treated as special reserve for Benywave Wireless (representing net return to or contribution from equity holders of the Company) but shall be transferred to Benywave Technology in the form of cash at the end of each reporting period. While the relevant amount of cash inflow exceeds the reserve of the Group as at 31 December 2013 and the movement of net return to equity holders of the Company is included in the special reserve as set out in the consolidated statement of changes in equity, this caused a reduction in equity of RMB175.0 million exceeding the reserve of the Group RMB131.4 million and resulted in the negative equity.

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FINANCIAL INFORMATION As the net current liability and negative equity is as a result of an accounting treatment for the purpose of the Split, our Directors confirm the Overseas Business and the Group has sufficient working capital prior to and after the completion of the Split, and all the current account balances (including amount due from a fellow subsidiary and amount due to a related party are settled prior to the Listing. We operate independently from Benywave Technology and we are able to fund our operations with our own cash generated from our operations as well as the assets assumed from Benywave Technology upon completion of the Split. Our Directors confirm and the Sole Sponsor concurs based on the cash generated from our operations and the estimated proceeds from the Listing, we will have sufficient working capital for at least 12 months following the date of this prospectus. As the negative equity was merely a result of an accounting treatment which the Directors considered appropriate for the Group, we do not foresee negative equity to occur in the future. However, there can be no assurance that we will not record a net current liability position in the future due to other reasons, including the risk factors disclosed under the section headed “Risk Factors” in this prospectus. If we have net current liabilities in the future, our working capital may be constrained and we may be forced to seek additional external financing, which may not be available at commercially reasonable terms or at all. Any such development could materially and adversely affect our business, results of operations and financial condition. We changed from a net current asset status of approximately RMB48.3 million as at 31 December 2012 to a net current liability status of approximately RMB43.9 million as at 31 December 2013. The changes was mainly due to: (i) an increase in inventories of approximately RMB56.0 million due to our business expansion, (ii) a decrease in trade and other receivables of approximately RMB55.1 million as the expedited settlement by telegraphic transfer were favoured by our customers and (iii) an increase in trade payables of approximately RMB65.8 million as a result of the increased amount of inventories purchased from Benywave Technology but not yet settled. We changed from a net current liability status of approximately RMB43.9 million as at 31 December 2013 to a net current asset status of approximately RMB297.3 million as at 31 December 2014. The changes was mainly due to: (i) an increase in trade and other receivables by approximately RMB352.7 million because (a) we granted credit terms to an increasing number of more customers to expand our customer base and to increase our competitiveness and (b) we granted approval to some of our customers an extended credit period on a case-by-case basis at the request of our customers to cater for their needs at the specific time after taking into account of various factors including among others, the length of relationship and historical credit record, (ii) an increase in inventories by approximately RMB54.1 million and (iii) an increase in trade payables by approximately RMB79.6 million as we purchased more raw materials following the increase of our operation scale. Our Group’s net current assets slightly increased by approximately 5.5% and RMB16.3 million from approximately RMB297.3 million as at 31 December 2014 to approximately RMB313.6 million as at 30 April 2015. Such increase was mainly due to (i) an increase in trade payables of approximately RMB188.0 million primarily because we tended to utilise our credit terms granted by our suppliers for better cash management after the Split and make payments to our suppliers around the expiry date of general credit terms granted by our suppliers of 60 days following the increase in size of the operations for overseas sales (whereas we used to early settle the trade payables to maintain good business relationship with our suppliers); (ii) a decrease in trade and other receivables of RMB40.3 million as a result of our efforts to collect outstanding trade receivables and (iii) an increase in structured deposits of RMB250.0 million as we set aside the increased cash on hand resulting from both the increase in trade payables and the decrease in trade receivables from the aforesaid two reasons and revenue earned during the period, to earn a relatively higher interest rate at periods where we have excess working capital.

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FINANCIAL INFORMATION Structured deposit While there was increase in bank and cash available due to utilisation of our credit terms granted by our suppliers and sales proceeds whereas the first and second quarters are generally the less busy period for our sales and production which requires less working capital on hand for funding our business, for cash management purpose to earn higher interests, we maintained a total principal of RMB250 million as of 30 April 2015 at a principal-protected RMB-denominated structured deposit account in a licensed commercial bank in the PRC with a maturity period of 181 days up to early August 2015. The minimum deposit amount is RMB10 million. The amount of interest on the structured deposit account is linked to the three-month London Interbank Offer Rate (LIBOR). At maturity, we are entitled to receive the principal plus interests. The expected annual interest rate for the structured deposits is indicated at 4.9% to 5.0%, however the actual interest to be received is uncertain until maturity. The structured deposits shall not be terminated by us or the bank unless according to the term of the relevant agreements or otherwise agreed between the parties. Under these agreed terms, the structured deposits may be early terminated by us forfeiting any interests entitled to earn during the period and at a fee of 2.5% of the principal amount. The structured deposits may be early terminated by the bank if the deposit amount fell below the minimum required sum or there is material fluctuation of the market or any circ*mstances that might result in the incapability of maintaining the structured deposit account, of which, we shall bear the risk that our deposits remaining at the current account will be accrued with general deposit interest rate. Given the structured deposits are principal-protected in nature with an upside potential of earning a more attractive return than current saving or fixed deposit rate under the low interest rate trend, our management consider that the structured deposit is in the interest of our Group. We do not enter into structured products unless it is principal guaranteed. The structured deposit was placed after due care and analysis and having considered that the investment principals of which are guaranteed and the sufficiency of our working capital, and upon approval by our chairman. As we plan to launch more products of new models at the end of the second quarter of 2015, our management expect we would need more working capital for our operations in the third and the fourth quarter to meet higher demand of our products, we currently do not intend to renew the structured deposits upon its maturity. For any future new principal guaranteed deposits to be made, our in-house legal is responsible for reviewing the relevant terms (with the assistance of external legal advisers if needed) and our chief finance officer prepares reports on maturity term, interests rate and features of proposed structured deposits and analysis on impact on working capital and cashflow, and submits to the risk management committee who would re-assess the risk involved and for approval. DESCRIPTION OF CERTAIN ITEMS OF CONSOLIDATED STATEMENTS OF FINANCIAL POSITION Inventories The following table sets forth the components of our inventories as of the dates indicated.

2012 RMB’000 Finished goods Raw materials

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As at 31 December 2013 RMB’000

2014 RMB’000

7,612 5,811

57,407 12,006

16,351 107,192

13,423

69,413

123,543

FINANCIAL INFORMATION Raw materials primarily consist of electrical and electronic components such as mobile chipsets, memory, display modules, OGS panels and others. Finished goods represent mobile phones ready to be sold and smartphone component packs consist of pre-specified mobile phone components ordered by our Brazil customer for their assembling and packaging after the importation of the products to their countries. We adopt stringent inventory control through effective inventory management. We also periodically review our inventory levels for slow moving inventory, obsolescence or declines in market value. Provision is made against when the net realisable value of inventories falls below the cost or any of the inventories is identified obsolete at period end. The amount of inventory provisions made by our Group were approximately RMB2.7 million, RMB3.0 million and RMB2.5 million for each of the three years ended 31 December 2014. We manage our inventory levels principally based on the purchase orders received from our customers. Our balance of inventories increased by approximately RMB56.0 million or 417.9% from approximately RMB13.4 million as at 31 December 2012 to approximately RMB69.4 million as at 31 December 2013, primarily as a result of increased amount of purchase order towards the year end of 2013 which resulted in more finished goods stored in the warehouse awaits to be shipped. Our balance of inventories increased by approximately RMB54.1 million or 78.0% to approximately RMB123.5 million as at 31 December 2014 mainly attributable to the one-off purchase of all the raw materials ordered by Benywave Technology on behalf of us after the Split. The following table sets forth the turnover days of our inventories for the periods indicated. For the year ended 31 December 2012 2013 2014 Average inventory turnover days (1)

19.4

12.4

21.3

Note: (1)

Average inventory turnover days for each of the three years ended 31 December 2014 is derived by dividing the arithmetic mean of the opening and closing balances of inventories for the relevant period by cost of sales and multiplying by 365 days.

Our average inventory turnover days decreased from 19.4 days in 2012 to 12.4 days in 2013, primarily due to growth of cost of sales was higher than that of inventories during the same period as we maintained relatively low level of inventory on hand. Our average inventory turnover days then increased to 21.3 days in 2014 primarily due to we maintained higher level of inventory on hand following our increase in operation scale, as well as made one off purchase from Benywave Technology for the raw materials it has purchased on behalf of the Overseas Business during the Pre-split Period. As at the Latest Practicable Date, approximately RMB123.1 million or 99.7% of our inventory balance as of 31 December 2014 were sold or utilized. Trade and other receivables Our customers generally settle their purchases by cash payments through telegraphic transfer or up to 90 days letter of credit. We grant credit period to customers where we consider appropriate approved by senior management. The credit term must be approved by both of our sales manager and finance manager before the credit terms were granted. Factors to be taken into account for granting of credit terms include, among others, the size, credit worthiness, business relationship as well as potential business opportunities with our customers. During the Track Record Period, we have granted credit terms from 60 to 90 days credit period to certain customers, in particular for those customers in markets where we would like to expand as a result of negotiation with our customers. Our Group seeks to maintain strict control over outstanding receivables, and overdue balances are reviewed regularly by senior management. We typically do not require any collateral as security.

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FINANCIAL INFORMATION Our trade receivables arise from i) the letters of credits we received from our customers which the date of collection from the banks has not yet reached; ii) the uncollected payment from the credit terms we grant to selective customers which the management consider are of good credit profile, approximately 50% of our 44 customers as at 31 December 2014 were granted credit terms, from 60 to 90 days (of which the majority were for 60 days). We have generally increased the granting of credit terms to customers in the year ended 31 December 2014 as we consider it strengthens our competitiveness with our customers. The following table sets forth the components of our trade and other receivables as of the dates indicated:

2012 RMB’000 Trade receivables Other receivables Value added tax receivables Others Prepayments to suppliers Listing fee Total trade and other receivables

As at 31 December 2013 RMB’000

2014 RMB’000

44,522

9,452

337,184

55,625 162 – –

35,696 10 – –

55,858 90 1,226 3,485

100,309

45,158

397,843

Our trade receivables decreased by approximately RMB35.0 million or 78.7% from RMB44.5 million as at 31 December 2012 to approximately RMB9.5 million as at 31 December 2013, which was mainly because customers gradually changed to using telegraphic transfer in stead of letter of credit to settle the payment. The amount increase to approximately RMB337.2 million as at 31 December 2014 primarily because of the increase in credit period of 60 to 90 days offered to some of our customers to establish a long term relationship with them as well as we approved to grant extended credit period to certain of our customers at their request at special circ*mstances considering our business relationship with them, their credit profile and historical payment record. The maximum credit period extended was up to 360 days involving the sales to a customer in Indonesia amounting to approximately RMB1.4 million in relations to certain batch of smartphones we sold to this customer in 2014. Such customer has been placing other sales orders after the delivery of such batch of smartphones and made payments for its other purchases timely. The outstanding payment was fully settled as at the Latest Practicable Date. As at 31 December 2014, our trade receivables mainly comprised of trade receivables from a customer in India, a customer in Africa, a customer in USA, a customer in Dubai and a customer in Hong Kong. Of which the trade receivables from the customers in Africa, USA, Dubai and Hong Kong were as a result of our increase in business volume with these customers and were within the credit period as at 31 December 2014. Our policy for impairment on trade receivables is based on an evaluation of collectability and aging analysis of the receivables that requires the use of judgment and estimates of our management. Provisions would apply to the receivables when there are events or changes in circ*mstances which indicate that the balances may not be collectable. Our management closely reviews the trade receivables balances and any overdue balances on an ongoing basis, and assessments are made by our management on the collectability of overdue balances. After fully considering the nature of trade receivables and their collectability on a case-by-case basis, we would make provisions for the impairment of certain long overdue trade receivables in order to ensure the quality of our assets. As at 31 December 2012, 2013 and 2014, respectively, no provisions were provided for individually impaired trade receivables.

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FINANCIAL INFORMATION The following table sets forth the aging analysis of our gross trade receivables as at the dates indicated: As at 31 December 2012 2013 RMB’000 RMB’000 0-60 days 61-90 days 91-180 days 181 days to 1 year

2014 RMB’000

41,195 3,327 – –

6,707 1,688 1,057 –

234,514 7 96,518 6,145

44,522

9,452

337,184

As of 31 December 2012, 2013 and 2014, trade receivables due from external customers of approximately RMB3.3 million, RMB2.7 million and RMB102.7 million, respectively, were past due but not impaired. These related to independent customers for whom there is no significant financial difficulty and based on our experience, our Directors were of the view that no impairment allowance was necessary in respect of these overdue balances as there had not been significant change in credit quality of our customers and the balances were considered fully recoverable. The trade receivables past due by not impaired as at 31 December 2014 were mainly attributable to the specific circ*mstance of our customers as below: Trade receivables amounting to approximately RMB71.3 million, representing approximately 21.2% of the total trade receivables as at 31 December 2014 was attributable to our major customer in India as they have been going through internal re-organization and deferred the payments for a particular lot of our products delivered for orders placed by one of their key management that has subsequently left their firm. This customer has then requested us to provide extension to their payment date in resolving their internal procedures. In order to maintain good relationship with this customer, we agreed to extend their payment date primarily taking into account of our long term relationship for over 6 years and their good standing historical credit record. As at 31 December 2014, trade receivables amounting to approximately RMB60.3 million were past due but not impaired, representing approximately 58.7% of the total trade receivables past due but not impaired due to the above said reason. As of the Latest Practicable Date, all of the trade receivables from the relevant customer in India had been repaid. Trade receivables amounting to approximately RMB19.0 million, representing approximately 5.6% of the total trade receivables as at 31 December 2014 was attributable to a customer in Philippines, to the best information of the Directors, this customer had internal changes to the sales personnel who placed an order for a batch of our products, which caused the delay in payment due to the customer’s internal process. In order to maintain good relationship with this customer, we agreed to extend their payment date primarily taking into account of our long term relationship for over five years and their good standing historical credit record. As at 31 December 2014, trade receivables amounting to approximately RMB18.8 million was past due but not impaired representing approximately 18.3% of the total trade receivables past due but not impaired due to the above said reason. The customer is expected to settle such outstanding payments within June 2015. Trade receivables amounting to approximately RMB18.5 million, representing approximately 5.5% of the total trade receivables as at 31 December 2014 was attributable to sales of component packs, all of which was past due but not impaired which represented 18.0% of the total trade receivables past due but not impaired. As at the Latest Practicable Date, all such trade receivables were received. As at the Latest Practicable Date, approximately RMB327.8 million or 97.23% of our trade receivables outstanding as at 31 December 2014 were settled.

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FINANCIAL INFORMATION The table below sets forth a summary of average turnover days of trade receivables as at the dates indicated: For the year ended 31 December 2012 2013 Average turnover days of trade receivables

(1)

51.2

7.2

2014 33.0

Note: (1)

Average turnover days of trade receivables for each of the three years ended 31 December 2014 is derived by dividing the arithmetic mean of the opening and closing balances of trade receivables for the relevant period by revenue and multiplying by 365 days.

Our turnover days of trade receivables decreased from 51.2 days in 2012 to 7.2 days in 2013 primarily because of the decreased in trade receivables as some of our customers used telegraph transfer instead of letter of credit. The turnover days of trade receivable then increased to 33.0 days in 2014 mainly attributable to extended credit period offered to certain customers considering its specific circ*mstances upon their request. Other receivables mainly comprise value added tax receivables prepayments to supplies, listing fee and others. Value added tax (“VAT”) receivables are VAT we paid that would be refunded by tax authority when we export our products as a preferential tax policy for exportation. Prepayments to suppliers mainly represent insurance premium for our trade receivables. Listing fee represent the amount of listing fees capitalised, which will be set off against the share premium account upon Listing. Other receivables decreased by approximately RMB20.1 million from RMB55.8 million as at 31 December 2012 to RMB35.7 million as at 31 December 2013, which was mainly due to the decrease in VAT receivables of approximately RMB19.9 million because of only two months (November and December) VAT receivables were under tax authority’s processing in 2013 as compared to the five months’ amounts in 2012. The amount increased by approximately RMB20.2 million from RMB35.7 million as at 31 December 2013 to RMB55.9 million as at 31 December 2014, which was mainly due to the increase in VAT receivables of approximately RMB20.2 million because of three months (October, November and December) VAT receivables were under tax authority’s processing in 2014 as compared to two months’ amounts in 2013. Trade payables The placing of purchase orders of raw materials from independent suppliers for PRC Business and Overseas Business was made by Benywave Technology as a single entity during the Pre-Split Period. Prior to the completion of the Split, the purchases from Overseas Business were deemed to be made from Benywave Technology. After the Split, our own sourcing department directly placed order with third-party suppliers and maintained a trade payables account. The following table set forth the components of our trade payables as of the dates indicated:

2012 RMB’000 Trade payables to third parties Trade payable to Benywave Technology

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At 31 December 2013 RMB’000

2014 RMB’000

– 18,837

– 84,676

164,289 –

18,837

84,676

164,289

FINANCIAL INFORMATION We recorded trade payables of approximately RMB18.8 million, RMB84.7 million and RMB164.3 million as at 31 December 2012, 2013 and 2014, respectively. Trade payables to Benywave Technology as at 31 December 2012 and 2013 represented the inventories purchased from Benywave Technology not yet settled as at the period end calculated based on the gross value of inventories including the 17% VAT at the respective date. The following is an aged analysis of trade payables based on the invoice date or the recognition date of inventory at the end of the Track Record Period:

2012 RMB’000 Within 90 days 91 to 180 days

At 31 December 2013 RMB’000

2014 RMB’000

15,965 2,872

84,676 –

163,747 542

18,837

84,676

164,289

As at the Latest Practicable Date, approximately RMB123.4 million or 75.1% of our trade payables outstanding as at 31 December 2014 were settled. The following table sets out the average turnover days of trade payables for the period indicated: For the year ended 31 December 2012 2013 Average turnover days of trade payables (1)

25.6

15.5

2014

27.4

Note: (1)

Average turnover days of trade payables for each of the three years ended 31 December 2014 is derived by dividing the arithmetic mean of the opening and closing balances of trade payables for the relevant period by cost of sales and multiplying by 365 days.

Our average turnover days of trade payables decreased from 25.6 days for the year ended 31 December 2012 to approximately 15.5 days for the year ended 31 December 2013 which was primarily because we enhanced our inventory control management to ensure the finished goods are delivered within a short period of time which resulted in the increase of the average inventory level at a lower pace than the cost of sales. Average turnover days of trade payables then increased to 27.4 days for the year ended 31 December 2014 due to more raw material were kept to meet the increasing demand for our products.

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FINANCIAL INFORMATION Accrual and other payables Accrual and other payables as at 31 December 2012, 2013 and 2014 were approximately RMB2.9 million, RMB7.4 million, and RMB22.6 million, respectively, of which a breakdown is set out below:

2012 RMB’000 Payable for premium and freights Accrued staff costs Accrued royalty Others

As at 31 December 2013 RMB’000

2014 RMB’000

914 1,946 – –

4,641 2,765 – –

3,669 3,644 13,210 2,103

2,860

7,406

22,626

Our accrual and other payables mainly comprise payables for premium and freights, accrued staff costs, accrued royalty expenses and others. Accrual and other payables increased by approximately RMB4.5 million from RMB2.9 million as at 31 December 2012 to RMB7.4 million as at 31 December 2013, which is mainly attributable to the increase in payable for premium and freights of approximately RMB3.7 million due to delay in settlement of freights charges. The amount increased by approximately RMB15.2 million from RMB7.4 million as at 31 December 2013 to RMB22.6 million as at 31 December 2014, which is mainly attributable to (i) the increase in accrued royalty of approximately RMB13.2 million we have not yet received invoices from our supplier for certain royalty expenses payable for the year ended 31 December 2014 and (ii) the increase in accrued staff costs of approximately RMB0.9 million as a result of the increase in staff headcount. For details of the background leading to the increased of accrued royalties, please refer to the subsection headed “Business — Intellectual Property Rights — Third Party Licences” in this prospectus. Deposits received from customers Deposits received from customers mainly represent approximately 5% to 20% sales deposit (of the estimated contract size) paid to us from our customers at the time of requesting the Group to form a design according to their specifications. These specifications usually include the type of chipset to be used, the size of LCD monitor, size of memory, and the resolution of the camera. It usually takes 45 to 60 days for us to provide and confirm the design with the customer before they place a purchase order with us. Deposits received from customers were approximately RMB35.2 million, RMB53.9 million and RMB14.8 million as at 31 December 2012, 2013 and 2014, respectively. The amount fluctuated during the Track Record Period mainly because of the timing difference of receiving customers’ purchase order. Provision Provision were approximately RMB8.6 million, RMB12.5 million and RMB23.3 million as at 31 December 2012, 2013 and 2014, respectively. The warranty provision represent our managements’ best estimate of our liability under one-year warranty granted on mobile devices, which was generally estimated based on the 2% of our cost of sales for sales transaction with no spare devices provided.

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FINANCIAL INFORMATION KEY FINANCIAL RATIOS The following table sets forth our key financial ratios as at each of the dates indicated: For the year ended 31 December 2012 2013 2014 Gross Profit Margin (%) (1) Net Profit Margin (%) (2) Adjusted return on equity (%) (3) Adjusted return on total assets (%)

12.0 5.4 11.9 9.7

(4)

2012 Adjusted current ratio (5) Gearing ratio (%) (6)

5.6 0.0

10.8 6.1 21.6 15.3 As at 31 December 2013 3.4 0.0

13.6 8.2 28.9 19.9

2014 3.2 0.0

Notes: (1)

Gross profit margin for each of the three years ended 31 December 2014 was calculated on gross profit divided by turnover for the respective year. Please refer to the subsection headed “Review of Historical Results of Operations” in this section for more details on our gross profit margins.

(2)

Net profit margin for each of the three years ended 31 December 2014 was calculated on net profit attributable to the Shareholder divided by turnover for the respective year. Please refer to the subsection headed “Review of Historical Results of Operations” in this section for more details on our net profit margins.

(3)

Adjusted return on equity for each of the three years ended 31 December 2014 was calculated based on the net profit for the respective period divided by the total equity attributable to the Shareholders as of the respective years and multiplied by 100%. Total equity was adjusted based on total equity of our Group and taking no account of the accumulated funds provided for or withdrawn from Benywave Technology as of the respective years presented in the consolidated statements of change in equity.

(4)

Adjusted return on total asset for each of the three years ended 31 December 2014 was calculated based on the net profit for the respective years divided by the total asset of the respective years and multiplied by 100%. Total asset was adjusted based on the total assets of our Group plus the funds provided for or withdrawn from Benywave Technology for the respective period as presented in the consolidated statements of change in equity.

(5)

Adjusted current ratios as of 31 December 2012 and 2013 and 2014 were calculated based on the total current assets as of the respective dates divided by the total current liabilities as of the respective dates. Total current assets was adjusted based on the total current assets of our Group plus the funds provided for or withdrawn from Benywave Technology for the respective period as presented in the consolidated statements of change in equity.

(6)

Gearing ratios as of 31 December 2012, 2013 and 2014 were calculated based on the total interest-bearing loans of our Group as of the respective dates divided by total equity of our Group as at the respective dates and multiplied by 100%.

Adjusted return on equity Our return on equity increased for the year ended 31 December 2012, 2013 and 2014 were approximately 11.9%, 21.6% and 28.9%, respectively. The continuous increase during the Track Record Period was mainly attributable to the revenue increased at a faster pace than that of equity accumulation.

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FINANCIAL INFORMATION Adjusted return on total assets Our return on total asset for the years ended 31 December 2012, 2013 and 2014 were approximately 9.7%, 15.3% and 19.9%, respectively. The continuous increase during the Track Record Period was mainly attributable to the ability to maintain an increase in profitability of the Group based on the given level of total asset. Adjusted current ratio Our business expansion in 2013 boosted both our current assets and current liabilities, while our relatively small amount of current liabilities in 2012 caused current ratio to decrease from approximately 5.6 as at 31 December 2012 to 3.4 as at 31 December 2013. The current ratio remained stable at 3.4 and 3.2 as at 31 December 2013 and 2014, respectively. Gearing ratio Our gearing ratio was all nil as at 31 December 2012, 2013 and 2014 as we do not have any interest-bearing loans at these period end. As at the Latest Practicable Date, our Group did not have any material covenant. CONTRACTUAL AND CAPITAL COMMITMENTS During the Track Record Period, we did not have any contractual obligations or capital commitments. Capital expenditures during the Track Record Period Our Group’s capital expenditures principally consisted of expenditures on acquisitions of equipment in our operations. For the three years ended 31 December 2014, our Group incurred capital expenditures of approximately RMB36,000, RMB155,000 and RMB7,000, respectively. Between 31 December 2014 and the Latest Practicable Date, we did not make any material capital expenditures. Planned capital expenditure For the year ended 31 December 2014, we do not have any planned capital expenditure. Our Group’s projected capital expenditures are subject to revision based upon any future changes in our business plan, market conditions, and economic and regulatory environment. Please refer to the section headed “Future Plans and Use of Proceeds” of this prospectus for further information. We expect to fund our contractual commitments and capital expenditures principally though the net proceeds we receive from the Global Offering, cash generated from our operating activities and proceeds from borrowings and notes. We believe that these sources of funding will be sufficient to finance our contractual commitments and capital expenditure needs for the next 12 months. INDEBTEDNESS As at 30 April 2015, being the latest practicable date for the purpose of ascertaining information contained in the indebtedness statement prior to the printing of this Prospectus, our Group had no interest-bearing loans. As of 30 April 2015, we had a bank financing facility in the amount of USD3.0 million but we have not utilised any of the limit.

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FINANCIAL INFORMATION Contingent liabilities As at 30 April 2015, being the latest practicable date for the purpose of the indebtedness statement, we did not have any material contingent liabilities or guarantees. Save as aforesaid or as otherwise disclosed herein, and apart from intra-group liabilities, our Group did not have outstanding at the close of business on 30 April 2015, any loan capital issued and outstanding or agreed to be issued, bank overdrafts, loans or other similar indebtedness, liabilities under acceptances (other than normal trade bills) or acceptable credits, debentures, mortgages, charges, finance leases or hire purchases commitments, guarantees or other material contingent liabilities. WORKING CAPITAL Our Directors confirm that, taking into consideration the financial resources presently available to us, our internally generated cashflow, and the estimated net proceeds from the Global Offering, we will have sufficient working capital for our present requirements and for at least the next 12 months commencing from the date of this prospectus. Although as of 30 April 2015, we had a bank financing facility in the amount of USD3.0 million, our Directors confirm that the aforesaid working capital sufficiency statement stands without taking into account the utilization of such banking facility. Save as disclosed in this prospectus, our Directors are not aware of any other factors that would have a material impact on our Group’s liquidity. We do not have any material external financing plans. Details of the funds necessary to meet our existing operations and to fund our future plans are set out in the section headed ‘‘Future Plans and Use of Proceeds’’ of this prospectus. TRANSACTIONS WITH RELATED PARTIES As of 31 December 2012, 2013 and 2014, amounts due from a fellow subsidiary were approximately nil, nil and RMB7.9 million, respectively. As of December 31, 2012, 2013 and 2014, amount due to a related party were approximately nil, nil and RMB4.1 million, respectively. With respect to the related party transactions set forth in the Accountants’ Report in Appendix I to this prospectus, our Directors confirm that these transactions were conducted on normal commercial terms or such terms that were no less favourable to our Group than those available to Independent Third Parties and were fair and reasonable and in the interest of our Shareholders as a whole. All non-trade balances with related parties will be settled before Listing. Our Director are of the view that the related party transactions did not cause any distortion of our results of operations or make our historical results not reflective in the Track Record Period. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS We are exposed to market risks from changes in market rates and prices, such as foreign currency, credit and liquidity. Foreign currency risk Our Group undertakes certain operating transactions in foreign currencies, which expose us to foreign currency risk. We do not use any derivative contracts to hedge against its exposure to currency risk. The management manages its currency risk by closely monitoring the movement of the foreign currency rates and considering hedging significant foreign currency exposure should the need arise.

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FINANCIAL INFORMATION The carrying amounts of our foreign currency denominated monetary assets (trade receivables, cash and bank balances) and liabilities (Trade payables and amount due to a related party) at the end of each reporting periods are as follows:

2012 RMB’000 USD HKD

44,522 –

At 31 December 2013 RMB’000 9,452 –

2014 RMB’000 295,749 10

Sensitivity analysis The following table details our Group’s sensitivity to a 5% increase and decrease in RMB against USD and all other various were held constant. 5% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation to RMB at year end for a 5% change in foreign currency rates. A positive number below indicates an increase in post-tax profit where RMB weakens 5% against the USD. For a 5% strengthening of RMB against the USD, there would be an equal and opposite impact on the profit for the year, and the amounts below would be negative.

2012 RMB’000 Profit for the year

1,892

At 31 December 2013 RMB’000 402

2014 RMB’000 11,091

In our management’s opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk as the year end exposure does not reflect the exposure during the year. Credit risk Our maximum exposure to credit risk which will cause a financial loss to us due to failure to discharge an obligation by the counterparties is arising from the carrying amount of the respective recognised financial assets as stated in the consolidated statements of financial position. We have concentration of credit risk as the total trade receivables were due from our 4, 7 and 10 customers as at 31 December 2012, 2013 and 2014 respectively and the balance of amount due from a fellow subsidiary as at 31 December 2014 is significant. Our management considered that the credit risk of trade receivables and amount due from related parties are insignificant after considering the credit quality and financial ability of these customers and the fellow subsidiary. We trade with certain individual customers and trading terms are mainly by requesting the customers to place 5%–20% deposit upon receiving purchase orders and arrange letter of credit and make payment through telegraphic transfer to settle the outstanding balance upon delivery. We generally allow a credit period of up to 60 days to selected customers on a case-by-case basis depending on the business relationship with and creditworthiness of the respective customers. We monitor the credit risk on an ongoing basis and credit evaluations are regularly performed. Hence, our management believe that our credit risk is significantly reduced.

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FINANCIAL INFORMATION Liquidity risk Prior to our Reorganisation, we relied on the financial support of the equity holders of Benywave Technology as the Overseas Business was operated by Benywave Technology. Upon the completion of Reorganisation, we manage liquidity risk by maintaining a level of cash and cash equivalents deemed adequate by the management to finance our operations and mitigate the impacts of fluctuations in cash flows. The following tables details our remaining contractual maturity for our non-derivative financial liabilities. The table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which we are required to pay. On demand or within one month RMB’000

Total undiscounted cash flows RMB’000

Carrying amount RMB’000

As at 31 December 2012 Financial liabilities Other payables Trade payables to a related party

914 18,837

Total

19,751

As at 31 December 2013 Financial liabilities Other payables Trade payables to a related party

4,641 84,676

Total

89,317

As at 31 December 2014 Financial liabilities Other payables Trade payables Amount due to a related party

5,772 164,289 4,116

Total

174,177

DISCLOSURE REQUIRED UNDER THE LISTING RULES Our Directors confirm that, as at the Latest Practicable Date, no circ*mstances would give rise to a disclosure requirement under Rules 13.13 to 13.19 of the Listing Rules. PROPERTY INTERESTS As at the Latest Practicable Date, we did not own any property and all of our places of operations are leased properties. We had no single property with a carrying amount of 15% or more of our total assets, and on this basis, we are not required by Chapter 5 of Listing Rules to include in this document any valuation report. Pursuant to section 6(2) of the Companies (Exemption of Companies and Prospectuses from Compliance with Provisions) Notice (Chapter 32L of the Laws of Hong Kong), this prospectus is exempted from compliance with the requirements of section 342(1)(b) of the Companies (Winding Up and Miscellaneous Provisions)

– 245 –

FINANCIAL INFORMATION Ordinance in relation to paragraph 34(2) of the Third Schedule to the Companies (Winding Up and Miscellaneous Provisions) Ordinance, which requires a valuation report with respect to all of our interests in land or buildings. LISTING EXPENSES We incurred listing expenses of approximately RMB12.5 million for the year ended 31 December 2014 in connection with the Global Offering, which were charged to our profit and loss accounts as expenses. Listing expenses (excluding commission and incentive fees (if any) to be payable to the Underwriters, the SFC transaction levy and the Stock Exchange trading fee) paid or payable by our Company are estimated to be approximately RMB14.7 million for the year ending 31 December 2015 in connection with the Global Offering, of which approximately RMB11.2 million will be charged to our profit and loss accounts as expenses and approximately RMB3.5 million will be capitalised. Our Directors do not expect such expenses to have a material adverse impact on our financial results for the year ending 31 December 2015. DIVIDEND POLICY We have not declared any dividend during the Track Record Period. The recommendation of the payment of dividend is subject to the absolute discretion of our Board, and, after listing, any declaration of final dividend for the year will be subject to the approval of our Shareholders. Our Directors may recommend a payment of dividend in the future after taking into account our operations, earnings, financial condition, cash requirements and availability, capital expenditure and future development requirements and other factors as it may deem relevant at such time. Any declaration and payment as well as the amount of the dividend will be subject to our constitutional documents and the Companies Law, including the approval of our Shareholders. Future dividend payments will also depend upon the availability of dividends received from our foreign-invested subsidiary in the PRC. PRC laws require that dividends be paid only out of the net profit calculated according to PRC accounting principles, which differ in many aspects from generally accepted accounting principles in other jurisdictions, including IFRS. PRC laws also require foreign-invested enterprises to set aside part of their net profit as statutory reserves, which are not available for distribution as cash dividends. Distributions from our foreign invested subsidiary may also be restricted if it incurs debt or losses or pursuant to any restrictive covenants in bank credit facilities, convertible bond instruments or other agreements that we or our subsidiaries and associated companies may enter into in the future. Any distributable profit that is not distributed in any given year will be retained and available for distribution in subsequent years. To the extent profit is distributed as dividends, such portion of profit will not be available to be reinvested in our operations. DISTRIBUTABLE RESERVES Our Company was incorporated on 12 August 2014 and is an investment holding company. There were no reserves for distribution to the Shareholders as of the Latest Practicable Date. UNAUDITED PRO FORMA ADJUSTED NET TANGIBLE ASSETS The unaudited pro forma data relating to our net tangible assets prepared in accordance with Rule 4.29 of the Listing Rules is set out below to illustrate the effect of the Global Offering on our net tangible assets as at 31 December 2014 as if the Global Offering had taken place on that date. The unaudited pro forma statement of adjusted net tangible assets of the Group have been prepared for illustrative purposes only and because of its hypothetical nature, it may not give a true picture of the net

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FINANCIAL INFORMATION consolidated tangible assets of the Group, as at 31 December 2014 or any future date following the Global Offering. It is prepared based on the net consolidated tangible assets of the Group attributable to equity holders of the Company as at 31 December 2014 as set out in the consolidated statements of financial position contained in Appendix I to this prospectus, and adjusted as described below. Consolidated net

Pro forma

tangible assets

adjusted

of the Group

consolidated net tangible assets

attributable to equity holders of

Estimated net

of the Group

the Company as

proceeds from

attributable to

at 31 December

the Global

equity holders of

2014

Offering

the Company

RMB’000

(Note 1)

(Note 2)

297,464

328,495

297,464

458,939

Pro forma adjusted consolidated net tangible assets of the Group attributable to equity holders of the Company per share RMB

HK$

(Note 3)

(Note 4)

625,959

0.74

0.93

756,403

0.89

1.13

Based on Offer Price of HK$2.22 per Share

Based on Offer Price of HK$3.06 per Share

Notes: 1.

The consolidated net tangible assets of the Group attributable to equity holders of the Company as at 31 December 2014 is extracted from the consolidated statements of financial position set out in Appendix I to this prospectus.

The estimated net proceeds to be received by the Company from the Global Offering are based on 204,000,000 shares at the Offer Price of lower limit and upper limit of HK$2.22 and HK$3.06 per share, after deduction of the underwriting commissions and fees and other related fees (excluding approximately RMB12.5 million listing expenses which has charged to profit or loss up to 31 December 2014 paid/payable by the Company) assuming that the Over-allotment Option is not exercised. It does not take into account of any shares (i) which may be issued under Share Option Scheme or RSU Scheme or (ii) which may be allotted and issued or repurchased by our Company under the general mandates for the allotment and issue or repurchase of shares granted to the directors of the Company. For the purpose of the estimated net proceeds from the Global Offering, the amount denominated in HK$ has been converted in RMB at the rate of HK$1 to RMB0.7889, which was the rate prevailing on 31 December 2014 as quoted by the PBOC. No representation is made that the HK$ amounts have been, could have been or may be converted to RMB, or vice versa, at that rate or any other rates or at all.

The pro forma adjusted consolidated net tangible assets of the Group attributable to owners of the Company per share is arrived at on the basis that 850,000,000 Shares were in issue assuming that the Global Offering and Capitalisation Issue had been completed on 31 December 2014. It does not take into account of any Shares which may be issued upon the exercise of the Over-allotment Option, any Shares which may be allotted and issued upon the exercise of any options that may be granted under the Share Option Scheme or RSU Scheme, or any Shares which may be issued or repurchased pursuant to our Company’s general mandate.

The pro forma adjusted consolidated net tangible assets of the Group attributable to equity holders of the Company per Share are converted into HK$ at an exchange rate of RMB0.7889 to HK$1, which was the prevailing rate on 31 December 2014 as quoted by PBOC. No representation is made that the RMB amounts have been, could have been or may be converted to HK$ at that rate or any other rates at all.

The pro forma adjusted net tangible assets of the Group attributable to owners of the Company does not take into account the effect of the trading result or other transaction of the Group subsequent to 31 December 2014.

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FINANCIAL INFORMATION OFF-BALANCE SHEET ARRANGEMENT As at the Latest Practicable Date, we did not have any material off-balance sheet arrangements or contingencies except as disclosed under the paragraphs headed “Contractual and capital commitments” and “Indebtedness” in this section. RECENT DEVELOPMENTS AND NO MATERIAL ADVERSE CHANGE Although the legal process of the Split was completed on 22 July 2014, the Overseas Business and the PRC Business have been separated and delineated from all material respects since 2010, hence the Split was in substance a legal process to reflect the practical state of facts and provide a separate legal for entity for each of the two businesses already delineated and has no material impact on our Group’s operations and financial position. Our Directors expect our Group to maintain the same cost structure as the cost of sales and selling and distribution expenses of our Group have been recorded separately from the PRC Business during the Pre-split Period up to 31 August 2014 and will continue to be recorded separately after the Split. The total sharing of costs between our Group and the PRC Business accounted for approximately 14.9%, 10.6% and 9.7% of the total operating costs excluding raw materials for our Group for each of the two years ended 31 December 2013 and for the eight months ended 31 August 2014 respectively, such sharing of costs have ceased by 31 August 2014 (shortly after obtaining of the Customs Declaration Certificate (海關報關單位註冊登記證書) by Benywave Wireless) except for the connected transaction as set out in the section headed “Connected Transaction” of this prospectus. Taking into account the proportion of R&D costs and administrative expenses actually incurred after the Split up to 31 December 2014 to our Group’s total revenue during the relevant period, our Directors expect that there would be no material change in the proportion of the R&D costs and the administrative expenses to our total revenue as a result of the Split. Save as the expected change in the applicable enterprise income tax rate as mentioned in the subsection headed “Risk Factors — We may be subject to higher enterprise income tax and this will reduce our profitability” in this prospectus above, given there has been no material change of the cost structure of our Group after the Split, our Directors expect the operating profit margin of our Group will be maintained at a similar level as those during the Pre-split Period up to 31 August 2014. Based on our unaudited management accounts, our sales for the four months ended 30 April 2015 remained stable whereas the gross profit and gross profit margin increased as compared to the corresponding period in 2014. This is a net-off effect of the decreases in sales, gross profit and gross profit margin for the two months ended 28 February 2015 as compared to the previous corresponding period, and the gradual pick up performance in subsequent months up to April 2015. The decreases for the two months ended 28 February 2015 were primarily because of (i) the gradual decrease in average selling price of 3G products with the progression of its product life cycle, increase in competition in the 3G product market and upcoming popularity of 4G mobile handsets. In particular, certain 3G smartphone products we sold for the two months ended 28 February 2015 were repeated orders of long aged designs which were sold at low average selling prices; (ii) decrease in sales of our smartphone component packs as the relevant customer which we supplied smartphone component packs during the Track Record Period was acquired by a multinational technology company and as our management foresee potential changes in its mobile business segment on its development plan we have intentionally decreased sales to such customer to avoid any uncertainties arising from its internal restructuring; and (iii) there had been large orders of products delivered in December 2014 rather than in January 2015 which reduced the products delivered and revenue recognized in January 2015 as compared to the previous corresponding period. The overall increases in gross profit and gross profit margin for the four months ended 30 April 2015 as compared to the previously corresponding period was mainly due to the increase in sales of 4G products and the launch of our new 2015 4G smartphone models, which achieved higher gross profit margin than 3G products.

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FINANCIAL INFORMATION Up to 30 April 2015, there was no significant increase in costs of sales or other costs subsequent to 31 August 2014 as compared to the Pre-Split Period. Based on our unaudited management accounts, our sales, gross profit and gross profit margin for the eight months ended 30 April 2015 increased as compared to the corresponding period in 2014. These increases were mainly due to our increase in total sales volume and increase in sales of 4G products which has higher average selling price than 3G products. According to Frost & Sullivan, although the standard of 5G has been released, it is still at a conceptual stage and its commercialisation is expected to take certain years taking into account that it took around eight years to upgrade from 3G to 4G. Global subscription for LTE has reached 497.0 million in 2014 and is expected to grow at a CAGR of approximately 31.8% to 1,976.4 million in 2019. Save as the above, our Directors confirm that there has been no material change in the industry in which we operate or to our business, our business model, cost and revenue structures or financial condition, operational or trading position since 31 December 2014 that would materially affect the information shown in our financial statements as set forth in Appendix I to this prospectus.

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FUTURE PLANS AND USE OF PROCEEDS FUTURE PLANS AND PROSPECTS Please see the subsection headed “Business — Our Business Strategies” in this prospectus for a detailed description of our future plans. USE OF PROCEEDS The aggregate net proceeds from the Global Offering (after deducting underwriting fees and estimated expenses in connection with the Global Offering and assuming an Offer Price of HK$2.64 per Share, being the mid-point of the indicative range of the Offer Price of HK$2.22 to HK$3.06 per Share, and assuming the Over-allotment Option is not exercised) will be approximately HK$500.3 million. We will bear the underwriting commissions, SFC transaction levy and Stock Exchange trading fee payable by us in connection with the issue of the New Shares together with any applicable fees relating to the Global Offering. The Selling Shareholder will be responsible for the underwriting commissions attributable to the Sale Shares, together with Stock Exchange trading fees, SFC transaction levy and any applicable fees in respect of the Sale Shares. The Company’s Directors intend to apply the net proceeds from the Global Offering as follows: (a)

approximately HK$227.6 million (equivalent to approximately RMB180.5 million, representing 45.5% of the net proceeds) will be used for purchasing of raw materials to expand our raw material sourcing capacity. We generally receives 5-20% deposit for the company’s orders and proceeds with purchase of raw materials. It takes 60 to 90 days from the sourcing of raw materials to the shipment of finished goods. While our payment term offered by creditors is usually 30 to 60 days and our credit term offered to our customers ranges from full payment before delivery to 90 days. Our cash conversion cycle is normally two to three months. We believe that the increase in capital for purchasing of raw materials will enable us to take more orders and to enjoy economies of scale. We expect that approximately HK$75.0 million (approximately RMB59.5 million) out of which will be used to increase the raw material purchase capacity in the second year after Listing (i.e. 2016), where the remaining HK$152.6 million (approximately RMB121.0 million) will be used to increase the raw material purchase capacity in the second year after Listing (i.e. 2017). Our management considers the increase in scale step by step will facilitate a healthy growth of the Company;

(b)

approximately HK$135.1 million (equivalent to approximately RMB107.1 million, representing 27.0% of the net proceeds) will be used for setting up overseas representative offices and/or establishing partnership with local leading branded mobile handset suppliers or telecommunication operators at our key markets such as India, Southeast Asia, Europe, South America and other geographical regions which the Group considers with great potential in the future to improve our local technical support to its clients, ongoing client coverage and strengthen the cooperative relationship with key customers;

(c)

approximately HK$62.5 million (equivalent to approximately RMB49.6 million, representing 12.5% of the net proceeds) will be used to expand our research and development capabilities by i) employing additional R&D personnel; ii) purchasing additional R&D equipments and upgrade existing software platforms; iii) acquiring specialized design house or its intellectual properties for smartphone accessories which can complement our product offerings;

(d)

approximately HK$25.0 million (equivalent to approximately RMB19.8 million, representing 5.0% of the net proceeds) will be used to set up a new quality testing lab, employ additional quality testing personnel and purchase additional quality testing equipments, to facilitate efficient and cost effective quality testing process while reducing the need and cost to engage external testing labs; and

– 250 –

FUTURE PLANS AND USE OF PROCEEDS (e)

approximately HK$50.0 million (equivalent to approximately RMB39.7 million, representing 10.0% of the net proceeds) will be used for working capital and other general corporate purposes.

If the Offer Price is fixed at the high-end of the indicative range of the Offer Price, being HK$3.06 per Share, the net proceeds we receive from the Global Offering will increase by approximately HK$83.6 million. We intend to apply the additional net proceeds for the above purposes on a pro-rata basis. If the Offer Price is set at the low-end of the indicative range of the Offer Price, being HK$2.22 per Share, the net proceeds we receive from the Global Offering will decrease by approximately HK$82.6 million. We intend to reduce the net proceeds for the above purposes on a pro-rata basis. Assuming the Offer Price is fixed at HK$2.64 per Share (being the mid-point of the indicative range of the Offer Price) and assuming the Over-allotment Option is not exercised, we estimate that the Selling Shareholder will receive approximately HK$21.6 million, after deducting the underwriting commissions and fees payable by the Selling Shareholder in respect of the Sale Shares. We will not receive the net proceeds from the sale of Sale Shares by the Selling Shareholder in the Global Offering. If the Over-allotment Option is exercised in full, we estimate that the additional net proceeds from the offering of these additional Shares to be received by us, after deducting underwriting fees and estimated expenses payable by it, will be approximately (i) HK$94.3 million, assuming the Offer Price is fixed at the high-end of the indicative range of the Offer Price, being HK$3.06 per Share; (ii) HK$81.2 million, assuming the Offer Price is fixed at the mid-point of the indicative range of the Offer Price, being HK$2.64 per Share; and (iii) HK$68.3 million, assuming the Offer Price is fixed at the low-end of the indicative range of the Offer Price, being HK$2.22 per Share. Any additional proceeds received by us from the exercise of the Over-allotment Option will also be allocated to the above businesses and projects on a pro-rata basis. To the extent that the net proceeds are not immediately applied to the above purposes and to the extent permitted by applicable laws and regulations, we intend to deposit the net proceeds into short-term demand deposits with authorised financial institutions and/or licensed banks in Hong Kong.

– 251 –

UNDERWRITING HONG KONG UNDERWRITERS Sole Global Coordinator, Sole Bookrunner and Sole Lead Manager Haitong International Securities Company Limited Co-Lead Managers RHB OSK Securities HK Limited Astrum Capital Management Limited Co-Managers Convoy Investment Services Limited Bright Smart Securities International (H.K.) Limited UNDERWRITING ARRANGEMENTS AND EXPENSES Hong Kong Public Offering Hong Kong Underwriting Agreement Pursuant to the Hong Kong Underwriting Agreement, our Company has agreed to offer the Hong Kong Public Offer Shares for subscription by the public in Hong Kong on and subject to the terms and conditions of this prospectus and the Application Forms. Subject to, among other conditions, the granting of the listing of, and permission to deal in, the Shares in issue and to be issued as mentioned in this prospectus by the Listing Committee and to certain other conditions set out in the Hong Kong Underwriting Agreement, the Hong Kong Underwriters have severally agreed to subscribe or procure subscribers for their respective applicable proportions of the Hong Kong Public Offer Shares now being offered which are not taken up under the Hong Kong Public Offering on the terms and conditions of this prospectus, the Application Forms and the Hong Kong Underwriting Agreement. Grounds for termination The obligations of the Hong Kong Underwriters to subscribe or procure subscribers for the Hong Kong Public Offer Shares are subject to termination if certain events, including force majeure, shall occur at any time at or before 8: 00 a.m. (Hong Kong time) on the Listing Date. The Sole Global Coordinator (for itself and on behalf of the other Hong Kong Underwriters) has the right, in their sole and absolute discretion, to terminate the obligations of the Hong Kong Underwriters under the Hong Kong Underwriting Agreement if they see fit upon the occurrence of any of the following events: (a)

there has come to the notice of the Sole Global Coordinator that: (i)

any statement contained in this prospectus, the Application Forms or any other relevant documents used in connection with the Global Offering (“Offer Documents”) considered by the Sole Global Coordinator (for itself and on behalf of the Hong Kong Underwriters) in its sole and absolute opinion to be material in the context of the Global Offering, was, when it was issued, or has become, untrue, incorrect or misleading in any respect or that any forecast, expression of opinion, intention or expectation expressed in any Offer Documents is not, in the sole and absolute opinion of the Sole Global Coordinator, in all material respects, fair and honest and based on reasonable assumptions, when taken as a whole; or

– 252 –

UNDERWRITING (ii)

any matter has arisen or has been discovered which would or might, had it arisen or been discovered immediately before the date of this prospectus, constitute an omission therefrom considered by the Sole Global Coordinator (for itself and on behalf of the Hong Kong Underwriters) in its sole and absolute opinion to be material in the context of the Global Offering; or

(iii) any of the representations and warranties given by our Company in the Hong Kong Underwriting Agreement or the International Underwriting Agreement is (or would when repeated be) untrue, inaccurate or misleading or having been breached and considered by the Sole Global Coordinator (for itself and on behalf of the Hong Kong Underwriters) in its sole and absolute opinion to be material in the context of the Global Offering; or (iv) any breach of any of the obligations or undertakings imposed upon any party (other than the Sole Global Coordinator or any of the Underwriters) to any of the Underwriting Agreements; or (v)

any material adverse change or prospective material adverse change in the condition, business, assets and liabilities, properties, results of operations, in the financial or trading position or prospect of any member of our Group; or

(vi) approval by the Listing Committee of the listing of, and permission to deal in, the Shares is refused or not granted, other than subject to customary conditions, or if granted, the approval is subsequently withdrawn, qualified (other than by customary conditions) or withheld; or (vii) the Company withdraws any of the Offer Documents (and/or any other documents used in connection with the contemplated subscription of the Offer Shares) or the Global Offering; or (viii) any matter, event, act or omission which gives or is likely to give rise to any material liability of our Company pursuant to the indemnities given by our Company; or (ix) any person (other than the Hong Kong Underwriters) has withdrawn or sought to withdraw its consent to being named in any of the Offer Documents or to the issue of any of the Offer Documents; or (b)

there shall develop, occur, exist or come into effect: (i)

any change or development involving a prospective change in, or any event or series of events resulting or likely to result in or representing any change or development in local, national, regional or international financial, political, military, industrial, legal, economic, currency market, fiscal or regulatory or market matters or conditions (including, without limitation, conditions in stock and bond markets, money and foreign exchange markets and inter-bank markets, a change in the system under which the value of the Hong Kong currency is linked to that of the currency of the United States or a devaluation of the Renminbi against any foreign currencies) in or affecting Hong Kong, Macau, China, the Cayman Islands, the British Virgin Islands, the United States, the United Kingdom, Canada, the European Union (or any member thereof), Japan, Singapore or any other relevant jurisdiction (each a “Relevant Jurisdiction”); or

(ii)

any new law or regulation or any change or development involving a prospective change in any existing law or regulation, or any change in the interpretation or application thereof by any court or other competent authority in or affecting any Relevant Jurisdiction; or

– 253 –

UNDERWRITING (iii) any event or series of events in the nature of force majeure (including, without limitation, acts of government, strikes, lock-outs, fire, explosion, flooding, civil commotion, acts of war, riot, public disorder, acts of terrorism (whether or not responsibility has been claimed), acts of God, epidemic, outbreak of infectious disease (including without limitation SARS and Influenza A (H5N1)) in or affecting any of the Relevant Jurisdictions; or (iv) any local, national, regional or international outbreak or escalation of hostilities (whether or not war is or has been declared) or other state of emergency or calamity or crisis in or affecting any of the Relevant Jurisdictions; or (v)

(A) any suspension or limitation on trading in shares or securities generally on the Stock Exchange, the New York Stock Exchange, the Nasdaq National Market, the London Stock Exchange, the Shanghai Stock Exchange, the Shenzhen Stock Exchange, the Tokyo Stock Exchange, or (B) a general moratorium on commercial banking activities in any of the Relevant Jurisdictions declared by the relevant authorities, or a disruption in commercial banking activities or foreign exchange trading or securities settlement or clearance services in or affecting any of the Relevant Jurisdictions; or

(vi) any material adverse change or development or event involving a prospective material adverse change in taxation or exchange controls (or the implementation of any exchange control), currency exchange rates or foreign investment regulations in any of the Relevant Jurisdictions; or (vii) any imposition of economic sanctions, in whatever form, directly or indirectly, by any of the Relevant Jurisdictions; or (viii) any material adverse change or development or event involving a prospective material adverse change in our Group’s assets, liabilities, profit, losses, performance, condition, business, financial, earnings, trading position or prospects; or (ix) the commencement by any judicial or regulatory body or organisation of any public action against a Director or an announcement by any judicial or regulatory body or organisation that it intends to take any such action; or (x)

other than with the approval of the Sole Global Coordinator, the issue or requirement to issue by our Company of a supplementary prospectus or offering document pursuant to the Companies (Winding Up and Miscellaneous Provisions) Ordinance or the Listing Rules in circ*mstances where the matter to be disclosed is, in the opinion of the Sole Global Coordinator materially adverse to the marketing for or implementation of the Global Offering; or

(xi) a petition is presented for the winding up or liquidation of our Company or any of its subsidiaries, or our Company or any of its subsidiaries make any compromise or arrangement with our Company’s or our creditors or enter into a scheme of arrangement or any resolution is passed for the winding-up of our Company or any of our subsidiaries or a provisional liquidator, receiver or manager is appointed over all or part of the assets or undertaking of the Company or any of our subsidiaries or anything analogous thereto occurs in respect of the Company or any of our subsidiaries; or (xii) a valid demand by any creditor for repayment or payment of any of the Company’s indebtedness or those of any of our subsidiaries or in respect of which our Company or any of

– 254 –

UNDERWRITING our subsidiaries are liable prior to its stated maturity, or any loss or damage sustained by our Company or any of its subsidiaries (howsoever caused and whether or not the subject of any insurance or claim against any person); or (xiii) any material litigation or claim being threatened or instigated against our Company or any of our subsidiaries or the existing Shareholders/Controlling Shareholders, and which, in any of the above cases and in the sole opinion of Sole Global Coordinator (for itself and on behalf of the Hong Kong Underwriters): (a)

is or may or will be or is likely to be materially adverse to, or materially and prejudicially affect, the business or financial or trading position or prospects of our Company or our subsidiaries as a whole; or

(b)

has or may have or will have or is likely to have an adverse effect on the success of the Global Offering and/or make it impracticable or inadvisable for any part of this Agreement, the Hong Kong Public Offering or the Global Offering to be performed or implemented as envisaged; or

(c)

makes or may make or will or is likely to make it inadvisable or inexpedient to proceed with the Hong Kong Public Offering and/or the Global Offering or the delivery of the Offer Shares on the terms and in the manner contemplated by this prospectus.

Undertakings to the Stock Exchange under the Listing Rules By us We have undertaken to the Stock Exchange that no further Shares or securities convertible into our equity securities (whether or not of a class already listed) may be issued by us or form the subject of any agreement to such an issue by us within six months from the Listing Date (whether or not such issue of Shares or securities will be completed within six months from the Listing Date) without the prior consent of the Stock Exchange, except in the circ*mstances prescribed by Rule 10.08 of the Listing Rules. By Controlling Shareholders Each of our Controlling Shareholders has undertaken to the Stock Exchange that, except pursuant to the Global Offering, the Over-allotment Option and/or if the applicable, the Stock Borrowing Agreement, it shall not and shall procure that the relevant registered holder(s) shall not: (a)

at any time within the period commencing on the date by reference to which disclosure of his/its shareholding in our Company is made in this prospectus and ending on the date which is six months from the Listing Date, dispose of, nor enter into any agreement to dispose of or otherwise create any options, rights, interests or encumbrances in respect of, any of the Shares or securities of our Company in respect of which he/it is shown by this prospectus to be the beneficial owners; or

(b)

at any time during the six-month period commencing on the date on which the period mentioned in paragraph (a) above expires, dispose of, nor enter into any agreement to dispose of or otherwise create any options, rights, interests or encumbrances in respect of, any of the Shares or securities referred to in (a) above if, immediately following such disposal or upon the exercise or enforcement of such options, rights, interests or encumbrances, he/it would cease to be our Controlling Shareholder(s).

– 255 –

UNDERWRITING Pursuant to Note 3 to Rule 10.07(1) of the Listing Rules, each of our Controlling Shareholders has also undertaken to the Stock Exchange that, within the period commencing on the date by reference to which disclosure of his/its shareholding in our Company is made in this prospectus and ending on the date which is 12 months from the Listing Date, he/it will: (a)

when he or it pledges or charges any Shares or other securities of our Company beneficially owned by him or it in favour of an authorised institution (as defined in the Banking Ordinance (Chapter 155 of the Laws of Hong Kong)) for a bona fide commercial loan, immediately inform us of such pledge or charge together with the number of such Shares or other securities of our Company so pledged or charged; and

(b)

when he or it receives any indications, either verbal or written, from any pledgee or charge that any of the pledged or charged Shares or securities will be disposed of, immediately inform us of any such indications.

We have agreed and undertaken to the Stock Exchange that, we shall inform the Stock Exchange as soon as we have been informed of the above matters (if any) by any of the Controlling Shareholders and disclose such matters by way of an announcement as soon as possible. Undertakings pursuant to the Hong Kong Underwriting Agreement By us We have undertaken to each of the Sole Global Coordinator, the Sole Sponsor, the Sole Lead Manager and the Hong Kong Underwriters that, except pursuant to the Global Offering, the Capitalisation Issue, the Over-allotment Option, any options which may be granted under the Share Option Scheme and any Share(s) granted under the RSU Scheme, we will not, and will procure that our subsidiaries will not, without the prior written consent of the Sole Global Coordinator (for itself and on behalf of the Hong Kong Underwriters) and unless in compliance with the requirements of the Listing Rules, at any time from the date of the Hong Kong Underwriting Agreement until the expiry of six months from the Listing Date (the “First Six-month Period”): (a)

offer, accept subscription for, pledge, charge, allot, issue, sell, lend, mortgage, assign, contract to allot, issue or sell, sell any option or contract to purchase, purchase any option or contract to sell, grant or agree to grant any option, right or warrant to purchase or subscribe for, lend or otherwise transfer or dispose of, either directly or indirectly, conditionally or unconditionally, or repurchase any of its share capital or other securities of our Company or any of our subsidiaries or any interest therein (including but not limited to any securities convertible into or exercisable or exchangeable for or that represent the right to receive any such share capital or securities or any interest therein);

(b)

enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of such share capital or securities or any interest therein;

(c)

enter into any transaction with the same economic effect as any transaction specified in sub-paragraphs (a) or (b) above; or

(d)

offer to or agree to do any of the foregoing or announce any intention to do so,

whether any of the foregoing transactions is to be settled by delivery of share capital or such other securities, in cash or otherwise, and in the event of our Company doing any of the foregoing by virtue of the aforesaid exceptions or during the period of six months immediately following the First Six-month Period (the “Second Six-month Period”), our Company will take all reasonable steps to ensure that any such act will not create a disorderly or false market for the Shares or other securities of our Company.

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UNDERWRITING We have further undertaken to each of the Sole Global Coordinator, the Sole Sponsor, the Sole Lead Manager and the Hong Kong Underwriters that in respect of any option to be granted by us under Share Option Scheme during the First Six-month Period, such option shall be granted subject to the condition that the grantee shall not, without the prior written consent of the Sole Global Coordinator (for itself and on behalf of the Hong Kong Underwriters), at any time during the First Six-month Period in respect of the Shares derived from the option so granted: (a)

offer, pledge, charge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant or agree to grant any option, right or warrant to purchase or subscribe for, lend, make any short sale or otherwise transfer or dispose of (nor enter into any agreement to transfer or dispose of or otherwise create any options, rights, interests or encumbrances in respect of), either directly or indirectly, conditionally or unconditionally, any of the share or debt capital or other securities of our Company or any interest therein (including, but not limited to any securities that are convertible into or exercisable or exchangeable for, or that represent the right to receive, any such capital or securities or any interest therein) whether now owned or hereinafter acquired, directly or indirectly, by him/her (including holding as a custodian) or with respect to which he or she has beneficial interest;

(b)

enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any such capital or securities or any interest therein;

(c)

enter into any transaction with the same economic effect as any transaction described in paragraph (a) or (b) above; or

(d)

offer or agree or contract to, or publicly announce any intention to enter into, any transaction described in paragraph (a) or (b) or (c) above, whether any such transaction described in paragraph (a) or (b) or (c) above is to be settled by delivery of Shares or such other securities, in cash or otherwise.

By our Controlling Shareholders Each of our Controlling Shareholders has undertaken to each of the Sole Global Coordinator, the Sole Sponsor, the Sole Lead Manager and the Hong Kong Underwriters that, except pursuant to the Global Offering, the Capitalisation Issue, the Over-allotment Option and/or if applicable, the Stock Borrowing Agreement, it will not, and will procure that none of its associates will, without the prior written consent of the Sole Global Coordinator (for itself and on behalf of the Hong Kong Underwriters), at any time during the First Six-month Period: (a)

offer, pledge, charge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant or agree to grant any option, right or warrant to purchase or subscribe for, lend, make any short sale or otherwise transfer or dispose of (nor enter into any agreement to transfer or dispose of or otherwise create any options, rights, interests or encumbrances in respect of), either directly or indirectly, conditionally or unconditionally, any of the share or debt capital or other securities of our Company or any interest therein (including, but not limited to any securities that are convertible into or exercisable or exchangeable for, or that represent the right to receive, any such capital or securities or any interest therein) whether now owned or hereinafter acquired, directly or indirectly, by any of our Controlling Shareholders (including holding as a custodian) or with respect to which any of our Controlling Shareholders has beneficial interest;

(b)

enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any such capital or securities or any interest therein;

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UNDERWRITING (c)

enter into any transaction with the same economic effect as any transaction described in paragraph (a) or (b) above; or

(d)

In addition, during the Second Six-month Period, each of our Controlling Shareholders will not enter into any of the foregoing transactions described in (a), (b), (c) or (d) if, immediately following such transaction, it will cease to be a Controlling Shareholder of our Company or would together with the other Controlling Shareholders cease to be Controlling Shareholders of our Company. Until the expiry of the Second Six-month Period, in the event that any of our Controlling Shareholders enters into any of the foregoing transactions described in (a), (b), (c) or (d), it will take all reasonable steps to ensure that it will not create a disorderly or false market in the Shares or other securities of our Company. Each of our Controlling Shareholders has further undertaken to our Company, the Sole Global Coordinator, the Sole Sponsor, the Sole Lead Manager and the Hong Kong Underwriters that it will, at any time before the expiry of the Second Six-month Period: (a)

upon any pledge or charge in favour of an authorised institution (as defined in the Banking Ordinance (Chapter 155 of the Laws of Hong Kong)) of any share capital or other securities of our Company or any interests therein in respect of which it is the beneficial owner, immediately inform our Company and the Sole Global Coordinator (for itself and on behalf of the Hong Kong Underwriters) in writing of such pledge or charge together with the number of Shares or other securities so pledged or charged; and

(b)

upon any indication received by it, either verbal or written, from any pledgee or chargee that any of the pledged or charged shares or securities or interests in the shares or other securities of our Company will be disposed of, immediately inform our Company, the Sole Global Coordinator and the Sole Lead Manager (for itself and on behalf of the other Hong Kong Underwriters) in writing of such indications.

Our Company will inform the Stock Exchange, the Sole Sponsor, the Sole Global Coordinator and the Sole Lead Manager in writing as soon as it has been informed of any of the matters referred to above (if any) by our Controlling Shareholders and disclose such matters by way of a press announcement to be published in accordance with Rule 2.07C of the Listing Rules as soon as possible. Each of our Company and our Controlling Shareholders agrees and undertakes that it will not, and each Controlling Shareholder further undertakes to procure that Company will not, effect any transactions of Shares, or agree to do so, which may reduce the holdings of Shares of persons other than the Directors, chief executives, substantial shareholders or their respective associates to below 25% within the First Six Months Period without first having obtained the prior written consent of the Sole Global Coordinator (for itself and on behalf of the Hong Kong Underwriters).

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UNDERWRITING By RSU Scheme Nominee RSU Scheme Nominee has undertaken to each of the Sole Global Coordinator, the Sole Sponsor, the Sole Lead Manager and the Hong Kong Underwriters that, it will not, and will procure that none of its associates will, without the prior written consent of the Sole Global Coordinator (for itself and on behalf of the Hong Kong Underwriters), at any time during the First Six-month Period: (a)

offer, pledge, charge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant or agree to grant any option, right or warrant to purchase or subscribe for, lend, make any short sale or otherwise transfer or dispose of (nor enter into any agreement to transfer or dispose of or otherwise create any options, rights, interests or encumbrances in respect of), either directly or indirectly, conditionally or unconditionally, any of the share or debt capital or other securities of our Company or any interest therein (including, but not limited to any securities that are convertible into or exercisable or exchangeable for, or that represent the right to receive, any such capital or securities or any interest therein) whether now owned or hereinafter acquired, directly or indirectly, by it (including holding as a custodian) or with respect to which it has beneficial interest;

(b)

enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any such capital or securities or any interest therein;

(c)

enter into any transaction with the same economic effect as any transaction described in paragraph (a) or (b) above; or

(d)

RSU Scheme Nominee has further undertaken to each of the Sole Global Coordinator, the Sole Sponsor, the Sole Lead Manager and the Hong Kong Underwriters that in respect of any RSU to be granted by it under RSU Scheme during the First Six-month Period, such RSU shall be granted subject to the condition that the grantee shall not, without the prior written consent of the Sole Global Coordinator (for itself and on behalf of the Hong Kong Underwriters), at any time during the First Six-month Period, do any of the acts in respect of the underlying Shares derived from RSUs so granted as set out in paragraphs (a) to (d) above (inclusive). International Placing In connection with the International Placing, it is expected that our Company and the Selling Shareholder, will enter into the International Underwriting Agreement with, inter alia, the International Underwriters. Under the International Underwriting Agreement, the International Underwriters will, subject to certain conditions, severally agree to subscribe or buy or procure subscribers or purchasers for the International Placing Shares being offered pursuant to the International Placing. Our Company is expected to grant to the Sole Global Coordinator the Over-allotment Option, exercisable by the Sole Global Coordinator (on behalf of the International Underwriters) at any time from the date of the International Underwriting Agreement until 30 days from the date of the last day of lodging applications under the Hong Kong Public Offering to require our Company to allot and issue up to an aggregate of 31,875,000 additional New Shares, representing 15% of the initial Offer Shares in aggregate, at the same price per Share under the International Placing to cover, among other things, over-allocations (if any) in the International Placing and the Selling Shareholder.

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UNDERWRITING Commission and expenses The Underwriters will receive an underwriting commission of 3.5% on the aggregate Offer Price of all the Offer Shares, out of which any sub-underwriting commission will be paid. We may, at our sold discretion, pay the Sole Global Coordinator an incentive fee of up to 1% of the aggregate Offer Price of all the Offer Shares. The underwriting commissions (excluding any incentive fee), listing fees, Stock Exchange trading fee and transaction levy, legal and printing and other professional fees and other expenses relating to the Global Offering which are estimated to be approximately RMB45.7 million in aggregate (assuming (i) an Offer Price of HK$2.64 per Offer Share (being the mid-point of the indicative Offer Price range stated in this prospectus); (ii) the Over-allotment Option is not exercised), are payable and borne by our Company in respect of the New Shares. Indemnity Our Company has agreed to indemnify the Hong Kong Underwriters against certain losses which they may suffer, including losses arising from their performance of their obligations under the Hong Kong Underwriting Agreement and any breach by us of the Hong Kong Underwriting Agreement. Activities by Syndicate members Set out below is a variety of activities that the Underwriters of the Hong Kong Public Offering and the International Placing, together referred to as “Syndicate Members”, may each individually undertake, and which do not form part of the underwriting or the stabilising process. It should be noted that when engaging in any these activities the Syndicate Members are subject to restrictions, including the following: (a)

under the agreement among the Syndicate Members, none of the Underwriters (except for the Sole Global Coordinator, its affiliate(s) or any person(s) acting for it for the purpose of taking any stabilising action) will, and each of the Underwriters will procure that none of its respective affiliates and agents will, in connection with the distribution of the Offer Shares, effect, cause or authorise any other person to effect any transactions including, but not limited to issuing options or derivatives on the underlying Shares (whether in the open market or otherwise and whether in Hong Kong or elsewhere) with a view to stabilising or maintaining the market price of any of the Shares at a level higher than that which might otherwise prevail in the open market or any action which is designed to or which constitutes or which might be expected to, cause or result in the stabilisation or manipulation, in violation of applicable laws, of the price of any security of the Company; and

(b)

none of the Underwriters (other than the Sole Global Coordinator or its affiliate(s) or any other person(s) acting for it for the purpose of taking any stabilising action), will, during the period which begins on the commencement of trading of the Shares on the Stock Exchange and ends on the 30th day after the last day for the lodging of applications under the Hong Kong Public Offering, issue any warrant, option or derivative on the underlying Shares (whether in the open market or otherwise), except with the prior written consent of the Sole Global Coordinator.

The Syndicate Members and their affiliates are diversified financial institutions with relationships in countries around the world. These entities engage in a wide range of commercial and investment banking, brokerage, funds management, trading, hedging, investing and other activities for their own account and for the account of others. In relation to the Shares, those activities could include acting as agent for buyers and sellers of the Shares and entering into transactions with those buyers and sellers in a principal capacity, proprietary trading in the Shares, and entering into over the counter or listed derivative transactions or listed and unlisted securities transactions (including issuing securities such as derivative warrants listed on a stock exchange)

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UNDERWRITING which have the Shares as their or part of their underlying assets. Those activities may require hedging activity by those entities involving, directly or indirectly, buying and selling the Shares. All such activities could occur in Hong Kong and elsewhere in the world and may result in the Syndicate Members and their affiliates holding long and/or short positions in the Shares, in baskets of securities or indices including the Shares, in units of funds that may purchase the Shares, or in derivatives related to any of the foregoing. In relation to issues by Syndicate Members or their affiliates of any listed securities having the Shares as their or part of their underlying assets, whether on the Stock Exchange or on any other stock exchange, the rules of the relevant exchange may require the issuer of those securities (or one of its affiliates or agents) to act as a market maker or liquidity provider in the security, and this will also result in hedging activity in the Shares in most cases. All of these activities may occur both during and after the end of the stabilising period described under the subsection headed “Structure and conditions of the Global Offering — Stabilisation” in this prospectus. These activities may affect the market price or value of the Shares, the liquidity or trading volume in the Shares, and the volatility of the Shares and their share price, and the extent to which this occurs from day to day cannot be estimated. Underwriters’ interests in our Company Save for their obligations under the Underwriting Agreements, none of the Underwriters has any shareholding interests in our Company nor has any right or option (whether legally enforceable or not) to subscribe for or nominate persons to subscribe for any Shares in our Company nor any interest in the Global Offering. Sponsor’s Independence Haitong International Capital satisfies the independence criteria applicable to sponsors as set out in Rule 3A.07 of the Listing Rules.

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STRUCTURE AND CONDITIONS OF THE GLOBAL OFFERING THE GLOBAL OFFERING This prospectus is published in connection with the Hong Kong Public Offering which forms part of the Global Offering. Haitong International Capital is the Sole Sponsor for the listing of the Shares on the Stock Exchange as well as the Sole Global Coordinator and Sole Bookrunner of the Global Offering. The Global Offering initially consists of (subject to the Over-allotment Option): (i)

the Hong Kong Public Offering of 21,250,000 Offer Shares (subject to re-allocation as mentioned below) in Hong Kong as described in the subsection headed “Hong Kong Public Offering” in this section of the prospectus below; and

(ii)

the International Placing of 191,250,000 Offer Shares comprising 182,750,000 New Shares and 8,500,000 Sale Shares (subject to re-allocation and the Over-allotment Option as mentioned below) outside the United States in reliance on Regulation S.

Investors may apply for Offer Shares under the Hong Kong Public Offering or indicate an interest, if qualified to do so, for the Offer Shares under the International Placing, but may not do both. Reasonable steps will be taken to identify and reject applications in the Hong Kong Public Offering from investors who have received Offer Shares in the International Placing, and to identify and reject indications of interest in the International Placing from investors who have applied for Hong Kong Public Offer Shares in the Hong Kong Public Offering. The Hong Kong Public Offering is open to members of the public in Hong Kong as well as to institutional and professional investors in Hong Kong. The International Placing will involve selective marketing of Offer Shares to professional, institutional and other investors anticipated to have a sizeable demand for such Offer Shares in Hong Kong and other jurisdictions outside the United States in reliance on Regulation S. Professional investors generally include brokers, dealers, companies (including fund managers) whose ordinary business involves dealing in shares and other securities and corporate entities which regularly invest in shares and other securities. The International Underwriters are soliciting from prospective investors’ indications of interest in acquiring the Offer Shares in the International Placing. Prospective professional, institutional and other investors will be required to specify the number of Offer Shares under the International Placing they would be prepared to acquire either at different prices or at a particular price. This process, known as “book-building”, is expected to continue up and to cease on or around, the last day for lodging applications under the Hong Kong Public Offering. The number of Offer Shares to be offered under the Hong Kong Public Offering and International Placing respectively may be subject to re-allocation and, in the case of the International Placing only, the Over-allotment Option as set out in the subsection headed “International Placing — Over-allotment Option” in this section of the prospectus. The Hong Kong Public Offering is fully underwritten by the Hong Kong Underwriters under the terms of the Hong Kong Underwriting Agreement and is subject to our Company (for ourselves and on behalf of the Selling Shareholder) and the Sole Global Coordinator (for itself and on behalf of the Underwriters) agreeing on the Offer Price. Our Company and, among others, the Selling Shareholder expect to enter into the International Underwriting Agreement relating to the International Placing on the Price Determination Date. Details of the underwriting arrangements are summarized in the section headed “Underwriting” of this prospectus. This Prospectus has not been and will not be registered as a prospectus under the (Indian) Companies Act, 2013, as amended, with any registrar of companies in India. This prospectus, or any other offering document or material relating to the International Placing Shares, may not be circulated or distributed, directly or indirectly, to the public or any members of the public in India.

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STRUCTURE AND CONDITIONS OF THE GLOBAL OFFERING CONDITIONS OF THE GLOBAL OFFERING Acceptance of all applications for Offer Shares pursuant to the Global Offering will be conditional on, among others: (i)

the Listing Committee granting the listing of, and permission to deal in, the Shares in issue, the Offer Shares to be issued pursuant to the Global Offering and the Capitalisation Issue and any Shares which may be issued pursuant to the exercise of the Over-allotment Option, and any options which may be granted under Share Option Scheme;

(ii)

the Offer Price having been fixed on or around the Price Determination Date;

(iii) the execution and delivery of the International Underwriting Agreement on or around the Price Determination Date; and (iv) the obligations of the Underwriters under each of the Hong Kong Underwriting Agreement and the International Underwriting Agreement becoming and remaining unconditional and not having been terminated in accordance with the terms of the respective agreements, in each case on or before the dates and times specified in the respective agreements. in each case on or before the dates and times specified in the Underwriting Agreements (unless to the extent such conditions are validly waived on or before such dates and times) and in any event not later than the date which is 30 days after the date of this prospectus. The Offer Shares are being offered at the Offer Price which is expected to be fixed between the Sole Global Coordinator (for itself and on behalf of the Underwriters) and our Company (for ourselves and on behalf of the Selling Shareholder) on the Price Determination Date, which is expected to be on or around Friday, 19 June 2015 and in any event, not later than Tuesday, 23 June 2015. If, for any reason, the Offer Price is not agreed between the Sole Global Coordinator (for itself and on behalf of the Underwriters) and our Company (for ourselves and on behalf of the Selling Shareholder) by Tuesday, 23 June 2015, the Global Offering will not proceed and will lapse. The consummation of each of the Hong Kong Public Offering and the International Placing is conditional upon, among other things, the other offering becoming unconditional and not having been terminated in accordance with its terms. If the above conditions are not fulfilled or waived prior to the times and dates specified, the Global Offering will lapse and the Stock Exchange will be notified immediately. We will cause a notice of the lapse of the Hong Kong Public Offering to be published in the South China Morning Post (in English) and the Hong Kong Economic Times (in Chinese) and on the website of the Stock Exchange at www.hkexnews.hk and our website at www.vital-mobile.com on the next Business Day following such lapse. In such eventuality, all application monies will be returned, without interest, on the terms set out in the section headed “How to apply for the Hong Kong Public Offer Shares” of this prospectus. In the meantime, all application monies will be held in separate bank account(s) with the receiving bank(s) or other bank(s) in Hong Kong licensed under the Banking Ordinance (Chapter 155 of the Laws of Hong Kong) (as amended).

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STRUCTURE AND CONDITIONS OF THE GLOBAL OFFERING Share certificates for the Offer Shares are expected to be issued on Thursday, 25 June 2015 but will only become valid certificates of title at 8:00 a.m. on Friday, 26 June 2015 provided that (i) the Global Offering has become unconditional in all respects; and (ii) the right of termination as described in the subsection headed “Underwriting — Underwriting arrangements and expenses — Hong Kong Public Offering — Grounds for termination” in this prospectus has not been exercised. Investors who trade Shares prior to the receipt of share certificates or prior to the share certificates bearing valid certificates of title do so entirely at their own risk. HONG KONG PUBLIC OFFERING Number of Offer Shares initially offered Our Company is initially offering 21,250,000 Offer Shares for subscription by the public in Hong Kong at the Offer Price, representing 10% of the total number of Offer Shares initially available under the Global Offering (assuming that the Over-allotment Option is not exercised). Subject to the re-allocation of Shares between (i) the International Placing; and (ii) the Hong Kong Public Offering as mentioned below, the number of the Hong Kong Public Offer Shares will represent approximately 10% of our Company’s issued share capital immediately after completion of the Global Offering and Capitalisation Issue assuming that the Over-allotment Option is not exercised. Completion of the Hong Kong Public Offering is subject to the conditions as set out in the subsection headed “Conditions of the Global Offering” in this section of the prospectus. Allocation Allocation of Offer Shares to investors under the Hong Kong Public Offering will be based solely on the level of valid applications received under the Hong Kong Public Offering. The basis of allocation may vary, depending on the number of Hong Kong Public Offer Shares validly applied for by applicants. Such allocation could, where appropriate, consist of balloting, which would mean that some applicants may receive a higher allocation than others who have applied for the same number of Hong Kong Public Offer Shares, and those applicants who are not successful in the ballot may not receive any Hong Kong Public Offer Shares. The total number of Offer Shares available under the Hong Kong Public Offering (after taking into account of any re-allocation of Offer Shares between the Hong Kong Public Offering and the International Placing) is to be divided into two pools (subject to adjustment of odd lot size) for allocation purposes: pool A and pool B. The Hong Kong Public Offer Shares in pool A will be allocated on an equitable basis to applicants who have applied for Hong Kong Public Offer Shares with an aggregate price of HK$5 million or below (excluding the brokerage, SFC transaction levy and Stock Exchange trading fee payable). The Hong Kong Public Offer Shares in pool B will be allocated on an equitable basis to applicants who have applied for Hong Kong Public Offer Shares with an aggregate price of more than HK$5 million (excluding the brokerage, SFC transaction levy and Stock Exchange trading fee payable). Investors should be aware that applications in pool A and applications in pool B may receive different allocation ratios. If the Hong Kong Public Offer Shares in one (but not both) of the pools are under-subscribed, the surplus Hong Kong Public Offer Shares will be transferred to the other pool to satisfy demand in that other pool and be allocated accordingly. For the purpose of this paragraph only, the “price” for Offer Shares means the price payable on application therefor (without regard to the Offer Price as finally determined). Applicants can only receive an allocation of Hong Kong Public Offer Shares from either pool A or pool B but not from both pools and can only apply for Hong Kong Public Offer Shares in either pool A or pool B. Multiple or suspected multiple applications within either pool or between pools and any application for more than 10,625,000 Hong Kong Public Offer Shares (being 50% of the initial number of Hong Kong Public Offer Shares) are liable to be rejected.

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STRUCTURE AND CONDITIONS OF THE GLOBAL OFFERING Re-allocation The allocation of the Offer Shares between the Hong Kong Public Offering and the International Placing is subject to adjustment. If the number of Offer Shares validly applied for under the Hong Kong Public Offering represents (i) 15 times or more but less than 50 times; (ii) 50 times or more but less than 100 times; and (iii) 100 times or more, of the number of Offer Shares initially available under the Hong Kong Public Offering, then Offer Shares will be re-allocated to the Hong Kong Public Offering from the International Placing so that the total number of Offer Shares available under the Hong Kong Public Offering will be increased to 63,750,000 Offer Shares (in the case of (i)), 85,000,000 Offer Shares (in the case of (ii)) and 106,250,000 Offer Shares (in the case of (iii)) representing approximately 30%, 40% and 50% of the Offer Shares initially available under the Global Offering, respectively (before any exercise of the Over-allotment Option) in each case, the additional Offer Shares re-allocated to the Hong Kong Public Offering will be allocated between pool A and pool B and the number of Offer Shares allocated to the International Placing will be correspondingly reduced, in such manner as the Sole Global Coordinator deems appropriate. In addition, in certain prescribed circ*mstances, the Sole Global Coordinator may, at its sole and absolute discretion, re-allocate International Placing Shares as it deems appropriate from the International Placing to the Hong Kong Public Offering to satisfy in whole or in part the excess valid application in the Hong Kong Public Offering. If the Hong Kong Public Offer Shares are not fully subscribed for, the Sole Global Coordinator may, at its sole and absolute discretion, re-allocate all or any unsubscribed Hong Kong Public Offer Shares to the International Placing, in such proportion as the Sole Global Coordinator deems appropriate. Applications The Sole Global Coordinator (on behalf of the Underwriters) may require any investor who has been offered Shares under the International Placing, and who has made an application under the Hong Kong Public Offering, to provide sufficient information to the Sole Global Coordinator so as to allow them to identify the relevant applications under the Hong Kong Public Offering and to ensure that it is excluded from any application for Shares under Hong Kong Public Offering. Each applicant under the Hong Kong Public Offering will also be required to give an undertaking and confirmation in the Application Form submitted by him that he and any person(s) for whose benefit he is making the application have not applied for or taken up, or indicated an interest for, and will not apply for or take up, or indicate an interest for, any Offer Shares under the International Placing, and such applicant’s application is liable to be rejected if the said undertaking and/or confirmation is breached and/or untrue (as the case may be) or it has been or will be placed or allocated (including conditionally and/or provisionally) Offer Shares under the International Placing. The listing of the Offer Shares on the Stock Exchange is sponsored by the Sole Sponsor. Applicants under the Hong Kong Public Offering are required to pay, on application, the maximum price of HK$3.06 per Offer Share in addition to any brokerage, SFC transaction levy and Stock Exchange trading fee payable on each Offer Share. If the Offer Price, as finally determined in the manner described in the subsection headed “Price determination of the Global Offering” in this section of the prospectus, is less than the maximum price of HK$3.06 per Share, appropriate refund payments (including the brokerage, SFC transaction levy and Stock Exchange trading fee attributable to the surplus application monies) will be made to successful applicants, without interest. Further details are set out in the section headed “How to apply for the Hong Kong Public Offer Shares” of this prospectus. References in this prospectus to applications, Application Forms, application monies or the procedure for application relate solely to the Hong Kong Public Offering.

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STRUCTURE AND CONDITIONS OF THE GLOBAL OFFERING INTERNATIONAL PLACING Number of Offer Shares offered The number of Offer Shares to be initially offered for subscription under the International Placing will be new 191,250,000 Shares, representing approximately 90% of the total number of the Offer Shares initially available under the Global Offering (subject to re-allocation and the Over-allotment Option). Subject to any re-allocation of Offer Shares between the International Placing and the Hong Kong Public Offering, the International Placing Shares will represent approximately 22.5% of our enlarged issued share capital immediately after completion of the Global Offering and Capitalisation Issue assuming the Over-allotment Option is not exercised. The International Placing is subject to the same conditions as stated in the subsection headed “Conditions of the Global Offering” in this section of the prospectus. Allocation The International Placing will include selective marketing of Offer Shares to professional, institutional and other investors anticipated to have a sizeable demand for such Offer Shares in Hong Kong and other jurisdictions outside the United States in reliance on Regulation S. Professional investors generally include brokers, dealers, companies (including fund managers) whose ordinary business involves dealing in shares and other securities and corporate entities which regularly invest in shares and other securities. Allocation of Offer Shares pursuant to the International Placing will be effected in accordance with the book-building process described in the subsection headed “Price determination of the Global Offering” in this section of the prospectus and based on a number of factors, including the level and timing of demand, the total size of the relevant investor’s invested assets or equity assets in the relevant sector and whether or not it is expected that the relevant investor is likely to buy further Offer Shares, and/or hold or sell its Offer Shares, after the listing of the Offer Shares on the Stock Exchange. Such allocation is intended to result in a distribution of the Shares on a basis which would lead to the establishment of a solid professional and institutional shareholder base to the benefit of our Company and our Shareholders as a whole. Over-allotment Option In connection with the Global Offering, our Company is expected to grant an Over-allotment Option to the Sole Global Coordinator (on behalf of International Underwriters) that is exercisable at the sole discretion of the Sole Global Coordinator (on behalf of the International Underwriters). Pursuant to the Over-allotment Option, the Sole Global Coordinator has the right, exercisable at any time from the date of the International Underwriting Agreement until 30 days from the date of the last day of lodging application under the Hong Kong Public Offering, to require our Company to allot and issue up to 31,875,000 additional New Shares, representing 15% of the number of the Offer Shares initially available under the Global Offering, at the same price per Share under the International Placing to cover, among other things, over-allocation in the International Placing, if any. If the Over-allotment Option is exercised in full, the additional Offer Shares will represent approximately 3.75% of our enlarged share capital immediately following the completion of the Global Offering and Capitalisation Issue and the exercise of the Over-allotment Option. In the event that the Over-allotment Option is exercised, an announcement will be made in accordance with the Listing Rules.

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STRUCTURE AND CONDITIONS OF THE GLOBAL OFFERING STABILISATION ACTION Stabilisation is a practice used by underwriters in some markets to facilitate the distribution of securities. To stabilise, the underwriters may bid for, or purchase, the new securities in the secondary market during a specified period of time to retard and, if possible, prevent any decline in the market price of the securities below the offer price. In Hong Kong and a number of other jurisdictions, activity aimed at reducing the market price is prohibited and the price at which stabilisation is effected is not permitted to exceed the offer price. The Sole Global Coordinator has been appointed by us as the stabilising manager (“Stabilising Manager”) for the purposes of the Global Offering in accordance with the Securities and Futures (Price Stabilising) Rules made under the SFO. In connection with the Global Offering, the Stabilising Manager, its affiliates or any person acting for it, on behalf of the Underwriters, may, to the extent permitted by applicable laws of Hong Kong or elsewhere, over-allocate or effect any other transactions with a view to stabilising or maintaining the market price of our Shares at a level higher than that which might otherwise prevail in the open market for a limited period beginning on the Listing Date and expected to end on Sunday, 19 July 2015, being the 30th day after the last day for lodging of applications under the Hong Kong Public Offering. Such transactions may be effected in all jurisdictions where it is permissible to do so, in each case in compliance with all applicable laws and regulatory requirements. Any market purchases of the Shares may be effected on any stock exchange, including the Stock Exchange, any over-the-counter market or otherwise, provided that they are made in compliance with all applicable laws and regulatory requirements. However, there is no obligation on the Stabilising Manager its affiliates or any person acting for it to conduct any such stabilising activity, which if commenced, will be done at the sole and absolute discretion of the Sole Global Coordinator and may be discontinued at any time. Any such stabilising activity is required to be brought to an end on the 30th day after the last day for the lodging of applications under the Hong Kong Public Offering. The number of Shares that may be over-allocated will not exceed the number of Shares that may be allotted and issued by our Company under the Over-allotment Option, namely 31,875,000 Shares in aggregate, which is approximately 15% of the Shares initially available under the Global Offering. Stabilising Manager, its affiliates or any person acting for it, may take all or any of the following stabilizing action in Hong Kong during the stabilisation period: (i)

purchase, or agree to purchase, any of the Shares or offer or attempt to do so for the sole purpose of preventing or minimizing any reduction in the market price of the Shares;

(ii)

in connection with any action described in paragraph (i) above; (a)

(1)

over-allocation; or

(2)

selling or agreeing to sell the Shares so as to establish a short position in them,

for the purpose of preventing or minimizing any reduction in the market price of the Shares; (b)

exercise the Over-allotment Option and subscribe for, or agreeing to subscribe for, the Shares pursuant to the Over-allotment Option in order to close out any position established under paragraph (a) above;

(c)

sell or agree to sell any Shares by it in the course of the stabilising action in order to liquidate any position that has been established by such actions; and

(d)

offer or attempt to do anything described in (a)(2), (b) and (c) above.

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STRUCTURE AND CONDITIONS OF THE GLOBAL OFFERING Specifically, prospective applicants for and investors in the Shares should note that: •

the Stabilising Manager, its affiliates or any person acting for it, may, in connection with the stabilising action, maintain a long position in the Shares, and there is no certainty regarding the extent to which and the time period for which the Stabilising Manager, its affiliates or any person acting for it, will maintain such a position; Investors should be warned of the possible impact of any liquidation of such long position by the Stabilising Manager, its affiliates or any other person acting for them, may have an adverse impact on the market price of the Shares;

•

stabilising action cannot be used to support the price of the Shares for longer than the stabilising period which will begin on the Listing Date following announcement of the Offer Price, and is expected to expire on Sunday, 19 July 2015, being the 30th day after the last date for lodging applications under the Hong Kong Public Offering. After this date, when no further stabilising action may be taken, demand for the Shares, and therefore the price of the Shares, could fall;

•

the price of the Shares cannot be assured to stay at or above the Offer Price either during or after the stabilising period by taking of any stabilising action; and

•

stabilising bids may be made or transactions effected in the course of the stabilising action at any price at or below the Offer Price, which means that stabilising bids may be made or transactions effected at a price below the price paid by applicants for, or investors in, the Shares.

Our Company will ensure or procure that a public announcement in compliance with the Securities and Futures (Price Stabilizing) Rules will be made within seven days of the expiration of the stabilising period. In connection with the Global Offering, the Sole Global Coordinator may over-allocate up to and not more than an aggregate of 31,875,000 additional Shares and cover such over-allocations by exercising the Over-allotment Option, which will be exercisable by the Sole Global Coordinator (on behalf of the International Underwriters) at its sole discretion, or by making purchases in the secondary market at prices that do not exceed the Offer Price or through stock borrowing arrangements or a combination of these means. STOCK BORROWING ARRANGEMENT In order to facilitate settlement of over-allocations in the International Placing and for the purpose of stabilising of the market price of the Shares (if any), the Sole Global Coordinator may borrow up to 31,875,000 Shares, equivalent to the maximum number of Shares to be issued on the exercise of the Over-allotment Option in full, pursuant to the Stock Borrowing Agreement. The loan of Shares by the Sole Global Coordinator pursuant to the Stock Borrowing Agreement shall not be subject to the restrictions under Rule 10.07(1)(a) of the Listing Rules which restricts the disposal of Shares by our Controlling Shareholders subsequent to the date of this prospectus, subject to compliance with the following requirements in accordance with the provisions of Rule 10.07(3) of the Listing Rules: (a)

the Stock Borrowing Agreement will be for the sole purpose of covering any short position prior to the exercise of the Over-allotment Option in connection with the International Placing;

(b)

the maximum number of Shares which may be borrowed from Winmate must not exceed the maximum number of Shares which may be issued upon the full exercise of the Over-allotment Option;

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STRUCTURE AND CONDITIONS OF THE GLOBAL OFFERING (c)

the same number of Shares so borrowed must be returned to Winmate or its nominees, as the case may be, on or before the third Business Day following the earlier of (i) the last day for exercising the Over-allotment Option, and (ii) the date on which the Over-allotment Option is exercised in full;

(d)

the borrowing of Shares pursuant to the Stock Borrowing Agreement will be effected in compliance with all applicable Listing Rules, laws and other regulatory requirements; and

(e)

no payments will be made to Winmate by the Stabilising Manager in relation to the Stock Borrowing Agreement.

PRICE DETERMINATION OF THE GLOBAL OFFERING The Offer Price is expected to be fixed on the Price Determination Date, which is expected to be on or around Friday, 19 June 2015, and in any event on or before Tuesday, 23 June 2015, by agreement between the Sole Global Coordinator (for itself and on behalf of the Underwriters) and our Company (for ourselves and on behalf of the Selling Shareholder). The Offer Price will be not more than HK$3.06 per Share and is expected to be not less than HK$2.22 per Share unless otherwise announced, as further explained below, not later than the morning of the last day for lodging applications under the Hong Kong Public Offering. Prospective investors should be aware that the Offer Price to be determined on the Price Determination Date may be, but is not expected to be, lower than the indicative Offer Price range stated in this prospectus. The Sole Global Coordinator, for itself and on behalf of the Underwriters, may, where considered appropriate, based on the level of interest expressed by prospective professional, institutional and other investors during the book-building process, and with the consent of our Company, reduce the number of Offer Shares offered in the Global Offering and/or the indicative Offer Price range below that stated in this prospectus at any time on or prior to the morning of the last day for lodging applications under the Hong Kong Public Offering. In such a case, we will, as soon as practicable following the decision to make such reduction, and in any event not later than the morning of the day which is the last day for lodging applications under the Hong Kong Public Offering, cause to be published in the South China Morning Post (in English) and the Hong Kong Economic Times (in Chinese), and on the website of the Stock Exchange at www.hkexnews.hk and our website at www.vital-mobile.com notices of the reduction in the number of Offer Shares being offered under the Global Offering and/or the indicative Offer Price range. Upon issue of such a notice, the number of Offer Shares offered in the Global Offering and/or the revised Offer Price range will be final and conclusive and the offer price, if agreed upon by the Sole Global Coordinator (for itself and on behalf of the Underwriters) and our Company (for ourselves and on behalf of the Selling Shareholder), will be fixed within such revised offer price range. Applicants should have regard to the possibility that any announcement of a reduction in the number of Offer Shares being offered under the Global Offering and/or the indicative offer price range may not be made until the day which is the last day for lodging applications under the Hong Kong Public Offering. Such notice will also include confirmation or revision, as appropriate, of the working capital statement and the Global Offering statistics as currently set out in this prospectus, and any other financial information which may change as a result of such reduction. In the absence of any such notice so published, the Offer Price, if agreed upon by our Company (for ourselves and on behalf of the Selling Shareholder) with the Sole Global Coordinator (for itself and on behalf of the Underwriters), will under no circ*mstances be set outside the Offer Price range as stated in this prospectus.

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STRUCTURE AND CONDITIONS OF THE GLOBAL OFFERING The final Offer Price, the levels of indication of interest in the Global Offering, the results of applications and the basis of allotment of Offer Shares under the Hong Kong Public Offering, are expected to be announced on Thursday, 25 June 2015 in the manner set out in the subsection headed “How to apply for the Hong Kong Public Offer Shares — Publication of Results” in this prospectus. DEALING Assuming that the Hong Kong Public Offering becomes unconditional at or before 8:00 a.m. in Hong Kong on Friday, 26 June 2015, it is expected that dealings in the Offer Shares on the Stock Exchange will commence at 9:00 a.m. on Friday, 26 June 2015, and will be traded in board lots of 1,000 Shares under the stock code 6133.

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HOW TO APPLY FOR THE HONG KONG PUBLIC OFFER SHARES 1.

HOW TO APPLY

If you apply for Hong Kong Public Offer Shares, then you may not apply for or indicate an interest for International Placing Shares. To apply for Hong Kong Public Offer Shares, you may: •

use a WHITE or YELLOW Application Form;

•

apply online via the HK eIPO White Form service at www.hkeipo.hk; or

•

electronically cause HKSCC Nominees to apply on your behalf.

None of you or your joint applicant(s) may make more than one application, except where you are a nominee and provide the required information in your application. The Company, the Sole Global Coordinator, the HK eIPO White Form Service Provider and their respective agents may reject or accept any application in full or in part for any reason at their discretion. 2.

WHO CAN APPLY

You can apply for Hong Kong Public Offer Shares on a WHITE or YELLOW Application Form if you or the person(s) for whose benefit you are applying: •

are 18 years of age or older;

•

have a Hong Kong address;

•

are outside the United States, and are not a United States Person (as defined in Regulation S under the U.S. Securities Act); and

•

are not a legal or natural person of the PRC.

If you apply online through the HK eIPO White Form service, in addition to the above, you must also: (i) have a valid Hong Kong identity card number and (ii) provide a valid e-mail address and a contact telephone number. If you are a firm, the application must be in the individual members’ names. If you are a body corporate, the application form must be signed by a duly authorised officer, who must state his representative capacity, and stamped with your corporation’s chop. If an application is made by a person under a power of attorney, the Sole Global Coordinator may accept it at their discretion and on any conditions they think fit, including evidence of the attorney’s authority. The number of joint applicants may not exceed four and they may not apply by means of HK eIPO White Form service for the Hong Kong Public Offer Shares.

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HOW TO APPLY FOR THE HONG KONG PUBLIC OFFER SHARES Unless permitted by the Listing Rules, you cannot apply for any Hong Kong Public Offer Shares if you are:

•

an existing beneficial owner of Shares in the Company and/or any its subsidiaries;

•

a Director or chief executive officer of the Company and/or any of its subsidiaries;

•

a close associate (as defined in the Listing Rules) of any of the above;

•

a core connected person (as defined in the Listing Rules) of the Company or will become a core connected person of the Company immediately upon completion of the Global Offering; and

•

have been allocated or have applied for any International Placing Shares or otherwise participate in the International Placing.

APPLYING FOR HONG KONG PUBLIC OFFER SHARES Which Application Channel to Use For Hong Kong Public Offer Shares to be issued in your own name, use a WHITE Application Form or apply online through www.hkeipo.hk. For Hong Kong Public Offer Shares to be issued in the name of HKSCC Nominees and deposited directly into CCASS to be credited to your or a designated CCASS Participant’s stock account, use a YELLOW Application Form or electronically instruct HKSCC via CCASS to cause HKSCC Nominees to apply for you. Where to Collect the Application Forms You can collect a WHITE Application Form and a prospectus during normal business hours between from 9:00 a.m. on Tuesday, 16 June 2015 until 12:00 noon on Friday, 19 June 2015 from: (i)

any of the following addresses of the Hong Kong Underwriters: Haitong International Securities Company Limited 22/F, Li Po Chun Chambers 189 Des Voeux Road Central Hong Kong RHB OSK Securities HK Limited 12/F World-wide House 19 Des Voeux Road Central Hong Kong Convoy Investment Services Limited Unit C, 24/F, @CONVOY 169 Electric Road North Point Hong Kong

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HOW TO APPLY FOR THE HONG KONG PUBLIC OFFER SHARES Bright Smart Securities International (H.K.) Limited 10/F, Wing On House 71 Des Voeux Road Central Hong Kong Astrum Capital Management Limited 11/F, 122 QRC 122–126 Queen’s Road Central Hong Kong (ii)

any of the following branches of Standard Chartered Bank (Hong Kong) Limited: District

Branch

Address

Hong Kong Island

Des Voeux Road Branch

Standard Chartered Bank Building, 4-4A, Des Voeux Road Central, Central Shop C2 on G/F and 1/F to 2/F, Lee Wing Building, No. 156-162 Hennessy Road, Wanchai Shop G, G/F, North Point Centre, 284 King’s Road, North Point G/F to 2/F, Yee Wah Mansion, 38–40A Yee Wo Street, Causeway Bay

Wanchai Southorn Branch

North Point Centre Branch

Causeway Bay Branch

Kowloon

Kwun Tong Hoi Yuen Road Branch Mongkok Branch

Tsimshatsui Branch Mei Foo Manhattan Branch

New Territories

Tuen Mun Town Plaza Branch

Shatin Plaza Branch

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G/F, f*ck Cheong Building, No. 63 Hoi Yuen Road, Kwun Tong Shop B, G/F, 1/F & 2/F, 617-623 Nathan Road, Mongkok G/F, 8A-10 Granville Road, Tsimshatsui Shop Nos.07 & 09, Ground Floor, Mei Foo Plaza, Mei Foo Sun Chuen Shop No. G047–G052, Tuen Mun Town Plaza Phase I, Tuen Mun Shop No. 8, Shatin Plaza, 21-27 Shatin Centre Street, Shatin

HOW TO APPLY FOR THE HONG KONG PUBLIC OFFER SHARES You can collect a YELLOW Application Form and a copy of the prospectus during normal business hours from 9:00 a.m. on Tuesday, 16 June 2015 until 12:00 noon on Friday, 19 June 2015, from the Depository Counter of HKSCC at 1/F, One & Two Exchange Square, 8 Connaught Place, Central, Hong Kong; or from your stockbroker. Time for Lodging Application Forms Your completed WHITE or YELLOW Application Form, together with a cheque or a banker’s cashier order attached and marked payable to “Horsford Nominees Limited — Vital Mobile Public Offer” for the payment, should be deposited in the special collection boxes provided at any of the branches of the receiving banks listed above, at the following times: Tuesday, Wednesday, Thursday, Friday,

16 17 18 19

June June June June

2015 2015 2015 2015

— — — —

9:00 9:00 9:00 9:00

a.m. a.m. a.m. a.m.

to to to to

5:00 p.m. 5:00 p.m. 5:00 p.m. 12:00 noon

The application lists will be open from 11:45 a.m. to 12:00 noon on 19 June 2015, the last application day or such later time as described in the subsection headed “Effect of Bad Weather on the Opening of the Applications Lists” in this section of the prospectus. 4.

TERMS AND CONDITIONS OF AN APPLICATION

Follow the detailed instructions in the Application Form carefully; otherwise, your application may be rejected. By submitting an Application Form or applying through the HK eIPO White Form service, among other things, you: (i)

undertake to execute all relevant documents and instruct and authorise the Company and/or the Sole Global Coordinator (or their agents or nominees), as agents of the Company, to execute any documents for you and to do on your behalf all things necessary to register any Hong Kong Public Offer Shares allocated to you in your name or in the name of HKSCC Nominees as required by the Articles of Association;

(ii)

agree to comply with the Companies (Winding Up and Miscellaneous Provisions) Ordinance and the Articles of Association;

(iii) confirm that you have read the terms and conditions and application procedures set out in this prospectus and in the Application Form and agree to be bound by them; (iv) confirm that you have received and read this prospectus and have only relied on the information and representations contained in this prospectus in making your application and will not rely on any other information or representations except those in any supplement to this prospectus; (v)

confirm that you are aware of the restrictions on the Global Offering in this prospectus;

(vi) agree that none of the Company, the Sole Global Coordinator, the Underwriters, their respective directors, officers, employees, partners, agents, advisers and any other parties involved in the Global Offering is or will be liable for any information and representations not in this prospectus (and any supplement to it);

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HOW TO APPLY FOR THE HONG KONG PUBLIC OFFER SHARES (vii) undertake and confirm that you or the person(s) for whose benefit you have made the application have not applied for or taken up, or indicated an interest for, and will not apply for or take up, or indicate an interest for, any Offer Shares under the International Placing nor participated in the International Placing; (viii) agree to disclose to the Company, our Hong Kong Branch Share Registrar, receiving banks, the Sole Global Coordinator, the Underwriters and/or their respective advisers and agents any personal data which they may require about you and the person(s) for whose benefit you have made the application; (ix) if the laws of any place outside Hong Kong apply to your application, agree and warrant that you have complied with all such laws and none of the Company, the Selling Shareholder, the Sole Sponsor, the Sole Global Coordinator and the Underwriters nor any of their respective officers or advisers will breach any law outside Hong Kong as a result of the acceptance of your offer to purchase, or any action arising from your rights and obligations under the terms and conditions contained in this prospectus and the Application Form; (x)

agree that once your application has been accepted, you may not rescind it because of an innocent misrepresentation;

(xi) agree that your application will be governed by the laws of Hong Kong; (xii) represent, warrant and undertake that (i) you understand that the Hong Kong Public Offer Shares have not been and will not be registered under the U.S. Securities Act; and (ii) you and any person for whose benefit you are applying for the Hong Kong Public Offer Shares are outside the United States (as defined in Regulation S) or are a person described in paragraph (h)(3) of Rule 902 of Regulation S; (xiii) warrant that the information you have provided is true and accurate; (xiv) agree to accept the Hong Kong Public Offer Shares applied for, or any lesser number allocated to you under the application; (xv) authorise the Company to place your name(s) or the name of the HKSCC Nominees, on the Company’s register of members as the holder(s) of any Hong Kong Public Offer Shares allocated to you, and the Company and/or its agents to send any share certificate(s) and/or any e-Auto Refund payment instructions and/or any refund cheque(s) to you or the firstnamed applicant for joint application by ordinary post at your own risk to the address stated on the application, unless you have chosen to collect the share certificate(s) and/or refund cheque(s) in person; (xvi) declare and represent that this is the only application made and the only application intended by you to be made to benefit you or the person for whose benefit you are applying; (xvii) understand that the Company and the Sole Global Coordinator will rely on your declarations and representations in deciding whether or not to make any allotment of any of the Hong Kong Public Offer Shares to you and that you may be prosecuted for making a false declaration; (xviii) (if the application is made for your own benefit) warrant that no other application has been or will be made for your benefit on a WHITE or YELLOW Application Form or by giving electronic application instructions to HKSCC or to the HK eIPO White Form Service Provider by you or by any one as your agent or by any other person; and

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HOW TO APPLY FOR THE HONG KONG PUBLIC OFFER SHARES (xix) (if you are making the application as an agent for the benefit of another person) warrant that (i) no other application has been or will be made by you as agent for or for the benefit of that person or by that person or by any other person as agent for that person on a WHITE or YELLOW Application Form or by giving electronic application instructions to HKSCC; and (ii) you have due authority to sign the Application Form or give electronic application instructions on behalf of that other person as their agent. Additional Instructions for Yellow Application Form You may refer to the Yellow Application Form for details. 5.

APPLYING THROUGH HK eIPO WHITE FORM SERVICE General Individuals who meet the criteria in “Who can apply” section, may apply through the HK eIPO White Form service for the Offer Shares to be allotted and registered in their own names through the designated website at www.hkeipo.hk. Detailed instructions for application through the HK eIPO White Form service are on the designated website. If you do not follow the instructions, your application may be rejected and may not be submitted to the Company. If you apply through the designated website, you authorise the HK eIPO White Form Service Provider to apply on the terms and conditions in this prospectus, as supplemented and amended by the terms and conditions of the HK eIPO White Form service. Time for Submitting Applications under the HK eIPO White Form You may submit your application to the HK eIPO White Form Service Provider at www.hkeipo.hk (24 hours daily, except on the last application day) from 9:00 a.m. on Tuesday, 16 June 2015 until 11:30 a.m. on Friday, 19 June 2015 and the latest time for completing full payment of application monies in respect of such applications will be 12:00 noon on Friday, 19 June 2015 or such later time as described in the subsection headed “Effect of Bad Weather on the Opening of the Applications Lists” in this section of the prospectus. No Multiple Applications If you apply by means of HK eIPO White Form, once you complete payment in respect of any electronic application instruction given by you or for your benefit through the HK eIPO White Form service to make an application for Hong Kong Public Offer Shares, an actual application shall be deemed to have been made. For the avoidance of doubt, giving an electronic application instruction under HK eIPO White Form more than once and obtaining different application reference numbers without effecting full payment in respect of a particular reference number will not constitute an actual application. If you are suspected of submitting more than one application through the HK eIPO White Form service or by any other means, all of your applications are liable to be rejected.

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HOW TO APPLY FOR THE HONG KONG PUBLIC OFFER SHARES Section 40 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance For the avoidance of doubt, the Company and all other parties involved in the preparation of this prospectus acknowledge that each applicant who gives or causes to give electronic application instructions is a person who may be entitled to compensation under Section 40 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (as applied by Section 342E of the Companies (Winding Up and Miscellaneous Provisions) Ordinance). 6.

APPLYING BY GIVING ELECTRONIC APPLICATION INSTRUCTIONS TO HKSCC VIA CCASS General CCASS Participants may give electronic application instructions to apply for the Hong Kong Public Offer Shares and to arrange payment of the money due on application and payment of refunds under their participant agreements with HKSCC and the General Rules of CCASS and the CCASS Operational Procedures. If you are a CCASS Investor Participant, you may give these electronic application instructions through the CCASS Phone System by calling 2979 7888 or through the CCASS Internet System (https://ip.ccass.com) (using the procedures in HKSCC’s “An Operating Guide for Investor Participants” in effect from time to time). HKSCC can also input electronic application instructions for you if you go to: Hong Kong Securities Clearing Company Limited Customer Service Centre 1/F, One & Two Exchange Square 8 Connaught Place, Central Hong Kong and complete an input request form. You can also collect a prospectus from this address. If you are not a CCASS Investor Participant, you may instruct your broker or custodian who is a CCASS Clearing Participant or a CCASS Custodian Participant to give electronic application instructions via CCASS terminals to apply for the Hong Kong Public Offer Shares on your behalf. You will be deemed to have authorised HKSCC and/or HKSCC Nominees to transfer the details of your application to the Company, the Sole Global Coordinator and our Hong Kong Branch Share Registrar. Giving Electronic Application Instructions to HKSCC via CCASS Where you have given electronic application instructions to apply for the Hong Kong Public Offer Shares and a WHITE Application Form is signed by HKSCC Nominees on your behalf: (i)

HKSCC Nominees will only be acting as a nominee for you and is not liable for any breach of the terms and conditions of the WHITE Application Form or this prospectus;

(ii)

HKSCC Nominees will do the following things on your behalf:

– 277 –

HOW TO APPLY FOR THE HONG KONG PUBLIC OFFER SHARES •

agree that the Hong Kong Public Offer Shares to be allotted shall be issued in the name of HKSCC Nominees and deposited directly into CCASS for the credit of the CCASS Participant’s stock account on your behalf or your CCASS Investor Participant’s stock account;

•

agree to accept the Hong Kong Public Offer Shares applied for or any lesser number allocated;

•

undertake and confirm that you have not applied for or taken up, will not apply for or take up, or indicate an interest for, any Offer Shares under the International Placing;

•

declare that only one set of electronic application instructions has been given for your benefit;

•

(if you are an agent for another person) declare that you have only given one set of electronic application instructions for the other person’s benefit and are duly authorised to give those instructions as their agent;

•

confirm that you understand that the Company, the Directors and the Sole Global Coordinator will rely on your declarations and representations in deciding whether or not to make any allotment of any of the Hong Kong Public Offer Shares to you and that you may be prosecuted if you make a false declaration;

•

authorise the Company to place HKSCC Nominees’ name on the Company’s register of members as the holder of the Hong Kong Public Offer Shares allocated to you and to send share certificate(s) and/or refund monies under the arrangements separately agreed between us and HKSCC;

•

confirm that you have read the terms and conditions and application procedures set out in this prospectus and agree to be bound by them;

•

confirm that you have received and/or read a copy of this prospectus and have relied only on the information and representations in this prospectus in causing the application to be made, save as set out in any supplement to this prospectus;

•

agree that none of the Company, the Selling Shareholder, the Sole Sponsor, the Sole Global Coordinator, the Underwriters, their respective directors, officers, employees, partners, agents, advisers and any other parties involved in the Global Offering, is or will be liable for any information and representations not contained in this prospectus (and any supplement to it);

•

agree to disclose your personal data to the Company, our Hong Kong Branch Share Registrar, receiving banks, the Selling Shareholder, the Sole Sponsor, the Sole Global Coordinator, the Underwriters and/or its respective advisers and agents;

•

agree (without prejudice to any other rights which you may have) that once HKSCC Nominees’ application has been accepted, it cannot be rescinded for innocent misrepresentation;

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HOW TO APPLY FOR THE HONG KONG PUBLIC OFFER SHARES •

agree that any application made by HKSCC Nominees on your behalf is irrevocable before the fifth day after the time of the opening of the application lists (excluding any day which is Saturday, Sunday or public holiday in Hong Kong), such agreement to take effect as a collateral contract with us and to become binding when you give the instructions and such collateral contract to be in consideration of the Company agreeing that it will not offer any Hong Kong Public Offer Shares to any person before the fifth day after the time of the opening of the application lists (excluding any day which is Saturday, Sunday or public holiday in Hong Kong), except by means of one of the procedures referred to in this prospectus. However, HKSCC Nominees may revoke the application before the fifth day after the time of the opening of the application lists (excluding for this purpose any day which is a Saturday, Sunday or public holiday in Hong Kong) if a person responsible for this prospectus under Section 40 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance gives a public notice under that section which excludes or limits that person’s responsibility for this prospectus;

•

agree that once HKSCC Nominees’ application is accepted, neither that application nor your electronic application instructions can be revoked, and that acceptance of that application will be evidenced by the Company’s announcement of the Hong Kong Public Offering results;

•

agree to the arrangements, undertakings and warranties under the participant agreement between you and HKSCC, read with the General Rules of CCASS and the CCASS Operational Procedures, for the giving electronic application instructions to apply for Hong Kong Public Offer Shares;

•

agree with the Company, for itself and for the benefit of each Shareholder (and so that the Company will be deemed by its acceptance in whole or in part of the application by HKSCC Nominees to have agreed, for itself and on behalf of each of the Shareholders, with each CCASS Participant giving electronic application instructions) to observe and comply with the Companies (Winding Up and Miscellaneous Provisions) Ordinance and the Articles of Association; and

•

agree that your application, any acceptance of it and the resulting contract will be governed by the Laws of Hong Kong.

Effect of Giving Electronic Application Instructions to HKSCC via CCASS By giving electronic application instructions to HKSCC or instructing your broker or custodian who is a CCASS Clearing Participant or a CCASS Custodian Participant to give such instructions to HKSCC, you (and, if you are joint applicants, each of you jointly and severally) are deemed to have done the following things. Neither HKSCC nor HKSCC Nominees shall be liable to the Company or any other person in respect of the things mentioned below: •

instructed and authorised HKSCC to cause HKSCC Nominees (acting as nominee for the relevant CCASS Participants) to apply for the Hong Kong Public Offer Shares on your behalf;

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HOW TO APPLY FOR THE HONG KONG PUBLIC OFFER SHARES •

instructed and authorised HKSCC to arrange payment of the maximum Offer Price, brokerage, SFC transaction levy and the Stock Exchange trading fee by debiting your designated bank account and, in the case of a wholly or partially unsuccessful application and/or if the Offer Price is less than the maximum Offer Price per Offer Share initially paid on application, refund of the application monies (including brokerage, SFC transaction levy and the Stock Exchange trading fee) by crediting your designated bank account; and

•

instructed and authorised HKSCC to cause HKSCC Nominees to do on your behalf all the things stated in the WHITE Application Form and in this prospectus.

Minimum Purchase Amount and Permitted Numbers You may give or cause your broker or custodian who is a CCASS Clearing Participant or a CCASS Custodian Participant to give electronic application instructions for a minimum of 1,000 Hong Kong Public Offer Shares. Instructions for more than 1,000 Hong Kong Public Offer Shares must be in one of the numbers set out in the table in the Application Forms. No application for any other number of Hong Kong Public Offer Shares will be considered and any such application is liable to be rejected. Time for Inputting Electronic Application Instructions CCASS Clearing/Custodian Participants can input electronic application instructions at the following times on the following dates: Tuesday, Wednesday, Thursday, Friday,

16 17 18 19

June June June June

2015 2015 2015 2015

— — — —

9:00 8:00 8:00 8:00

a.m. to a.m. to a.m. to a.m. (1)

8:30 p.m. (1) 8:30 p.m. (1) 8:30 p.m. (1) to 12:00 noon

Note: 1.

These times are subject to change as HKSCC may determine from time to time with prior notification to CCASS Clearing/Custodian Participants.

CCASS Investor Participants can input electronic application instructions from 9:00 a.m. on Tuesday, 16 June 2015 until 12:00 noon on Friday, 19 June 2015 (24 hours daily, except the last application day). The latest time for inputting your electronic application instructions will be 12:00 noon on Friday, 19 June 2015, the last application day or such later time as described in the subsection headed “Effect of Bad Weather on the Opening of the Application Lists” in this section of the prospectus. No Multiple Applications If you are suspected of having made multiple applications or if more than one application is made for your benefit, the number of Hong Kong Public Offer Shares applied for by HKSCC Nominees will be automatically reduced by the number of Hong Kong Public Offer Shares for which you have given such instructions and/or for which such instructions have been given for your benefit. Any electronic application instructions to make an application for the Hong Kong Public Offer Shares given by you or for your benefit to HKSCC shall be deemed to be an actual application for the purposes of considering whether multiple applications have been made.

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HOW TO APPLY FOR THE HONG KONG PUBLIC OFFER SHARES Section 40 of the Companies (Winding Up and Micellaneous Provisions) Ordinance For the avoidance of doubt, the Company and all other parties involved in the preparation of this prospectus acknowledge that each CCASS Participant who gives or causes to give electronic application instructions is a person who may be entitled to compensation under Section 40 of the Companies (Winding Up and Micellaneous Provisions) Ordinance (as applied by Section 342E of the Companies (Winding Up and Micellaneous Provisions) Ordinance. Personal Data The section of the Application Form headed “Personal Data” applies to any personal data held by the Company, the Hong Kong Branch Share Registrar, the receiving bankers, the Sole Global Coordinator, the Underwriters and any of their respective advisers and agents about you in the same way as it applies to personal data about applicants other than HKSCC Nominees. 7.

WARNING FOR ELECTRONIC APPLICATIONS

The subscription of the Hong Kong Public Offer Shares by giving electronic application instructions to HKSCC is only a facility provided to CCASS Participants. Similarly, the application for Hong Kong Public Offer Shares through the HK eIPO White Form service is also only a facility provided by the HK eIPO White Form Service Provider to public investors. Such facilities are subject to capacity limitations and potential service interruptions and you are advised not to wait until the last application day in making your electronic applications. The Company, the Directors, the Sole Bookrunner, the Sole Sponsor, the Sole Global Coordinator and the Underwriters take no responsibility for such applications and provide no assurance that any CCASS Participant or person applying through the HK eIPO White Form service will be allotted any Hong Kong Public Offer Shares. To ensure that CCASS Investor Participants can give their electronic application instructions, they are advised not to wait until the last minute to input their instructions to the systems. In the event that CCASS Investor Participants have problems in the connection to CCASS Phone System/CASS Internet System for submission of electronic application instructions, they should either (i) submit a WHITE or YELLOW Application Form, or (ii) go to HKSCC’s Customer Service Centre to complete an input request form for electronic application instructions before 12:00 noon on Friday, 19 June 2015. 8.

HOW MANY APPLICATIONS CAN YOU MAKE

Multiple applications for the Hong Kong Public Offer Shares are not allowed except by nominees. If you are a nominee, in the box on the Application Form marked “For nominees” you must include: •

an account number; or

•

some other identification code,

for each beneficial owner or, in the case of joint beneficial owners, for each joint beneficial owner. If you do not include this information, the application will be treated as being made for your benefit. All of your applications will be rejected if more than one application on a WHITE or YELLOW Application Form or by giving electronic application instructions to HKSCC or through HK eIPO White Form service, is made for your benefit (including the part of the application made by HKSCC Nominees acting on electronic application instructions). If an application is made by an unlisted company and: •

the principal business of that company is dealing in securities; and

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HOW TO APPLY FOR THE HONG KONG PUBLIC OFFER SHARES •

you exercise statutory control over that company,

then the application will be treated as being for your benefit. “Unlisted company” means a company with no equity securities listed on the Stock Exchange. “Statutory control” means you:

•

control the composition of the board of directors of the company;

•

control more than half of the voting power of the company; or

•

hold more than half of the issued share capital of the company (not counting any part of it which carries no right to participate beyond a specified amount in a distribution of either profit or capital).

HOW MUCH ARE THE HONG KONG PUBLIC OFFER SHARES

The WHITE and YELLOW Application Forms have tables showing the exact amount payable for Shares. You must pay the maximum Offer Price, brokerage, SFC transaction levy and the Stock Exchange trading fee in full upon application for Shares under the terms set out in the Application Forms. You may submit an application using a WHITE or YELLOW Application Form or through the HK eIPO White Form service in respect of a minimum of 1,000 Hong Kong Public Offer Shares. Each application or electronic application instruction in respect of more than 1,000 Hong Kong Public Offer Shares must be in one of the numbers set out in the table in the Application Form, or as otherwise specified on the designated website at www.hkeipo.hk. If your application is successful, brokerage will be paid to the Exchange Participants, and the SFC transaction levy and the Stock Exchange trading fee are paid to the Stock Exchange (in the case of the SFC transaction levy, collected by the Stock Exchange on behalf of the SFC). For further details on the Offer Price, please refer to the subsection headed “Structure and Conditions of the Global Offering — Price Determination of the Global Offering” in this prospectus. 10.

EFFECT OF BAD WEATHER ON THE OPENING OF THE APPLICATION LISTS The application lists will not open if there is: •

a tropical cyclone warming signal number 8 or above; or

•

a “black” rainstorm warning,

in force in Hong Kong at any time between 9:00 a.m. and 12:00 noon on Friday, 19 June 2015. Instead they will open between 9:00 a.m. and 12:00 noon on the next Business Day which does not have either of those warnings in Hong Kong in force at any time between 9:00 a.m. and 12:00 noon.

– 282 –

HOW TO APPLY FOR THE HONG KONG PUBLIC OFFER SHARES If the application lists do not open and close on Friday, 19 June 2015 or if there is a tropical cyclone warning signal number 8 or above or a “black” rainstorm warning signal in force in Hong Kong that may affect the dates mentioned in the section headed “Expected timetable” of this prospectus, an announcement will be made in such event. 11.

PUBLICATION OF RESULTS

The Company expects to announce the final Offer Price, the level of indication of interest in the International Placing, the level of applications in the Hong Kong Public Offering and the basis of allocation of the Hong Kong Public Offer Shares on Thursday, 25 June 2015 in South China Morning Post (in English) and Hong Kong Economic Times (in Chinese) on the Company’s website at www.vital-mobile.com and the website of the Stock Exchange at www.hkexnews.hk. The results of allocations and the Hong Kong identity card/passport/Hong Kong business registration numbers of successful applicants under the Hong Kong Public Offering will be available at the times and date and in the manner specified below: •

in the announcement to be posted on the Company’s website at www.vital-mobile.com and the Stock Exchange’s website at www.hkexnews.hk by no later than 9:00 a.m. Thursday, 25 June 2015;

•

from the designated results of allocations website at www.tricor.com.hk/ipo/result with a “search by ID” function on a 24-hour basis from 8:00 a.m. on Thursday, 25 June 2015 to 12:00 midnight on Thursday, 2 July 2015;

•

by telephone enquiry line by calling 3691 8488 between 9:00 a.m. and 6:00 p.m. from Thursday, 25 June 2015 to Tuesday, 30 June 2015 (excluding Saturday, Sunday and Public Holiday);

•

in the special allocation results booklets which will be available for inspection during opening hours from Thursday, 25 June 2015 to Monday, 29 June 2015 at all the receiving bank branches and sub-branches.

If the Company accepts your offer to purchase (in whole or in part), which it may do by announcing the basis of allocations and/or making available the results of allocations publicly, there will be a binding contract under which you will be required to purchase the Hong Kong Public Offer Shares if the conditions of the Global Offering are satisfied and the Global Offering is not otherwise terminated. Further details are contained in the section headed “Structure and conditions of the Global Offering” of this prospectus. You will not be entitled to exercise any remedy of rescission for innocent misrepresentation at any time after acceptance of your application. This does not affect any other right you may have. 12.

CIRc*msTANCES IN WHICH YOU WILL NOT BE ALLOTTED OFFER SHARES

You should note the following situations in which the Hong Kong Public Offer Shares will not be allotted to you: (i)

If your application is revoked:

By completing and submitting an Application Form or giving electronic application instructions to HKSCC or to HK eIPO White Form Service Provider, you agree that your application or the application made by HKSCC Nominees on your behalf cannot be revoked on or before the fifth day after the time of the opening of the application lists (excluding for this purpose any day which is Saturday, Sunday or public holiday in Hong Kong). This agreement will take effect as a collateral contract with the Company.

– 283 –

HOW TO APPLY FOR THE HONG KONG PUBLIC OFFER SHARES Your application or the application made by HKSCC Nominees on your behalf may only be revoked on or before such fifth day if a person responsible for this prospectus under Section 40 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (as applied by Section 342E of the Companies (Winding Up and Miscellaneous Provisions) Ordinance) gives a public notice under that section which excludes or limits that person’s responsibility for this prospectus. If any supplement to this prospectus is issued, applicants who have already submitted an application will be notified that they are required to confirm their applications. If applicants have been so notified but have not confirmed their applications in accordance with the procedure to be notified, all unconfirmed applications will be deemed revoked. If your application or the application made by HKSCC Nominees on your behalf has been accepted, it cannot be revoked. For this purpose, acceptance of applications which are not rejected will be constituted by notification in the press of the results of allocation, and where such basis of allocation is subject to certain conditions or provides for allocation by ballot, such acceptance will be subject to the satisfaction of such conditions or results of the ballot respectively. (ii)

If the Company or its agents exercise their discretion to reject your application:

The Company, the Sole Global Coordinator, the HK eIPO White Form Service Provider and their respective agents and nominees have full discretion to reject or accept any application, or to accept only part of any application, without giving any reasons. (iii) If the allotment of Hong Kong Public Offer Shares is void: The allotment of Hong Kong Public Offer Shares will be void if the Listing Committee of the Stock Exchange does not grant permission to list the Shares either: •

within three weeks from the closing date of the application lists; or

•

within a longer period of up to six weeks if the Listing Committee notifies the Company of that longer period within three weeks of the closing date of the application lists.

(iv) If: •

you make multiple applications or suspected multiple applications;

•

you or the person for whose benefit you are applying have applied for or taken up, or indicated an interest for, or have been or will be placed or allocated (including conditionally and/or provisionally) Hong Kong Public Offer Shares and International Placing Shares;

•

your Application Form is not completed in accordance with the stated instructions;

•

your electronic application instructions through the HK eIPO White Form service are not completed in accordance with the instructions, terms and conditions on the designated website;

•

your payment is not made correctly or the cheque or banker’s cashier order paid by you is dishonoured upon its first presentation;

•

the Underwriting Agreements do not become unconditional or are terminated;

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HOW TO APPLY FOR THE HONG KONG PUBLIC OFFER SHARES

13.

•

the Company or the Sole Global Coordinator believe that by accepting your application, it or they would violate applicable securities or other laws, rules or regulations; or

•

your application is for more than 50% of the Hong Kong Public Offer Shares initially offered under the Hong Kong Public Offering.

REFUND OF APPLICATION MONIES

If an application is rejected, not accepted or accepted in part only, or if the Offer Price as finally determined is less than the maximum offer price per Offer Share (excluding brokerage, SFC transaction levy and the Stock Exchange trading fee thereon), or if the conditions of the Hong Kong Public Offering are not fulfilled in accordance with “Structure and Conditions of the Global Offering — Conditions of the Global Offering” in this prospectus or if any application is revoked, the application monies, or the appropriate portion thereof, together with the related brokerage, SFC transaction levy and the Stock Exchange trading fee, will be refunded, without interest or the cheque or banker’s cashier order will not be cleared. Any refund of your application monies will be made on Thursday, 25 June 2015. 14.

DESPATCH/COLLECTION OF SHARE CERTIFICATES AND REFUND MONIES

You will receive one share certificate for all Hong Kong Public Offer Shares allotted to you under the Hong Kong Public Offering (except pursuant to applications made on YELLOW Application Forms or by electronic application instructions to HKSCC via CCASS where the share certificates will be deposited into CCASS as described below). No temporary document of title will be issued in respect of the Shares. No receipt will be issued for sums paid on application. If you apply by WHITE or YELLOW Application Form, subject to personal collection as mentioned below, the following will be sent to you (or, in the case of joint applicants, to the first-named applicant) by ordinary post, at your own risk, to the address specified on the Application Form: •

share certificate(s) for all the Hong Kong Public Offer Shares allotted to you (for YELLOW Application Forms, share certificates will be deposited into CCASS as described below); and

•

refund cheque(s) crossed “Account Payee Only” in favour of the applicant (or, in the case of joint applicants, the first-named applicant) for (i) all or the surplus application monies for the Hong Kong Public Offer Shares, wholly or partially unsuccessfully applied for; and/or (ii) the difference between the Offer Price and the maximum Offer Price per Offer Share paid on application in the event that the Offer Price is less than the maximum Offer Price (including brokerage, SFC transaction levy and the Stock Exchange trading fee but without interest). Part of the Hong Kong identity card number/passport number, provided by you or the first-named applicant (if you are joint applicants), may be printed on your refund cheque, if any. Your banker may require verification of your Hong Kong identity card number/passport number before encashment of your refund cheque(s). Inaccurate completion of your Hong Kong identity card number/passport number may invalidate or delay encashment of your refund cheque(s).

Subject to arrangement on despatch/collection of share certificates and refund monies as mentioned below, any refund cheques and share certificates are expected to be posted on or around Thursday, 25 June 2015. The right is reserved to retain any share certificate(s) and any surplus application monies pending clearance of cheque(s) or banker’s cashier’s order(s).

– 285 –

HOW TO APPLY FOR THE HONG KONG PUBLIC OFFER SHARES Share certificates will only become valid at 8:00 a.m. on Friday, 26 June 2015 provided that the Global Offering has become unconditional and the right of termination described in the “Underwriting” section in this prospectus has not been exercised. Investors who trade shares prior to the receipt of Share certificates or the Share certificates becoming valid do so at their own risk. Personal Collection (i)

If you apply using a WHITE Application Form

If you apply for 1,000,000 or more Hong Kong Public Offer Shares and have provided all information required by your Application Form, you may collect your refund cheque(s) and/or share certificate(s) from the Company’s Hong Kong Branch Share Registrar, Tricor Investor Services Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong, from 9:00 a.m. and 1:00 p.m. on Thursday, 25 June 2015 or such other date as notified by us in the newspapers. If you are an individual who is eligible for personal collection, you must not authorise any other person to collect for you. If you are a corporate applicant which is eligible for personal collection, your authorised representative must bear a letter of authorisation from your corporation stamped with your corporation’s chop. Both individuals and authorised representatives must produce, at the time of collection, evidence of identity acceptable to the Hong Kong Branch Share Registrar. If you do not collect your refund cheque(s) and/or share certificate(s) personally within the time specified for collection, they will be despatched promptly to the address specified in your Application Form by ordinary post at your own risk. If you apply for less than 1,000,000 Hong Kong Public Offer Shares, your refund cheque(s) and/or share certificate(s) will be sent to the address on the relevant Application Form on Thursday, 25 June 2015, by ordinary post and at your own risk. (ii)

If you apply using a YELLOW Application Form

If you apply for 1,000,000 Hong Kong Public Offer Shares or more, please follow the same instructions as described above. If you have applied for less than 1,000,000 Hong Kong Public Offer Shares, your refund cheque(s) will be sent to the address on the relevant Application Form on Thursday, 25 June 2015, by ordinary post and at your own risk. If you apply by using a YELLOW Application Form and your application is wholly or partially successful, your share certificate(s) will be issued in the name of HKSCC Nominees and deposited into CCASS for credit to your or the designated CCASS Participant’s stock account as stated in your Application Form on Thursday, 25 June 2015, or upon contingency, on any other date determined by HKSCC or HKSCC Nominees. •

If you apply through a designated CCASS participant (other than a CCASS investor participant)

For Hong Kong Public Offering shares credited to your designated CCASS participant’s stock account (other than CCASS Investor Participant), you can check the number of Hong Kong Public Offering shares allotted to you with that CCASS participant.

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HOW TO APPLY FOR THE HONG KONG PUBLIC OFFER SHARES •

If you are applying as a CCASS investor participant

The Company will publish the results of CCASS Investor Participants’ applications together with the results of the Hong Kong Public Offering in the manner described in “Publication of Results” above. You should check the announcement published by the Company and report any discrepancies to HKSCC before 5:00 p.m. on Thursday, 25 June 2015 or any other date as determined by HKSCC or HKSCC Nominees. Immediately after the credit of the Hong Kong Public Offer Shares to your stock account, you can check your new account balance via the CCASS Phone System and CCASS Internet System. (iii) If you apply through the HK eIPO White Form service If you apply for 1,000,000 Hong Kong Public Offer Shares or more and your application is wholly or partially successful, you may collect your Share certificate(s) from the Company’s Hong Kong Branch Share Registrar, Tricor Investor Services Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong, from 9:00 a.m. to 1:00 p.m. on Thursday, 25 June 2015, or such other date as notified by the Company in the newspapers as the date of despatch/collection of Share certificates/e-Auto Refund payment instructions/refund cheques. If you do not collect your Share certificate(s) personally within the time specified for collection, they will be sent to the address specified in your application instructions by ordinary post at your own risk. If you apply for less than 1,000,000 Hong Kong Public Offer Shares, your Share certificate(s) (where applicable) will be sent to the address specified in your application instructions on Thursday, 25 June 2015 by ordinary post at your own risk. If you apply and pay the application monies from a single bank account, any refund monies will be despatched to that bank account in the form of e-Auto Refund payment instructions. If you apply and pay the application monies from multiple bank accounts, any refund monies will be despatched to the address as specified in your application instructions in the form of refund cheque(s) by ordinary post at your own risk. (iv) If you apply via Electronic Application Instructions to HKSCC Allocation of Hong Kong Public Offer Shares For the purposes of allocating Hong Kong Public Offer Shares, HKSCC Nominees will not be treated as an applicant. Instead, each CCASS Participant who gives electronic application instructions or each person for whose benefit instructions are given will be treated as an applicant. Deposit of Share Certificates into CCASS and Refund of Application Monies •

If your application is wholly or partially successful, your share certificate(s) will be issued in the name of HKSCC Nominees and deposited into CCASS for the credit of your designated CCASS Participant’s stock account or your CCASS Investor Participant stock account on Thursday, 25 June 2015, or, on any other date determined by HKSCC or HKSCC Nominees.

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HOW TO APPLY FOR THE HONG KONG PUBLIC OFFER SHARES

15.

•

The Company expects to publish the application results of CCASS Participants (and where the CCASS Participant is a broker or custodian, the Company will include information relating to the relevant beneficial owner), your Hong Kong identity card number/passport number or other identification code (Hong Kong business registration number for corporations) and the basis of allotment of the Hong Kong Public Offering in the manner specified in “Publication of Results” above on Thursday, 25 June 2015. You should check the announcement published by the Company and report any discrepancies to HKSCC before 5:00 p.m. on Thursday, 25 June 2015 or such other date as determined by HKSCC or HKSCC Nominees.

•

If you have instructed your broker or custodian to give electronic application instructions on your behalf, you can also check the number of Hong Kong Public Offer Shares allotted to you and the amount of refund monies (if any) payable to you with that broker or custodian.

•

If you have applied as a CCASS Investor Participant, you can also check the number of Hong Kong Public Offer Shares allotted to you and the amount of refund monies (if any) payable to you via the CCASS Phone System and the CCASS Internet System (under the procedures contained in HKSCC’s “An Operating Guide for Investor Participants” in effect from time to time) on Thursday, 25 June 2015. Immediately following the credit of the Hong Kong Public Offer Shares to your stock account and the credit of refund monies to your bank account, HKSCC will also make available to you an activity statement showing the number of Hong Kong Public Offer Shares credited to your CCASS Investor Participant stock account and the amount of refund monies (if any) credited to your designated bank account.

•

Refund of your application monies (if any) in respect of wholly and partially unsuccessful applications and/or difference between the Offer Price and the maximum Offer Price per Offer Share initially paid on application (including brokerage, SFC transaction levy and the Stock Exchange trading fee but without interest) will be credited to your designated bank account or the designated bank account of your broker or custodian on Thursday, 25 June 2015.

ADMISSION OF THE SHARES INTO CCASS

If the Stock Exchange grants the listing of, and permission to deal in, the Shares and we comply with the stock admission requirements of HKSCC, the Shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the date of commencement of dealings in the Shares or any other date HKSCC chooses. Settlement of transactions between Exchange Participants (as defined in the Listing Rules) is required to take place in CCASS on the second Business Day after any Trading Day. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time. Investors should seek the advice of their stockbroker or other professional adviser for details of the settlement arrangement as such arrangements may affect their rights and interests. All necessary arrangements have been made enabling the Shares to be admitted into CCASS.

– 288 –

APPENDIX I

ACCOUNTANTS’ REPORT

Deloitte Touche Tohmatsu 35/F, One Pacific Place 88 Queensway Hong Kong

香港金鐘道88號太古廣場一座35樓

16 June 2015 The Directors Vital Mobile Holdings Limited Haitong International Capital Limited Dear Sirs, We set out below our report on the financial information (the “Financial Information”) relating to Vital Mobile Holdings Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”) for each of the three years ended 31 December 2014 (the “Track Record Periods”) for inclusion in the prospectus of the Company dated 16 June 2015 (the “Prospectus”) issued in connection with the proposed listing of the shares of the Company on the Main Board of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) (the “Listing”). The Company was incorporated and registered as an exempted company in the Cayman Islands with limited liability under the Companies Law, Cap. 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Island on 12 August 2014. Through a group reorganisation as more fully explained in the paragraph headed “Reorganisation” in the section headed “History, development and reorganisation” in the Prospectus (the “Group Reorganisation”), the Company became the holding company of the Group on 29 August 2014. As at the date of this report, the Company has interests in the following subsidiaries:

Name of subsidiaries

Place and date of incorporation/ establishment

Issued and fully paid ordinary share capital/ registered capital United States Dollar (“USD”) 1

N/A

100

100 Investment holding

Hong Kong Dollar (“HKD”) 1

N/A

100

100 Investment holding

People’s Republic Renminbi (“RMB”) 100,000,000 of China (“PRC”) 22 July 2014

N/A

100

100 Developing, designing, production management and selling mobile telecommunication devices on original design manufacturer (“ODM”) basis and sale of mobile telecommunication related components and accessories, targeting overseas markets

Vital Mobile Limited (“Vital BVI”)*

British Virgin Islands (“BVI”) 27 June 2014

Vital Mobile (HK) Limited (“Vital HK”)

Hong Kong 4 July 2014

Beijing Benywave Wireless Communication Co., Ltd.+ (“Benywave Wireless”) 北京百納威爾無綫通信設備有限公司

Notes: * +

Equity interest attributable to the Group Date of 31 December this 2012 2013 2014 report Principal activities % % %

Directly held by the Company. The English name is for identification only.

– I-1 –

APPENDIX I

ACCOUNTANTS’ REPORT

The financial year end date of the Company and its subsidiaries is 31 December. Historically, the Overseas Business (as defined in note 2 to Section A to the Financial Information) was operated as a separate business unit (the “Overseas Business Unit”) under Beijing Benywave Technology Co., Ltd (“Benywave Technology”) during the Track Record Periods until the establishment of Benywave Wireless and completion of the split, which the Overseas Business related assets and liabilities were assumed by Benywave Wireless on 29 August 2014 (the “Assets Transfer”). The Overseas Business Unit has been under the common control by the same controlling parties throughout the Track Record Periods. For the purpose of this report, the directors of the Company have prepared the consolidated financial statements of the Company which comprise the Company and its subsidiaries and the Overseas Business Unit prior to the Assets Transfer for the Track Record Periods in accordance with accounting policies that conform with the International Financial Reporting Standards (“IFRSs”) (the “Underlying Financial Statements”). The Underlying Financial Statements have been audited by us in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”). The statutory financial statements of Benywave Technology for each of the two years ended 31 December 2013 were prepared in accordance with the relevant accounting principles and financial regulations applicable to the enterprises established in the PRC. They were audited by 大華會計師事務所有限公司, Certified Public Accountants registered in the PRC. No statutory audited financial statements have been prepared for the Company and Vital BVI as they were incorporated in jurisdictions where there are no statutory audit requirements. No statutory audited financial statements have been prepared for Vital HK and Benywave Wireless since their respective dates of incorporation/establishment as they are not yet due for issuance as at the date of this report. We have also examined the Underlying Financial Statements in accordance with the Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant” issued by the HKICPA. The Financial Information of the Group for the Track Record Periods as set out in this report has been prepared from the Underlying Financial Statements on the basis set out in note 2 to Section A of the Financial Information. No adjustment was considered necessary to adjust the Underlying Financial Statements in the preparation of this report for inclusion in the Prospectus. The Underlying Financial Statements are the responsibility of the directors of the Company (“Directors”) who approved their issue. The Directors are also responsible for the contents of the Prospectus in which this report is included. It is our responsibilities to compile the Financial Information set out in this report from the Underlying Financial Statements, to form an independent opinion on the Financial Information, and to report our opinion to you. In our opinion, on the basis of preparation set out in note 2 to Section A of the Financial Information, the Financial Information gives, for the purpose of this report, a true and fair view of the state of affairs of the Group as at 31 December 2012, 2013 and 2014, and of the Company as at 31 December 2014, and of the Group’s profit and cash flows for the Track Record Periods.

– I-2 –

APPENDIX I A.

ACCOUNTANTS’ REPORT

FINANCIAL INFORMATION CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

NOTES

Revenue Cost of sales

Gross profit Other gain and loss Research and development costs Selling and distribution expenses Administrative expenses Listing expense

Profit before tax Income tax expense

10 11

Profit and total comprehensive income for the year attributable to equity holders of the Company

Earnings per share — basic

– I-3 –

Year ended 31 December 2012 2013 2014 RMB’000 RMB’000 RMB’000 663,579 (584,080)

1,368,897 (1,220,676)

1,916,183 (1,655,949)

79,499 (1,009) (13,122) (14,196) (9,074) –

148,221 (3,139) (16,397) (17,858) (13,298) –

260,234 (2,235) (22,047) (22,847) (6,901) (12,544)

42,098 (6,339)

97,529 (14,656)

193,660 (37,435)

35,759

82,873

156,225

RMB

0.06

0.13

0.24

APPENDIX I

ACCOUNTANTS’ REPORT

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

NOTES

Non-current assets Equipment Investment in a subsidiary

The Group At 31 December 2012 2013 RMB’000 RMB’000

309 –

340 –

208 –

– –

309

340

208

–

18 19

13,423 100,309

69,413 45,158

123,543 397,843

– 3,485

16 20 20

– – –

7,860 535 10,440

– – –

113,732

114,571

540,221

3,485

18,837 2,860

84,676 7,406

164,289 22,626

– 1,822

35,161

53,937

14,811

–

– – – 8,604

– – – 12,478

4,116 – 13,791 23,332

4,116 10,136 – –

65,462

158,497

242,965

16,074

Net current assets (liabilities)

48,270

(43,926)

297,256

(12,589)

Total assets less current liabilities

48,579

(43,586)

297,464

(12,589)

Net assets (liabilities)

48,579

(43,586)

297,464

(12,589)

– 48,579

– (43,586)

– 297,464

– (12,589)

48,579

(43,586)

297,464

(12,589)

Current assets Inventories Trade and other receivables Amount due from a fellow subsidiary Pledged bank deposits Cash and bank balances

Current liabilities Trade payables Accrual and other payables Deposits received from customers Amount due to a related party Amount due to a subsidiary Tax liabilities Provision

Capital and reserves Share capital Reserves Total equity

15 17

2014 RMB’000

The Company At 31 as December 2014 RMB’000

21 22

16 16 23

24 25

– I-4 –

APPENDIX I

ACCOUNTANTS’ REPORT

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY Attribute to equity holders of the Company Share Special Retained capital reserve profit Total RMB’000 RMB’000 RMB’000 RMB’000 (Note 24) Balance at 1 January 2012 Profit and total comprehensive income for the year Transfer of net profit in respect of Overseas Business (note 1) Net return to Benywave Technology (note 2)

–

129,219

–

129,219

–

35,759

–

35,759

–

(116,399)

–

(116,399)

–

48,579

–

48,579

–

82,873

–

82,873

–

(175,038)

–

(175,038)

Balance at 31 December 2013 Capital Profit and total comprehensive income for the year Transfer of net profit in respect of Overseas Business prior to the Assets Transfer (note 1) Net contribution from Benywave Technology prior to the Assets Transfer (note 3)

– –

(43,586) –

– –

(43,586) –

Balance at 31 December 2014

Balance at 31 December 2012 Profit and total comprehensive income for the year Transfer of net profit in respect of Overseas Business (note 1) Net return to Benywave Technology (note 2)

(35,759)

(82,873)

156,225

–

133,821

–

184,825

–

184,825

–

275,060

22,404

297,464

(133,821)

156,225

–

Notes: 1.

The profit in respect of operations of the Overseas Business carried out by Benywave Technology prior to the Group Reorganisation was legally belonged to Benywave Technology. The transfer of net profit in respect of the Overseas Business represents the results of the Overseas Business as such profit are non-distributable profit of the Group.

The net return to Benywave Technology represents the funding generated by the Overseas Business Unit retained by Benywave Technology prior to the Assets Transfer.

The net contribution from Benywave Technology represents the funding provided by Benywave Technology to the Overseas Business Unit prior to the Assets Transfer.

– I-5 –

APPENDIX I

ACCOUNTANTS’ REPORT

CONSOLIDATED STATEMENTS OF CASH FLOWS Prior to the Assets Transfer, the Overseas Business Unit was operated under Benywave Technology and no separate bank accounts have been maintained by the Overseas Business Unit. The treasury and cash disbursem*nt functions of the Overseas Business Unit were centrally administrated by Benywave Technology. The net cash flows generated by the Overseas Business Unit were kept in the bank accounts of Benywave Technology. Accordingly, the funds provided for or withdrawn from Benywave Technology were presented as movements in the equity while there are no cash and cash equivalents balance for the Overseas Business Unit and there were no cash received/paid directly by the Group in connection with its operating, investing and financing activities. After the completion of the Assets Transfer to Benywave Wireless, Benywave Wireless opened its own bank accounts. For the purpose of presenting a completed set of financial information of the Group, the following comprises the information of cash inflow/outflow of the Group and the Overseas Business Unit received/paid by Benywave Technology prior to the Assets Transfer. Year ended 31 December 2012 2013 RMB’000 RMB’000 Operating activities Profit for the year Adjustments for: Income tax recognised in profit or loss Depreciation of equipment Foreign exchange (gain) loss, net Write down of inventories (Reversal of provision) provision for warranty Operating cash flows before movements in working capital Decrease (increase) in inventories Decrease (increase) in trade and other receivables Increase (decrease) in trade payables Increase in accrual and other payables Increase (decrease) in deposits received from customers Net cash generated from (used in) operating activities

35,759

82,873

2014 RMB’000 156,225

– 108 (54) 2,675 (4,796)

– 124 (380) 2,960 3,874

13,791 138 2,235 2,472 10,854

33,692 32,500 67,774 (44,314) 634

89,451 (58,950) 55,531 65,839 4,546

185,715 (56,602) (354,920) 79,613 15,220

24,220

18,776

(39,126)

114,506

175,193

(170,100)

Investing activities Increase in amount due from a fellow subsidiary Proceeds from disposal of equipment Purchases of equipment Repayment from a sales director

– 10 (36) 1,919

– – (155) –

(7,860) 1 (7) –

Net cash (used in) generated from investing activities

1,893

(155)

(7,866)

Cash generated from financing activity Increase in amount due to a related party

–

116,399

175,038

(173,850)

(116,399) –

(175,038) –

184,825 (535)

Net cash generated by (used in) Overseas Business/net increase (decrease) in cash and cash equivalents Net (return to) contribution from Benywave Technology Effect of pledged bank deposits Cash and cash equivalents at the end of the year

– I-6 –

–

4,116

10,440

APPENDIX I

ACCOUNTANTS’ REPORT

NOTES TO THE FINANCIAL INFORMATION 1.

GENERAL INFORMATION

The Company was established in the Cayman Islands as an exempted company with limited liability on 12 August 2014. The address of the registered office and the principal place of business of the Company are set out in the section headed “Corporate Information” to the Prospectus. The immediate holding company of the Company is Winmate Limited (“Winmate”) which is incorporated in the BVI and is 90% and 10% owned by Ms. Rong Xiuli (“Ms. Rong”) and Mr. Ni Gang (“Mr. Ni”), the husband of Ms. Rong, respectively. The Financial Information is presented in Renminbi (“RMB”), which is the same as the functional currency of the Company. 2.

GROUP REORGANISATION AND BASIS OF PREPARATION OF FINANCIAL INFORMATION

Historically and prior to completion of the Assets Transfer, Benywave Technology carried out the PRC Business (which has been primarily engaged in developing, designing, production management and selling of mobile telecommunications devices, and sale of mobile telecommunication related components and accessories under the self-owned brands, targeting the PRC market) and Overseas Business (which has been primarily engaged in developing, designing, production management and selling mobile telecommunication devices on ODM basis and sale of mobile telecommunication related components and accessories, targeting overseas markets.) Pursuant to a split agreement dated 29 April 2014 which was approved by the relevant authorities in the PRC in July 2014, Benywave Technology has been resolved to split into two separate legal entities namely Benywave Technology and Benywave Wireless, with the original Benywave Technology retaining PRC Business and the new entity Benywave Wireless assuming the Overseas Business. Benywave Technology and Benywave Wireless are owned by Vital Profit Technology Inc (“Vital Profit”) which is ultimately controlled by Winmate. In August 2014, The Company acquired the entire interest in Benywave Wireless from Vital Profit at a consideration of RMB100,000,000. The Group comprising the Company and its subsidiaries resulting from the Group Reorganisation is regarded as a continuing entity. The Overseas Business Unit has been under the common control by Ms. Rong and Mr. Ni throughout the Track Record Periods. For the purpose of presenting the financial positions, financial results and cash flows of the Group in this report, the Overseas Business Unit is deemed to be part of the Group throughout the Track Record Periods. Accordingly, the Financial Information of the Group has been prepared on the basis as if the Company had always been the holding company of the Group. The consolidated statements of profit or loss and other comprehensive income, consolidated statements of changes in equity and consolidated statements of cash flows of the Group for each the three years ended 31 December 2014 include the results, changes in equity and cash flows of the Overseas Business as if the Overseas Business had been operated by the Group throughout the Track Record Periods. The consolidated statements of financial position of the Group as at 31 December 2012 and 2013 have been prepared to present the assets and liabilities of the Overseas Business, as if the current group structure had been in existence and the Overseas Business had been transferred to the Group on those dates. The Overseas Business was carried out by Benywave Technology prior to the Assets Transfer. To the extent the assets, liabilities, income and expenses that are specifically identified to the Overseas Business, such items are included in the Financial Information throughout the Track Record Periods. To the extent the assets, liabilities, income and expenses that are common to the Overseas Business and PRC Business, these items are allocated between the Overseas Business and PRC Business on the basis set out below (such items include certain research and development costs, administrative expenses and income tax expenses). Items that do not meet the criteria above are not included in the Financial Information of the Group. Expenses which are common to the Overseas Business and the PRC Business are allocated on the following basis: (1) included in research and development costs of approximately RMB6.7 million, RMB8.2 million and RMB7.9 million for each of three years ended 31 December 2014, representing partial staff costs, product test costs and other expenses were allocated based on percentage of the budget revenue of the Overseas Business and percentage of the budget revenue of the PRC Business; (2) included in administrative expenses of approximately RMB5.6 million, RMB5.0 million and RMB3.1 million for each of three years ended 31 December 2014, representing partial staff costs, sundry office costs and other expenses were allocated based on headcount of the Overseas Business and the headcount of the PRC Business; and (3) income tax expenses were calculated based on the tax rate of the Overseas Business Unit as if it were a separate tax payer.

– I-7 –

APPENDIX I

ACCOUNTANTS’ REPORT

The Directors believe that the method of allocation of the above items presents a reasonable basis of estimating what the Overseas Business Unit operating results would have been on a stand-alone basis for the Track Record Periods. Other than certain of the research and development costs, administrative expenses and income tax expenses mentioned above, all other items of the assets, liabilities, income and expenses are specifically identified. Prior to the completion of the Assets Transfer, the treasury and cash disbursem*nt functions of the Overseas Business Unit were centrally administrated by Benywave Technology. All the transactions of the Overseas Business Units were settled by Benywave Technology and therefore, the net cash flows generated by the Overseas Business Unit was presented as net returns to Benywave Technology in the consolidated statements of changes in equity. 3.

APPLICATION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS (“IFRSs”)

For the purpose of preparing and presenting the Financial Information for the Track Record Periods, the Group has consistently applied the relevant IFRSs which are effective for the financial year beginning on 1 January 2014 throughout the Track Record Periods. The Group has not early applied the following new and revised IFRSs that have been issued which are not yet effective. IFRS 9 IFRS 14 IFRS 15 Amendments Amendments Amendments Amendments Amendments Amendments Amendments

to to to to to to to

IFRS 11 IAS 1 IAS 16 and IAS 38 IAS 16 and IAS 41 IAS 19 IAS 27 IFRS 10 and IAS 28

Amendments to IFRS 10, IFRS 12 and IAS 28 Amendments to IFRSs Amendments to IFRSs Amendments to IFRSs 1 2 3 4 5 6

Effective Effective Effective Effective Effective Effective

for for for for for for

Financial Instruments 1 Regulatory Deferral Accounts 2 Revenue from Contracts with Customers 3 Accounting for Acquisitions of Interests in Joint Operations 5 Disclosure Initiative 5 Clarification of Acceptable Methods of Depreciation and Amortization 5 Agriculture: Bearer Plants 5 Defined Benefit Plans: Employee Contributions 4 Equity Method in Separate Financial Statements 5 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture 5 Investment Entities: Applying the Consolidation Exception 5 Annual Improvements to IFRSs 2010-2012 Cycle 6 Annual Improvements to IFRSs 2011-2013 Cycle 4 Annual Improvements to IFRSs 2012-2014 Cycle 5

annual periods beginning on or after 1 January 2018 first annual IFRS financial statements beginning on or after 1 January 2016 annual periods beginning on or after 1 January 2017 annual periods beginning on or after 1 July 2014 annual periods beginning on or after 1 January 2016 annual periods beginning on or after 1 July 2014, with limited exceptions

Except as disclosed below, the Directors anticipate that the application of the new and revised IFRSs will have no material impact on the Financial Information. IFRS 15 Revenue from Contracts with Customers In May 2014, IFRS 15 was issued which establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. IFRS 15 will supersede the current revenue recognition guidance including IAS 18 Revenue, IAS 11 Construction Contracts and the related interpretations when it becomes effective. The core principle of IFRS 15 is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for goods or services. Specifically, the Standard introduces a 5-step approach to revenue recognition: •

Step 1: Identify the contract(s) with customer

•

Step 2: Identify the performance obligations in the contract

•

Step 3: Determine the transaction price

– I-8 –

APPENDIX I

ACCOUNTANTS’ REPORT

•

Step 4: Allocate the transaction price to the performance obligations in the contract

•

Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation

Under IFRS 15, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e. when ‘control’ of the goods or services underlying the particular performance obligation is transferred to the customer. Far more prescriptive guidance has been added in IFRS 15 to deal with specific scenarios. Furthermore, extensive disclosures are required by IFRS 15. The directors of the Company anticipate that the application of IFRS 15 in the future may have a material impact on the amounts reported and disclosures made in the Group’s consolidated financial statements. However, it is not practicable to provide a reasonable estimate of the effect of IFRS 15 until the Group performs a detailed review. 4.

SIGNIFICANT ACCOUNTING POLICIES

The Financial Information has been prepared in accordance with the following accounting policies which conform with IFRSs issued by the International Accounting Standards Board. In addition, the Financial Information includes applicable disclosures required by the Rules Governing the Listing of Securities on the Stock Exchange. These financial statements also comply with the applicable disclosure requirements of the Hong Kong Companies Ordinance, which for the Track Record Periods continue to be those of the predecessor Companies Ordinance (Cap. 32), in accordance with transitional and saving arrangements for Part 9 of the Hong Kong Companies Ordinance (Cap. 622), “Accounts and Audit”, which are set out in sections 76 to 87 of Schedule 11 to that Ordinance. The Financial Information has been prepared under the historical cost basis. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. Basis of consolidation The Financial Information incorporates the financial statements of the Company and entities controlled by the Company and its subsidiaries. Control is achieved when the Company: •

has power over the investee;

•

is exposed, or has rights, to variable returns from its involvement with the investee; and

•

has the ability to use its power to affect its returns.

The Group reassesses whether or not it controls an investee if facts and circ*mstances indicate that there are changes to one or more of the three elements of control listed above. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statements of profit or loss and other comprehensive income from the date the Group gains control until the date when the Group ceases to control the subsidiary. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies. All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. Business combination under common control The Financial Information incorporates the financial statements items of the combining entity or business in which the common control combination occurs as if it had been combined from the date when the combining entity or business first came under the control of the controlling party.

– I-9 –

APPENDIX I

ACCOUNTANTS’ REPORT

The net assets of the combining entity or business are consolidated using the existing book values from the controlling party’s perspective. No amount is recognised in respect of goodwill or excess of acquirer’s interest in the net fair value of acquiree’s identifiable assets, liabilities and contingent liabilities over cost at the time of common control combination, to the extent of the continuation of the controlling party’s interest. The consolidated statement of profit or loss and other comprehensive income includes the result of the combining entity or business from the earliest date presented or since the date when the combining entity or business first came under the common control, where this is a shorter period, regardless of the date of the common control combination. Investment in a subsidiary Investment in a subsidiary is stated as cost less any identified impairment loss on the statement of financial position of the Company. The result of a subsidiary is accounted for on the basis of dividend received and receivable. Revenue recognition Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods sold in the normal course of business, net of discounts. Revenue from the sale of goods is recognised when the goods are delivered and titles have passed, at which time all the following conditions are satisfied: •

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

•

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

•

the amount of revenue can be measured reliably;

•

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

•

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

Foreign currencies In preparing the Financial Information, transactions in currencies other than the functional currency of the Group are recorded in the respective functional currency (i.e. the currency of the primary economic environment in which the Group operates) at the rates of exchanges prevailing on the dates of the transactions. At the end of the reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences arising on the settlement of monetary items and on the retranslation of monetary items are recognised in profit or loss in the period in which they arise. Research and development costs Expenditure on research activities is recognised as an expense in the period in which it is incurred. When no internally-generated intangible asset can be recognised, development expenditure is recognised in profit or loss in the period in which it is incurred. Retirement benefit costs Payments to state-managed retirement benefit schemes which are defined contribution plans are recognised as an expense when employees have rendered service entitling them to the contribution. Inventories Inventories are stated at the lower of cost and net realisable value. Cost is calculated using the weighted average method. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.

– I-10 –

APPENDIX I

ACCOUNTANTS’ REPORT

Provision for warranties Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle that obligation, and a reliable estimate can be made of the amount of the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (where the effect of time value of money is material). Provisions for the expected cost of warranty obligations under the relevant sales of goods legislation are recognised at the date of sale of the relevant products, at the Directors’ best estimate of the expenditure required to settle the Group’s obligation. Equipment Equipment is stated at cost less subsequent accumulated depreciation and accumulated impairment losses, if any. Depreciation is recognised so as to write off the cost of items of equipment less their residual values over their estimated useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. An item of equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss. Leasing Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. The Group as lessee Operating lease payments are recognised as an expense on a straight-line basis over the lease term. Impairment of non-financial assets At the end of the reporting period, the Group reviews the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified. Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or a cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or a cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss. Where an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or a cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately.

– I-11 –

APPENDIX I

ACCOUNTANTS’ REPORT

Taxation Income tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the year. Taxable profit differs from ‘profit before tax’ as reported in the consolidated statements of profit or loss and other comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period. Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the Financial Information and the corresponding tax base used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary difference to the extent that it is probable that taxable profit will be available against which those deductible temporary differences can be utilised. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the asset to be recovered. Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset is realised, based on tax rate (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively. Financial instruments Financial assets and financial liabilities are recognised in the consolidated statements of financial position when a group entity becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets or financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Financial assets The Group’s financial assets are classified as loans and receivables. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. Effective interest method The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the Track Record Periods. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset, or, where appropriate, a shorter period to the net carrying amount on initial recognition. Interest income is recognised on an effective interest basis for debt instruments.

– I-12 –

APPENDIX I

ACCOUNTANTS’ REPORT

Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, loans and receivables (including trade and other receivables, amount due from a fellow subsidiary, cash and bank balances and pledged bank deposits) are carried at amortised cost using the effective interest method, less any identified impairment losses. Impairment of loans and receivables Loans and receivables are assessed for indicators of impairment at the end of each of the reporting period. Loans and receivables are considered to be impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the loans and receivables have been affected. Objective evidence of impairment could include: •

significant financial difficulty of the issuer or counterparty; or

•

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

•

it becoming probable that the borrower will enter bankruptcy or financial reorganisation.

For trade receivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period, as well as observable changes in national or local economic conditions that correlate with default on receivables. The amount of the impairment loss recognised is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate. The carrying amount of the loans and receivables is reduced by the impairment loss directly for all loans and receivables with the exception of trade and other receivables, where the carrying amount is reduced through the use of an allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to profit or loss. If, in a subsequent period, the amount of impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment losses was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the loans and receivables at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised. Financial liabilities and equity instruments Debt and equity instruments issued by a group entity are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. Financial liabilities The financial liabilities (including trade payables, other payables amount due to a subsidiary and amount due to a related party) are subsequently measured at amortised cost using the effective interest method.

– I-13 –

APPENDIX I

ACCOUNTANTS’ REPORT

Effective interest method The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the Track Record Periods. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition. Interest expense is recognised on an effective interest basis. Derecognition The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. On derecognition of a financial asset, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognised in profit or loss. The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss. 5.

KEY SOURCES OF ESTIMATION UNCERTAINTY In the application of the Group’s accounting policies, which are described in note 4, the Directors are required to make

judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The following is the key assumptions concerning the future, and other keys sources of estimation uncertainty at the end of the reporting period that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. Allowance for inventories The Group makes allowance for inventories based on an assessment of the net realisable value of inventories. Allowances are applied to inventories where events or changes in circ*mstances indicate that the net realisable value is lower than the cost of inventories. The identification of obsolete inventories requires the use of judgment and estimates on the conditions and usefulness of the inventories. Where the expectation is different from the original estimate, such difference will impact carrying value of inventories in the year in which such estimate has been changed. At 31 December 2012, 2013 and 2014, the carrying amounts of inventories are approximately RMB13,423,000, RMB69,413,000 and RMB123,543,000 respectively (net of write down of inventories of approximately RMB2,675,000, RMB2,960,000 and RMB2,472,000 respectively). Provision for warranty Provision for warranty is measured at the management’s best estimate of the Group’s liability under one year warranty period granted on mobile telecommunication devices at the end of each reporting period. Estimated costs related to warranty are accrued at the time of sales based on historical record and adjusted as required to reflect actual costs incurred, as information becomes available. At 31 December 2012, 2013 and 2014, the carrying amounts of provision for warranty are approximately RMB8,604,000, RMB12,478,000 and RMB23,332,000 respectively.

– I-14 –

APPENDIX I 6.

ACCOUNTANTS’ REPORT

CAPITAL RISK MANAGEMENT

The Group manages its capital to ensure that it will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance. Prior to the Group Reorganisation, the Overseas Business Unit was operated under Benywave Technology during the Track Record Periods. Upon the completion of the Group Reorganisation, the management reviews the capital structure by considering the cost of capital and the risks associated with each class of capital. In view of this, the Group will balance its overall capital structure through the payment of dividends, new shares issue as well as the issue of new debt. 7.

FINANCIAL INSTRUMENTS Categories of financial instruments

2012 RMB’000

The Group At 31 December 2013 2014 RMB’000 RMB’000

The Company 2014 RMB’000

Financial assets Loans and receivables (including cash and bank balances, pledged bank deposits)

44,684

9,462

356,109

–

Financial liabilities Amortised cost

19,751

89,317

174,177

16,074

Financial risk management objectives and policies The Group’s major financial instruments include trade receivables, amount due from a fellow subsidiary, pledged bank deposits, cash and bank balances, trade payables, other payables and amounts due to related parties. Details of these financial instruments are disclosed in respective notes. The risks associated with these financial instruments include market risk (mainly currency risk), credit risk and liquidity risk. The policies on how to mitigate these risks are set out below. The management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner. Market risk Foreign currency risk The Group undertakes certain operating transactions in foreign currencies, which expose the Group to foreign currency risk. The Group does not use any derivative contracts to hedge against its exposure to currency risk. The management manages its currency risk by closely monitoring the movement of the foreign currency rates and considering hedging significant foreign currency exposure should the need arise.

– I-15 –

APPENDIX I

ACCOUNTANTS’ REPORT

The carrying amounts of the Group’s foreign currency denominated monetary assets (trade receivables, cash and bank balances) and liabilities (Trade payables and amount due to a related party) at the end of each reporting periods are as follows:

USD HKD

2012 RMB’000

At 31 December 2013 RMB’000

2014 RMB’000

44,522 –

9,452 –

295,749 10

Sensitivity analysis The following table details the Group’s sensitivity to a 5% increase and decrease in RMB against USD and all other variables were held constant. 5% represents management’s assessment of the reasonably possible change in the foreign exchange rate. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation to RMB at each period end for a 5% change in the foreign currency rate. A positive number below indicates an increase in post-tax profit where RMB weakens 5% against the USD. For a 5% strengthening of RMB against the USD, there would be an equal and opposite impact on the profit for the year, and the amounts below would be negative.

Profit for the year

2012 RMB’000

At 31 December 2013 RMB’000

2014 RMB’000

1,892

402

11,091

In management’s opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk as the year end exposure does not reflect the exposure during the year. Credit risk The Group’s maximum exposure to credit risk which will cause a financial loss to the Group due to failure to discharge an obligation by the counterparties is arising from the carrying amounts of the respective recognised financial assets as stated in the consolidated statements of financial position. The Group has concentration of credit risk as the total trade receivables were due from the Group’s 4, 7 and 10 customers as at 31 December 2012, 2013 and 2014 respectively. The management considered that the credit risk of trade receivables is insignificant after considering the credit quality and financial ability of these customers. Details of the Group’s credit policy is set out in note 19. The Group monitors the credit risk on an ongoing basis and credit evaluations are regularly performed. The Group also maintains export credit insurance policies to lower its credit risk. Hence, the management of the Company believes that the Group’s credit risk is significantly reduced.

– I-16 –

APPENDIX I

ACCOUNTANTS’ REPORT

Liquidity risk Prior to the Group Reorganisation, the Group relied on the financial support of the equity holders of Benywave Technology as the Overseas Business Unit was operated by Benywave Technology. Upon the completion of the Group Reorganisation, the Group manages liquidity risk by maintaining a level of cash and cash equivalents deemed adequate by the management to finance the Group’s operations and mitigate the impacts of fluctuations in cash flows. The following tables details the Group’s remaining contractual maturity for its non-derivative financial liabilities. The table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. On demand or within one year RMB’000

Total undiscounted cash flows RMB’000

Carrying amount RMB’000

As at 31 December 2012 Financial liabilities Other payables Trade payables to a related party

914 18,837

Total

19,751

As at 31 December 2013 Financial liabilities Other payables Trade payables to a related party

4,641 84,676

Total

89,317

As at 31 December 2014 Financial liabilities Other payables Trade payables Amount due to a related party

5,772 164,289 4,116

Total

174,177

Fair value of financial instruments There are no financial instruments measured at fair value or a recurring basis. The fair values of financial assets and financial liabilities are determined in accordance with generally accepted pricing models based on discounted cash flow analysis. The management considers that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the Financial Information approximate their fair values.

– I-17 –

APPENDIX I 8.

ACCOUNTANTS’ REPORT

REVENUE AND SEGMENT INFORMATION Revenue Revenue represents the amounts received and receivable for goods sold in the normal course of business, net of discounts. Segment information The Group operates and manages the Overseas Business as a single operating segment that engaged in developing, designing, production management and selling mobile telecommunication devices on ODM basis and sale of mobile telecommunication related components and accessories, targeting overseas markets. The Group’s chief operating decision maker has been identified as the Chief Executive Officer, who reviews revenue analysis by major products and the gross profit of the Group as a whole when making decisions about allocating resources and assessing performance of the Group. As no other discrete financial information is available for assessment of performance of different products, only entity-wide disclosures are presented. Revenue from major products The following table sets forth a breakdown of the Group’s revenue by major products during the Track Record Periods: Year ended 31 December 2012 2013 RMB’000 RMB’000 Smartphones Feature phones Smartphone component packs Mobile device components

2014 RMB’000

311,735 351,489 – 355

1,242,092 4,780 121,528 497

1,717,971 – 196,277 1,935

663,579

1,368,897

1,916,183

Geographical information The Group's major operations are currently operated in the PRC and all non-current assets of the Group are located in the PRC. Accordingly, no geographical information has been presented. The following table sets forth a breakdown of the Group’s revenue during the Track Record Periods based on locations of the external customers: Year ended 31 December 2012 2013 RMB’000 RMB’000 Southeast Asia South Asia Europe South America Other parts of Asia Hong Kong North America Africa

– I-18 –

2014 RMB’000

117,585 441,716 1,340 7,188 59,083 16,659 4,628 15,380

357,607 356,055 234,640 124,787 230,013 827 64,968 –

93,727 183,008 259,877 203,920 174,961 500,331 424,465 75,894

663,579

1,368,897

1,916,183

APPENDIX I

ACCOUNTANTS’ REPORT

Notes: 1.

Southeast Asia includes Philippines, Thailand, Vietnam, Malaysia and Indonesia.

South Asia includes India and Bangladesh.

Europe includes France, Romania, Spain, Russia, Portugal and Italy.

South America includes Brazil, Chile and Venezuela.

Other parts of Asia includes Yemen, Taiwan, Pakistan, Dubai, Israel, Nepal, Turkey and Sri Lanka.

Sales to Hong Kong mainly comprised of sales to certain mobile trading companies incorporated in Hong Kong who sell branded mobile handsets to various countries including but not limited to Philippines, Vietnam, Thailand, Malaysia, India, Indonesia, Korea, and Pakistan.

North America includes United States of America, Mexico and Honduras.

Africa includes South Africa, Algeria and Morocco.

Information about major customers Revenue from customers contributing over 10% of the total sales of the Group during the Track Record Periods is as follows: Year ended 31 December 2012 2013 RMB’000 RMB’000 215,042 1 N/A N/A 3 N/A 3 N/A 3 136,666 1 N/A 3 N/A 3 N/A

Customer A Customer B Customer C Customer D Customer E Customer F Customer G Customer H Customer I

1 2 3

257,410 1 137,047 1 156,027 1 142,557 1 142,021 1 N/A 3 N/A 3 N/A 3 N/A 3

2014 RMB’000 N/A 3 N/A 3 N/A 3 N/A 3 N/A 3 N/A 3 385,855 1 365,772 1 196,277 2

Revenue from sales of smartphones Revenue from sales of smartphone component packs The corresponding revenue did not contribute over 10% of the total revenue of the Group

OTHER GAIN AND LOSS Year ended 31 December 2012 2013 RMB’000 RMB’000 Foreign exchange loss, net

1,009

– I-19 –

3,139

2014 RMB’000 2,235

APPENDIX I 10.

ACCOUNTANTS’ REPORT

PROFIT BEFORE TAX Profit before tax has been arrived at after charging: Year ended 31 December 2012 2013 RMB’000 RMB’000 Auditor’s remuneration Depreciation of equipment Depreciation of other equipment Directors’ emoluments (Note 12) Other staff cost Salaries and other allowance Retirement benefit schemes contribution Total staff costs Cost of inventories recognised as an expense Write down of inventories (included in cost of sales) Operating lease rentals in respect of rented premises

11.

2014 RMB’000

20 108 779 1,466

14 124 624 1,532

18 138 543 1,859

14,767 3,728

17,024 4,173

18,750 4,084

19,961 584,080

22,729 1,220,676

24,693 1,655,949

2,675

2,960

2,472

1,001

865

983

INCOME TAX EXPENSE Year ended 31 December 2012 2013 RMB’000 RMB’000 Enterprise income tax (“EIT”) PRC Enterprise Income Tax

2014 RMB’000

6,339

14,656

37,435

6,339

14,656

37,435

Under the Law of the PRC and Enterprise Income tax (the “EIT Law”) and Implementation Regulation of the EIT Law, the tax rate of Benywave Wireless is 25%. However, Benywave Technology is recognised as “New and High Technology Enterprises” and therefore entitled to apply a tax rate of 15%. The PRC EIT of the Overseas Business carried out by Benywave Technology prior to the establishment of Benywave Wireless is estimated by treating the Overseas Business Unit as a separate tax payer using the tax rate of Benywave Technology prior to the Assets Transfer. The tax charge for the Track Record Periods can be reconciled to the profit before tax per the consolidated statements of profit or loss and other comprehensive income as follows: Year ended 31 December 2012 2013 RMB’000 RMB’000 Profit before tax Tax calculated at applicable domestic tax rates (2012: 15%, 2013: 15%, 2014: 25%) Tax effect of expenses not deductible for tax purposes Effect of different tax rate of Overseas Business Unit prior to the Assets Transfer Income tax expenses

– I-20 –

2014 RMB’000

42,098

97,529

193,660

6,315

14,629

48,415

4,783

–

(15,763)

6,339

14,656

37,435

APPENDIX I 12.

ACCOUNTANTS’ REPORT

EMOLUMENTS OF DIRECTORS AND CHIEF EXECUTIVE

The Directors’ emoluments paid/payable to the Executive directors, who were appointed on 12 August 2014, and the Independent non-executive directors, who were appointed on 19 September 2014, of the Company during the Track Record Periods were as follows: Year ended 31 December 2012 Retirement Salaries and benefit schemes allowances contribution RMB’000 RMB’000 Executive Directors Ms. Rong Mr. Rong Shengli

720 600

73 73

793 673

1,320

146

1,466

Year ended 31 December 2013 Retirement Salaries and benefit schemes allowances contribution RMB’000 RMB’000 Executive Directors Ms. Rong Mr. Rong Shengli

Directors’ fee RMB’000 Executive Directors Ms. Rong Mr. Rong Shengli Independent non-executive Directors Mr. Hon Kwok Ping Lawrence Mr. Lam Yiu Kin Mr. Tsang Yat Kiang

Total RMB’000

720 650

81 81

801 731

1,370

162

1,532

Year ended 31 December 2014 Retirement benefit Salaries and schemes allowances contribution RMB’000 RMB’000

Total RMB’000

– –

720 720

85 85

805 805

83 83 83

– – –

83 83 83

249

1,440

170

1,859

During the Track Record Periods and prior to the completion of the Assets Transfer, Ms. Rong and Mr. Rong Shengli who were also director and employee of Benywave Technology received emoluments from Benywave Technology. The amounts above comprise the total emoluments of Ms. Rong and Mr. Rong Shengli received from the Group and Benywave Technology for their services to the Overseas Business Unit prior to the completion of the Assets Transfer. Mr. Rong Shengli is the Chief Executive Officer of the Company.

– I-21 –

APPENDIX I

ACCOUNTANTS’ REPORT

Of the five individuals with the highest emoluments in the Group, two were the Directors for the Track Record Periods whose emoluments are included in the disclosures above. The emoluments of the remaining three individuals for the Track Record Periods were as follows: Year ended 31 December 2012 2013 RMB’000 RMB’000 Salaries and allowance Retirement benefits schemes contribution

2014 RMB’000

1,165 218

1,224 243

1,088 255

1,383

1,467

1,343

The number of these five highest paid individuals (including Directors) whose remuneration fell within the following band is as follows: Year ended 31 December 2012 2013 Nil to HKD1,000,000

2014 5

During the Track Record Periods, no Directors waived or agreed to waive any emoluments, and no emoluments were paid by the Group to the Directors or the five highest paid individuals as an inducement to join or upon joining the Group or as compensation for loss of office. 13.

EARNINGS PER SHARE

The calculation of the basic earnings per share for the Track Record Periods is based on the profit attributable to equity holders of the Company for each of the Track Record Periods, and on the basis of weighted average number of ordinary shares of 646,000,000, taking into consideration the 1,000 shares of the Company in issue, the Group Reorganisation as disclosed in note 2 and 645,999,000 shares to be issued pursuant to the capitalisation issue as more fully explained in the section headed “Resolutions of our Shareholders” in Appendix IV to the Prospectus and Section C. 14.

DIVIDENDS

As the Overseas Business was operated as the Overseas Business Unit under Benywave Technology during the Track Record Periods, the net return to Benywave Technology as set out in the consolidated statements of changes in equity does not necessarily represent a distribution of profit and no dividends were considered to be paid or declared by the Group during the Track Record Periods.

– I-22 –

APPENDIX I 15.

ACCOUNTANTS’ REPORT

EQUIPMENT Electronic and office equipment RMB’000 COST At 1 January 2012 Additions Disposals

775 36 (17)

At 31 December 2012 Additions

794 155

At 31 December 2013 Additions Disposals

949 7 (38)

At 31 December 2014

918

ACCUMULATED DEPRECIATION At 1 January 2012 Charge for the year Eliminated on disposals

384 108 (7)

At 31 December 2012 Charge for the year

485 124

At 31 December 2013 Charge for the year Eliminated on disposals

609 138 (37)

At 31 December 2014

710

CARRYING AMOUNT At 31 December 2012

309

At 31 December 2013

340

At 31 December 2014

208

Depreciation is provided to write off the cost of items of equipment, over their estimated useful lives and after taking into account of their estimated residual values, using the straight-line method at the following rates: Electronic and office equipment

10–20%

– I-23 –

APPENDIX I 16.

ACCOUNTANTS’ REPORT

AMOUNTS DUE FROM/TO RELATED PARTIES The amounts are non-trading in nature, unsecured, non-interest bearing and have no fixed terms of repayment.

The amounts due from a fellow subsidiary and to a related party represent balances with Benywave Technology and a related company controlled by Ms. Rong respectively as at 31 December 2014. The amount due to a related party is denominated in USD, a currency other than the functional currency of the Company and its subsidiaries. 17.

INVESTMENTS IN A SUBSIDIARY THE COMPANY As at 31 December 2014 RMB’000 Unlisted share, at cost of USD1

18.

–

INVENTORIES

Raw materials Finished goods

19.

2012 RMB’000

At 31 December 2013 RMB’000

2014 RMB’000

5,811 7,612

12,006 57,407

107,192 16,351

13,423

69,413

123,543

TRADE AND OTHER RECEIVABLES The Group

Trade receivables Other receivables – Value added tax receivables – Others Prepayments to suppliers Listing fee

2012 RMB’000

At 31 December 2013 RMB’000

2014 RMB’000

The Company As at 31 December 2014 RMB’000

44,522

9,452

337,184

–

55,625 162 – –

35,696 10 – –

55,858 90 1,226 3,485

– – – 3,485

100,309

45,158

397,843

3,485

Normally, deposit of 5% to 20% is required upon receiving the purchase order from the customer. Before the goods are delivered, a full payment by telegraphic transfer or up to 60 days letter of credit is required for certain customers. Credit terms are granted to selected customers on case by case basis. The Group assesses the customer’s credit quality by evaluating their historical credit records and defines credit limits for each customer. Recoverability and credit limit of the existing customers are reviewed by the management regularly.

– I-24 –

APPENDIX I

ACCOUNTANTS’ REPORT

The Group allows a credit terms from 60 to 90 days to selected customers on a case-by-case basis depending on the business relationship with and creditworthiness of the respective customers. The following is an aged analysis of trade receivables presented based on the invoice dates at the end of the reporting period, which approximated the respective revenue recognition dates.

Within 60 days 61 to 180 days 181 days to 1 year

2012 RMB’000

At 31 December 2013 RMB’000

2014 RMB’000

41,195 3,327 –

6,707 2,745 –

234,514 96,525 6,145

44,522

9,452

337,184

Included in trade receivables are the following carrying amounts denominated in a currency other than the functional currency of the Group.

USD

2012 RMB’000

At 31 December 2013 RMB’000

2014 RMB’000

44,522

9,452

337,184

Included in the Group’s trade receivable balance are debtors with aggregate carrying amount of RMB3,327,000, RMB2,745,000 and RMB102,670,000 which are past due as at 31 December 2012, 2013 and 2014, for which the Group has not provided for impairment loss as there has not been a significant change in credit quality and the Group believes that the amounts are still considered recoverable as these amounts are covered by letters of credit issued by reputable banks. The Group does not hold any collateral over these balances. The average age of these receivables is 62 days, 81 days and 151 days as at 31 December 2012, 2013 and 2014. The following is an aged analysis of the trade receivables based on invoice dates, which are past due but not impaired.

61 to 180 days 181 days to 1 year

20.

2012 RMB’000

At 31 December 2013 RMB’000

2014 RMB’000

3,327 –

2,745 –

96,525 6,145

3,327

2,745

102,670

CASH AND BANK BALANCES

Included in cash and bank balances are the following amounts denominated in currency other than functional currency of the Company and its subsidiaries:

2012 RMB’000 Cash and bank balances denominated in: – USD – HKD

– –

As at 31 December 2013 RMB’000

– –

2014 RMB’000

8,033 10

Bank balances carried interest at market rates which range from 0.01% to 0.35% per annum as at 31 December 2014.

– I-25 –

APPENDIX I

ACCOUNTANTS’ REPORT

The bank balances denominated in RMB were deposited with banks in the PRC and the conversion of such balances into foreign currencies is subject to the rules and regulations of foreign exchange control promulgated by the PRC government. 21.

TRADE PAYABLES

Prior to the completion of the Assets Transfer, the placing of purchase orders of raw materials from independent suppliers for PRC Business and Overseas Business was made by Benywave Technology as a single entity.

Trade payables to third parties Trade payable to Benywave Technology

2012 RMB’000

At 31 December 2013 RMB’000

2014 RMB’000

– 18,837

– 84,676

164,289 –

18,837

84,676

164,289

The following is an aged analysis of trade payable presented based on the recognition date of inventory at the end of the reporting period:

2012 RMB’000 Within 90 days 91 to 180 days

As at 31 December 2013 RMB’000

2014 RMB’000

15,965 2,872

84,676 –

163,747 542

18,837

84,676

164,289

Included in trade payables are the following carrying amounts denominated in a currency other than the functional currency of the Group.

USD

22.

2012 RMB’000

At 31 December 2013 RMB’000

2014 RMB’000

–

45,352

ACCRUAL AND OTHER PAYABLES The Group

Payable for premium and freights Accrued staff cost Accrued royalty Others

2012 RMB’000

At 31 December 2013 RMB’000

2014 RMB’000

The Company At as 31 December 2014 RMB’000

914 1,946 – –

4,641 2,765 – –

3,669 3,644 13,210 2,103

– – – 1,822

2,860

7,406

22,626

1,822

– I-26 –

APPENDIX I 23.

ACCOUNTANTS’ REPORT

PROVISION Warranty provision RMB’000 At 1 January 2012 Reversal of provision

13,400 (4,796)

At 31 December 2012 Additional provision

8,604 3,874

At 31 December 2013 Additional provision

12,478 10,854

At 31 December 2014

23,332

The warranty provision represents management’s best estimate of the Group’s liability under one-year warranty granted on mobile telecommunication devices, based on prior experience. 24.

SHARE CAPITAL The Company Nominal value Number of shares

Authorised On incorporation (Note i)

500,000

At 31 December 2014

500,000

Issued On incorporation (Notes i and ii)

100

At 31 December 2014

100

Presented as

per share HK$

Share capital HK$

0.1

50,000 50,000

0.1

10 10 RMB 7.94

Notes: (i)

On 12 August 2014, the Company was incorporated in the Cayman Islands as an exempted company with limited liability with authorised share capital comprised of 500,000 shares at par value of HK$0.1 per share. Upon its incorporation, 1 subscriber share of par value of HK$0.1 was allotted, issued and credited as nil paid to a third party as the initial subscriber. On the same day, the third party transferred the one share to Winmate.

(ii)

Furthermore, 92 new Shares and 7 new Shares with par value of HK$0.10 each were issued and allotted to Winmate and Favor Gain Enterprises Limited (“Favor Gain”) respectively pro-rata to their respective shareholdings in Vital Profit. None of the 100 Shares in the Company issued to Favor Gain and Winmate were paid up on allotment.

– I-27 –

APPENDIX I 25.

ACCOUNTANTS’ REPORT

RESERVES The Company The amount represents accumulated loss as at 31 December 2014.

26.

MAJOR NON-CASH TRANSACTION

All the transactions of the Overseas Business were settled by Benywave Technology during the Track Record Periods. The funds provided by or withdrawn from Benywave Technology were presented as movements in the special reserve as set out in the consolidated statements of changes in equity. 27.

CONTINGENT LIABILITY AND CAPITAL COMMITMENTS

The Group had no significant contingent liabilities and capital expenditure contracted for but not provided or authorised but not contract for in the Financial Information at the end of each reporting period. 28.

RETIREMENTS BENEFITS CONTRIBUTION

The PRC employees of the Group are members of a state-managed retirement benefit plan operated by the government of the PRC. The PRC subsidiaries of the Company are required to contribute a specified percentage of payroll costs to the retirement benefit plan to fund the employee benefits. The only obligation of the Group with respect to the retirement benefit plan is to make the specified contributions. The retirement benefit cost charged to profit or loss during the Track Record Periods amounted to RMB3,874,000, RMB4,335,000, and RMB4,254,000 respectively. 29.

RELATED PARTY TRANSACTIONS

Saved as disclosed elsewhere in the Financial Information, the Group entered into the following transactions with related parties during the Track Record Periods: (a)

Related party transactions Year ended 31 December 2012 2013 RMB’000 RMB’000 Purchase of goods from Benywave Technology (Notes i and iii)

Rental expenses incurred by Benywave Technology for Overseas Business (Notes i and iv) Rental expense incurred by Benywave Wireless (Note ii and iv) Equipment rental expense incurred by Benywave Wireless (Note ii and v) Royalty expenses incurred by Benywave Technology for Overseas Business and Benywave Wireless (Notes i and vi)

– I-28 –

2014 RMB’000

556,903

1,267,589

1,169,264

556,903

1,267,589

1,169,264

1,001

865

610

–

341

–

5,135

19,610

29,967

APPENDIX I

ACCOUNTANTS’ REPORT

Notes:

(b)

(i)

These related party transactions will be ceased after the Listing.

(ii)

These related party transactions will continue after the Listing.

(iii)

The sourcing of raw materials from external independent suppliers for PRC Business and Overseas Business was centralised by Benywave Technology. The amounts represent the purchase costs of raw materials used in the production of the Overseas Business during the Track Record Periods. After the Group Reorganisation, Benywave Wireless entered into agreements with those suppliers directly.

(iv)

The amounts represent rental expenses allocated to the Overseas Business Unit in relation to the lease of office from Beijing Tianyu Communication Equipment Co., Ltd. (“Tianyu”) by Benywave Technology during the Track Record Periods. Tianyu is an entity wholly owned by Ms. Rong and Mr. Ni. After completion of the Group Reorganisation, Benywave Wireless entered into a lease agreement with Tianyu for the lease of office directly.

(v)

The amounts represent rental expenses paid by Benywave Wireless in relation to the lease of equipment from Benywave Technology.

(vi)

Tianyu entered into a licensing agreement with an external independent supplier and assigned the license to Benywave Technology such that Benywave Technology is required to pay royalty fees based on the number of mobile telecommunication devices it produced and sold to Tianyu. The amounts represent royalty fees allocated to the Overseas Business and Benywave Wireless in relation to the mobile telecommunication devices produced and sold under the Overseas Business during the Track Record Periods.

Remuneration of key management personal of the Group Year ended 31 December 2012 2013 RMB’000 RMB’000 Short term employee benefits Post-employment benefit

– I-29 –

2014 RMB’000

2,485 364

2,594 405

3,015 473

2,849

2,999

3,488

APPENDIX I B.

ACCOUNTANTS’ REPORT

DIRECTORS’ REMUNERATION

Under the arrangements presently in force, the aggregate remuneration payable to the Directors for the year ending 31 December 2015 is estimated to be approximately RMB2,483,000. C.

SUBSEQUENT EVENTS

Other than those disclosed in the Section A of the Financial Information, the following significant events took place subsequent to 31 December 2014:

(a)

Pursuant to the written resolution passed by the shareholders of the Company on 9 June 2015 conditional upon the listing of the Company’s shares on the Stock Exchange, the Directors were authorised to capitalise the amount of HK$64,599,900 from the amount standing to the credit of the share premium account of the Company to pay up in full at par of 645,999,000 shares for allotment and issue to the then existing shareholdings in the Company.

(b)

On 9 June 2015, the restricted share unit (“RSU”) scheme of the Company is conditionally approved and adopted by the board of Directors. The principal terms of the RSU scheme are set out in the section “Statutory and General Information RSU Scheme” in Appendix IV to the prospectus. No RSU was granted up to the date of this report.

(c)

On 9 June 2015, the share option scheme of the Company is conditionally approved and adopted by the board of Directors. Further details of the share options scheme are set out in the section “Statutory and General Information — Share Option Scheme” in Appendix IV to the Prospectus. No options were granted up to the date of this report.

SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements of the Company or any of its subsidiaries have been prepared in respect of any period subsequent to 31 December 2014. Yours faithfully Deloitte Touche Tohmatsu Certified Public Accountants Hong Kong

– I-30 –

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION

The information set out in this Appendix does not form part of the Accountants’ report prepared by Deloitte Touche Tohmatsu, our Company’s Reporting Accountants, as set out in Appendix I to this prospectus (the “Accountants’ Report”) and is included herein for information only. The pro forma financial information should be read in conjunction with the section headed “Financial Information” in this prospectus. (A) PRO FORMA STATEMENT OF ADJUSTED NET TANGIBLE ASSETS OF THE GROUP The following pro forma statement of adjusted net tangible assets of the Group has been prepared in accordance with Rule 4.29 of the Listing Rules and is set out in this appendix to illustrate how the Global Offering might have affected the net tangible assets of the Group after completion of the Global Offering as if the Global Offering had taken place on 31 December 2014. The pro forma statement of adjusted consolidated net tangible assets of the Group have been prepared for illustrative purposes only and because of its hypothetical nature, it may not give a true picture of the consolidated net tangible assets of the Group as at 31 December 2014 or any future date following the Global Offering. It is prepared based on the consolidated net tangible assets of the Group attributable to equity holders of the Company as at 31 December 2014 as set out in the consolidated statements of financial position contained in Appendix I to this prospectus, and adjusted as described below. Consolidated net

Pro forma

tangible assets

adjusted

of the Group

consolidated net

attributable to

tangible assets

equity holders of

Estimated net

of the Group

the Company as

proceeds from

attributable to

at 31 December

the Global

equity holders of

2014

Offering

the Company

RMB’000

(Note 1)

(Note 2)

297,464

328,495

297,464

458,939

Pro forma adjusted consolidated net tangible assets of the Group attributable to equity holders of the Company per share RMB

HK$

(Note 3)

(Note 4)

625,959

0.74

0.93

756,403

0.89

1.13

Based on Offer Price of HK$2.22 per Share

Based on Offer Price of HK$3.06 per Share

Notes: 1.

– II-1 –

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION

For the purpose of the estimated net proceeds from the Global Offering, the amount denominated in HK$ has been converted in RMB at the rate of HK$1 to RMB0.7889, which was the rate prevailing on 31 December 2014 as quoted by the PBOC. No representation is made that the HK$ amounts have been, could have been or may be converted to RMB, or vice versa, at that rate or any other rates or at all. 3.

– II-2 –

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION

(B) ASSURANCE REPORT FROM THE REPORTING ACCOUNTANTS ON PRO FORMA FINANCIAL INFORMATION The following is the text of the independent reporting accountants’ assurance report received from Deloitte Touche Tohmatsu, Certified Public Accountant, Hong Kong, the reporting accountants of our Company, in respect of the Group’s pro forma financial information prepared for the purpose of incorporation in this prospectus.

香港金鐘道88號太古廣場一座35樓

Deloitte Touche Tohmatsu 35/F, One Pacific Place 88 Queensway Hong Kong

INDEPENDENT REPORTING ACCOUNTANTS’ ASSURANCE REPORT ON THE COMPILATION OF PRO

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