Tpv Technology Limited

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in TPV Technology Limited, you should at once hand this circular and the accompanying form of proxy to the purchaser(s) or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser(s) or transferee(s).

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

TPV TECHNOLOGY LIMITED (Incorporated in Bermuda with limited liability) (Stock Code: 903) (1) VERY SUBSTANTIAL ACQUISITION IN RELATION TO THE PROPOSED ACQUISITION OF PHILIPS TV BUSINESS IN EUROPE AND CERTAIN SOUTH AMERICAN COUNTRIES THROUGH A JOINT VENTURE WITH PHILIPS;

(2) POSSIBLE VERY SUBSTANTIAL ACQUISITION IN RELATION TO THE PROPOSED GRANTING OF THE PHILIPS PUT OPTIONS;

(3) CONTINUING CONNECTED TRANSACTIONS IN RELATION TO THE PROPOSED LICENSING OF THE PHILIPS TRADEMARKS AND THE PHILIPS SECONDARY TRADEMARKS;

AND

(4) CONTINUING CONNECTED TRANSACTIONS IN RELATION TO THE PROPOSED ENTERING INTO OF THE INTELLECTUAL PROPERTY AGREEMENT, THE AUXILIARY AGREEMENTS AND THE REVERSED AUXILIARY AGREEMENTS REGARDING THE JOINT VENTURE WITH PHILIPS

Independent financial adviser to the Independent Board Committee and the Independent Shareholders SOMERLEY LIMITED

A letter from the Independent Board Committee containing its recommendations in respect of the Continuing Connected Transactions (including the Annual Caps) to the Independent Shareholders is set out on pages 91 to 92 of this circular. A letter from Somerley, the independent financial adviser containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 93 to 147 of this circular.

A notice convening the SGM to be held at Unit 1208–16, 12/F, C-BONS International Center, 108 Wai Yip Street, Kwun Tong, Kowloon, Hong Kong on Wednesday, 22 February 2012 at 3: 00 p.m. (the ‘‘SGM Notice’’)issetoutonpagesSGM-1toSGM-3ofthiscircular.A form of proxy for use at the SGM is enclosed with this circular. Whether or not you are able to attend the SGM in person, you are requested to complete and return the form of proxy in accordance with the instructions set out in the SGM Notice. If your shares are registered with the Company’s Hong Kong share registrar, you should deposit your form of proxy at Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong or the Company’sprincipal office in Hong Kong at Unit 1208–16, 12/F, C-BONS International Center, 108 Wai Yip Street, Kwun Tong, Kowloon, Hong Kong. If your shares are registered with the Company’s Singapore share transfer office, you should deposit your form of proxy at Boardroom Corporate & Advisory Services Pte. Ltd. at 50 Raffles Place, Singapore Land Tower #32-01, Singapore 048623 or the Company’s principal office in Hong Kong at the address stated above. The proxy form should be deposited as soon as possible but in any event not later than 48 hours before the time appointed for the holding of the SGM in order to be valid. Completion of the form of proxy will not preclude you from attending and voting at the SGM or any adjournment thereof should you so wish.

23 December 2011 CONTENTS

Page

DEFINITIONS ...... 1

LETTER FROM THE BOARD

Introduction ...... 19 TheProposedTransactions ...... 20

CorporateStructurebeforeandaftercompletion ...... 80

The Existing Philips Transaction ...... 81 InformationontheGroup ...... 83

Information on Philips ...... 83 ReasonsforandbenefitsoftheProposedTransactions ...... 83

Financial effects of the Acquisition and the exercise of any of the Philips Put Options ...... 85

FinancialandtradingprospectsoftheEnlargedGroup ...... 86 ListingRulesimplications ...... 87

IndependentBoardCommittee ...... 88 TheSGM ...... 88

Recommendations ...... 89

Additionalinformation ...... 89

LETTER FROM THE INDEPENDENT BOARD COMMITTEE ...... 91

LETTER FROM SOMERLEY ...... 93

– i – CONTENTS

Page

APPENDIX I — FINANCIAL INFORMATION OF THE GROUP ...... I-1

APPENDIX II — ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS ...... II-1

APPENDIX III — UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP ...... III-1

APPENDIX IV — MANAGEMENT DISCUSSION AND ANALYSIS AND OTHER FINANCIAL INFORMATION OF THE ENLARGED GROUP ...... IV-1

APPENDIX V — GENERAL INFORMATION ...... V-1

NOTICE OF THE SGM ...... SGM-1

– ii – DEFINITIONS

In this circular, the following expressions have the meanings set out below unless the context otherwise requires:

‘‘2010 Trademark : an agreement dated 29 September 2010 entered License Agreement’’ into between Philips, AOC and the Company for granting to AOC and its affiliates an exclusive right and license to use the certain Philips trademarks on certain TVs and related promotional materials in the PRC

‘‘3D Patents’’ : patents that enable an auto-stereoscopic three- dimensional viewing experience (glasses-free three-dimensional)

‘‘Acquisition’’ : the proposed acquisition by MMD of a 70% equity interest in JVCo from Philips pursuant to the terms and conditions of the Sale and Purchase Agreement

‘‘acting in concert’’ : has the meaning ascribed to it under the Takeovers Code

‘‘Annual Cap(s)’’ : the maximum annual aggregate value(s) for the Continuing Connected Transactions for the period from the date of Completion to 31 December of various years as set out in this circular

‘‘AOC’’ : AOC Holdings Limited, a wholly-owned subsidiary of the Company

‘‘Argentina JV’’ : Fabrica Austral de Productos Eléctricos S.A., a company incorporated in Argentina, which will be owned as to 63.4% by JVCo and 36.6% by Philips Argentina immediately upon Completion (subject to adjustment)

‘‘Argentina JV : the agreement to be entered into at Completion Shareholders among JVCo, Philips Argentina S.A., the Agreement’’ Argentina JV and Philips in respect of, among other things, the relationship of the shareholders of the Argentina JV

– 1 – DEFINITIONS

‘‘Argentina Non-TV continuing transactions between Argentina JV Transactions’’ and Philips relating to the non-TV business unit of Argentina JV, the details of which are set out in sub-paragraph headed ‘‘Argentina Non-TV Transactions’’ under the section headed ‘‘(III) The entering into of the Argentina JV Shareholders Agreement’’

‘‘associate(s)’’ : has the meaning ascribed to it under the Listing Rules

‘‘Assumed Employees’’ : those persons proposed to be employed by the JV Group at Completion pursuant to the Disentanglement

‘‘Auxiliary Agreements’’ : collectively, the Transitional Services Agreement, the IT Transitional Service Level Agreement and the Remote Control Sale Agreement

‘‘Board’’ : the board of Directors

‘‘Brazil Lease : an agreement to be entered into at Completion Agreement’’ between TP Vision Indústria Eletrônica Ltda., a wholly-owned of JVCo, and Philips Do Brasil Ltda., which is ultimately owned by Philips, in respect of the lease by TP Vision Indústria Eletrônica Ltda. to Philips Do Brasil Ltda. of a property in Brazil

‘‘Bridge Facility’’ : the revolving facility in the amount of EUR100 million (equivalent to approximately US$140 million) to be provided by Philips (or its nominee) to JVCo at Completion

‘‘CEC’’ : China Electronic Corporation, a state-owned company incorporated in the PRC, being the ultimate parent of the Company

‘‘CEC Group’’ : CEC and its subsidiaries from time to time

‘‘CKD’’ : complete knock down assembly kit

‘‘Completion’’ : completion of the Acquisition

‘‘Completion Date’’ :dateofCompletion

– 2 – DEFINITIONS

‘‘Company’’ or ‘‘TPV’’ : TPV Technology Limited, a company incorporated in Bermuda with limited liability, the shares of which are primarily listed on the main board of the Hong Kong Stock Exchange and secondarily listed on the Singapore Stock Exchange

‘‘Continuing Connected : the Trademark License Agreement, the Transactions’’ Secondary Trademark License Agreement, the Intellectual Property Agreement, the Auxiliary Agreements, the Reversed Auxiliary Agreements and the transactions contemplated thereunder

‘‘connected person(s)’’ : has the meaning ascribed to it under the Listing Rules

‘‘Consumer Care’’ : the after sales service and support as set out in the Trademark License Agreement

‘‘Deferred Purchase : an amount equal to 70% of the JV Group’s Price’’ average audited consolidated EBIT in each financial year commencing from (and including) the year ending 31 December 2012 to (and including) the Last Year multiplied by four, provided that, if the above calculation results in a negative number, then the Deferred Purchase Priceisdeemedtobezero

‘‘Director(s)’’ : the directors of the Company from time to time

‘‘Disentanglement’’ : all the steps which are necessary to be carried out by Philips or a relevant member of the Philips Group in order to transfer the Philips Contributed Business to the JV Group (including, for the avoidance of doubt, the joint venture arrangement with respect to the Argentina JV and related ‘‘spin off’’ as contemplated under the Argentina JV Shareholders Agreement)

‘‘Dixtal’’ : Dixtal Biomédica Indústria e Comércio Ltda., a wholly-owned subsidiary of Philips

‘‘Dixtal Lease : an agreement dated 22 September 2009 entered Agreement’’ into between Philips Brazil and Dixtal, which is ultimately owned by Philips

– 3 – DEFINITIONS

‘‘EBIT’’ : earnings before interest and taxes and adjusted pursuant to the terms of the Sale and Purchase Agreement

‘‘Employee Shop’’ : the relevant wholly-owned subsidiary of Philips in the local jurisdiction which will enter into the Employee Shop Agreements with Local JVCo Subsidiary

‘‘Employee Shop : agreements to be entered into at Completion Agreements’’ between Employee Shop and the Local JVCo Subsidiary in respect of the sale by the Local JVCo Subsidiary and purchase by Employee ShopofvariousTVproductsaswellasother products that may be offered by the Local JVCo Subsidiary from time to time as specified in the agreements

‘‘Enlarged Group’’ : the Group as enlarged by the Acquisition

‘‘EU’’ :theEuropeanUnion

‘‘EUR’’, ‘‘Euro’’ or ‘‘€’’ : the euro as defined in Council Regulation (EC) No. 1103/97 of 17 June 1997

‘‘Existing Philips : the existing continuing connected transaction Transaction’’ with Philips contemplated under the 2010 Trademark License Agreement

‘‘Funding Documents’’ : the loan agreements for each of the Bridge Facility, the Shareholder Loan and the TPV Loan to be entered into by the relevant parties at Completion

‘‘Group’’ : the Company and its subsidiaries from time to time

‘‘GWSZ’’ : China Great Wall Computer Shenzhen Company Limited （中國長城計算機深圳股份有限公司）,a company incorporated in the PRC, whose shares are listed on the Shenzhen Stock Exchange

‘‘GWT’’ : Great Wall Technology Company Limited（長城科技股份有限公司）, a joint stock limited company incorporated in the PRC with limited liability, whose shares are listed on the Hong Kong Stock Exchange

– 4 – DEFINITIONS

‘‘Hong Kong’’ : Hong Kong Special Administrative Region of the PRC

‘‘Hong Kong Stock : The Stock Exchange of Hong Kong Limited Exchange’’

‘‘Hungary Lease and : an agreement to be entered into at Completion Service Agreement’’ between TP Vision Hungary and Philips Hungary in respect of the lease of a factory building and provision of services in the factory building by TP Vision Hungary to Philips Hungary

‘‘Independent Board : an independent committee of the board of Committee’’ Directors comprising all independent non- executive Directors, namely Mr. Chan Boon- Teong, Dr. Ku Chia-Tai and Mr. Wong Chi Keung

‘‘Independent : Shareholders except for Philips, its associates and Shareholders’’ those Shareholders required to abstain from voting on relevant matters pursuant to the Listing Rules

‘‘Intellectual Property : an agreement to be entered into at Completion Agreement’’ between Philips and JVCo relating to the transfer, license or non-assert of certain Intellectual Property Rights relating to the Scope Products

‘‘Intellectual Property : all patents and patent rights, trademarks and Rights’’ trademark rights, trade names and trade name rights, service marks and service mark rights, service names and service name rights, brand names, logos and slogans, inventions, formulae, copyrights and copyright rights, trade dress, business and product names, logos, slogans, trade secrets, industrial models, processes, designs, plans, proposals, methodologies, computer programs (including all source codes) and related documentation, technical data and information, manufacturing, engineering and technical drawings, know-how design rights, all pending applications for and registrations of any of the foregoing and rights to apply for such registrations

– 5 – DEFINITIONS

‘‘IT’’ : information technology

‘‘IT Transitional Service : an agreement to be entered into at Completion Level Agreement’’ between Philips Electronics and JVCo relating to the provision of information technology services by Philips Electronics to JVCo

‘‘JVCo’’ : T.P. Vision Holding B.V., a company incorporated in the Netherlands with limited liability which, immediately prior to Completion, will own and control the Philips Contributed Business directly or indirectly through local subsidiaries

‘‘JV Group’’ : JVCo and its subsidiaries from time to time

‘‘JVCo Sale Shares’’ : 70% of the issued shares in the share capital of JVCo as at the Completion Date

‘‘Last Year’’ : the later of (a) 2014 and (b) the last completed financial year prior to the date on which Philips gives notice in writing to MMD of its election to receive the Deferred Purchase Price

‘‘Latest Practicable Date’’ : 20 December 2011, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained herein

‘‘LCD’’ : liquid crystal display

‘‘Licensed Patents’’ : any patents other than the Transfer Patents which are owned and/or controlled by Philips as of the Completion Date, which are entitled to the benefit of a filing date prior to the Completion Date and for which Philips has the free right to grant licenses, all to the extent used or intended to be used, at Completion, in commercially released Scope Products (either current or under development) of the Philips Contributed Business, but in any case excluding any 3D Patents

‘‘Listing Rules’’ : the Rules Governing the Listing of Securities on theHongKongStockExchange

– 6 – DEFINITIONS

‘‘Local JVCo Subsidiary’’ : the relevant wholly-owned subsidiary of JVCo in the local jurisdiction which will enter into the Employee Shop Agreements with Employee Shop

‘‘Material Adverse : an effect that is or is reasonably likely to be Effect’’ materially adverse to the business, financial condition or results of operations of the JV Group or the Philips Contributed Business, in each case taken as a whole or which is or is reasonably likely to materially and adversely affect the ability of the JV Group to carry on the Philips Contributed Business in the same manner and to the same extent as the Philips Contributed Business is carried on by the Philips Group as at the date of the Sale and Purchase Agreement, provided that in no event shall any of the following be taken into account (alone or in combination with any other event identified in this provision) in determining whether there has been such a Material Adverse Effect: (i) any change in applicable law or accounting standards or interpretations thereof applicable to the Philips Contributed Business, (ii) any change in economic or business conditions or industry- wide or financial market conditions generally, (iii) any currency exchange rate fluctuations, (iv) any political conditions (including effects arising out of acts of terrorism, sabotage, armed hostilities or war) or other force majeure events, and (v) any loss of customers or suppliers of, or employees to, the Philips Contributed Business as a result of the execution of the Sale and Purchase Agreement or the announcement of the transactions contemplated thereunder, except to the extent that such effect disproportionately affects the JV Group or the Philips Contributed Business, taken as a whole

‘‘Mitsui’’ :Mitsui&Co.,Ltd.

‘‘MMD’’ : Coöperatie MMD Meridian U.A., a cooperative established in the Netherlands with limited liability, being a wholly-owned subsidiary of the Company

– 7 – DEFINITIONS

‘‘Monitor’’ : a display device primarily intended for connecting to a PC via wired or wireless means and having a screen size between thirteen (13’’) and twenty-three (23’’)inches

‘‘Net TV’’ : the access by hardware devices of Philips of the NET TV Portal using the NET TV or other use by hardware devices of Philips of the NET TV Technology pursuant to which such hardware devices of Philips can use or access an application

‘‘Net TV License and : an agreement to be entered into at Completion Services Agreement’’ between Philips Consumer Lifestyle B.V. and JVCo relating to the provision of Net TV Services by JVCo to the Philips Group

‘‘Net TV Portal’’ : a website, such as the website currently operated by Philips under the name Net TV Portal, but to be further designed, hosted and maintained as of Completion by JVCo or any of its subcontractors or members of the JV Group, providing access to various entertainment and information applications for the Scope Products

‘‘Net TV Services’’ : services related to the operation, hosting, maintenance and support of the Net TV Portal

‘‘Net TV Technology’’ : the software development kit and all intellectual property rights, documents, know-how and information, related to NET TV and Smart TV

‘‘Non-Exclusive : those contracts to which a member of the Philips Contracts’’ Group is a party which relate in part to, or are used in part by, the Philips Contributed Business

‘‘ODM’’ : original design manufacturer

‘‘OEM’’ : original equipment manufacturer

‘‘Online Shop’’ : Philips Consumer Relations B.V., a wholly- owned subsidiary of Philips

– 8 – DEFINITIONS

‘‘Online Shop and My : an agreement to be entered into at Completion Shop Agreement’’ amongst Philips Consumer Relations B.V., Philips Electronics Nederland B.V. and JVCo in respect of the sale by JVCo and purchase by Philips Consumer Relations B.V. and Philips Electronics Nederland B.V. of various TV products as well as other products that may be offered by JVCo from time to time as specified in the agreement

‘‘PC’’ : personal computer

‘‘Philips’’ : Koninklijke Philips Electronics N.V., a public limited liability company incorporated in the Netherlands, the shares of which are listed on NYSE Euronext

‘‘Philips Argentina’’ : Philips Argentina S.A., a wholly-owned subsidiary of Philips

‘‘Philips Brand’’ : any product brand represented by or associated with the Philips Trademark

‘‘Philips Brazil’’ : Philips Do Brasial Ltda., a wholly-owned subsidiary of Philips

‘‘Philips Business’’ : the entire business of the product management, innovation and development, manufacturing, operation, marketing, sale and distribution of the Scope Products as carried on by the Philips Group under the Philips Trademarks immediately prior to Completion, but excluding the marketing, sale and distribution of the Scope Products under the Philips Trademarks carried on by those third parties having received a license from Philips under certain Philips trademarks

‘‘Philips Consumer : Philips Consumer Lifestyle B.V., a wholly-owned Lifestyle’’ subsidiary of Philips

– 9 – DEFINITIONS

‘‘Philips Contracts’’ : (i) a list of the key contracts set out in the Sale and Purchase Agreement; (ii) all other contracts to which any member of the Philips Group is a party entered into before the date of the Sale and Purchase Agreement in the course of conducting the Philips Business, except for any Non- Exclusive Contracts; and (iii) the contracts entered into by any member of the Philips Group or any member of the JV Group in the course of conducting the Philips Business between the date of the Sale and Purchase Agreement and the Completion Date, except for any Non-Exclusive Contracts, which are not fully performed as at the Completion Date or which have not been terminated without any further rights or obligations as at the Completion Date

‘‘Philips Electronics’’ or : Philips Electronics Nederland B.V., a wholly- ‘‘My Shop’’ owned subsidiary of Philips

‘‘Philips Contributed : the Philips Business including (i) all of the rights Business’’ and assets of the Philips Group fully or partly dedicated to the Philips Business to be reorganised pursuant to the Disentanglement and to be contributed by the Philips Group to the JV Group pursuant to the Disentanglement, including the Philips Contracts and the Non- Exclusive Contracts, to the extent such contracts relate to the Philips Contributed Business; (ii) the Intellectual Property Rights owned by the Philips Group which will be licensed or transferred to the JV Group pursuant to the Intellectual Property Agreement, the Trademark License Agreement and the Secondary Trademark License Agreement; (iii) the Assumed Employees; (iv) all liabilities related to any Philips Contracts subsisting at Completion and arising in respect of matters to be performed after Completion, but excluding, amongst others, (v) any litigation and claims related to the Philips Business before Completion; (vi) the Philips Receivables; and (vii) liabilities in relation to any Non-Exclusive Contract, to the extent that such contract does not relate to the Philips Business

– 10 – DEFINITIONS

‘‘Philips Control Put : anoptiongranted,pursuanttotheShareholders Option’’ Agreement, pursuant to which Philips shall have the right to sell and transfer all, and not less than all,ofitssharesofJVCotoMMD,intheeventof the occurrence of the TPV Change of Control as set out in sub-paragraph headed ‘‘Philips Control Put Option’’ under the paragraph headed ‘‘Principal Terms’’ in the section headed ‘‘(II)Theenteringintoofthe Shareholders Agreement’’ in this circular

‘‘Philips Default Put : anoptiongranted,pursuanttotheShareholders Option’’ Agreement, pursuant to which Philips shall have the right to sell and transfer all, and not less than all,ofitssharesofJVCotoMMD,intheeventof theoccurrenceofanEventofDefaultassetoutin sub-paragraph headed ‘‘Default’’ under the paragraph headed ‘‘Principal Terms’’ in the section headed ‘‘(II)Theenteringintoofthe Shareholders Agreement’’ in this circular

‘‘Philips Exit Put Option’’ : anoptiongranted,pursuanttotheShareholders Agreement, pursuant to which Philips shall have the right to sell and transfer all, and not less than all, of its shares in JVCo to MMD

‘‘Philips Group’’ : Philips and its subsidiaries from time to time

‘‘Philips Hungary’’ : Philips Ltd., a wholly-owned subsidiary of Philips

‘‘Philips Payables’’ : the amounts owed by Philips or the relevant members of the Philips Group as at the Completion Date in respect of the Philips Business prior to the Completion Date

‘‘Philips Put Options’’ : the Philips Exit Put Option, the Philips Control Put Option and the Philips Default Put Option

‘‘Philips Receivables’’ : all receivables and other amounts owing to Philips or relevant members of the Philips Group as at the Completion Date in respect of the Philips Business prior to the Completion Date

‘‘Philips Secondary : the trademarks of ‘‘ARISTONA’’, ‘‘ERRES’’, Trademarks’’ ‘‘PYE’’, ‘‘RADIOLA’’, ‘‘SCHNEIDER’’ and ‘‘SIERA’’

– 11 – DEFINITIONS

‘‘Philips Singapore’’ : Philips Electronics Singapore Pte Ltd, a wholly- owned subsidiary of Philips

‘‘Philips Trademarks’’ : the word mark ‘‘Philips’’, the Philips shield emblem, the Ambilight mark and the word mark ‘‘Sense and Simplicity’’

‘‘PRC’’ or ‘‘China’’ :thePeople’s Republic of China, and for the purpose of this circular, specifically excluding Hong Kong, Macau Special Administrative Region of the People’sRepublicofChinaand Taiwan

‘‘Proposed Transactions’’ : the transactions contemplated under the Sale and Purchase Agreement, the Shareholders Agreement, the Argentina JV Shareholders Agreement, the Trademark License Agreement, the Secondary Trademark License Agreement, the Intellectual Property Agreement, the Auxiliary Agreement, the Reversed Auxiliary Agreement and the Funding Documents

‘‘R&D’’ : research and development

‘‘Remote Control Sale : an agreement to be entered into at Completion Agreement’’ between Philips Electronics Singapore Pte Ltd and JVCo relating to the sale of remote control products and other products and the granting of a license to use remote control products by Philips Electronics Singapore Pte Ltd to JVCo

‘‘Reversed Auxiliary : collectively, the NET TV License and Services Agreements’’ Agreement, the Online Shop and My Shop Agreement, the Employee Shop Agreements, the Brazil Lease Agreement, the Amendment to the Dixtal Lease Agreement, the Hungary Lease and Service Agreement and the Tax Audit Service Agreement

‘‘R$’’ : Real, the lawful currency of Brazil

‘‘Sale and Purchase : the agreement dated 1 November 2011 entered Agreement’’ into between the Company, MMD, Philips and JVCo in respect of the Acquisition

– 12 – DEFINITIONS

‘‘Scope Products’’ : TVs but excluding: (i) any display product for exclusively displaying information, advertising and the like to the general public; (ii) any display product for use in combination with medical systems; (iii) any display product for automotive use; (iv) any display product that is a hand-held or portable device with a screen size of less than fifteen (15’’) inches; or (v) any display product primarily intended for being connected to and displaying signals originating from PCs

‘‘Secondary Trademark : TVs and remote control devices (including Scope Products’’ remote control devices with a display) bundled with TVs (meaning sold, distributed and/or marketedwiththeTVinsidethepackagingof the TV) bearing the Philips Secondary Trademarks, including replacements of such remote control devices, but excluding: (i) any display product for exclusively displaying information, advertising and the like to the general public; (ii) any display product for use in combination with medical systems; (iii) any display product for automotive use; (iv) any display product that is a hand-held or portable device with a screen size of less than fifteen (15’’) inches; or (v) any display product primarily intended for being connected to and displaying signals originating from PCs

‘‘Secondary Trademark : the agreement to be entered into at Completion License Agreement’’ between Philips and JVCo in respect of the grant by Philips to JVCo and certain of its affiliates an exclusive trademark license in respect of the Philips Secondary Trademarks under which JVCo and certain of its affiliates may design, manufacture, source, sell, distribute and market Scope Products in the Territory

‘‘SFO’’ : the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

– 13 – DEFINITIONS

‘‘SGM’’ : the special general meeting of the Company to be convened on 22 February 2012 for the purpose of considering and, if thought fit, approving the Sale and Purchase Agreement, the Shareholders Agreement, the Argentina JV Shareholders Agreement, the Trademark License Agreement, the Secondary Trademark License Agreement, the Intellectual Property Agreement, the Auxiliary Agreements, the Reversed Auxiliary Agreements, the Funding Documents, and the respective transactions contemplated thereunder and the Annual Caps

‘‘Share(s)’’ : ordinary shares of US$0.01 each in the share capital of the Company

‘‘Shareholder Loan’’ : the term loan in the total amount of EUR170 million (equivalent to approximately US$238 million) to be provided by Philips (or its nominee) and MMD (or its nominee) to JVCo at Completion

‘‘Shareholder(s)’’ : holder(s) of Share(s)

‘‘Shareholders : the agreement to be entered into at Completion Agreement’’ among Philips, the Company, MMD and JVCo in respect of, among other things, the corporate governance arrangements of JVCo, restrictions on transfer of JVCo shares and the Philips Put Options

‘‘Singapore Stock : Singapore Exchange Securities Trading Limited Exchange’’

‘‘SKD’’ : semi-knock down assembly kit

‘‘Smart TV’’ : the Philips consumer branded feature that includes NET TV and the Philips consumer branded function for sharing content between certain devices and applications for personal computer, smartphone and tablets and TV-only features for advanced programming of the TV and new ways to control the Smart TV enabled device

– 14 – DEFINITIONS

‘‘Smart TV Dashboard’’ : the Smart TV start-up screen that provides an integrated user experienced combining the various Smart TV elements

‘‘Somerley’’ : Somerley Limited, a corporation licensed by the Securities and Futures Commission to conduct type 1 (dealing in securities), type 4 (advising on securities), type 6 (advising on corporate finance) and type 9 (asset management) regulated activities under the SFO, the independent financial adviser appointed by the Company to advise the Independent Board Committee and the Independent Shareholders in respect of the Continuing Connected Transactions (including the Annual Caps)

‘‘substantial : has the meaning ascribed to it in the Listing shareholder(s)’’ Rules

‘‘Takeovers Code’’ : The Hong Kong Code on Takeovers and Mergers

‘‘Tax Audit Service : an agreement to be entered into at Completion Agreement’’ between TP Vision Hungary and Philips Hungary in respect of various services in relation to tax audits with respect to Philips

‘‘Territory’’ : worldwide, with the exception of the PRC, India, the US, Canada, Mexico and South America (with the exception of Brazil, Uruguay and Paraguay which will be included in the Territory and Argentina where a non-exclusive trademark license will be granted by Philips to the JV Group pursuant to the Trademark License Agreement)

‘‘Term Sheet’’ : the term sheet dated 17 April 2011 between the Company and Philips relating to, among other things, the Acquisition, the granting of the Philips Put Options, the entering into of the Trademark License Agreement and the Auxiliary Agreements and the transactions contemplated thereunder

‘‘TP Vision Brazil’’ : TP Vision Indústria Electrônica Ltda., which will be a wholly-owned subsidiary of JVCo upon Completion

– 15 – DEFINITIONS

‘‘TP Vision Hungary’’ : TP Vision Hungary Ltd., which will be a wholly- owned subsidiary of JVCo upon Completion

‘‘TP Vision Netherlands’’ : TP Vision Netherlands B.V., which will be a wholly-owned subsidiary of JVCo upon Completion

‘‘TPV Loan’’ : the term loan in the total amount of EUR100 million (equivalent to approximately US$140 million) to be provided by Philips (or its nominee) to the Company (or its nominee) at Completion

‘‘Trademark License : the agreement to be entered into at Completion Agreement’’ between Philips and JVCo in respect of the grant by Philips to JVCo and certain of its affiliates of an exclusive trademark license under which JVCo and certain of its affiliates may design, manufacture, source, sell, distribute and market Philips-branded Scope Products in the Territory

‘‘Transfer Patents’’ : certain patents or inventions owned by Philips and/or its members which are solely used within the Philips Contributed Business as of the Completion Date and which are not incorporated in a licensing program of Philips to third parties (excluding 3D Patents)

‘‘Transitional Services : the agreement to be entered into at Completion Agreement’’ between Philips and JVCo in respect of the provision of certain transitional services by the Philips Group to the JV Group

‘‘Transitional Service : the transitional service level agreements in Level Agreements’’ relation to the provision of services pursuant to the Transitional Services Agreement in effect as of Completion

‘‘Turnover’’ : the number of the Scope Products invoiced or shipped by the JV Group times the relevant net selling price of the Scope Products

– 16 – DEFINITIONS

‘‘TV’’ : electronic devices with a display primarily intended for displaying television signals receivable via off-air television transmissions, via cable, or satellite or internet (whether intended for sale to the mass retail market or to hotels, restaurants, ships, planes, trains and locations including sleeping accommodations such as hospitals, army bases, student dormitories and elderly home estates)

‘‘TVIL’’ : Top Victory Investments Ltd., a wholly-owned subsidiary of the Company

‘‘US’’ : the United States of America

‘‘US$’’ or ‘‘USD’’ : US dollar(s), the lawful currency of the US

‘‘%’’ : per cent

Unless otherwise specified in this circular, amounts denominated in EUR and R$ have been converted, for illustrative purpose only, into US$ at exchange rates of EUR1.00 = US$1.4 and R$1.00 = US$0.6279. Such exchange rates are for the purpose of illustration only and do not constitute a representation that any amount has been, could have been or may be converted at any oftheaboveratesandanyotherratesoratall.

– 17 – LETTER FROM THE BOARD

TPV TECHNOLOGY LIMITED (Incorporated in Bermuda with limited liability) (Stock Code: 903)

Executive Director: Registered office: Dr. Hsuan, Jason Canon’sCourt (Chairman and Chief Executive Officer) 22 Victoria Street Hamilton HM 12 Non-executive Directors: Bermuda Mr. Liu Liehong Mr. Lu Ming Principal office and place Ms. Wu Qun of business in Hong Kong: Mr. Xu Haihe Unit 1208–16, 12/F, Mr. Du Heping C-BONS International Center Mr. Tam Man Chi 108 Wai Yip Street Mr. Robert Theodoor Smits Kwun Tong Mr. Chen Yen-Sung Kowloon Mr. Junichi Kodama Hong Kong

Independent non-executive Directors: Mr.ChanBoonTeong Dr. Ku Chia-Tai Mr. Wong Chi Keung

23 December 2011

To the Shareholders

DearSirorMadam,

(1) VERY SUBSTANTIAL ACQUISITION IN RELATION TO THE PROPOSED ACQUISITION OF PHILIPS TV BUSINESS IN EUROPE AND CERTAIN SOUTH AMERICAN COUNTRIES THROUGH A JOINT VENTURE WITH PHILIPS;

(2) POSSIBLE VERY SUBSTANTIAL ACQUISITION IN RELATION TO THE PROPOSED GRANTING OF THE PHILIPS PUT OPTIONS;

(3) CONTINUING CONNECTED TRANSACTIONS IN RELATION TO THE PROPOSED LICENSING OF THE PHILIPS TRADEMARKS AND THE PHILIPS SECONDARY TRADEMARKS;

AND

– 18 – LETTER FROM THE BOARD

INTRODUCTION

References are made to the announcements of the Company dated 18 April 2011 and 9November2011inrelationtotheenteringinto of the Term Sheet by the Company and Philips and the Sale and Purchase Agreement by MMD, Philips, the Company and JVCo in connection with the Proposed Transactions.

On 1 November 2011, MMD, the Company’s wholly-owned subsidiary, has conditionally agreed to acquire the JVCo Sale Shares and the Company has agreed to guarantee the obligations of MMD under the Sale and Purchase Agreement on and subject to the terms and conditions of the Sale and Purchase Agreement. Philips will retain the remaining 30% equity interest in JVCo, which can be sold by Philips to MMD under any of the Philips Put Options pursuant to the Shareholders Agreement to be entered into at Completion. JVCo will own and control the Philips Contributed Business comprising, amongst other things, innovation and development sites, manufacturing sites, sales organizations in various countries, the Assumed Employees, and certain patents and contracts relating to the Philips Contributed Business. The Sale and Purchase Agreement is subject to the conditions precedent referred to below in the paragraph headed ‘‘Conditions for the Sale and Purchase Agreement’’.

As part of the Proposed Transactions, the Shareholders Agreement, the Argentina JV Shareholders Agreement, the Trademark License Agreement, the Secondary Trademark License Agreement, the Intellectual Property Agreement, the Auxiliary Agreements, the Reversed Auxiliary Agreements and the Funding Documents will be entered into among the members of the Philips Group and members of the Group (including JVCo) upon Completion. The Shareholders Agreement will set out the provisions governing the management and operations of JVCo and the terms and conditions for Philips exercising the Philips Put Options to sell its remaining 30% interest in JVCo to MMD. The Argentina JV Shareholders Agreement will set out the provisions governing the operations of the Argentina JV to be jointly held by JVCo and a member of the Philips Group. Pursuant to the Trademark License Agreement and the Secondary Trademark License Agreement, Philips will grant a license to the JV Group for an initial period of five years for the use of the Philips Trademarks and the Philips Secondary Trademarks, respectively, in the Territory. Pursuant to the Intellectual Property Agreement, Philips will transfer and license patents, know-how and software to JVCo in relation to the Scope Products in the Territory. The Auxiliary Agreements and the Reversed Auxiliary Agreements will contain the terms and conditions for the provision of certain transitional services, which will facilitate the transition of the Philips Contributed Business to be operated under JVCo after Completion. The Funding Documents set out the terms upon which (i) Philips will advance the Bridge Facility to JVCo, (ii) Philips and MMD (or its nominee) will advance the Shareholder Loan to JVCo, and (iii) Philips will advance the TPV Loan to MMD (or its nominee) at Completion.

Themainpurposesofthiscircularare:

(a) to provide you with further information relating to the Proposed Transactions;

– 19 – LETTER FROM THE BOARD

(b) to set out the letter of advice from Somerley to the Independent Board Committee and the Independent Shareholders as well as the recommendation and opinion of the Independent Board Committee as advised by Somerley in relation to the Continuing Connected Transactions (including the Annual Caps); and

THE PROPOSED TRANSACTIONS

(I) Purchase of the Philips Contributed Business

The Sale and Purchase Agreement

On 1 November 2011, MMD, the Company’s wholly-owned subsidiary has conditionally agreed to acquire the JVCo Sale Shares and the Company has agreed to guarantee the obligations of MMD under the Sale and Purchase Agreement on and subject to the terms and conditions of the Sale and Purchase Agreement. Philips will complete the Disentanglement in all material respects prior to Completion so that all the assets of the Philips Contributed Business are owned, directly or indirectly, by JVCo.

The Philips Contributed Business

The principal business of the Philips Contributed Business is the design, manufacture, distribution, marketing and sale of Philips branded TVs worldwide, with the exception of mainland China, India, United States, Canada, Mexico and certain countries in South America. Upon Completion, JVCo will, directly or indirectly, own and control the Philips Contributed Business comprising, amongst others, the following:

. innovation and development sites in Eindhoven (Netherlands), Bruges (Belgium), Bangalore (India) and Singapore;

. manufacturing plants in Szekesfehervar (Hungary), Manaus (Brazil) and Tierra del Fuego (Argentina);

. sales organizations in various countries, including but not limited to Germany, Austria, Switzerland, France, Russia, Brazil, Belgium, the Netherlands, Luxembourg, Italy, Denmark, Finland, Norway, Sweden, Spain, Argentina, Turkey, Poland and the United Kingdom;

. the Philips Contracts;

. inventory owned at Completion by the Philips Group used exclusively in connection with the Philips Business;

. the Assumed Employees; and

– 20 – LETTER FROM THE BOARD

. the Intellectual Property Rights owned by the Philips Group which will be licensed or transferred to the JV Group pursuant to the Intellectual Property Agreement, the Trademark License Agreement and the Secondary Trademark License Agreement.

Completion of the Sale and Purchase Agreement is subject to the conditions precedent referred to in the sub-paragraph headed ‘‘Conditions for the Sale and Purchase Agreement’’ below.

Date

1 November 2011

Parties

(1) MMD

(2) Philips

(3) the Company

(4) JVCo

MMD is principally engaged in investment holding and is a wholly-owned subsidiary of the Company.

As at the Latest Practicable Date, to the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, save for Philips owning approximately 2.69% of the issued share capital of the Company as at the Latest Practicable Date, Philips and the ultimate beneficial owner of Philips are third parties independent of the Company and its connected persons.

Pursuant to the Sale and Purchase Agreement, the Company guarantees to Philips the due and punctual discharge by MMD of its obligations thereunder.

Consideration and payment terms

MMD will purchase the JVCo Sale Shares at the Deferred Purchase Price, which will be an amount equal to 70% of the JV Group’s average audited consolidated EBIT in each financial year commencing from (and including) the year ended 31 December 2012 to (and including) the Last Year multiplied by four, provided that, if the above calculation results in a negative number, then the Deferred Purchase Price is deemed to be zero.

The Deferred Purchase Price was agreed after arm’s length negotiation between the Company and Philips. The Deferred Purchase Price has been determined with reference to, among other things, (i) the future prospects and performance of JVCo leveraging on the Philips Contributed Business and Philips Trademarks; (ii) the future economic and commercial prospects of the Territory; and (iii) Philips TV’s

– 21 – LETTER FROM THE BOARD global presence and innovation capabilities. The Directors consider that the Deferred Purchase Price is fair and reasonable because the Deferred Purchase Price provides an incentive to Philips (as the vendor of the Philips Contributed Business and owner of the Philips brand) to show commitment and support to the JV Group and to contribute to the turnaround of the Philips Contributed Business.

It is anticipated that the Deferred Purchase Price shall be satisfied from the Company’s internal resources and be settled by telegraphic transfer in immediately available funds of the Company as and when the Deferred Purchase Price becomes due and payable. Given that the Deferred Purchase Price will be calculated based on the JV Group’s average audited consolidated EBIT in financial years 2012 to the Last Yearandisnotsubjecttoacap,itisnotpossibletoascertaintheamountofthe Deferred Purchase Price at the present time.

Conditions for the Sale and Purchase Agreement

Pursuant to the Sale and Purchase Agreement, Completion is conditional upon the satisfaction, on or prior to the Completion Date (or their satisfaction subject only to Completion), of, among other things, the following conditions:

(A) the obtaining by MMD of all relevant governmental approvals as set out in the Sale and Purchase Agreement;

(B) (i) the Disentanglement having been completed in all material respects and, taking account of the arrangements set out in the relevant transaction documents, the JV Group being able to carry on the Philips Contributed Business, in all material respects, in the same manner and to the same extent as the Philips Business is carried on by the Philips Group as at the date of the Sale and Purchase Agreement;

(ii) not less than six of the eight key individuals of the Philips Contributed Business as set out in the Sale and Purchase Agreement having entered into a new employment contract with the relevant member of the JV Group or been transferred to the relevant member of the JV Group by operation of relevant laws and regulations, and each such employee not having resigned or their employment not having been terminated in accordance with the terms thereof;

(iii) not less than 70% of the 53 selected key employees of senior management of the Philips Contributed Business listed in the Sale and Purchase Agreement having entered into a new employment contract with the relevant member of the JV Group or been transferred to the relevant member of the JV Group by operation of relevant laws and regulations, and each such employee not having resigned or their employment not having been terminated in accordance with the terms thereof;

– 22 – LETTER FROM THE BOARD

(iv) all key employees of the research and development and sales force departments of the Philips Contributed Business listed in the Sale and Purchase Agreement having entered into a new employment contract with the relevant member of the JV Group or been transferred to the relevant member of the JV Group by operation of relevant laws and regulations, and each such employee not having resigned or their employment not having been terminated in accordance with the terms thereof; and

(v) completion by Philips of applicable mandatory consultation procedures with employee representative bodies (including workers councils and trade unions);

(C) the Company having convened a special general meeting at which resolutions shall have been duly passed by the Independent Shareholders to approve (i) the entering into of the Sale and Purchase Agreement and the other relevant transaction documents and the acquisition by MMD of the JVCo Sale Shares, and (ii) the entering into of the Transitional Services Agreement, and such other continuing connected transactions that may be entered into between any members of the Group and the Philips Group and which require the approval of the Independent Shareholders, in each case, in compliance with relevant laws and regulations, including the Listing Rules, and the by-laws of the Company;

(D) GWT having convened an extraordinary general meeting at which resolutions shall have been duly passed by the independent shareholders of GWT and having convened a board meeting at which resolutions shall have been duly adopted by the directors of GWT, in each case to approve (i) the entering into of the Sale and Purchase Agreement and the other relevant transaction documents and the acquisition by MMD of the JVCo Sale Shares, and (ii) the entering into of the Transitional Services Agreement, and such other continuing connected transactions that may be entered into between any members of the Group and the Philips Group and which require the approval of the independent shareholders of GWT, in each case, in compliance with relevant laws and regulations, including the Listing Rules, and the by-laws of GWT;

(E) if required by relevant laws and regulations, GWSZ having convened a general meeting at which resolutions shall have been duly passed by the shareholders of GWSZ and having convened a board meeting at which resolutions shall have been duly adopted by the directors of GWSZ, in each case to approve (i) the entering into of the Sale and Purchase Agreement and the other relevant transaction documents and the acquisition by MMD of the JVCo Sale Shares, and (ii) the entering into of the Transitional Services Agreement, and such other continuing connected transactions that may be entered into between any members of the Group and the Philips

– 23 – LETTER FROM THE BOARD

Group and which require the approval of the shareholders of GWSZ, in each case, in compliance with relevantlawsandregulationsincludingthe rules of the Shenzhen Stock Exchange, and the by-laws of GWSZ;

(F) none of the warranties and representations given by Philips under the Sale and Purchase Agreement being found to be, or no event occurring or matter arising which renders any of such warranties and representations being, untrue or incorrect in any respect on and as at Completion, where the event or matter which causes such warranties and representations to be untrue or incorrect has or is reasonably likely to have a material adverse effect to the JV Group or the Philips Contributed Business;

(G) none of the warranties and representations given by Philips under the Sale and Purchase Agreement which is expressed to be ‘‘as at the date of the Sale and Purchase Agreement’’ being found to be, or no event occurring or matter arising which renders any such warranties and representations being, untrue or incorrect in any respect if such warranties and representations were instead deemed to be ‘‘as at the Completion Date’’, where the event or matter which would cause such warranties and representations to be untrue or incorrect has, or is reasonably likely to have, a material adverse effect to the JV Group or the Philips Contributed Business;

(H) none of the warranties and representations given by MMD or the Company under the Sale and Purchase Agreement being found to be, and no event occurring or matter arising which renders any of such warranties and representations given by MMD or the Company being, untrue or incorrect in any respect on and as at Completion, where the event or matter which causes such warranties and representations given by MMD or the Company to be untrue or incorrect has or is reasonably likely to have a material adverse effect on the transactions contemplated under the Sale and Purchase Agreement;

(I) (i) the European Commission adopting a decision under Article 6(1)(b) of Council Regulation (EC) 139/2004 as amended (‘‘EUMR’’)interms reasonably satisfactory to MMD declaring such acquisition to be compatible with the common market; or

(ii) such acquisition being deemed to have been declared compatible with the common market pursuant to Article 10(6) EUMR; and

(iii) in the event that a request under Article 9(2) EUMR has been made by a Member State of the European Union, the European Commission indicating that it does not intend to refer such acquisition or any aspect of it to the competent authorities of such state in accordance with Article 9 EUMR and no such referral being deemed to have been made pursuant to Article 9(5) EUMR;

– 24 – LETTER FROM THE BOARD

(J) there shall not be pending by any government any proceeding (or by any other person any proceeding under any anti-trust or competition law that has a substantial likelihood of success) challenging or seeking to restrain, prohibit or modify the transactions contemplated by the Sale and Purchase Agreement;

(K) a written clearance from the relevant government has been obtained or the waiting period under the applicable anti-trust or competition law in any other affected non-European Union jurisdictions expiring, and all material related approvals, registrations, or declarations of, or filings with any government in any such jurisdictions required to be obtained or made prior to Completion having been obtained or made on a basis reasonably satisfactory to MMD;

(L) there being no fact or circumstance having occurred between the date of the Sale and Purchase Agreement and Completion which, in each case individually or in the aggregate, has or is reasonably likely to have a Material Adverse Effect;

(M) the conditions precedent to drawdown under the Funding Documents (except any condition precedent to the effect that the conditions in the Sale and Purchase Agreement have been satisfied or waived) shall have been satisfied or waived (as the case may be) in accordance with the terms of such Funding Documents;

(N) the delivery to MMD of the audited combined accounts of the Philips Business for each of the years ended 31 December 2008, 31 December 2009 and 31 December 2010 and for the period ended 3 July 2011, signed by PricewaterhouseCoopers, within 10 business days prior to the date on which the circular is dispatched by the Company to its Shareholders;

(O) a director of the Argentina JV having transferred all of his legal and beneficial interest in the share capital of the Argentina JV to Philips Argentina S.A; and

(P) the registration with the Real Estate Registry Office having been updated to show that no social security premiums are due by Philips do Brasil Ltda in connection with the factory site in Manaus.

Theconditionsassetoutin(B),(F),(G),(L),(M),(N),(O)and(P)aboveare insertedforthebenefitofMMD,assuch,MMDmaywaiveinwholeorinpartallor any of such conditions. Philips may waive in whole or in part all or any of the conditions as set out in (H) above. The remaining conditions may be waived only by mutual agreement of MMD and Philips. In the event that all the conditions above are not satisfied or waived (as the case may be) on or before 30 April 2012, or such other date as the parties to the Sale and Purchase Agreement may agree, the Sale and Purchase Agreement shall lapse and none of the parties to the Sale and Purchase Agreement shall make any claim against any other in respect thereof.

– 25 – LETTER FROM THE BOARD

As at the Latest Practicable Date, save for conditions (N), none of the conditions above have been satisfied.

Reasons for conditions (D) and (E) above

TothebestoftheDirectors’ knowledge, information and belief having made all reasonable enquiries, as at the Latest Practicable Date, (i) GWSZ owns approximately 8.5% of the issued share capital of the Company; (ii) China Great Wall Computer (H.K.) Holding Limited (‘‘CGCHK’’), a wholly-owned subsidiary of GWSZ, owns approximately 15.8% of the issued share capital of the Company; and (iii) GWSZ is owned as to 53.92% by GWT. GWT and GWSZ are listed on the Hong Kong Stock Exchange and Shenzhen Stock Exchange, respectively. As such, it is a prerequisite for GWT and GWSZ to obtain the approval from their respective boards and shareholders on the Proposed Transactions for GWSZ and CGCHK to vote in the SGM of the Company.

Treatment of the Philips Receivables and the Philips Payables

Pursuant to the Sale and Purchase Agreement, it is agreed that the Philips Receivables shall remain with the Philips Group (excluding the JV Group) and shall not be transferred to the JV Group under the Disentanglement. Accordingly, the Philips Group (excluding the JV Group) shall remain entitled to the Philips Receivables. The Philips Payables shall remain with the Philips Group (excluding the JV Group) and shall not be transferred to the JV Group under the Disentanglement. Accordingly, the Philips Group (excluding the JV Group) shall remain responsible for settling the Philips Payables.

Based on the financial information on the Philips Business, trade and other receivables of the Philips Business amounted to US$616 million as at 31 December 2010. Trade and other payables and accruals of the Philips Business amounted to US$1,484 million as at 31 December 2010. Management of Philips considers that the nature of these receivables and payables are broadly within the definitions of Philips Receivables and Philips Payables.

Trade and other receivables primarily represent receivables from customers arising from sales. Trade payables, other payables and accruals mainly comprise, among others, payables to suppliers for purchases of inventories, sales-related taxes and social security contributions payables, material related and other accruals, sales related accruals, and salary and wages payable. Philips Receivables and Philips Payables refer to balances as at the Completion Date, and accordingly, the net assets position as of 3 July 2011 and the net liabilities position as of 31 December 2010 (as set out in the paragraph headed ‘‘Information on JVCo’’ below) do not include Philips Receivables and Philips Payables. However, they include the aforementioned trade and other receivables, trade payables, other payables and accruals as at 3 July 2011 and 31 December 2010, which management of Philips considers that they should be of a similar nature as Philips Receivables and Philips Payables as at the Completion Date.

– 26 – LETTER FROM THE BOARD

Assumed Employees

Pursuant to the Sale and Purchase Agreement, the key treatment of the Assumed Employees will be, among others, as follow:

(i) subject to Completion, in respect of any Assumed Employees employed by a member of the Philips Group (excluding the JV Group), who will transfer to JVCo or another member of the JV Group by operation of the relevant laws and regulations of the relevant jurisdiction (the ‘‘Automatic Transfer Employees’’), the relevant member of the JV Group shall, with effect from the moment of transfer:

(a) employ, on terms as to the capacity and place in which such Assumed Employee will be employed and as to other terms and conditions of his or her employment (including the pension arrangements) which, when considered overall, are no less favourable than the corresponding provisions of his or her contract of employment immediately prior to the transfer; and

(b) count the Assumed Employee’s period of continuous service with the Philips Group as continuous service with the JV Group;

(ii) in respect of any Assumed Employees employed by a member of the Philips Group (excluding the JV Group), but who will not transfer to JVCo or another member of the JV Group in connection with the Disentanglement on or before Completion by operation of the relevant laws and regulations of the relevant jurisdiction (the ‘‘Non-Automatic Transfer Employees’’), in sufficient time to allow proper contractual or statutory notice of termination of employment to be given to Non- Automatic Transfer Employees or at such time as Philips and MMD may agree but in any event not later than the Completion Date, Philips shall cause the relevant member of the JV Group to make an offer to each Non- Automatic Transfer Employee (other than those under notice of termination of employment) to employ such Assumed Employee under a new contract of employment commencing, subject to Completion, on or prior to the Completion Date. The offer to be made shall be such that:

(a) the provisions of the new contract shall be, as to the capacity and place in which the Assumed Employee will be employed, and as to the other terms and conditions of his or her employment (including the pension arrangements), when considered overall, no less favourable than the corresponding provisions of his or her contract of employment as existing immediately prior to the offer; and

(b) itprovidesthattheAssumedEmployee’s period of continuous service with the Philips Group shall be counted as continuous service with the JV Group.

– 27 – LETTER FROM THE BOARD

The relevant member of the Philips Group shall terminate the employment of each Non-Automatic Transfer Employee with effect from the Completion Date.

(iii) MMD shall procure that the JV Group will retain all Assumed Employees for a period of at least 12 months after Completion on terms and conditions which, when considered overall, are not less favourable to the relevant Assumed Employee compared to those by which the relevant Assumed Employee was employed immediately prior to Completion (save for the right to terminate an employment contract with any Assumed Employee at anytimeforcauseundertherelevantemployment contracts and applicable laws).

Funding of JVCo

Pursuant to the Sale and Purchase Agreement, Philips and MMD have agreed to financially support the JV Group by way of the following:

The Shareholder Loan

(i) Philips or one of its wholly-owned subsidiaries shall provide to JVCo at Completion its share of the Shareholder Loan in an amount of EUR51.0 million (equivalent to approximately US$71.4 million) for the general corporate funding needs of the JV Group;

(ii) MMD (or its nominee) shall provide at Completion its share of the Shareholder Loan in an amount of EUR119.0 million (equivalent to approximately US$166.6 million) for the general corporate funding needs of the JV Group;

The Shareholder Loan will be split into two tranches being:

(A) a 3-year EUR70.0 million (equivalent to approximately US$98.0 million) tranche bearing an interest rate, subject to an extension of the tenor, of EURIBOR plus 2.20% per annum (increasing to 2.70% per annum following an extension of the tenor); and

(B) a 5-year EUR100.0 million (equivalent to approximately US$140.0 million) tranche bearing an interest rate of EURIBOR plus 2.70% per annum.

In certain circumstances the tenor of each tranche of the Shareholder Loan may be extended pursuant to the terms of the Shareholder Loan up to a maximum of 10 years after Completion and may become repayable in instalments prior to maturity if Philips ceases to hold an interest in JVCo in accordance with the Shareholders Agreement;

– 28 – LETTER FROM THE BOARD

Equity contribution

(iii) immediately after the transfer of the JVCo Sale Shares, Philips shall make an additional contribution in cash to its remaining shares in JVCo in the amount of EUR30.0 million (equivalent to approximately US$42.0 million), to be regarded as share premium reserve;

(iv) immediately after the transfer of the JVCo Sale Shares, MMD shall make an additional contribution in cash to the JVCo Sale Shares in the amount of EUR70.0 million (equivalent to approximately US$98.0 million), to be regarded as share premium reserve;

Philips brand promotion and marketing support

(v) at Completion, Philips shall pay in cash to JVCo the amount of EUR135.0 million (equivalent to approximately US$189.0 million), which amount JVCo shall apply towards its promotion and marketing activities which benefit the Philips brand. Pursuant to the Trademark License Agreement, there is an additional EUR50.0 million (equivalent to approximately US$70.0 million) to be paid by Philips to JVCo in four equal quarterly amounts in the second year after Completion — please refer to the sub-paragraph headed ‘‘Philips brand promotion and marketing support’’ in section (IV) ‘‘Licensing of Philips Trademarks and Philips Secondary Trademarks for the Philips Contributed Business’’;

The Bridge Facility

(vi) Philips or one of its wholly-owned subsidiaries shall make available to JVCo as of Completion the Bridge Facility (which will be revolving in nature) in the total amount of EUR100.0 million (equivalent to approximately US$140.0 million) for the working capital funding needs of the JV Group, the 9-month Bridge Facility bears an interest rate, subject to an extension of the tenor, of EURIBOR plus 1.80% per annum. (increasing to 2.70% per annum following an extension of the tenor). In certain circumstances the tenor of the Bridge Facility may be extended pursuant to the terms of the Bridge Facility to a maximum of 5 years and may become repayable in instalments prior to maturity if Philips ceases to hold an interest in JVCo in accordance with the Shareholders Agreement; the refinancing of the Bridge Facility has been agreed between the parties to the Shareholders Agreement. Please refer to details of such refinancing arrangements as set out in sub-paragraph headed ‘‘Financing’’ under the paragraph headed ‘‘Principal Terms’’ in the section headed ‘‘(II) The entering into of the Shareholders Agreement’’ below.

In the instance where there is a refinancing of the Bridge Facility, if JVCo requests, Philips will provide a guarantee to the respective lender(s) under such new facility for 30% of the outstandings under such facility contingent on: (i) TPVprovidingatthesametimeaguaranteetotherespectivelender(s)under

– 29 – LETTER FROM THE BOARD

such new facility for 70% of the outstandings under such facility; and (ii) JVCo providing a counter-indemnity to Philips in respect of Philips’s obligations under its above mentioned guarantee; and

The TPV Loan

(vii) Philips or one of its wholly-owned subsidiaries shall make available to MMD (or its nominee) at Completion the 3-year TPV Loan in an amount of EUR100.0 million or its equivalent in US$ (equivalent to approximately US$140.0 million) for the purpose of funding MMD’s obligations under the Shareholder Loan. The Company guarantees to Philips punctual performance by MMD (or its nominee) of MMD’s(oritsnominee’s) obligations under the TPV Loan. The currency of the loan may be US$ or EUR and the interest rate will be, (if drawn in US$) LIBOR plus 3.8% per annum or, (if drawn in EUR) EURIBOR plus 3.8% per annum.

The TPV Loan may be mandatorily prepayable prior to its originally stated maturity in certain circumstances including Philips requiring prepayment following the exercise of the Philips Control Put Option.

The references to EURIBOR and LIBOR above refer in each case to a rate in EUR or US$, respectively, aimed at reflecting the prevailing market rates for interbank lending between leading banks for the relevant currency and period of the respective interest periods applicable to each loan.

Completion

Upon satisfaction or the waiver (as the case may be) of all the conditions set out above, Completion shall take place on the Completion Date. Upon Completion, JVCo will become a 70%-owned subsidiary of the Company and will carry on the Philips Contributed Business. The accounts of JVCo will be consolidated into the Company’s consolidated accounts.

Termination

Either MMD or Philips may terminate the Sale and Purchase Agreement by written notice if, amongst others, any of the following events occurs at any time before Completion:

(A) either party commits any material breach of, or omits to observe any of its material obligations or undertakings under, the Sale and Purchase Agreement and it is not reasonable to expect that such breach or omission will be cured within the period set out in the Sale and Purchase Agreement; or

(B) there occurs a material adverse effect to the JV Group or the Philips Contributed Business.

– 30 – LETTER FROM THE BOARD

If(i)theCompanyhasnotdespatchedthe circular in connection with the SGM referredtoinparagraph(C)inthesectionheaded‘‘Conditions for the Sale and Purchase Agreement’’ in this circular to the Shareholders on or before 31 December 2011; or (ii) the general meetings of each of the Company, GWT and GWSZ referred to in paragraphs (C), (D) and (E) in the section headed ‘‘Conditions for the Sale and Purchase Agreement’’ in this circular are not held on or before 29 February 2012, then Philips may in its sole and absolute discretion terminate the Sale and Purchase Agreement.

Information on JVCo

JVCo, with its statutory seat in Eindhoven, the Netherlands, is incorporated by Philips to hold the Philips Contributed Business. Pursuant to the Disentanglement to be carried out by Philips or the members of the Philips Group prior to Completion, the Philips Contributed Business will be transferred to the JV Group. Upon Completion, JVCo will, directly or indirectly, own and control the Philips Contributed Business.

The Philips Contributed Business, which is currently part of Philips Consumer Lifestyle, has its headquarters in Amsterdam (Netherlands), innovation/ development sites in Eindhoven (Netherlands), Bruges (Belgium), Bangalore (India) and Singapore, manufacturing sites in Szekesfehervar (Hungary), Manaus (Brazil) and Tierra del Fuego (Argentina) and sales organisations in 31 countries in Europe and South America.

The Philips Contributed Business also consists of employees (either directly employed by Philips or through a third party), assets (both tangible and intangible) and liabilities to the extent owned by or fully dedicated (or attributable) to the Scope Products.

The assets include certain intellectual property rights, material contracts, distribution and marketing, customer care, research and developments, websites and contracts with manufacturers and suppliers, order portfolio, inventory (including goods in transit), product roadmaps, IT hardware and software systems.

Set out below is a summary of the financial information on the Philips Business, which is prepared based on the accounting policies of the Company which are consistent with Hong Kong Financial Reporting Standards.

For the period from 1 January 2011 to 3 July 2011 US$ (million)

Revenue 1,658 Net loss before income tax and finance costs (335) Net loss before income tax (336) Net loss after income tax (341)

– 31 – LETTER FROM THE BOARD

For the year ended 31 December 2010 2009 US$ (million) US$ (million)

Revenue 4,083 3,951 Net loss before income tax and finance costs (104) (211) Net loss before income tax (105) (212) Net loss after income tax (125) (231)

As of 3 July 2011, the net assets position of the Philips Business was US$39 million. Notwithstanding a net loss of US$341 million for the period from 1 January to 3 July 2011, the net assets position of the Philips Business has improved from net liabilities of US$310 million as of 31 December 2010 due to a net additional funding of US$713 million from Philips.

As of 31 December 2010, the total assets and the net liabilities position of the Philips Business were US$1,404 million and US$310 million, respectively.

Reasons for the net loss for the period from 1 January 2011 to 3 July 2011

Price erosion, partly driven by stock depletion of high inventory levels from 2010, drives the gross profit decline in the first six months of 2011 compared to the same period last year. The industrial and the Philips Business overstock at the end of 2010 has led to relatively high stock in the retail stores. Competitors have also driven excessive price erosion to try and clear their oversupply. This has driven the market to experience higher than normal price erosion in 2011.

Total operating expenses increased mainly due to a rise in research and development expenses largely resulted from exceptional impairments as a result of lower returns. In addition, substantial amounts were incurred to speed up the time to market for 2012.

The results deteriorated due to the increased price erosion that materialized during the first six months of 2011 and the subsequent decline in gross profit and increased total operating expenses.

Price erosion and pressure is common for consumer electronics goods in general (and not just for TVs) due to economies of scale and continued advance in manufacturing research and technology. The Company hopes that the adverse impact from price erosion can be better managed using an improved cost structure, enhanced economies of scale with the acquisition of the Philips Contributed Business and more effective management of inventories.

– 32 – LETTER FROM THE BOARD

Reasons for the net loss for the year ended 31 December 2010

In 2010, there was a lower gross profit driven by price pressure across the product range. In the second half of 2010 there were high inventory levels at all global TV manufacturers and lower sales due to temporary component shortage.

Reasons for the net loss for the year ended 31 December 2009

Following the global recession caused by the financial crisis, in 2009, revenues decreased by 24% due to a world-wide sales decline in the Scope Products that mainly incurred in Brazil, Russia, the United Kingdom and France.

(II) The Entering into of the Shareholders Agreement

Pursuant to the Sale and Purchase Agreement, the Shareholders Agreement in respect of the operations of JVCo will be entered into at Completion. The principal terms of the Shareholders Agreement are summarized below.

The Shareholders Agreement

Parties

(1) Philips

(2) the Company

(3) MMD

(4) JVCo

Pursuant to the Shareholders Agreement, the Company guarantees to Philips the due and punctual discharge by MMD of its obligations thereunder.

– 33 – LETTER FROM THE BOARD

Principal terms

Managing Board The Managing Board (as defined below) shall consist of five members, four of whom shall be nominated by MMD and one of whom shall be nominated by Philips. The Managing Board shall comprise the chief executive officer and the chief financial officer (both of which must be nominated by MMD).

MMD has the approval rights, and not Philips, in respect of the nomination of any new member to be appointed to the Managing Board at the general meeting of JVCo. Each nominationbyMMD,however,shallbesubjectto consultation with Philips and Philips shall be offered a reasonable opportunity to review such nomination and discuss the nomination with MMD and the nominee.

The Supervisory Board has the power to suspend or remove, at any time, any member of the Managing Board.

The day-to-day business and affairs of JVCo shall be managedbyastatutorymanagingboardofJVCo(the ‘‘Managing Board’’) which may exercise all powers of JVCo save as otherwise provided pursuant to any applicable laws and regulations, the Shareholders Agreement or the articles of association of JVCo, and the Managing Board shall be supervised by a non-executive supervisory board of JVCo (the ‘‘Supervisory Board’’).

Supervisory Board The Supervisory Board shall consist of four members, of which MMD and Philips are entitled to nominate three members and one member respectively at the general meeting of JVCo.

– 34 – LETTER FROM THE BOARD

It is the duty of the Supervisory Board to supervise the Managing Board and the general course of affairs in JVCo and its subsidiaries, and the business connected with them. The Supervisory Board shall also advise the Managing Board and it has the right to approve or resolve, by way of unanimous resolution, certain material matters of JVCo including, among other things:

(i) any related party transaction (or series of related transactions) between any member of the JV Group and any connected person, other than the following related party transactions which do not require unanimous approval by the Supervisory Board:

a. related party transactions that are on arm’s length terms with a value of not more than EUR4.0 million (equivalent to approximately US$5.6 million) on an individual basis, provided that such related party transactions are on arm’slengthtermsandthetermsofwhich (including as to quality, pricing and other material terms, taking into account the nature and extent of the commercial relationship with its relevant related party and taking into account the quality, pricing and other material terms available in the relevant market from reputable third parties), taken as a whole, are fair and reasonable to the relevant member of the JV Group;

b. related party transactions that relate to the supply to any member of the JV Group of a Scope Product or a product used in the manufacturing of a Scope Product, provided that such transactions are on arm’slengthterms and the terms of which (including as to quality, pricing and other material terms, taking into accountthenatureandextentofthecommercial relationship with its relevant connected person and taking into account the quality, pricing and other material terms available in the relevant market from reputable third parties), taken as a whole, are fair and reasonable to the relevant member of the JV Group;

– 35 – LETTER FROM THE BOARD

c. related party transactions that relate to the provision of a service to or by any member of the JV Group, provided that such transactions are on arm’slengthtermsandthetermsofwhich (including as to quality, pricing and other material terms, taking into account the nature and extent of the commercial relationship with its relevant connected person and taking into account the quality, pricing and other material terms available in the relevant market from reputable third parties), taken as a whole, are fair and reasonable to the relevant member of the JV Group;

d. related party transactions that relate to the transfer of assets to or by any member of the JV Group, provided that such assets are transferred at a value that would have been paid in an arm’s length negotiation;

(With respect to

a. related party transactions set out in paragraph b. above, if the value of such transactions is more than EUR30.0 million (equivalent to approximately US$42.0 million) on an annual basis or EUR10.0 million (equivalent to approximately US$14.0 million) on an individual basis; and

b. related party transactions set out in paragraphs c. and d. above, if the value of such transactions is more than EUR10.0 million (equivalent to approximately US$14.0 million) on an annual basis or EUR5,000,000 (equivalent to approximately US$7.0 million) on an individual basis,

then details of such transactions shall be notified in writing to the shareholder of JVCo who is not qualifying as a connected person to the subject transaction, prior to the execution of the transaction.)

– 36 – LETTER FROM THE BOARD

(ii)anyproposalformerger,de-merger,spin-off,or corporate restructuring of any kind of any member of the JV Group (other than any corporate restructuring necessary in order to reorganize and integrate the Philips Contributed Business, including redundancies and/or termination of employment contracts or closing down of premises and/or facilities);

(iii) initiating any bankruptcy, liquidation or winding up proceedings, moratorium or suspension of payments (or any similar proceedings in the relevant jurisdiction) with respect to any subsidiary of JVCo, other than any voluntary solvent restructuring;

(iv) any proposal for amendment to the articles of association of any subsidiary of JVCo;

(v) any proposal for distribution of dividends or any other form of distribution by a non-wholly owned subsidiary of the JV Group, including any distribution of reserves or premiums;

(vi) any proposal for issuance, redemption or repurchase of securities, or other increase or reduction of the share capital, by a non-wholly owned subsidiary of JVCo;

(vii) any proposal for listing or public offering of securities issued by a member of the JV Group and any action required to be taken by the relevant member of the JV Group in connection therewith;

(viii) changes in accounting principles, to the extent that the proposed changes are inconsistent with International Financial Reporting Standards or to the extent that the proposed changes may affect the calculation of EBIT;

– 37 – LETTER FROM THE BOARD

(ix) any acquisition or disposal of assets by any member of the JV Group, other than in the ordinary course of business on arm’s length terms, having individually or in the aggregate, in a single transaction or a series of related transactions over a 12-month period, a value, including any assumed or assigned financial debt, in excess of EUR25.0 million (equivalent to approximately US$35.0 million) on a consolidated basis;

(x) entering into any financing transaction by any member of the JV Group, other than in the ordinary course of business on arm’s length terms, of any kind, in amounts in excess of EUR25.0 million (equivalent to approximately US$35.0 million), and the provision of any guarantees (or counter-guarantees) by any member of the JV Group of any kind in favour of third parties covering (directly or indirectly) payment obligations for amounts in excess of EUR25.0 million (equivalent to approximately US$35.0 million), the foregoing amounts to be calculated on a consolidated basis (i.e., taking into account the amount involved in the same kind of transactions performed by JVCo and its subsidiaries during the same period);

(xi) any capital expenditure by any member of the JV Group in excess of EUR25.0 million (equivalent to approximately US$35.0 million), per transaction or series of related transactions;

(xii) any agreement for the formation of a joint venture, consortium or partnership (other than ordinary commercial contracts) the combined net asset value or share capitalization of which is in excess EUR25.0 million (equivalent to approximately US$35.0 million); and

(xiii) the initiation, choice of a defense strategy or settlement by a member of the JV Group of any litigation or arbitral proceedings where the claimed amount is in excess of EUR10.0 million (equivalent to approximately US$14.0 million).

General meeting Any of MMD, Philips, the Supervisory Board or the Managing Board may convene a general meeting of JVCo by notice to each of MMD and Philips.

– 38 – LETTER FROM THE BOARD

Thefollowingmattersshallbedecidedbythegeneral meeting of JVCo or, as the case may be, require the prior written approval of the general meeting of JVCo, and resolutions of the general meeting of JVCo on these matters shall require unanimous approval in a meeting where both Philips and MMD are present:

(i) the allocation and issuance by a member of the JV Group of stock options;

(ii) amendment of the articles of association of JVCo;

(iii) modification or waiver of the pre-emptive rights attaching to shares of JVCo;

(iv) any legal merger, demerger or liquidation of JVCo;

(v) any issuance, redemption or repurchase of securities, or other increase or reduction of the share capital of JVCo;

(vi) approval of a transfer of shares of JVCo;

(vii) initiating any bankruptcy, dissolution, liquidation or winding up proceedings, moratorium or suspension of payments (or any similar proceedings in the relevant jurisdiction) with respect to JVCo; and

(viii) declaration or payment of any dividends or distributions.

Voluntary wind-up If,notwithstandingthatthefullamountoftheadditional option funding has been provided to JVCo pursuant to an increase of the Shareholder Loan:

(i) JVCo records accumulated EBIT losses in excess of EUR300.0 million (equivalent to approximately US$420.0 million) (before taking into account EUR125 million (equivalent to approximately US$175 million) paid by Philips as part of the brand promotion and marketing support fee or otherwise received by JVCo for the same purposes) following Completion; or

(ii) there is insufficient funding to sustain JVCo as a going concern and MMD and Philips fail to implement a remedial plan within three months,

– 39 – LETTER FROM THE BOARD

MMD or Philips may in its sole and absolute discretion elect to initiate a voluntary wind-up process by giving writtennoticetotheotherpartyandJVCoatanytime within 30 business days after the occurrence of one of the abovementioned events.

Financing Initial funding

For further details of the initial funding of JVCo, please refer to the paragraph headed ‘‘Funding of JVCo’’ in the section headed ‘‘(I) Purchase of the Philips Contributed Business’’.

Refinancing of the Bridge Facility

If, on the date falling 6 months after Completion, JVCo determines that it has insufficient funds available to it, taking into account its projected funding needs during the year following the date falling 9 months after Completion (the ‘‘Bridge Facility Termination Date’’)withanysuch shortfall in funds as compared against the funds available to it (the ‘‘Bridge Facility Funding Shortfall’’)torepay the amounts outstanding under the Bridge Facility on the Bridge Facility Termination Date:

(i) JVCo shall apply towards repayment of the outstanding loan such amount as it determines as being available to it to make such repayment without a Bridge Facility Funding Shortfall occurring; and

(ii) MMD (or its nominee) shall purchase by way of a transfer of part of the loan from Philips or its relevant wholly-owned subsidiary that is the lender under the Bridge Facility so that, on and following such transfer, the outstanding loan (taking into account any repayment made under paragraph (i) above) is provided by MMD (or its nominee) as to 70% and by Philips or its relevant wholly-owned subsidiary that is the lender under the Bridge Facility as to 30%.

– 40 – LETTER FROM THE BOARD

Further funding

If, at any time after Completion, JVCo requires funding additional to the funding available to it to enable the JV Group to meet its working capital requirements and liabilities as they fall due and carry on its business without a significant curtailment of operations, the Company and Philips, in proportion to its shareholding in JVCo, shall provide (or arrange for its respective nominee to provide) additional funding to JVCo up to EUR140.0 million (equivalent to approximately US$196.0 million) and EUR60 million (equivalent to approximately US$84.0 million), respectively.

Dividend policy JVCo shall not make any distributions, dividends or other payments on any shares of JVCo or any other security rights issued by JVCo at any time while the Bridge Facility and the Shareholder Loan are outstanding and have not been repaid or, in the case of the Bridge Facility, cancelled in full.

Transfer of shares Neither MMD nor Philips may sell, transfer or otherwise assign, or dispose of, or undertake to assign or dispose of, whether by way of transfer of the legal and/or beneficial ownership of the shares of JVCo (including for the avoidance of doubt a conditional or unconditional transfer or voting rights), any shares of JVCo held by it, whether directly or indirectly (the ‘‘Share Transfer’’), except if and to the extent that it complies with certain provisions, including, among others, the other shareholder of JVCo has given its approval in writing to the Share Transfer.

There is a tag-along provision in the Shareholders Agreement in the event that a bona fide third party acquirer (the ‘‘Third Party Acquirer’’)wishestoacquirea shareholder’s shares of JVCo, and such shareholder (the ‘‘Seller’’) wishes to accept the offer, the Seller shall immediatelygivenoticethereoftotheothershareholder of JVCo (the ‘‘Tag-along Seller’’) disclosing the details of the offer. And the Tag-Along Seller shall have the right to require the Seller to procure the Third Party Acquirer to acquire all of the Tag-along Seller’ssharesofJVCo concurrently with the transfer of the Seller’ssharesof JVCo.

– 41 – LETTER FROM THE BOARD

Philips Exit As from expiry of a period of 6 years commencing on the Put Option date of the Shareholders Agreement, Philips shall have the right to sell and transfer all, and not less than all, of its shares of JVCo to MMD. Philips shall deliver to MMD a notice to exercise the Philips Exit Put Option (the ‘‘Philips Exit Put Option Notice’’). Philips shall cease to have the Philips Exit Put Option if it has sold and transferred its shares of JVCo pursuant to the Philips Control Put Option.

The price to be paid by MMD for the shares of JVCo owned by Philips pursuant to an exercise of the Philips Exit Put Option (the ‘‘Exit Put Option Price’’)shallbe payable in cash and shall be the higher of nil and an amount calculated as:

AxB,where:

A=JVCo’s average consolidated EBIT in 2012 to the last completed financial year prior to the date on which Philips has delivered the Philips Exit Put Option Notice, multiplied by 4; and

B = the percentage of the shares of JVCo held by Philips at the time of the Philips Exit Put Option Notice.

The price to be paid by MMD for the shares of JVCo owned by Philips upon the exercise of the Philips Exit Put Option has been arrived at after arm’s length negotiations between the Company and Philips with reference to, among other factors, actual earnings performance of the Philips Contributed Business between Completion and the most recently completed financial year prior to the exercise of the Philips Exit Put Option. The Directors consider that the Exit Put Option Price is fair and reasonable.

Philips Control Upon a change of control of the Company by way of the Put Options following (the ‘‘TPV Change of Control’’):

(a) the Company or any of the members of the Group enters into an alliance, joint venture, consortium, partnership or similar agreement relating to Scope Products with any person listed as a competitor as set out in the Trademark License Agreement (as updated from time to time);

– 42 – LETTER FROM THE BOARD

(b) (i) CEC together with any of the members of the CEC Group and associated companies, either as a group or acting in concert with Mitsui, ceases to hold, directly or indirectly, at least 30% of the then outstanding Shares; or (ii) a person (or persons acting in concert), other than CEC together with any of the members of the CEC Group and associated companies, either as a group or acting in concert with Mitsui, become the owner of (or become entitled to vote), directly or indirectly, 30% or more of the then outstanding Shares;

(c) the Company and/or any members of the Group undertakes any act or thing pursuant to which a person (or persons acting in concert), other than CEC together with any of the members of the CEC Group or associated companies, either as a group or parties acting in concert with Mitsui, is able to direct or cause the direction of the management and policies of the Company;

(d) a person, other than a member of the Group, becomes owner of more than 50% of the assets of the Company (bybookvalue,bymarketvalueorbyvolume);or

(e) the Company ceases to hold, directly or indirectly, 100% of the equity interests in MMD.

Philips shall have the rights to sell and transfer all, and not less than all, of its shares of JVCo to MMD.

In the event that Philips elects to exercise the Philips Control Put Option, Philips shall deliver to MMD a notice (the ‘‘Philips Control Put Option Notice’’), stating the irrevocable decision of Philips to exercise the Philips Control Put Option.

– 43 – LETTER FROM THE BOARD

The price to be paid by MMD for the shares of JVCo owned by Philips pursuant to an exercise of the Philips Control Put Option (the ‘‘Control Put Option Price’’)shall be payable in cash and shall be the higher of nil and an amount calculated as:

AxB,where:

A=JVCo’s average consolidated EBIT in 2012 to the last completed financial year prior to the date on which Philips has delivered the Philips Control Put Option Notice, multiplied by a factor of 4; and

B = 1 in case the TPV Change of Control occurs before Philips has exercised its right to receive the Deferred Purchase Price, in which case MMD will be released from any obligation to pay the Deferred Purchase Price and/or the Philips Exit Put Option Price; or

B = the percentage of the shares of JVCo held by Philips at the time of the Philips Control Put Option Notice in case the TPV Change of Control occurs after payment of the Deferred Purchase Price but before exercise of the Philips Exit Put Option.

The price to be paid by MMD for the shares of JVCo owned by Philips upon the exercise of the Philips Exit Put Option has been arrived at after arm’s length negotiations between the Company and Philips with reference to, among other factors, actual earnings performance of the Philips Contributed Business between Completion and the most recently completed financial year prior to the exercise of the Philips Control Put Option. The Directors consider that the Control Put Option Price is fair and reasonable.

Default A shareholder (the ‘‘Defaulting Shareholder’’)shallbe deemed to be in material breach of the Shareholders Agreement if any of the following occurs (each an ‘‘Event of Default’’):

(i) an order by a court of competent jurisdiction, declaring the Defaulting Shareholder bankrupt, or the passing of a resolution for the dissolution or liquidation of the Defaulting Shareholder;

– 44 – LETTER FROM THE BOARD

(ii) the convening of a meeting of creditors of the Defaulting Shareholder, or the drawing up and publication of a proposal or an arrangement with or any assignment for the benefit of creditors of the Defaulting Shareholder; and

(iii) any material failure by the Defaulting Shareholder to comply with any of its material obligations under the Shareholders Agreement which is not cured within 30 business days from receiving written notice of default.

Upon an Event of Default, the non-defaulting shareholder of JVCo shall have the right, exercisable upon delivery of a notice to the Defaulting Shareholder (the ‘‘Default Notice’’), to (i) terminate the Shareholders Agreement; and (ii) in the event (a) Philips is the defaulting shareholder, to call on Philips to sell and transfer to MMD (and Philips shall be obliged to thus sell and transfer) the shares of JVCo held by Philips (‘‘Philips Default Put Option’’) against payment by MMD of the Default Option Price (as defined below); and (b) MMD is the defaulting shareholder, to sell and transfer to MMD (and MMD shall be obliged to thus purchase and accept) the shares of JVCo held by Philips against payment by MMD of the Default Option Price (as defined below).

The price to be paid by MMD for the shares of JVCo owned by Philips pursuant to an exercise of the Philips Default Put Option (the ‘‘Default Option Price’’)shallbe payable in cash and shall be the higher of nil and an amount calculated as:

AxB,where:

A=JVCo’s average consolidated EBIT in 2012 to the last completed financial year prior to the date on which the Event of Default occurred, multiplied by 4; and

B = the percentage of the shares of JVCo held by Philips at thetimeoftheEventofDefault.

– 45 – LETTER FROM THE BOARD

The price to be paid by MMD for the shares of JVCo owned by Philips upon the exercise of the Philips Default Put Option has been arrived at after arm’slength negotiations between the Company and Philips with reference to, among other factors, actual earnings performance of the Philips Contributed Business between Completion and the most recently completed financial year prior to the exercise of the Philips Default Put Option. The Directors consider that the Default Option Price is fair and reasonable.

Term

The Shareholders Agreement shall commence on the Completion Date and shall continue to be in effect for an indefinite period of time, unless it is terminated as per the paragraph below.

Termination

The Shareholders Agreement shall terminate upon the occurrence of either of MMD or Philips ceasing to own directly or indirectly shares of JVCo, the related transfer being in accordance with the terms of the Shareholders Agreement and the acquiror not acceding to the Shareholders Agreement.

(III) The Entering into of the Argentina JV Shareholders Agreement

In order to preserve the preferential tax treatment currently enjoyed by the Argentina JV, the Argentina JV Shareholders Agreement in respect of the operations of the Argentina JV will be entered into at Completion pursuant to the Sale and Purchase Agreement. The principal terms of the Argentina JV Shareholders Agreement are summarized below.

The Argentina JV Shareholders Agreement

Date

At the Completion Date.

Parties

(1) JVCo

(2) Philips Argentina S.A. (‘‘Philips Argentina’’)

(3) Fabrica Austral de Productos Eléctricos S.A. (the ‘‘Argentina JV’’)

(4) Philips, as guarantor

– 46 – LETTER FROM THE BOARD

Philips Argentina is principally engaged in the import and sale of Philips branded products (lighting, consumer lifestyle and health care products) and is ultimately owned by Philips.

The Argentina JV is principally engaged in the manufacturing and sale of electronic products and is ultimately owned by Philips.

Pursuant to the Argentina JV Shareholders Agreement, there will be two business units within the Argentina JV: the TV business unit and the non-TV business unit. Philips guarantees to JVCo the due and punctual discharge by Philips Argentina of its obligations related to the non-TV business unit. The split of TV and non-TV business units are put in place in order to preserve the preferential tax treatment currently enjoyed by the Argentina JV and to reflect the commercial deal between the parties that JVCo will be entitled to the economics and results of the TV business unit only.

It is currently intended that the Argentina JV will be owned as to 63.4% by JVCo and 36.6% by Philips Argentina. Pursuant to the Sale and Purchase Agreement, such percentage shareholding is subject to an adjustment mechanism based on the fair market valuation of the tangible assets and liabilities, commitments and contingencies of the Argentina JV at Completion. Despite such percentage shareholding, pursuant to the Argentina JV Shareholders Agreement, JVCo will be entitled to 100% of the economics and results of the TV business unit, whereas Philips Argentina will be entitled to 100% of the economics and results of the non-TV business unit. At Completion, pursuant to the Argentina JV Shareholders Agreement, the assets and liabilities related to the Philips Contributed Business in Argentina JV will be for the account of JVCo.

Principal terms

Board of directors The structure, size and composition of the board of directors will be in accordance with the following principles:

(i) the management of the Argentina JV shall be the responsibility of the board of directors; and

(ii) JVCo shall appoint the majority of the members of the board of directors and the chairman of the board of directors.

The directors appointed by JVCo, including the chairman, shall be assigned to take care of the management of and to assume exclusive responsibility for the TV business unit. The directors appointed by Philips Argentina shall be assigned to the management of and to assume exclusive responsibility for the non-TV business unit.

– 47 – LETTER FROM THE BOARD

The board of directors of the Argentina JV shall form two executive committees, to which it will delegate the supervision of the regular operations of the TV business unit and the non-TV business unit, respectively.

Shareholders meetings The shareholders shall hold formal meetings at least once a year. Quorum for ordinary shareholders’ meeting on first call shall be achieved with the presence of shareholders holding a majority of the votes. Quorum for extraordinary shareholders’ meetings on first call shall be achieved upon the presence of shareholders holding 80% of the votes.

Dividend policy The shareholders agree that whenever the Argentina JV’s financial statements show profits, the board of directors will recommend to establish special reserves for each business unit, allocating to the TV business unit’s special reserve the profits generated by the TV business unit, and to the non-TV business unit’s special reserve the profits generated by the non-TV business unit. The special reserves will be distributed to each shareholder upon implementation of the spin-off (see ‘‘Spin-off’’ paragraph below). Upon the spin-off date, each shareholder shall be entitled to receive the special reserve corresponding to its particular business unit.

Allocation of business JVCo shall benefit from all profits and shall suffer all units’ profit and losses resulting from the TV business unit; and Philips losses Argentina shall benefit from all profits and shall suffer all losses resulting from the non-TV business unit.

– 48 – LETTER FROM THE BOARD

Cross-indemnities From a legal perspective, Argentina JV (as the legal entity within which both the TV business unit and the non-TV business unit are housed) will be legally liable if there is litigation or other liabilities relating to the TV business unit or the non-TV business unit of Argentina JV. However, from a contractual perspective as between JVCo and Philips Argentina, at Completion, pursuant to the Argentina JV Shareholders Agreement, litigation or other liabilities relating to the non-TV business unit will be for the account of Philips Argentina, whereas litigation or other liabilities relating to the TV business unit will be for the account of JVCo. The Argentina JV Shareholders Agreement also provides for cross-indemnities, pursuant to which:

(i) Philips Argentina will indemnify JVCo, the directors appointed by JVCo to the board of the Argentina JV and JVCo’s affiliates, officers, directors and employeesforanylossorexpensesufferedorpaid, directly or indirectly as a result of or arising from, amongst others, any claims or liabilities or obligations derived from the non-TV business unit activities carried out by the Argentina JV; and

(ii) JVCo will indemnify Philips Argentina, the directors appointed by Philips Argentina to the board of the Argentina JV and Philips Argentina’s affiliates, officers, directors and employees for any loss or expense suffered or paid, directly or indirectly as a result of or arising from, amongst others, any claims or liabilities or obligations derived from the TV business unit activities carried out by the Argentina JV after the Completion Date.

– 49 – LETTER FROM THE BOARD

Spin-off The Argentina JV will spin-off, on the second anniversary of the date of the Argentina JV Shareholders Agreement, all the assets and liabilities related to the TV business unit (the ‘‘Spin-Off’’) and transfer them to a new company created for such purposes. After the Spin-Off, the Argentina JV will continue developing the non-TV business and the new company will develop the TV business. JVCo will cease to hold any shares or have any interest in the Argentina JV after the Spin-Off. It is currently contemplated that (i) such results will be achieved by cancellation of all of JVCo’ssharesin Argentina JV. The detailed Spin-Off plan will be discussed and agreed between the parties post- Completion and prior to the implementation of the Spin- Off; and (ii) the spun-off new company will be 100% owned by JVCo, subject to local law or regulatory restrictions. The new company will become a subsidiary of the Company after the Spin-Off.

The staff providing services for the non-TV business unit shall remain working in the Argentina JV, while the staff providing services for the TV business unit shall be transferred to the new company.

Rationale for the It is the local statutory requirement of the preferential tax Spin-Off regime in Argentina that a new shareholder (that is, JVCo) needs to be a shareholder of Argentina JV for at least two years before the date of the Spin-Off and that, subject to theapprovalofthelocalauthority,thecurrentstructure should allow the spun-off new company to maintain the existing preferential tax treatment after the Spin-Off.

Term

The Argentina JV Shareholders Agreement shall commence on the Completion Date and shall remain in effect for as long as both Philips Argentina and JVCo hold equity shares in the Argentina JV.

Termination

The Argentina JV Shareholders Agreement shall terminate upon any of the parties not complying with any of the obligations set forth in the Argentina JV Shareholders Agreement and the default is not remedied within 30 days of the receipt of the notice.

– 50 – LETTER FROM THE BOARD

Argentina Non-TV Transactions

Based on the information provided by Philips to the Company, there will be two types of continuing transactions between Argentina JV and Philips relating to the non-TV business unit of Argentina JV (‘‘Argentina Non-TV Transactions’’), the details of which are set out below:

(i) a trademark license agreement between Argentina JV and Philips, pursuant to which Philips will grant Argentina JV the right to use certain trademarks relating to the non-TV products in Argentina. There is no payment obligation under such trademark license agreement; and

(ii) the provision of certain general corporate services, component purchase for non-TV products, sale of non-TV products and purchase of fixed assets for the production of non-TV products between Argentina JV and Philips. The provision of general corporate services comprises shared business services in relation to finance and accounting, sourcing and purchasing services, information systems support services, real estate and facility management services, general management services such as in-house legal services, corporate communications, public relations management and treasury services (such as payroll administration).

Philips has confirmed to the Company that the Argentina Non-TV Transactions will be on normal commercial terms.

On the basis that the economics and results of the non-TV business unit of Argentina JV are for the account of Philips Argentina (and not JVCo), and that it would be impractical and unduly burdensome for the Company to monitor the continuing transactions between Philips and Argentina JV relating to the non-TV business unit of Argentina JV, the Company has applied to the Hong Kong Stock Exchange for a waiver from compliance with the requirements of Chapter 14A in relation to the Argentina Non-TV Transactions. A waiver from compliance with the requirements of Chapter 14A in relation to the Argentina Non-TV Transactions was granted by the Hong Kong Stock Exchange on 13 December 2011. The Company will disclose details of the waiver application in relation to the Argentina Non-TV Transactions in its subsequent annual reports.

On the basis that the economics and results of the non-TV business unit of Argentina JV are for the account of Philips Argentina (and not JVCo), the Company considers that information related to the non-TV business unit of Argentina JV is unlikely to constitute price-sensitive information of the Group pursuant to Rule 13.09 of the Listing Rules. However, considering that the TV business unit and the non-TV business unit are housed within the same legal entity (that is, Argentina JV) and that, from a legal perspective, Argentina JV (as the legal entity within which the non-TV business is housed) will be legally liable if there is litigation or other liabilities relating to the non-TV business unit of Argentina JV, the Company will assess any litigation or claims against Argentina JV which are related to the non-TV business unit of Argentina JV on a case-by-case basis and will comply with Rule

– 51 – LETTER FROM THE BOARD

13.09 of the Listing Rules if the Company considers that any such litigation or claims would constitute price-sensitive information of the Group. Going forward, if the activities of Argentina JV have any other implications under the Listing Rules, the Company will continue to comply with the requirements of the Listing Rules or consult the Hong Kong Stock Exchange if strict compliance with the requirements of the Listing Rules is not feasible in the circumstances.

(IV) Licensing of Philips Trademarks and Philips Secondary Trademarks for the Philips Contributed Business

Pursuant to the Sale and Purchase Agreement, the Trademark License Agreement and the Secondary Trademark License Agreement in respect of licensing of the Philips Trademarks and the Philips Secondary Trademarks will be entered into at Completion.

(A) The Trademark License Agreement

Parties

(1) Philips, as the licensor

(2) JVCo, as the licensee

Principal terms

As part of the Proposed Transactions and under the Trademark License Agreement, Philips will grant an exclusive (except with respect to Argentina) right and license to the JV Group for an initial period of five years from the date of Completion, under which the JV Group can use the Philips Trademarks in the Territory, including the right and license to assemble and manufacture outside the Territory for sales, marketing and distribution in the Territory, in relation to the Scope Products, marketing materials, consumer care delivery and the provision of Net TV Services.

– 52 – LETTER FROM THE BOARD

Royalty payable

JVCo will pay a royalty to Philips on an annual basis, which is based on a percentage of the turnover of the Scope Products. Details of the annual royalty payable throughout the License Term (as defined in the paragraph headed ‘‘Term and renewal’’ below) are set out in the table below.

Year of the Guaranteed minimum License Term Annual royalty annual royalty

First year Nil Nil

Second year to fifth year 2.2% of the Turnover EUR50.0 million (equivalent to approximately US$70.0 million)

The royalty shall be payable in arrears by JVCo to Philips in cash (in EUR) within 30 days after the end of each quarter.

The royalty has been arrived at after arm’s length negotiations between the Company and Philips with reference to, among other factors, the historical performance and future prospects of the Philips Contributed Business, including its earnings potential and synergies with the Group.

Term and renewal

The Trademark License Agreement will have an initial term of five years starting from the date of Completion and will be automatically renewed for a subsequent five-year period if JVCo meets certain key performance indicators as set out in the Trademark License Agreement. After the second 5-year term, the Trademark License Agreement may be extended by mutual agreement for successive 5-year periods against such terms and conditions as may be agreed between Philips and JVCo (but including in any event guaranteed minimum royalty obligations for JVCo) (the ‘‘License Term’’).

Termination

Philips may terminate the Trademark License Agreement by giving JVCo at least 3 months’ written notice if, among others, the following events occur: (i) there is a TPV Change of Control (as set out in the sub-paragraph headed ‘‘Philips Control Put Option’’ under the paragraph headed ‘‘Principal Terms’’ in the section headed ‘‘(II) The entering into of the Shareholders Agreement’’ in this circular); or (ii) the Company or the JV Group enters into an alliance or joint venture or similar agreement for its TV operations with a company which is considered by Philips as a competitor of Philips.

– 53 – LETTER FROM THE BOARD

Each party to the Trademark License Agreement may terminate the Trademark License Agreement by written notice in case of material breach, by the other party of certain terms as set out in the Trademark License Agreement and provided that the aforesaid breaches, which are capable of being cured, have not been cured within the period set out in the Trademark License Agreement.

Non-compete

During the License Term, Philips shall not (other than with respect to Argentina) (i) grant to any other party a license for the use of the Philips Trademarks in the Territory in relation to any Scope Products, whether with or without fee or royalty or (ii) be engaged or involved in the manufacture, assembly, sale, distribution or marketing of any Scope Products in the Territory with the Philips Trademarks, or be interested in any business that is engaged or involved in any of abovementioned activities.

Philips brand promotion and marketing support

Philips will pay to JVCo a total amount of EUR185 million (equivalent to approximately US$259 million), which amount JVCo shall apply towards its promotion and marketing activities which benefit the Philips brand. Such amount is payable as follows:

(i) an initial advance payment of EUR135 million (equivalent to approximately US$189 million) which shall be payable by Philips to JVCo at Completion as set out in the Sale and Purchase Agreement — please refer to the sub-paragraph headed ‘‘Philips brand promotion and marketing support’’ under the paragraph headed ‘‘Funding of JVCo’’ in section (I) ‘‘Purchase of the Philips Contributed Business’’; and

(ii) an additional advance payment of EUR50 million (equivalent to approximately US$70 million) in the second year after Completion which shall be payable by Philips to JVCo.

Consumer Care for the Scope Products sold prior to Completion

Philips will keep the warranty liabilities for the Scope Products sold prior to Completion (except for certain ScopeProductssuppliedbytheCompanyto Philips under certain arrangement). JVCo shall pay the costs of the warranty claimsrelatedtotherepairandexchangeoftheScopeProductssoldpriorto Completion to the consumer care providers.

Philips shall pay EUR9 million (equivalent to approximately US$12.6 million) to JVCo as compensation for JVCo’s cost of organization to fulfil its Consumer Care obligations relating to the Scope Products sold prior to Completion (except for certain Scope ProductssuppliedbytheCompanyto

– 54 – LETTER FROM THE BOARD

Philips under certain arrangement) of which EUR6 million (equivalent to approximately US$8.4 million) and the remaining EUR3 million (equivalent to approximately US$4.2 million) shall be paid in the first year and the second year from Completion, respectively. From the third year onwards, JVCo shall continue to render the consumer care services for the Scope Products sold prior to Completion (except for certain ScopeProductssuppliedbytheCompanyto Philips under certain arrangement) and Philips and JVCo shall in good faith negotiate a fair compensation for such services based on the actual hours spent.

The consumer care compensation has been arrived at after arm’slength negotiations between the Company and Philips with reference to, among other factors, the number of the Assumed Employees that will work in the consumer care team and quality team of the JV Group, historical trend of claims volumes, historical amount of consumer care expenses and warranty of the Scope Products.

(B) The Secondary Trademark License Agreement

Parties

(1) Philips, as the licensor

(2) JVCo, as the licensee

Principal terms

As part of the Proposed Transactions and under the Secondary Trademark License Agreement, Philips will grant an exclusive right and license to the JV Group for an initial period of five years from the date of Completion, under which the JV Group can use the Philips Secondary Trademarks in the Territory, including the right and license to assemble and manufacture outside the Territory for sales, marketing and distribution in the Territory, in relation to the Secondary Trademark Scope Products, marketing materials and consumer care delivery.

Royalty payable

JVCo will pay a royalty to Philips on an annual basis, which is based on 1% oftheturnoveroftheSecondaryTrademarkScopeProducts.Theroyaltyshall be payable in arrears by JVCo to Philips in cash (in EUR) within 30 days after the end of each quarter.

The royalty has been arrived at after arm’s length negotiations between the Company and Philips with reference to, among other factors, the historical performance and future prospects of the Philips Contributed Business in respect of the Philips Secondary Trademarks, including its earnings potential and synergies with the Group.

– 55 – LETTER FROM THE BOARD

Term and renewal

The Secondary Trademark License Agreement will have an initial term of five years starting from the date of Completion and will be automatically renewed for subsequent five-year periods, provided that the Trademark License Agreement has been extended as well.

Termination

The Secondary Trademark License Agreement will terminate automatically upon the termination of the Trademark License Agreement. Philips may terminate the Secondary Trademark License Agreement by giving JVCo at least 3months’ written notice if, among others, the following events occur: (i) there is a TPV Change of Control (as set out in the sub-paragraph headed ‘‘Philips Control Put Option’’ under the paragraph headed ‘‘Principal Terms’’ in the section headed ‘‘(II) The entering into of the Shareholders Agreement’’ in this circular); or (ii) the Company or the JV Group enters into an alliance or joint venture or similar agreement for its TV operations with a company which is considered by Philips as a competitor of Philips.

Each party to the Secondary Trademark License Agreement may terminate the Secondary Trademark License Agreement by written notice in case of material breach by the other party to the Secondary Trademark License Agreement, of certain terms as set out in the Secondary Trademark License Agreement and provided that the aforesaid breaches, which are capable of being cured, have not been cured within the period set out in the Secondary Trademark License Agreement.

Non-compete

During the Secondary Trademarks License Term, Philips shall not (i) grant to any other party a license for the use of the Philips Secondary Trademarks in the Territory in relation to any Secondary Trademark Scope Products, whether with or without fee or royalty or (ii) be engaged or involved in the manufacture, assembly, sale, distribution or marketingofanySecondaryTrademarkScope Products in the Territory with the Philips Secondary Trademarks, or be interested in any business that is engaged or involved in any of abovementioned activities.

– 56 – LETTER FROM THE BOARD

Annual Caps for the royalty under the Trademark License Agreement

Set out below is a summary of the Annual Caps for the royalty payable by JVCo to Philips under the Trademark License Agreement for the financial year ending 31 December 2012 up to and including the financial year ending 31 December 2017:

2012: Nil 2013: EUR81.4 million (equivalent to approximately US$114.0 million) 2014: EUR91.3 million (equivalent to approximately US$127.8 million) 2015: EUR96.8 million (equivalent to approximately US$135.5 million) 2016: EUR100.1 million (equivalent to approximately US$140.1 million) 2017: EUR50.1 million (equivalent to approximately US$70.1 million)

The Annual Caps were determined by the Company after taking into account, amongst other things, (i) the Group’s estimates for the increase in the future demand for the Scope Products, which was determined with reference to the historical and estimated future demand and production trend for the Scope Products; (ii) the prospects, outlook and the competitive environment of the global market for the Scope Products; (iii) the pricing trend for the Scope Products; and (iv) additional buffers to cater for possible fluctuation of materials costs as a result of possible changes in market conditions.

Annual Caps for the consumer care compensation for the Scope Products sold prior to Completion

Set out below is a summary of the Annual Caps for the consumer care compensation payable by Philips to JVCo for the financial year ending 31 December 2012 up to and including the financial year ending 31 December 2017:

2012: EUR6.00 million (equivalent to approximately US$8.40 million) 2013: EUR4.50 million (equivalent to approximately US$6.30 million) 2014: EUR1.88 million (equivalent to approximately US$2.63 million) 2015: EUR0.44 million (equivalent to approximately US$0.62 million) 2016: EUR0.07 million (equivalent to approximately US$0.10 million) 2017: EUR0.02 million (equivalent to approximately US$0.03 million)

The Annual Caps were determined by the Company after taking into account, amongst other things, (i) the compensation for JVCo’scostof organization to fulfil its consumer care obligations relating to the Scope Products sold prior to Completion (except for certain Scope Products supplied by the Company to Philips under certain arrangement) as agreed in the Trademark License Agreement; and (ii) possible change of the Completion Date.

– 57 – LETTER FROM THE BOARD

Annual Caps for the royalty under the Secondary Trademark License Agreement

Set out below is a summary of the Annual Caps for the royalty payable by JVCo to Philips under the Secondary Trademark License Agreement for the financial year ending 31 December 2012 up to and including 31 December 2017:

2012: EUR1.10 million (equivalent to approximately US$1.54 million) 2013: EUR1.98 million (equivalent to approximately US$2.77 million) 2014: EUR3.30 million (equivalent to approximately US$4.62 million) 2015: EUR4.62 million (equivalent to approximately US$6.47 million) 2016: EUR6.05 million (equivalent to approximately US$8.47 million) 2017: EUR3.03 million (equivalent to approximately US$4.24 million)

The Annual Caps were determined by the Company after taking into account, amongst other things, (i) the Group’s estimates of future demand and production trend for the Secondary Trademark Scope Products; (ii) the prospects, outlook and the competitive environment of the global market for the Secondary Trademark Scope Products; (iii) the pricing trend for the Secondary Trademark Scope Products; and (iv) additional buffers to cater for possible fluctuation of materials costs as a result of possible changes in market conditions.

(D) Reasons for term in excess of three years

JVCo and Philips have agreed to enter into the Trademark License Agreement and the Secondary Trademark License Agreement for a period in excess of three years (i.e. for an initial term of five years) as normally required under the Listing Rulesafterarm’s length negotiations between JVCo, the Company and Philips. The term in excess of three years is beneficial to the Company because (i) any term shorter than the License Term and the Secondary Trademark License Term would increase the risks associated with, and lower the returns on, the Group’s investment in its brand building of the Philips Contributed Business; (ii) following Completion, the Group is expected to invest substantial management efforts to broaden the Philips Contributed Business’ product range and market share, the benefits of which will extend beyond three years; and (iii) it is the intention of the Company to strengthen the Philips Contributed Business and the presence of the Philips Trademarks and the Philips Secondary Trademark in the markets where the Scope Products are sold.

Somerley has explained in the letter from Somerley in this circular why a term in excess of three years is required for the Trademark License Agreement and the Secondary Trademark License Agreement and has confirmed that it is normal business practice for contracts of this type to be longer than three years.

– 58 – LETTER FROM THE BOARD

(V) Entering into of the Intellectual Property Agreement

Pursuant to the Sale and Purchase Agreement, the Intellectual Property Agreement in respect of the transfer and license of patents, know-how and software to JVCo in relation to the Scope Products in the Territory will be entered into at Completion.

Parties

(1) Philips, as the licensor

(2) JVCo, as the licensee

Principal terms

(i) Transfer Patents

Philips will assign and agree to transfer and will cause its members to assign and transfer to JVCo, effective as of the Completion Date, all of Philips’ and, as applicable, its members’ rights, title and interest in and to the Transfer Patents (excluding the right to sue for past infringements), subject to an unrestricted license under the Transfer Patents to be retained by Philips.

(ii) Licensed Patents

(iii) 3D Patents

In the event Philips asserts any 3D Patents against suppliers of JVCo, and where such a supplier pays Philips a royalty for any 3D Patents in respect of display panels or components supplied to JVCo for use in Philips-branded Scope Products in the Territory, Philips will pay to JVCo 70% of the 3D Patent royalty revenue (after deduction of any taxes, agent fees, bank and administration costs) it has received for such supplied display panels or components.

(iv) Business know-how

Philips will assign and transfer to JVCo all its rights, title and interest in and to certain business know-how, being know-how owned by Philips and/or its members, which originated within the Philips Contributed Business and which is solely used within the Philips Contributed Business as of the Completion Date, subject to an unrestricted license under such business know-how to be retained by Philips.

– 59 – LETTER FROM THE BOARD

Philips will grant to JVCo a non-exclusive, non-transferable, non-encumberable, fully paid-up and royalty-free license, without the right to grant sublicenses under certain other know-how of Philips, to the extent that such know-how is used within the Philips Contributed Business, for the continued use of such know-how in Philips- branded Scope Products in the Territory.

(v) Business software

Philips will assign and transfer to JVCo all its rights, title and interest in and to certain business software owned by Philips and/or its members, which originated in the Philips Contributed Business, and which is solely used within the Philips Contributed Business as of the Completion Date (excluding the right to sue for past infringements), subject to an unrestricted license under such business software to be retained by Philips.

Philips will grant to JVCo an irrevocable, royalty-free, non-exclusive and non- transferable license under certain other software of Philips to use (in the broadest sense) such software within the scope of the Philips Contributed Business in the Territory, including without limitation, the right to modify, create derivative works, the right to have Philips-branded Scope Products manufactured by a third party outside or inside the Territory solely for the use, sale or other disposal by JVCo of Philips-branded Scope Products within the Territory and the right to grant sublicenses in the context of and to the extent necessary for selling or marketing Philips- branded Scope Products.

(vi) Design rights

Philips will grant JVCo, effective as of the Completion Date, a non-exclusive, non-transferable, non-encumberable, fully paid-up and royalty-free license, without the right to grant sublicenses (other than the rights to have Philips-branded Scope Products made by a third party outside or inside the Territory solely for the use, sale or other disposal by JVCo of Scope Products within the Territory), under certain registered design rights of Philips as set out in the Intellectual Property Agreement and any unregistered design rights and/or copyrights on non-technical designs of Scope Products owned by any members of the Philips Group which are used within the Philips Contributed Business as of the Completion Date, for the continued use of such registered design rights in Philips-branded Scope Products, in each case limited to the Territory.

Pricing

The transfers and licenses of the aforementioned patents, business know-how, business software and design rights shall be on a royalty-free basis. JVCo shall also be entitled to receive from Philips a rebate of 70% of the 3D Patent royalty. The consideration for the patents, business know-how, business software and design rights and the 3D Patent royalty rebate have been arrived at after arm’slength negotiations between the Company and Philips.

– 60 – LETTER FROM THE BOARD

Term and renewal

The Intellectual Property Agreement shall commence on the Completion Date and any license granted by Philips under the Intellectual Property Agreement shall continue in force until, among other things, the date that the Trademark License Agreement has terminated.

Termination

Any license granted by Philips under the Intellectual Property Agreement can be terminated by Philips by giving notice thereof to JVCo in case of a material breach by JVCo or any of the members of the JV Group of any of its obligations under the Intellectual Property Agreement, which breach is not curable, or if curable, is not cured within 30 calendar days written notice by Philips to JVCo specifying such breach and requiring it to be remedied.

Annual Caps

Set out below is a summary of the Annual Caps for the royalty fee rebate payable for the 3D Patents by the Philips Group to the JV Group for each of the financial years ending 31 December 2015 during the term of the Intellectual Property Agreement:

2012: EUR262,500 (equivalent to approximately US$367,500) 2013: EUR525,000 (equivalent to approximately US$735,000) 2014: EUR1,050,000 (equivalent to approximately US$1,470,000) 2015: EUR525,000 (equivalent to approximately US$735,000)

The Annual Caps were determined by the Company after taking into account, amongst other things, (i) the Group’s estimates for the increase in the future demand for the Scope Products (utilizing any 3D Patents), which was determined with reference to the estimated future demand and production trend for the Scope Products; (ii) the prospects, outlook and the competitive environment of the global market for the Scope Products; (iii) the pricing trend for the Scope Products; (iv) the sharing percentage of the 3D Patents royalty rebate as agreed in the Intellectual Property Agreement; (v) the estimated 3D Patents royalty rate; and (vi) possible change of the Completion Date.

(VI) Entering into of the Auxiliary Agreements

To facilitate the operation of the Philips Contributed Business after Completion, the Philips Group and JVCo will enter into various Auxiliary Agreements on Completion. Set out below are the details of each of the Auxiliary Agreements.

– 61 – LETTER FROM THE BOARD

(A) The Transitional Services Agreement

Parties

(1) Philips

(2) JVCo

Principal terms

Pursuant to the Transitional Services Agreement, the Philips Group will provide to the JV Group after Completion certain transitional services for a certain period in order to enable the JV Group to put definitive arrangements in place. The transitional services to be provided under the Transitional Services Agreement include, but are not limitedto,innovationanddesign,finance, human resources, distribution, sales, marketing, warehousing, purchasing, consumer care, legal and real estate.

The provision of the transitional services shall be governed by the terms in the Transitional Services Agreement and each and every Transitional Service Level Agreement shall comply with the Listing Rules and all applicable laws. If any of the provisions as contained in any of the Transitional Service Level Agreements conflicts in any material matter with the provisions of the Transitional Services Agreement, the provisions of the Transitional Services Agreement shall prevail, except if such provisions are contained in a Transitional Service Level Agreement which was in agreed form between Philips and the Company prior to the issuance of this circular, in which case the provisions of such Transitional Service Level Agreement shall prevail.

Pricing

The prices for the transitional services provided shall be either (i) on normal commercial terms (as defined in the Listing Rules) and determined on an arm’s length basis having regard to the price levels applicable to the Philips Contributed Business immediately prior to Completion or (ii) on terms more beneficial to the JV Group, except for the prices for services relating to office space, for which the price shall be the lower of the price level applicable to the Philips Contributed Business immediately prior to Completion and the market price as established by a reputable broker. The prices for the transitional services have been arrived at after arm’s length negotiations between the Company and Philips.

– 62 – LETTER FROM THE BOARD

Term and renewal

The Transitional Services Agreement shall commence on the Completion Date and shall continue in force until the last contract period set out in the relevant Transitional Service Level Agreement terminates or expires. The Transitional Service Level Agreement will not have a term of over 3 years.

Termination

The JV Group may terminate any transitional service provided under a Transitional Service Level Agreement by giving to the Philips Group not less than two calendar months’ notice in writing (with a few exceptions).

Annual Caps

Set out below is a summary of the Annual Caps for the service fee payable for the transitional services by the JV Group to the Philips Group for each of the financial years ending 31 December 2012 up to and including the financial year ending 31 December 2015:

2012: EUR24.61 million (equivalent to approximately US$34.45 million) 2013: EUR19.32 million (equivalent to approximately US$27.05 million) 2014: EUR9.48 million (equivalent to approximately US$13.27 million) 2015: EUR2.47 million (equivalent to approximately US$3.46 million)

The Annual Caps were determined by the Company after taking into account, amongst other things, (i) expected volume of the services to be supplied by the Philips Group; (ii) the pricing of the services; (iii) a buffer for additional services; and (iv) possible change of the Completion Date.

(B) The IT Transitional Service Level Agreement

Pursuant to the Transitional Services Agreement, the IT Transitional Service Level Agreement in respect of the provision of certain transitional IT services by Philips Electronics (as defined below) to JVCo will be entered into at Completion.

Parties

(1) Philips Electronics Nederland B.V. (‘‘Philips Electronics’’)

(2) JVCo

Philips Electronics is principally engaged in the development, manufacturing and sale of electronic products and is ultimately owned by Philips.

– 63 – LETTER FROM THE BOARD

Principal terms

Pursuant to the IT Transitional Service Level Agreement, Philips Electronics shall procure the provision of the IT services to JVCo as set out in the IT Transitional Service Level Agreement and additional IT services at JVCo’srequest.

Pricing

The price for the IT services is a fixed amount of EUR20.0 million (equivalent to approximately US$28.0 million). Additional IT services shall be charged on terms and fees to be agreed by both parties and based on normal commercial terms, or on terms no less favourable to JVCo than terms available from independent third parties. The prices for the IT services and the additional IT services have been arrived at after arm’s length negotiations between the Company and Philips after considering the required IT functions to safeguard the continuity of the Philips Contributed Business, the estimated services for provision of IT application and infrastructure services and historical charges of the IT services to the Philips Contributed Business.

Term and renewal

The IT Transitional Service Level Agreement shall commence on the Completion Date and shall continue in force for one year. If necessary, JVCo may request an extension of the contract period. Subject to compliance with the Listing Rules as amended from time to time, any extension will be on existing conditions and terms to be agreed by both parties on an arm’s length basis and based on normal commercial terms, or on terms no less favourable to JVCo than terms available from independent third parties.

Termination

Unless previously terminated in accordance with the IT Transitional Service Level Agreement or the Transitional Services Agreement, each IT service shall be supplied until expiry of the term of the IT Transitional Service Level Agreement. In deviation of the termination provision of the Transitional Services Agreement, JVCo shall be entitled to terminate each IT service on prior notice to Philips, where possible taking into account a notice term of at least 30 calendar days.

– 64 – LETTER FROM THE BOARD

Annual Caps

Set out below is a summary of the Annual Cap for the service fee payable for the IT transitional services by the JV Group to the Philips Group for the financial year ending 31 December 2012 up to and including the financial year ending 31 December 2013 during the term of the IT Transitional Service Level Agreement:

2012: EUR24.0 million (equivalent to approximately US$33.6 million) 2013: EUR12.0 million (equivalent to approximately US$16.8 million)

The Annual Caps have been determined by the Company after taking into account, amongst other things, (i) the fixed fee of EUR20.0 million (equivalent to approximately US$28.0 million) for the IT services as agreed under the IT Services Level Agreement; (ii) a buffer for additional IT services; and (iii) possible change of the Completion Date.

Pursuant to the Sale and Purchase Agreement, the Remote Control Sale Agreement in respect of sale of remote control products and other products by Philips Singapore (as defined below) to JVCo will be entered into at Completion.

Parties

(1) Philips Electronics Singapore Pte Ltd (‘‘Philips Singapore’’)

(2) JVCo

Philips Singapore is amongst others the local headquarter and the local sales organisation for all Philips sectors (lighting, healthcare and consumer lifestyle) and is ultimately owned by Philips.

Principal terms

Philips Singapore will sell remote control products and other products to JVCo and will grant a license to JVCo for using remote control products. Any purchase order, product, price and invoice agreement and amendment to the Remote Control Sale Agreement must be negotiated on an arm’slengthbasis and based on normal commercial terms or on terms no more favourable to Philips Singapore than terms available to independent third parties.

Pricing

Prices will be based on delivery free on board Singapore or Shanghai Philips Singapore’s manufacturing facility or other facility designated by Philips Singapore. The pricing and payment terms are determined at arm’s

– 65 – LETTER FROM THE BOARD length basis and based on normal commercial terms, or on terms no less favorable to JVCo than terms available to or from independent third parties taking in consideration the volumes and terms and conditions.

Term and renewal

The Remote Control Sale Agreement shall commence on the Completion Date and shall continue in force for an initial term of three years. Thereafter, subject to compliance with the Listing Rules, the Remote Control Sale Agreement shall be automatically renewed for additional successive periods of three years each, unless terminated by either party.

Termination

Either party may terminate the Remote Control Sale Agreement by giving six months’ prior notice in writing.

Either party may, by written notice to the other party, terminate with immediateeffecttheRemoteControlSale Agreement if, among other things:

(a) the other party violates or breaches any material term of the Remote Control Sale Agreement; or

(b) any proceedings in insolvency, bankruptcy (including reorganization) liquidation or winding up are instituted against the other party.

Annual Caps

Set out below is a summary of the Annual Caps for the fee payable for the services by the JV Group to Philips Singapore for the financial year ending 31 December 2012 up to and including the financial year ending 31 December 2015 during the term of the Remote Control Sale Agreement:

2012: EUR2.75 million (equivalent to approximately US$3.85 million) 2013: EUR3.30 million (equivalent to approximately US$4.62 million) 2014: EUR3.85 million (equivalent to approximately US$5.39 million) 2015: EUR1.93 million (equivalent to approximately US$2.70 million)

The Annual Caps were determined by the Company after taking into account, amongst other things, (i) the estimate of the future demand for the Scope Products, which was determined with reference to the historical demand and production trend for the Scope Products; (ii) the historical demand for remote control in respect of the Scope Products; (iii) the pricing trend of the Scope Products and remote control; (iv) additional buffer to cater for possible fluctuation of material costs as a result of possible changes in market conditions; and (v) possible change of the Completion Date.

– 66 – LETTER FROM THE BOARD

(VII) Entering into of the Reversed Auxiliary Agreements

To facilitate the operation of the Philips Contributed Business after Completion, the Philips Group and JVCo will enter into various Reversed Auxiliary Agreements on Completion. Set out below are the details of each of the Reversed Auxiliary Agreements.

(A) The NET TV License and Services Agreement

Pursuant to the Sale and Purchase Agreement, the NET TV License and Services Agreement in respect of provision of services by JVCo to Philips Consumer Lifestyle (as defined below) and its subsidiaries related to the operation, hosting, maintenance and support of the Net TV/Smart TV Portal will be entered into at Completion.

Parties

(1) Philips Consumer Lifestyle B.V. (‘‘Philips Consumer Lifestyle’’)

(2) JVCo

Philips Consumer Lifestyle is principally engaged in manufacturing, developing and selling consumer lifestyle products and is ultimately owned by Philips.

Principal terms

Under NET TV licensing program, JVCo will grant Philips Consumer Lifestyle a non-exclusive, non-transferable, worldwide, license to use or to have used, under the technology related to NET TV and Smart TV in the devices so that consumers can access the NET TV Portal, the Smart TV Dashboard and to the websites of content service providers.

JVCo shall render services for the operation of the NET TV Portal, the Smart TV and the Smart TV Dashboard so that these are accessible via Internet by the Philips Consumer Lifestyle devices.

JVCo shall put in place an automated partner portal for validating and uploading of applications and electronically contract content service providers. JVCo shall manage the relationship and enter into agreements with content service providers in its own name.

Pricing and financing arrangements

The pricing and payment terms are determined on an arm’slengthbasis.

All revenues that may be generated by advertising by Philips Consumer Lifestyle on the Philips Consumer Lifestyle devices shall be shared on an equal basis. This may include revenue shares for user purchase on services and advertising. All revenues generated by the use of applications on Philips’ active devices that has connected to the Net TV Service Portal, will be shared as to 50%

– 67 – LETTER FROM THE BOARD of the net revenues to JVCo and 50% of the net revenues to Philips Consumer Lifestyle. Net revenues generally represent the revenues minus the costs for payment and handling, and specific costs related to the type of service offering.

Philips Consumer Lifestyle shall pay to JVCo for the license to use the NET TV Portal and Smart TV Dashboard from the Completion Date. Parties will agree on the annual costs to be paid by Philips Consumer Lifestyle to JVCo for the managed operations of the service portal, the use of the services and the day to day operations.

Term and renewal

The NET TV License and Services Agreement shall commence on the Completion Date and shall continue in force for an initial term of three years. Thereafter, subject to compliance with the Listing Rules, the NET TV License and Services Agreement shall be automatically renewed for additional successive periods of one year each, unless terminated by either party.

Termination

Either party may terminate the NET TV License and Services Agreement by giving six months’ prior notice in writing as of the end of a calendar year. In case of material breach by a party which, if curable, is not cured within 30 days, the other party shall have the right to terminate the NET TV License and Services Agreement.

Annual Caps

Set out below is a summary of the Annual Caps for the fee payable for the services by Philips Consumer Lifestyle to JVCo for each of the financial years ending 31 December 2015 during the term of the NET TV License and Services Agreement:

2012: EUR2.40 million (equivalent to approximately US$3.36 million) 2013: EUR2.90 million (equivalent to approximately US$4.06 million) 2014: EUR3.40 million (equivalent to approximately US$4.76 million) 2015: EUR1.70 million (equivalent to approximately US$2.38 million)

The Annual Caps were determined by the Company, after taking into account, amongst other things, (i) the Group’s estimates of the advertising revenue that may be generated and the sharing percentage under the NET TV License and Services Agreement; (ii) the estimated annual costs to be paid by Philips Consumer Lifestyle to JVCo for the managed operations of the service portal, the use of the services and the day-to-day operations; and (iii) the possible change of the Completion Date.

– 68 – LETTER FROM THE BOARD

(B) The Online Shop and My Shop Agreement

Pursuant to the Sale and Purchase Agreement, the Online Shop and My Shop Agreement in respect of the sale by TP Vision Netherlands (as defined below) and the purchase by Online Shop and My Shop of various Scope Products as well as other products that may be offered by TP Vision Netherlands from time to time as specified in the Online Shop and My Shop Agreement, will be entered into at Completion. The products will be distributed by Online Shop and My Shop to (i) the current employees of the Philips Group; (ii) the retired Philips persons; and (iii) certain former Philips employees working for companies which have been spun off and are no longer part of the Philips Group. Former employees of the Philips Group located in The Netherlands can purchase from My Shop, and current employees located in France, the United Kingdom and Germany can purchase from the Online Shop.

Parties

(1) Philips Consumer Relations B.V. (‘‘Online Shop’’)

(2) Philips Electronics (‘‘My Shop’’)

(3) TP Vision Netherlands B.V. (‘‘TP Vision Netherlands’’)

Online Shop is principally engaged in selling consumer products and is ultimately owned by Philips.

As at the Latest Practicable Date, TP Vision Netherlands does not have any business activities. Upon Completion, TP Vision Netherlands will be a wholly- owned subsidiary of JVCo and will principally engage in the business of, amongst other things, the design, development, manufacture and sale of a wide range of televisions on a global basis.

Principal terms

The Online Shop and My Shop Agreement and the terms contained therein apply to and form an integral part of all quotations and offers made by TP Vision Netherlands, all acceptances, acknowledgements or confirmations by TP Vision Netherlands of any orders by Online Shop and Philips Electronics and any agreements regarding the sale by TP Vision Netherlands and purchase by Online Shop and Philips Electronics of different TV products, unless and to the extent the parties to the Online Shop and My Shop Agreement explicitly agree otherwise in writing. Any amendment must be negotiated on an arm’slength basis and based on normal commercial terms or on terms no more favourable to Online Shop and/or Philips Electronics than terms available to independent third parties.

– 69 – LETTER FROM THE BOARD

Furthermore, certain special offers will be made by Philips for its customers from time to time and will be done in conjunction with TP Vision Netherlands. TP Vision Netherlands will discuss and agree with Online Shop and Philips Electronics on a regular basis to operate the special offer programs.

Pricing

The sale prices (excluding taxes, duties and similar levies) applicable for the products are set out in the Online Shop and My Shop Agreement. TP Vision Netherlands will add taxes, duties and similar levies to the sale price where TP Vision Netherlands is required or enabled by law to pay or collect them and these will be paid by Online Shop and/or Philips Electronics together with the sale price. The sale prices and payment terms are determined on an arm’slength basis and on normal commercial terms or on terms no more favourable to Online Shop and/or Philips Electronics than terms available to independent third parties. The principles for the pricing are the following: (i) TP Vision Netherlands, Online Shop and Philips Electronics will have bi-annual price negotiations; (ii) notwithstanding the foregoing TP Vision Netherlands, Online Shop and Philips Electronics shall separately agree on prices for the special offer programs; and (iii) the prices for both (i) and (ii) will be negotiated on an arm’s length basis and based on normal commercial terms or on terms no more favourable to Online Shop and/or Philips Electronics than terms available to independent third parties.

Term and renewal

The Online Shop and My Shop Agreement shall commence on the Completion Date and shall continue in force for three years. Thereafter, subject to compliance with the Listing Rules, the Online Shop and My Shop Agreement shall renew automatically for additional successive periods of two years each, unless terminated earlier by either party.

Termination

TP Vision Netherlands may terminate the Online Shop and My Shop Agreement if, among other things, Online Shop and Philips Electronics violate or breach any term of the Online Shop and My Shop Agreement and Online Shop and Philips Electronics after having been notified by TP Vision Netherlands thereof and have not cured the breach within thirty days after such notification.

– 70 – LETTER FROM THE BOARD

Annual Caps

SetoutbelowisasummaryoftheAnnualCapsforthesalespricepayable by Online Shop and Philips Electronics to TP Vision Netherlands for each of the financial years ending 31 December 2015 during the term of the Online Shop and My Shop Agreement:

2012: EUR7.26 million (equivalent to approximately US$10.16 million) 2013: EUR7.26 million (equivalent to approximately US$10.16 million) 2014: EUR7.26 million (equivalent to approximately US$10.16 million) 2015: EUR3.63 million (equivalent to approximately US$5.08 million)

The Annual Caps were determined by the Company after taking into account, amongst other things, (i) the Group’s estimates for the future demand for the Scope Products, which was determined with reference to the historical and estimated future demand and for the Scope Products; (ii) the pricing trend for the Scope Products; (iii) additional buffers to cater for possible fluctuation of materials costs as a result of possible changes in market conditions; and (iv) the possible change of the Completion Date.

In addition to the Online Shop and My Shop Agreement, the Local JVCo Subsidiary will enter into the Employee Shop Agreements in certain jurisdictions (namely, Belgium, Brazil, the Czech Republic, France, Greece, Italy, Malaysia, Russia, Singapore, Switzerland and Ukraine) in respect of the sale by the Local JVCo Subsidiary and the purchase by Employee ShopofvariousScopeProductsaswellas other products that may be offered by the Local JVCo Subsidiary from time to time as specified in the Employee Shop Agreements at Completion. It is currently contemplated that the products will be distributed by Employee Shop to the current employees of the Philips Group.

Parties

(1) the relevant wholly-owned subsidiary of Philips in the local jurisdiction (‘‘Employee Shop’’)

(2) the relevant wholly-owned subsidiary of JVCo in the local jurisdiction (‘‘Local JVCo Subsidiary’’)

Employee Shop is principally engaged in selling consumer lifestyle products and is ultimately owned by Philips.

Principal terms

– 71 – LETTER FROM THE BOARD orders by Employee Shop and any agreements regarding the sale by the Local JVCo Subsidiary and purchase by Employee Shop of different TV products, unless and to the extent the parties to the Employee Shop Agreements explicitly agree otherwise in writing. Any amendment must be negotiated on an arm’s length basis.

Furthermore, certain special offers will be made by Philips for its customers from time to time and will be done in conjunction with the Local JVCo Subsidiary. The Local JVCo Subsidiary will discuss and agree with Employee Shop on a regular basis to operate the special offer programs.

Pricing

The sale prices (excluding taxes, duties and similar levies) applicable for the products are set out in the Employee Shop Agreements. The Local JVCo Subsidiary will add taxes, duties and similar levies to the sale price where the Local JVCo Subsidiary is required or enabled by law to pay or collect them and these will be paid by Employee Shop together with the sale price. The sale prices and payment terms are determined on an arm’slengthbasisandon normal commercial terms. The principles for the pricing are the following: (i) the Local JVCo Subsidiary and Employee Shop will have bi-annual price negotiations; (ii) notwithstanding the foregoing the Local JVCo Subsidiary and Employee Shop shall separately agree on prices for the special offer programs.

Term and renewal

TheEmployeeShopAgreementsshallcommence on the Completion Date and shall continue in force for three years. Thereafter, subject to compliance with the Listing Rules, the Employee Shop Agreements shall renew automatically for additional successive periods of three years each, unless terminated earlier by either party on six months’ prior notice in writing.

Termination

The Local JVCo Subsidiary may terminate the Employee Shop Agreements if, among other things, Employee Shop violates or breaches any term of the Employee Shop Agreements and Employee Shop, after having been notified by the Local JVCo Subsidiary thereof, has not cured the breach within thirty days after such notification.

– 72 – LETTER FROM THE BOARD

Annual Caps

SetoutbelowisasummaryoftheAnnualCapsforthesalespricepayable for by Employee Shop to the Local JVCo Subsidiary for each of the financial years ending 31 December 2015 during the term of the Employee Shop Agreements:

2012: EUR5.28 million (equivalent to approximately US$7.39 million) 2013: EUR5.28 million (equivalent to approximately US$7.39 million) 2014: EUR5.28 million (equivalent to approximately US$7.39 million) 2015: EUR2.64 million (equivalent to approximately US$3.70 million)

The Annual Caps were determined by the Company after taking into account, amongst other things, (i) the Group’s estimates for the future demand for the Scope Products, which was determined with reference to the historical and estimated future demand and for the Scope Products; (ii) the pricing trend for the Scope Products; and (iii) the possible change of the Completion Date.

(D) The Brazil Lease Agreement

Pursuant to the Sale and Purchase Agreement, the Brazil Lease Agreement in respect of the lease by TP Vision Brazil (as defined below) to Philips Brazil (as defined below) of a property of 8,600 square metres at Avenida Torquato Tapajós, No. 2236, Bairro Flores, municipality of Manaus, Amazonas state, Brazil will be entered into at Completion.

Parties

(1) TP Vision Indústria Eletrônica Ltda. (‘‘TP Vision Brazil’’), as the lessor

(2) Philips Do Brasil Ltda. (‘‘Philips Brazil’’), as the lessee

As at the Latest Practicable Date, TP Vision Brazil does not have any business activities. Upon Completion, TP Vision Brazil will be a wholly-owned subsidiary of JVCo and will principally engage in the manufacture and trade of TVs in Brazil.

Philips Brazil is principally engaged in the activity of manufacture, marketing and sales of lighting, healthcare and consumer lifestyle products and is ultimately owned by Philips.

Principal terms

Pursuant to the Brazil Lease Agreement, TP Vision Brazil will lease an industrial property in Brazil to Philips Brazil.

– 73 – LETTER FROM THE BOARD

Pricing

The lease payment will be R$142,666.67 (equivalent to approximately US$89,580) per month, which shall be adjusted annually by the variation of the general market price index.

During the term of the lease agreement, taxes, utility bills for electricity, phone, water, gas which Philips Brazil incurs or comes to incur shall be borne by TP Vision Brazil. Every month Philips Brazil shall pay TP Vision Brazil an amount related to the services and facilities costs related to the use of the building. Such amount shall be calculated monthly, based on actual expenditure and apportioned among the parties as defined in the Brazil Lease Agreement.

The lease payment and the additional condominium charge were determined with reference to, among other factors, (i) the market rate of the rental in similar area; (ii) the size of the area of the subject property; (iii) the general market price index; and (iv) the actual amount of condominium expenditure incurred by Philips Brazil.

Term and renewal

The Brazil Lease Agreement shall commence on Completion and shall continue in force for 2 years. Thereafter the term of the Brazil Lease Agreement may be extended at the discretion of Philips Brazil for an additional term of 1 year. Subject to compliance with the Listing Rules, the Brazil Lease Agreement may also be renewed for the same period by mutual agreement between the parties to the Brazil Lease Agreement.

Termination

The Brazil Lease Agreement may be terminated or rescinded before the term of the Brazil Lease Agreement (i) by Philips Brazil in writing in advance of 180 days; (ii) in the event of bankruptcy, insolvency or dissolution of any of party to the Brazil Lease Agreement; and (iii) default of any clauses or conditions of the Brazil Lease Agreement by either party to the Brazil Lease Agreement.

Annual Caps

Set out below is a summary of the Annual Caps for the rental and additional condominium charge payable for the lease by Philips Brazil to TP Vision Brazil for each of the financial years ending 31 December 2013 during the term of the Brazil Lease Agreement:

2012: EUR1.97 million (equivalent to approximately US$2.76 million) 2013: EUR2.26 million (equivalent to approximately US$3.16 million) 2014: EUR2.60 million (equivalent to approximately US$3.64 million) 2015: EUR1.30 million (equivalent to approximately US$1.82 million)

– 74 – LETTER FROM THE BOARD

The Annual Caps were determined by the Company after taking into account, amongst other things, (i) the monthly rental payment as agreed in the Brazil Lease Agreement; (ii) the duration, including the possible extension, of the Brazil Lease Agreement; (iii) the projected inflation rate; (iv) potential changes in the exchange rate; and (v) a buffer for additional condominium expenditure incurred.

(E) Amendment to the Dixtal Lease Agreement

The Dixtal Lease Agreement in respect of the lease by Philips Brazil to Dixtal (as defined below) of a property of 2,880 square metres at Avenida Torquato Tapajós, No. 2236, Bairro Flores, municipality of Manaus, Amazonas state, Brazil (‘‘Manaus Manufacturing Plant’’) was entered into on 22 September 2009.

Pursuant to the Disentanglement, TP Vision Brazil will become owner of the Manaus Manufacturing Plant at Completion. As such, TP Vision Brazil will enter into an amendment agreement to the Dixtal Lease Agreement (‘‘Amendment to the Dixtal Lease Agreement’’) with Philips Brazil and Dixtal as follows:

Parties

(1) TP Vision Brazil, as the landlord

(2) Philips Brazil, as the original lessor

(3) Dixtal Biomédica Indústria e Comércio Ltda. (‘‘Dixtal’’), as the lessee

Dixtal is principally engaged in health care activities and is ultimately owned by Philips.

Principal terms

Pursuant to the Amendment to the Dixtal Lease Agreement, TP Vision Brazil will replace Philips Brazil in the Dixtal Lease Agreement and will continue to lease part of the Manaus Manufacturing Plant to Dixtal.

Pricing

The lease payment is R$27,014.4 (equivalent to approximately US$16,962) per month, which shall be adjusted annually by the variation of the general market price index, and additional condominium charge based on defined pro- rating keys. The lease payment and the additional condominium charge were determined with reference to, among other factors, (i) the monthly rental payment as agreed in the Amendment to the Dixtal Lease Agreement (ii) the market rate of the rental in similar area; (iii) the size of the area of the property, (iv) the general market price index; and (v) the actual amount of condominium expenditure incurred by Dixtal.

– 75 – LETTER FROM THE BOARD

Term and renewal

The Dixtal Lease Agreement commenced on 1 August 2009 and will expire as of 31 July 2014.

Termination

The Dixtal Lease Agreement may be terminated or ended prior to the term (i) by both parties in writing in advance of 180 days; (ii) in the event of bankruptcy, insolvency or dissolution of either party; and (iii) default of any clauses or conditions of the Dixtal Lease Agreement by either party.

Annual Caps

Set out below is a summary of the Annual Caps for the rental and additional condominium charge payable for the lease by Philips Brazil to Dixtal for each of the financial years ending 31 December 2014 during the term of the Dixtal Lease Agreement:

2012: EUR304,000 (equivalent to approximately US$425,600) 2013: EUR350,000 (equivalent to approximately US$490,000) 2014: EUR268,000 (equivalent to approximately US$375,200)

The Annual Caps were determined by the Company after taking into account, amongst other things, (i) the monthly rental payment and the additional condominium charge as agreed in the Amendment to the Dixtal Lease Agreement; (ii) the duration of the Dixtal Lease Agreement; (iii) the estimated inflation rate; and (iv) potential changes in the exchange rate.

(F) The Hungary Lease and Service Agreement

Pursuant to the Sale and Purchase Agreement, the Hungary Lease and Service Agreement in respect of the lease of a factory building and provision of services in the factory building will be entered into between TP Vision Hungary (as defined below) as the lessor and services provider, and Philips Hungary (as defined below) as the lessee and services receiver upon Completion.

Parties

(1) TP Vision Hungary Ltd. (‘‘TP Vision Hungary’’)

(2) Philips Ltd. (‘‘Philips Hungary’’)

As at the Latest Practicable Date, TP Vision Hungary does not have any business activities. Upon Completion, TP Vision Hungary will be a wholly- owned subsidiary of JVCo and will principally engage in the manufacture of consumer products.

– 76 – LETTER FROM THE BOARD

Philips Hungary is principally engaged in the manufacture of several consumer products and is ultimately owned by Philips.

Principal terms

Pursuant to the Hungary Lease and Service Agreement, TP Vision Hungary will lease to Philips Hungary a factory building located at 8000 Székesfehérvár, Holland fasor 6., Szekesfehervar, Hungary. Furthermore, TP Vision Hungary will also provide services to Philips Hungary comprising (i) the site area for production and warehousing including infrastructure and canteen; (ii) supply chain management including procurement and planning; (iii) human resources including direct labour management; (iv) quality management including supplier quality management and process quality management; (v) finance and controlling; and (vi) blistering or production activity.

Pricing

The total service fee for the lease and the services will be EUR468,750 (equivalent to approximately US$656,250) for 3 months.

The costs of services not covered in the Hungary Lease and Service Agreement will be agreed by both parties on an arm’s length basis and based on normal commercial terms, or on terms no more favourable to Philips Hungary than terms available to independent third parties.

Term and extension

The Hungary Lease and Service Agreement shall commence on the Completion Date and end on 31 March 2012. Philips Hungary is entitled to extend the term of the Hungary Lease and Service Agreement with subsequent periods of one month but in no event will the Hungary Lease and Service Agreement be valid after 30 June 2012 unless agreed differently and subject to compliance with the Listing Rules. In the event that the Completion Date is beyond the last date of the term of the Hungary Lease and Service Agreement, theHungaryLeaseandServiceAgreementwillnottakeeffect.

– 77 – LETTER FROM THE BOARD

Annual Cap

The Annual Cap for the fee payable by Philips Hungary to TP Vision Hungary pursuant to the Hungary Lease and Service Agreement for the financial year ending 31 December 2012 will be EUR1.04 million (equivalent to approximately US$1.46 million). The Annual Cap was determined by the Company after taking into account, amongst other things, (i) the lease payment as agreed in the Hungary Lease and Service Agreement; (ii) duration and possible extension of the Hungary Lease and Service Agreement; and (iii) a buffer for potential additional services costs.

(G) The Tax Audit Service Agreement

Pursuant to the Sale and Purchase Agreement, the Tax Audit Service Agreement in respect of the provision of various services in relation to tax audits with respect to Philips will be entered into at Completion.

Parties

(1) TP Vision Hungary

(2) Philips Hungary

Principal terms

Pursuant to the Tax Audit Service Agreement, TP Vision Hungary will provide to Philips Hungary various services in relation to tax audits with respect to Philips, including (i) accounting and financial support for tax audits; (ii) data retrieval and archiving support; (iii) support internal and external groups with timely submission and/or documentation and answers to inquiries on historical transactions and or business operations; and (iv) assist with historical data in preparation for any filing requirement.

– 78 – LETTER FROM THE BOARD

Pricing

The costs of services not covered in the Tax Audit Service Agreement will be agreed by both parties on an arm’s length basis and based on normal commercial terms, or on terms no more favourable to Philips Hungary than terms available to independent third parties.

Term and renewal

The Tax Audit Service Agreement shall commence on the Completion Date and shall continue in force until 31 March 2013 or completion of the services, whichever is earlier.

Annual Caps

Set out below is a summary of the Annual Caps for the fee payable for the services by Philips Hungary to TP Vision Hungary for each of the financial years ending 31 December 2013 during the term of the Tax Audit Service Agreement:

2012: EUR100,000 (equivalent to approximately US$140,000) 2013: EUR100,000 (equivalent to approximately US$140,000)

The Annual Caps were determined by the Company after taking into account, amongst other things, (i) the expected number of hours required for and the agreed hourly rate of the services under the Tax Audit Service Agreement; and (ii) a buffer for potential additional services costs.

– 79 – LETTER FROM THE BOARD

CORPORATE STRUCTURE BEFORE AND AFTER COMPLETION

The following diagram shows a simplified corporate structure of the Philips Contributed Business upon completion of the Disentanglement and immediately prior to Completion:

Philips

100% 100%

JVCo Philips Argentina

100% 100%

Subsidiaries Argentina JV of JVCo

Philips Contributed Business

The following diagram shows a simplified corporate and shareholding structure of the Enlarged Group upon Completion:

TPV

20-100% 100% Existing MMD Philips subsidiaries and associated companies 70%30% 100%

JVCo Philips Argentina

100% 63.4%(1) 36.6%(1)

Subsidiaries Argentina JV of JVCo

Philips Contributed Business

Note:

(1) It is currently intended that the Argentina JV will be owned as to 63.4% by JVCo and 36.6% by Philips Argentina. Pursuant to the Sale and Purchase Agreement, such percentage shareholding is subject to an adjustment mechanism based on the fair market valuation of the tangible assets and liabilities, commitments and contingencies of the Argentina JV at Completion. Despite such percentage shareholding, pursuant to the Argentina JV Shareholders Agreement, JVCo will be entitled to 100% of the economics and results of the TV business unit, whereas Philips Argentina will be entitled to 100% of the economics and results of the non-TV business unit.

– 80 – LETTER FROM THE BOARD

THE EXISTING PHILIPS TRANSACTION

Reference is made to the announcement of the Company dated 29 September 2010 in relation to, among other things, the 2010 Trademark License Agreement. As mentioned in the aforesaid announcement, the Group would conduct a continuing connected transaction with the Philips Group. It is expected that the Group will continue to carry out such transaction with Philips upon Completion. Details of the Existing Philips Transaction are set out below.

The2010TrademarkLicenseAgreement

Introduction

On 29 September 2010, the Company, AOC and Philips entered into the 2010 Trademark License Agreement which Philips will grant to AOC and its affiliates an exclusive right and license to use certain Philips trademarks (i.e. the word mark ‘‘Philips’’ and the Philips Shield Emblem) on certain TVs in the PRC and on related promotional materials.

Date

29 September 2010

Parties

(1) Philips, as the licensor

(2) AOC, as the licensee

(3) the Company, as guarantor

AOC is principally engaged in investment holding and a wholly-owned subsidiary of the Company.

Principal terms

Philips has agreed to grant to AOC and its affiliates an exclusive right and license to use certain Philips trademarks (i.e. the word mark ‘‘Philips’’ and the Philips Shield Emblem) on certain TVs and related promotional materials in the PRC. The Company has agreed to guarantee the obligations of AOC and its affiliates under the 2010 Trademark License Agreement.

The scope products, being certain TVs, shall be manufactured only by AOC and its affiliates, or for AOC by those manufacturers as set out in the 2010 Trademark License Agreement or as may be approved by Philips from time to time.

The effective time of the 2010 Trademark License Agreement is the time of completion of the transfer of TV sales and distribution business in the PRC by Philips to AOC (the ‘‘PRC TV Transfer’’), i.e. at 24: 00 on 31 December 2010.

– 81 – LETTER FROM THE BOARD

Royalty payable

Under the 2010 Trademark License Agreement, AOC agreed to pay royalty on an annual basis, which is based on certain percentage of the turnover of the scope products which ranges from 2.5% to 3.0% based on a sliding scale of turnover of the scope products. AOC is required to pay a guaranteed minimum annual royalty of EUR6.8 million (equivalent to approximately US$9.5 million) under the 2010 Trademark License Agreement. The royalty payments are to be made in arrears every three months until the expiry or earlier termination (pro-rated accordingly) of the 2010 Trademark License Agreement.

The royalty has been arrived at after arm’s length negotiations among AOC, the Company and Philips with reference to trademark license arrangements of a similar nature. The minimum annual royalty has also been agreed based on arm’slength negotiations with reference to the historical revenue trend of the scope products.

Terms and renewal

The 2010 Trademark License Agreement will have a term of five years as from the time of completion, i.e. at 24: 00 on 31 December 2010. As soon as practicable after the fourth anniversary of the date of completion of the PRC TV Transfer, subject to AOC meeting certain agreed key performance indicators, Philips and AOC will enter into good faithnegotiationsonanexclusivebasisastothetermsofanextensionorrenewalofthe 2010 Trademark License Agreement.

Termination

Under the 2010 Trademark License Agreement, both AOC and Philips have a right to terminate by giving three months’ written notice to the other upon the occurrence of certain events. In addition, Philips has further rights to terminate by giving 12 months’ written notice after the second anniversary of the 2010 Trademark License Agreement if certain changes occur within Philips’ TV business in Europe and Philips is required to pay AOC certain specified compensation if it exercises such early termination right.

Reasons for and the benefits of the 2010 Trademark License Agreement

It is considered that Philips trademarks (i.e. the word mark ‘‘Philips’’ and the Philips Shield Emblem) are among the most renowned brands for televisions in the world. The entering into of the 2010 Trademark License Agreement offers a valuable opportunity for the Company to strengthen its leadership in the display industry in the PRC as well as being a significant step towards its strategy of diversifying into downstream operations. The then Directors consider the terms of the 2010 Trademark License Agreement are fair and reasonable and in the interests of the Company and its Shareholders as a whole.

– 82 – LETTER FROM THE BOARD

INFORMATION ON THE GROUP

The Group is a leading display solutions provider. The Group designs and produces afullrangeofPCMonitorsandLCDTVsonODMbasis for its distribution worldwide. The Group’s products add value to customers through cost leadership, timely delivery and superior quality. Today, the Group is the world’s largest PC monitor manufacturer and ODM LCD TV maker in terms of unit shipments. The Company is listed on both Hong Kong and Singapore stock exchanges.

INFORMATION ON PHILIPS

Royal Philips Electronics of the Netherlands (NYSE: PHG, AEX: PHI) is a diversified health and well-being company, focused on improving people’s lives through timely innovations. As a world leader in healthcare, lifestyle and lighting, Philips integrates technologies and design into people-centric solutions, based on fundamental customer insights and the brand promise of ‘‘sense and simplicity’’. Headquartered in the Netherlands, Philips employs over 120,000 employees in more than 100 countries worldwide. With sales of EUR22.3 billion (equivalent to approximately US$31.2 billion) in 2010, the company is a market leader in cardiac care, acute care and home healthcare, energy efficient lighting solutions and new lighting applications, as well as lifestyle products for personal well-being and pleasure with strong leadership positions in male shaving and grooming, portable entertainment and oral healthcare.

REASONS FOR AND BENEFITS OF THE PROPOSED TRANSACTIONS

It is believed that the entering into of the Proposed Transactions will have the following benefits:

Solidifying a leading position in LCD TV market

The global demand for LCD TVs continuestogrowatdouble-digitrate attributable to the strong growth in the emerging markets including China, the stable replacement and upgrade demand in Europe and the US, and the fast- changing TV technologies. The 2011 global LCD TVs’ shipping volume is expected to reach approximately 211 million units, up by 16% when compared with approximately 182 million units in 2010. The acquisition of the Philips Contributed Business represents a long term strategy of the Group to become a leading global LCD TV manufacturer. Together with the acquisitions of Philips’ LCD TVs business in the PRC last year and the monitors business in 2009, the Proposed Transactions will enable the Group to strengthen its long term strategic relationship with Philips.

Continuing development needs of the Group

The Group is a leading monitor and television producer in the world. It commands leadership in product development, manufacturing and cost control. Its scale is backed up by an enhanced supply chain and back-end integration well- recognized in the industry. With Philips brand, innovation and development

– 83 – LETTER FROM THE BOARD capabilities, the Group will be better placed to compete with leading Japanese and Korean brands in the future. The Proposed Transactions will enable the Company to build on its strong fundamentals with a reputable brand with global market presence.

Economies of scale and creation of synergies

With the acquisition of the Philips Contributed Business, the Group will increase market share in LCD TVs production and this will enhance the Group’scost effectiveness by centralizing procurement of components, streamlining the sales channels and increasing research and development efficiencies. Costs savings are expected to arise from improvement in economies of scale in procurement of components given the increased volumes contributed by the Philips Contributed Business. The benefits of increased scale will be further enhanced by sharing best practices, consolidating vendor lists and increasing common product platforms and product line realignment between the Group’s business and that of the Philips Contributed Business. The Acquisition enables the Company to have a well established sales and distribution network without significant set up costs.

Stronger research and development

The Philips Contributed Business includes research and development organization in Eindhoven, Bruges, Singapore and Bangalore, including highly skilled and experienced research and development staff teams. This will complement and enhance the Group’s current research and development strengths and technological capabilities in TVs and TV products.

Enhanced product portfolio

The Acquisition provides the Group with a more comprehensive and innovative product range to address high-end market segment which will enhance the Group’s overall product delivery.

As integral parts to facilitate the Proposed Transactions, the entering into of the Auxiliary Agreements and the Reversed Auxiliary Agreements is premised on the extent that certain operational activitiescouldnotbeorganisedonatimelyandan independent manner by either the JV Group or the Philips Group prior to and after Completion (the ‘‘Transitional Period’’). Therefore, Philips or its members will in principle provide certain transitional services to JVCo or its members (or vice versa) to enable each party to carry out these operational activities during the Transitional Period. It is expected that after the Transitional Period, each party will be able to maintain independent operational and management structures to organise their operational activities independently.

The Board (including the independent non-executive Directors) considers that the terms of the Sale and Purchase Agreement, the Shareholders Agreement, the Argentina JV Shareholders Agreement and the Funding Documents are fair and reasonable and on normal commercial terms following arm’s length negotiations

– 84 – LETTER FROM THE BOARD

between the parties, and the entering into of the transactions contemplated under the Sale and Purchase Agreement, the Shareholders Agreement, the Argentina JV Shareholders Agreement and the Funding Documents is in the interests of the Company and the Shareholders as a whole.

The Board (including the independent non-executive Directors) considers that the terms of the Trademark License Agreement, the Secondary Trademark License Agreement, the Intellectual Property Agreement, the Auxiliary Agreements and the Reversed Auxiliary Agreements and the Annual Caps are fair and reasonable and on normal commercial terms following arm’s length negotiations between the parties, and the entering into of the transactions contemplated under the Trademark License Agreement, the Secondary Trademark License Agreement, the Intellectual Property Agreement, the Auxiliary Agreements and the Reversed Auxiliary Agreements is in the interests of the Company and the Shareholders as a whole.

Save for Mr. Robert Theodoor Smits who is an employee of Philips, (i) none of the Directors has any material interest in the transactions contemplated under the Sale and Purchase Agreement, the Shareholders Agreement, the Argentina JV Shareholders Agreement, the Trademark License Agreement, the Secondary Trademark License Agreement, the Auxiliary Agreements and the Reversed Auxiliary Agreements; and (ii) none of them was required to abstain from voting on the board resolution in respect of the approving the aforesaid transactions.

TothebestoftheDirectors’ knowledge, information and belief having made all reasonable enquiries, Mr. Robert Theodoor Smits has no shareholding in the Company as at the Latest Practicable Date.

FINANCIAL EFFECTS OF THE ACQUISITION AND THE EXERCISE OF ANY OF THE PHILIPS PUT OPTIONS

Upon Completion and the exercise of any of the Philips Put Options, JVCo will become 70%-owned and a wholly-owned subsidiary of the Company, respectively, and the JV Group’s results will be consolidated into the Group’s consolidated financial statements. The unaudited pro forma consolidated financial information of the Enlarged Group illustrating the financial impact of the Acquisition and the exercise of any of the Philips Put Options on the results, assets and liabilities of the Group is set out in appendix III to this circular.

Based on the unaudited pro forma consolidated balance sheet of the Enlarged Group as set out in appendix III to this circular and assuming Completion had taken place on 30 June 2011, as a result of Completion, (i) the total assets would be increased by approximately 33.5% from approximately US$4,908 million to approximately US$6,551 million; (ii) the total liabilities would be increased by approximately 51.8% from approximately US$3,069 million to approximately US$4,660 million; and (iii) the net assets attributable to the Shareholders would be decreased by approximately 1.3% from approximately US$1,840 million to approximately US$1,817 million.

– 85 – LETTER FROM THE BOARD

Based on the unaudited pro forma consolidated balance sheet of the Enlarged Group as set out in appendix III to this circular and assuming Completion and the exercise of any of the Philips Put Options had taken place on 30 June 2011, as a result of Completion and the exercise of any of the Philips Put Options, (i) the total assets would be increased by approximately 33.5% from approximately US$4,908 million to approximately US$6,551 million; (ii) the total liabilities would be increased by approximately 51.6% from US$3,069 million to approximately US$4,654 million; and (iii) the net assets attributable to the Shareholders would be increased by approximately 3.2% from approximately US$1,840 million to approximately US$1,898 million.

Based on the unaudited pro forma consolidated income statement of the Enlarged Group as set out in appendix III to this circular and assuming Completion had taken place on 1 January 2010, as a result of Completion, (i) the total revenue would be increased by approximately 27.2% from approximately US$11,632 million to approximately US$14,792 million; and (ii) the net profit attributable to the Shareholders would be decreased by approximately 80.0% from US$170 million to approximately US$34 million.

Based on the unaudited pro forma consolidated income statement of the Enlarged Group as set out in appendix III to this circular and assuming Completion and the exercise of any of the Philips Put Options had taken place on 1 January 2010, as a result of Completion and the exercise of any of the Philips Put Options, (i) the total revenue would be increased by approximately 27.2% from approximately US$11,632 million to approximately US$14,792 million; and (ii) the net profit attributable to the Shareholders would be decreased by approximately 97.1% from US$170 million to approximately US$5 million.

Since the values of the assets and liabilities of the JV Group may be different at the Completion Date and the date of completion of the exercise of any of the Philips Put Options from their respective values used in the preparation of the unaudited pro forma financial information of the Enlarged Group, the actual amounts of the assets and liabilities of the JV Group to be recorded in the financial statements of the Group may be different from the estimated amounts shown in the unaudited pro forma financial information of the Enlarged Group.

FINANCIAL AND TRADING PROSPECTS OF THE ENLARGED GROUP

Financial and trading prospects of the Group

The continuing debt crisis in Europe will continue to dampen consumption and investment, rendering a near term recovery difficult. The latest forecast by the World Bank for global economic growth in 2011 and 2012 is low at 3.2% and 3.6%, respectively. Fiscal problems in the US and Europe are likely to continue suppressing market demand, whereas ongoing inflation and mounting cost pressures could create challenges for emerging economies. Standard & Poor’s downgrade of US credit rating in early August may well add to the market’s uncertainties.

– 86 – LETTER FROM THE BOARD

In the TFT-LCD industry, TV brands have become cautious about market demand in the second half, and they have adjusted their annual shipment targets downwards. DisplaySearch has also lowered its forecast for LCD TV shipments from 217 million units to 210 million units during the same period.

In response to these challenging trends in its business environment, the Company recently initiated a restructuring plan that will integrate its two business units and give it a functional organizational structure. This will improve the Group’s cost structure and efficiency by centralizing its operations. The Company remains confident that the commitment it is now making to the future of its business will bear fruit when the market picks up.

Financial and trading prospects of the Philips Business

The global economic outlook is uncertain with the continuing European sovereign debt crisis and Standard & Poor’s downgrade of US credit rating in early August. The market demand in the EU is likely to shrink with the Greece bailout package and austerity measures to be applied in various EU member states. On the other hand, emerging markets like Eastern Europe and Latin-America continue to grow.

Over the first nine months of 2011 the Philips Business results have deteriorated mainly because of the inventory and supply chain commitments carry over from 2010 into 2011. This high stock carry over in combination with oversupply in the industry have resulted in strong price erosion and exceptional low margins of the 2010 range. In addition, total operating expenses increased mainly due to overrun on research and development expenses largely resulting from exceptional impairments of capitalized development expenses, triggered by lower results. Furthermore, substantial amounts were incurred to speed up the time-to-market for 2012. The results deteriorated for the first nine months of 2011 due to the increased price erosion that materialized and the subsequent decline in gross profit and increased total operating expenses. Going into the fourth quarter of 2011 it is expected that the results will improve compared to the first three quarters of 2011. The new 2011 product range has better margins and the relative share of 2010 range sales with exceptional low margins is declining in the fourth quarter.

LISTING RULES IMPLICATIONS

The Acquisition and the Philips Put Options

As the consideration for the Acquisition and the Philips Put Options cannot be determined at this stage, the acquisition of a 70% equity interest in JVCo by the Company from Philips and the acquisition of the remaining 30% equity interest in JVCo by the Company from Philips through the exercise of any of the Philips Put Options constitutes a very substantial acquisition and a possible very substantial acquisition for the Company under Chapter 14 of the Listing Rules. Accordingly, the Acquisition and the granting of the Philips Put Options are subject to reporting, announcement and shareholders’ approval requirements under Chapter 14 of the Listing Rules.

– 87 – LETTER FROM THE BOARD

Under the Bridge Facility, which is revolving in nature, the amounts advanced by Philips to JVCo will constitute the provision of financial assistance by a connected person, and will therefore constitute a continuing connected transaction under Chapter 14A of the Listing Rules. As the terms of the aforesaid financial assistance is on normal commercial terms where no security over the assets of the Company is granted in respect of the financial assistance, the financial assistance is exempt from reporting, announcement and independent shareholders’ approval under the Listing Rules.

The entering into of the Trademark License Agreement, the Secondary Trademark License Agreement, the Intellectual Property Agreement, the Auxiliary Agreements and the Reversed Auxiliary Agreements

Immediately upon Completion, Philips will hold a 30% equity interest in JVCo and will become a connected person of the Company by virtue of being a substantial shareholder of JVCo. Each of Philips Electronics, Philips Singapore, Philips Consumer Lifestyle, Online Shop, Employee Shop, Philips Brazil, Dixtal and Philips Hungary are direct or indirect wholly-owned subsidiaries of Philips. The transactions contemplated under the Trademark License Agreement, the Secondary Trademark License Agreement, the Intellectual Property Agreement, the Auxiliary Agreements and the Reversed Auxiliary Agreements and the transactions contemplated thereunder will therefore constitute continuing connected transactions for the Company under Chapter 14A of the Listing Rules. As certain applicable percentage ratios of the Annual Caps are more than 5%, the Trademark License Agreement, the Secondary Trademark License Agreement, the Intellectual Property Agreement, the Auxiliary Agreements and the Reversed Auxiliary Agreements and the transactions contemplated thereunder are subject to the reporting, annual review, announcement and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.

INDEPENDENT BOARD COMMITTEE

The Independent Board Committee comprising all of the three independent non- executive Directors, namely Mr. Chan Boon-Teong, Dr. Ku Chia-Tai and Mr. Wong Chi Keung, has been constituted to advise the Independent Shareholders as regards the terms of the Continuing Connected Transactions (including the Annual Caps). Somerley has been appointed to advise the Independent Board Committee and the Independent Shareholders in the same regard.

THE SGM

Philips, being the holder of approximately 2.69% equity interests in the Company as at the Latest Practicable Date, together with its associates, will abstain from voting at the SGMontheresolutionsinrelationtotheProposedTransactions.

– 88 – LETTER FROM THE BOARD form of proxy in accordance with the instructions set out in the SGM Notice. If your shares are registered with the Company’s Hong Kong share registrar, you should deposit your form of proxy at Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong or the Company’s principal office in Hong Kong at Unit 1208–16, 12/F, C-BONS International Center, 108 Wai Yip Street, Kwun Tong, Kowloon, Hong Kong. If your shares are registered with the Company’s Singapore share transfer office, you should deposit your form of proxy at Boardroom Corporate & Advisory Services Pte. Ltd. at 50 Raffles Place, Singapore Land Tower #32-01, Singapore 048623 or the Company’s principal office in Hong Kong at the address stated above. The proxy form should be deposited as soon as possible but in any event not later than 48 hours before the time appointed for the holding of the SGM in order to be valid. Completion of the form of proxy will not preclude you from attending and voting at the SGM or any adjournment thereof should you so wish.

As required by the Listing Rules, the votes taken at the SGM to seek approval of the Proposed Transactions and the Annual Caps will be taken by a poll. An announcement on the poll results will be made by the Company after the SGM in the manner prescribed under Rule 13.39(5) of the Listing Rules.

RECOMMENDATIONS

The Board (including the independent non-executive Directors) considers that the terms of the Acquisition and the Philips Put Options are fair and reasonable and the entering into of the Proposed TransactionsisintheinterestsoftheCompanyandthe Shareholders as a whole. The Board (including the independent non-executive Directors) also considers that the terms of the Continuing Connected Transactions (including the Annual Caps) are on normal commercial terms, fair and reasonable as far as the Independent Shareholders are concerned and in the interests of the Company and the Shareholders as a whole. Accordingly, the Board (including the independent non- executive Directors) recommends the Independent Shareholders to vote in favour of the ordinary resolutions to be proposed at the SGM in relation to the Acquisition, grant of the Philips Put Options and the Continuing Connected Transactions (including the Annual Caps).

ADDITIONAL INFORMATION

Your attention is drawn to the letter of advice from the Independent Board Committee set out on pages 91 to 92 and the letter from Somerley set out on pages 93 to 147 containing its recommendation to the Independent Board Committee and the Independent Shareholders in relation to the terms of the Continuing Connected Transactions (including the Annual Caps).

– 89 – LETTER FROM THE BOARD

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

The Board wishes to emphasize that completion of the Proposed Transactions may or may not take place. Shareholders and potential investors are reminded to exercise cautionwhendealinginthesecuritiesoftheCompany.

Yours faithfully, for and on behalf of the Board TPV Technology Limited Dr Hsuan, Jason Chairman and Chief Executive Officer

– 90 – LETTER FROM THE INDEPENDENT BOARD COMMITTEE

TPV TECHNOLOGY LIMITED (Incorporated in Bermuda with limited liability) (Stock Code: 903)

23 December 2011

To the Independent Shareholders

DearSirorMadam,

(1) CONTINUING CONNECTED TRANSACTIONS IN RELATION TO THE PROPOSED LICENSING OF THE PHILIPS TRADEMARKS AND THE PHILIPS SECONDARY TRADEMARKS;

AND

(2) CONTINUING CONNECTED TRANSACTIONS IN RELATION TO THE PROPOSED ENTERING INTO OF THE INTELLECTUAL PROPERTY AGREEMENT, THE AUXILIARY AGREEMENTS AND THE REVERSED AUXILIARY AGREEMENTS REGARDING THE JOINT VENTURE WITH PHILIPS

We refer to the circular dated 23 December 2011 of the Company (the ‘‘Circular’’)of which this letter forms part. Terms defined in the Circular shall have the same meaning herein unless the context otherwise requires.

We have been appointed as the Independent Board Committee to consider and advise the Independent Shareholders as to whether, in our opinion, the entering into of the Continuing Connected Transactions (including the Annual Caps) is in the ordinary and usual course of business of the Company and in the interests of the Company and the Independent Shareholders as a whole and whether the terms of the Continuing Connected Transactions (including the Annual Caps) are on normal commercial terms and fair and reasonable as far as the Independent Shareholders are concerned. Somerley has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in the same regard.

We wish to draw your attention to the ‘‘Letter from the Board’’ set out on pages 18 to 90 of the Circular which contains, inter alia, information on the Continuing Connected Transactions (including the Annual Caps), as well as to the letter from Somerley set out on pages 93 to 147 of the Circular which contains its advice in respect of the terms of the Continuing Connected Transactions (including the Annual Caps).

– 91 – LETTER FROM THE INDEPENDENT BOARD COMMITTEE

After taking into consideration the advice of Somerley, we consider the entering into of the Continuing Connected Transactions (including the Annual Caps) is part and parcel of the Acquisition, in the ordinary and usual course of business of the Company when the Company decided to acquire 70% interest in JVCo and in the interests of the Company and the Independent Shareholders as a whole. We also consider that the terms of the Continuing Connected Transactions (including the Annual Caps) are on normal commercial terms and fair and reasonable as far as the Independent Shareholders are concerned. Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the SGM in relation to the Continuing Connected Transactions (including the Annual Caps).

Yours faithfully For and on behalf of Independent Board Committee of TPV Technology Limited Mr.ChanBoonTeong Dr.KuChia-Tai Mr.WongChiKeung Independent non-executive Directors

– 92 – LETTER FROM SOMERLEY

The following is the letter of advice from Somerley to the Independent Board Committee and the Independent Shareholders, which has been prepared for the purpose of inclusion in this circular.

SOMERLEY LIMITED 10th Floor TheHongKongClubBuilding 3A Chater Road Central Hong Kong

23 December 2011

To: the Independent Board Committee and the Independent Shareholders of TPV Technology Limited

Dear Sirs,

CONTINUING CONNECTED TRANSACTIONS IN RELATION TO

(1) THE PROPOSED LICENSING OF THE PHILIPS TRADEMARKS AND THE PHILIPS SECONDARY TRADEMARKS;

AND

(2) THE PROPOSED ENTERING INTO OF THE INTELLECTUAL PROPERTY AGREEMENT, THE AUXILIARY AGREEMENTS AND THE REVERSED AUXILIARY AGREEMENTS REGARDING THE JOINT VENTURE WITH PHILIPS

INTRODUCTION

WerefertoourappointmenttoadvisetheIndependent Board Committee and the Independent Shareholders in relation to the Continuing Connected Transactions (including the Annual Caps). Details of the terms of the Continuing Connected Transactions (including the Annual Caps) are set out in the letter from the Board contained in the circular (the ‘‘Circular’’)oftheCompanytotheShareholdersdated 23 December 2011, of which this letter forms part. Unless otherwise defined, capitalised terms used in this letter shall have the same meanings as those defined in the Circular.

On 1 November 2011, MMD, a wholly-owned subsidiary of the Company, and Philips entered into the Sale and Purchase Agreement. The Sale and Purchase Agreement involves, among other things, (i) the acquisition by MMD of 70% interest in JVCo, which will hold the Philips Contributed Business; and (ii) the granting of the Philips Put Options to Philips for selling the remaining 30% interest in JVCo to MMD. The Acquisition and the granting of the Philips Put Options constitute a very substantial acquisition and a possible very substantial acquisition for the Company respectively but neither of them is not a connected transaction under the Listing Rules. In the

– 93 – LETTER FROM SOMERLEY circumstances, it is not part of our assignment to advise on the Acquisition and the granting of the Philips Put Options or to advise the Independent Board Committee or the Independent Shareholders on voting on the resolution in this regard.

Immediately upon Completion, Philips will hold 30% equity interest in JVCo shares and will become a connected person of the Company by virtue of being a substantial shareholder of JVCo. Consequently, the transactions contemplated under the Trademark License Agreement, the Secondary Trademark License Agreement, the Intellectual Property Agreement, the Auxiliary Agreements and the Reversed Auxiliary Agreements between the Philips Group and the Group, including the JV Group, will constitute continuing connected transactions for the Company under Chapter 14A of the Listing Rules upon and after Completion. As certain applicable percentage ratios of the AnnualCapsaremorethan5%,theTrademarkLicenseAgreement,theSecondary Trademark License Agreement, the Intellectual Property Agreement, the Auxiliary Agreements and the Reversed Auxiliary Agreements and the transactions contemplated thereunder are subject to the reporting, annual review, announcement and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules. We understand that the terms of the Continuing Connected Transactions were negotiated as a package with the Acquisition and the granting of the Philips Put Options. Consequently, in considering the terms of the Continuing Connected Transactions, we have taken into account the strategic effect of the Acquisition and the granting of the Philips Put Options by MMD.

The Independent Board Committee, comprising all of the independent non-executive Directors, namely Mr. Chan Boon Teong, Dr. Ku Chia-Tai and Mr. Wong Chi Keung, has been established to make a recommendation to the Independent Shareholders as to the Continuing Connected Transactions (including the Annual Caps). We, Somerley Limited, have been appointed as the independent financial adviser to advise the Independent BoardCommitteeandtheIndependentShareholdersinthesameregard.

We are not associated with the Company, Philips, or their respective substantial shareholders or associates, and accordingly, are considered eligible to give independent advice on the Continuing Connected Transactions (including the Annual Caps). Apart from normal professional fees payable to us in connection with this and other similar appointments, no arrangement exists whereby we will receive any fees or benefits from the Company, Philips, or their substantial shareholders or associates.

In formulating our opinion and recommendation, we have reviewed, among other things, the Trademark License Agreement, the Secondary Trademark License Agreement, the Intellectual Property Agreement, the Auxiliary Agreements and the Reversed Auxiliary Agreements, the annual reports of the Company for the two years ended 31 December 2010, the interim report of the Company for the six months ended 30 June 2011, the unaudited quarterly results announcement of the Company for the nine months ended 30 September 2011 and the financial information on the Group, the JV Group and the Enlarged Group as set out in the appendices to the Circular. We have also discussed

– 94 – LETTER FROM SOMERLEY with and reviewed information provided by the management of the Company regarding the businesses of the Group and the JV Group and the prospects of the Philips Contributed Business.

In addition, we have relied on the information and facts supplied, and the opinions expressed, by the management of the Company and have assumed that the information and facts provided and opinions expressed to us are true, accurate and complete in all material aspects at the time they were made and will remain true, accurate and complete up to the date of the SGM. We have also sought and received confirmation from the Company that no material facts have been omitted from the information supplied by them and that their opinions expressed to us are not misleading in any material respect. We consider that the information we have received is sufficient for us to formulate our opinion and recommendation as set out in this letter and have no reason to believe that any material information has been withheld, nor to doubt the truth or accuracy of the information provided to us. We have not, however, conducted any independent investigation into the business and affairs of the Group or the JV Group, nor have we carried out any independent verification of the information supplied.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating our opinion and recommendation with regard to the Continuing Connected Transactions, we have taken into account the following principal factors and reasons:

1. Information on the Group

2. Reasons for entering into the Continuing Connected Transactions

As set out in the letter from the Board, it is believed that the entering into of the Proposed Transactions, which include the Continuing Connected Transactions, will have the benefits of: (i) solidifying a leading position in LCD TV market; (ii) continuing development needs of the Group; (iii) economies of scale and creation of synergies; (iv) stronger research and development; and (v) enhanced product portfolio. We also consider that the Proposed Transactions allow the Group to acquire more well-known upscale brand products in addition to the brands currently sold by the Group. Furthermore, as integral parts to facilitate the Proposed Transactions, the Intellectual Property Agreement in respect of the transfer and license of patents, know-how and softwaretoJVCoinrelationtotheScopeProducts in the Territory will be entered into at Completion. In addition, the entering into of the Auxiliary Agreements and the Reversed Auxiliary Agreements is premised on the extent that certain operational activities could not be organised on a timely and an independent manner by either the JV Group or the

– 95 – LETTER FROM SOMERLEY

Philips Group prior to and after Completion (the ‘‘Transitional Period’’). Therefore, Philips or its members will in principle provide certain transitional services to JVCo or its members (or vice versa) to enable each party to carry out these operational activities during the Transitional Period. It is expected that after the Transitional Period, each party will be able to maintain independent operational and management structures to organise their operational activities independently. In summary, the Continuing Connected Transactions are part and parcel of the Acquisition. It is impracticable for the JV Group to operate after Completion without the Continuing Connected Transactions in place.

Based on the above, we consider that the entering into of the Continuing Connected Transactions is part and parcel of the Acquisition, in the ordinary and usual course of the business of the Company when the Company decided to acquire 70% interest in JVCo and in the interests of the Company and the Independent Shareholders as a whole.

3. Principal terms of the Trademark License Agreement, the Secondary Trademark License Agreement and the Intellectual Property Agreement

(a) The Trademark License Agreement

Pursuant to the Sale and Purchase Agreement, the Group will enter into the Trademark License Agreement in respect of licensing of the Philips Trademarks at Completion.

Parties

(1) Philips, as the licensor

(2) JVCo, as the licensee

Principal terms

As part of the Proposed Transactions and under the Trademark License Agreement, Philips will grant an exclusive (except with respect to Argentina, which will be non-exclusive) right and license to the JV Group for an initial period of five years from the date of Completion, under which the JV Group can use the Philips Trademarks in the Territory, including the right and license to assemble and manufacture outside the Territory for sales, marketing and distribution in the Territory, in relation to the Scope Products, marketing materials, consumer care delivery and the provision of Net TV Services.

– 96 – LETTER FROM SOMERLEY

Royalty payable

Guaranteed minimum Year of the License Term Annual royalty annual royalty

First year Nil Nil

Second year to fifth year 2.2% of the EUR50.0 million (equivalent Turnover to approximately US$70.0 million)

The royalty shall be payable in arrears by JVCo to Philips in cash (in EUR) within 30 days after the end of each quarter.

In assessing the terms of the royalty payable to Philips under the Trademark License Agreement, we have reviewed a number of comparable transactions involving the granting of licenses to use trademarks or brands (the ‘‘Comparable Trademark Transactions’’). The Comparable Trademark Transactions are selected based on the following criteria: (i) one of the parties (including their parent companies) to such transaction is listed on the Stock Exchange; (ii) such transactions are publicly announced by way of announcement made pursuant to the Listing Rules; and (iii) such transactions relate to the granting of licenses to use recognised brands and/or trademarks in relation to TV products and/or display devices (as to primary comparables) or other consumer products (as to secondary comparables). Although some of the Comparable Trademark Transactions (i.e. under the secondary comparables category) involve products not directly related to televisions or display devices products, we consider they provide good references to our analysis on the basis that both the Scope Products and the products under the secondary comparables category are consumer products.

– 97 – LETTER FROM SOMERLEY

The Comparable Trademark Transactions are set out in the table below. To the best of our knowledge, the Comparable Trademark Transactions represent an exhaustive list of comparable transactions for our assessment in this section.

Date of Company announcement (stock code) Nature of transaction Rate of royalty fee

Primary comparables (announced in the period from October 2008 up to the Latest Practicable Date)

9 October 2008 TCL Multimedia Grant of an exclusive, non sub- Ranges from 0% to 1.5% Technology licensable and non-transferable of the net sales of the Holdings Limited license to use certain of licensor’s television products (1070) registered trademarks for the depending on the manufacture and sale of television trademarks, territories products and performance

9 February 2009 The Company Grant of an exclusive right and 1.2% of the net selling license to use certain trademarks on price of the relevant certain monitors and business to products business two dimensional LCD display devices

15 October 2009 Nanjing Panda Grantofanon-exclusiverighttouse Ranges from RMB2.0 to Electronics the licensor’strademarkbythe RMB5.0 per unit Company Limited licensee in respect of certain depending on the type of (553) television sets and other electronic colour television set. Such products licence fee per unit can be reduced in respect of products that are manufactured and sold for export purpose or incurred loss, in view of greater costs and resources required to penetrate into the overseas markets

29 September TheCompany Grantofanexclusiverightand Based on a percentage of 2010 licencetousethelicensor’s the turnover of certain trademarks on certain TVs and TVs, subject to the related promotional materials in the payment of a guaranteed PRC minimum annual royalty

16 December Great Wall Grant of a non-exclusive right and A royalty of 0.15% of the 2011 Technology license to use the trademarks on annual sales amount of Company Limited licensee’s PC and PC peripheral the products on which (74) products, operational, marketing the trademarks are used and promotion activities by licensee and its affiliates in the PRC

– 98 – LETTER FROM SOMERLEY

Date of Company announcement (stock code) Nature of transaction Rate of royalty fee

Secondary comparables (announced during the period from January 2010 up to the Latest Practicable Date)

4 February 2010 CCT Telecom Grant of (i) an exclusive license and Undisclosed Holdings Limited right to use the licensor’sbrandon (138) certain telecommunication products for sale and distribution by the licensees worldwide; (ii) a non- exclusive license to use the licensor’s brand on accessories sold for use with such telecommunication products, for sale and distribution by the licensees worldwide; and (iii) a non-exclusive license and right to use the licensor’s brand on mobile cellular phones, for sale and distribution by the licensees in China only

2 March 2010 Hua Han Bio- Grant of a licence to the licensee to A nominal amount Pharmaceutical use certain trademarks in the sale, Holdings Limited marketing and distribution of (587) cosmetics and skincare products business in greater China region

1 April 2010 San Miguel Grantofanexclusiverightornon- 2.5% of net sales value Brewery Hong exclusive right (as the case maybe) to (gross billings less certain Kong Limited (236) use the licensed trademarks in direct outgoings) of all products connection with the distribution and bearing the licensed sale of beer products trademarks

28 June 2010 One Media Group Grant of (i) exclusive, non-assignable Ranges from 3.5% to 7% Limited (426) right and license to use certain of the net revenue magazine trademarks; (ii) non- depending on the level of exclusive, non-assignable right and contents as contained in license to use past editorial and other the magazines contents associated with certain magazines, and a non-exclusive; and (iii) non-assignable right to sub- license the use certain magazine trademarks and/or to sub-license past editorial and other contents associated with certain magazines to other parties

5November Starlight Grant of a licence in relation to the Undisclosed 2010 International production and distribution of Holdings Limited branded instant photography (485) products, digital still cameras, digital video cameras, digital photo frames and mobile products in the US and Canada

– 99 – LETTER FROM SOMERLEY

Date of Company announcement (stock code) Nature of transaction Rate of royalty fee

10 February 2011 Telefield Grant of an exclusive license to Based on a percentage of International distribute phone systems bearing the net sales or the (Holdings) Limited atrademark estimated sales of phone (1143) systems made by the licensee. As reference, the royalty fee paid by the licensee for the year ended 31 December 2009 and the eight months ended 31 August 2010 accounted for less than 1% of the licensee’stotal revenue for the corresponding periods

19 March 2011 China Billion Grant of an exclusive license to use A total royalty of 10% of Resources Limited certain trademarks in respect of the the licensee’s annual (formerly known as cosmetics and skincare business gross revenue of those ‘‘Global Green Tech owned by the licensor merchandise or articles Group Limited’’) being manufactured by (274) the licensee for 10 years with the minimum guaranteed amount of HK$60.0 million in aggregate

22 March 2011 First Pacific Grant of an exclusive license to use, Licensing royalty fees of Company Limited manufacture, sell, distribute, 1% on the net sales value (142) advertiseandpromoteitssugar of the sugar products products under the licensor’s trademark

21 April 2011 Lenovo Group Grant of a license to use certain 0.21% of the gross sales Limited (992) letters and mark of the licensor to amount of licensee to use on the business of the licensee customers other than the and certain products and/or services licensor and/or the of the licensee’s personal computer licensor’s consolidated business subsidiaries, plus 0.21% of the total gross sales amount of the licensee

– 100 – LETTER FROM SOMERLEY

Date of Company announcement (stock code) Nature of transaction Rate of royalty fee

31 May 2011 Stella International Grant of (i) an exclusive right to A royalty representing Holdings Limited manufacture shoes under licensor's certain percentage of the (1836) brand name at factories in the PRC total wholesale of the and Vietnam; (ii) an exclusive right licensee, and an one-off to distribute such shoes in stores and architectural fixed fee for shops to be opened by licensee eachofthefreestanding worldwide (with certain exclusions); stores of a size greater (iii)arighttosellsuchmanufactured than 120 square meters shoes directly to certain distributors opened by the licensee or outside certain pre-agreed sales sub-licensees in certain territories as agreed by the licensor; pre-agreed sales and(iv)arighttouseundercertain territories terms and conditions of the trademark and the intellectual property rights for the manufacturing, marketing, sales and distribution of such shoes

13 July 2011 China Post Grant of a sole and exclusive license Payment of an upfront E-Commerce to use the licensor's trademarks of fee (undisclosed) upon (Holdings) Limited certain fashion apparels in Hong signing of the relevant (8041) Kong and the PRC license agreement and royalties on the net profitsofproductssoldin Hong Kong and the PRC

21 September TCL Grant of an exclusive worldwide A lump sum of US$40 2011 Communication right and license to use certain million Technology trademarks solely on or in Holdings Limited connection with the manufacture, (2618) sale, marketing, advertising, promotion, distribution and use of mobile handsets, tablets and wireless mobile network appliance equipment manufactured or assembled by the licensee

6 October 2011 Epicurean and Grantofexclusivelicensesandrights HK$1 million and certain Company, Limited to use the trademarks, trade names shares in an indirect (8213) and logos and all other proprietary wholly-owned subsidiary rights and intellectual property of the licensee rights whatsoever relating to the operation of a restaurant

– 101 – LETTER FROM SOMERLEY

Date of Company announcement (stock code) Nature of transaction Rate of royalty fee

4November San Miguel Grantoftrademarks(i)exclusivefor Ranges from US$0.025 2011 and Brewery Hong the production, sale and distribution per hectoliter to US$0.1 24 December Kong Limited (236) of branded beer in Hong Kong; (ii) per hectoliter depending 2010 exclusiveforthesaleand on the volume of beer distribution of branded beer in produced by the licensee Macau; (iii) non-exclusive only for the importation, sale and distribution in the PRC, Guam and Vietnam of branded pilsener beer produced in Hong Kong by the licensee; and (iv) exclusive for the production, sale and distribution of branded beer in Hong Kong; exclusive for the importation, sale and distribution of branded beer in Macau and the continental United States, such beer to be produced in Hong Kong by the licensee

4November Tingyi (Cayman (i) the appointment by the licensor of Undisclosed 2011 Islands) Holding the licensee as its franchise bottler, Corp. (322) which together with the other bottlers engaged by the licensor in the PRC, will manufacture, package, bottle, distribute and sell on an exclusive basis, and advertise and promoteonanon-exclusivebasis, carbonated soft drink products under certain of the licensor's trademarks in the PRC;

(ii) the licensing of the licensee to manufacture, package, bottle, distribute and sell, on an exclusive basis, and advertise and promote on a non-exclusive basis, sports drink products under certain trademarks in the PRC;

(iii) the granting of the exclusive license to manufacture and distribute pure juices, nectars/blended juices and juice drinks under certain brand and co-branded juice drinks in the PRC; and

(iv) the granting of a non-exclusive and royalty-free license to the licensee to manufacture, package, distribute, sell, advertise and promote non-carbonated water beverage products under certain trademarks in the PRC

– 102 – LETTER FROM SOMERLEY

As set out in the table above, the annual royalty rate of the primary comparables of the Comparable Trademark Transactions are ranged from 0% to 1.5% of turnover and therefore the annual royalty of 2.2% of the turnover payable under the Trademark License Agreement is above the aforesaid range. The annual royalty rate of the secondary comparables of the Comparable Trademark Transactions are ranged from at least 0.21% to 10.0% of turnover and therefore the annual royalty of 2.2% of the turnover payable under the Trademark License Agreement falls within the range of the secondary comparables of the Comparable Trademark Transactions.

It should be noted that, as discussed in the paragraph headed ‘‘Philips brand promotion and marketing support’’ in this section below, the Group, through JVCo, will be entitled to receive a total amount of EUR185 million (equivalent to approximately US$259 million) from Philips under the Trademark License Agreement. Taking into consideration of this payment and no royalty payment is required for the first year and based on the projected sales amount of the Scope Products, the effective annual royalty rate will decrease to slightly below 1% of the Turnover, which is in line with the primary comparables of the Comparable Trademark Transactions.

The guaranteed minimum annual royalty payable will be EUR50.0 million (equivalent to approximately US$70.0 million) starting from the second year of the License Term.

We have reviewed the sales projection of the JV Group prepared jointly by themanagementoftheGroupandtheJVGroup.Wenotethattheprojected turnover of the JV Group for 2013 will be EUR3,350 million (equivalent to approximately US$4,690 million) and the corresponding royalty will be EUR73.7 million (equivalent to approximately US$103.2 million). The projected turnover of the JV Group is anticipated to increase during the remaining period of the initial 5-year term of the Trademark License Agreement. Therefore, the management of the Group expects that the royalty payable during the License Term will not be less than the guaranteed minimum annual royalty payable of EUR50.0 million (equivalent to approximately US$70.0 million).

In addition, based on the historical turnover of the JV Group, the implied annual royalty at the rate of 2.2% would be approximately EUR82.1 million (equivalent to approximately US$114.9 million), EUR62.1 million (equivalent to approximately US$86.9 million) and EUR64.2 million (equivalent to approximately US$89.9 million) for 2008, 2009 and 2010 respectively, all of which would exceed the guaranteed minimum annual royalty.

Furthermore, as discussed above, Philips will contribute to JVCo a total amount of EUR185 million (equivalent to approximately US$259 million) in the first two years after Completion towards JVCo’s promotion and marketing

– 103 – LETTER FROM SOMERLEY activities which benefit the Philips brand. The provision of such funding will reduce the cash outlay of the JV Group for the promotion and marketing activities for the Scope Products and is beneficial to the JV Group.

Based on the above, we consider the pricing terms of the Trademark License Agreement are fair and reasonable.

Term and renewal

The Trademark License Agreement will have an initial term of five years starting from the date of Completion and will be automatically renewed for a subsequent five-year period if JVCo meets certain key performance indicators as set out in the Trademark License Agreement. After the second five-year term, the Trademark License Agreement may be extended by mutual agreement for successive five-year periods against such terms and conditions as may be agreed between Philips and JVCo (but including in any event guaranteed minimum royalty obligations for JVCo) (the ‘‘License Term’’).

Termination

Philips may terminate the Trademark License Agreement by giving JVCo at least 3 months’ written notice if, among others, the following events occur: (i) there is a TPV Change of Control; or (ii) the Company or the JV Group enters into an alliance or joint venture or similar agreement for its TV operations with a company which is considered by Philips as a competitor of Philips.

Non-compete

Philips brand promotion and marketing support

– 104 – LETTER FROM SOMERLEY amount is payable as follows: (i) an initial advance payment of EUR135 million (equivalent to approximately US$189 million) which shall be payable by Philips to JVCo at Completion; and (ii) an additional advance payment of EUR50 million (equivalent to approximately US$70 million) in the second year after Completion which shall be payable by Philips to JVCo.

ConsumercarefortheScopeProductssoldpriortoCompletion

Philips shall pay EUR9.0 million (equivalent to approximately US$12.6 million) to JVCo as compensation for JVCo’s cost of organisation to fulfill its consumer care obligations relating to the Scope Products sold prior to Completion (except for certain Scope ProductssuppliedbytheCompanyto Philips under certain arrangement) of which EUR6.0 million (equivalent to approximately US$8.4 million) and the remaining EUR3.0 million (equivalent to approximately US$4.2 million) shall be paid in the first year and the second year from Completion, respectively. From the third year onwards, JVCo shall continue to render the consumer care services for the Scope Products sold prior to Completion (except for certain ScopeProductssuppliedbytheCompanyto Philips under certain arrangement) and Philips and JVCo shall in good faith negotiate a fair compensation for such services based on the actual hours spent.

We have reviewed and note that the historical costs in relation to the warranty claims regarding the repair and exchange of the Scope Products to consumer care providers were approximately EUR8.5 million (equivalent to approximately US$11.9 million) per annum. We have also reviewed the historical statistics of the timing of warranty claims made by consumer care providers and the expected split of warranty claims to be made between the Scope Products (except for certain Scope Products supplied by the Company to Philips under certain arrangement) sold prior to and after Completion. Based on the above, it is estimated that approximately 65% (approximately EUR5.5 million (equivalent to approximately US$7.6 million)) and 32% (approximately EUR2.7 million (equivalent to approximately US$3.8 million)) of the warranty claimswouldbemadeinthefirstandsecondyearssubsequenttoCompletion while those in the third year and onwards would not be very significant. Given

– 105 – LETTER FROM SOMERLEY

the total compensation to JVCo to fulfill its consumer care obligations relating to the Scope Products (except for certain Scope Products supplied by the Company to Philips under certain arrangement) sold prior to Completion will be EUR9.0 million (equivalent to approximately US$12.6 million), which exceed the estimated costs, we consider the total compensation amount is fair and reasonable.

(b) The Secondary Trademark License Agreement

Pursuant to the Sale and Purchase Agreement, the Secondary Trademark License Agreement in respect of licensing of the Philips Secondary Trademarks will be entered into at Completion.

Parties

(1) Philips, as the licensor

(2) JVCo, as the licensee

Principal terms

Royalty payable

The royalty has been arrived at after arm’s length negotiations between the Company and Philips with reference to, among other factors, the historical performance and future prospects of the Philips Contributed Business in respect of the Philips Secondary Trademarks, including its earnings potential and synergies with the Group.

As set out in the table of the Comparable Trademark Transactions in the section 3(a) headed ‘‘The Trademark License Agreement’’ above, the annual royalty rate of primary comparables and the secondary comparables of the Comparable Trademark Transactions are ranging from 0% to 1.5% and from at

– 106 – LETTER FROM SOMERLEY least 0.21% to 10.0% of turnover respectively and therefore the annual royalty rate of 1.0% of the turnover payable under the Secondary Trademark License Agreement is within the range of the Comparable Trademark Transactions.

Furthermore, there will be no guaranteed minimum annual royalty payable under the Secondary Trademark License Agreement. The absence of such minimum royalty payment is favorable to the Company as the JV Group has the flexibility to sell the Secondary Trademark Scope Products only when it is beneficial to do so.

Term and renewal

Termination

Non-compete

– 107 – LETTER FROM SOMERLEY

Parties

(1) Philips, as the licensor

(2) JVCo, as the licensee

Principal terms

(i) Transfer Patents

Philips will assign and agree to transfer and will cause its members to assign and transfer to JVCo, effective as of the Completion Date, all of Philips’ and, as applicable, its members’ rights, title and interest in and to the Transfer Patents (excluding the right to sue for past infringements) at no cost, subject to an unrestricted license under the Transfer Patents to be retained by Philips.

(ii) Licensed Patents

(iii) 3D Patents

(iv) Business know-how

– 108 – LETTER FROM SOMERLEY which is solely used within the Philips Contributed Business as of the Completion Date, subject to an unrestricted license under such business know-how to be retained by Philips.

Philips will grant to JVCo a non-exclusive, non-transferable, non- encumberable, fully paid-up and royalty-free license, without the right to grant sublicenses under certain other know-how of Philips, to the extent that such know-how is used within the Philips Contributed Business, for the continued use of such know-how in Philips-branded Scope Products in the Territory.

(v) Business software

Philips will grant to JVCo an irrevocable, royalty-free, non-exclusive and non-transferable license under certain other software of Philips to use (in the broadest sense) such software within the scope of the Philips Contributed Business in the Territory, including without limitation, the right to modify, create derivative works, the right to have Philips-branded Scope Products manufactured by a third party outside or inside the Territory solely for the use, sale or other disposal by JVCo of Philips-branded Scope Products within the Territory and the right to grant sublicenses in the context of and to the extent necessary for selling or marketing Philips-branded Scope Products.

(vi) Design rights

Philips will grant JVCo, effective as of the Completion Date, a non- exclusive, non-transferable, non-encumberable, fully paid-up and royalty-free license, without the right to grant sublicenses (other than the rights to have Philips-branded Scope Products made by a third party outside or inside the Territory solely for the use, sale or other disposal by JVCo of the Scope Products within the Territory), under certain registered design rights of Philips as set out in the Intellectual Property Agreement and any unregistered design rights and/ or copyrights on non-technical designs of the Scope Products owned by any members of the Philips Group which are used within the Philips Contributed Business as of the Completion Date, for the continued use of such registered design rights in Philips-branded Scope Products, in each case limited to the Territory.

– 109 – LETTER FROM SOMERLEY

Pricing

The transfers and licenses of the aforementioned patents, business know- how, business software and design rights shall be on a royalty-free basis. As the relevant intellectual properties are essential for the Philips Contributed Business, we are of the view that the royalty-free arrangement is beneficial to the Company.

JVCo shall also be entitled to receive from Philips a rebate of 70% of the 3D Patent royalty. The consideration for the patents, business know-how, business software and design rights and the 3D Patent royalty rebate have been arrived at after arm’s length negotiations between the Company and Philips.

Although JVCo shall be entitled to receive 70% of the 3D Patent royalty rebate from Philips, we are of the view that such arrangement may not be favourable to JVCo on the basis that the suppliers of JVCo, which will make the 3D Patent royalty payment to Philips, may pass on such additional cost and raisethepriceofproductstobesoldtoJVCoinlongrun.Inotherword,JVCo may indirectly subsidise 30% of 3D Patent royalty payment to Philips as a result of the aforesaid arrangement. Based on our discussion with the management of the Group and after considering the anticipated 3D Patent royalty rate of not exceeding EUR1.5 (equivalent to approximately US$2.1) per panel and the projected production volume of the Philips-branded Scope Products (with 3D Patents in respect of display panels or components) in the Territory of not more than 250,000 units, 500,000 units and 1 million units for the first, second and third year of the term of the IntellectualPropertyAgreement,thetotalamount of the 3D Patent royalty rebate shared by Philips is anticipated to be insignificant as compared to the projected turnover of the JV Group. Having taken into account the terms of the Proposed Transactions, we consider the pricing terms of the Intellectual Property Agreement are acceptable.

Term and renewal

Termination

– 110 – LETTER FROM SOMERLEY

4. Principal terms of the Auxiliary Agreements

(a) The Transitional Services Agreement

Pursuant to the Sale and Purchase Agreement, the Transitional Services Agreement in respect of the provision of certain transitional services by the Philips Group to the JV Group will be entered into at Completion. The entering into of the Transitional Services Agreement will ensure a smooth transition of the JV Group from the Philips Group to the Group immediately after Completion for a transitional period.

Parties

(1) Philips

(2) JVCo

Principal terms

The provision of the transitional services shall be governed by the terms in the Transitional Services Agreement and each and every Transitional Service Level Agreement shall comply with the Listing Rules and all applicable laws. If any of the provisions as contained in any of the Transitional Service Level Agreements conflicts in any material matter with the provisions of the Transitional Services Agreement, the provisions of the Transitional Services Agreement shall prevail, except if such provisions are contained in a Transitional Service Level Agreement which was in agreed form between Philips and the Company prior to the issuance of the Circular, in which case the provisions of such Transitional Service Level Agreement shall prevail.

Pricing

– 111 – LETTER FROM SOMERLEY

price as established by a reputable broker. The prices for the transitional services have been arrived at after arm’s length negotiations between the Company and Philips.

We have reviewed the Transitional Service Level Agreements and note that the pricing are determined based on the basis as set out above. Given the pricing will be determined based on normal commercial terms or on terms more beneficial to the JV Group (except for the prices for services relating to office space, which shall be the lower of the prior price level and the market price), we are of the view that the terms of the Transitional Services Agreement are on normal commercial terms and are fair and reasonable.

Term and renewal

Termination

The JV Group may terminate any transitional service provided under a Transitional Service Level Agreement by giving to the Philips Group not less than two calendar month’s notice in writing (with a few exceptions).

(b) The IT Transitional Service Level Agreement

Parties

(1) Philips Electronics

(2) JVCo

Principal terms

Pricing

– 112 – LETTER FROM SOMERLEY commercial terms, or on terms no less favourable to JVCo than terms available from independent third parties. The prices for the IT services and the additional IT services have been arrived at after arm’s length negotiations between the Company and Philips after considering the required IT functions to safeguard the continuity of the Philips Contributed Business, the estimated services for provision of IT application and infrastructure services and historical charges of the IT services to the Philips Contributed Business.

We have discussed with the management of the Group and they considered that the IT services and applications currently utilised or to be utilised in the year after Completion by the JV Group have been included in the EUR20.0 million (equivalent to approximately US$28.0 million) IT service package. Based on the financial information on the JV Group, the total IT services cost incurred by the JV Group were approximately EUR58.0 million (equivalent to approximately US$81.2 million), EUR44.0 million (equivalent to approximately US$61.6 million) and EUR40.0 million (equivalent to approximately US$56.0 million) for 2008, 2009 and 2010 respectively. Given the IT services to be provided under the IT Transitional Service Level Agreement will be similar to those in the past, the payment of EUR20 million (equivalent to approximately US$28.0 million) by JVCo for the IT services under the IT Transitional Service Level Agreement is favourable to the Company. Moreover, additional IT services shall be charged on terms and fees to be agreed by both parties and based on normal commercial terms, or on terms no less favourable to JVCo than terms available from independent third parties. Based ontheabove,weconsiderthatthepricing terms of the IT Transitional Service Level Agreement are fair and reasonable.

Term and renewal

Termination

– 113 – LETTER FROM SOMERLEY

Pursuant to the Sale and Purchase Agreement, the Remote Control Sale Agreement in respect of sale of remote control products and other products by Philips Singapore to JVCo will be entered into at Completion.

Parties

(1) Philips Singapore

(2) JVCo

Principal terms

Philips Singapore will sell remote control products and other products to JVCo and will grant a license to JVCo for using remote control products. Any purchase order, PPIA and amendment to the Remote Control Sale Agreement must be negotiated on an arm’s length basis and based on normal commercial terms or on terms no more favourable to Philips Singapore than terms available to independent third parties.

Pricing

Prices will be based on delivery free on board Singapore or Shanghai Philips, Singapore’s manufacturing facility or other facility designated by Philips Singapore. The pricing and payment terms are determined at arm’s length basis and based on normal commercial terms, or on terms no less favorable to JVCo than terms available to or from independent third parties taking in consideration the volumes and terms and conditions.

We have discussed with the management of the Group and we note that Philips Singapore has sold remote control and related products to third party customers based on pricing mechanism above, i.e. delivery free on board Singapore or Shanghai or Philips Singapore’s manufacturing facility or other facility designated by Philips Singapore. Given the pricing terms of the products to be sold to JVCo will be based on normal commercial terms, or on terms no less favorable to JVCo than termsavailabletoorfromindependent third parties taking into consideration the volumes, terms and conditions, we consider that the pricing terms of the Remote Control Sale Agreement are fair and reasonable.

Term and renewal

– 114 – LETTER FROM SOMERLEY

Termination

Either party may terminate the Remote Control Sale Agreement by giving six months’ prior notice in writing. Either party may, by written notice to the other party, terminate with immediate effect the Remote Control Sale Agreement if, among other things: (a) the other party violates or breaches any material term of the Remote Control Sale Agreement; or (b) any proceedings in insolvency, bankruptcy (including reorganisation) liquidation or winding up are instituted against the other party.

5. Principal terms of the Reversed Auxiliary Agreements

(a) The NET TV License and Services Agreement

Pursuant to the Sale and Purchase Agreement, the NET TV License and Services Agreement in respect of provision of services by JVCo to Philips Consumer Lifestyle and its subsidiaries related to the operation, hosting, maintenance and support of the Net TV/Smart TV Portal will be entered into at Completion.

Parties

(1) Philips Consumer Lifestyle

(2) JVCo

Principal terms

JVCo shall render services for the operation of the NET TV Portal, the Smart TV and the Smart TV Dashboard so that these are accessible via Internet by the Philips Consumer Lifestyle devices.

Pricing and financing arrangements

The pricing and payment terms are determined on an arm’slengthbasis.

– 115 – LETTER FROM SOMERLEY advertising. All revenues generated by the use of applications on Philips’ active devices that has connected to the Net TV Service Portal, will be shared as to 50% of the net revenues to JVCo and 50% of the net revenues to Philips Consumer Lifestyle. Net revenues generally represent the revenues minus the costs for payment and handling, and specific costs related to the type of service offering.

We have discussed with the management of the Group and we understand that the NET TV Services is now in the planning stage and has not been activated. Based on the current plan, the NET TV Services will be operated by a joint venture company to be owned by JVCo and a number of partners. The shareholding of the aforesaid joint venture company has yet to be determined at this stage. The NET TV Services Portal can be accessed by Philips’ active devices (e.g. the Scope Products) or devices (e.g. mobile phones) of other participants. The revenues generated will be split among Philips Consumer Lifestyle and the otherparticipantsbasedonthenumberof subscribers to the NET TV Services. The share receivable by Philips Consumer Lifestyle will then be equally split between JVCo and Philips Consumer Lifestyle pursuant to the NET TV License and Services Agreement. JVCo will not be entitled to share any of the revenue receivable by other participants.

Based on our review of the NET TV License and Services Agreement, we note that Philips Consumer Lifestyle will pay the aforesaid costs based on the actual costs planned for that year and the proportion of Philips Consumer Lifestyle’s total installed base of active devices to the total Net TV installed base for that year. We have discussed with the management of the Group and we understand that no agreement has been made with other participants on the sharing of annual costs for the managed operations of the service portal, the use of the services and the day to day operations.

Based on the above, we consider the pricing terms of the NET TV License and Services Agreement are fair and reasonable.

Term and renewal

– 116 – LETTER FROM SOMERLEY

Termination

(b) The Online Shop and My Shop Agreement

Pursuant to the Sale and Purchase Agreement, the Online Shop and My Shop Agreement in respect of the sale by TP Vision Netherlands and the purchase by Online Shop and My Shop of various Scope Products as well as other products that may be offered by TP Vision Netherlands from time to time as specified in the Online Shop and My Shop Agreement, will be entered into at Completion. The products will be distributed by Online Shop and My Shop to (i) the current employees of the Philips Group; (ii) the retired Philips persons; and (iii) certain former Philips employees working for companies which have been spun off and are no longer part of the Philips Group. Employees of the Philips Group located in The Netherlands can purchase with My Shop, and employees located in France, the United Kingdom and Germany can purchase with the Online Shop.

Parties

(1) Online Shop

(2) My Shop

(3) TP Vision Netherlands

Principal terms

The Online Shop and My Shop Agreement and the terms contained therein apply to and form an integral part of all quotations and offers made by TP Vision Netherlands, all acceptances, acknowledgements or confirmations by TP Vision Netherlands of any orders by Online Shop and My Shop and any agreements regarding the sale by TP Vision Netherlands and purchase by Online Shop and My Shop of different TV products, unless and to the extent the parties to the Online Shop and My Shop Agreement explicitly agree otherwise in writing. Any amendment must be negotiated on an arm’s length basis and based on normal commercial terms or on terms no more favourable to Online Shop and/or My Shop than terms available to independent third parties.

Furthermore, certain special offers will be made by Philips for its customers from time to time and will be done in conjunction with TP Vision Netherlands. TP Vision Netherlands will discuss and agree with Online Shop and My Shop on a regular basis to operate the special offer programs.

– 117 – LETTER FROM SOMERLEY

Pricing

The sale prices (excluding taxes, duties and similar levies) applicable for the products are set out in the Online Shop and My Shop Agreement. TP Vision Netherlands will add taxes, duties and similar levies to the sale price where TP Vision Netherlands is required or enabled by law to pay or collect them and these will be paid by Online Shop and/or My Shop together with the sale price. The sale prices and payment terms are determined on an arm’slengthbasisand on normal commercial terms or on terms no more favourable to Online Shop and/or My Shop than terms available to independent third parties. The principles for the pricing are the following: (i) TP Vision Netherlands, Online Shop and My Shop will have bi-annual price negotiations; (ii) notwithstanding the foregoing TP Vision Netherlands, Online Shop and My Shop shall separately agree on prices for the special offer programs; and (iii) the prices for both (i) and (ii) will be negotiated on an arm’s length basis and based on normal commercial terms or on terms no more favourable to Online Shop and/ or My Shop than terms available to independent third parties.

Given the pricing will be determined based on normal commercial terms or on terms no more favourable to Online Shop and/or My Shop than terms available to independent third parties, we are of the view that the pricing terms under the Online Shop and My Shop Agreement are fair and reasonable.

Term and renewal

Termination

TP Vision Netherlands may terminate the Online Shop and My Shop Agreement if, among other things, Online Shop and My Shop violate or breach any term of the Online Shop and My Shop Agreement and Online Shop and My Shop after having been notified by TP Vision Netherlands thereof and have not cured the breach within thirty days after such notification.

– 118 – LETTER FROM SOMERLEY

The Employee Shop Agreements are similar to the Online Shop and My Shop Agreement except for the locations of the Scope Products to be sold by the Philips Group. The Local JVCo Subsidiary will enter into the Employee Shop Agreements in certain jurisdictions (namely, Belgium, Brazil, the Czech Republic, France, Greece, Italy, Malaysia, Russia, Singapore, Switzerland and Ukraine) in respect of the sale by the Local JVCo Subsidiary and the purchase by Employee Shop of various Scope Products as well as other products that may be offered by the Local JVCo Subsidiary from time to time as specified in the Employee Shop Agreements at Completion. It is currently contemplated that the products will be distributed by Employee Shop to the current employees of the Philips Group.

Parties

(1) Employee Shop

(2) Local JVCo Subsidiary

Principal terms

The Employee Shop Agreements and the terms contained therein apply to and form an integral part of all quotations and offers made by Local JVCo Subsidiary, all acceptances, acknowledgements or confirmations by JVCo of any orders by Employee Shop and any agreements regarding the sale by the Local JVCo Subsidiary and purchase by Employee Shop of different TV products, unless and to the extent the parties to the Employee Shop Agreements explicitly agree otherwise in writing. Any amendment must be negotiated on an arm’s length basis.

Pricing

– 119 – LETTER FROM SOMERLEY

Given the pricing will be determined on an arm’slengthbasisandon normal commercial terms, we are of the view that the pricing terms under the Employee Shop Agreements are fair and reasonable.

Term and renewal

Termination

(d) The Brazil Lease Agreement

Pursuant to the Sale and Purchase Agreement, the Brazil Lease Agreement in respect of the lease by TP Vision Brazil to Philips Brazil of an industrial property of 8,600 square metres at Avenida Torquato Tapajós, No. 2236, Bairro Flores, municipality of Manaus, Amazonas state, Brazil will be entered into at Completion.

Parties

(1) TP Vision Brazil, as the lessor

(2) Philips Brazil, as the lessee

Principal terms

Pursuant to the Brazil Lease Agreement, TP Vision Brazil will lease an industrial property in Brazil to Philips Brazil.

Pricing

The lease payment will be R$142,666.67 (equivalent to approximately US$89,580) per month, which shall be adjusted annually by the variation of the general market price index.

– 120 – LETTER FROM SOMERLEY

amount related to the services and facilities costs related to the use of the building. Such amount shall be calculated monthly, based on actual expenditure and apportioned among the parties as defined in the Brazil Lease Agreement.

We have reviewed an independent valuation of the market rates of similar properties in the same area and rental rates paid by the factories of the Group operated in the similar area. We note that lease payment amount under the Brazil Lease Agreement is in line with the prevailing market rates. The inflation adjustment clause will result in the future rental payment continue to be aligned with the future market rental in general. The condominium charges will be determined based on the actual expenditure and apportionment parameters as set out in the Brazil Lease Agreement. We have reviewed the apportionment parameters and we consider the basis of apportionment is reasonable. Based on the above, we consider the pricing terms of the Brazil Lease Agreement are fair and reasonable.

Term and renewal

Termination

(e) Amendment to the Dixtal Lease Agreement

The Dixtal Lease Agreement in respect of the lease by Philips Brazil to Dixtal of an industrial property of 2,880 square metres at Avenida Torquato Tapajós, No. 2236, Bairro Flores, municipality of Manaus, Amazonas state, Brazil (‘‘Manaus Manufacturing Plant’’) was entered into on 22 September 2009. Pursuant to the Disentanglement, TP Vision Brazil will become owner of the Manaus Manufacturing

– 121 – LETTER FROM SOMERLEY

Plant at Completion. As such, TP Vision Brazil will enter into an amendment agreement to the Dixtal Lease Agreement with Philips Brazil and Dixtal as set out below.

Parties

(1) TP Vision Brazil, as the landlord

(2) Philips Brazil, as the original lessor

(3) Dixtal, as the lessee

Principal terms

Pricing

We have reviewed an independent valuation of the market rates of similar properties in the same area and the rental rates paid by the factories of the Group operated in similar area. We note that lease payment amount under the Dixtal Lease Agreement (as amended) is close to the lower end of the range of the prevailing market rates. The inflation adjustment clause will result in the future rental payment continue to be aligned with the future market rental in general. The condominium charges will be determined based on the actual expenditure and apportionment parameters as set out in the Amendment to the Dixtal Lease Agreement. We have reviewed the apportionment parameters and we consider the basis of apportionment is reasonable. Based on the above and after having considered that the undercharged lease payment amount is not very material in terms of the Proposed Transactions as a whole, we consider the pricing terms of the Dixtal Lease Agreement (as amended) are acceptable.

Term and renewal

The Dixtal Lease Agreement commenced on 1 August 2009 and will expire as of 31 July 2014.

– 122 – LETTER FROM SOMERLEY

Termination

(f) The Hungary Lease and Service Agreement

Pursuant to the Sale and Purchase Agreement, the Hungary Lease and Service Agreement in respect of the lease of a factory building and provision of services in the factory building will be entered into between TP Vision Hungary, as the lessor and services provider, and Philips Hungary, as the lessee and services receiver, upon Completion.

Parties

(1) TP Vision Hungary

(2) Philips Hungary

Principal terms

Pricing

The total service fee for the lease and the services will be EUR468,750 (equivalent to approximately US$656,250) for 3 months. The costs of services not covered in the Hungary Lease and Service Agreement will be agreed by bothpartiesonanarm’s length basis and based on normal commercial terms, or on terms no more favourable to Philips Hungary than terms available to independent third parties.

We have reviewed the actual expenditure incurred for the aforesaid operations in the subject building and the apportionment parameters in respect of the services to be provided to Philips Hungary, and we consider the basis of apportionment is reasonable. In addition, given the services not covered in the Hungary Lease and Service Agreement will be agreed by both parties at arm’s length basis and based on normal commercial terms, or on terms no more

– 123 – LETTER FROM SOMERLEY

favourable to Philips Hungary than terms available to independent third parties, we consider the pricing terms under the Hungary Lease and Service Agreement are fair and reasonable.

Term and extension

(g) The Tax Audit Service Agreement

Parties

(1) TP Vision Hungary

(2) Philips Hungary

Principal terms

Pricing

The services to be provided under the Tax Audit Service Agreement will be charged at an hourly rate and based on the number of hours spent by TP Vision Hungary to deliver the services with a maximum of EUR100,000 (equivalent to approximately US$140,000) per annum. The service fees have been arrived at after arm’s length negotiations between the Company and Philips. The costs of services not covered in the Tax Audit Service Agreement will be agreed by both partiesonanarm’s length basis and based on normal commercial terms, or on terms no more favourable to Philips Hungary than terms available to independent third parties.

– 124 – LETTER FROM SOMERLEY

We have reviewed of the Tax Audit Service Agreement and we note that the services will be charged based on the numbers of hours incurred by the relevant personnel and the hourly rate of EUR50 (equivalent to approximately US$70). Based on our discussion with the management of the Group, they considered that the aforesaid hourly rate is in line with the cost of services to be performed by relevant level of personnel. Additional items will be agreed based on normal commercial terms, or on terms no more favourable to Philips Hungary than terms available to independent third parties. Based on the above, we consider the pricing terms of the Tax Audit Service Agreement are fair and reasonable.

Term and renewal

The Tax Audit Service Agreement shall commence on the Completion Date and shall continue in force until 31 March 2013 or completion of the services, whichever is earlier.

Based on the above and given (i) the independent non-executive Directors will, pursuant to Rule 14A.37 of the Listing Rules, review, amongst other things, whether the Continuing Connected Transactions are conducted on normal terms; and (ii) the auditors of the Company, for the purpose of Rule 14A.38 of the Listing Rules, will review, amongst other things, whether the Continuing Connected Transactions are conducted in accordance with the terms of the relevant agreement, we are of the view that (i) the overall terms under the Trademark License Agreement, the Secondary Trademark License Agreement, the Intellectual Property Agreement, the Auxiliary Agreement, the Reversed Auxiliary Agreement and the transactions contemplated thereunder are on normal commercial terms and are fairly and reasonably determined; and (ii) adequate measures have been put in place, as required under the Listing Rules mentioned above, to monitor the Continuing Connected Transactions in order to protect the interests of the Company and the Independent Shareholders.

6. Reasons for term in excess of three years

JVCo and Philips have agreed to enter into the Trademark License Agreement, the Secondary Trademark License Agreement and the Intellectual Property Agreement for a period in excess of three years (i.e. for an initial term of five years) as normally required under the Listing Rules after arm’s length negotiations among JVCo, the Company and Philips. The term in excess of three years is beneficial to the Company because (i) any term shorter than the License Term would increase the risks associated with, and lower the returns on, the Group’s investment in its brand building of the Philips Contributed Business; (ii) following Completion, the Group is expected to invest substantial management effort to broaden the Philips Contributed Business’ product range and market share, the benefits of which will extend beyond three years; and (iii) it is the intention of the Company to strengthen the Philips Contributed Business and the presence of the Philips Trademarks and the Philips Secondary Trademarks in the markets in which the Scope Products are sold.

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In arriving at our opinion, we have relied on the intentions of the Company as described in this section. In considering whether it is normal business practice for contracts of a similar nature to the Trademark License Agreement, the Secondary Trademark License Agreement and the Intellectual Property Agreement to have a term of such duration, we have reviewed a number of comparable transactions involving the granting of licences to use intellectual properties, trademarks and/or brands (the ‘‘Comparable Licensing Transactions’’). The Comparable Licensing Transactions selected are based on the following criteria: (i) one of the parties (including their parent companies) to such transaction is listed on the Stock Exchange; (ii) such transactions are publicly announced by way of announcement made pursuant to the Listing Rules; and (iii) such transactions relate to the granting of licences to use intellectual properties, recognised brands and/or trademarks of consumer electronic products (including TVs and display devices). We note that the terms of the Comparable Licensing Transactions are ranging from five to twenty years. Accordingly, the License Term falls on the lower end of the range of the terms of the Comparable Licensing Transactions. On the basis of the above and having considered the annual guaranteed minimum amount of royalty payable under the Trademark License Agreement, we are of the view that the License Term (i.e. for an initial term of five years) balances the business risk of and the benefit expected to be generated from the Philips Contributed Business.

Having considered that (i) the distribution of the Scope Products under the Philips Trademarks and the Philips Secondary Trademarks requires a medium to long term commitment; (ii) the License Term of longer than three years would facilitate the Group’s continuous marketing initiatives and generate income from the Philips Contributed Business for a longer period; (iii) any term shorter than the License Term would increase the risks associated with, and lower the returns on, any investment made by the Group in relation to its brand building of the Philips Contributed Business; (iv) the Group is expected to invest substantial management effort to broaden the Philips Contributed Business’ product range and market share, the benefits of which will extend beyond three years; (v) the intellectual properties under the Intellectual Property Agreement are essential for the operations of the Philips Contributed Business; (vi) the terms of the Comparable Licensing Transactions are ranging from five to twenty years; and (vii) it is economically beneficial for the Group to avoid renegotiating the terms of the Trademark License Agreement, the Secondary Trademark License Agreement and the Intellectual Property Agreement after three years as it is expected that the Group will take the first one or two years to streamline the operations of the JV Group and the benefits of the Acquisition and the entering into of the Trademark License Agreement, the Secondary Trademark License Agreement and the Intellectual Property Agreement are likely to be materialised beyond the third year, we are of the view that a term of longer than three years is required for the Trademark License Agreement, the Secondary Trademark License Agreement and the Intellectual Property Agreement and confirms that it is normal business practice for contracts similar to this type to be of such duration.

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7. The Annual Caps

(a) The royalty under the Trademark License Agreement

For the year ending 31 December 2012 2013 2014 2015 2016 2017

In EUR (million) Nil 81.4 91.3 96.8 100.1 50.1

Approximately equivalent US$ (million) Nil 114.0 127.8 135.5 140.1 70.1

The Annual Caps for the royalty payable by JVCo to Philips under the Trademark License Agreement were determined by the Company after taking into account, amongst other things, (i) the Group’s estimates for the increase in the future demand for the Scope Products, which was determined with reference to the historical and estimated future demand and production trend for the Scope Products; (ii) the prospects, outlook and the competitive environment of the global market for the Scope Products; (iii) the pricing trend for the Scope Products; and (iv) additional buffers to cater for possible fluctuation of materials costs as a result of possible changes in market conditions.

In assessing the fairness and reasonableness of the aforesaid Annual Caps, we have reviewed the followings:

(i) Historical and projected sales volumes of the Scope Products

The projected sales volumes of the JV Group are determined with reference to the historical sales volumes of the Scope Products. The historical sales volumes of the JV Group were approximately 8.6 million units, approximately 7.7 million units and approximately 7.7 million units for 2008, 2009 and 2010 respectively. We have reviewed the projected sales volumes of the JV Group jointly prepared by the management of the Group and the JV Group and we note that they are generally in line with the projected sales volumes of TVs in general estimated by an independent industry researcher.

(ii) Unit sales price of the Scope Products

The projected unit sales price of the Scope Products is determined with reference to the historical unit sales price of the Scope Products and the projected unit sales price of similar models of TVs in the market. We have reviewed the projected average unit sales price of the Scope Products and we note that the pricing trend is in line with that of similar models of TVs in the market estimated by the independent industry researcher.

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(iii) Buffer to accommodate changes in market conditions

In light of the volatility of the industry that the JV Group is involved in, a buffer of 10% for each of the five years ending 31 December 2017 has been added to the aforesaid Annual Caps. The management of the Group were of the view that sales price of the Scope Products and cost of goods sold might change considerably subject to the then prevailing market demand and conditions. Based on our review of the historical average selling prices of the Group’sTV products, we note that average selling prices have varied significantly and might fluctuate by more than 10% in the same year. Accordingly, we are of the view that a buffer of 10% is reasonable and will allow more flexibility to the Group when market conditions change.

(iv) Possible change of the Completion Date

The Trademark License Agreement will commence on the Completion Date, which may not fall at the beginning of the financial year of the Group. The actual payment date therefore will be subject to change due to the possible change of the Completion Date. As a result, part of the payment in the fifth year of the term of the Trademark License Agreement may fall into 2017. The Annual Cap for 2017, which represents the amount for less than one full year, therefore is less than the Annual Cap for 2016, which represents a full year amount. We have reviewed the estimation of the aforesaid Annual Caps due to the possible change of the Completion Date and we consider the estimation is reasonable.

(v) Direct relationship between royalty payment and turnover of the JV Group

The royalty payment is equivalentto2.2%oftheTurnover.Ahigher royalty payment implies a higher revenue generated by JVCo, which is in turn beneficial to JVCo and the Group. Accordingly, a higher annual cap for royalty payment gives room to generate higherrevenuefortheJVGroupandthe Group.

Having considered the basis on which the Annual Caps for the royalty payable by JVCo to Philips under the Trademark License Agreement were determined as described above, we are of the view that the aforesaid Annual Caps are fair and reasonable.

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(b) The consumer care compensation for the Scope Products sold prior to Completion under the Trademark License Agreement

For the year ending 31 December 2012 2013 2014 2015 2016 2017

In EUR (million) 6.00 4.50 1.88 0.44 0.07 0.02

Approximately equivalent US$ (million) 8.40 6.30 2.63 0.62 0.10 0.03

The Annual Caps were determined by the Company after taking into account, amongst other things, (i) the compensation for JVCo’s cost of organisation to fulfill its consumer care obligations relating to the Scope Products sold prior to Completion (except for certain Scope Products supplied by the Company to Philips under certain arrangement) as agreed in the Trademark License Agreement; and (ii) possible change of the Completion Date.

In assessing the fairness and reasonableness of the aforesaid Annual Caps, we have reviewed the followings:

(i) Consumer care compensation agreed under the Trademark License Agreement

Pursuant to the Trademark License Agreement, the consumer care compensation payable by Philips to JVCo will be EUR6.0 million (equivalent to approximately US$8.4 million) and EUR3.0 million (equivalent to approximately US$4.2 million) for the first and second years from Completion. We have reviewed computation and we note the estimation of the aforesaid Annual Caps has incorporated the above amounts.

From the third year onwards, Philips and JVCo shall in good faith negotiate a fair compensation for consumer care services based on the actual hoursspent.Wehavealsoreviewedthehistorical statistics of the timing of claims made by consumer care providers and the expected split of claims made between the Scope Products sold prior to and after Completion (except for certain Scope Products supplied by the Company to Philips under certain arrangement) from the third year onwards, we note that the expected amounts of claims will be approximately EUR0.76 million (equivalent to approximately US$1.06 million), EUR0.11 million (equivalent to approximately US$0.15 million) and EUR0.03 million (equivalent to approximately US$0.04 million) for the third, fourth and fifth years from Completion. We have reviewed computation and we note the estimation of the aforesaid Annual Caps has incorporated the above amounts.

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(ii) Possible change of the Completion Date

Having considered the basis on which the Annual Caps for the consumer care compensation were determined as described above, we are of the view that the aforesaid Annual Caps are fair and reasonable.

For the year ending 31 December 2012 2013 2014 2015 2016 2017

In EUR (million) 1.10 1.98 3.30 4.62 6.05 3.03

Approximately equivalent US$ (million) 1.54 2.77 4.62 6.47 8.47 4.24

In assessing the fairness and reasonableness of the aforesaid Annual Caps, we have reviewed the followings:

(i) Projected sales volume of the Secondary Trademark Scope Products

Based on our discussion with the management of the Group, we note that there was no sale of the Secondary Trademark Scope Products in the last few years. It is the intention of the management of the Group and the JV Group that the JV Group will launch the Secondary Trademark Scope Products, which equipped with basic features of TVs, to the western European countries. Based on the business plan jointly prepared by the management of the Group and the JV Group, the projected sales volumes of the Secondary Trademark Scope

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Products, in the best scenario, will be approximately 0.3 million units, 0.6 million units, 1.0 million units, 1.5 million units and 2.1 million units for each of the five years from Completion. We have reviewed the historical sales volume of TV of less-known brands and we note there were significant growths of shipment of these products in the last two years. After considering the historical trend of sales volume of TV of less-known brands, we are of the view that the projected sales volumes of the Secondary Trademark Scope Products are within a reasonable range.

(ii) Unit price of sales

TheunitpriceofsalesundertheaforesaidAnnualCapsaredetermined with reference to the projected unit salepriceoftheScopeProducts,i.e.theTV products with the Philips Trademarks. Given brand names of the Secondary Trademark Scope Products are less-known to the consumer market, it is the intention of the management of the Group to price the Secondary Trademark ScopeProductsatadiscounttothepriceoftheScopeProducts.Wehave reviewed target pricing level of the Secondary Trademark Scope Products and the historical discount of pricing of certain secondary brand products sold by the Group in the past, we note the pricing discount applied in the estimation of the aforesaid Annual Caps is within a reasonable range.

(iii) Buffer to accommodate changes in market conditions

Similar to the Annual Caps for the royalty payable under the Trademark License Agreement, a buffer of 10% for each of the five years ending 31 December 2017 has been added to the Annual Caps for the royalty payable under the Secondary Trademark License Agreement. Likewise, we are of the view that a buffer of 10% is reasonable and will allow more flexibility to the Group when market conditions change.

(iv) Possible change of the Completion Date

The Secondary Trademark License Agreement will commence on the Completion Date, which may not fall at the beginning of the financial year of the Group. The actual payment date therefore will be subject to change due to thepossiblechangeoftheCompletionDate as discussed above. Therefore the Annual Cap for 2017, which represents the amount for less than one full year, is less than the Annual Cap for 2016, which represents a full year amount. We have reviewed the estimation of the aforesaid Annual Caps due to the possible change of the Completion Date and we consider the estimation is reasonable.

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(v) Direct relationship between royalty payment and turnover of the JV Group

The royalty payment is equivalent to 1.0% of the turnover. A higher royalty payment implies a higher revenue generated by JVCo, which is in turn beneficial to JVCo and the Group. Accordingly, a higher annual cap for royalty payment gives room to generate higherrevenuefortheJVGroupandthe Group.

Having considered the basis on which the Annual Caps for the royalty payable by JVCo to Philips under the Secondary Trademark License Agreement were determined as described above, we are of the view that the aforesaid Annual Caps are fair and reasonable.

(d) The Intellectual Property Agreement

Set out below is a summary of the Annual Caps for the 3D Patent royalty rebate payable by Philips to JVCo under the Intellectual Property Agreement for the financial year ending 31 December 2012 up to and including the financial year ending 31 December 2015.

For the year ending 31 December 2012 2013 2014 2015

In EUR 262,500 525,000 1,050,000 525,000

Approximately equivalent US$ 367,500 735,000 1,470,000 735,000

The Annual Caps were determined by the Company after taking into account, amongst other things, (i) the Group’s estimates for the increase in the future demand for the Scope Products (utilising any 3D Patents), which was determined with reference to the estimated future demand and production trend for the Scope Products; (ii) the prospects, outlook and the competitive environment of the global market for the Scope Products; (iii) the pricing trend for the Scope Products; (iv) the sharing percentage of the 3D Patents royalty rebate as agreed in the Intellectual Property Agreement; (v) the estimated 3D Patents royalty rate; and (vi) possible change of the Completion Date.

In assessing the fairness and reasonableness of the aforesaid Annual Caps, we have reviewed the followings:

(i) Projected sales volume of the Scope Products with 3D technology

Based on our discussion with the management of the Group, no Scope Products with three-dimensional (‘‘3D’’) technology has been sold by the JV Group so far. It is currently anticipated that the Scope Products with 3D technology will be rolled out to the market as soon as in 2012 and the projected sales volumes will not be more than 250,000 units, 500,000 units and 1 million units for the first, second and third years from Completion respectively. We

– 132 – LETTER FROM SOMERLEY

have reviewed the projected sales volumes of the Scope Products of the JV Group and we note that the projected sales volumes of the Scope Products with 3D technology represent approximately 2.8% 5.0% and 8.3% of that of the Scope Products for each of the three years from Completion respectively. After considering the Scope Products with 3D technology have not launched to the market so far and percentages to the projected sales volumes of the total Scope Products, we consider the projected maximum sales volumes of the Scope Products with 3D technology is reasonable.

(ii) Sharing percentage of the 3D Patents royalty rebate

As set out in the Intellectual Property Agreement, JVCo shall be entitled to receive 70% of the 3D Patent royalty rebate from Philips. We have reviewed and note the computation of the aforesaid Annual Caps has taken into account such sharing percentage.

(iii) Estimated 3D Patents royalty

As discussed with the management of the Group, we note that no 3D Patent royalty has been asserted against any suppliers by Philips so far. Based on the experience of the Group’s management, it is anticipated that the royalty rate will not exceed EUR 1.5 (equivalent to approximately US$2.1) per panel.

(iv) Possible change of the Completion Date

The Intellectual Property Agreement will commence on the Completion Date, which may not fall at the beginning of the financial year of the Group. The actual payment date therefore will be subject to change due to the possible change of the Completion Date as discussed above. We have reviewed the estimationoftheaforesaidAnnualCapsduetothepossiblechangeofthe Completion Date and we consider the estimation is reasonable.

Having considered the basis on which the Annual Caps for the 3D Patent royalty rebate payable by Philips to JVCo under the Intellectual Property Agreement were determined as described above, we are of the view that the aforesaid Annual Caps are fair and reasonable.

– 133 – LETTER FROM SOMERLEY

(e) The Transitional Services Agreement

Set out below is a summary of the Annual Caps for the service fee payable for the transitional services by the JV Group to the Philips Group under the Transitional Services Agreement for the financial year ending 31 December 2012 up to and including the financial year ending 31 December 2015.

For the year ending 31 December 2012 2013 2014 2015

In EUR (million) 24.61 19.32 9.48 2.47

Approximately equivalent US$ (million) 34.45 27.05 13.27 3.46

In assessing the fairness and reasonableness of the aforesaid Annual Caps, we have reviewed the followings:

(i) Expected volume of the services

We have discussed and reviewed the historical and the expected volumes of the services under the Transitional Services Agreement with the management oftheGroup.Wenotethattheexpected volume of the services has been adjusted based on the anticipated usage of the relevant services (e.g. number of headcounts and hours performing services, area size of building, etc.) and the duration of the relevant services required for the JV Group after Completion. In the event that the relevant services can be replaced ‘‘in-house’’ by the Group or provided by third party vendors, such services are accordingly reduced in the estimation of the aforesaid Annual Caps.

(ii) Pricing of the services

We have reviewed the pricing of the transitional services and we note that the pricing is determined either based on current price levels applicable to the Philips Business or the anticipated actual costs to be incurred by the Philips Group.

(iii) Buffer to accommodate changes in market conditions and potential taxes

Similar to the Annual Caps for the royalty payable under the Trademark License Agreement and the Secondary Trademark License Agreement, a buffer of 10% for each of the four years ending 31 December 2015 has been added to the Annual Caps for the service fee payable for the transitional services under the Transitional Services Agreement. Similarly, we are of the view that a buffer

– 134 – LETTER FROM SOMERLEY

of 10% is reasonable and will allow more flexibility to the Group when market conditions change as well as potential taxes are payable by the Group for the services rendered by the members of the Philips Group.

(iv) Possible change of the Completion Date

The Transitional Services Agreement will commence on the Completion Date, which may not fall at the beginning of the financial year of the Group. The actual payment date therefore will be subject to change due to the possible change of the Completion Date as discussed above. We have reviewed the estimationoftheaforesaidAnnualCapsduetothepossiblechangeofthe Completion Date and we consider the estimation is reasonable.

Having considered the basis on which the Annual Caps for the service fee payable for the transitional services under the Transitional Services Agreement were determined as described above, we are of the view that the aforesaid Annual Caps are fair and reasonable.

(f) The IT Transitional Service Level Agreement

Set out below is a summary of the Annual Caps for the service fee payable for the IT transitional services by the JV Group to the Philips Group under the IT Transitional Service Level Agreement for the financial year ending 31 December 2012 up to and including the financial year ending 31 December 2013.

For the year ending 31 December 2012 2013

In EUR (million) 24.0 12.0

Approximately equivalent US$ (million) 33.6 16.8

The Annual Caps have been determined by the Company after taking into account, amongst other things, (i) the fixed fee of EUR20.0 million (equivalent to approximately US$28.0 million) for the IT services as agreed under the IT Transitional Service Agreement; (ii) a buffer for additional IT services; and (iii) possiblechangeoftheCompletionDate.

In assessing the fairness and reasonableness of the aforesaid Annual Caps, we have reviewed the followings:

(i) The fixed fee agreed under the IT Transitional Service Level Agreement

The total fee agreed for the provision of IT services under the IT Transitional Service Level Agreement is fixed at EUR20.0 million (equivalent to approximately US$28.0 million). Based on our discussion with the management of the Group, we note that they considered that the EUR20.0

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million (equivalent to approximately US$28.0 million) IT service package has included all necessary IT services and applications to be required for the operations of the JV Group in the year after Completion. We have reviewed and we note that the EUR20.0 million (equivalent to approximately US$28.0 million) has been included in the computation of the aforesaid Annual Caps.

(ii) Buffer for additional IT services

As discussed with the management of the Group, the EUR20 million (equivalent to approximately US$28.0 million) IT service package has covered all the IT services required for the JV Group during the term of the IT Transitional Service Level Agreement as envisaged by the management of the Group. In light of the potential developments in new products and/or markets where additional IT services may be required, we are of the view that a buffer of 20% is reasonable.

(iii) Possible change of the Completion Date

The IT Transitional Service Level Agreement will commence on the Completion Date, which may not fall at the beginning of the financial year of the Group. The actual payment date therefore will be subject to change due to the possible change of the Completion Date as discussed above. We have reviewed the estimation of the aforesaid Annual Caps due to the possible change of the Completion Date and we consider the estimation is reasonable.

Having considered the basis on which the Annual Caps for the service fee payable for the IT transitional services under the IT Transitional Service Level Agreement were determined as described above, we are of the view that the aforesaid Annual Caps are fair and reasonable.

(g) The Remote Control Sale Agreement

SetoutbelowisasummaryoftheAnnualCaps for the purchase costs payable by the JV Group to Philips Singapore under the Remote Control Sale Agreement for the financial year ending 31 December 2012 up to and including the financial year ending 31 December 2015.

For the year ending 31 December 2012 2013 2014 2015

In EUR (million) 2.75 3.30 3.85 1.93

Approximately equivalent US$ (million) 3.85 4.62 5.39 2.70

– 136 – LETTER FROM SOMERLEY

Scope Products; (iii) the pricing trend of the Scope Products and remote control; (iv) additional buffer to cater for possible fluctuation of material costs as a result of possible changes in market conditions; and (v) possible change of the Completion Date.

In assessing the fairness and reasonableness of the aforesaid Annual Caps, we have reviewed the followings:

(i) Projected sales volume of the Scope Products

The remote control products, after bundling together with the Scope Products, will be sold to customers. The quantity of remote control products purchased by the JV Group therefore should be in line with the projected sales volume of the Scope Products. We understand from the management of the Group that the Philips Business purchased remote control products from both the Philips Group (approximately 2 million units for each of 2009 and 2010) and independent third party suppliers in the past and the Philips Business will continue to do so in the foreseeable future. We have reviewed the projected sales volumes of the Scope Products (as discussed in the paragraph 7(a)(i) above) and we note that the growth of projected purchase volumes of remote control products are largely in line with that of projected sales volumes of the Scope Products.

(ii) Unit purchase price

The estimated unit purchase price of the remote control products is approximately EUR1.0 (equivalent to approximately US$1.4) to EUR1.5 (equivalent to approximately US$2.1) per unit. We have compared with the actual unit purchase price of the remote control products purchased by the Group recently and we note that the estimated unit purchase price is generally in line with the actual unit purchase price.

(iii) Buffer to accommodate changes in market conditions

Similar to the Annual Caps for the royalty payable under the Trademark License Agreement and the Secondary Trademark License Agreement, a buffer of 10% for each of the four years ending 31 December 2015 has been added to the Annual Caps for the purchase costs under the Remote Control Sale Agreement. Similarly, we are of the view that a buffer of 10% is reasonable and will allow more flexibility to the Group when market conditions change.

(iv) Possible change of the Completion Date

The Remote Control Sale Agreement will commence on the Completion Date, which may not fall at the beginning of the financial year of the Group. The actual payment date therefore will be subject to change due to the possible

– 137 – LETTER FROM SOMERLEY

change of the Completion Date as discussed above. We have reviewed the estimationoftheaforesaidAnnualCapsduetothepossiblechangeofthe Completion Date and we consider the estimation is reasonable.

Having considered the basis on which the Annual Caps for the purchase costs under the Remote Control Sale Agreement were determined as described above, we are of the view that the aforesaid Annual Caps are fair and reasonable.

(h) The NET TV License and Services Agreement

Set out below is a summary of the Annual Caps for the fee payable for the services by Philips Consumer Lifestyle to JVCo under the NET TV License and Services Agreement for the financial year ending 31 December 2012 up to and including the financial year ending 31 December 2015.

For the year ending 31 December 2012 2013 2014 2015

In EUR (million) 2.40 2.90 3.40 1.70

Approximately equivalent US$ (million) 3.36 4.06 4.76 2.38

The Annual Caps were determined by the Company, after taking into account, amongst other things, (i) the Group’s estimates of the revenue that may be generated and the sharing percentage under the NET TV License and Services Agreement; (ii) the estimated annual costs to be paid by Philips Consumer Lifestyle to JVCo for the managed operations of the service portal, the use of the services and the day-to-day operations; and (iii) possible change of the Completion Date.

In assessing the fairness and reasonableness of the aforesaid Annual Caps, we have reviewed the followings:

(i) Projected revenue generated from the NET TV Services and the sharing percentage under the NET TV License and Services Agreement

As discussed in the paragraph headed ‘‘pricing and financing arrangements’’ in section 5(a) above, we understand that the NET TV Services are now in the planning stage and have not been activated. Accordingly, there was no historical track record of revenue can be referenced to. Based on the estimation of the management of the Group and after taking into account, among other things, the structure of the NET TV Services and the revenue sharing mechanism among the participants and subject to the timing of the activation of the NET TV Services, it is anticipated that the revenue to be generated from user purchase on services and advertising to be shared by the JV Group will be EUR1.0 million (equivalent to approximately US$1.4 million), EUR1.5 million (equivalent to approximately US$2.1 million) and EUR2.0 million (equivalent to approximately US$2.8

– 138 – LETTER FROM SOMERLEY

million) for the first, second and third years from Completion respectively. Given the NET TV Services are still in planning stage, we consider the above estimate is not unreasonable.

(ii) Estimated annual costs payable by Philips Consumer Lifestyle

Pursuant to the NET TV License and Services Agreement, Philips Consumer Lifestyle shall pay to JVCo for the license to use the NET TV Portal and Smart TV Dashboard, which will be based on the actual costs planned for that year and the proportion of Philips Consumer Lifestyle’stotal installed base of active devices for that year to the total Net TV installed base for that year. We have discussed with the management of the Group, we understand that the Philips Group has funded approximately EUR1.0 million (equivalent to approximately US$1.4 million) for the development of the NET TV Services in 2011. Moreover, we also note that additional contributions of up to EUR0.4 million (equivalent to approximately US$0.6 million) may be made by Philips in relation to some joint knowhow programs for the Net TV Services, which will be discussed and agreed on a case-by-case basis. Accordingly, we consider it reasonable that the total costs payable by Philips Consumer Lifestyle will be up to EUR1.4 million (equivalent to approximately US$1.96 million) per year during the term of the NET TV License and Service Agreement.

(iii) Possible change of the Completion Date

The NET TV License and Services Agreement will commence on the Completion Date, which may not fall at the beginning of the financial year of the Group. The actual payment date therefore will be subject to change due to the possible change of the Completion Date as discussed above. We have reviewed the estimation of the aforesaid Annual Caps due to the possible change of the Completion Date and we consider the estimation is reasonable.

Having considered the basis on which the Annual Caps for the fee payable for the services under the NET TV License and Services Agreement were determined as described above, we are of the view that the aforesaid Annual Caps are fair and reasonable.

– 139 – LETTER FROM SOMERLEY

(i) The Online Shop and My Shop Agreement

SetoutbelowisasummaryoftheAnnualCapsforthesalespricepayableby Online Shop and My Shop to TP Vision Netherlands, a wholly-owned subsidiary of JVCo, under the Online Shop and My Shop Agreement for the financial year ending 31 December 2012 up to and including the financial years ending 31 December 2015.

For the year ending 31 December 2012 2013 2014 2015

In EUR (million) 7.26 7.26 7.26 3.63

Approximately equivalent US$ (million) 10.16 10.16 10.16 5.08

The Annual Caps were determined by the Company after taking into account, amongst other things, (i) the Group’s estimates for the future demand of Online Shop and My Shop for the Scope Products, which was determined with reference to their historical and estimated future demand for the Scope Products; (ii) the pricing trend for the Scope Products; (iii) additional buffers to cater for possible fluctuation of materials costs as a result of possible changes in market conditions; and (iv) possiblechangeoftheCompletionDate.

In assessing the fairness and reasonableness of the aforesaid Annual Caps, we have reviewed the followings:

(i) Historical and projected sales amount of the Scope Products to the Philips Group

The amount of sales of the Scope Products to the Philips Group under similar arrangements of the Online Shop and My Shop Agreement were approximately EUR6.3 million (equivalent to approximately US$8.8 million), EUR6.6 million (equivalent to approximately US$9.2 million) and EUR6.5 million (equivalent to approximately US$9.1 million) for 2008, 2009 and 2010 respectively. It is currently expected that the projected sales during the term of the Online Shop and My Shop Agreement will be approximately EUR6.6 million (equivalent to approximately US$9.2 million) per year. We have reviewed the track record of sales of the Scope Products to the Philips Group in the last few years as mentioned above and the projected employees’ demand for the Scope Products provided by Philips, we consider the Company’s sales projection is reasonable.

(ii) Buffer to accommodate changes in market conditions

Similar to the Annual Caps for the royalty payable under the Trademark License Agreement and the Secondary Trademark License Agreement, a buffer of 10% for each of the four years ending 31 December 2015 has been added to the Annual Caps for the sales under the Online Shop and My Shop Agreement. Likewise, we are of the view that a buffer of 10% is reasonable and will allow more flexibility to the Group when market conditions change.

– 140 – LETTER FROM SOMERLEY

(iii) Possible change of the Completion Date

The Online Shop and My Shop Agreement will commence on the Completion Date, which may not fall at the beginning of the financial year of the Group. The actual payment date therefore will be subject to change due to the possible change of the Completion Date as discussed above. We have reviewed the estimation of the aforesaid Annual Caps due to the possible change of the Completion Date and we consider the estimation is reasonable.

Having considered the basis on which the Annual Caps for the sales price under the Online Shop and My Shop Agreement were determined as described above, we are of the view that the aforesaid Annual Caps are fair and reasonable.

(j) The Employee Shop Agreements

SetoutbelowisasummaryoftheAnnualCapsforthesalespricepayableby Employee Shop to Local JVCo Subsidiary under the Employee Shop Agreements for the financial year ending 31 December 2012 up to and including the financial years ending 31 December 2015.

For the year ending 31 December 2012 2013 2014 2015

In EUR (million) 5.28 5.28 5.28 2.64

Approximately equivalent US$ (million) 7.39 7.39 7.39 3.70

The Annual Caps were determined by the Company after taking into account, amongst other things, (i) the Group’sestimatesforthefuturedemandofEmployee Shop for the Scope Products, which was determined with reference to the historical and estimated future demand and for the Scope Products; (ii) the pricing trend for the Scope Products; and (iii) possible change of the Completion Date.

In assessing the fairness and reasonableness of the aforesaid Annual Caps, we have reviewed the followings:

(i) Historical and projected sales of the Scope Products to the Philips Group

The amount of sales of the Scope Products to the Philips Group under similar arrangements of the Employee Shop Agreements were in the range of approximately EUR4 million (equivalent to approximately US$5.6 million) and EUR5 million (equivalent to approximately US$7.0 million) in 2009 and 2010. It is currently expected that the projected sales during the term of the Online Shop and My Shop Agreement will be approximately EUR4.8 million (equivalent to approximately US$6.7 million) per annum. We have reviewed the track record of sales of the Scope Products to the Philips Group as mentioned above and the projected employees’ demand for the Scope Products provided by Philips, we consider the Company’s sales projection is reasonable.

– 141 – LETTER FROM SOMERLEY

(ii) Buffer to accommodate changes in market conditions

Similar to the Annual Caps for the royalty payable under the Trademark License Agreement and the Secondary Trademark License Agreement, a buffer of 10% for each of the four years ending 31 December 2015 has been added to the Annual Caps for the sales under the Employee Shop Agreements. Likewise, we are of the view that a buffer of 10% is reasonable and will allow more flexibility to the Group when market conditions change.

(iii) Possible change of the Completion Date

The Employee Shop Agreements will commence on the Completion Date, which may not fall at the beginning of the financial year of the Group. The actual payment date therefore will be subject to change due to the possible change of the Completion Date as discussed above. We have reviewed the estimationoftheaforesaidAnnualCapsduetothepossiblechangeofthe Completion Date and we consider the estimation is reasonable.

Having considered the basis on which the Annual Caps for the sales price under the Employee Shop Agreements were determined as described above, we are of the view that the aforesaid Annual Caps are fair and reasonable.

(k) The Brazil Lease Agreement

Set out below is a summary of the Annual Caps for the rental and additional condominium charge payable for the lease by TP Vision Brazil to Philips Brazil under the Brazil Lease Agreement for the financial year ending 31 December 2012 up to and including the financial years ending 31 December 2015.

For the year ending 31 December 2012 2013 2014 2015

In EUR (million) 1.97 2.26 2.60 1.30

Approximately equivalent US$ (million) 2.76 3.16 3.64 1.82

– 142 – LETTER FROM SOMERLEY

In assessing the fairness and reasonableness of the aforesaid Annual Caps, we have reviewed the followings:

(i) The agreed monthly rental

Pursuant to the Brazil Lease Agreement, the monthly lease payment will be R$142,666.67 (equivalent to approximately US$89,580). The total rental per year will be approximately EUR768,000 (equivalent to approximately US$1,075,200).

(ii) Projected inflation rate

The monthly rental under the Brazil Lease Agreement will be adjusted annually by the variation of the general market price index. A projected inflation rate of 15% therefore has been included in the estimation of aforesaid Annual Caps. We have reviewed the history of inflation in Brazil, we note that the inflation rate has been in single digit in recent years but it did surge up to around 17% in 2003. On the above basis, we consider the inclusion of inflation rate of 15% is reasonable for the purpose of estimation of aforesaid Annual Caps.

(iii) Potential changes in the exchange rate

The rental and condominium charges under the Brazil Lease Agreement will be payable in R$. A buffer of 20% has been included in the estimation of the aforesaid Annual Caps due to the potential changes in the exchange rate between R$ and EUR. We have reviewed the exchange rate of R$ against EUR andwenotethattheexchangeratehasfluctuatedasmuchas15%duringthe current year up to the Latest Practicable Date. Accordingly, we consider a buffer of 20% for the potential changes in the exchange rate is reasonable for the purpose of estimation of the aforesaid Annual Caps.

(iv) Condominium expenditure

The condominium charges payable are estimated to be approximately EUR594,000 (equivalent to approximately US$831,600) per annum. We have reviewed and we note that the actual condominium expenditure recently incurred was close to the estimated condominium charges. In addition, a buffer of 10% for each of the four years ending 31 December 2015 has been added to the condominium charges for estimation of the Annual Caps. This will allow the Group to recover additional condominium expenditure incurred by Philips Brazil. Based on the above, we consider the estimation of the condominium charges and the buffer of 10% is reasonable.

Having considered the basis on which the Annual Caps for the rental and additional condominium charge under the Brazil Lease Agreement were determined as described above, we are of the view that the aforesaid Annual Caps are fair and reasonable.

– 143 – LETTER FROM SOMERLEY

(l) Amendment to the Dixtal Lease Agreement

Set out below is a summary of the Annual Caps for the rental and additional condominium charge payable for the lease by Philips Brazil to Dixtal under the Dixtal Lease Agreement (as amended) for the financial year ending 31 December 2012 up to and including the financial year ending 31 December 2014.

For the year ending 31 December 2012 2013 2014

In EUR 304,000 350,000 268,000

Approximately equivalent US$ 425,600 490,000 375,200

In assessing the fairness and reasonableness of the aforesaid Annual Caps, we have reviewed the followings:

(i) The agreed monthly rental

Pursuant to the Dixtal Lease Agreement, the monthly rental was R$27,014.4 (equivalent to approximately US$16,962) in 2009. After adjusted for inflation, the current monthly rental has been adjusted upwards to R$30,960 (equivalent to approximately US$19,440) and the yearly rental has become approximately EUR167,000 (equivalent to approximately US$233,800).

(ii) Condominium expenditure

The condominium charges payable are estimated to be approximately EUR48,000 (equivalent to approximately US$67,200) per annum. We have reviewed and note that the actual condominium expenditure recently incurred was close to the estimated condominium charges. In addition, a buffer of 10% for each of the two years ending 31 December 2014 has been added to the condominium charges for estimation of the Annual Caps. This will allow the Group to recover additional condominium expenditure incurred by Dixtal. Based on the above, we consider the estimation of the condominium charges and the buffer of 10% is reasonable.

– 144 – LETTER FROM SOMERLEY

(iii) Projected inflation rate

Same as the Brazil Lease Agreement, therentalrateundertheDixtalLease Agreement (as amended) will be adjusted annually for inflation. A projected inflation rate of 15% therefore has been included in the estimation of the aforesaid Annual Caps. Based on our review above, we consider the projected inflation rate of 15% is reasonable for the purpose of estimation of the aforesaid Annual Caps.

(iv) Potential changes in the exchange rate

Also same as the Brazil Lease Agreement, the amount payable under the Dixtal Lease Agreement (as amended) will be payable in R$. A buffer of 20% has been included in the estimation of the aforesaid Annual Caps due to the potential changes in the exchange rate between R$ and EUR. Based on our work above, we consider the buffer of 20% for the potential changes in the exchange rate is reasonable for the purpose of estimation of the aforesaid Annual Caps.

(v) Duration of the Dixtal Lease Agreement (as amended)

The Dixtal Lease Agreement (as amended) will expire on 31 July 2014. We have reviewed and we note that the computation of the aforesaid Annual Caps for 2014 has taken into account the expiry of the Dixtal Lease Agreement (as amended) on 31 July 2014.

Having considered the basis on which the Annual Caps for the rental and additional condominium charge under the Dixtal Lease Agreement (as amended) were determined as described above, we are of the view that the aforesaid Annual Caps are fair and reasonable.

(m) The Hungary Lease and Service Agreement

TheAnnualCapwasdeterminedbytheCompanyaftertakingintoaccount, amongst other things, (i) the lease payment as agreed in the Hungary Lease and Service Agreement; (ii) duration and possible extension of the Hungary Lease and Service Agreement; and (iii) a buffer for potential additional services costs.

– 145 – LETTER FROM SOMERLEY

In assessing the fairness and reasonableness of the aforesaid Annual Cap, we have reviewed the followings:

(i) The agreed lease and service fee and the duration of the Hungary Lease and Service Agreement

Pursuant to the Hungary Lease and Service Agreement, the total service for lease and related services will be EUR468,750 (equivalent to approximately US$656,250) for three months. The management of the Group anticipates that theHungaryLeaseandServiceAgreementmaycommenceassoonas1January 2012 and, assuming an extension is made, may end on 30 June 2012. Accordingly, the maximum amount of the total service fee will become approximately EUR937,500 (equivalent to approximately US$1,312,500).

(ii) Buffer for potential additional services costs

In addition to the lease and services as defined in the Hungary Lease and Service Agreement to be provided by TP Vision Hungary, other services will be agreed by both parties on an arm’s length basis separately. Accordingly, a buffer of 10% for the year ending 31 December 2012 has been included to the aforesaid Annual Cap for such additional services. We are of the view that such buffer of 10% is reasonable and will allow the Group to recover the costs incurred by TP Vision Hungary for provision of additional services.

Having considered the basis on which the Annual Cap for the fee pursuant to theHungaryLeaseandServiceAgreementwere determined as described above, we are of the view that the aforesaid Annual Cap is fair and reasonable.

(n) The Tax Audit Service Agreement

Set out below is a summary of the Annual Caps for the fee payable by Philips Hungary to TP Vision Hungary under the Tax Audit Service Agreement for the financial year ending 31 December 2012 up to and including the financial year ending 31 December 2013.

For the year ending 31 December 2012 2013

In EUR 100,000 100,000

Approximately equivalent US$ 140,000 140,000

The Annual Caps were determined by the Company after taking into account, amongst other things, (i) the expected number of hours required for and the agreed hourly rate for the services under the Tax Audit Service Agreement; and (ii) a buffer for potential additional services costs.

– 146 – LETTER FROM SOMERLEY

In assessing the fairness and reasonableness of the aforesaid Annual Caps, we have reviewed (i) the maximum charges for the services under the Tax Audit Service Agreement; and (ii) the expected number of hours and the agreed hourly rate. We have reviewed the Tax Audit Service Agreement and we note that the maximum charges for the services will be EUR100,000 (equivalent to approximately US$140,000). In addition, based on our discussion with the management of the Group, it is currently expected that maximum number of hours required for the provision of various services, including any potential additional services, in relation to tax audits with respect to Philips will not be more than 2,000 hours. The agreed rate for the provision of services will be approximately EUR50 (equivalent to approximately US$70) per hour, which, based on our understanding with the management of the Group, is in line with the costs of services provided by the relevant level of staff.

Having considered the basis on which the Annual Caps for the fee under the Tax Audit Service Agreement were determined as described above, we are of the view that the aforesaid Annual Caps are fair and reasonable.

OPINION AND RECOMMENDATION

Based on the above principal factors and reasons, we consider the entering into of the Continuing Connected Transactions (including the Annual Caps) is part and parcel of the Acquisition, in the ordinary and usual course of business of the Company when the Company decided to acquire 70% interest in JVCo and in the interests of the Company and the Independent Shareholders as a whole. We also consider the terms of the Continuing Connected Transactions (including the Annual Caps) are on normal commercial terms and fair and reasonable as far as the Independent Shareholders are concerned. Accordingly, we recommend the Independent Board Committee to recommend, and we ourselves recommend, the Independent Shareholders, to vote in favor of the ordinary resolution to be proposed at the SGM in relation to the Continuing Connected Transactions (including the Annual Caps).

Yours faithfully for and on behalf of SOMERLEY LIMITED Jenny Leung Director — Corporate Finance

– 147 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

1. FINANCIAL SUMMARY

Set out below are the consolidated financial information of the Company for the last three financial years and nine months with respect to the profits and losses, financial record and position, as a comparative table.

Consolidated income statement

For the nine months ended For the year ended 30 September 31 December 2011 2010 2009 2008 US$’000 US$’000 US$’000 US$’000 (unaudited)

Revenue 8,151,787 11,631,576 8,031,972 9,247,020 Cost of goods sold (7,661,862) (11,007,331) (7,562,253) (8,818,588)

Gross profit 489,925 624,245 469,719 428,432

Other income 17,469 30,620 22,715 31,267

Other gains — net 45,315 62,869 37,368 41,210

Selling and distribution expenses (239,456) (280,726) (175,548) (167,984) Administrative expenses (129,379) (120,913) (93,934) (112,687) Research and development expenses (90,935) (105,459) (80,152) (67,335)

Operating profit 92,939 210,636 180,168 152,903

Finance income 2,964 2,632 4,428 2,433 Finance costs (8,086) (16,740) (13,633) (51,332)

Finance costs — net (5,122) (14,108) (9,205) (48,899)

Share of profit of associates and jointly controlled entities 193 5,144 3,483 3,288

Profit before income tax 88,010 201,672 174,446 107,292 Income tax expense (12,284) (42,734) (31,969) (9,712)

Profit for the period/year 75,726 158,938 142,477 97,580

– I-1 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

For the nine months ended For the year ended 30 September 31 December 2011 2010 2009 2008 US$’000 US$’000 US$’000 US$’000 (unaudited)

Profit attributable to: Equity holders of the Company 80,105 169,349 141,214 97,177 Non-controlling interests (4,379) (10,411) 1,263 403

75,726 158,938 142,477 97,580

Earnings per share for profit attributable to the equity holders of the Company — Basic US3.41 cents US7.37 cents US6.69 cents US4.74 cents

— Diluted US3.41 cents US7.08 cents US6.25 cents US4.54 cents

Dividends 14,778 50,670 42,226 29,137

– I-2 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Consolidated balance sheet

As at 30 September As at 31 December 2011 2010 2009 2008 US$’000 US$’000 US$’000 US$’000 (unaudited)

Assets Non-current assets Intangible assets 442,444 406,798 408,045 389,366 Property, plant and equipment 484,640 458,958 366,845 334,844 Land use rights 27,158 27,408 23,797 16,000 Investment properties 35,086 28,246 11,899 15,912 Investments in associates 34,481 30,276 18,006 14,523 Investments in jointly controlled entities 9,614 11,020 —— Available-for-sale financial assets 780 2,155 3,177 3,031 Deferred income tax assets 29,048 10,949 11,690 15,712 Other receivables 1,562 ———

1,064,813 975,810 843,459 789,388

Current assets Inventories 1,379,955 1,305,003 856,213 669,978 Trade receivables 2,347,916 2,193,205 1,881,460 1,366,436 Deposits, prepayments and other receivables 274,650 393,281 280,885 229,764 Financial assets at fair value through profit or loss 6,903 2,562 2,920 275 Current income tax recoverable 2,246 5,431 657 6,182 Derivative financial instruments 53,198 65,103 18,832 120,364 Pledged bank deposit 8,604 2,311 — 200 Cash and cash equivalents 183,816 184,426 270,438 171,066

4,257,288 4,151,322 3,311,405 2,564,265

Total assets 5,322,101 5,127,132 4,154,864 3,353,653

– I-3 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

As at 30 September As at 31 December 2011 2010 2009 2008 US$’000 US$’000 US$’000 US$’000 (unaudited)

Equity Equity attributable to the Company’s equity holders Share capital 23,456 23,458 21,112 21,112 Other reserves 1,781,654 1,737,191 1,454,913 1,343,956 Proposed final dividend — 32,842 29,558 10,556

1,805,110 1,793,491 1,505,583 1,375,624 Non-controlling interests (50) 2,529 2,039 776

Total equity 1,805,060 1,796,020 1,507,622 1,376,400

Liabilities Non-current liabilities Borrowings 76,782 — 6,124 206,015 Deferred income tax liabilities 10,339 9,526 —— Pension obligations 5,836 5,836 5,061 4,590 Other payables and accruals 51,294 22,460 28,759 —

144,251 37,822 39,944 210,605

Current liabilities Trade payables 2,562,759 2,235,310 1,931,721 929,623 Other payables and accruals 427,896 434,883 367,299 266,682 Current income tax liabilities 15,364 16,415 14,220 9,793 Warranty provisions 66,575 70,312 67,272 56,945 Derivative financial instruments 31,551 63,837 17,574 106,365 Borrowings 268,645 472,533 209,212 397,240

3,372,790 3,293,290 2,607,298 1,766,648

Total liabilities 3,517,041 3,331,112 2,647,242 1,977,253

Total equity and liabilities 5,322,101 5,127,132 4,154,864 3,353,653

Net current assets 884,498 858,032 704,107 797,617

Total assets less current liabilities 1,949,311 1,833,842 1,547,566 1,587,005

– I-4 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

2. AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010

Set out below are the audited consolidated financial statements of the Group for the year ended 31 December 2010, together with the notes thereto, as extracted from the annual report of the Company for the year ended 31 December 2010.

Consolidated Income Statement For the year ended 31 December 2010 Note 2010 2009 US$’000 US$’000

Revenue 5 11,631,576 8,031,972 Cost of goods sold (11,007,331) (7,562,253)

Gross profit 624,245 469,719

Other income 6 30,620 22,715

Realised and unrealised gains/(losses) on foreign exchange forward contracts — net 35,961 (13,334) Net exchange gains 23,079 38,734 Others 3,829 11,968

Other gains — net 7 62,869 37,368

Selling and distribution expenses (280,726) (175,548) Administrative expenses (120,913) (93,934) Research and development expenses (105,459) (80,152)

Operating profit 8 210,636 180,168

Finance income 10 2,632 4,428 Finance costs 10 (16,740) (13,633)

Finance costs — net (14,108) (9,205)

Share of profit/(loss) of: Associates 6,758 3,483 Jointly controlled entities (1,614) —

Profit before income tax 201,672 174,446 Income tax expense 11 (42,734) (31,969)

Profit for the year 158,938 142,477

– I-5 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Note 2010 2009 US$’000 US$’000

Profit attributable to: Equity holders of the Company 12 169,349 141,214 Non-controlling interests (10,411) 1,263

158,938 142,477

Earnings per share for profit attributable to the equity holders of the Company 13 — Basic US7.37 cents US6.69 cents

— Diluted US7.08 cents US6.25 cents

Dividends 14 50,670 42,226

The accompanying notes are an integral part of these consolidated financial statements.

– I-6 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Consolidated Statement of Comprehensive Income For the year ended 31 December 2010 2010 2009 US$’000 US$’000

Profit for the year 158,938 142,477

Other comprehensive income: Fair value (losses)/gains on available-for-sale financial assets (165) 3,410 Exchange differences 6,250 6,984

Other comprehensive income for the year, net of tax 6,085 10,394

Total comprehensive income for the year 165,023 152,871

Attributable to: — Equity holders of the Company 175,434 151,608 — Non-controlling interests (10,411) 1,263

Total comprehensive income for the year 165,023 152,871

The accompanying notes are an integral part of these consolidated financial statements.

– I-7 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Consolidated Balance Sheet As at 31 December 2010 Note 2010 2009 US$’000 US$’000

Assets Non-current assets Intangible assets 15 406,798 408,045 Property, plant and equipment 16 458,958 366,845 Land use rights 17 27,408 23,797 Investment properties 18 28,246 11,899 Investments in associates 20 30,276 18,006 Investments in jointly controlled entities 21 11,020 — Available-for-sale financial assets 22 2,155 3,177 Deferred income tax assets 30 10,949 11,690

975,810 843,459

Current assets Inventories 23 1,305,003 856,213 Trade receivables 24 2,193,205 1,881,460 Deposits, prepayments and other receivables 24 393,281 280,885 Financial assets at fair value through profit or loss 25 2,562 2,920 Current income tax recoverable 5,431 657 Derivative financial instruments 34 65,103 18,832 Pledged bank deposit 26 2,311 — Cash and cash equivalents 26 184,426 270,438

4,151,322 3,311,405

Total assets 5,127,132 4,154,864

Equity Equity attributable to the Company’s equity holders Share capital 27 23,458 21,112 Other reserves 28 1,737,191 1,454,913 Proposed final dividend 28 32,842 29,558

1,793,491 1,505,583 Non-controlling interests 2,529 2,039

Total equity 1,796,020 1,507,622

The accompanying notes are an integral part of these consolidated financial statements. – I-8 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Note 2010 2009 US$’000 US$’000

Liabilities Non-current liabilities Borrowings 29 — 6,124 Deferred income tax liabilities 30 9,526 — Pension obligations 31 5,836 5,061 Other payables and accruals 22,460 28,759

37,822 39,944

Current liabilities Trade payables 32 2,235,310 1,931,721 Other payables and accruals 434,883 367,299 Current income tax liabilities 16,415 14,220 Warranty provisions 33 70,312 67,272 Derivative financial instruments 34 63,837 17,574 Borrowings 29 472,533 209,212

3,293,290 2,607,298

Total liabilities 3,331,112 2,647,242

Total equity and liabilities 5,127,132 4,154,864

Net current assets 858,032 704,107

Total assets less current liabilities 1,833,842 1,547,566

The accompanying notes are an integral part of these consolidated financial statements.

– I-9 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Balance Sheet As at 31 December 2010 Note 2010 2009 US$’000 US$’000

Assets Non-current assets Intangible assets 15 160 215 Investments in subsidiaries 19 798,514 797,710

798,674 797,925

Current assets Amounts due from subsidiaries 19 172,414 215,714 Cash and cash equivalents 26 372 1,190

172,786 216,904

Total assets 971,460 1,014,829

Equity Equity attributable to the Company’s equity holders Share capital 27 23,458 21,112 Other reserves 28 894,405 753,055 Proposed final dividend 28 32,842 29,558

950,705 803,725

Current liabilities Other payables and accruals 755 1,892 Borrowings 29 20,000 209,212

20,755 211,104

Total liabilities 20,755 211,104

Total equity and liabilities 971,460 1,014,829

Net current assets 152,031 5,800

Total assets less current liabilities 950,705 803,725

The accompanying notes are an integral part of these consolidated financial statements.

– I-10 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Consolidated Statement of Changes in Equity For the year ended 31 December 2010 Non- Share Other controlling capital reserves interests Total US$’000 US$’000 US$’000 US$’000

Balance at 1 January 2009 21,112 1,354,512 776 1,376,400

Comprehensive income: Profit for the year — 141,214 1,263 142,477 Other comprehensive income: Net fair value gains on available- for-sale financial assets — 3,410 — 3,410 Exchange differences — 6,984 — 6,984

Total comprehensive income for the year, net of tax — 151,608 1,263 152,871

Transaction with owners Employee share option scheme: — Employee share-based compensation benefits — 1,575 — 1,575 Dividends paid — (23,224) — (23,224)

Balance at 31 December 2009 21,112 1,484,471 2,039 1,507,622

Balance at 1 January 2010 21,112 1,484,471 2,039 1,507,622

Comprehensive income: Profit/(loss) for the year — 169,349 (10,411) 158,938 Other comprehensive income: Net fair value losses on available- for-sale financial assets — (165) — (165) Exchange differences — 6,250 — 6,250

Total comprehensive income for the year, net of tax — 175,434 (10,411) 165,023

– I-11 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Non- Share Other controlling capital reserves interests Total US$’000 US$’000 US$’000 US$’000

Transaction with owners Employee share option scheme: — Employee share-based compensation benefits — 804 — 804 Waiver of entitlement by non- controlling interests — 1,919 (1,919) — Non-controlling interests’ contribution to new subsidiaries — — 12,820 12,820 Proceeds from shares issued 2,346 154,791 — 157,137 Dividends paid — (47,386) — (47,386)

Balance at 31 December 2010 23,458 1,770,033 2,529 1,796,020

The accompanying notes are an integral part of these consolidated financial statements.

– I-12 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Consolidated Statement of Cash Flows For the year ended 31 December 2010 Note 2010 2009 US$’000 US$’000

Cash flows from operating activities Net cash (used in)/generated from operations 37 (188,958) 661,930 Interest paid (15,438) (10,436) Income tax paid (35,183) (17,995)

Net cash (used in)/generated from operating activities (239,579) 633,499

Cash flows from investing activities Proceeds from disposal of property, plant and equipment 7,449 3,457 Proceeds from disposal of an available-for-sale financial asset — 532 Proceeds from disposal of investment properties — 3,622 Purchase of property, plant and equipment (206,067) (114,638) Purchase of land use rights (7,327) (3,760) Purchase of financial assets at fair value through profit or loss — (1,962) Purchase of intangible assets (2,500) — Interest received 2,632 4,428 Investments in associates (14,810) — Investments in jointly controlled entities (7,840) (8,100) Acquisition of subsidiary, net of cash acquired 41 (763) — Proceeds from disposal of subsidiary, net of cash disposed 41 (2,089) — Dividends received from an associate 8,102 —

Net cash used in investing activities (223,213) (116,421)

– I-13 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Note 2010 2009 US$’000 US$’000

Cash flows from financing activities Inception of long-term bank borrowings — 6,124 Net inception/(repayments) of short-term bank borrowings 466,409 (397,240) Repayment of convertible bonds (210,514) — Proceeds from issuance of new shares 157,137 — Repayment for derivative financial instruments — interest rate swaps (2,000) (2,000) (Increase)/decrease in pledged bank deposit (2,311) 200 Dividends paid (47,386) (23,224) Non-controlling interests’ contribution to new subsidiaries 12,820 —

Net cash generated from/(used in) financing activities 374,155 (416,140)

Net (decrease)/increase in cash and cash equivalents (88,637) 100,938 Cash and cash equivalents at beginning of year 270,438 171,066 Exchange gains/(losses) on cash and cash equivalents 2,625 (1,566)

Cash and cash equivalents at end of year 184,426 270,438

Analysis of cash and cash equivalents: Bank balances and cash 184,426 270,438

The accompanying notes are an integral part of these consolidated financial statements.

– I-14 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Notes to the Consolidated Financial Statements

1 General information

TPV Technology Limited (the “Company”) and its subsidiaries (together, the “Group”) designs, manufactures and sells computer monitors and flat TV products. The Group manufactures mainly in the People’s Republic of China (the “PRC”), Europe and South America and sells to Europe, North and South America, the PRC, Asian countries and the rest of the world.

The Company is a limited liability company incorporated in Bermuda. The address of its registered office is Canon’s Court, 22 Victoria Street, Hamilton HM 12, Bermuda.

The company has its primary listing on The Stock Exchange of Hong Kong Limited and secondary listing on Singapore Exchange Limited.

These financial statements are presented in US dollars, unless otherwise stated.

2 Summary of significant accounting policies

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

2.1 Basis of preparation

The consolidated financial statements of the Group have been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRS”). The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets, financial assets and financial liabilities (including derivative financial instruments) at fair value through profit or loss and investment properties, which are carried at fair value.

The preparation of financial statements in conformity with HKFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 4.

(a) New and amended standards, and interpretation adopted by the Group

The following new standards and amendments to standards, and interpretation are mandatory for the first time for the financial year beginning 1 January 2010. The adoption of these new standard and amendments to standards does not have any significant impact to the results and financial position of the Group.

HKFRS 3 (revised), ‘Business combinations’, and consequential amendments to HKAS 27, ‘Consolidated and separate financial statements’, HKAS 28, ‘Investments in associates’, and HKAS 31, ‘Interests in joint ventures’, are effective prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on 1 January 2010.

The revised standard continues to apply the acquisition method to business combinations but with some significant changes compared with HKFRS 3. For example, all payments to purchase a business are recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently re-measured through the statement of comprehensive income.

– I-15 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

There is a choice on an acquisition-by-acquisition basis to measure the non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets. All acquisition-related costs are expensed.

The revised standard was applied to the acquisition of the controlling interest in HannStar- TPV Display (Wuhan) Corp. on 23 December 2010. This acquisition has occurred in stages. The revised standard requires bargain purchase to be determined only at the acquisition date rather than at the previous stages. The determination of bargain purchase includes the previously held equity interest to be adjusted to fair value, with any gain or loss recorded in the income statement. See Note 41 for further details of the business combination that occurred in 2010.

HKAS 27 (revised) requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses. The standard also specifies the accounting when control is lost. Any remaining interest in the entity is re-measured to fair value, and a gain or loss is recognised in profit or loss. HKAS 27 (revised) has had no impact on the current period, as none of the non-controlling interests have a deficit balance; there have been no transactions whereby an interest in an entity is retained after the loss of control of that entity, and there have been no transactions with non-controlling interests.

HKAS 1 (amendment), ‘Presentation of financial statements’. The amendment clarifies that the potential settlement of a liability by the issue of equity is not relevant to its classification as current or non-current. By amending the definition of current liability, the amendment permits a liability to be classified as non-current (provided that the entity has an unconditional right to defer settlement by transfer of cash or other assets for at least 12 months after the accounting period) notwithstanding the fact that the entity could be required by the counterparty to settle in shares at any time.

HKFRS 2 (amendments), ‘Group cash-settled share-based payment transactions’, effective form 1 January 2010. In addition to incorporating HK(IFRIC) 8, ‘Scope of HKFRS 2’, and HK(IFRIC) 11, ‘HKFRS 2 — Group and treasury share transactions’, the amendments expand on the guidance in HK(IFRIC) 11 to address the classification of group arrangements that were not covered by that interpretation.

HKAS 36 (amendment), ‘Impairment of assets’, effective 1 January 2010. The amendment clarifies that the largest cash-generating unit (or group of units) to which goodwill should be allocated for the purposes of impairment testing is an operating segment, as defined by paragraph 5 of HKFRS 8, ‘Operating segments’ (that is, before the aggregation of segments with similar economic characteristics).

HK Interpretation 5, ‘Presentation of Financial Statements — Classification by the Borrower of a Term Loan that Contains a Repayment on Demand Clause’, issued on 29 November 2010, immediately effective on that day. The interpretation states that a borrower shall classify the term loan as a current liability in its balance sheet under paragraph 69(d) of HKAS 1, if the borrower does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period.

HKAS 17 (amendment), ’Leases’, deletes specific guidance regarding classification of leases of land, so as to eliminate inconsistency with the general guidance on lease classification. As a result, leases of land should be classified as either finance or operating lease using the general principles of HKAS 17, i.e. whether the lease transfers substantially all the risks and rewards incidental to ownership of an asset to the lessee. Prior to the amendment, land interest which title is not expected to pass to the Group by the end of the lease term was classified as operating lease under “Land use rights”, and amortised over the lease term.

– I-16 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

‘Improvements to HKFRSs 2009’, mainly comprises a collection of amendments to HKFRSs, including the HKAS 17 (amendment) as described above. It is not expected to have a significant effect on the financial statements with adoption of these amendments.

(b) New and amended standards, and interpretations that are effective but not currently relevant to the Group

The following new and amended standards, and interpretations are mandatory for the first time for the financial year beginning 1 January 2010, but are not currently relevant to the Group:

HKAS 39 (Amendment) Eligible Hedged Items HKFRS 1 (Revised) First-time Adoption of HKFRSs HKFRS 1 (Amendment) Additional Exemptions for First-time Adopters HKFRS 5 (Amendment) Non-current Assets Held for Sale and Discontinued Operations HK(IFRIC) — Int 9 Reassessment of embedded derivatives HK(IFRIC) — Int 16 Hedges of a Net Investment in a Foreign Operation HK(IFRIC) — Int 17 Distribution of Non-cash Asset of Owners HK(IFRIC) — Int 18 Transfers of Assets from Customers

(c) New standards, amendments and interpretations have been issued but are not effective and have not been early adopted by the Group

The following new standards, amendments and interpretations have been issued and are mandatory for the Group’s accounting periods beginning on or after 1 January 2011 or later periods, but the Group has not early adopted them:

HKFRS 9, ‘Financial instruments’, issued in November 2009 and December 2010. This standard is the first step in the process to replace HKAS 39, ‘Financial instruments: recognition and measurement’. HKFRS 9 introduces new requirements for classifying and measuring financial assets and is likely to affect the Group’s accounting for its financial assets. The standard is not applicable until 1 January 2013 but is available for early adoption.

In relation to financial liabilities, the significant change relates to financial liabilities that are designated as at fair value through profit or loss. Specifically, under HKFRS 9, for financial liabilities that are designated as at fair value through profit or loss, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, unless the presentation of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability’s credit risk are not subsequently reclassified to profit or loss. Previously, under HKAS 39, the entire amount of the change in the fair value of the financial liability designated as at fair value through profit or loss was presented in profit or loss.

The Group is yet to assess HKFRS 9’s full impact. However, initial indications are that it may affect the Group’s accounting for its debt available-for-sale financial assets, as HKFRS 9 only permits the recognition of fair value gains and losses in other comprehensive income if they relate to equity investments that are not held for trading. Fair value gains and losses on available-for- sale debt investments, for example, will therefore have to be recognised directly in profit or loss. The Group will apply the standard from 1 January 2013.

HKAS 24 (revised), ‘Related party disclosures’, issued in November 2009. It supersedes HKAS 24, ‘Related party disclosures’, issued in 2003. HKAS 24 (revised) is mandatory for periods beginning on or after 1 January 2011. Earlier application, in whole or in part, is permitted.

– I-17 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

The revised standard clarifies and simplifies the definition of a related party and removes the requirement for government-related entities to disclose details of all transactions with the government and other government-related entities. The Group will apply the revised standard from 1 January 2011. When the revised standard is applied, the Group and the parent will need to disclose any transactions between its subsidiaries and its associates. The Group has systems in place to capture the necessary information. No significant change in disclosure in the financial statements is expected. The Group will apply the standard from 1 January 2011.

‘Classification of rights issues’ (amendment to HKAS 32), issued in October 2009. The amendment applies to annual periods beginning on or after 1 February 2010. Earlier application is permitted. The amendment addresses the accounting for rights issues that are denominated in a currency other than the functional currency of the issuer. Provided certain conditions are met, such rights issues are now classified as equity regardless of the currency in which the exercise price is denominated. Previously, these issues had to be accounted for as derivative liabilities. The amendment applies retrospectively in accordance with IAS 8 ‘Accounting policies, changes in accounting estimates and errors’. It is not expected to have a significant effect on the financial statements with adoption of this amendment. The Group will apply the amended standard from 1 January 2011.

HK (IFRIC) — Int 19, ‘Extinguishing financial liabilities with equity instruments’, effective 1 July 2010. The interpretation clarifies the accounting by an entity when the terms of a financial liability are renegotiated and result in the entity issuing equity instruments to a creditor of the entity to extinguish all or part of the financial liability (debt for equity swap). It requires a gain or loss to be recognised in profit or loss, which is measured as the difference between the carrying amount of the financial liability and the fair value of the equity instruments issued. If the fair value of the equity instruments issued cannot be reliably measured, the equity instruments should be measured to reflect the fair value of the financial liability extinguished. The Group will apply the interpretation from 1 January 2011. It is not expected to have any impact on the Group or the parent entity’s financial statements.

HKAS 12 (revised), ‘Income Taxes’, issued in December 2010. It supersedes HK(SIC) — Int 21’Income Taxes — Recovery of Revalued Non-Depreciable Assets’, issued in 2004. HKAS 12 (revised) is mandatory for periods beginning on or after 1 January 2012. Earlier application, in whole or in part, is permitted.

The revised standard clarifies that deferred taxes on an investment property, carried under the fair value model in HKAS 40, will be measured presuming that an investment property is recovered entirely through sale. The presumption is rebutted if the investment property is held within a business model whose objective is to consume substantially all of the economic benefits embodied in the investment property over time, rather than through sale. It is not expected to have a significant effect on the financial statements with adoption of this amendment. The Group will apply the amended standard from 1 January 2012.

Amendments to HKFRS 7 (revised), ‘Financial Instruments: Disclosures’, issued in October 2010. The amendment will be effective for annual periods beginning on or after 1 July 2011, with earlier application permitted. The amendments require additional disclosures for risk exposures arising from transferred financial assets and no disclosures are required for prior periods. No significant change in disclosure in the financial statements is expected. The Group will apply the amendment from 1 January 2012.

– I-18 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

‘Improvements to HKFRSs 2010’, issued in May 2010. The amendments are primarily effective for annual periods beginning on or after 1 January 2011, with earlier application permitted. The amendment comprises a collection of amendments to HKFRSs. It is not expected to have a significant effect on the financial statements with adoption of these amendments. The Group will apply the amended standard from 1 January 2011.

‘Prepayments of a minimum funding requirement’ (amendments to HK (IFRIC) — Int 14). The amendments correct an unintended consequence of HK (IFRIC) — Int 14, ‘HKAS 19 — The limit on a defined benefit asset, minimum funding requirements and their interaction’. Without the amendments, entities are not permitted to recognise as an asset some voluntary prepayments for minimum funding contributions. This was not intended when HK (IFRIC) — Int 14 was issued, and the amendments correct this. The amendments are effective for annual periods beginning 1 January 2011. Earlier application is permitted. The amendments should be applied retrospectively to the earliest comparative period presented. It is not expected to have a significant effect on the financial statements with adoption of these amendments. The Group will apply these amendments for the financial reporting period commencing on 1 January 2011.

2.2 Consolidation

(a) Subsidiaries

Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

The Group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets.

Investments in subsidiaries are accounted for at cost less impairment. Cost is adjusted to reflect changes in consideration arising from contingent consideration amendments. Cost also includes direct attributable costs of investment. The results of subsidiaries are accounted for by the Company on the basis of dividend received and receivable.

The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired is recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the statement of comprehensive income.

Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

– I-19 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

(b) Transactions with non-controlling interests

The Group treats transactions with non-controlling interests as transactions with equity owners of the Group. For purchases from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

When the Group ceases to have control or significant influence, any retained interest in the entity is remeasured to its fair value, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.

Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights.

A joint venture is a contractual arrangement whereby the venturers undertake an economic activity which is subject to joint control and over which none of the participating parties has unilateral control.

Jointly controlled entity is joint venture which involves the establishment of a separate entity.

Investments in associates and jointly controlled entities are accounted for using the equity method of accounting and are initially recognised at cost. The Group’s investment in associates and jointly controlled entities includes goodwill identified on acquisition, net of any accumulated impairment loss.

The Group’s share of its associates and jointly controlled entities’ post-acquisition profits or losses is recognised in the consolidated income statement, and its share of post-acquisition movements in other comprehensive income is recognised in the consolidated other comprehensive income. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in an associate or a jointly controlled entity equals or exceeds its interest in the associate or the jointly controlled entity, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate or the jointly controlled entity.

Unrealised gains on transactions between the Group and its associates and jointly controlled entities are eliminated to the extent of the Group’s interest in the associates and jointly controlled entities. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates and jointly controlled entities have been changed where necessary to ensure consistency with the policies adopted by the Group.

Dilution gains and losses arising in investments in associates and jointly controlled entities are recognised in the consolidated income statement.

– I-20 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

The Group assesses at the end of each reporting period whether there is any objective evidence that its interests in the associates and jointly controlled entities are impaired. Such objective evidence includes whether there has been any significant adverse changes in the technological, market, economic or legal environment in which the associates or jointly controlled entities operate or whether there has been a significant or prolonged decline in value below their cost. If there is an indication that an interest in an associate or jointly controlled entity is impaired, the Group assesses whether the entire carrying amount of the investment (including goodwill) is recoverable. An impairment loss is recognised in profit or loss for the amount by which the carrying amount is lower than the higher of the investment’s fair value less costs to sell or value in use. Any reversal of such impairment loss in subsequent periods is reversed through profit or loss.

Changes in accounting policy

The Group has changed its accounting policy for transactions with non-controlling interests and the accounting for loss of control or significant influence from 1 January 2010 when revised HKAS 27, ‘Consolidated and separate financial statements’, became effective. The revision to HKAS 27 contained consequential amendments to HKAS 28, ‘Investments in associates’, and HKAS 31, ‘Interests in joint ventures’.

Previously, transactions with non-controlling interests were treated as transactions with parties external to the Group. Disposals therefore resulted in gains or losses in profit or loss and purchases resulted in the recognition of goodwill. On disposal or partial disposal, a proportionate interest in reserves attributable to the subsidiary was reclassified to profit or loss or directly to retained earnings.

Previously, when the Group ceased to have control or significant influence over an entity, the carrying amount of the investment at the date control or significant influence became its cost for the purposes of subsequently accounting for the retained interests as associates, jointly controlled entities or financial assets.

The Group has applied the new policy prospectively to transactions occurring on or after 1 January 2010. As a consequence, no adjustments were necessary to any of the amounts previously recognised in the financial statements.

2.3 Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the steering committee that makes strategic decisions.

2.4 Foreign currency translation

(a) Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The consolidated financial statements are presented in US dollars, which is the Company’s functional and the Group’s presentation currency.

– I-21 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

(b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation when items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.

All foreign exchange gains and losses are presented in the income statement within ‘other gains — net.’

Changes in the fair value of monetary securities denominated in foreign currency classified as available-for-sale are analysed between translation differences resulting from changes in the amortised cost of the security and other changes in the carrying amount of the security. Translation differences related to changes in amortised cost are recognised in profit or loss, and other changes in carrying amount are recognised in other comprehensive income.

Translation difference on non-monetary financial assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss. Translation differences on non-monetary financial assets such as equities classified as available-for-sale are included in other comprehensive income.

The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

(i) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

(ii) income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and

(iii) all resulting exchange differences are recognised in other comprehensive income.

On consolidation, exchange differences arising from the translation of the net investment in foreign operations, and of borrowings and other currency instruments designated as hedges of such investments, are taken to other comprehensive income. When a foreign operation is partially disposed of or sold, exchange differences that were recorded in equity are recognised in the income statement as part of the gain or loss on sale.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

2.5 Property, plant and equipment

Property, plant and equipment, other than freehold land, are stated at historical cost less depreciation and impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

– I-22 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

Freehold land is not depreciated. Depreciation of property, plant and equipment, other than freehold land, is calculated using the straight-line method to allocate their costs to their residual values over their estimated useful lives, as follows:

Buildings 20 years Leasehold improvements 20 years Machinery and equipment 5 to 10 years Moulds 2 years Electrical appliances and equipment 3 to 5 years Transportation equipment 3 to 5 years Furniture, fixtures and miscellaneous equipment 1 to 5 years

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (Note 2.9).

Gains and losses on disposals are determined by comparing proceeds with carrying amount and are recognised in the income statement.

2.6 Construction-in-progress

Construction-in-progress represents buildings, plant and machinery under construction and pending installation and is stated at cost. Cost includes the costs of construction of buildings, the costs of plant and machinery, installation, testing and other direct costs. No depreciation is made on construction-in-progress until such time as the relevant assets are completed and ready for intended use. When the assets concerned are brought into use, the costs are transferred to property, plant and equipment and depreciated in accordance with the policy as stated in Note 2.5 above.

2.7 Investment properties

Investment property, principally comprising leasehold land and office buildings, is held for long- term rental yields and is not occupied by the Group. It also includes properties that are being constructed or developed for future use as investment properties. Land held under operating leases are accounted for as investment properties when the rest of the definition of an investment property is met. In such cases, the operating leases concerned are accounted for as if they were finance leases.

Investment property is initially measured at cost, including related transaction costs. After initial recognition at cost investment properties are carried at fair value, representing open market value determined at each reporting date by external valuers. Fair value is based on active market prices, adjusted, if necessary, for any difference in the nature, location or condition of the specific asset. If the information is not available, the Group uses alternative valuation methods such as recent prices on less active markets or discounted cash flow projections. Changes in fair values are recorded in the income statement as part of a valuation gain or loss in other income.

– I-23 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

2.8 Intangible assets

(a) Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose identified according to operating segment.

(b) Trademarks and patents

Separately acquired trademarks and patents are shown at historical cost. Trademarks and patents acquired in a business combination are recognised at fair value at the acquisition date. Trademarks and patents have a finite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost of trademarks and patents over their estimated useful lives (not more than 15 years).

2.9 Impairment of investments in subsidiaries and non-financial assets

Assets that have an indefinite useful life, for example goodwill, are not subject to amortisation and are tested annually for impairment. Assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.

Impairment testing of an investment in a subsidiary is required upon receiving a dividends if the dividend exceeds the total comprehensive income of the subsidiary in the period the dividend is declared or if the carrying amount of the subsidiary in the Company’s balance sheet exceeds the carrying amount in the consolidated financial statements of the investee’s net assets including goodwill.

2.10 Financial assets

2.10.1 Classification

The Group classifies its financial assets in the following categories: at fair value through profit or loss, loans and receivables and available-for-sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

– I-24 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

(a) Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if expected to be within 12 months; otherwise, they are classified as non-current.

(b) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets. The Group’s loans and receivables comprise “trade and other receivables” and “cash and cash equivalents” in the balance sheet (Notes 2.15 and 2.16).

Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless the investment matures or management intends to dispose of it within 12 months of the end of the reporting period.

2.10.2 Recognition and measurement

Regular way purchases and sales of financial assets are recognised on trade-date — the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value and transaction costs are expensed in the income statement. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are subsequently carried at amortised cost using the effective interest method.

Gains or losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category are presented in the income statement within ‘other gains — net’ in the period in which they arise. Dividend income from financial assets at fair value through profit or loss is recognised in the income statement as part of other income when the Group’s right to receive payments is established.

Changes in the fair value of monetary and non-monetary securities classified as available for sale are recognised in other comprehensive income.

When securities classified as available for sale are sold or impaired, the accumulated fair value adjustments recognised in equity are included in the income statement as ‘gains and losses from investment securities’.

Interest on available-for-sale securities calculated using the effective interest method is recognised in the income statement as part of other income. Dividends on available-for-sale equity instruments are recognised in the income statement as part of other income when the Group’s right to receive payments is established.

– I-25 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

2.11 Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.

2.12 Impairment of financial assets

(a) Assets carried at amortised cost

The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

The criteria that the Group uses to determine that there is objective evidence of an impairment loss include:

• Significant financial difficulty of the issuer or obligor;

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

• The Group, for economic or legal reasons relating to the borrower’s financial difficulty, granting to the borrower a concession that the lender would not otherwise consider;

• It becomes probable that the borrower will enter bankruptcy or other financial reorganisation;

• The disappearance of an active market for that financial asset because of financial difficulties; or

• Observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the portfolio, including:

(i) adverse changes in the payment status of borrowers in the portfolio;

(ii) national or local economic conditions that correlate with defaults on the assets in the portfolio.

The Group first assesses whether objective evidence of impairment exists.

For loans and receivables category, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the consolidated income statement. If a loan or held- to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument’s fair value using an observable market price.

– I-26 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss is recognised in the consolidated income statement.

(b) Assets classified as available for sale

The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a Group of financial assets is impaired. For debt securities, the Group uses the criteria refer to (a) above. In the case of equity investments classified as available for sale, a significant or prolonged decline in the fair value of the security below its cost is also evidence that the assets are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss — measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss — is removed from equity and recognised in the separate consolidated income statement. Impairment losses recognised in the separate consolidated income statement on equity instruments are not reversed through the separate consolidated income statement. If, in a subsequent period, the fair value of a debt instrument classified as available for sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed through the separate consolidated income statement.

2.13 Derivative financial instruments which do not qualify for hedge accounting

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value.

Changes in the fair value of the derivative instruments which do not qualify for hedge accounting are recognised immediately in the income statement within “other gains — net”.

2.14 Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted average method. The cost of finished goods and work in progress comprises design costs, raw materials, direct labour, other direct costs and related production overheads (based on normal operating capacity). It excludes borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.

2.15 Trade and other receivables

Trade receivables are amounts due from customers for merchandise sold or services performed in the ordinary course of business. If collection of trade and other receivables is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets.

Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.

2.16 Cash and cash equivalents

In the consolidated statement of cash flows, cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. In the consolidated balance sheet, bank overdrafts are shown within borrowings in current liabilities.

– I-27 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

2.17 Share capital

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

Where any group company purchases the Company’s equity share capital (treasury shares), the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the Company’s equity holders until the shares are cancelled or reissued. Where such shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the Company’s equity holders.

2.18 Trade and other payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.

Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

2.19 Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the end of the reporting period.

2.20 Compound financial instruments

Compound financial instruments issued by the Group comprise convertible bonds that can be converted to share capital at the option of the holder, and the number of shares to be issued does not vary with changes in their fair value.

The liability component of a compound financial instrument is recognised initially at the fair value of a similar liability that does not have an equity conversion option. The equity component is recognised initially at the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts.

Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortised cost using the effective interest method. The equity component of a compound financial instrument is not re-measured subsequent to initial recognition except on conversion or expiry.

– I-28 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

2.21 Current and deferred income tax

The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case the tax is also recognised in other comprehensive income or directly in equity, respectively.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the company’s subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries, associates and jointly controlled entities, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

2.22 Employee benefits

(a) Pension obligations

The Group participates in a number of defined contribution schemes in the PRC, Hong Kong, Taiwan and overseas countries, the assets of which are held separately from those of the Group in independently administered funds. Contributions are made to these schemes based on a certain percentage of the employees’ salaries.

One of the Group’s subsidiaries in Taiwan also participates in a defined benefit pension plan in accordance with the local statutory regulations. Under this plan, pension costs are assessed using the projected unit credit method: the cost of providing pensions is charged to the income statement so as to spread the regular cost over the service lives of employees in accordance with the advice of an independent actuary who carries out a full valuation of the plan each year. The pension obligation is measured at the present value of the estimated future cash outflows using the rate of return of high-quality fixed-income investments in Taiwan which have the terms to maturity approximating to the terms of the related pension liability. Actuarial gains and losses are recognised over the average remaining service lives of employees. Past service costs are recognised as an expense on a straight-line basis over the vesting period.

– I-29 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

The Group’s contributions to defined contribution schemes are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

(b) Termination benefits

Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when it is demonstrably committed to a termination when the entity has a detailed formal plan to terminate the employment of current employees without possibility of withdrawal. In the case of an offer made to encourage voluntary redundancy, the termination benefits are measured based on the number of employees expected to accept the offer. Benefits falling due more than 12 months after the end of the reporting period are discounted to their present value.

The Group recognises a liability and an expense for bonuses and profit-sharing, based on a formula that takes into consideration the profit attributable to the Company’s shareholders after certain adjustments. The Group recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation.

2.23 Share-based payments

The Group operates a number of equity-settled, share-based compensation plans, under which the entity receives services from employees as consideration for equity instruments (options) of the Group. The fair value of the employee services received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed is determined by reference to the fair value of the options granted:

• including any market performance conditions (for example, an entity’s share price);

• excluding the impact of any service and non-market performance vesting conditions (for example, profitability, sales growth targets and remaining an employee of the entity over a specified time period); and

• excluding the impact of any non-vesting conditions (for example, the requirement for employees to save).

Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each reporting period, the entity revises its estimates of the number of options that are expected to vest based on the non- marketing vesting conditions. It recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity.

When the options are exercised, the Company issues new shares. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised.

The grant by the Company of options over its equity instruments to the employees of subsidiary undertakings in the Group is treated as a capital contribution. The fair value of employee services received, measured by reference to the grant date fair value, is recognised over the vesting period as an increase to investment in subsidiary undertakings, with a corresponding credit to equity.

– I-30 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

The social security contributions payable in connection with the grant of the share options is considered an integral part of the grant itself, and the charge will be treated as a cash-settled transaction.

2.24 Provisions

Provisions are recognised when: the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not recognised for future operating losses.

Provision for warranties is provided based on management’s estimates of the repair costs per unit of product sold in the relevant years and is calculated based on historical experience of the level of repairs and replacements. Actual warranty expenditure is charged against the provision as incurred.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense.

2.25 Revenue recognition

Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Group’s activities. Revenue is shown net of value-added tax, returns, rebates and discounts and after eliminating sales within the Group.

The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and specific criteria have been met for each of the Group’s activities as described below. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

(a) Sales of goods

Sales of goods are recognised when the risk and reward of the goods has been transferred to the customer, which is usually at the date when a group entity has delivered products to the customer, the customer has accepted the products, and there is no unfulfilled obligations that could affect the customer’s acceptance of the products. Accumulated experience is used to estimate and provide for sales return at the time of sale.

(b) Interest income

Interest income is recognised using the effective interest method. When a loan and receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loan and receivables are recognised using the original effective interest rate.

Operating lease rental income is recognised on a straight-line basis over the lease periods.

– I-31 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

2.26 Government grants

Government grants are subsidies on export of computer monitors and flat TV products and economic assistance on certain projects provided by governments.

Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions.

Government grants relating to property, plant and equipment are included in non-current liabilities as deferred government grants and are credited to the income statement on a straight-line basis over the expected lives of the related assets.

2.27 Research and development costs

Research costs are expensed as incurred.

Development costs relating to the design and testing of new or improved products and reassessment of production procedures for cost efficiency purposes are expensed as incurred as the directors consider that the related economic benefits generated from these developments have very limited useful lives.

2.28 Borrowing costs

Borrowing costs incurred for the construction of any qualifying asset are capitalised during the year that is required to complete and prepare the asset for its intended user sale. Other borrowing costs are expensed in the income statement.

2.29 Leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor), including upfront payment made for leasehold land and land use rights, are charged to the income statement on a straight-line basis over the period of the lease.

2.30 Financial guarantee

A financial guarantee (a kind of insurance contract) is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the original or modified terms of a debt instrument. The Group does not recognise liabilities for financial guarantee at inception, but perform a liability adequacy test at each reporting date by comparing its net liability regarding the financial guarantee with the amount that would be required if the financial guarantee would result in a present legal or constructive obligation. If the liability is less than its present legal or constructive obligation amount, the entire difference is recognised in the income statement immediately.

2.31 Dividend distribution

Dividend distribution to the Company’s shareholders is recognised as a liability in the Group’s and the Company’s financial statements in the period in which the dividends are approved by the Company’s shareholders.

– I-32 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

3 Financial risk management

3.1 Financial risk factors

The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, price risk, fair value interest rate risk and cash flow interest rate risk), credit risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance.

Risk management is carried out by a central treasury department (Group Treasury) under policies approved by the Board of Directors. Group Treasury identifies, evaluates and mitigates financial risks in close co-operation with the Group’s operating units. The Board provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and cash management.

(a) Market risk

(i) Foreign exchange risk

The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to Renminbi and Brazilian real. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign operations. Moreover, the conversion of Renminbi into foreign currencies is subject to the rules and regulations of exchange control promulgated by the PRC government.

Management has set up a policy to require Group companies to manage their foreign exchange risk against their functional currency. Entities in the Group manage the amount of financial assets and liabilities denominated in foreign currencies together with the use of foreign exchange forward contracts to manage their foreign exchange risk arising from future commercial transactions and recognised assets and liabilities.

As at 31 December 2010, if US dollars had weakened/strengthened by 1% against Renminbi with all other variables held constant, post-tax profit for the year would have been US$1,426,000 (2009: US$975,000) higher/lower, mainly as a result of foreign exchange gains/losses on translation of Renminbi denominated trade receivables and payables and cash and cash equivalents.

As at 31 December 2010, if US dollars had weakened/strengthened by 1% against Brazilian real with all other variables held constant, post-tax profit for the year would have been US$2,068,000 (2009: US$1,302,000) higher/lower, mainly as a result of foreign exchange gains/losses on translation of US dollars denominated trade payables.

The Company does not have significant exposure to foreign exchange risk.

(ii) Price risk

The Group is exposed to equity securities price risk because investments held by the Group and classified on the consolidated balance sheet either as available-for-sale or at fair value through profit or loss. The Group has not mitigated its price risk arising from investments in equity securities.

– I-33 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

For the Group’s investments that are publicly traded, the fair value is determined with reference to quoted market prices. For the Group’s investments that are not publicly traded, the Group uses its judgement to select a variety of methods and make assumptions that are mainly based on market conditions existing at the balance sheet date.

The Company does not have significant exposure to price risk.

(iii) Interest rate risk

The Group’s income and operating cash flows are substantially independent of changes in market interest rates as the Group has no significant interest-bearing assets except for cash at bank which earned a low interest. The Group’s exposures to changes in interest rates are mainly attributable to its borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk which is partially offset by cash held at variable rates. Borrowings issued at fixed rates expose the Group to fair value interest rate risk, which arises from the convertible bonds issued at a fixed rate of 3.35% in 2005 and fully redeemed during the current year. Details of the Group’s borrowings and convertible bonds have been disclosed in Note 29 and Note 36, respectively.

The Group also invests in interest rate swaps which expose the Group to cash flow and interest rate risk. Details of the Group’s interest rate swaps have been disclosed in Note 34.

The Company’s amounts due from subsidiaries were interest free and this exposes the Company to fair value interest rate risk.

As at 31 December 2010, if interest rates on borrowings had been 10 basis points higher/lower with all other variables held constant, the Group’s and the Company’s post- tax profit for the year would have been US$28,684 (2009: US$5,981) and US$1,991 (2009: Nil) lower/higher respectively, mainly as a result of higher/lower interest expenses on floating rate borrowings.

(b) Credit risk

Credit risk is managed on a group basis. The Group’s credit risk mainly arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures to trade and other receivables. Management has policies in place to monitor the exposures to these credit risks on an on-going basis.

As at 31 December 2010 and 2009, for cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, they are all deposited or traded with high quality financial institutions without significant credit risk.

The Group has put in place policies to ensure that sales of products are made to customers with an appropriate credit history and the Group performs periodic credit evaluations of its customers. The Group’s historical experience in collection of trade and other receivables falls within the recorded allowances.

– I-34 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

The table below shows the balance of the five major debtors aggregated on a global basis for companies which belong to the same group at the balance sheet date.

2010 Counterparty US$’000

Customer A 299,459 Customer B 234,536 Customer C 224,810 Customer D 139,777 Customer E 139,113

1,037,695

2009 Counterparty US$’000

Customer C 224,782 Customer B 158,437 Customer D 108,409 Customer F 98,934 Customer G 92,961

683,523

Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of banking facilities. The Group aims to maintain flexibility in funding by keeping credit lines available at all time.

Cash flow forecasting is performed in the operating entities of the Group and aggregated by Group finance. Group finance monitors rolling forecasts of the Group’s liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed banking facilities (Note 29) at all times so that the Group does not breach borrowing limits or covenants (where applicable) on any of its banking facilities. Such forecasting takes into consideration the Group’s debt financing plans, covenant compliance, compliance with internal balance sheet ratio targets and exchange control.

Surplus cash held by the operating entities over and above balance required for working capital management are transferred to the Group Treasury. Group Treasury invests surplus cash mainly in time deposits, choosing instruments with appropriate maturities or sufficient liquidity to provide sufficient headroom as determined by the above-mentioned forecasts. At the reporting date, the Group held cash and cash equivalents of US$184,426,000 (2009: US$270,438,000) (Note 26) and trade receivables of US$2,193,205,000 (2009: US$1,881,460,000) (Note 24) that are expected to readily generate cash inflows for managing liquidity risk. In addition, the Group holds listed equity securities for trading of US$2,562,000 (2009: US$2,920,000) (Note 25), which could be readily realised to provide a further source of cash if the need arose. The Group will also factor its trade receivables to banks without recourse should there be additional liquidity needs.

– I-35 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

The table below analyses the Group’s non-derivative financial liabilities and net-settled derivative financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. Derivative financial liabilities are included in the analysis if their contractual maturities are essential for an understanding of the timing of the cash flows. The amounts disclosed in the table are the contractual undiscounted cash flows.

Group

Between Between Less than 1 and 2 and 1 year 2 years 5 years Total US$’000 US$’000 US$’000 US$’000

At 31 December 2010 Borrowings 472,533 — — 472,533 Interest payments on borrowings 448 — — 448 Derivative financial instruments 63,837 — — 63,837 Trade payables 2,235,310 — — 2,235,310 Other payables and accruals 434,883 22,460 — 457,343 Financial guarantee contracts 3,000 — — 3,000

At 31 December 2009 Borrowings 210,514 6,124 — 216,638 Interest payments on borrowings 7,254 34 — 7,288 Derivative financial instruments 17,574 — — 17,574 Trade payables 1,931,721 — — 1,931,721 Other payables and accruals 367,299 28,759 — 396,058 Financial guarantee contracts 3,000 — — 3,000

Company

Between Between Less than 1 and 2 and 1 year 2 years 5 years Total US$’000 US$’000 US$’000 US$’000

At 31 December 2010 Borrowings 20,000 — — 20,000 Interest payments on borrowings 22 — — 22 Other payables and accruals 755 — — 755 Financial guarantee contracts 2,935,428 — — 2,935,428

At 31 December 2009 Borrowings 210,514 — — 210,514 Interest payments on borrowings 7,052 — — 7,052 Other payables and accruals 1,892 — — 1,892 Financial guarantee contracts 1,499,013 — — 1,499,013

– I-36 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

The table below analyses the Group’s derivative financial instruments that will be settled on a gross basis into relevant maturity groupings based on the remaining period at the balance sheet to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.

Group

Between Between Less than 1 and 2 and 1 year 2 years 5 years Total US$’000 US$’000 US$’000 US$’000

At 31 December 2010 Foreign exchange forward contracts — Inflow 3,285,733 — — 3,285,733 — Outflow 3,263,724 — — 3,263,724

At 31 December 2009 Foreign exchange forward contracts — Inflow 2,846,169 — — 2,846,169 — Outflow 2,853,000 — — 2,853,000

3.2 Capital risk management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. Except for the compliance of certain financial covenants for maintaining the Group’s banking facilities and convertible bonds, the Group is not subject to any externally imposed capital requirements.

The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including ‘current and non-current borrowings’ as shown in the consolidated balance sheet) less cash and cash equivalents. Total capital is calculated as ‘equity’ as shown in the consolidated balance sheet plus net debt. Management considers a gearing ratio of not more than 100% as reasonable.

Group Company 2010 2009 2010 2009 US$’000 US$’000 US$’000 US$’000

Total borrowings 472,533 215,336 20,000 209,212 Less: Cash and cash equivalents (184,426) (270,438) (372) (1,190)

Net debt/(cash) 288,107 (55,102) 19,628 208,022 Total equity 1,796,020 1,507,622 950,705 803,725

Total capital 2,084,127 N/A 970,333 1,011,747

Gearing ratio 13.8% N/A 2.0% 20.6%

– I-37 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

As the Group was in a net cash position as at 31 December 2009, gearing ratio was not applicable.

3.3 Fair value estimation

The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

• Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).

• Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2).

• Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).

The following table presents the Group’s financial assets and liabilities that are measured at fair value at 31 December 2010:

Level 1 Level 2 Level 3 Total US$’000 US$’000 US$’000 US$’000

Assets Available-for-sale financial assets 2,079 — 76 2,155 Financial assets at fair value through profit or loss 2,562 — — 2,562 Derivative financial instruments — 65,103 — 65,103

4,641 65,103 76 69,820

Liabilities Derivative financial instruments — 63,837 — 63,837

The following table presents the Group’s financial assets and liabilities that are measured at fair value at 31 December 2009:

Level 1 Level 2 Level 3 Total US$’000 US$’000 US$’000 US$’000

Assets Available-for-sale financial assets 2,260 — 917 3,177 Financial assets at fair value through profit or loss 2,920 — — 2,920 Derivative financial instruments — 18,832 — 18,832

5,180 18,832 917 24,929

Liabilities Derivative financial instruments — 17,574 — 17,574

The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and

– I-38 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

those prices represent actual and regularly occurring market transactions on an arm’s length basis. The quoted market price used for financial assets held by the Group is the current bid price. These instruments are included in level 1.

The fair value of financial instruments that are not traded in an active market (for example, over- the-counter derivatives) is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.

Specific valuation techniques used to value financial instruments include:

• Quoted market prices or dealer quotes for similar instruments.

• The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows based on observable yield curves.

• The fair value of forward foreign exchange contracts is determined using forward exchange rates at the balance sheet date, with the resulting value discounted back to present value.

• Other techniques, such as discounted cash flow analysis including dividend growth model, are used to determine fair value for the remaining financial instruments.

There were no significant transfers of financial assets between level 1, level 2 and level 3 fair value hierarchy classifications.

The following table presents the changes in level 3 instruments for the year ended 31 December 2010:

Available-for- sale financial assets US$’000

Opening balance 917 Impairment losses recognised in profit or loss (841)

Closing balance 76

The following table presents the changes in level 3 instruments for the year ended 31 December 2009:

Available-for- sale financial assets US$’000

Opening balance 1,410 Impairment losses recognised in profit or loss (493)

Closing balance 917

– I-39 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

4 Critical accounting estimates and judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

4.1 Critical accounting estimates and assumptions

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.

(a) Income taxes

The Group is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining the worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences would impact the current and deferred income tax assets and liabilities in the period in which such determination is made.

(b) Warranty provision

The Group gives warranties on certain products and undertakes to repair or replace items that fail to perform satisfactorily ranging from twelve to thirty-six months. Significant judgement is required in determining the warranty expenses. The Group estimates the warranty expenses based on the actual repair and replacement costs incurred for the products sold in the last thirty- six months. Where the warranty expenses incurred are different from the original provision, such difference would impact the consolidated income statement in the period in which the warranty expenses are incurred.

The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in Note 2.8. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations required the use of estimates (Note 15).

(d) Pending litigations

The Group had certain pending litigations at the balance sheet date. Significant judgement is required in determining whether it is more likely than not that an outflow of resources will be required to settle the pending litigations in which case an accrual for the potential litigation expenses is recognised.

(e) Estimation of provision for impairment of receivables

The Group makes provision for impairment of receivables based on an assessment of the collectability of trade and other receivables. Provisions for impairment are applied to trade and other receivables where events or changes in circumstances indicate that the balances may not be collectible. The identification of doubtful debts requires the use of judgement and estimates. Where the expectation is different from the original estimate, such difference will impact the carrying amount of receivables and doubtful debt expense in the period in which such estimate is changed.

– I-40 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

(f) Net realisable value of inventories

Net realisable value of inventories is the estimated selling price in the ordinary course of business, less estimated cost to completion and selling expenses. These estimates are based on the current market condition and the historical experience of manufacturing and selling products of similar nature. Management reassesses the estimation at the end of each reporting period.

(g) Useful lives of property, plant and equipment

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

(h) Employee benefits — share-based payments

The valuation of the fair value of the share options granted requires judgement in determining the expected volatility of the share price, the dividends expected on the shares, the risk-free interest rate during the life of the options and the number of share options that are expected to vest. Where the outcome of the number of options that are vested is different, such difference will impact the consolidated income statement in the subsequent remaining vesting period of the relevant share options.

(i) Fair value of derivatives and other financial instruments

The fair value of financial instruments traded in active markets is based on quoted market prices at the end of each reporting period. The quoted market price used for financial assets held by the Group is the current bid price; the appropriate quoted market price for financial liabilities is the current ask price.

The fair value of financial instruments that are not traded in an active market is determined by using appropriate valuation techniques and making assumptions that are based on market conditions existing at each balance sheet date.

(j) Royalty

The Group estimates the royalty expenses based on industry knowledge and other market information. Significant judgement is required in determining the royalty expenses. Where the royalty expenses incurred are different from the original estimate, such difference would impact the income statement in the period in which the royalty expenses are incurred.

(k) Estimated fair values of investment properties

The Group carries its investment properties at fair value with changes in the fair values recognised in profit or loss. It obtains independent valuations at least annually. At the end of each reporting period, the management update their assessment of the fair value of each property, taking into account the most recent independent valuations.

– I-41 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

5 Segment information

Management has determined the operating segments based on the reports reviewed by the chief operating decision-maker, Dr Hsuan, Jason, chairman and chief executive officer of the Company, that are used to make strategic decisions and resources allocation.

The Group’s businesses are managed according to the nature of their operations and the products and services they provide.

The Group is organised on a worldwide basis into two main operating segments. They are (i) Monitors; and (ii) TVs.

Others mainly comprise the sales of chassis, spare parts, CKD/SKD and other general corporate items.

The Group’s chief operating decision-maker assesses the performance of the operating segments based on a measure of adjusted operating profit. Export incentives received, fiscal refund received, technical innovation subsidy received, other gains — net, finance income, finance costs and share of profits less losses of associates and jointly controlled entities are not included in the result for each operating segment that is reviewed by the Group’s chief operating decision-maker.

Sales are categorised according to the final destination of shipment. There are no inter-segment sales.

Capital expenditure represented addition of property, plant and equipment and land use rights.

Segment assets consist primarily of intangible assets, property, plant and equipment, land use rights, inventories, trade receivables and deposits, prepayments and other receivables. They exclude investment properties, investments in associates, investments in jointly controlled entities, available-for-sale financial assets, deferred income tax assets, financial assets at fair value through profit or loss, current income tax recoverable, derivative financial instruments, pledged bank deposits and cash and cash equivalents, which are managed on a central basis. These are included in the reconciliation to total balance sheet assets.

Segment liabilities mainly comprise pension obligations, trade payables, other payables and accruals and warranty provisions. They exclude borrowings, current income tax liabilities and derivative financial instruments, which are managed on a central basis. These are included in the reconciliation to total balance sheet liabilities.

– I-42 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

The segment results for the year ended 31 December 2010 are as follows:

For the year ended 31 December 2010 Monitors TVs Others Total US$’000 US$’000 US$’000 US$’000

Revenue from external customers 6,300,234 4,042,620 1,288,722 11,631,576

Cost of goods sold (5,885,635) (3,858,697) (1,262,999) (11,007,331) Other income excluding export incentives received, fiscal refund received and technical innovation subsidy received 6,099 3,913 1,247 11,259 Operating expenses (253,879) (170,796) (19,554) (444,229)

Adjusted operating profit 166,819 17,040 7,416 191,275

Depreciation of property, plant and equipment 39,086 53,352 5,236 97,674 Amortisation of land use rights — — 492 492 Amortisation of intangible assets — — 3,747 3,747 Capital expenditure 70,072 129,482 13,840 213,394

The segment results for the year ended 31 December 2009 are as follows:

For the year ended 31 December 2009 Monitors TVs Others Total US$’000 US$’000 US$’000 US$’000

Revenue from external customers 5,098,464 2,683,383 250,125 8,031,972

Cost of goods sold (4,789,257) (2,530,709) (242,287) (7,562,253) Other income excluding export incentives received, fiscal refund received and technical innovation subsidy received 5,942 3,127 291 9,360 Operating expenses (214,346) (92,541) (5,379) (312,266)

Adjusted operating profit 100,803 63,260 2,750 166,813

Depreciation of property, plant and equipment 49,942 27,779 3,450 81,171 Amortisation of land use rights — — 295 295 Amortisation of intangible assets — — 1,921 1,921 Capital expenditure 55,696 62,702 — 118,398

– I-43 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

The segment assets and liabilities at 31 December 2010 are as follows:

Monitors TVs Others Total US$’000 US$’000 US$’000 US$’000

Segment assets 2,425,543 2,004,633 354,477 4,784,653

Segment liabilities (1,656,736) (1,014,042) (98,023) (2,768,801)

The segment assets and liabilities at 31 December 2009 are as follows:

Monitors TVs Others Total US$’000 US$’000 US$’000 US$’000

Segment assets 2,459,232 1,313,473 44,540 3,817,245

Segment liabilities (1,672,712) (722,338) (5,062) (2,400,112)

A reconciliation of adjusted operating profit for reportable segments to total profit before income tax is provided as follows:

For the year ended 31 December 2010 2009 US$’000 US$’000

Adjusted operating profit for reportable segments 191,275 166,813 Export incentives received 15,706 11,087 Fiscal refund and technical innovation subsidy received 3,655 2,268

Operating profit 210,636 180,168 Finance income 2,632 4,428 Finance costs (16,740) (13,633) Share of profits less losses of associates 6,758 3,483 Share of profits less losses of jointly controlled entities (1,614) —

Profit before income tax 201,672 174,446

– I-44 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

A reconciliation of segment assets to total assets is provided as follows:

As at 31 December 2010 2009 US$’000 US$’000

Segment assets 4,784,653 3,817,245 Investment properties 28,246 11,899 Investments in associates 30,276 18,006 Investments in jointly controlled entities 11,020 — Available-for-sale financial assets 2,155 3,177 Deferred income tax assets 10,949 11,690 Financial assets at fair value through profit or loss 2,562 2,920 Current income tax recoverable 5,431 657 Derivative financial instruments 65,103 18,832 Pledged bank deposits 2,311 — Cash and cash equivalents 184,426 270,438

Total assets 5,127,132 4,154,864

A reconciliation of segment liabilities to total liabilities is provided as follows:

At 31 December 2010 2009 US$’000 US$’000

Segment liabilities 2,768,801 2,400,112 Current income tax liabilities 16,415 14,220 Derivative financial instruments 63,837 17,574 Deferred income tax liabilities 9,526 — Borrowings 472,533 215,336

Total liabilities 3,331,112 2,647,242

The segment results by geography are as follows:

At 31 December 2010 2009 US$’000 US$’000

Europe 3,651,774 2,298,266 North America 2,184,219 1,943,292 South America 701,900 476,324 Africa 25,446 20,571 Australia 108,215 81,984 The PRC 3,589,024 2,380,379 Rest of the world 1,370,998 831,156

11,631,576 8,031,972

– I-45 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

At 31 December 2010, the total of non-current assets other than financial instruments and deferred income tax assets located in the PRC is US$402,264,000 (2009: US$297,504,000), and the total of these non- current assets located in other countries is US$560,442,000 (2009: US$534,265,000).

For the year ended 31 December 2010, revenues of approximately US$1,151,816,000 (2009: US$710,268,000) are derived from a single external customer. These revenues are attributable to the sale of monitors and TVs. This customer is also the third largest debtors at the balance sheet date.

6 Other income

2010 2009 US$’000 US$’000

Other income Export incentives received (Note (a)) 15,706 11,087 Fiscal refund received (Note (a)) 2,829 2,268 Technical innovation subsidy (Note (a)) 826 — Rental income 2,624 1,326 Miscellaneous income 8,635 8,034

30,620 22,715

Note:

(a) Export incentives, fiscal refund and technical innovation subsidy were received from the municipal governments.

7 Other gains — net

2010 2009 US$’000 US$’000

Realised and unrealised gains/(losses) on foreign exchange forward contracts — net 35,961 (13,334) Net exchange gains 23,079 38,734 Realised and unrealised gains on interest rate swaps — net 390 14,429 Fair value (losses)/gains on financial assets at fair value through profit or loss (358) 664 Fair value gains on revaluation of investment properties 3,063 352 Loss on disposal of investment properties — (743) Impairment losses on available-for-sale financial assets (857) (2,734) Gain on disposal of a subsidiary 206 — Gain from a bargain purchase of a subsidiary 1,385 —

62,869 37,368

– I-46 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

8 Operating profit

Operating profit is stated after charging the followings:

2010 2009 US$’000 US$’000

Cost of inventories 10,499,887 7,160,786 Employee benefit expense (including directors’ emoluments) (Note 9) 327,802 244,472 Depreciation of property, plant and equipment 97,674 81,171 Amortisation of land use rights 492 295 Operating lease rental for land and buildings and machinery 14,542 8,572 Auditors’ remuneration 1,745 1,151 Amortisation of intangible assets 3,747 1,921 Provision for warranty (Note 33) 69,035 56,110 Provision/(reversal) for bad and doubtful debts (Note 24) 1,377 (824) (Gain)/loss on disposal of property, plant and equipment (826) 2,206 Provision of inventories to net realisable value 22,011 23,067 Impairment losses on property, plant and equipment 517 — Donations 411 489

9 Employee benefit expense

2010 2009 US$’000 US$’000

Wages, salaries and welfare 324,219 240,764 Share options granted to directors and employees 804 1,575 Pension costs — defined contribution plans 2,352 1,604 Pension costs — defined benefit plan (Note 31) 427 529

327,802 244,472

– I-47 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

(a) Directors’ and senior management’s emoluments

The remuneration of every director for the year ended 31 December 2010 is set out below:

Basic salaries, housing allowances and other benefits in Discretionary Name of director Fees kind bonuses Total US$’000 US$’000 US$’000 US$’000

Dr Hsuan, Jason — 331 807 1,138 Mr Maarten Jan de Vries (Note (iv)) — — — — Mr Lu Ming — — — — Mr Robert Theodoor Smits — — — — Mr Liu Liehong — — — — Ms Wu Qun — — — — Mr Xu Haihe — — — — Mr Du Heping — — — — Mr Tam Man Chi — — — — Mr Chen Yen-Sung — — — — Mr Junichi Kodama (Note (v)) — — — — Mr Chan Boon Teong 44 — — 44 Dr Ku Chia-Tai 33 — — 33 Mr Wong Chi Keung 33 — — 33

The remuneration of every director for the year ended 31 December 2009 is set out below:

Basic salaries, housing allowances and other benefits in Discretionary Name of director Fees kind bonuses Total US$’000 US$’000 US$’000 US$’000

Dr Hsuan, Jason — 321 516 837 Mr Houng Yu-Te (Note (i)) — 187 155 342 Mr Maarten Jan de Vries — — — — Mr Lu Ming — — — — Mr Robert Theodoor Smits — — — — Mr Kuo Chen-Lung (Note (ii)) — — — — Mr Liu Liehong (Note (iii)) — — — — Ms Wu Qun (Note (iii)) — — — — Mr Xu Haihe (Note (iii)) — — — — Mr Du Heping (Note (iii)) — — — — Mr Tam Man Chi (Note (iii)) — — — — Mr Chen Yen-Sung (Note (iii)) — — — — Mr Chan Boon Teong 41 — — 41 Dr Ku Chia-Tai 31 — — 31 Mr Wong Chi Keung 31 — — 31

– I-48 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Notes:

(i) Resigned on 13 October 2009

(ii) Resigned on 31 March 2009

(iii) Appointed on 13 October 2009

(iv) Resigned on 9 April 2010

(v) Appointed on 7 June 2010

(b) Five highest paid individuals

The five individuals whose emoluments were the highest in the Group for the year include one (2009: one) director whose emoluments are reflected in the analysis presented above. The emoluments payable to the remaining four (2009: four) individuals during the year are as follows:

2010 2009 US$’000 US$’000

Basic salaries, housing allowances and other benefits in kind 1,388 1,433 Discretionary bonuses 839 529

2,227 1,962

The emoluments fell within the following bands:

Number of individuals 2010 2009

HK$3,000,001 to HK$3,500,000 (equivalent to US$384,616 to US$448,717) — 2 HK$3,500,001 to HK$4,000,000 (equivalent to US$448,718 to US$512,821) 2 1 HK$4,500,001 to HK$5,000,000 (equivalent to US$576,923 to US$641,022) 1 — HK$5,000,001 to HK$5,500,000 (equivalent to US$641,023 to US$705,128) 1 1

During the year, no director waived any emoluments and the Group had not paid any emoluments to the directors or any of the five highest paid individuals as an inducement to join or upon joining the Group or as compensation for loss of office.

– I-49 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

10 Finance income and costs

2010 2009 US$’000 US$’000

Interest expense on bank borrowings wholly repayable within five years 8,288 3,404 Interest expense on convertible bonds wholly repayable within five years (Note 36) 8,452 10,229

16,740 13,633 Interest income on short-term bank deposits (2,632) (4,428)

Finance costs — net 14,108 9,205

No borrowing costs were capitalised during the years ended 31 December 2010 and 2009.

11 Income tax expense

No provision for Hong Kong profits tax has been made as the Group had no estimated assessable profit generated in Hong Kong for the year (2009: Nil).

Taxation on profits has been calculated on the estimated assessable profit for the year at the rates of taxation prevailing in the countries/places in which the Group operates.

The amount of taxation charged/(credited) to the consolidated income statement represents:

2010 2009 US$’000 US$’000

Current income tax — current year 32,393 28,424 — under/(over)-provision in prior years 74 (477) Deferred income tax expense (Note 30) 10,267 4,022

Income tax expense 42,734 31,969

– I-50 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the primary tax rate of 15% (2009: 15%) applicable to profits of the majority of the consolidated entities as follows:

2010 2009 US$’000 US$’000

Profit before tax 201,672 174,446

Calculated at a taxation rate of 15% (2009: 15%) 30,251 26,167 Different taxation rates in other countries 3,299 9,631 Change of taxation rate 179 (1,336) Income not subject to tax (5,516) (2,951) Preferential tax rate in respect of tax holiday enjoyed by the PRC subsidiaries (552) (2,567) Expenses not deductible for tax purposes 8,223 17,154 Losses for which no deferred income tax asset was recognised 3,047 7,528 Utilisation of previously unrecognised tax loss (2,599) (21,180) Under/(over)-provision in prior years 74 (477) Withholding tax on unremitted earnings 6,328 —

Income tax expense 42,734 31,969

There were no taxation charged to equity for the year (2009: Nil) as there were no material tax effect for other comprehensive income.

12 Profit attributable to equity holders

The profit attributable to equity holders of the Company is dealt with in the financial statements of the Company to the extent of US$36,425,000 (2009: US$38,258,000).

13 Earnings per share

(a) Basic

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year.

2010 2009

Profit attributable to equity holders of the Company (US$’000) 169,349 141,214

Weighted average number of ordinary shares in issue (thousands) 2,297,634 2,111,253

Basic earnings per share (US cents per share) 7.37 6.69

– I-51 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

(b) Diluted

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Company has two categories of dilutive potential ordinary shares: convertible bonds and share options. The convertible bonds are assumed to have been converted into ordinary shares and the net profit is adjusted to eliminate the interest expense. For the share options, a calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company’s shares) based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options.

2010 2009

Profit attributable to equity holders of the Company (US$’000) 169,349 141,214 Interest expense on convertible bonds (US$’000) 8,452 10,229

Profit used to determine diluted earnings per share (US$’000) 177,801 151,443

Weighted average number of ordinary shares in issue (thousands) 2,297,634 2,111,253 Adjustments for — assumed conversion of convertible bonds (thousands) 214,582 313,289

Weighted average number of ordinary shares for diluted earnings per share (thousands) 2,512,216 2,424,542

Diluted earnings per share (US cents per share) 7.08 6.25

14 Dividends

2010 2009 US$’000 US$’000

Interim, paid, of US0.76 cent (2009: US0.60 cent) per ordinary share 17,828 12,668 Final, proposed, of US1.40 cents (2009: US1.26 cents) per ordinary share 32,842 29,558

50,670 42,226

The directors proposed on 23 March 2011 a final dividend of US1.40 cents per share (2009: US1.26 cents) payable in cash to equity holders. The amount of 2010 proposed final dividend is based on 2,345,836,139 shares in issue as at 23 March 2011 (2009: 2,345,836,139 shares as at 31 March 2010). This proposed dividend is not reflected as a dividend payable in these financial statements, but will be reflected as an appropriation of retained profits for the year ending 31 December 2011.

– I-52 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

15 Intangible assets

Group Trademarks Goodwill and patents Total US$’000 US$’000 US$’000

At 1 January 2009 Cost 389,098 800 389,898 Accumulated amortisation — (532) (532)

Net book amount 389,098 268 389,366

Year ended 31 December 2009 Opening net book amount 389,098 268 389,366 Additions attributable to a business combination — 20,600 20,600 Amortisation charge (Note) — (1,921) (1,921)

Closing net book amount 389,098 18,947 408,045

At 31 December 2009 Cost 389,098 21,400 410,498 Accumulated amortisation — (2,453) (2,453)

Net book amount 389,098 18,947 408,045

Year ended 31 December 2010 Opening net book amount 389,098 18,947 408,045 Additions — 2,500 2,500 Amortisation charge (Note) — (3,747) (3,747)

Closing net book amount 389,098 17,700 406,798

At 31 December 2010 Cost 389,098 23,900 412,998 Accumulated amortisation — (6,200) (6,200)

Net book amount 389,098 17,700 406,798

– I-53 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Company Trademarks US$’000

At 1 January 2009 Cost 800 Accumulated amortisation (532)

Net book amount 268

Year ended 31 December 2009 Opening net book amount 268 Amortisation charge (Note) (53)

Closing net book amount 215

At 31 December 2009 Cost 800 Accumulated amortisation (585)

Net book amount 215

Year ended 31 December 2010 Opening net book amount 215 Amortisation charge (Note) (55)

Closing net book amount 160

At 31 December 2010 Cost 800 Accumulated amortisation (640)

Net book amount 160

Note: Amortisation charge is included in “administrative expenses” in the income statement.

– I-54 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Impairment tests for goodwill

A summary of the goodwill allocation is presented below.

2010 2009 US$’000 US$’000

Monitors 324,274 324,274 TVs 64,824 64,824

389,098 389,098

The recoverable amount of cash generating units (“CGU”) is determined based on value-in-use calculations. These calculations use pre-tax cash flow projections based on financial budgets approved by management covering a one-year period. Cash flows beyond the one-year period are extrapolated for the first ten-year period and for the period after the tenth year using different estimated growth rates stated below. These growth rates do not exceed the long-term average growth rate for the business in which the CGU operates.

Key assumptions used for value-in-use calculations are as follows:

Monitors TV

Gross margin 6.6% 5.5% Average growth rate for the first ten-year projection period 4.0% 18.0% Growth rate after the tenth year 2.0% 2.0% Discount rate 7.4% 7.4%

Management determined budgeted gross margin based on past performance and its expectations of market development. The weighted average growth rates used are consistent with the forecasts included in industry reports. The discount rates used are pre-tax and reflect specific risks relating to the relevant operating segments.

The directors are of the opinion that there was no impairment of goodwill as at 31 December 2010 and 2009.

– I-55 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

16 Property, plant and equipment

Freehold Electrical Furniture, land Buildings Machinery appliances fixtures and outside outside Leasehold and and Transportation miscellaneous Construction- Group Hong Kong Hong Kong improvements equipment Moulds equipment equipment equipment in-progress Total US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

At 1 January 2009 Cost 12,598 136,826 15,348 85,275 182,211 113,509 3,414 29,314 42,202 620,697 Accumulated depreciation — (21,718) (3,811) (35,057) (137,836) (68,989) (1,770) (13,858) — (283,039) Accumulated impairment losses — (2,031) — (167) (32) — — (584) — (2,814)

Net book amount 12,598 113,077 11,537 50,051 44,343 44,520 1,644 14,872 42,202 334,844

Year ended 31 December 2009 Opening net book amount 12,598 113,077 11,537 50,051 44,343 44,520 1,644 14,872 42,202 334,844 Exchange differences 508 1,914 1,450 3,333 20 39 49 999 44 8,356 Additions 296 13,704 3,787 17,631 49,964 10,005 1,089 2,869 15,293 114,638 Transfer — 42,139 970 (2,086) 617 5,354 127 129 (51,409) (4,159) Disposals — (944) (89) (1,113) (2,256) (821) (342) (98) — (5,663) Depreciation — (6,126) (1,667) (9,706) (43,360) (15,213) (657) (4,442) — (81,171)

Closing net book amount 13,402 163,764 15,988 58,110 49,328 43,884 1,910 14,329 6,130 366,845

At 31 December 2009 Cost 13,402 193,247 21,630 92,772 213,815 124,066 4,056 31,981 6,130 701,099 Accumulated depreciation — (27,452) (5,642) (34,495) (164,455) (80,182) (2,146) (17,068) — (331,440) Accumulated impairment losses — (2,031) — (167) (32) — — (584) — (2,814)

Net book amount 13,402 163,764 15,988 58,110 49,328 43,884 1,910 14,329 6,130 366,845

Year ended 31 December 2010 Opening net book amount 13,402 163,764 15,988 58,110 49,328 43,884 1,910 14,329 6,130 366,845 Exchange differences 920 1,018 369 587 39 209 42 (44) 341 3,481 Additions — 1,184 7,248 26,710 68,832 28,184 1,048 9,266 63,595 206,067 Additions through business combinations — 3,092 — 556 — 189 46 667 15 4,565 Transfer 3,971 (6,809) 16,011 (6,235) — 1,175 — 868 (18,897) (9,916) Disposals — (3) (65) (1,743) (4,799) — (13) — — (6,623) Disposal of subsidiary — — (1,949) (3,243) — (9) (73) (149) (1,847) (7,270) Depreciation — (8,257) (3,792) (6,699) (56,150) (17,138) (535) (5,103) — (97,674) Impairment losses — (517) — — — — — — — (517)

Closing net book amount 18,293 153,472 33,810 68,043 57,250 56,494 2,425 19,834 49,337 458,958

At 31 December 2010 Cost 18,293 194,667 44,389 121,789 270,510 152,967 4,976 42,863 49,337 899,791 Accumulated depreciation — (38,647) (10,579) (53,579) (213,228) (96,473) (2,551) (22,445) — (437,502) Accumulated impairment losses — (2,548) — (167) (32) — — (584) — (3,331)

Net book amount 18,293 153,472 33,810 68,043 57,250 56,494 2,425 19,834 49,337 458,958

Depreciation expense of US$92,276,000 (2009: US$77,197,000) has been charged in ‘cost of goods sold’, US$694,000 (2009: US$386,000) in ‘selling and distribution expenses’, US$2,334,000 (2009: US$1,427,000) in ‘administrative expenses’ and US$2,370,000 (2009: US$2,161,000) in ‘research and development expenses’.

– I-56 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

17 Land use rights

The Group’s interests in land use rights represent prepaid operating lease payments and their net book values are analysed as follows:

Group 2010 2009 US$’000 US$’000

Outside Hong Kong, held on: Leases of over 50 years 1,336 1,383 Leases of between 10 and 50 years 26,072 22,414

27,408 23,797

2010 2009 US$’000 US$’000

Opening balance at 1 January 23,797 16,000 Exchange differences 144 173 Additions 7,327 3,760 Transfer (out)/in (3,368) 4,159 Amortisation of prepaid operating lease payments (492) (295)

Closing balance at 31 December 27,408 23,797

18 Investment properties

Group 2010 2009 US$’000 US$’000

Opening balance at 1 January 11,899 15,912 Transfer out (351) — Transfer in 13,635 — Net gain from fair value adjustment 3,063 352 Disposal — (4,365)

Closing balance at 31 December 28,246 11,899

The investment properties are in the PRC on land held on leases of between 10 and 50 years and in Poland on freehold land.

– I-57 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

The Group’s investment properties comprise:

Group 2010 2009 US$’000 US$’000

Freehold land 3,059 — Leasehold land 25,187 11,899

28,246 11,899

The Group leases out some of the investment properties under operating leases, for a period of one to nine years.

The investment properties were revalued as at 31 December 2010 by an independent and professionally qualified valuer, Jones Lang LaSalle Sallmanns Limited, on a market basis, which has taken into account the comparable market transactions and the net income derived from existing tenancies with due allowance for reversionary income potential.

19 Investments in subsidiaries and amounts due from subsidiaries

Company 2010 2009 US$’000 US$’000

Unlisted shares, at cost 59,066 59,066 Amounts due from subsidiaries 911,862 954,358

970,928 1,013,424 Less: Non-current portion (Note) (798,514) (797,710)

Current portion 172,414 215,714

Note: As at 31 December 2010 and 2009, the non-current amounts due from subsidiaries are unsecured, interest free and repayable on demand. However, the Company does not expect to recall these amounts within the next twelve months.

– I-58 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Particulars of the principal subsidiaries of the Group which, in the opinion of the directors, principally affect the profit and assets of the Group as at and for the year ended 31 December 2010 are as follows:

Place of incorporation/ establishment Particulars of issued and kind of legal share capital/registered Interest Name entity (Note (a)) Principal activities capital held

Shares directly held by the Company:

Top Victory British Virgin Investment holding 1,000 ordinary shares of 100% International Limited Islands US$1 each

Shares/investments indirectly held by the Company:

Top Victory Hong Kong Trading of computer HK$11,000 divided into 100% Investments Limited monitors and flat 1,000 voting class “A” TVs and sourcing ordinary shares of of materials HK$1 each and 10,000 non-voting deferred shares of HK$1 each (Note (c))

Top Victory Electronics The PRC, limited Production and sales Paid-in capital of 100% (Fujian) Company liability of computer US$40,000,000 Limited1 (Note (b)) company monitors

Top Victory Electronics Taiwan Research and 92,000,000 ordinary 100% (Taiwan) Company development of shares of NT$10 each Limited1 computer monitors and flat TVs and sourcing of certain components

TPV Electronics The PRC, limited Production and sales Paid-in capital of 100% (Fujian) Company liability of computer US$45,000,000 Limited1 company monitors and flat (Note (b)) TVs

TPV Electronics The PRC, limited Trading computer Paid-in capital of 100% (Fuzhou Bonded liability monitors and flat US$3,000,000 Zone) Trading company TVs Company Limited1 (Note (b))

TPV Technology The PRC, limited Production and sales Paid-in capital of 100% (Wuhan) Company liability of computer US$16,880,000 Limited1 company monitors (Note (b))

– I-59 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Place of incorporation/ establishment Particulars of issued and kind of legal share capital/registered Interest Name entity (Note (a)) Principal activities capital held

Wuhan Admiral The PRC, limited Trading of computer Paid-in capital of 100% Technology Limited1 liability monitors and flat RMB80,000,000 (Note (b)) company TVs

AOC International Germany Sales and 1 ordinary share of 100% (Europe) GmbH distribution of €230,081 each computer monitors and flat TVs

TPV International United States of Sales and 1,000,000 ordinary 100% (USA), Inc. America distribution of shares of US$1 each computer monitors and flat TVs

TPV International The Netherlands Provision of after- 5,000 ordinary shares of 100% (Netherlands) B.V. sales services €100 each

Envision Industria de Brazil Production and sales 50,000,000 ordinary 99.79% Productos of computer shares of Brazilian Electronicos Ltda. monitors and flat real $1 each TVs

TPV Technology The PRC, limited Production and sales Paid-in capital of 100% (Beijing) Company liability of computer RMB320,000,000 Limited1 company monitors and flat (Note (b)) TVs

TPV Technology The PRC, limited Production and sales Paid-in capital of 100% (Suzhou) Company liability of computer US$48,000,000 Limited1 company monitors and flat (Note (b)) TVs

TPV Technology Polska Poland Production and sales 300,000 ordinary share 100% Sp.z o.o of computer of PLN50 each monitors and flat TVs

TPV Display Polska Poland Production and sales 253,600 ordinary share 100% Sp.z o.o of computer of PLN500 each monitors and flat TVs

P-Harmony Monitors Taiwan Trading of computer 100,000 ordinary shares 100% (Taiwan) Limited1 monitors of NT$10 each

P-Harmony Monitors The Netherlands Trading of computer 300 ordinary shares of 100% Netherlands B.V. monitors €100 each

– I-60 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Place of incorporation/ establishment Particulars of issued and kind of legal share capital/registered Interest Name entity (Note (a)) Principal activities capital held

MMD-Monitors & The Netherlands Sales and 180 ordinary shares of 100% Displays Nederland distribution of €100 each B.V. computer monitors and flat TVs

MMD (Shanghai) The PRC, limited Sales and Paid-in capital of 100% Electronics Trading liability distribution of RMB6,150,060 Co., Ltd1 company computer (Note (b)) monitors and flat TVs

MMD (Shanghai) The PRC, limited Sales and Paid-in capital of 100% Electronics liability distribution of RMB3,413,500 Technology Co., Ltd1 company computer (Note (b)) monitors and flat TVs

TPV-INVENTA Hong Kong Sales and 20,000,000 ordinary 51% Holding Limited distribution of shares of US$1 each all-in-one PC products

TPV-INVENTA (Fujian) The PRC, limited Production and sales Paid-in capital of 51% Electronics liability of all-in-one PC US$15,000,000 Technology Co., Ltd1 company products (Note (b))

TPV Technology The PRC, limited Production and sales Paid-in capital of 80% (Qingdao) Co., Ltd1 liability of computer US$15,000,000 (Note (b)) company monitors, flat TVs and LCM modules

TPV Display The PRC, limited Production and sales Paid-in capital of 100% Technology (Xiamen) liability of flat TVs and US$25,000,000 Co., Ltd1 company LCM modules (Note (b))

TPV Display The PRC, limited Production and sales Paid-in capital of 100% Technology (China) liability of computer US$6,000,000 Co., Ltd1 company monitors, flat TVs (Note (b)) and all-in-one PC products

Top Victory Electronics Mexico Trading of computer Paid-in capital of 100% de Mexico, S.A. de monitors and flat US$150,055 C.V. TVs

– I-61 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Place of incorporation/ establishment Particulars of issued and kind of legal share capital/registered Interest Name entity (Note (a)) Principal activities capital held

AOC Australia Pty Ltd Australia Trading of computer Paid-in capital of 100% monitors and flat AUD$100 TVs

Trend Smart CE Mexico Provision of Paid-in capital of 100% México, S. de R.L. consultancy and US$11,766,078 de C.V intermediary services

Trend Smart America US Trading of flat TVs Paid-in capital of 100% Ltd US$200,000

TPV CIS Ltd Russia Production and sales Paid-in capital of 100% of flat TVs US$4,229,857

TPV do Brazil Industria Brazil Production and sales Paid-in capital of 99.81% de Componentes of computer Brazilian real Eletronicos Ltda. monitors and flat $6,650,000 TVs components

Brivictory Brasil Brazil Production and sales Paid-in capital of 99.81% Indústria de of LCM modules Brazilian real Eletrônicos Ltda. $11,185,483

HannStar-TPV Display The PRC, limited Production and sales Paid-in capital of 100% (Wuhan) Corp1 liability of LCM modules US$15,000,000 (Note (b)) company

MEXHK Servicios, S.A. Mexico Provision of Paid-in capital of 100% de C.V. consultancy and MXN$50,000 intermediary services

MMD-Monitors & Taiwan Sales and Paid-in capital of 100% Displays Taiwan Ltd distribution of NT$500,000 computer monitors and flat TVs

MMD-Monitors & Czech Republic Sales and Paid-in capital of 100% Displays Czech distribution of CZK$11,701,000 Republic s.r.o computer monitors and flat TVs

– I-62 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Place of incorporation/ establishment Particulars of issued and kind of legal share capital/registered Interest Name entity (Note (a)) Principal activities capital held

MMD Singapore Pte. Singapore Sales and Paid-in capital of 100% Ltd. distribution of US$20,000 computer monitors and flat TVs

MMD Hong Kong Hong Kong Investment holding Paid-in capital of HK$1 100% Holding Limited

1 English translation is for identification purpose only.

Notes:

(a) These subsidiaries principally operate in their places of incorporation/establishment.

(b) These subsidiaries were established as foreign-owned enterprises in the PRC.

(c) The non-voting deferred shares shall not confer on the holders thereof voting rights or any rights and privileges to participate in profits and assets except that Top Victory Investments Limited may distribute profits in respect of any financial year the first HK$100,000,000,000,000 thereof among the holders of the “A” ordinary shares and the balance, if any, among the holders of the “A” ordinary shares and the non-voting deferred shares. Top Victory Investments Limited may distribute assets as regards the first HK$100,000,000,000,000 thereof among the holders of “A” ordinary shares and the balance, if any, among the holders of “A” ordinary shares and non-voting deferred shares.

20 Investments in associates

Group 2010 2009 US$’000 US$’000

At 1 January 18,006 14,523 Additions 14,810 — Business combination — transfer to subsidiaries (1,196) — Dividend (8,102) — Share of profit 6,758 3,483

At 31 December 30,276 18,006

– I-63 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

The Group’s share of the results of its associates, all of which are unlisted, and the aggregated assets and liabilities, are as follows:

Place of incorporation/ Attributable to the Group % Interest Particulars of establishment held Name issued shares held (Note (a)) Assets Liabilities Revenues Profit/(loss) indirectly US$’000 US$’000 US$’000 US$’000

2010 Envision Peripherals, Inc. 3,520,700 ordinary shares US 22,396 (21,048) 100,567 204 24% with no par value

L&T Display Technology Paid-in capital of The PRC 77,695 (68,443) 67,022 922 49% (Fujian) Limited1 US$17,000,000

L&T Display Technology Paid-in capital of The PRC 129,886 (119,699) 267,500 4,307 49% (Xiamen) Limited1 US$12,000,000

CPT TPV Optical (Fujian) Paid-in capital of The PRC 19,519 (10,030) 8,758 3,330 20% Co., Ltd.1 (Note (b)) US$22,500,000

HannStar Display (Wuhan) Paid-in capital of The PRC N/A N/A 1,511 (2,005) N/A Corp.1 (Note (b) & (c)) US$15,000,000

249,496 (219,220) 445,358 6,758

Place of incorporation/ Attributable to the Group % Interest Particulars of establishment held Name issued shares held (Note (a)) Assets Liabilities Revenues Profit indirectly US$’000 US$’000 US$’000 US$’000

2009 Envision Peripherals, Inc. 2,000,000 ordinary shares US 53,077 (52,241) 158,540 544 24% with no par value

HannStar Display (Wuhan) Paid-in capital of The PRC 3,775 (830) 2,504 (230) 20% Corp.1 (Note (b)) US$15,000,000

CPT TPV Optical (Fujian) Paid-in capital of The PRC 22,338 (8,113) 7,694 3,169 20% Co., Ltd.1 (Note (b)) US$22,500,000

79,190 (61,184) 168,738 3,483

1 English translation is for identification purpose only.

Notes:

(a) These associates principally operate in their places of incorporation/establishment.

(b) These associates are established as foreign-owned enterprises in the PRC.

(c) This associate has become a wholly-owned subsidiary in December 2010 as the Group has further acquired 80% interest in this associate.

– I-64 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

21 Investments in jointly controlled entities

Group 2010 US$’000

At 1 January — Additions 12,634 Share of loss (1,614)

At 31 December 11,020

The Group’s share of the results of its jointly controlled entities, all of which is unlisted, and its aggregated assets and liabilities, are as follows:

Place of incorporation/ % Interest Attributable to the Group Particulars of issued establishment held Name shares held (Note (a)) Assets Liabilities Revenues Loss indirectly US$’000 US$’000 US$’000 US$’000

2010 Three Titans Technology Paid-in capital of The PRC 16,661 (12,327) 6,960 (460) 50% (Xiamen) Co., Ltd1 US$10,000,000 (Note (b))

BriVictory Display Technology 15,999,998 ordinary Malaysia and Poland 11,920 (5,234) 9,952 (1,154) 49% (Labuan) Corp. and its shares with US$1 wholly-owned subsidiary, each BriVictory Display Technology (Poland) Sp.z o.o

28,581 (17,561) 16,912 (1,614)

1 English translation is for identification purpose only.

(a) The jointly controlled entities principally operate in its place of incorporation.

(b) The jointly controlled entity is established as foreign-owned enterprises in the PRC.

There are no contingent liabilities relating to the group’s interest in the jointly controlled entity, and there are no contingent liabilities of the venture itself.

22 Available-for-sale financial assets

Group 2010 2009 US$’000 US$’000

At 1 January 3,177 3,031 Exchange differences — 2 Disposals — (532) Net (losses)/gains transferred to equity (Note 28) (165) 3,410 Impairment losses charged to the income statement (857) (2,734)

At 31 December 2,155 3,177

– I-65 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Available-for-sale financial assets include the following:

Group 2010 2009 US$’000 US$’000

Listed securities: — Equity securities — Taiwan 2,079 2,260 Unlisted securities — Equity securities — Taiwan and the PRC 76 917

2,155 3,177

Market value of listed securities 2,079 2,260

Available-for-sale financial assets are denominated in the following currencies:

Group 2010 2009 US$’000 US$’000

US dollars 17 500 New Taiwan dollars 2,138 2,677

2,155 3,177

23 Inventories

Group 2010 2009 US$’000 US$’000

Raw materials 583,978 384,518 Work-in-progress 51,803 23,529 Finished goods 666,731 446,282 Production supplies 2,491 1,884

1,305,003 856,213

The cost of inventories recognised as expense and included in ‘cost of goods sold’ amounted to US$10,521,898,000 (2009: US$7,183,853,000).

– I-66 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

24 Trade receivables, deposits, prepayments and other receivables

Group 2010 2009 US$’000 US$’000

Trade receivables 2,194,990 1,884,606 Less: Provision for impairment of trade receivables (1,785) (3,146)

Trade receivables, net 2,193,205 1,881,460 Deposits 3,881 3,186 Prepayments 41,703 27,315 Other receivables 347,697 250,384

2,586,486 2,162,345

The carrying amounts of trade receivables, deposits, prepayments and other receivables approximate their fair values.

The Group’s sales are on credit terms from 30 to 120 days and certain of its export sales are on letter of credit or documents against payment.

As at 31 December 2010 and 2009, the ageing analysis of the trade receivables based on invoice date were as follows:

Group 2010 2009 US$’000 US$’000

0–30 days 711,023 917,450 31–60 days 952,291 658,962 61–90 days 368,636 265,446 91–120 days 128,775 32,942 Over 120 days 34,265 9,806

2,194,990 1,884,606

There was a concentration of credit risk with respect to trade receivables as the Group’s sales are concentrated in several key customers. The Group’s credit risk control is disclosed in Note 3.

As at 31 December 2010, trade receivables of US$152,043,000 (2009: US$79,420,000) were past due but not impaired. These relate to a number of independent customers for whom there is no recent history of default. The past due ageing analysis of these trade receivables is as follows:

2010 2009 US$’000 US$’000

1–90 days 143,851 74,270 91–120 days 1,164 2,415 Over 120 days 7,028 2,735

152,043 79,420

– I-67 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

As at 31 December 2010, trade receivables of US$1,785,000 (2009: US$3,146,000) were impaired. The amount of the provision was US$1,785,000 as at 31 December 2010 (2009: US$3,146,000). The individually impaired receivables mainly relate to a number of small customers, which are in unexpectedly difficult economic situations. The ageing of these past due receivables is as follows:

2010 2009 US$’000 US$’000

1–120 days — 2,506 Over 120 days 1,785 640

1,785 3,146

The carrying amounts of the trade receivables, deposits, prepayments and other receivables are denominated in the following currencies:

Group 2010 2009 US$’000 US$’000

US dollars 1,574,948 1,378,946 Renminbi 506,742 366,796 Brazilian real 199,482 180,948 Mexican peso 13,378 14,463 Euros 160,476 60,347 Indian rupees 15,748 13,326 Polish zloty 76,209 128,952 New Taiwan Dollars 12,069 9,893 Other currencies 27,434 8,674

2,586,486 2,162,345

Movements on the provision for impairment of trade receivables are as follows:

2010 2009 US$’000 US$’000

At 1 January 3,146 3,970 Provision/(reversal) for impairment of receivables (Note 8) 1,377 (824) Receivables written off during the year as uncollectible (2,738) —

At 31 December 1,785 3,146

The creation and release of provision for impaired receivables have been included in administrative expenses in the income statement (Note 8). Amounts charged to the allowance account are generally written off when there is no expectation of recovering additional cash.

The other classes within trade and other receivables do not contain impaired assets.

The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above. The Group does not hold any collateral as security.

– I-68 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

25 Financial assets at fair value through profit or loss

Group 2010 2009 US$’000 US$’000

Listed securities, at market value: — Equity securities — Singapore 234 583 — Equity securities — Taiwan (Note) 2,328 2,337

2,562 2,920

Note: It represents convertible options of a underlying security listing in Taiwan with quoted prices in active markets.

Financial assets at fair value through profit or loss are presented within ‘operating activities’ as part of the changes in working capital in the consolidated statement of cash flows (Note 37).

Changes in fair values of financial assets at fair value through profit or loss are recorded in “other gains — net” in the income statement.

The fair value of the equity securities is based on their current bid prices in an active market.

26 Cash and cash equivalents and pledged bank deposit

Group Company 2010 2009 2010 2009 US$’000 US$’000 US$’000 US$’000

Cash at bank and on hand 175,760 270,438 372 1,190 Short-term bank deposits 8,666 — — —

184,426 270,438 372 1,190 Pledged bank deposit (Note 35) 2,311 — — —

186,737 270,438 372 1,190

Maximum exposure to credit risk 185,988 270,271 372 1,190

Cash and cash equivalents and pledged bank deposit are denominated in the following currencies:

Group Company 2010 2009 2010 2009 US$’000 US$’000 US$’000 US$’000

US dollars 114,123 127,868 207 105 Renminbi 43,191 95,083 — — Brazilian real 8,769 2,833 — — Euros 8,878 15,082 — — Other currencies 11,776 29,572 165 1,085

186,737 270,438 372 1,190

The conversion of Renminbi into foreign currencies is subject to the rules and regulations of foreign exchange control promulgated by the PRC government.

– I-69 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

27 Share capital

2010 2009 US$’000 US$’000

Authorised: 4,000,000,000 (2009: 4,000,000,000) ordinary shares of US$0.01 each 40,000 40,000

Issued and fully paid: 2,345,836,139 (2009: 2,111,252,525) ordinary shares of US$0.01 each 23,458 21,112

A summary of the above movements in issued share capital of the Company is as follows:

2010 2009 Number of Number of issued issued ordinary ordinary shares of Par value shares of Par value US$0.01 each US$’000 US$0.01 each US$’000

At 1 January 2,111,252,525 21,112 2,111,252,525 21,112 Issue of new shares (Note) 234,583,614 2,346 — —

At 31 December 2,345,836,139 23,458 2,111,252,525 21,112

Note: The Company issued 234,583,614 shares of HK$5.20 each for a total consideration of US$157,137,000 on 16 March 2010 to Mitsui.

Movements in the number of share options outstanding and their related weighted average exercise prices are as follows:

Number of share options At At Exercised Lapsed 31 Exercise 1 January during during December Date of grant price Note 2010 the year the year 2010

12 December 2007 HK$5.75 (i) 21,358,026 — (690,000) 20,668,026

Notes:

(i) These options are exercisable at HK$5.75 (US$0.73) per share in three trenches: the maximum percentage of share options exercisable within the periods commencing from 12 December 2008 to 11 December 2012, from 12 December 2009 to 11 December 2012 and from 12 December 2010 to 11 December 2012 are 20%, 50% and 100%, respectively.

(ii) During the year, 690,000 (2009: 63,241,800) share options were lapsed as a result of the cessation of employment of certain employees.

– I-70 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

28 Reserves

Group

Employee Available-for- Share share-based Reserve Merger sale financial Assets Convertible Share Capital redemption compensation Exchange fund difference assets fair revaluation bonds Other Retained premium reserve reserve reserve reserve (Note (a)) (Note (b)) value reserve surplus (Note (d)) reserves profits Total US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

Balance at 1 January 2009 604,764 68,202 12 8,513 3,463 52,935 10,001 (3,210) 5,308 58,271 (9,423) 555,676 1,354,512 Net fair value gains on available-for- sale financial assets, net of tax — — — — — — — 3,410 — — — — 3,410 Exchange differences — — — — 6,984 — — — — — — — 6,984 Profit for the year — — — — — — — — — — — 141,214 141,214 Employee share option scheme: — Employee share-based compensation benefits — — — 1,575 — — — — — — — — 1,575 Dividends paid: — 2008 final — — — — — — — — — — — (10,556) (10,556) — 2009 interim — — — — — — — — — — — (12,668) (12,668)

Balance at 31 December 2009 604,764 68,202 12 10,088 10,447 52,935 10,001 200 5,308 58,271 (9,423) 673,666 1,484,471

Represented by: Other reserves 1,454,913 Proposed final dividend 29,558

1,484,471

Balance at 1 January 2010 604,764 68,202 12 10,088 10,447 52,935 10,001 200 5,308 58,271 (9,423) 673,666 1,484,471

Net fair value gains on available-for- sale financial assets, net of tax — — — — — — — (165) — — — — (165) Exchange differences — — — — 6,250 — — — — — — — 6,250 Profit for the year — — — — — — — — — — — 169,349 169,349 Waiver of entitlement by non- controlling interests — — — — — — — — — — — 1,919 1,919 Transfer from retained profits — — — — — 11,998 — — — — — (11,998) — Employee share option scheme: — Employee share-based compensation benefits — — — 804 — — — — — — — — 804 Dividends paid: — 2009 final — — — — — — — — — — — (29,558) (29,558) — 2010 interim — — — — — — — — — — — (17,828) (17,828) Issue of new shares 154,791 — — — — — — — — — — — 154,791

Balance at 31 December 2010 759,555 68,202 12 10,892 16,697 64,933 10,001 35 5,308 58,271 (9,423) 785,550 1,770,033

Represented by: Other reserves 1,737,191 Proposed final dividend 32,842

1,770,033

– I-71 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Company Employee Share share-based Contributed Convertible Share redemption compensation surplus bonds Retained premium reserve reserve (Note (c)) (Note (d)) profits Total US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

Balance at 1 January 2009 604,764 12 8,513 11,433 58,271 83,011 766,004 Profit for the year — — — — — 38,258 38,258 Employee share option scheme: — Employee share-based compensation benefits — — 1,575 — — — 1,575 Dividends paid: — 2008 final — — — — — (10,556) (10,556) — 2009 interim — — — — — (12,668) (12,668)

Balance at 31 December 2009 604,764 12 10,088 11,433 58,271 98,045 782,613

Represented by: Other reserves 753,055 Proposed final dividend 29,558

782,613

Balance at 1 January 2010 604,764 12 10,088 11,433 58,271 98,045 782,613 Profit for the year — — — — — 36,425 36,425 Employee share option scheme: — Employee share-based compensation benefits — — 804 — — — 804 Dividends paid: — 2009 final — — — — — (29,558) (29,558) — 2010 interim — — — — — (17,828) (17,828) Issue of new shares 154,791 — — — — — 154,791

Balance at 31 December 2010 759,555 12 10,892 11,433 58,271 87,084 927,247

Represented by: Other reserves 894,405 Proposed final dividend 32,842

927,247

– I-72 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

(a) In accordance with the relevant PRC regulations applicable to wholly foreign owned enterprises, the PRC subsidiaries are required to appropriate to reserve fund an amount of not less than 10% of the profit after income tax, calculated based on PRC accounting standards. Should the accumulated total of this reserve fund reach 50% of the registered capital of the PRC subsidiaries, except for the TPV Technology (Suzhou) Company Limited whereas it is 30% of its registered capital, the subsidiaries will not be required to make any further appropriation. Pursuant to the relevant PRC regulations, this reserve can be used for making up losses and increase of capital.

(b) The merger difference of the Group represents the difference between the aggregate nominal value of the share capital of the subsidiaries acquired pursuant to a corporate reorganization (the “Reorganization”), which was completed on 21 September 1999, in preparation for a listing of the Company’s shares on The Stock Exchange of Hong Kong Limited, over the nominal value of the share capital of the Company issued in exchange thereof.

(c) The contributed surplus of the Company represents the difference between the nominal value of the Company’s shares issued in exchange for the share capital of the subsidiary acquired pursuant to the Reorganization and the value of the consolidated net assets of the subsidiary acquired. Under the Companies Act 1981 of Bermuda (as amended), the contributed surplus is distributable to the shareholders, provided that the Company will be able to pay its liabilities as they fall due and subsequent to the distribution, the aggregate amount of its total liabilities, as well as the issued share capital and premium is less than the realisable value of its assets.

(d) Convertible bonds in reserves represent the value of the equity conversion component. Details of the convertible bonds are set out in Note 36.

29 Borrowings

Group Company 2010 2009 2010 2009 US$’000 US$’000 US$’000 US$’000

Non-current Bank borrowings — 6,124 — —

Current Bank borrowings 472,533 — 20,000 — Convertible bonds (Note 36) — 209,212 — 209,212

472,533 209,212 20,000 209,212

Total borrowings 472,533 215,336 20,000 209,212

– I-73 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

As at 31 December 2010, the Group’s borrowings were repayable as follows:

Group Company Bank borrowings Convertible bonds Bank borrowings Convertible bonds 2010 2009 2010 2009 2010 2009 2010 2009 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

Within one year 472,533 — — 209,212 20,000 — — 209,212 Between one and two years — 6,124 — — — — — — Between two and five years — — — — — — — —

Wholly repayable within five years 472,533 6,124 — 209,212 20,000 — — 209,212

The effective interest rates at the balance sheet date were as follows:

2010 2009

Bank borrowings 0.79%–3.51% 2.26%–3.51% Convertible bonds (Note 36) — 5.29%

The carrying amounts of bank borrowings approximate their fair values as the bank borrowings are at floating interest rates.

The carrying amounts of the Group’s borrowings are denominated in the following currencies:

Group Company 2010 2009 2010 2009 US$’000 US$’000 US$’000 US$’000

US dollar 467,238 215,336 20,000 209,212 Renminbi 5,295 — — —

Total borrowings 472,533 215,336 20,000 209,212

As at 31 December 2010, the Group’s available and undrawn bank loan and trade finance facilities were as follows:

2010 2009 US$’000 US$’000

Total available and undrawn facilities 2,399,549 2,732,280

– I-74 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

30 Deferred income tax

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current income tax recoverable against current income tax liabilities and when the deferred income tax assets and liabilities relate to income tax levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis. The offset amounts are as follows:

Group 2010 2009 US$’000 US$’000

Deferred income tax assets: — Deferred income tax assets to be recovered after more than 12 months 1,258 2,242 — Deferred income tax assets to be recovered within 12 months 9,691 9,448

10,949 11,690

Deferred income tax liabilities: — Deferred income tax liabilities to be settled after more than 12 months (1,136) — — Deferred income tax liabilities to be settled within 12 months (8,390) —

(9,526) —

Deferred income tax assets (net) 1,423 11,690

No deferred income tax was charged or credited to equity during the year (2009: Nil).

The gross movement on the deferred income tax account is as follows:

2010 2009 US$’000 US$’000

At 1 January 11,690 15,712 Income statement charge (10,267) (4,022)

At 31 December 1,423 11,690

– I-75 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

The movements in deferred income tax assets during the year are as follows:

Unrealised Pension profits on Provisions obligation inventories Tax losses Total 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

At 1 January 11,531 12,332 1,265 1,147 524 924 — 1,948 13,320 16,351 Credited/(charged) to the income statement 1,625 (801) 57 118 (524) (400) 2,022 (1,948) 3,180 (3,031)

At 31 December 13,156 11,531 1,322 1,265 — 524 2,022 — 16,500 13,320

The movements in deferred income tax liabilities during the year are as follows:

Unrealised gains Fair value gains Unrealised on derivative on revaluation Withholding tax losses financial of investment on distributable on inventories instruments properties profits Total 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

At 1 January — — (649) (6) (981) (631) — — (1,630) (637) Credited/(charged) to the income statement (309) — (6,591) (643) (219) (350) (6,328) — (13,447) (993)

At 31 December (309) — (7,240) (649) (1,200) (981) (6,328) — (15,077) (1,630)

Deferred income tax assets are recognised for temporary differences to the extent that the realization of the related tax benefit through future taxable profits is probable.

Deferred income tax assets are recognised for tax loss carry-forwards to the extent that the realisation of the related tax benefit through future taxable profits is probable. The Group did not recognise deferred income tax assets in respect of losses amounting to US$115,685,000 (2009: US$113,829,000) that can be carried forward against future taxable income. Losses amounting to US$16,823,000 (2009: US$16,968,000) expire from 2014 to 2020.

Deferred income tax liabilities have not been recognised for the withholding tax and other taxes that would be payable on the unremitted earnings of certain subsidiaries. Such amounts are permanently invested. Unremitted earnings totaled US$256,145,000 at 31 December 2010 (2009: US$251,775,000).

– I-76 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

31 Pension obligations

The balance represented the Group’s obligations in a defined benefit plan for its employees in Taiwan in accordance with the relevant local regulations.

The obligations are calculated using the projected unit credit method, discounted to its present value. Such pension obligations as at 31 December 2010 were valued by Actuarial Consulting Co., Ltd, an independent actuary.

The amount recognised in the consolidated balance sheet is determined as follows:

Group 2010 2009 US$’000 US$’000

Present value of funded obligations 9,744 6,963 Fair value of plan assets (1,072) (905)

8,672 6,058 Unrecognised actuarial losses (2,836) (997)

Liability in the balance sheet 5,836 5,061

The amounts recognised in the consolidated income statement are as follows:

2010 2009 US$’000 US$’000

Current service cost 261 331 Interest cost 159 182 Expected return on plan assets (21) (15) Net actuarial losses recognised during the year 28 31

Total expense, within employee benefit expense (Note 9) 427 529

The actual loss on plan assets was US$5,000 (2009: US$6,000).

– I-77 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Movements in the pension obligations are as follows:

Group 2010 2009 US$’000 US$’000

At 1 January 6,963 6,662 Current service cost 261 331 Interest cost 159 182 Benefit paid (147) (353) Actuarial losses 1,618 141 Exchange differences 890 —

At 31 December 9,744 6,963

Movements in the fair value of plan assets are as follows:

Group 2010 2009 US$’000 US$’000

At 1 January 905 1,029 Expected return on plan assets 21 15 Contributions 199 182 Benefit paid (147) (353) Actuarial (losses)/gains (5) 32 Exchange differences 99 —

At 31 December 1,072 905

The principal actuarial assumptions used are as follows:

2010 2009

Discount rate 1.75% 2.25% Expected rate of return on plan assets 1.75% 2.25% Expected rate of future salary increment 3.50% 3.00%

32 Trade payables

At 31 December 2010, the ageing analysis of trade payables based on invoice date were as follows:

Group 2010 2009 US$’000 US$’000

0–30 days 885,979 864,112 31–60 days 835,998 609,572 61–90 days 254,710 237,108 Over 90 days 258,623 220,929

2,235,310 1,931,721

– I-78 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

The carrying amounts of trade payables approximate their fair values.

The carrying amounts of trade payables are denominated in the following currencies:

Group 2010 2009 US$’000 US$’000

US dollars 2,019,290 1,676,976 Renminbi 176,750 193,616 Euros 13,936 10,629 Other currencies 25,334 50,500

2,235,310 1,931,721

33 wARRANTY provisions

Group 2010 2009 US$’000 US$’000

At 1 January 67,272 56,945 Charged to the income statement (Note 8) 69,035 56,110 Utilised during the year (65,995) (45,783)

At 31 December 70,312 67,272

The Group gives warranties on certain products and undertakes to repair or replace items that fail to perform satisfactorily within a period ranging from twelve months to thirty-six months. The provision as at 31 December 2010 had been made for expected warranty claims on the products sold during the last thirty- six months. It is expected that the majority of this provision will be utilised in the next financial year, and all will be utilised within three years of the balance sheet date.

34 Derivative financial instruments

Group 2010 2009 Assets Liabilities Assets Liabilities US$’000 US$’000 US$’000 US$’000

Foreign exchange forward contracts 64,360 (52,471) 18,431 (1,128) Interest rate swaps 743 (11,366) 401 (16,446)

65,103 (63,837) 18,832 (17,574)

(a) Interest rate swaps

The total notional principal amount of the outstanding interest rate swaps as at 31 December 2010 was US$333,300,000 (2009: US$334,400,000).

– I-79 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

(b) Foreign exchange forward contracts

The total notional principal amounts of the outstanding foreign exchange forward contracts as at 31 December 2010 are as follows:

Group 2010 2009 US$’000 US$’000

Sell Renminbi for US dollars 3,678,641 2,853,000 Sell US dollars for Renminbi 3,266,000 2,858,000 Sell Japanese Yen for US dollars 56,900 5,800 Sell Euros for US dollars 208,254 73,719 Sell Brazilian Real for US dollars 49,800 42,500 Sell Indian Rupee for US dollars 11,000 10,000 Sell British Pounds for US dollars 7,077 — Sell US dollars for Russian Ruble 765 — Sell US dollars for New Taiwan Dollars 17,000 — Sell HK dollars for US dollars — 3,000 Sell Mexican Peso for US dollars — 1,400

35 Pledge of assets

As at 31 December 2010, Group’s bank deposit of US$2,311,000 was pledged as security for banking facilities of the Group (2009: Nil).

36 Convertible bonds

The Company issued 3.35% convertible bonds in the principal amount of US$211 million to Koninklijke Philips Electronics N.V. (“Philips”) on 5 September 2005 as part of the purchase consideration for a business combination.

The convertible bonds matured on the fifth anniversary of the issue date in accordance with the terms and conditions thereof. On 7 September 2010, the Company redeemed an aggregate principal amount of US$210,514,000, being all the outstanding principal amount of the convertible bonds. Upon the redemption, the convertible bonds had been forthwith cancelled.

The fair values of the liability component and the equity conversion component were determined at the time of the issuance of the bonds.

At the time of issuance, the fair value of the liability component, included in borrowings, was calculated using a market interest rate for an equivalent non-convertible bond. The equity conversion component was included in shareholders’ equity as at 31 December 2009 (Note 28).

– I-80 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

The convertible bonds recognised in the balance sheets are calculated as follows:

Group and Company 2010 2009 US$’000 US$’000

Equity component (Note (a)) — 58,271

Liability component At 1 January 209,212 206,015 Interest expense (Note 10) 8,452 10,229 Interest paid (7,150) (7,032) Repayment (210,514) —

At 31 December (Note 29) — 209,212

The fair value of the liability component of the convertible bonds as at 31 December 2009 amounted to US$207,183,000. The fair value was calculated by using cash flows discounted at a rate of 7.42% per annum.

Note:

(a) The equity component of the convertible bonds remained in equity of the Group and that of the Company on redemption.

– I-81 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

37 Notes to the consolidated cash flow statement

Reconciliation of operating profit to net cash (used in)/generated from operations

2010 2009 US$’000 US$’000

Operating profit 210,636 180,168 Depreciation 97,674 81,171 Amortisation of land use rights 492 295 Amortisation of intangible assets 3,747 1,921 Gain on disposal of a subsidiary (206) — Gain from a bargain purchase of a subsidiary (1,385) — (Gain)/loss on disposal of property, plant and equipment (826) 2,206 Loss on disposal of investment properties — 743 Share options granted to directors and employees 804 1,575 Unrealised losses on derivative financial instruments 1,992 14,742 Fair value gains on revaluation of investment properties (3,063) (352) Fair value losses/(gains) on financial assets at fair value through profit or loss 358 (664) Impairment losses on available-for-sale financial assets 857 2,734 Impairment losses on property, plant and equipment 517 —

Operating profit before working capital changes 311,597 284,539 Changes in working capital (excluding the effects of acquisition and exchange differences on consolidation): — trade receivables (312,073) (515,024) — deposits, prepayments and other receivables (111,507) (51,121) — inventories (451,419) (174,615) — trade payables 306,787 1,002,098 — warranty provisions, other payables and accruals and pension obligations 67,657 116,053

Net cash (used in)/generated from operations (188,958) 661,930

38 Corporate guarantees

Group Company 2010 2009 2010 2009 US$’000 US$’000 US$’000 US$’000

Guarantees in respect of banking facilities granted to: — subsidiaries — — 2,935,428 1,499,013 — an associate 3,000 3,000 — —

3,000 3,000 2,935,428 1,499,013

– I-82 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

39 Contingent liabilities

The Group has a number of legal and other proceedings at 31 December 2010. The directors are of the opinion that even if the outcome of the following litigations and complaints turn out to be unfavourable, the directors consider that their future settlement, in aggregate, may not have any material financial impact on the Group as a whole.

(a) In January 2007, a third party company filed a complaint in the United States of America against the Group, one of its associates and certain other third party companies. The complaint claims damages related to alleged infringement of a US Patent in respect of technology to decode Program Map Information in the Digital TVs (“Patent I”).

As far as the Group and its associate are concerned, it is alleged among other matters that:

(i) They have directly infringed, contributed to and/or actively induced infringement of the Patent I and are continuing to directly infringe, contribute to and/or actively induce infringement by making, using, importing, offering for sale, soliciting sales by others of, enabling or assisting with sales by others of, and/or selling in the United States of America, including, without limitation, ATSC TVs under the AOC brand name, which are covered by one or more claims of the Patent I; and

(ii) as a consequence of their infringement complained of herein, the plaintiff had been damaged and will continue to sustain damages by such acts in an amount to be determined at trial and will continue to suffer irreparable loss and injury.

The directors are of the opinion that while the proceedings were stayed to the extent the Group is concerned according to the Court’s Stipulation and Order of 23 October 2007, it is not probable to assess the outcome of the litigation for the time being. Even if the outcome of the litigation turns out to be unfavourable, the directors consider that its future settlement may not have any material financial impact on the Group as a whole and that an appropriate amount of provision has been made, if any.

(b) In November 2007, the U.S. International Trade Commission instituted an investigation based on a complaint filed by a third party against the Group, one of its associates and other third party companies. The claims of the complaint related to alleged infringement of Patent I.

As far as the Group and its associate are concerned, it is alleged among other matters that:

(i) their unfair acts include the unlicensed importation, sale for importation and/or sale after importation of digital televisions and products containing the same in the United States of America. The accused televisions employ patented technology related to Patent I; and

(ii) the complainant requested for issuance of limited exclusion order prohibiting the entry into the United States of America all of respondents’ imported televisions and products containing digital television covered by Patent I; and cease and desist order stopping importing, offering for sale, marketing, advertising, demonstrating, warehousing, distributing, selling and/or using such imported products of respondents in the United States of America.

On 23 November 2010, the proceedings before the U.S. International Trade Commission are terminated based on a withdrawal of the complaint by the complainant. The directors consider that the termination does not have any material financial impact on the Group as a whole.

– I-83 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

(c) In December 2008, a third party company filed a complaint in the United States of America against the Group, one of its associates and other third party companies. The complaint concerns claims of damages related to alleged infringement of certain patents in respect of technology of the manufacture of computer monitors and televisions (“Patent II”).

As far as the Group and its associate are concerned, it is alleged among other matters that:

(i) they manufacture, assemble, service, including unlicensed monitors and televisions, and sell those products through the United States of America, and know, expect, and intend that the products, including unlicensed monitors, will be sold in the market of the United States of America.

(ii) as a consequence of the infringement, the plaintiff has been damaged and would continue to sustain damages unless the court issues an injunction, enjoining them from further infringement of said patents.

The directors are of the opinion that while the proceedings are still ongoing, it is not probable to assess the outcome of the case for the time being. Even if the outcome turns out to be unfavourable, the directors consider that its future settlement may not have any material financial impact on the Group as a whole and that an appropriate amount of provision has been made, if any.

(d) In January 2009, a third party company filed a complaint in Germany against the Group, one of its associates and other third party companies. The complaint concerns claims of damages related to alleged infringement of certain patents in respect of technology of the manufacture of computer monitor (“Patent III”).

As far as the Group and its associate are concerned, it is alleged among other matters that:

(i) they had had infringed, actively induced, contributed to the infringement of Patent III by making, using, causing to be used, offering to sell, selling, causing to be sold, importing and/or causing to be imported monitors in Germany; and

(ii) as a consequence of the infringement, the plaintiff has been damaged and would continue to sustain damages unless the court grants an award of damages to it covering reasonably attorneys’ fees, costs and expenses that incurred by it for pursuing this action.

(e) In November 2009, a third party company filed a complaint in the United States of America against the Group and certain other third party companies. The complaint concerns claims of damages related to indemnification arising out of alleged infringement of certain patents in respect of technology of the manufacture of computer monitors.

As far as the Group is concerned, it is alleged among other matters that:

(i) the Group is a merchant regularly dealing in goods of the kind of accused products and has breached its warranty of title and freedom from a claim of patent in the United States of America.

– I-84 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

(ii) the third party company is entitled to indemnification from the Group for any liabilities it incurs, including reasonable attorneys’ fees, settlement amount or any awarded damage.

(f) In April 2010, in light of threatened claim for infringement of patents, the Group and one of its associates filed a complaint in the United States of America against three third party companies. Under this complaint, they seek a judicial declaration from the court that they have not infringed the patents of certain digital television technologies (“Patent IV”) and/or the Patent IV are invalid and unenforceable.

On 15 November 2010, the complaint is dismissed according to the Court’s Order. The directors consider that the dismissal does not have any material financial impact on the Group as a whole.

(g) In July 2010, a third party company filed a complaint in the United States of America against the Group. The complaint concerns claims of compensation related to indemnity obligations as provided in an agreement between the parties.

(h) In July 2010, a third party company filed a complaint in the United States of America against the Group, one of its associates and another third party company.

The complaint concerns claims of damages related to alleged infringement of certain patents in respect of technology of the manufacture of certain televisions (“Patent V”).

As far as the Group and its associate are concerned, it is alleged among other matters that:

(i) they have been infringing and continue to infringe the Patent V, and contributing to and actively inducing the infringement of Patent V by others in the United States of America.

(ii) as a consequence of the infringement, the plaintiff has been damaged and will continue to sustain damages unless the court enjoins them from further infringement of Patent V.

(i) In November 2010, a third party individual filed a complaint in the United States of America against the Group. The Complaint concerns alleged claims of personal injury caused by products that contain asbestos.

– I-85 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

The directors are of the opinion that while the complaint is not properly served yet, it is not probable to assess the outcome of the case for the time being. Even if the outcome turns out to be unfavourable, the directors consider that its future settlement may not have any material financial impact on the Group as a whole and that an appropriate amount of provision has been made, if any.

40 Commitments

(a) Capital commitments

Capital expenditure contracted for plant and equipment at the end of the reporting period but not yet incurred is as follows:

Group 2010 2009 US$’000 US$’000

No later than one year 46,011 10,886 Later than one year and no later than five years 6,956 5,828 Later than five years 189 247

53,156 16,961

As at 31 December 2010, the Group has commitments for capital contribution in proportion to the Group’s interests in joint ventures and commitment to acquisition of business amounting to US$7,886,000 (2009: US$51,325,000). The principal activities of these joint ventures and business are manufacturing and sale of LCD monitors, TVs and All-in-one products.

As at 31 December 2010, the Company did not have any significant capital commitments (2009: Nil).

(b) Operating lease commitments — Group as lessee

The future aggregate minimum lease payments under non-cancellable operating leases are as follows:

Group 2010 2009 US$’000 US$’000

No later than one year 6,987 7,085 Later than one year and no later than five years 14,581 11,427 Later than five years 7,792 12,085

29,360 30,597

As at 31 December 2010, the Company did not have any significant commitments under operating leases (2009: Nil).

– I-86 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

The future minimum lease payments receivable under non-cancellable operating leases are as follows:

Group 2010 2009 US$’000 US$’000

No later than one year 2,724 1,277 Later than one year and no later than five years 6,273 408 Later than five years 1,065 —

10,062 1,685

As at 31 December 2010, the Company did not have any significant future operating lease receivable arrangements (2009: Nil).

41 Business combination and disposal

(a) Purchase of a subsidiary

On 23 December 2010, the Group acquired a further 80% equity interests in HannStar Display (Wuhan) Corp. (the “Hannstar-TPV”) for a purchase consideration of US$3,400,000, in addition to 20% of the original equity interests in this associate, and obtained the control of Hannstar-TPV.

A gain from a bargain purchase of US$1,385,000 arising from the acquisition is attributable to the long-term relationship between the Group and the seller and it is included in the consolidated income statement within “other gains—net” for the year ended 31 December 2010.

– I-87 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

The following table summarises the consideration for Hannstar-TPV and the amounts of the assets acquired and liabilities assumed at the acquisition date, as well as the fair values at acquisition.

2010 US$’000

Purchase consideration: — Cash paid 1,200 — Cash payable 2,200

Total consideration 3,400 Fair value of equity interest in Hannstar-TPV held before the business combination 1,196

4,596

Recognised amounts of identifiable assets acquired and liabilities assumed — at fair value Cash and cash equivalents 437 Property, plant and equipment 4,565 Inventories 411 Trade and other receivables 3,029 Trade and other payables (2,461)

Total identifiable net assets 5,981

Gain from a bargain purchase (1,385)

The revenue and losses included in the consolidated income statement since 23 December 2010 contributed by Hannstar-TPV were insignificant.

Had Hannstar-TPV been consolidated from 1 January 2010, revenue would increase by US$7,555,000 and profit would decrease by US$3,633,000 in the consolidated income statement.

– I-88 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

(b) Disposal of interests in a subsidiary

A subsidiary of the Group offered its shares for subscription by third parties in July 2010, which resulted in dilution of the Group’s interests in this subsidiary from 85% to 50%. Consequently, this subsidiary has been deconsolidated and accounted for as a jointly controlled entity.

The following table summarises the amounts of the assets and liabilities deconsolidated at the transaction date.

2010 US$’000

Property, plant and equipment 7,270 Inventories 3,040 Trade and other receivables 2,136 Trade payables and other payables (9,947)

2,499 Gain on disposal 206

2,705 Less: Investments retained subsequent to disposal (4,794)

(2,089)

Satisfied by: Cash and cash equivalents received as consideration — Less: Cash and cash equivalents disposed (2,089)

(2,089)

The effect on the Group’s results from the disposal of this subsidiary is not material for the year ended 31 December 2010.

42 Related party transactions

As at 31 December 2010, the major shareholders of the Company are CEC, Mitsui and CMI, which owned 35.06%, 15.05% and 6.42% of the Company’s issued shares respectively.

The Group is controlled by CEC, which indirectly owns 35.06% of the Company’s shares. The directors regard CEC, a state-owned enterprise established under the laws of the PRC, as being the ultimate holding company of the Company. CEC is an enterprise directly administered by State-owned Assets Supervision and Administration Commission of the State Council.

(a) Significant transactions with related parties

During the years ended 31 December 2010 and 2009, the Group had the following significant transactions with its associates, jointly controlled entities and its substantial shareholders, CEC, Mitsui, CMI and Philips.

– I-89 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

All of the transactions were carried out in the normal course of the Group’s business and on terms as agreed between the transacting parties. They were summarised as follows:

2010 2009 US$’000 US$’000

Sales of finished goods to associates 524,611 585,921 Sales of finished goods to jointly controlled entities 18,806 — Sales of finished goods to CEC and its subsidiaries 465 — Sales of finished goods to Mitsui (Note (i)) 298,046 — Sales of finished goods to Philips and its subsidiaries (Note (ii)) 171,949 640,686 Sales of finished goods to CMI and its subsidiaries — 404 Purchases of raw materials from associates (2,355) — Purchases of raw materials from jointly controlled entities (2,329) — Purchases of raw materials from Mitsui (Note (i)) (254,683) — Purchases of raw materials from Philips and its subsidiaries (Note (ii)) (106,018) (284,659) Purchase of raw materials from CMI and its subsidiaries (847,793) (948,794) Commission paid to an associate (425) (840) Rental income from associates 1,956 1,033 Rental income from jointly controlled entities 347 — Royalty paid to Philips and its subsidiaries (Note (ii)) — (4,000)

(i) Mitsui has become a substantial shareholder of the Company since 16 March 2010.

(ii) Philips has ceased to be a substantial shareholder of the Company since 9 March 2010.

(iii) The above information is summarised only for the period these companies are categorised as related parties.

(b) key management compensation

Key management includes directors (executive and non-executive) and senior management. The compensation paid or payable to key management for employee services is shown below:

2010 2009 US$’000 US$’000

Salaries and other short-term employee benefits 3,679 2,692 Share-based payments 38 —

3,717 2,692

– I-90 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

2010 2009 US$’000 US$’000

Receivable from associates (Note (i)) 140,082 169,456

Receivable from jointly controlled entities (Note (i)) 6,471 —

Receivables from substantial shareholders and their subsidiaries (Note (ii)) — CEC and its subsidiaries — — — Mitsui 436 — — Philips and its subsidiaries (Note (iv)) — 224,782 — CMI and its subsidiaries 1,050 —

1,486 224,782

Payable to associates (Note (i)) 1,436 —

Payable to a jointly controlled entity (Note (i)) 2,141 —

Payables to substantial shareholders and their subsidiaries (Note (iii)) — Mitsui 7,916 — — Philips and its subsidiaries (Note (iv)) — 81,149 — CMI and its subsidiaries 67,215 154,383

75,131 235,532

Notes:

(i) Receivables from associates and jointly controlled entities and payables to associates and a jointly controlled entity were presented in the consolidated balance sheet within trade receivables and trade payables respectively.

(ii) Receivables from substantial shareholders and their subsidiaries of US$436,000 (2009: US$224,782,000) and US$1,050,000 (2009: Nil) were presented in the consolidated balance sheet within trade receivables and deposits, prepayments and other receivables respectively.

(iii) Payables to substantial shareholders and their subsidiaries of US$75,131,000 (2009: US$231,532,000) and Nil (2009: US$4,000,000) were presented in the consolidated balance sheet within trade payables and other payables and accruals respectively.

(iv) Philips has ceased to be a substantial shareholder of the Company since 9 March 2010.

(v) The above balances are presented only if the companies remained as related parties at the year end.

– I-91 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

43 Events after the balance sheet date

(a) Licensing of Philips trademarks

On 29 September 2010, AOC Holdings Limited (the “AOC”), a wholly owned subsidiary of the Company, entered into a five-year trademark license agreement with Philips, of which trademarks for the sales and distribution of colour TVs in the PRC was granted to AOC and its affiliates in which AOC is required to pay royalty on an annual basis, which is based on a percentage of the turnover of the the aforesaid TVs as specified in the agreement. The trademark license agreement was completed on 1 January 2011.

In addition, a share purchase agreement was signed in which AOC agreed to purchase two wholly-owned subsidiaries of Philips, Ebony Hong Kong Holding Limited and PTC Consumer Electronic Co., Limited, with a consideration of EUR1.23 million (equivalent to US$1,636,000). The two companies were holding the necessary spare parts, in-store samples, equipment, employees and contracts for the operations of the Philips Contributed Business. The Philips Contributed Business represents the entire business of the product management, operation, marketing, sale and distribution of the aforesaid TVs manufactured under the brand name “Philips” or any other brand name or trademark of the Philips Group as carried on by the Philips Group in the PRC prior to completion of the share purchase agreement.

The share purchase agreement was completed on 1 January 2011 and AOC acquired 100% of the share capital of Ebony Hong Kong Holding Limited and PTC Consumer Electronic Co., Limited, for a cash consideration of EUR1.23 million (equivalent to US$1,636,000) on 1 January 2011.

Details of net assets acquired and goodwill are as follows:

US$’000

Purchase consideration: — Cash payable (1,636)

Total purchase consideration (1,636) Less: Provisional fair value of net identifiable assets acquired (see below) 5,119

Gain from a bargain purchase 3,483

The assets and liabilities arising from the acquisition, provisionally determined, are as follows:

2010 US$’000

Inventories and spare parts 5,119 Intangible assets — trademark 35,147 Other payables and accruals (35,147)

Net assets acquired 5,119

– I-92 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

(b) Equity transactions

On 18 January 2011, 45 million share options were granted to directors and employees, vesting over four years, with an exercise price at HK$5.008 per share and expiry date on 17 January 2021.

On 21 March 2011, the Group issued RMB500,000,000 4.25% note to finance its expansion programme and working capital requirements. The note is repayable on 21 March 2014.

44 Approval of financial statements

The financial statements were approved by the board of directors on 23 March 2011.

– I-93 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

3. UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2011

Set out below are the unaudited condensed consolidated interim financial statements of the Group for six months ended 30 June 2011, together with the notes thereto, as extracted from the interim report of the Company for the six months ended 30 June 2011.

CONDENSED CONSOLIDATED INTERIM INCOME STATEMENT For the six months ended 30 June 2011 Unaudited Six months ended 30 June Note 2011 2010 US$’000 US$’000

Revenue 5 5,296,995 5,448,785 Cost of sales (4,978,896) (5,148,422)

Gross profit 318,099 300,363

Other income 12,275 14,302 Other gains — net 54,266 24,199 Selling and distribution expenses (159,280) (131,114) Administrative expenses (84,048) (54,940) Research and development expenses (60,915) (47,200)

Operating profit 5 & 6 80,397 105,610

Finance income 1,751 1,736 Finance costs (5,235) (6,669)

Finance costs — net 7 (3,484) (4,933)

Share of profits/(losses) of: Associates 836 (226) Jointly controlled entities (899) —

Profit before income tax 76,850 100,451

Income tax expense 8 (10,428) (20,196)

Profit for the period 66,422 80,255

– I-94 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Unaudited Six months ended 30 June Note 2011 2010 US$’000 US$’000

Profit attributable to: Owners of the Company 70,093 80,293 Non-controlling interests (3,671) (38)

66,422 80,255

Earnings per share for profit attributable to owners of the Company 9 — Basic US2.99 cents US3.57 cents

— Diluted US2.99 cents US3.37 cents

Dividends 10 14,778 17,828

The accompanying notes are an integral part of this condensed consolidated interim financial information.

– I-95 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME For the six months ended 30 June 2011 Unaudited Six months ended 30 June 2011 2010 US$’000 US$’000

Profit for the period 66,422 80,255

Other comprehensive income/(expense) Fair value losses on available-for-sale financial assets (661) (411) Currency translation differences 7,798 (2,926)

Other comprehensive income/(expense) for the period 7,137 (3,337)

Total comprehensive income for the period 73,559 76,918

Total comprehensive income for the period attributable to: — Owners of the Company 77,230 76,956 — Non-controlling interests (3,671) (38)

73,559 76,918

The accompanying notes are an integral part of this condensed consolidated interim financial information.

– I-96 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

CONDENSED CONSOLIDATED interim BALANCE SHEET As at 30 June 2011 Unaudited Audited 30 June 31 December Note 2011 2010 US$’000 US$’000

Assets Non-current assets Intangible assets 11 446,054 406,798 Property, plant and equipment 11 493,045 458,958 Land use rights 11 27,270 27,408 Investment properties 11 35,086 28,246 Investments in associates 34,513 30,276 Investments in jointly controlled entities 10,121 11,020 Available-for-sale financial assets 1,495 2,155 Deferred income tax assets 18,529 10,949 Other receivables 4,810 —

1,070,923 975,810

Current assets Inventories 1,354,926 1,305,003 Trade receivables 12 1,868,596 2,193,205 Deposits, prepayments and other receivables 323,332 393,281 Financial assets at fair value through profit or loss 2,633 2,562 Current income tax recoverable 8,170 5,431 Derivative financial instruments 45,707 65,103 Pledged bank deposit 22,944 2,311 Cash and cash equivalents 210,095 184,426

3,836,403 4,151,322

Total assets 4,907,326 5,127,132

– I-97 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Unaudited Audited 30 June 31 December Note 2011 2010 US$’000 US$’000

Equity Equity attributable to owners of Company Share capital 13 23,456 23,458 Other reserves 1,802,039 1,737,191 Dividends 14,778 32,842

1,840,273 1,793,491 Non-controlling interests (1,142) 2,529

Total equity 1,839,131 1,796,020

Liabilities Non-current liabilities Borrowings and loans 14 75,812 — Deferred income tax liabilities 9,674 9,526 Retirement benefit obligations 5,836 5,836 Other payables and accruals 54,761 22,460

146,083 37,822

Current liabilities Trade payables 15 2,135,152 2,235,310 Other payables and accruals 427,648 434,883 Current income tax liabilities 9,127 16,415 Warranty provisions 16 71,326 70,312 Derivative financial instruments 36,957 63,837 Borrowings and loans 14 241,902 472,533

2,922,112 3,293,290

Total liabilities 3,068,195 3,331,112

Total equity and liabilities 4,907,326 5,127,132

Net current assets 914,291 858,032

Total assets less current liabilities 1,985,214 1,833,842

The accompanying notes are an integral part of this condensed consolidated interim financial information.

– I-98 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY For the six months ended 30 June 2011

Unaudited

Attributable to owners of the Company

Employee Available- share- for-sale based financial Share com- assets Assets Non- Share Share Capital redemption pensation Exchange Reserve Merger fair value revaluation Convertible Other Retained controlling Total capital premium reserve reserve reserve reserve fund difference reserve surplus bonds reserves profits interests equity US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$000 US$’000 US$’000 US$’000

Balance at 1 January 2011 23,458 759,555 68,202 12 10,892 16,697 64,933 10,001 35 5,308 58,271 (9,423) 785,550 2,529 1,796,020 Comprehensive income: Profit/(loss) for the period — — — — — — — — — — — — 70,093 (3,671) 66,422 Other comprehensive expense: Fair value loss on available-for- sale financial assets — — — — — — — — (661) — — — — — (661) Currency translation differences — — — — — 7,798 — — — — — — — — 7,798

Total comprehensive income/ (expense) for the period ended 30 June 2011 — — — — — 7,798 — — (661) — — — 70,093 (3,671) 73,559

Employee share option scheme: Employee share-based compensation benefits — — — — 2,487 — — — — — — — — — 2,487 Repurchase of shares (2) (91) — — — — — — — — — — — — (93) 2010 final dividend paid — — — — — — — — — — — — (32,842) — (32,842)

Balance at 30 June 2011 23,456 759,464 68,202 12 13,379 24,495 64,933 10,001 (626) 5,308 58,271 (9,423) 822,801 (1,142) 1,839,131

Represented by: Reserves 808,023 Interim dividend 14,778

Balance at 30 June 2011 822,801

The accompanying notes are an integral part of this condensed consolidated interim financial information.

– I-99 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Unaudited

Attributable to owners of the Company

Balance at 1 January 2010 21,112 604,764 68,202 12 10,088 10,447 52,935 10,001 200 5,308 58,271 (9,423) 673,666 2,039 1,507,622 Comprehensive income: Profit/(loss) for the period — — — — — — — — — — — — 80,293 (38) 80,255 Other comprehensive expense: Fair value loss on available-for- sale financial assets — — — — — — — — (411) — — — — — (411) Currency translation differences — — — — — (2,926) — — — — — — — — (2,926)

Total comprehensive (expense)/ income for the period ended 30 June 2010 — — — — — (2,926) — — (411) — — — 80,293 (38) 76,918

Employee share option scheme: Employee share-based compensation benefits — — — — 423 — — — — — — — — — 423 Issuance of new shares 2,346 154,791 — — — — — — — — — — — — 157,137 Formation of non-wholly owned subsidiaries — — — — — — — — — — — — — 11,000 11,000 2010 final dividend paid — — — — — — — — — — — — (29,558) — (29,558)

Balance at 30 June 2010 23,458 759,555 68,202 12 10,511 7,521 52,935 10,001 (211) 5,308 58,271 (9,423) 724,401 13,001 1,723,542

Represented by: Reserves 706,573 Interim dividend 17,828

Balance at 30 June 2010 724,401

The accompanying notes are an integral part of this condensed consolidated interim financial information.

– I-100 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS For the six months ended 30 June 2011 Unaudited Six months ended 30 June Note 2011 2010 US$’000 US$’000

Net cash generated from/(used in) operations 357,234 (77,827) Interest paid (5,235) (4,273) Overseas income tax paid (27,887) (24,563)

Net cash generated from/(used in) operating activities 324,112 (106,663)

Cash flows from investing activities: Proceeds from disposals of property, plant and equipment 1,379 339 Purchase of property, plant and equipment 11 (90,283) (97,228) Purchase of intangible assets 11 (800) — Investments in associated companies (6,250) (14,810) Dividend from an associated company 2,849 5,461 Interest received 1,751 1,736 Acquisition of subsidiaries (1,650) —

Net cash used in investing activities (93,004) (104,502)

Cash flows from financing activities: Dividends paid to owners of the Company and non-controlling interests (32,842) (29,558) Issue of note payable 75,812 — Net (repayments)/inception of bank borrowings (230,631) 36,203 Repayment for derivative financial instruments — interest rate swap (1,500) (1,500) Pledged bank deposit (20,633) (1,217) (Repurchase)/issuance of new shares 13 (93) 157,137 Non-controlling interests’ contribution to new subsidiaries — 11,000

Net cash (used in)/generated from financing activities (209,887) 172,065

– I-101 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Unaudited Six months ended 30 June Note 2011 2010 US$’000 US$’000

Net increase/(decrease) in cash and cash equivalents 21,221 (39,100) Cash and cash equivalents at beginning of the period 184,426 270,438 Effect of foreign exchange rate changes 4,448 (1,859)

Cash and cash equivalents at end of the period 210,095 229,479

Analysis of cash and cash equivalents: Bank balances and cash 210,095 229,479

The accompanying notes are an integral part of this condensed consolidated interim financial information.

– I-102 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION

1 General information

TPV Technology Limited (the “Company”) and its subsidiaries (together the “Group”) designs, manufactures and sells computer monitors and LCD TV sets. The Group manufactures mainly in the People’s Republic of China (the “PRC”) and sells to Europe, North and South America, the PRC and other Asian countries.

The Company is a limited liability company incorporated in Bermuda. The address of its registered office is Canon’s Court, 22 Victoria Street, Hamilton HM 12, Bermuda.

The shares of the Company are primarily listed on the Exchange and secondarily listed on Singapore Exchange Limited.

This condensed consolidated interim financial information is presented in US dollars, unless otherwise stated. This condensed consolidated interim financial information was approved for issue on 24 August 2011.

This condensed consolidated interim financial information has not been audited.

2 Basis of preparation

This condensed consolidated interim financial information for the six months ended 30 June 2011 has been prepared in accordance with Hong Kong Accounting Standard (“HKAS”) 34, ‘Interim financial reporting’ issued by the Hong Kong Institute of Certified Public Accountants. The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2010, which have been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRS”).

3 Accounting policies

Except as described below, the accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2010, as described in those annual financial statements.

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.

(a) The following revised standard and amendment to standard are mandatory for the first time for the financial year beginning 1 January 2011

HKAS 24 (Revised), “Related Party Disclosures” is effective for annual period beginning on or after 1 January 2011. It introduces an exemption from all of the disclosure requirements of HKAS 24 for transactions among government related entities and the government. Those disclosures are replaced with a requirement to disclose:

• The name of the government and the nature of their relationship;

• The nature and amount of any individually significant transactions; and

• The extent of any collectively-significant transactions qualitatively or quantitatively.

It also clarifies and simplifies the definition of a related party.

– I-103 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Amendment to HKAS 34 ‘Interim financial reporting’ is effective for annual periods beginning on or after 1 January 2011. It emphasizes the existing disclosure principles in HKAS 34 and adds further guidance to illustrate how to apply these principles. Greater emphasis has been placed on the disclosure principles for significant events and transactions. Additional requirements cover disclosure of changes to fair value measurement (if significant), and the need to update relevant information from the most recent annual report. The change in accounting policy only results in additional disclosures.

The adoption of this revised standard and amendment to standard had no material financial effect on the Group’s result and financial position for the current or prior periods.

(b) The following amendments to standards and interpretations are effective for accounting periods commencing on or after 1 January 2011, but are not relevant to the Group

HKAS 32 (Amendment) Classification of Rights Issues HK(IFRIC) — Int 14 Prepayments of a Minimum Funding Requirement HK(IFRIC) — Int 19 Extinguishing Financial Liabilities with Equity Instruments HKFRSs (Amendment) Third Improvements to HKFRSs 2010

The adoption of these amendments to standards and interpretations had no material effect on the preparation and presentation of the results and financial position of the Group for the current or prior accounting periods.

(c) The following new revised standards and amendments to standards have been issued but are not effective for the financial year beginning 1 January 2011 and have not been early adopted

The Group had not early adopted the following new revised standards and amendments to standards that have been issued but not yet effective in these condensed consolidated interim financial information.

Effective for accounting periods beginning on or after

HKFRS 7 (Amendment) Disclosures — Transfers of Financial Assets 1 July 2011 HKAS 12 (Amendment) Deferred tax: Recovery of Underlying Assets 1 January 2012 HKFRS 9 Financial Instruments 1 January 2013 HKFRS 10 Consolidated Financial Statements 1 January 2013 HKFRS 11 Joint Arrangements 1 January 2013 HKFRS 12 Disclosure of Interests in Other Entities 1 January 2013 HKFRS 13 Fair Value Measurement 1 January 2013 HKAS 1 (Amendment) Presentation of Financial Statements 1 January 2013 HKAS 19 (2011) Employee Benefits 1 January 2013 HKAS 27 (2011) Separate Financial Statements 1 January 2013 HKAS 28 (2011) Investments in Associates and 1 January 2013 Joint Ventures

The directors of the Company anticipate that the adoption of the above new revised standards and amendments to standards may result in new or amended presentation and disclosures on the condensed consolidated interim financial information but will have no significant impact on the Group’s results and financial position. The directors of the Company will adopt the new revised standards and amendments to standards when they become effective.

– I-104 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

4 Estimates

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2010.

5 Segment information

The Group’s businesses are managed according to the nature of their operations and the products and services they provide. Each of the Group’s operating segments represents a strategic business unit that offers products and services which are subject to risks and returns that are different from those of other operating segments.

The Group is organized on a worldwide basis into two main operating segments. They are (i) Monitors; and (ii) TVs.

Others mainly comprise the sales of chassis, spare parts, CKD/SKD and other general corporate items.

The Group’s chief operating decision-maker assesses the performance of the operating segments based on a measure of adjusted operating profit. Export incentives received, fiscal refund received, finance income, finance costs and share of profits less losses of associated companies and jointly controlled entities are not included in the result for each operating segment that is reviewed by the Group’s chief operating decision- maker.

Sales are categorized according to the final destination of shipment. There are no inter-segment sales.

Segment assets consist primarily of intangible assets, property, plant and equipment, land use rights, inventories, trade receivables, deposits and prepayments, and other receivables. They exclude investment properties, investments in associates and jointly controlled entities, available-for-sale financial assets, deferred income tax assets, non-current other receivables, financial assets at fair value through profit or loss, current income tax recoverable, derivative financial instruments, pledged bank deposits and cash and cash equivalents, which are managed on a central basis. These are included in the reconciliation to total balance sheet assets.

– I-105 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Segment liabilities mainly comprise trade payables, other payables and accruals and warranty provisions. They exclude borrowings and loans, current income tax liabilities, deferred tax liabilities and derivative financial instruments, which are managed on a central basis. These are included in the reconciliation to total balance sheet liabilities.

The segment results for the six months ended 30 June 2011 are as follows:

For the six months ended 30 June 2011 Monitors TVs Others Total US$’000 US$’000 US$’000 US$’000

Revenue from external customers 2,938,413 1,768,930 589,652 5,296,995

Cost of sales (2,729,043) (1,681,543) (568,310) (4,978,896) Other income excluding export incentives received and fiscal refund received 4,162 2,506 836 7,504 Operating expenses (132,261) (97,654) (20,062) (249,977)

Adjusted operating profit/ (loss) 81,271 (7,761) 2,116 75,626

Depreciation of property, plant and equipment 18,344 22,401 13,893 54,638 Amortization of land use rights — — 320 320 Amortization of intangible assets 1,883 4,522 359 6,764

– I-106 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

The segment results for the six months ended 30 June 2010 are as follows:

For the six months ended 30 June 2010 Monitors TVs Others Total US$’000 US$’000 US$’000 US$’000

Revenue from external customers 3,120,618 1,837,632 490,535 5,448,785

Cost of sales (2,922,942) (1,746,411) (479,069) (5,148,422) Other income excluding export incentives received and fiscal refund received 2,761 1,625 433 4,819 Operating expenses (125,916) (76,265) (6,874) (209,055)

Adjusted operating profit 74,521 16,581 5,025 96,127

Depreciation of property, plant and equipment 18,262 28,106 1,396 47,764 Amortization of land use rights — — 230 230 Amortization of intangible assets — — 1,660 1,660

The segment assets and liabilities at 30 June 2011 are as follows:

Monitors TVs Others Total US$’000 US$’000 US$’000 US$’000

Segment assets 2,566,037 1,689,613 257,573 4,513,223

Segment liabilities (1,720,537) (825,120) (149,066) (2,694,723)

The segment assets and liabilities at 31 December 2010 are as follows:

Monitors TVs Others Total US$’000 US$’000 US$’000 US$’000

Segment assets 2,425,543 2,004,633 354,477 4,784,653

Segment liabilities (1,656,736) (1,014,042) (98,023) (2,768,801)

– I-107 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

A reconciliation of adjusted operating profit for reportable segments to total profit before income tax is provided as follows:

Six months ended 30 June 2011 2010 US$’000 US$’000

Adjusted operating profit for reportable segments 75,626 96,127 Export incentives received 2,256 6,732 Fiscal refund received 2,515 2,751

Operating profit 80,397 105,610 Finance income 1,751 1,736 Finance costs (5,235) (6,669) Share of profits/(losses) of associates 836 (226) Share of losses of jointly controlled entities (899) —

Profit before income tax 76,850 100,451

A reconciliation of segment assets to total assets is provided as follows:

30 June 31 December 2011 2010 US$’000 US$’000

Segment assets 4,513,223 4,784,653 Investment properties 35,086 28,246 Investments in associates 34,513 30,276 Investments in jointly controlled entities 10,121 11,020 Available-for-sale financial assets 1,495 2,155 Deferred income tax assets 18,529 10,949 Non-current other receivables 4,810 — Financial assets at fair value through profit or loss 2,633 2,562 Current income tax recoverable 8,170 5,431 Derivative financial instruments 45,707 65,103 Pledged bank deposit 22,944 2,311 Cash and cash equivalents 210,095 184,426

Total assets per balance sheet 4,907,326 5,127,132

– I-108 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

A reconciliation of segment liabilities to total liabilities is provided as follows:

30 June 31 December 2011 2010 US$’000 US$’000

Segment liabilities (2,694,723) (2,768,801) Current income tax liabilities (9,127) (16,415) Derivative financial instruments (36,957) (63,837) Deferred income tax liabilities (9,674) (9,526) Borrowings and loans (317,714) (472,533)

Total liabilities per balance sheet (3,068,195) (3,331,112)

The segment results by geography are as follows:

30 June 30 June 2011 2010 US$’000 US$’000

Europe 1,460,008 1,724,942 North America 834,394 987,151 South America 564,030 375,324 Africa 23,627 14,913 Australia 36,390 48,394 The PRC 1,511,981 1,667,554 Rest of the world 866,565 630,507

5,296,995 5,448,785

At 30 June 2011, the total of non-current assets other than financial instruments and deferred income tax assets located in the PRC is US$412,698,000 (31 December 2010: US$402,264,000), and the total of these non-current assets located in other countries is US$638,201,000 (31 December 2010: US$560,442,000).

For the six months ended 30 June 2011, revenues of approximately US$495,684,000 (six months ended 30 June 2010: US$543,396,000) are derived from a single external customer. These revenues are attributable to the sales of monitors, TVs and others. This customer is also the second largest debtors at the balance sheet date.

– I-109 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

6 Operating profit

The following items have been credited/(charged) to the operating profit during the interim period:

Six months ended 30 June 2011 2010 US$’000 US$’000

Net exchange gains/(losses) 43,488 (28,012) Realized and unrealized gains on foreign exchange forward contracts — net 5,197 52,122 Realized and unrealized gains on interest rate swaps — net 1,009 1,137 Fair value gains/(losses) on financial assets at fair value through profit or loss 71 (362) (Provision)/reversal of provision for impairment of trade receivables (366) 768 Write-down of inventories to net realizable value (1,835) (10,469) Employee benefit expense (including directors’ emoluments) (211,407) (145,488) Depreciation of property, plant and equipment (54,638) (47,764) Amortization of land use rights (320) (230) Amortization of intangible assets (6,764) (1,660) Loss on disposal of property, plant and equipment (397) (76) Fair value gains on revaluation of investment properties (Note 11) 3,890 — Impairment losses on available-for-sale financial assets — (686) Provision for warranty (Note 16) (41,581) (31,273) Gain from a bargain purchase of subsidiaries (Note 17) 610 — Transaction costs in relation to acquisition of subsidiaries (Note 17) (116) —

7 Finance costs — net

Six months ended 30 June 2011 2010 US$’000 US$’000

Interest expense on borrowings and loans 4,198 747 Interest expense on convertible bonds — 5,922 Interest expense on note payable 1,037 —

5,235 6,669 Interest income on short-term bank deposits (1,751) (1,736)

Finance costs — net 3,484 4,933

No borrowing costs were capitalized during the six months ended 30 June 2011 and 2010.

– I-110 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

8 Income tax expense

No provision for Hong Kong profits tax has been made as the Group had no estimated assessable profit generated in Hong Kong for the six months ended 30 June 2011 (six months ended 30 June 2010: Nil).

Taxation on overseas profits has been calculated on the estimated assessable profits for the six months ended 30 June 2011 at the rates of taxation prevailing in the countries/places in which the Group operates.

The amount of taxation charged to the condensed consolidated interim income statement represents:

Six months ended 30 June 2011 2010 US$’000 US$’000

Current income tax — Overseas taxation 17,860 18,898 Deferred income tax (credit)/charge (7,432) 1,298

Income tax expense 10,428 20,196

9 Earnings per share

(a) Basic

Basic earnings per share is calculated by dividing the profit attributable to owners of the Company by the weighted average number of ordinary shares in issue during the period.

Six months ended 30 June 2011 2010

Profit attributable to owners of the Company (US$’000) 70,093 80,293 Weighted average number of ordinary shares in issue (thousands) 2,345,835 2,248,633 Basic earnings per share (US cents per share) 2.99 3.57

(b) Diluted

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares.

– I-111 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Six months ended 30 June 2011 2010

Profit attributable to owners of the Company (US$’000) 70,093 80,293 Interest expense on convertible bonds (US$’000) — 5,922

Profit used to determine diluted earnings per share (US$’000) 70,093 86,215

Weighted average number of ordinary shares in issue (thousands) 2,345,835 2,248,633 Adjustments for — assumed conversion of convertible bonds (thousands) — 313,289

Weighted average number of ordinary shares for diluted earnings per share (thousands) 2,345,835 2,561,922

Diluted earnings per share (US cents per share) 2.99 3.37

10 Dividends

Six months ended 30 June 2011 2010 US$’000 US$’000

Interim, of US0.63 cent (2010: US0.76 cent) per ordinary share 14,778 17,828

An interim dividend of US0.63 cent per share (2010: US0.76 cent per share) was declared by the board of directors on 24 August 2011. It is payable on or about Friday, 14 October 2011 to shareholders whose names are on the register as at 7 October 2011. This interim dividend, amounting to US$14,778,000 (2010: US$17,828,000), has not been recognized as a liability in this interim financial information. It will be recognized in shareholders’ equity in the year ending 31 December 2011.

– I-112 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

11 Capital expenditures and intangible assets

Property, Intangible assets plant and Land use Investment equipment rights properties Goodwill Trademarks Patents Total US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

Six months ended 30 June 2011 Opening net book amount as at 1 January 2011 458,958 27,408 28,246 389,098 15,460 2,240 406,798 Exchange differences 3,168 182 — — — — — Net gain from fair value adjustment — — 3,890 — — — — Additions 90,283 — — — 45,220 800 46,020 Disposals (1,776) — — — — — — Transfers (2,950) — 2,950 — — — — Depreciation and amortization (54,638) (320) — — (6,432) (332) (6,764)

Closing net book amount as at 30 June 2011 493,045 27,270 35,086 389,098 54,248 2,708 446,054

Six months ended 30 June 2010 Opening net book amount as at 1 January 2010 366,845 23,797 11,899 389,098 18,947 — 408,045 Exchange differences (1,076) 18 — — — — — Additions 97,228 — — — — — — Disposals (415) — — — — — — Reclassification 3,760 (3,760) — — — — — Transfers (13,756) (815) 14,571 — — — — Depreciation and amortization (47,764) (230) — — (1,660) — (1,660)

Closing net book amount as at 30 June 2010 404,822 19,010 26,470 389,098 17,287 — 406,385

– I-113 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

12 Trade receivables

30 June 31 December 2011 2010 US$’000 US$’000

Trade receivables 1,870,747 2,194,990 Less: provision for impairment of receivables (2,151) (1,785)

Trade receivables, net 1,868,596 2,193,205

The carrying amounts of trade receivables approximate their fair values.

The Group’s sales are with credit terms from 30 to 120 days and certain of its export sales are on letters of credit or documents against payment.

As at 30 June 2011 and 31 December 2010, the ageing analysis of trade receivables on invoice date were as follows:

30 June 31 December 2011 2010 US$’000 US$’000

0–30 days 890,191 711,023 31–60 days 617,164 952,291 61–90 days 290,232 368,636 91–120 days 47,184 128,775 Over 120 days 25,976 34,265

1,870,747 2,194,990

13 Share capital

30 June 31 December 2011 2010 US$’000 US$’000

Authorized: 4,000,000,000 ordinary shares of US$0.01 each 40,000 40,000

Issued and fully paid: 2,345,636,139 (2010: 2,345,836,139) ordinary shares of US$0.01 each 23,456 23,458

– I-114 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

A summary of the movements in issued share capital of the Company is as follows:

2011 2010 Number of Number of issued ordinary issued ordinary shares of Par value shares of Par value US$0.01 each US$’000 US$0.01 each US$’000

Opening balance at 1 January 2,345,836,139 23,458 2,111,252,525 21,112 Issue of new shares — — 234,583,614 2,346 Repurchase of shares (200,000) (2) — —

Closing balance at 30 June 2,345,636,139 23,456 2,345,836,139 23,458

The Group acquired 200,000 of its own shares through purchases on the Exchange on 29 June 2011. The total amount paid to acquire the shares was HK$725,000 (equivalent to US$93,000) and has been deducted from shareholders’ equity. All shares issued were fully paid.

Movements in the number of share options outstanding and their related weighted average exercise prices are as follows:

Number of share options At Granted Lapsed At Exercise 1 January during the during the 30 June Date of grant price 2011 period period 2011

12 December 2007 HK$5.750 20,668,026 — (80,000) 20,588,026 18 January 2011 HK$5.008 — 45,000,000 — 45,000,000

For the six months ended 30 June 2011, 80,000 share options (six months ended 30 June 2010: 470,000) were lapsed as a result of the cessation of employment of certain employees.

14 Borrowings and loans

30 June 31 December 2011 2010 US$’000 US$’000

Non-current Note payable (Note b) 75,812 —

Current Bank borrowings and loans (Note a) 241,902 472,533

Total borrowings and loans 317,714 472,533

– I-115 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Movements in borrowings and loans are analysed as follows:

Six months ended 30 June 2011 2010 US$’000 US$’000

At 1 January 472,533 215,336 Net inceptions of borrowings (230,631) 36,203 Issue of note payable 75,812 — Convertible bonds — liability component — 2,396

At 30 June 317,714 253,935

Notes:

(a) The carrying amounts of bank borrowings approximate their fair values as the bank borrowings are at floating interest rate.

(b) Unsecured RMB denominated note payable was issued at a total nominal value of RMB500,000,000 bearing an interest rate of 4.25% per annum on 21 March 2011. The note payable matures three years from the issue date at their nominal value of RMB500,000,000. The carrying value of the note payable, net of transaction cost of US$1,582,000, was determined at issuance of the note payable.

30 June 31 December 2011 2010 US$’000 US$’000

Undrawn borrowing facilities 2,758,987 2,399,549

15 Trade payables

As at 30 June 2011 and 31 December 2010, the ageing analysis of trade payables based on invoice date were as follows:

30 June 31 December 2011 2010 US$’000 US$’000

0–30 days 839,278 885,979 31–60 days 590,578 835,998 61–90 days 341,307 254,710 Over 90 days 363,989 258,623

2,135,152 2,235,310

The carrying amounts of trade payables approximate their fair values.

– I-116 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

16 wARRANTY provisions

Six months ended 30 June 2011 2010 US$’000 US$’000

At 1 January 70,312 67,272 Charged to the income statement (Note 6) 41,581 31,273 Utilized during the period (40,567) (27,465)

At 30 June 71,326 71,080

The Group gives warranties on certain products and undertakes to repair or replace items that fail to perform satisfactorily within a period ranging from twelve months to thirty-six months. The provision as of 30 June 2011 had been made for expected warranty claims on products sold during the last thirty-six months. It is expected that the majority of this provision will be utilized in the next twelve months, and all will be utilized in the next thirty-six months.

17 Business combination

On 29 September 2010, AOC Holdings Limited (“AOC”), a wholly owned subsidiary of the Company, entered into a five-year trademark license agreement with Koninklijke Philips Electronics N.V. (“Philips”), under which trademarks for the sales and distribution of colour TVs in the PRC was granted to AOC and its affiliates in which AOC is required to pay royalty on an annual basis, which is based on higher of percentage of the turnover of the aforesaid TVs and a minimum royalty of EUR6,800,000 a year as specified in the agreement. The trademark license agreement has been effective since 1 January 2011.

In addition, a share purchase agreement was signed pursuant to which AOC agreed to purchase two wholly-owned subsidiaries of Philips, Ebony Hong Kong Holding Limited and PTC Consumer Electronic Co., Limited, with a consideration of EUR1,240,000 (equivalent to US$1,636,000). The two companies were holding the necessary spare parts, in-store samples, equipment, employees and contracts for the operations of the Philips Contributed Business. The Philips Contributed Business represents the entire business of the product management, operation, marketing, sale and distribution of the aforesaid TVs manufactured under the brand name “Philips” or any other brand name or trademark of the Philips Group as carried on by the Philips Group in the PRC prior to completion of the share purchase agreement.

The share purchase agreement was completed on 1 January 2011 and AOC acquired 100% of the share capital of Ebony Hong Kong Holding Limited and PTC Consumer Electronic Co., Limited, for a cash consideration of EUR1,240,000 (equivalent to US$1,650,000) on 1 January 2011.

Fair value US$’000

Purchase consideration — Cash paid 1,650

– I-117 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Recognized amounts of identifiable assets acquired:

Carrying amount Fair value US$’000 US$’000

Trademark — 39,013 Inventories and spare parts 1,650 2,260 Other payables — (39,013)

Total identifiable net assets 1,650 2,260 Bargain purchase 610

Acquisition-related costs (included in administrative expenses in the condensed consolidated income statement for the six months ended 30 June 2011) 116

The acquired business contributed revenue of US$86,881,000 and net loss of US$10,877,000 to the Group for the six months ended 30 June 2011.

18 Corporate guarantees

30 June 31 December 2011 2010 US$’000 US$’000

Guarantees in respect of banking facilities granted to an associated company — 3,000

19 Contingent liabilities

The directors closely monitor the outstanding complaints and disputes over patents and assess the outcome of the complaints and disputes accordingly. The directors consider that the dismissed and settled complaints and disputes as well as outstanding complaints and disputes do not have any material financial impact on the Group as a whole. Even if the outcome turns out to be unfavourable, the directors consider that its future settlement may not have any material financial impact on the Group as a whole.

(a) In January 2007, a third party company filed a complaint in the United States of America against the Group, one of its associated companies and certain other third party companies. The complaint claims damages related to alleged infringement of a US Patent in respect of technology to decode Program Map Information in the Digital TVs (“Patent I”).

As far as the Group and its associated company are concerned, it is alleged among other matters that:

(i) they have directly infringed, contributed to and/or actively induced infringement of the Patent I and are continuing to directly infringe, contribute to and/or actively induce infringement by making, using, importing, offering for sale, soliciting sales by others of, enabling or assisting with sales by others of, and/or selling in the United States of America, including, without limitation, ATSC TVs under the AOC brand name, which are covered by one or more claims of the Patent I; and

– I-118 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

On 23 May 2011, the case was dismissed by the Court according to the Settlement Agreement between the parties.

(b) In December 2008, a third party company filed a complaint in the United States of America against the Group, one of its associated companies and other third party companies. The complaint concerns claims of damages related to alleged infringement of certain patents in respect of technology of the manufacture of computer monitors and televisions (“Patent II”).

As far as the Group and its associated company are concerned, it is alleged among other matters that:

On 14 June 2011, the parties settled the dispute over televisions, while otherwise the settlement to the part of computer monitors is still pending arbitration.

(c) In January 2009, a third party company filed a complaint in Germany against the Group, one of its associated companies and other third party companies. The complaint concerns claims of damages related to alleged infringement of certain patents in respect of technology of the manufacture of computer monitors (“Patent III”).

As far as the Group and its associated company are concerned, it is alleged among other matters that:

(i) they had infringed, actively induced, contributed to the infringement of Patent III by making, using, causing to be used, offering to sell, selling, causing to be sold, importing and/or causing to be imported monitors in Germany; and

The directors are of the opinion that while the appellate proceedings are still ongoing, it is not probable to assess the outcome of the case for the time being.

(d) In November 2009, a third party company filed a complaint in the United States of America against the Group and certain other third party companies. The complaint concerns claims of damages related to indemnification arising out of alleged infringement of certain patents in respect of technology of the manufacture of computer monitors.

– I-119 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

As far as the Group is concerned, it is alleged among other matters that:

(i) the Group is a merchant regularly dealing in goods of the kind of accused products and has breached its warranty of title and freedom from a claim of patent in the United States of America.

(ii) the third party company is entitled to indemnification from the Group for any liabilities it incurs, including reasonable attorneys’ fees, settlement amount or any awarded damage.

The complaint is now in the process of dismissal.

(e) In July 2010, a third party company filed a complaint in the United States of America against the Group. The complaint concerns claims of compensation related to indemnity obligations as provided in an agreement between the parties.

The directors are of the opinion that while the proceedings are still ongoing, it is not probable to assess the outcome of the case for the time being.

(f) In July 2010, a third party company filed a complaint in the United States of America against the Group, one of its associated companies and another third party company.

The complaint concerns claims of damages related to alleged infringement of certain patents in respect of technology of the manufacture of certain televisions (“Patent IV”).

As far as the Group and its associated company are concerned, it is alleged among other matters that:

(i) they have been infringing and continue to infringe the Patent IV, and contributing to and actively inducing the infringement of Patent IV by others in the United States of America.

(ii) as a consequence of the infringement, the plaintiff has been damaged and will continue to sustain damages unless the court enjoins them from further infringement of Patent IV.

The directors are of the opinion that while the proceedings are still ongoing, it is not probable to assess the outcome of the case for the time being.

(g) In November 2010, a third party individual filed a complaint in the United States of America against the Group. The Complaint concerns alleged claims of personal injury caused by products that contain asbestos.

The directors are of the opinion that while the proceedings are still ongoing, it is not probable to assess the outcome of the case for the time being.

– I-120 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

20 Commitments

(a) Capital commitments

30 June 31 December 2011 2010 US$’000 US$’000

Capital commitments for plant and equipment — Contracted but not provided for 78,218 53,156

Capital commitments for investments in a jointly controlled entities and associates — Contracted but not provided for — 7,886

(b) Commitments under operating leases

As at 30 June 2011, the Group had total future aggregate minimum lease payments under non- cancellable operating leases in respect of land and buildings as follows:

30 June 31 December 2011 2010 US$’000 US$’000

Not later than one year 25,574 6,987 Later than one year and not later than five years 16,839 14,581 Later than five years 8,418 7,792

50,831 29,360

As at 30 June 2011, the Group’s future aggregate minimum rental receivables under non- cancellable operating leases are as follows:

30 June 31 December 2011 2010 US$’000 US$’000

Not later than one year 2,975 2,724 Later than one year and not later than five years 8,587 6,273 Later than five years 18,599 1,065

30,161 10,062

– I-121 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

21 Related party transactions

As at 30 June 2011, the major shareholders of the Company are CEC, Mitsui and CMI, which owned 35.06%, 20.19% and 6.42% of the Company’s issued shares respectively.

(a) Significant transactions with related parties

During the six months ended 30 June 2011 and 2010, the Group had the following significant transactions with its associated companies and its substantial shareholders, CEC, Mitsui, CMI and Philips (Note i).

All of the transactions were carried out in the normal course of the Group’s business and were summarized as follows:

Six months ended 30 June 2011 2010 US$’000 US$’000

Sales of finished goods to associates 178,580 322,879 Sales of finished goods to a jointly controlled entity 2 — Sales of finished goods to CEC and its subsidiaries 815 151 Sales of finished goods to Mitsui 17,792 178,616 Sales of finished goods to Philips and its subsidiaries (Note i) — 171,949 Purchases of raw materials from associates (12,745) (718) Purchases of raw materials from jointly controlled entities (92,499) — Purchases of raw materials from Mitsui (23,372) (202,688) Purchases of raw materials from Philips and its subsidiaries (Note i) — (106,018) Purchases of raw materials from CMI and its subsidiaries (336,913) (510,480) Commission paid to an associate — (216) Rental income from an associate 1,175 604 Rental income from a jointly controlled entity 488 —

Notes:

(i) Philips has ceased to be a substantial shareholder of the Company since 9 March 2010.

The above transactions were conducted in the normal course of business at prices and terms as agreed between the transacting parties.

(b) key management compensation

Six months ended 30 June 2011 2010 US$’000 US$’000

Salaries and other short-term employee benefits 636 572 Share-based payments 221 20

857 592

– I-122 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

30 June 31 December 2011 2010 US$’000 US$’000

Receivables from related parties: Associates (Note (i)) 97,811 140,082

Jointly controlled entities (Note (i)) 347 6,471

Substantial shareholders and their subsidiaries (Note (ii)) 2,592 1,486

Payables to related parties: Associates (Note (i)) 7,855 1,436

Jointly controlled entities (Note (i)) 9,448 2,141

Substantial shareholders and their subsidiaries (Note (iii)) 70,654 75,131

Notes:

(i) Receivables from and payables to associated companies and jointly controlled entities were presented in the condensed consolidated interim balance sheet within trade receivables and trade payables, respectively.

(ii) Receivables from substantial shareholders and their subsidiaries of US$2,592,000 (2010: US$436,000) and US$ nil (2010: US$1,050,000) were presented in the condensed consolidated interim balance sheet within trade receivables and deposits, prepayments and other receivables respectively.

(iii) Payables to substantial shareholders and their subsidiaries of US$70,654,000 (2010: US$75,131,000) were presented in the condensed consolidated interim balance sheet within trade payables.

22 Event after balance sheet date

On 5 August 2011, a subsidiary of the Group has committed to acquiring the land use right for a piece of land in Shanghai, the PRC, from the government agency at a consideration of RMB282,850,000 (equivalent to US$43,717,000). The directors of the Company expect the transaction to be completed by the end of year 2011.

23 Seasonality

The sales of computer monitors and TVs are subject to seasonal fluctuations, with peak demand in the third and fourth quarters of the year. This is due to seasonal holiday periods.

– I-123 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

4. UNAUDITED CONSOLIDATED QUARTERLY RESULTS FOR THE NINE MONTHS ENDED 30 SEPTEMBER 2011

Set out below are the unaudited consolidated quarterly results of the Group for the nine months ended 30 September 2011, together with the notes thereto, as extracted from the announcement of unaudited quarterly results for the nine months ended 30 September 2011 of the Company.

QUARTERLY RESULTS

The board of directors (the “Board”) of TPV Technology Limited (the “Company”) are pleased to announce the unaudited condensed consolidated results of the Company and its subsidiaries (“TPV” or the “Group”) for the three months ended 30 September 2011, and the unaudited condensed consolidated results for the nine months ended 30 September 2011 together with the comparative figures for the previous period as follows: Unaudited Unaudited Three months ended Nine months ended 30 September 30 September 2011 2010 2011 2010 Note US$’000 US$’000 US$’000 US$’000

Revenue 2,854,792 2,950,041 8,151,787 8,398,826 Cost of sales (2,682,966) (2,801,257) (7,661,862) (7,949,679)

Gross profit 171,826 148,784 489,925 449,147 Other income 5,195 3,882 17,469 18,185 Other gains — net (8,951) 10,197 45,315 34,396 Selling and distribution expenses (80,177) (64,374) (239,456) (195,488) Administrative expenses (45,332) (32,647) (129,379) (87,588) Research and development expenses (30,019) (28,958) (90,935) (76,158)

Operating profit 12,542 36,884 92,939 142,494

Finance income 1,213 519 2,964 2,255 Finance costs (2,851) (5,753) (8,086) (12,422)

Finance costs — net (1,638) (5,234) (5,122) (10,167) Share of profits of associates and jointly controlled entities 255 1,190 193 964

Profit before income tax 11,159 32,840 88,010 133,291 Income tax expense 1 (1,856) (5,757) (12,284) (25,953)

Profit for the period 9,303 27,083 75,726 107,338

– I-124 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Unaudited Unaudited Three months ended Nine months ended 30 September 30 September 2011 2010 2011 2010 Note US$’000 US$’000 US$’000 US$’000

Profit attributable to: Owners of the Company 10,011 31,963 80,105 112,255 Non-controlling interests (708) (4,880) (4,379) (4,917)

9,303 27,083 75,726 107,338

Earnings per share attributable to owners of the Company 2

— Basic US0.43 cent US1.36 cents US3.41 cents US4.92 cents

— Diluted US0.43 cent US1.33 cents US3.41 cents US4.70 cents

Dividends 3 — — 14,778 17,828

– I-125 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

CONDENSED CONSOLIDATED BALANCE SHEET Unaudited Audited 30 September 31 December 2011 2010 US$’000 US$’000

ASSETS Non-current assets Intangible assets 442,444 406,798 Property, plant and equipment 484,640 458,958 Land use rights 27,158 27,408 Investment properties 35,086 28,246 Investments in associates 34,481 30,276 Investments in jointly controlled entities 9,614 11,020 Available-for-sale financial assets 780 2,155 Deferred income tax assets 29,048 10,949 Other receivables 1,562 —

1,064,813 975,810

Current assets Inventories 1,379,955 1,305,003 Trade receivables 2,347,916 2,193,205 Deposits, prepayments and other receivables 274,650 393,281 Financial assets at fair value through profit or loss 6,903 2,562 Current income tax recoverable 2,246 5,431 Derivative financial instruments 53,198 65,103 Pledged bank deposit 8,604 2,311 Cash and cash equivalents 183,816 184,426

4,257,288 4,151,322

Total assets 5,322,101 5,127,132

EQUITY Equity attributable to owners of the Company Share capital 23,456 23,458 Other reserves 1,781,654 1,737,191 Dividends — 32,842

1,805,110 1,793,491 Non-controlling interests (50) 2,529

Total equity 1,805,060 1,796,020

– I-126 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Unaudited Audited 30 September 31 December 2011 2010 US$’000 US$’000

LIABILITIES Non-current liabilities Borrowings and loans 76,782 — Deferred income tax liabilities 10,339 9,526 Retirement benefit obligations 5,836 5,836 Other payables and accruals 51,294 22,460

144,251 37,822

Current liabilities Trade payables 2,562,759 2,235,310 Other payables and accruals 427,896 434,883 Current income tax liabilities 15,364 16,415 Warranty provisions 66,575 70,312 Derivative financial instruments 31,551 63,837 Borrowings and loans 268,645 472,533

3,372,790 3,293,290

Total liabilities 3,517,041 3,331,112

Total equity and liabilities 5,322,101 5,127,132

Net current assets 884,498 858,032

Total assets less current liabilities 1,949,311 1,833,842

– I-127 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Notes:

1. Income tax expense

No provision for Hong Kong profits tax has been made as the Group has no estimated assessable profit generated in Hong Kong profits tax for the period (three months ended 30 September 2010: Nil).

Taxation on overseas profits has been calculated on the estimated assessable profits for the period at the rates of taxation prevailing in the countries/places in which the Group operates.

The amount of taxation charged to the condensed consolidated income statement represents:

Three months ended 30 September 2011 2010 US$’000 US$’000

Current income tax — Overseas taxation 5,006 8,501 Deferred income tax charge (3,150) (2,744)

Income tax expense 1,856 5,757

2. Earnings per share

(a) Basic

Basic earnings per share is calculated by dividing the profit attributable to owners of the Company by the weighted average number of ordinary shares in issue during the period.

Three months ended 30 September 2011 2010

Profit attributable to owners of the Company (US$’000) 10,011 31,963 Weighted average number of ordinary shares in issue (thousands) 2,345,636 2,345,836 Basic earnings per share (US cents per share) 0.43 1.36

– I-128 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

(b) Diluted

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares.

Three months ended 30 September 2011 2010

Profit attributable to owners of the Company (US$’000) 10,011 31,963 Interest expense on convertible bonds (US$’000) — 2,471

Profit used to determine diluted earnings per share (US$’000) — 34,434

Weighted average number of ordinary shares in issue (thousands) 2,345,636 2,345,836 Adjustments for — assumed conversion of convertible bonds (thousands) — 234,966

Weighted average number of ordinary shares for diluted earnings per share (thousands) 2,345,636 2,580,803

Diluted earnings per share (US cents per share) 0.43 1.33

3. Dividend

The Board does not recommend the payment of an interim dividend for the three months ended 30 September 2011 (three months ended 30 September 2010: Nil).

– I-129 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

The following is the text of a report received from the Company’s reporting accountant, PricewaterhouseCoopers, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this circular.

23 December 2011

The Directors TPV Technology Limited

Dear Sirs,

We report on the financial information of the Philips television business (the ‘‘Philips Business’’), as the acquisition target with details as set out in the announcements dated 18 April 2011 and 9 November 2011 issued by TPV Technology Limited (the ‘‘Company’’), which comprises the combined statements of financial position of the Philips Business as at 31 December 2008, 2009 and 2010 and 3 July 2011, and the combined income statements, the combined statements of comprehensive income, the combined statements of changes in equity and the combined statements of cash flows of the Philips Business for each of the years ended 31 December 2008, 2009 and 2010 and the period from 1 January 2011 to 3 July 2011 (the ‘‘Relevant Periods’’)andasummaryof significant accounting policies and other explanatory information. This financial information has been prepared by the directors of the Company and is set out in Sections I to III below for inclusion in Appendix II to the circular of the Company dated 23 December 2011 (the ‘‘Circular’’) in connection with the proposed acquisition of the Philips Business by the Company. Background of the proposed transaction and the details of the acquisition of the business and the relevant assets and liabilities are further described in Notes 1, 2 and 6 of Section II below.

The management of the Philips Business have prepared the combined financial statements of the Philips Business for the Relevant Periods, in accordance with Hong Kong Financial Reporting Standards (‘‘HKFRSs’’) issued by the Hong Kong Institute of Certified Public Accountants (the ‘‘HKICPA’’)(the‘‘Underlying Financial Statements’’). We have audited the Underlying Financial Statements in accordance with Hong Kong Standards on Auditing (the ‘‘HKSA’’) issued by the HKICPA pursuant to separate terms of engagement.

– II-1 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

The management of the Philips Business are responsible for the preparation of the Underlying Financial Statements that give a true and fair view in accordance with HKFRSs, and for such internal control as the management of the Philips Business determine is necessary to enable the preparation of the Underlying Financial Statements that are free from material misstatement, whether due to fraud or error.

The financial information has been prepared based on the Underlying Financial Statements, with no adjustment made thereon, and on the basis set out in Note 6 of Section II below.

Directors’ Responsibility for the Financial Information

The directors of the Company are responsible for the preparation of the financial information that gives a true and fair view in accordance with the basis of presentation set out in Note 6 of Section II below and in accordance with HKFRSs and accounting policies adopted by the Company and its subsidiaries (together, the ‘‘Group’’)assetout in the interim report of the Company for the six months ended 30 June 2011.

Reporting Accountant’s Responsibility

Our responsibility is to express an opinion on the financial information and to report our opinion to you. We carried out our procedures in accordance with the Auditing Guideline 3.340 ‘‘Prospectuses and the Reporting Accountant’’ issued by the HKICPA.

Opinion

In our opinion, the financial information gives, for the purpose of this report and presented on the basis set out in Note 6 of Section II below, a true and fair view of the combined state of affairs of the Philips Business as at 31 December 2008, 2009 and 2010 and 3 July 2011 and of the Philips Business’scombinedresultsandcashflowsforthe Relevant Periods then ended.

Review of stub period comparative financial information

We have reviewed the stub period comparative financial information set out in Sections I to II below included in Appendix II to the Circular which comprises the combined income statement, the combined statement of comprehensive income, the combined statement of changes in equity and the combined statement of cash flows of the Philips Business for the period from 1 January 2010 to 4 July 2010 and a summary of significant accounting policies and other explanatory information (the ‘‘Stub Period Comparative Financial Information’’).

The directors of the Company and the management of the Philips Business are responsible for the preparation and presentation of the Stub Period Comparative Financial Information in accordance with the basis of presentation set out in Note 6 of Section II below, and the accounting policies set out in Note 3 of Section II below and the accounting policies adopted by the Group as set out in the interim report of the Company for the six months ended 30 June 2011.

– II-2 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

Our responsibility is to express a conclusion on the Stub Period Comparative Financial Information based on our review. We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410, ‘‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’’ issued by the HKICPA. A review of Stub Period Comparative Financial Information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with HKSA and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Based on our review, nothing has come to our attention that causes us to believe that the Stub Period Comparative Financial Information, for the purpose of this report and presented on the basis set out in Note 6 of Section II below, is not prepared, in all material respects, in accordance with the accounting policies set out in Note 3 of Section II below.

– II-3 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

I. COMBINED FINANCIAL INFORMATION (in millions of USD except where otherwise stated)

A. Combined Income Statements

Year ended Six months ended 31 December 4July 3July 2008 2009 2010 2010 2011 Notes USD m USD m USD m USD m USD m Unaudited

Revenues 7 5,224 3,951 4,083 1,947 1,658 Cost of goods sold (4,537) (3,211) (3,469) (1,662) (1,513)

Gross profit 687 740 614 285 145 Other income and expense 10 70 21 6 9 — Realised and unrealised gains/(losses) on foreign exchange forward contracts — net 78 (44) 8 62 (77) Selling and distribution expenses (844) (689) (514) (262) (251) Administrative expenses (138) (98) (101) (46) (68) Research and development expenses (164) (141) (117) (51) (84)

Operating loss 8, 9 (311) (211) (104) (3) (335) Finance costs — (1) (1) (1) (1)

Loss before income tax (311) (212) (105) (4) (336) Income tax expense 11 (19) (19) (20) (10) (5)

Loss for the year/period (330) (231) (125) (14) (341)

As the Philips Business historically did not constitute a legal entity, a disclosure of earnings per share is not relevant.

– II-4 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

B. Combined Statements of Comprehensive Income

Year ended Six months ended 31 December 4July 3July 2008 2009 2010 2010 2011 Notes USD m USD m USD m USD m USD m Unaudited

Loss for the year/period (330) (231) (125) (14) (341) Other comprehensive income: Exchange differences, net of tax 22 6 (9) 34 57 (23)

Other comprehensive income/(loss) for the year/period, net of tax 6 (9) 34 57 (23)

Total comprehensive income/(loss) for the year/period (324) (240) (91) 43 (364)

Attributable to: — Owner (324) (240) (91) 43 (364)

– II-5 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

C. Combined Statements of Financial position

31 31 31 December December December 3July 2008 2009 2010 2011 Notes USD m USD m USD m USD m

Assets Non-current assets Intangible assets 12 51 38 51 34 Property, plant and equipment 13 67 49 48 59 Non-currentreceivables 5897

Total non-current assets 123 95 108 100

Current assets Inventories 15 351 190 506 473 Trade and other receivables 14 588 575 616 444 Derivative financial instruments 16 13 14 39 2 Other current assets 17 114 102 135 149

Total current assets 1,066 881 1,296 1,068

Total assets 1,189 976 1,404 1,168

Owner’snetinvestment— deficit/(surplus) 22 198 439 310 (39)

Liabilities Non-current liabilities Long-term warranty provision 19 (28) (36) (29) (20) Other long-term provisions 19 (43) (80) (44) (51) Non-current other payables and accruals 18 — (1) (7) (7)

Total non-current liabilities (71) (117) (80) (78)

Current liabilities Trade payables 20 (821) (807) (1,131) (637) Other payables and accruals 21 (386) (337) (353) (285) Short-term warranty provision 19 (72) (98) (85) (83) Other short-term provisions 19 (31) (45) (38) (15) Derivative financial instruments 16 (6) (11) (27) (31)

Total current liabilities (1,316) (1,298) (1,634) (1,051)

Total liabilities (1,387) (1,415) (1,714) (1,129)

Total liabilities and owner’snet investment (1,189) (976) (1,404) (1,168)

Net current (liabilities)/assets (250) (417) (338) 17

Total assets less current liabilities (127) (322) (230) 117

– II-6 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

D. Combined Statements of Cash flows

Year ended Six months ended 31 December 4July 3July 2008 2009 2010 2010 2011 USD m USD m USD m USD m USD m Unaudited

Cash flow from operating activities Operating loss (311) (211) (104) (3) (335) Add back: Depreciation, amortization & impairments 170113883964 Stock based compensation 3 1 1 ——

Subtotal (138) (97) (15) 36 (271)

Change in inventories 96 161 (316) (201) 33 Change in trade and other receivables 247 13 (41) (87) 172 Change in trade payables (270) (14) 324 166 (494) Change in other payables and accruals 5(49)16(49)(68) Change in other current assets (19) 12 (33) 9 (14) Change in non-current receivables, other payables and accruals (5) (2) 5 14 2 Change in derivative financial instruments (42) 4 (9) (26) 41

Change in working capital 12 125 (54) (174) (328)

Change in warranty provisions (20) 34 (20) (20) (11) Change in other provisions 30 51 (43) (30) (16)

Changes in provisions 10 85 (63) (50) (27) Foreign exchange impact on working capital and provisions 4 (12) 29 57 (24)

Net cash (used in)/generated from operations (112) 101 (103) (131) (650) Interest paid — (1) (1) (1) (1) Income tax paid (19) (19) (20) (10) (5)

Net cash (used in)/generated from operating activities (131) 81 (124) (142) (656)

– II-7 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

Year ended Six months ended 31 December 4July 3July 2008 2009 2010 2010 2011 USD m USD m USD m USD m USD m Unaudited

Cash flow from investing activities Proceeds from disposal of property, plant and equipment 4 2 ——— Purchase of property, plant and equipment (79)(44)(44)(31)(32) Additions to intangible assets (48) (37) (51) (33) (25)

Net cash used in investing activities (123)(79)(95)(64)(57)

Cash flow from financing activities Additional funding from/ (distribution to) owner 254 (2) 219 206 713

Net cash generated from/(used in) financing activities 254 (2) 219 206 713

Net (decrease)/increase in cash and cash equivalents ————— Cash and cash equivalents at beginning of year/period —————

Cash and cash equivalents at end of year/period —————

– II-8 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

E. Combined Statements of changes in equity

Year ended Six months ended 31 December 4July 3July 2008 2009 2010 2010 2011 Deficit/(Surplus) USD m USD m USD m USD m USD m Unaudited

Balance at beginning of year/period 131 198 439 439 310

Comprehensive (income)/loss — Loss for the year/period 330 231 125 14 341 Other comprehensive (income)/loss — Exchange differences, net of tax (6) 9 (34) (57) 23

Total comprehensive (income)/loss 324 240 91 (43) 364

Transactions with owner — (Additional funding from)/ distribution to owner (254) 2 (219) (206) (713) — Stock based compensation (3) (1) (1) ——

Transactions with owner (257) 1 (220) (206) (713)

Balance at end of year/period 198 439 310 190 (39)

– II-9 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

II. NOTES TO COMBINED FINANCIAL INFORMATION

1. PARTICULARS OF THE BUSINESS AND THE TARGET GROUP

Background

On 18 April 2011, TPV Technology Limited (‘‘TPV’’) and Royal Philips Electronics N.V. (‘‘Philips’’) announced that they have entered into a term sheet to transfer the Philips television business into a joint venture as part of a long-term strategic partnership (the ‘‘Transaction’’). The new joint venture will be 70% owned by TPV and 30% by Philips.

The joint venture (‘‘JVCo’’) will be responsible for the design, manufacturing, distribution, marketing and sales of Philips television business worldwide,with the exception of mainland China, India, United States, Canada, Mexico and certain countries in South America (the ‘‘Philips Business’’). As part of the transaction, Philips will grant the joint venture the right to use the Philips brand, under certain strict quality and customer care standards, for the Philips television business worldwide, excluding the above-mentioned territories. In addition, Philips will receive revenue-based royalty payments from the joint venture. Philips has existing brand license agreements in mainland China, India and North America, which will not move to the JVCo.

The contemplated transaction comprises certain assets and liabilities related to the Philips television business and not to specific legal or statutory entities. Prior to the acquisition, Philips Business did not exist as a statutory group and no separate statutory accounts were therefore prepared. Accordingly, carve out financial statements have been prepared. The Netherlands headquarters of the Philips Business have been considered as parent of the Philips Business (as defined under HKAS 27). The Philips Business comprises the management reporting units in which the Philips television business that will be contributed to the JVCo was carried out.

These financial statements are presented in US Dollar unless otherwise stated.

2. CARVE OUT FINANCIAL STATEMENTS

In connection with the Transaction, carve out financial statements have been derived from the consolidated financial statements and historical accounting records of Philips.

The Combined Financial Statements of the Philips Business have been prepared in accordance with Hong Kong Financial Reporting Standards (‘‘HKFRS’’), issued by the Hong Kong Institute of Certified Public Accountants (‘‘HKICPA’’). The Combined Financial Statements have been prepared on a carve out basis, as explained in the Basis of Presentation set out in note 6 below.

The Combined Financial Statements comprise the Combined Income Statement, the Combined Statements of Comprehensive Income, the Combined Statements of Financial Position, the Combined Statements of Cash Flows and the Combined Statements of changes in equity of the Philips Business on a carve out basis.

The carve out financial statements for the Philips Business are purported to reflect the historical results of operations, and the historical assets and liabilities of the Philips television business that will be transferred to JVCo.

The Philips Business was a separate reporting unit within the Consumer Lifestyle Sector of Philips. The Philips Business has customers in common with other units within the Consumer Lifestyle Sector. Sales to customers are managed via shared National Sales Organizations for the Consumer Lifestyle Sector.

– II-10 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

Furthermore, the Philips Business uses infrastructure and corporate services from Philips, such as InformationTechnology,HumanResources, legal and financial administrative services. Where account balances on the Combined Statements of Financial Position or the Combined Income Statements were allocated, these allocations were made on a specifically identifiable basis or using relative percentages, as compared to Philips’ other businesses, of the Philips Business’s net sales, headcount, floor area usage or other reasonable methods.

Expenses, such as general and administrative, selling and research and development, in the carve out financial statements include allocations from Philips which have been historically charged based upon revenue or headcount or other methods. For further detailsreferenceismadetothebasisofpresentation included in note 6.

Management believes the assumptions underlying the carve out financial statements to be a reasonable reflection of the utilization of services provided by Philips. However, the costs the Philips Business would have incurred or will incur as a separate stand-alone group may be higher or lower than the cost allocations reflected in these combined carve out financial statements. As such, the carve out financial statements may not necessarily reflect the financial position, results of operations or cash flows that Philips Business might have had in the past, or might have in the future, if the Philips Business had existed as a separate, stand-alone business during the periods presented.

Going concern

The Philips Business has been funded by Philips in the past and the periods presented. Based on variousanalysesperformedandcashflowforecastsprepared by management of the Philips Business, the shareholders of the JVCo have indicated their willingness to support the Philips Business up to the presently expected maximum funding need.

Management of the Philips Business is aware that actual results are likely to deviate from current expectations and accordingly there is an inherent risk that actual funding requirements may exceed the presently expected maximum funding need.

In case the contemplated transaction will not be concluded, the Philips Business will continue to exist as part of the Philips organisation. Philips has confirmed that it is its current intention to provide, until the earlier of (i) the first anniversary of date ofapprovaloftheCombinedFinancialStatementsor (ii) the date of completion of the Transaction, the necessary funds, and to cause its subsidiaries to provide the necessary funds, to meet the liabilities of the Philips Business as they fall due. In addition, Philips has confirmed that there is at present no intention to liquidate or cease the operation of the Philips Business within twelve months from date of approval of the Combined Financial Statements. On the basis of the above, the Combined Financial Statements have been prepared on a going concern basis.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out below have been applied consistently to all periods presented in the Combined Financial Statements.

The Combined Financial Statements present the combined assets, liabilities, revenues, expenses and cash flows attributable to the Philips Business for the years ended 31 December 2008, 2009 and 2010 and the periods ended 4 July 2010 and 3 July 2011.

The Combined Financial Statements have been prepared on the historical cost basis, as modified by the revaluation of derivative financial instruments, which are carried at fair value.

– II-11 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

Basis of combination

The Combined Financial Statements include the activities that were managed by the Philips Business’s management during the periods presented and that will be part of the JVCo. These activities were combined and in the combination, all intercompany balances and transactions within the Philips Business were eliminated. The transactions and balances with other Philips reporting units have not been eliminated. The balances with these reporting units are presented separately within the Combined Statement of Financial Position, either as assets or liabilities, where these relate to trading activities or included within owner’s net investment where these relate to funding activities. Unrealized gains and losses have also been eliminated in the combination, but only to the extent there is no indication of impairment.

Foreign currencies

a) Functional and presentation currency

The Combined Financial Statements have been prepared in US Dollar as this is the Philips Business’s presentation currency. The functional currency of the majority of the reporting units within Philips Business is Euro unless the primary economic environment requires the use of another currency.

b) Group transactions on combination

The financial statements of foreign entities are translated into US Dollar. Assets and liabilities are translated using the exchange rates on the respective reporting dates. Income and expense items in the Combined Income Statement are translated at weighted average exchange rates during the year. The resulting translation adjustments are recorded as a separate component of other comprehensive income.

c) Transaction and balances

Gains and losses arising from the translation or settlement of foreign-currency-denominated monetary assets and liabilities into the functional currency are recognized in the income statement in the period in which they arise. Exchange gains and losses are presented in the Combined Income Statements. Translation differences on derivative financial assets and liabilities are recognised in the Combined Income Statements as part of the fair value gain or loss. When a gain or loss on a non- monetary item is recognised in other comprehensive income, any exchange component of that gain or loss shall be recognised in other comprehensive income. Conversely, when a gain or loss on a non- monetary item is recognised in income statement, any exchange component of that gain or loss shall be recognised in income statement.

Property, plant and equipment

Machinery, installations and test equipment is stated at cost, less accumulated depreciation. Depreciation is calculated using the straight-line method over the expected economic life of the asset. Gains and losses on the sale of property, plant and equipment are included in other income. Costs related to repair and maintenance activities are expensed in the period in which they are incurred unless leading to an extension of the original lifetime or capacity. The useful lives and residual values are evaluated every year.

Construction in progress is stated at cost and not depreciated until the related assets are ready for use.

– II-12 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

Freehold land is not depreciated. Depreciation ofproperty,plantandequipment,otherthan freehold land, is calculated using the straight-line method to allocate their costs to their residual values over their estimated useful lives, as follows:

The expected useful lives of the tangible fixed assets are as follows:

— Land and Buildings 20 years — Machinery and installations 5 to 10 years — Other equipment 3 to 5 years

Intangible assets

Product development

All research costs are expensed as incurred. Expenditure on development activities, whereby research findings are applied to a plan or design for the production of new or substantially improved products and processes, is capitalized as an intangibleassetiftheproductorprocessistechnicallyand commercially feasible and the Philips Business has sufficient resources and the intention to complete development. The Philips Business will have access to 3D TV technology developed by Philips.

The development expenditure capitalized includes the costs of materials, direct labour and an appropriate proportion of overheads. Other development expenditures and expenditures on research activities are recognized in the Combined Income Statement. Capitalized development expenditure is stated at cost less accumulated amortization and impairment losses. Amortization of capitalized development expenditure is charged to the Combined Income Statement on a straight-line basis over the estimated useful lives of the intangible assets.

Software

Costs relating to the development and purchase of software for internal use are capitalized and subsequently amortized over the estimated useful life.

Licenses

Costs relating to the purchase of licenses are capitalized and subsequently amortized over the estimated useful life, which does not exceed the term of the license.

The expected useful lives of the intangibles assets are as follows:

— Product development 1–2years — Software 1–8years — Licenses term of the license (1–5years) — Other 1–8years

Impairment of fixed assets

The Philips Business reviews the tangible and intangible fixed assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset with the greater of its value in use and its fair value less costs to sell. If the carrying amount of an asset exceeds the greater of its estimated value in use or fair value less costs to sell, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the recoverable amount. The review for impairment is carried out at the level where discrete cash flows occur that are largely independent of other cash flows (i.e. at cash generating unit level).

– II-13 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the reversal of previously recognised impairment loss is recognised in the Combined Income Statement.

Inventories

Inventories are stated at the lower of cost or net realisable value. The cost of inventories comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. The costs of conversion of inventories include direct labour and fixed and variable production overheads (at normal operating capacity), taking into account the stage of completion. It excludes borrowing costs. The cost of inventories is determined using the weighted average method. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses. An allowance is made for the estimated losses due to obsolescence. This allowance is determined for groups of products based on purchases in the recent past and/or expected future demand.

Receivables

Receivables are initially recognised at fair value and subsequently carried at the lower of amortized cost or the present value of estimated future cash flows, taking into account discounts given or agreed. The present value of estimated future cash flows is determined through the use of allowances for doubtful accounts. As soon as individual trade accounts receivable can no longer be collected in a normal way, they are designated as doubtful trade accounts receivable and valued at the expected collectible amounts. They are written off when they are deemed to be uncollectable because of bankruptcy or other form of receivership at the debtor. The allowance for the risk of non-collection of trade receivables takes into account credit-risk concentration, collective debt risk based on average historical losses and specific circumstances such as serious adverse economic conditions in a certain country or region.

Trade and other payables

Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

Revenue recognition

Sale of goods

Revenue for sale of goods is recognized when the significant risks and rewards of the ownership have transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of the goods can be reliably estimated, there is no continuing involvement with goods and the amount of revenue can be measured reliably. These criteria are generally met at the time the product is shipped and delivered to the customer and, depending on the delivery conditions, title and risk have passed to the customer and acceptance of the product, when contractually required, has been obtained, or, in cases where such acceptance is not contractually required, when management has established that all aforementioned conditions for revenue recognition have been met and no further post-shipment obligations exist. Examples of the above-mentioned delivery conditions are ‘Free on Board point of delivery’ and ‘Costs, Insurance Paid point of delivery’, where the point of delivery may be the shipping warehouse or any other point of destination as agreed in the contract with the customer and where title and risk in the goods pass to the customer.

– II-14 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

Revenues are recorded net of sales taxes, customer discounts, rebates and similar charges. For products for which a right of return exists during a defined period, revenue recognition is determined based on the historical pattern of actual returns, or in cases where such information is lacking, revenue recognition is postponed until the return period has lapsed. Return policies are typically in conformity with customary return arrangements in local markets.

Shipping and handling costs billed to customers are recognized as revenues. Expenses incurred for shipping and handling costs of internal movements of goods are recorded as cost of sales. Shipping and handling costs related to sales to third parties are reported as other direct expenses.

A provision for product warranty is made at the time of the revenue recognition and reflects the estimated costs of replacement and free-of-charge services that will be incurred by the Philips Business with respect to the products. For certain products, the customer has the option to purchase an extension of the warranty, which is subsequently billed to the customer. Revenue is then recognised on a straight- line basis over the warranty period.

Other income and expense

Other income mainly represents charges to other Philips reporting units that operated television businesses in territories that will not be accessible to the JVCo, as these territories have already been licensed out by Philips to other parties during the years 2008, 2009 and 2010. The charges reflect costs incurred by the Philips Business recharged to these reporting units in 2008, 2009 and 2010 based on the global Philips transfer pricing structure as laid down in general services agreements. No such recharges have occurred or are expected to occur after 2010.

Other income is recognized as services are rendered. Other expenses are recorded when services are received and costs are incurred.

Employee Benefit accounting

(a) Pension obligations

The Philips Business and its employees participate in a number of defined contribution schemes in various countries around the world, the assets of which are held separately from those of the Philips Business in independently administered funds. Contributions are made to these schemes based on a certain percentage of the employees’ salaries. The Philips Business also participates in defined benefit plans of Philips. These are accounted for in a similar manner to the defined contribution schemes for the purpose of these Combined Financial Statements (refer to note 6).

(b) Termination benefits

Termination benefits are payable when employment is terminated by the Philips Business before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Philips Business recognises termination benefits when it is demonstrably committed to a termination when the entity has a detailed formal plan to terminate the employment of current employees without possibility of withdrawal. In the case of an offer made to encourage voluntary redundancy, the termination benefits are measured based on the number of employees expected to accept the offer. Benefits falling due more than 12months after the end of the reporting period are discounted to their present value.

The Philips Business recognises a liability and an expense for bonuses on an accrual basis. The Philips Business recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation.

– II-15 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

Shared based compensation expenses

Certain members of management and certain employees are eligible to participate in certain equity settled Philips’ employee share based compensation plans. The Philips Business receives an allocation of share based compensation expenses recognised at the level of Philips. Philips recognizes share based compensation expenses at the estimated fair value, measured as of grant date of equity instruments granted to employees as personnel expense over the vesting period on a straight-line basis, taking into account forfeitures. The fair value of the equity instruments has been determined using the Black-Scholes option pricing model.

The Philips Business measures the estimated fair value as of grant date of equity instruments and recognises the expense over the vesting period.

Income tax

Income tax comprises current and deferred income tax. As the Philips Business previously did not exist in separate legal entities, current income tax positions included in the Combined Statements of Financial Position are reflected in owner’s net investment. The current income tax charge is based on enacted tax rates and the result before tax.

Deferred income tax is recognized using the liability method, for the expected tax consequences of temporary differences between the carrying amounts of assets and liabilities and the amounts used for taxation purposes. Deferred tax is measured at the tax rates that are expected to be applied when temporary differences reverse, based on laws that are enacted or substantially enacted at reporting date. Changes in tax rates are reflected in the period when the change has been enacted or substantively enacted by the reporting date.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset the current income tax payable and receivable and they relate to income taxes levied by the same tax authorities.

A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized.

Leases

Leases in which substantially all risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases, net of any incentives received from the lessor, are recognized in the Combined Income Statements on a straight-line basis over the term of the lease.

Derivative financial instruments

The Philips Business uses derivative financial instruments principally to manage its foreign currency risks. All derivative financial instruments are classified under derivative financial assets or derivative financial liabilities and are accounted for as of trade date. They are included in current assets or liabilities,except for maturities greater than 12 months after the end of the reporting period.

The Philips Business measures all derivative financial instruments based on fair values which have been estimated based on discounted cash flow valuation techniques, using directly observable market inputs. Changes in fair value are recognized in the Combined Income Statement, under ‘‘Realised and unrealised gains/(losses) on foreign exchange forward contracts — net’’.

– II-16 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

Provisions

Provisions are recognized if, as a result of a past event, the Philips Business has a present legal or constructive legal obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation. The increase in the provisions due to the passage of time is recognized as interest expenses.

A provision for warranties is recognized when the underlying products are sold. The provision is based on historical warranty data and a weighting of possible outcomes against their associated probabilities.

The provision for restructuring relates to the estimated costs of initiated reorganizations that have been approved by the Philips’ Board of Management and which involve the realignment of certain parts of the industrial and commercial organization. When such reorganizations require discontinuance and/or closure of lines of activities, the anticipated costs of closure are included in restructuring provisions. A liability is recognized for those costs only when the Philips Business has a detailed formal plan for the restructuring and has raised a valid expectation with those affected that it will carry out the restructuring by starting to implement the plan or announcing its main features to those affected by it.

4. IMPACT OF ISSUED BUT NOT YET EFFECTIVE HONG KONG FINANCIAL REPORTING STANDARDS

The following new standards and amendments to existing standards, which have been published and are mandatory and relevant for the Philips Business on or after 3 July 2011 or later periods, but have not been early adopted:

HKFRS 9 Financial Instruments

This standard introduces certain new requirements for classifying and measuring financial assets and liabilities. HKFRS 9 divides all financial assets that are currently in the scope of HKAS 39 into two classifications, those measured at amortized cost and those measured at fair value. The standard along with proposed expansion of HKFRS 9 for impairment and hedge accounting will be applicable from the year 2013, although entities are permitted to adopt it earlier. The new standard will be applied from 1 January 2013. The Philips Business is assessing the potential impact from this new standard.

HKFRS 10 Consolidated Financial Statements

This standard supersedes HKAS 27 Consolidated and Separate Financial Statements and HK (SIC) — 12 Consolidation — Special Purpose Entities. The objective of HKFRS 10 is to establish principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities. This standard is not expected to have a significant impact on the financial statements of the Philips Business. The standard is not applicable until 1 January 2013 but available for early adoption. The Philips Business will apply the standard from 1 January 2013.

Amendment to HKFRS 7 Financial Instruments: Disclosures

The revised standard addresses additional disclosure requirements on transfer of financial assets in situations where assets are reclassified. This amendment is applicable for annual periods starting on or after 1 July 2011. The amendment requires additional disclosures for risk exposures arising from transferred financial assets and no disclosures are required for prior periods. No significant change in disclosure in the financial statements is expected. The Philips Business will apply the amendment from 1 January 2012.

– II-17 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

HKFRS 13 Fair Value Measurement

This standard defines fair value, sets out in a single HKFRS a framework for measuring fair value and requires disclosures about fair value measurements. HKFRS 13 is applicable to annual reporting periods beginning on or after 1 January 2013. This standard is not expected to have a significant impact on the financial statements of the Philips Business. The Philips Business will apply the standard from 1 January 2013.

Amendment to HKAS 1 — amendment to revise the way other comprehensive income is presented

This amendment revises the way other comprehensive income is presented. The amendment is applicable to annual reporting periods beginning on or after 1 July 2011. The Philips Business will adopt the amendment on 1 January 2012. The Philips Business is assessing the potential impact from this new standard.

Amendment to HKAS 19 — employee benefits

This amendment eliminates the use of the ‘‘corridor approach’’ from HKAS 19, enhances disclosures and modifies accounting for termination benefits. The amendment is applicable to annual reporting periods beginning on or after 1 January 2013. This amendment is not expected to have a significant impact on the financial statements of the Philips Business. The Philips Business will apply the amendment from 1 January 2013.

5. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

The preparation of the Combined Financial Statements in conformity with HKFRS requires management to make judgement, estimates and assumptions that affect the application of accounting policies, the reported amounts of assets, liabilities, income and expenses and assumptions that affect amounts reported in the carve out financial statements. These estimates and judgements are evaluated on an on-going basis and are based on experience, current and expected future conditions, third party evaluations and various other assumptions that are considered reasonable under the circumstances. The results of these estimates form the basis for making judgements about the carrying value of assets and liabilities as well as identifying and assessing the accounting treatment with respect to commitments and contingencies. Actual results may differ from these estimates.

Estimates significantly impact the valuation of intangibles, financial instruments, the warranty provisions and the basis for allocation of accounts between reporting units within Philips and other provisions.

Intangible assets

The Philips Business capitalizes internal development spend on new products. Although the Philips Business has been loss making in the periods under review, the carrying value of the development projects of the Philips Business are below their value in use, as these development projects are necessary to ensure the product portfolio of the Philips Business is state of the art and external revenues are generated. The impairment analyses are performed at product range level. Critical assumptions and estimates to determine value in use are the expected future sales levels and expected gross margin percentages.

In case 10% of intangible assets carried on the Combined Statements of Financial Position as at 3 July 2011 would require impairment, this would have a USD3 million negative impact on operating loss.

– II-18 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

Estimated impairment of fixed assets

The Philips Business annually tests whether fixed assets have suffered any impairment, in accordance with the accounting policy stated in note 3. The recoverable amounts of cash-generating units have been determined based on the higher of fair value less costs to sell and value-in-use.

Critical assumptions and estimates to determine value in use are the expected future sales levels, expected gross margin percentages and the discount rate. For tangible fixed assets, the fair value less costs to sell is determined based on appraisals.

Non-financial assets that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.

The fair value less costs to sell of property, plant and equipment is above the net book value. A reduction of 10% of the fair value would not triggeranimpairmentofproperty,plantandequipment.

Useful lives of property, plant and equipment

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

Inventory valuation and obsolescence provision

Due to the significant price erosion and technological developments, inventory valuation requires significant forward looking estimates on future sales levels, future price erosion and related expected gross margin percentages. On each reporting date, management performs an extensive analysis of net realisable values and determines the lower of cost and net realisable value to measure its inventories.

In case 10% of the inventory carried on the balance sheet as at 3 July 2011 would be unsellable, this would have an adverse impact on operating loss of USD47 million going forward.

Estimation of provision for impairment of receivables

The Philips Business makes provision for impairment of receivables based on an assessment of the collectability of trade and other receivables. Provisions for impairment are applied to trade and other receivables where events or changes in circumstances indicate that the balances may not be collectible. The identification of doubtful debts requires the use of judgement and estimates. Where the expectation is different from the original estimate, such difference will impact the carrying amount of receivables and doubtful debt expense in the period in which such estimate is changed.

The Philips Business’s historical experience in collection of trade and other receivables falls within the recorded allowances.

Rebate accruals

The customers of the Philips Business, which are common with the Philips’ Consumer Lifestyle Sector, receive discounts based on meeting certain performance criteria, such as volume commitments. Rebates are paid out on a monthly, quarterly or annual basis. Actual settlements may differ from the accrued amounts, which are based on management’s best estimate. If actual rebates would be 10%

– II-19 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

higher/lower than the original estimate, this would result in a decrease/increase in revenues between USD3 million and USD4 million in the periods presented. The Philips Business’shistoricalexperienceof actual rebates paid out falls within the recorded accruals.

Fair value of derivatives and other financial instruments

The Philips Business manages its exposure on foreign currency purchases (mostly in US Dollar) and sales using forward exchange contracts, which are reported at fair value. The fair value of the forward exchange contracts has been determined using discounted cash flow calculations using directly observable market inputs (level 2).

Warranty provisions

The Philips Business gives warranties on certain products and undertakes to repair or replace items that fail to perform satisfactorily ranging from twelve to thirty-six months. Significant judgement is required in determining the warranty expenses. The Philips Business estimates the warranty expensesbasedontheactualrepairandreplacementcostsincurredfortheproductssoldinthelast thirty-six months. Where the warranty expenses incurred are different from the original provision, such difference would impact the Combined Income Statement in the period in which the warranty expenses are incurred.

If cost of warranty would be 10% higher/lower from the estimates, this would result in additional/lower warranty costs of approximately USD11 million in the periods presented. The Philips Business’s historical experience of warranty costs falls within the recorded provisions.

Contingent liabilities

The Philips Business had certain pending litigations at the reporting date. Significant judgement is required in determining whether it is more likely than not that an outflow of resources will be required to settle the pending litigations in which case an accrual for the potential litigation expenses is recognised.

Basis of allocation

The nature of carve out financial statements requires management to make estimates of a reasonable allocation key for assets, liabilities and costs shared with other business groups within the Consumer Lifestyle division of Philips as well as within the Philips Group. These allocations were performed on a manner deemed reasonable by management and are explained in the Basis of Presentation hereafter. Different allocation keys could have resulted in different outcomes.

The basis of allocation may not be representative of the actual financial positions of the Philips Business in the future when it is operated by JVCo.

– II-20 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

6. BASIS OF PRESENTATION

Various accounts in the Statement of Financial Position contain balances which were not separately distinguished or reported for the Philips Business in the past. Where balances are not dedicated, allocations are necessary. Where account balances on the Statement of Financial Position were allocated, these allocations were made on a specifically identifiable basis or using relative percentages, as compared to Philips’ other businesses, of the Philips Business’s net sales, headcount, floor area usage or other reasonable methods.

The following balances contain material allocated balances:

Combined Statements of Financial Position

— Property, plant and equipment: in the assembly locations in Hungary, Brazil and Argentina the buildings are shared between the Philips Business and other Consumer Lifestyle activities. The allocation of the net book value of the buildings to the Philips Business has been performed based on floor area usage of the Philips Business. In the Bruges Research & Development site, the property is rented and only used by the Philips Business. For all other sites, the Philips Business is using Philips facilities and is charged an annual fee for the usage of facilities.

— Accounts receivable of National Sales Organisations: since the Philips Business and other Philips Consumer Lifestyle activities have common customers, the debtor balances are not separately tracked for the Philips Business. To have a more precise presentation of accounts receivable in the carve out financial statements, the receivables were split by product category, with certain product categories being dedicated to the different Business Groups after which there were remaining unallocated balances, due to partial payments, general credit notes and other debtor balances not yet assigned to product categories.

These remaining unallocated balances were allocated between the Philips Business and other Consumer Lifestyle activities based on the outstanding receivables of the Philips Business as percentage of the total outstanding receivables.

— Rebate accruals relate to common Consumer Lifestyle customers and have been allocated based on relative sales share of the Philips Business as a percentage of total Consumer Lifestyle sales.

— Accounts payable: Bill of Material related trade creditors are accounted for separately in the Philips Business (suppliers of materials such as panels and components). Creditors for shared costs of the organisation have joint creditor balances, which were allocated to the Philips Business based on allocation keys (Full Time Equivalent employees (‘‘FTE’’)orcostshare,reflectingthe nature of the related charges).

— Other liabilities and accrued liabilities were allocated to the Philips Business based on allocation keys (either sales, FTE or cost share), as deemed relevantbythenatureoftheaccruedcosts.

Combined Income Statements

— Salaries, wages and pensions: part of salaries and wages is dedicated (mainly direct FTEs in the factories). In the case of salaries and wages, including pension costs and social security, they have been allocated based on relative sales share in 2008 and 2009. In 2010, an estimate of FTEs working for the Philips Business has been used to allocate salaries and wages as the Philips Business management believed this reflects the key drivers of the costs more accurately. The impact of this change in accounting estimate has not had a material impact on the financial statements.

– II-21 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

— Other shared costs: certain costs of organisation shared with other Consumer Lifestyle activities, have been allocated based on relative sales share in 2008 and 2009. In 2010, an estimate of FTEs working for the Philips Business has been used to allocate costs within the other costs of organisation as the Philips Business management believed this reflects the key drivers of the costs more accurately. The impact of this change in accounting estimate has not had a material impact on the financial statements.

Share based compensation

Certain employees working (part of their time) for the Philips Business are entitled to stock options of Philips. The related share based compensation expenses have been allocated to the Philips Business based on an estimate of the services delivered (time spent) by the employees to the Philips Business.

As several employees that hold or have been granted stock options are not specifically related to the Philips Business, it is not practical nor feasible to prepare an overview of outstanding stock options or stock options granted at the Philips Business in accordance with HKFRS 2 paragraphs 45 and 47 and as such this overview has not been presented in the notes to the Combined Financial Statements.

Pensions

The Philips Business has accounted for its participation in externally funded Philips sponsored pension plans as plans under common control in line with HKAS 19 paragraph 34A and 34B. As a result related pension assets and liabilities are not included in the Philips Business’s Statement of Financial Position and the Philips Business has recognized its contributions payable for the period, which is considered, in absence of any formal agreements, equal to the service costs allocated to them.

The annual service costs are considered to equal the pension premiums settled via the intercompany funding accounts with other Philips group companies.

Corporate income tax

The Philips Business has been in a combined loss making position in the periods presented. Certain parts of the Philips Business are remunerated on a ‘‘cost plus’’ or ‘‘market minus’’ transfer pricing structure and thus generate taxable profits. Residual results of the activities are with other reporting units (manufacturing locations and other entities that perform certain functions such as fulfilment of warranty obligations referred to as ‘‘Regional Entrepreneur Locations’’) of the Philips Business that act as the economic risk takers in the transfer pricing structure.

A ‘‘cost plus’’ transfer pricing structure is a reimbursement methodology based on actual costs incurred with a mark-up to reflect the services delivered and economic risk taken by that part of the organisation. A ‘‘market minus’’ transfer pricing structure is a reimbursement methodology based on a net margin of actual revenues to reflect the services delivered and economic risk taken by that part of the organisation.

– II-22 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

The activities of the Philips Business are operated by a series of local legal entities that also operate other businesses of Philips. The Philips Business does not comprise any individual legal entities, but only management reporting units. Considering that these reporting units are not individual legal entities, the separate return approach is applied.

In the separate return method of allocation, current and deferred tax expense or benefit for the period is determined for each member of a combined group by applying the requirements of HKAS 12 as if that group member was filing a separate tax return. Under the separate return method, the sum of the amounts allocated to the individual group members sometimes may not equal the actual total amount of current and deferred income tax expense, or benefit for the carve out business. Any difference is considered as a combination adjustment and is recorded through owner’snetinvestment.

Thecurrentincometaxchargeisbasedonthestatutorytaxratewithintherelevanttax jurisdiction and the income tax payable and deferred taxation is recorded as part of owner’snet investment.

The losses of the Philips Business mainly accumulate in the manufacturing locations and the Regional Entrepreneur Locations. As there was no expectation that these manufacturing and entrepreneur locations would return to taxable profits in the near future, no deferred tax assets have been recognized. Deferred tax positions are only recognized in case taxable profits are made or expected to be made in the foreseeable future. The unrecognised tax losses will not transfer to the JVCo.

Segment reporting

Owner’snetinvestment

As indicated, the Philips Group (including the Philips Business) utilises a central approach to cash management and the funding of its operations. On the absence of a contractual obligation to deliver cash or other financial assets in relation to the funding from other Philips reporting units and the fact that the balances will not be settled with Philips Business’s own equity instruments,all balances with other Philips reporting units are presented as owner’s net investment in the carve out financial statements.

– II-23 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

Combined Statements of Cash Flows

The Philips Group utilises a central approach to cash management and the financing of its operations. Cash deposits of the Philips Group are pooled and transferred to a Central Treasury function on a daily basis. As the Philips Business did not operate or exist as a separate legal entity, during the period of the combined financial statements, no amounts for cash, cash equivalents and debt have been reflected within the Combined Financial Statements.

The cash flow statements are prepared using the indirect method. Cash flows in foreign currencies have been translated into US Dollars using the weighted average exchange rate for the periods involved.

As the Philips Business does not have a separate tax paying relation towards tax authorities (all relations with tax authorities are via shared Philips legal entities), the income tax charge for the period equals the income tax paid, as it has been assumed that the tax charge is directly settled via owner’snet investment.

7. SEGMENT INFORMATION

Management has determined the operating segments based on the reports reviewed by the chief operating decision-maker (the ‘‘CODM’’), the Chief Executive Officer (‘‘CEO’’) of the Philips Business, who is responsible for allocating resources and assessing performance of the operating segments.

The Philips Business is structured in two market-oriented product lines: Consumer TV and Hospitality TV. Consumer TV comprises the sales of TV sets to end customers through various distribution channels and is reported in further detail along geographical segments. Hospitality TV comprises business-to-business sales to hotels, hospitals and other large hospitality institutions.

Reports used by the chief operating decision-maker used for strategic decisions and resource allocation, separately distinguish Consumer TV and Hospitality TV and the key sales geographies for Consumer TV.

Certain countries are grouped in territories: Benelux reflects The Netherlands, Belgium and Luxemburg. Nordics reflects Sweden, Norway, Denmark and Finland. Iberia refers to Spain and Portugal. Central and Eastern Europe includes Hungary, Czech Republic, Poland, Slovakia, Greece and the Baltic states. Emerging cluster includes Turkey, Hong Kong and Taiwan.

– II-24 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

7.1 Segment revenues and results

The following is an overview of the Philips Business’s revenue and results by reportable segment.

Year ended Six months ended 31 December 4 July 3 July in USD m 2008 2009 2010 2010 2011 Unaudited

Germany/Austria/Switzerland 1,003 927 909 455 339 France 627 498 443 216 179 Benelux 359 299 290 134 105 Nordic 229 210 190 92 76 Italy 233 199 205 88 59 Iberia 232 170 159 88 61 Central and Eastern Europe 499 269 282 108 107 Rest of Europe 229 77 56 26 18

Europe cluster 3,411 2,649 2,534 1,207 944 Russia 494 293 438 129 174 Brazil 596 474 578 334 279 Emerging cluster — other 283 213 291 156 147

Emerging cluster 1,373 980 1,307 619 600 Rest of the world 211 122 126 63 53

Total segment sales Consumer TV 4,995 3,751 3,967 1,889 1,597 Segment sales Hospitality TV 187 158 99 49 56

Total third party sales 5,182 3,909 4,066 1,938 1,653 Internal sales 42 42 17 9 5

Total Sales 5,224 3,951 4,083 1,947 1,658

Germany/Austria/Switzerland 13 11 (6) 15 (65) France (4) (17) (35) (14) (41) Benelux 40(11)4929(49) Nordic (22) (7) (19) (9) (15) Italy (29) — (11) (5) (13) Iberia (25) (7) (13) (5) (16) Central and Eastern Europe (9) (7) 2 (5) (16) Rest of Europe (41) (13) (6) (2) (3)

Europe cluster (77) (51) (39) 4 (218) Russia 34(22)7 2(28) Brazil (61) (15) (15) 10 (65) Emerging cluster — other (10) (12) 3 1 (20)

Emerging cluster (37) (49) (5) 13 (113) Rest of the world (34) (16) (6) (3) (10)

Total segment operating (loss)/ profit Consumer TV (148) (116) (50) 14 (341) Segment operating (loss)/profit Hospitality TV 15 (10) (18) (8) 6

Adjusted (loss)/profit (133) (126) (68) 6 (335)

– II-25 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

Segment revenue reported above represents revenue generated from third parties. Sales are categorised according to the final destination of shipment. There were no significant intersegment sales in any of the periods presented. Internal sales represent sales to other Philips reporting units. No single customer accounts for more than 10% of revenue in any of the periods presented.

In the management reporting, costs are recorded by geography based on volume of product sold.

The Philips Business’s CODM assesses the performance of the operating segments based on a measure of adjusted operating (loss)/profit. Restructuring costs and other income, which are managed on a central basis, are not included in the result of each operating segment that is reviewed by the Philips Business’sCODM.

A reconciliation of adjusted (loss)/profit for reportable segments to loss for the year/period is as follows:

Year ended Six months ended 31 December 4 July 3 July in USD m 2008 2009 2010 2010 2011 Unaudited

Adjusted (loss)/profit (133) (126) (68) 6 (335) Other costs (Other income and expense, Restructuring costs) (178) (85) (36) (9) —

Total operating loss (311) (211) (104) (3) (335) Finance costs — (1) (1) (1) (1)

Loss before income tax (311) (212) (105) (4) (336) Income tax expense (19) (19) (20) (10) (5)

Loss for the year/period (330) (231) (125) (14) (341)

The Philips Business has its headquarter in the Netherlands. Its revenue from external customers in the Netherlands is USD60 million in 6 months ended 3 July 2011 (USD104 million in 6 months ended 4 July 2010, USD211 million, USD206 million and USD239 million in the years ended 31 December 2010, 2009 and 2008) and the total of revenue from external customers from other countries is USD1,593 million in 6 months ended 3 July 2011 (USD1,834 million in 6 months ended 4 July 2010, USD3,855 million, USD3,703 million, USD4,943 million in the years ended 31 December 2010, 2009 and 2008).

– II-26 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

7.2 Segment assets and liabilities

Segment information — assets 31 December 3 July in USD m 2008 2009 2010 2011

Germany/Austria/Switzerland 55 100 58 65 France 23 31 14 7 Benelux 177 69 119 109 Nordic 10 23 28 32 Italy 7 15 17 3 Iberia 22 25 27 18 Central and Eastern Europe 370 328 525 441 Rest of Europe ——17 9

Europe cluster 664 591 805 684 Russia 61 64 116 49 Brazil 180 184 282 236 Emerging cluster — other 107 79 128 128

Emerging cluster 348 327 526 413 Rest of the world 149 42 52 48

Segment assets Consumer TV 1,161 960 1,383 1,145 Segment assets Hospitality TV 28 16 21 23

Total assets 1,189 976 1,404 1,168

Segment information — liabilities 31 December 3 July in USD m 2008 2009 2010 2011

Germany/Austria/Switzerland 121 131 104 77 France 111 95 96 50 Benelux 79 227 197 494 Nordic 14 44 40 36 Italy 36394827 Iberia 18 33 18 16 Central and Eastern Europe 642 537 777 184 Rest of Europe 9 14 17 9

Europe cluster 1,030 1,120 1,297 893 Russia 75306318 Brazil 55 101 182 81 Emerging cluster — other 34539371

Emerging cluster 164 184 338 170 Rest of the world 159 79 55 50

Segment liabilities Consumer TV 1,353 1,383 1,690 1,113 Segment liabilities Hospitality TV 34 32 24 16

Total liabilities 1,387 1,415 1,714 1,129

Segment assets and liabilities reflect all assets and liabilities reflected on the Statement of Financial Position by the Philips Business reporting unit included in that geography, excluding assets and liabilities related to Hospitality TV.

– II-27 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

The total of non-current assets located in the Netherlands as at 3 July 2011 is USD14 million (USD20 million, USD8 million, USD10 million as at 31 December 2010, 2009 and 2008) and the total of these non-current assets located in other countries as at 3 July 2011 is USD96 million (USD88 million, USD87 million and USD113 million as at 31 December 2010, 2009 and 2008).

Note that in 2011 the Benelux and Central and Eastern Europe liabilities are impacted by a shift in activities performed by the respective Regional Entrepreneur Locations in these segments which drive the variations in the liabilities between 31 December 2010 and 3 July 2011.

Six months Segment information — Capital ended expenditure Year ended 31 December 3July in USD m 2008 2009 2010 2011

Germany/Austria/Switzerland ———— France 12 1 —— Benelux 31314922 Nordic ———— Italy ———— Iberia ———— CentralandEasternEurope 44291615 Rest of Europe ————

Europe cluster 87 61 65 37

Russia ———— Brazil 6 4 12 8 Emerging cluster — other 3123

Emerging cluster 9 5 14 11

Rest of the world 31 15 16 9

Segment capital expenditure TV 127 81 95 57 Segment capital expenditure Hospitality TV ————

Total capital expenditures 127 81 95 57

Capital expenditure represents additions of property, plant and equipment and intangible assets.

– II-28 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

Segment information — Depreciation, amortization and Year ended Six months ended impairment 31 December 4 July 3 July in USD m 2008 2009 2010 2010 2011 Unaudited

Germany/Austria/Switzerland ——— —— France 15 5 1 —— Benelux 4337381939 Nordic ——— —— Italy ——— —— Iberia ——— —— Rest of Europe ——— —— Central and Eastern Europe 56 41 24 12 8

Europe cluster 114 83 63 31 47 Russia ——— —— Brazil 5 5 9 4 5 Emerging cluster — other 2 1 1 — 1

Emerging cluster 761046 Rest of the world 48 23 15 4 11

Segment depreciation, amortization and impairment Consumer TV 169 112 88 39 64 Segment depreciation, amortization and impairment Hospitality TV 11———

Total depreciation, amortization and impairment 170 113 88 39 64

8. EMPLOYEE BENEFIT EXPENSES

Employee benefit expenses as included in the Combined Income Statements can be specified as follows:

Year ended Six months ended 31 December 4 July 3 July in USD m 2008 2009 2010 2010 2011 Unaudited

Salaries and wages 273 252 196 101 100 Social securities 49 37 39 21 15 Pension 19 10 9 4 6 Cost of termination plans 45 46 6 7 — Temporary personnel 16 14 23 7 12 Share based compensation 3 1 1 ——

Total 405 360 274 140 133

– II-29 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

Employee benefit expenses are included in the following line items in the Combined Income Statements:

Year ended Six months ended 31 December 4 July 3 July in USD m 2008 2009 2010 2010 2011 Unaudited

Cost of goods sold 134 132 76 43 31 Selling and distribution expenses 196 135 105 55 48 Administrative expenses 8 22 24 12 12 Research and development expenses 67 71 69 30 42

Total 405 360 274 140 133

9. OPERATING LOSS

The operating loss is stated after charging/(crediting) the following:

Year ended Six months ended 31 December 4 July 3 July in USD m 2008 2009 2010 2010 2011 Unaudited

Cost of inventories 4,235 2,948 3,289 1,577 1,412 Employee benefit expenses (note 8) 405 360 274 140 133 Realised and unrealised (gains)/losses on foreign exchange forward contracts — net (78) 44 (8) (62) 77 Amortization of intangible assets (note 12) 62 48 33 16 23 Impairment losses on intangible assets (note 12) 21 2 8 2 21 Depreciation of property, plant and equipment (note 13) 87 56 47 21 20 Impairment losses on property, plant and equipment (note 13) — 7 ——— Loss on disposal of property, plant and equipment 2 —— —— Operating lease rental for land and building 1 1 1 1 1 Auditor’s remuneration* ——— —— Provision for warranty (note 19) 69 125 80 47 48 Allowance for doubtful accounts receivable (note 14) 721297 Advertizing and promotion expenses 130 99 106 47 37 Transport, packaging and warehousing expenses 179 134 102 48 51

* Auditor’s remuneration has been borne by the owner with no recharge included in the carve out financials.

– II-30 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

10. OTHER INCOME AND EXPENSE

Other income and expense reflect cost recharges under general service agreements from the operating reporting units included in the Philips Business to other Philips operating reporting units, which are not part of the contemplated transaction. These mainly comprise reporting units in the US and the People’sRepublic of China (‘‘PRC’’)thatoperatedPhilips’ TV businesses, which were licensed out by Philips in 2009 and 2010 respectively.

The other income/(expense) can be split by geography as follows:

Year ended Six months ended 31 December 4 July 3 July in USD m 2008 2009 2010 2010 2011 Unaudited

US 43 8 ——— PRC 19 27 12 6 — Other countries 8 10 1 3 — Charges from Lighting Sector Philips for Hospitality TV — (24) (7) ——

Total 70 21 6 9 —

In 2009 and 2010, the Hospitality TV business was managed as a part of the Lighting Sector of Philips. As a result, the Lighting Sector of Philips incurred certain costs that it charged out to the Hospitality TV segment.

The other income/(expense) can be split by nature as follows:

Year ended Six months ended 31 December 4 July 3 July in USD m 2008 2009 2010 2010 2011 Unaudited

R&D cost recharges 35 18 6 3 — Corporate cost recharges 35 18 6 3 — Other — 91 3— Charges from Lighting Sector Philips for Hospitality TV — (24) (7) ——

Total 70 21 6 9 —

The Research &Development (‘‘R&D’’) and corporate cost recharges are internal cost recharges that have been determined using Philips’ transfer pricing methodologies. The costs are predominantly recharged based on relative sales share of each reporting unit. As these cost recharges in FY11 are only made to reporting units that will transfer to the JVCo (and therefore are within the perimeter of the combination), no such other income will recur from FY11 onwards.

– II-31 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

11. INCOME TAX EXPENSE

Income tax expense amounted to USD5 million in six months ended 3 July 2011 (six months ended 4 July 2010: USD10 million, years ended 31 December 2010, 2009 and 2008: USD20 million, USD19 million and USD19 million respectively). The income tax expense only comprises current income taxes. No deferred tax assets or liabilities exist in the majority of the countries in which the Philips Business operates, as there are no differences between the tax bases of assets and liabilities and their carrying amounts in the Combined Financial Statements. In a number of countries where the Philips Business operates and where deferred tax positions exist, deferred tax liabilities have been computed, and to the extent there are tax losses in the same fiscal jurisdiction, a deferred tax asset is recognised for a similar offsetting amount. Any deferred tax assets recognized are limited to the amount of deferred tax liabilities that have been computed and recognized. If there are excess tax losses, no further deferred tax assets have been recognised considering the significant tax losses incurred and carried forward by the Philips Business. The unrecognised tax losses will not transfer to theJVCo(seenote6).

The income tax expense for the year can be reconciled to the accounting result as follows:

Year ended Six months ended 31 December 4 July 3 July in USD m 2008 2009 2010 2010 2011 Unaudited

Loss before income tax 311 212 105 4 336 Income tax calculated at primary rate (79) (54) (27) (1) (86) Expenses not deductible for corporate income tax 8 10 15 8 26 Losses for which no deferred income tax asset was recognised 86 60 34 4 66 Different taxation rate in other countries 4 3 (2) (1) (1)

Income tax expense recognised in Combined Income Statements 19 19 20 10 5

The primary rate of 25.5% is the current statutory tax rate in the Netherlands, where the Philips Business has its headquarter and major operations. For the years 2008 up to 2010 and six months’ periods ended 4 July 2010 and 3 July 2011, the primary tax rate in the Netherlands was 25.5%.

There was no material tax effect of items included in other comprehensive income, which were not included in the Combined Income Statements.

– II-32 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

12. INTANGIBLE ASSETS

A summary of the movements of intangible fixed assets is given below:

Licenses and other Product intangible in USD m development Software assets Total Balance as of 1 January 2008 Cost 92 41 15 148 Accumulated amortizations and impairment losses (22) (41) — (63) Book value 70 — 15 85 Change in book value: Additions 48 ——48 Amortizations (58) — (4) (62) Impairment losses (21) ——(21) Translation differences 3 — (2) 1 Reclassifications 2 — (2) — Total changes (26) — (8) (34) Balance as of 31 December 2008 Cost 88 31 13 132 Accumulated amortizations and impairment losses (44) (31) (6) (81) Book value 44 — 751 Change in book value: Additions 37 ——37 Amortizations (45) — (3) (48) Impairment losses (2) —— (2) Translation differences ———— Total changes (10) — (3) (13) Balance as of 31 December 2009 Cost 78 27 13 118 Accumulated amortizations and impairment losses (44) (27) (9) (80) Book value 34 — 438 Change in book value: Additions 42 — 951 Amortizations (23) — (10) (33) Impairment losses (8) —— (8) Translation differences 2 — 13 Total changes 13 ——13 Balance as of 31 December 2010 Cost 120 21 23 164 Accumulated amortizations and impairment losses (73) (21) (19) (113) Book value 47 — 451 Change in book value: Additions 25 ——25 Amortizations (20) — (3) (23) Impairment losses (21) ——(21) Reclassifications (2) — 2 — Translation differences (4) — 62 Total changes (22) — 5(17) Balance as of 3 July 2011 Cost 140 21 18 179 Accumulated amortizations and impairment losses (115) (21) (9) (145) Book value 25 — 934

– II-33 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

The write-offs of fully amortized assets are not separately shown in the changes in book value above.

Research and development cost relates to product development carried out by the Philips Business. An impairment of USD21 million has been charged to the result for six months ended 3 July 2011 (six months ended 4 July 2010: USD2 million; years ended 31 December 2010, 2009 and 2008: USD8 million, USD2 million and USD21 million respectively). These write downs relate to terminations of the development projects for new products or lower than expected sales from the developed product. The impairment in 2008 was mainly caused by the more negative outlook on development in sales at the end of 2008.

Amortization and impairment of intangible assets are included in the Combined Income Statements as follows:

Year ended Six months ended 31 December 4 July 3 July in USD m 2008 2009 2010 2010 2011 Unaudited

Cost of goods sold (7) (7) (7) (4) (3) Research and development expenses (76) (43) (34) (14) (41)

Total (83) (50) (41) (18) (44)

There are no intangible fixed assets with restricted title or pledged as security for liabilities.

13. PROPERTY, PLANT AND EQUIPMENT

The movements in the tangible fixed assets are as follows:

Machinery Land and and Other Construction in USD m buildings installations equipment in progress Total

Balance as of 1 January 2008 Cost 58 66 218 10 352 Accumulated depreciation (37) (52) (184) — (273)

Book value 21 14 34 10 79

Change in book value: Capital expenditure ——57479 Assets available for use 1 4 66 (71) — Depreciation (2) (6) (79) — (87) Disposals — (2) (2) (2) (6) Translation differences (2) — 312

Total changes (3) (4) (7) 2 (12)

Balance as of 31 December 2008 Cost 54 56 237 12 359 Accumulated depreciation (36) (46) (210) — (292)

Book value 18 10 27 12 67

– II-34 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

Machinery Land and and Other Construction in USD m buildings installations equipment in progress Total

Change in book value: Capital expenditure ——44044 Assets available for use 1 1 45 (47) — Depreciation (1) (6) (49) — (56) Disposals — (2) ——(2) Impairment losses — (1) (6) — (7) Translation differences — 21 — 3

Total changes — (6) (5) (7) (18)

Balanceasof31December2009 Cost 55 44 225 5 329 Accumulated depreciation (37) (40) (203) — (280)

Book value 18 4 22 5 49

Change in book value: Capital expenditure 1 1 11 31 44 Assets available for use 1 4 27 (32) — Depreciation (2) (3) (42) — (47) Translation differences 4 (2) 1 (1) 2

Total changes 4 — (3) (2) (1)

Balanceasof31December2010 Cost 57 38 262 3 360 Accumulated depreciation (35) (34) (243) — (312)

Book value 22 4 19 3 48

Change in book value: Capital expenditure ——32932 Assets available for use — 718(25)— Depreciation (1) (3) (16) — (20) Transfers (8) —— —(8) Translation differences (1) 3 5 — 7

Total changes (10) 7 10 4 11

Balance as of 3 July 2011 Cost 31 45 282 7 365 Accumulated depreciation (19) (34) (253) — (306)

Book value 12 11 29 7 59

Write-offs of fully depreciated assets are not separately shown in the changes in book value above.

Freehold land with a book value of USD1.6 million at 3 July 2011 (2010: USD1.8 million, 2009: USD1.8 million and 2008 USD1.7 million) is not depreciated. As explained in note 6 the freehold land as reflected in the Statements of Financial Position comprises the allocatedshareoffreeholdlandtothePhilipsBusiness based on floor area utilization.

The 2011 transfers relate to the premises in Dreux (France) that were transferred at net book value to the facility management department of Philips, which is not part of these Combined Financial Statements.

The impairment loss in 2009 relates to write down of equipment upon closure of the production plant in Dreux in France.

– II-35 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

Depreciationandimpairmentofproperty,plantandequipmentareincludedintheCombinedIncome Statements as follows:

Year ended Six months ended 31 December 4 July 3 July in USD m 2008 2009 2010 2010 2011 Unaudited

Cost of goods sold (82) (59) (43) (20) (20) Administrative expenses (2) (2) (2) (1) — Research and development expenses (3) (2) (2) ——

Total (87) (63) (47) (21) (20)

There are no lease assets included in property, plant and equipment. There are no property, plant and equipment with restricted title or that have been pledged as security for liabilities.

The gains or losses on disposal of assets are disclosed in note 9 to these Combined Financial Statements.

14. TRADE AND OTHER RECEIVABLES

Trade and other receivables comprise:

31 December 31 December 31 December 3 July in USD m 2008 2009 2010 2011

Trade receivables (gross) 975 874 887 726 Allowance for doubtful accounts (22) (21) (23) (32)

Trade receivables (net) 953 853 864 694 Allowance for commissions and rebates (395) (319) (311) (273) Other receivables 30 41 63 23

Total 588 575 616 444

The carrying amounts of trade and other receivables approximate their fair values. Credit terms generally range between 30 and 120 days.

Trade receivables that are impaired are shown separately as ‘‘trade receivables provided for’’ and are fully provided for. These balances typically are overdue more than 180 days. Bad debt expenses are recorded as part of selling expenses. Reference is made to note 28 for more background on credit risk management.

– II-36 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

The ageing of the trade receivables past due, including impaired receivables, is as follows:

Trade receivables — ageing 31 December 31 December 31 December 3 July in USD m 2008 2009 2010 2011

Current 820 839 839 610 Over due 1–30 days 41 7 19 43 Over due 31–180 days 74 6 6 25 Over due > 180 days 40 22 23 48

Total 975 874 887 726

The change in the allowance for doubtful accounts receivable is as follows:

31 December 31 December 31 December 3 July in USD m 2008 2009 2010 2011

Balance at 1 January 30 22 21 23 Additions charged to income statement 7 2 12 7 Utilization of allowance (14) (3) (8) — Currency translations (1) — (2) 2

Closing balance at reporting date 22 21 23 32

The allowance for doubtful accounts receivable equals the balance of trade receivables that were impaired.

The Philips Business has entered into non-recourse factoring for some of its trade receivables in 2008 and 2009 and it was ceased in 2010 and subsequent periods. The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivables mentioned above. The Philips Business does not hold any collateral as security.

15. INVENTORIES

Inventories are summarised as follows:

31 December 31 December 31 December 3 July in USD m 2008 2009 2010 2011

Components 104 94 192 170 Finished goods 257 106 334 322 Inventory obsolescence provision (10) (10) (20) (19)

Total 351 190 506 473

The write-down of inventories to realizable value amounted to USD51 million for six months ended 3 July 2011 (six months ended 4 July 2010: USD7 million, years ended 2010, 2009 and 2008: USD212 million, USD43 million and USD19 million respectively). The write-down is included in cost of goods sold. Reference is also made to note 9 for cost of inventories included in the operating loss.

Circumstances resulting in the higher write downs of inventories in 2010 were mainly resulting from the oversupply in the market (both TV-sets at distributors, as well as the Philips Business and its competitors), technological developments and global price reductions for panels.

No inventories have been pledged as security.

– II-37 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

16. DERIVATIVE FINANCIAL INSTRUMENTS

The Philips Business had the following forward foreign exchange contracts outstanding as at year/ period ends (due to rounding, items with a value of less than USD0.5 million are presented as nil):

31 December 2008 2008 2008 2009 2009 2009 Local Local currency m USD m USD m currency m USD m USD m Notional Notional Notional Notional amount amount Fair value amount amount Fair value

Forward contracts to cover payable positions EUR USD 29 29 — 624 624 8 BRL USD ——— 74 74 (2) CLP USD 4 4 — 16 16 — ARS USD 1 1 — 88— ARS EUR ——— ——— EUR GBP 10 15 (2) ——— EUR HUF 1,463 8 — 1,775 9 — Other 278 53 (1) 19 7 —

Forward contracts to cover receivable positions EUR RUB ———(877) (29) — EUR SEK ———(143) (20) — EUR CHF (44) (42) (2) (22) (21) — EUR HUF (510) (3) — (564) (3) — EUR USD (29) (29) 3 (141) (141) (3) EUR CZK (258) (14) 1 (97) (5) — EUR DKK (91) (17) — (88) (17) — EUR NOK (55) (8) 1 (62) (11) — EUR PLN (69) (23) 3 (65) (23) — EUR RON (16) (6) — (16) (5) — CLP USD (3) (3) — (21) (21) — USD HKD (71) (9) — (59) (8) — USD SGD (6) (4) — (3) (2) — EUR GBP (18) (26) 4 (11) (18) — Other (74) (5) ————

Total 73

Analyzed as: Derivative financial instruments — current assets 13 14 Derivative financial instruments — current liabilities (6) (11)

Net position derivate financial instruments 73

– II-38 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

31 December 3 July 2010 2010 2010 2011 2011 2011 Local Local currency m USD m USD m currency m USD m USD m Notional Notional Notional Notional amount amount Fair value amount Fair value amount

Forward contracts to cover payable positions EUR USD 1,555 1,555 17 777 777 (27) BRL USD 96 96 (4) 52 52 (2) CLP USD 16 16 (1) 27 27 — ARS USD 6 6 — 23 23 — ARS EUR ——— 68— EUR GBP ——— ——— EUR HUF 3,532 17 — 3,011 17 —

Forward contracts to cover receivable positions EUR RUB (2,738) (90) 2 (257) (9) — EUR SEK (275) (41) (1) (145) (23) — EUR CHF (26) (28) (1) (5) (6) — EUR HUF (648) (3) — (204) (1) — EUR USD (257) (257) — (45) (44) — EUR CZK (104) (6) — (28) (2) — EUR DKK (39) (7) — (40) (8) — EUR NOK (32) (5) — (11) (2) — EUR PLN (31) (11) — (11) (4) — EUR RON (12) (4) — (3) (1) — CLP USD (9) (9) — (25) (24) — USD HKD (3) —— ——— USD SGD (2) (2) — (1) (1) — EUR GBP (1) (2) — (4) (7) — Other ——— (1) ——

Total 12 (29)

Analyzed as: Derivative financial instruments — current assets 39 2 Derivative financial instruments — current liabilities (27) (31)

Net position derivate financial instruments 12 (29)

– II-39 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

The table below analyses the Philips Business’s derivative financial instruments that will be settled on a gross basis into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

Forward contract maturity in USD m <1year 1–5 years > 5 years Total

As at 3 July 2011 Foreign exchange forward contracts — inflow 1,090 ——1,090 — outflow (1,119) ——(1,119)

(29)

As at 31 December 2010 Foreign exchange forward contracts — inflow 2,993 ——2,993 — outflow (2,986) ——(2,986)

As at 31 December 2009 Foreign exchange forward contracts — inflow 1,429 ——1,429 — outflow (1,428) ——(1,428)

As at 31 December 2008 Foreign exchange forward contracts — inflow 302 ——302 — outflow (307) ——(307)

(5)

Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.

17. OTHER CURRENT ASSETS

Other current assets are analysed as follows:

31 December 31 December 31 December 3 July in USD m 2008 2009 2010 2011

VAT and sales tax 68 64 86 100 Claimsonsuppliers 11163131 Other prepayments and receivables 35 22 18 18

Total 114 102 135 149

– II-40 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

Claims on suppliers relate to product deficiencies reclaimed from suppliers. The increased balance in 2010 was due to a failing component from one specific supplier originating from 2009, for which claims were filed in 2010.

18. NON-CURRENT OTHER PAYABLES AND ACCRUALS

Other non-current payables and accruals are analysed as follows:

31 December 31 December 31 December 3 July in USD m 2008 2009 2010 2011

Non-current trade payables —— 66 Other — 111

Total — 177

19. PROVISIONS

Provisions can be analysed as follows:

Provisions

31 December 31 December 31 December 3 July in USD m 2008 2009 2010 2011

Product warranty 100 134 114 103 Restructuring-related provisions 32 86 50 31 Loss contingencies (environmental remediation and product liability) and other provisions 9 13 14 19 Post-employment benefits, jubilee benefit obligations and obligatory severance payments 33 26 18 16

Other provisions 42 39 32 35

Total 174 259 196 169

Of which: Short-term provisions 103 143 123 98 Long-term provisions 71 116 73 71

Total 174 259 196 169

Product warranty provisions

The Philips Business gives warranties on certain products and undertakes to repair or replace items that fail to perform satisfactorily within a period ranging from twelve months to thirty-six months.

– II-41 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

The movement in the product warranty provisions is analysed as follows:

31 December 31 December 31 December 3 July in USD m 2008 2009 2010 2011

Balance as at 1 January 120 100 134 114 Additions 69 125 80 48 Utilizations (93) (98) (90) (64) Currency translations 4 7 (10) 5

Closing balance at reporting date 100 134 114 103

The provision as at 3 July 2011 had been made for expected warranty claims on the products sold during the last thirty-six months. Warranty periods typically do not exceed 3 years.

The actual utilization of the provision will depend on the number of returns and the actual cost of repairs, which may differ from management’sestimate.

It is expected that the majority of this provision will be utilized in the next financial year, and all will be utilized within three years of the reporting date.

Theincreaseinproductwarrantyprovisionsin2009 is caused by a failing component supplied by a third party supplier.

Any expected reimbursements from suppliers are presented in other current assets, ‘‘claims on suppliers’’.

Restructuring-related provisions

In relation to the restructuring of its organisation, the Philips Business has recorded restructuring costs in relation to announced reorganisations. The restructuring provision covers expected termination benefit payments to employees that are declared redundant as well as other expenses related to the restructuring. The movement in the restructuring-related provision is as follows:

31 December 31 December 31 December 3 July in USD m 2008 2009 2010 2011

Balance as at 1 January — 32 86 50 Additions 6283118 Utilizations (28) (29) (42) (32) Currency translations (2) — (5) 5 Releases from provision ————

Closing balance at reporting date 32 86 50 31

The additions to restructuring related provisions reflect cost of employee termination plans and various other closure costs.

The additions to the restructuring provisions in 2008 predominantly relate to the Philips Business’s earn-to-invest program started in 2008. In this program, the Philips Business has streamlined its organisation, reduced headcount and closed a number of smaller reporting units. The addition in 2009 mainly relates to the closure of the Philips Business’s production facility in Dreux in France.

– II-42 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

The provision as at 3 July 2011 mainly relates to final settlements in relation to the restructuring announced in Dreux in France and Bruges in Belgium. It is expected that the majority of the provision will be paid out within the next financial year and all will be utilized within three years of the reporting date.

Other provisions

Other provisions mainly relate to employee related liabilities, loss contingencies and other-long term accrued liabilities:

Other provision movements

31 December 31 December 31 December 3 July in USD m 2008 2009 2010 2011

Balance as at 1 January 44 42 39 32 Additions 30845 Utilizations (28) (10) (9) (3) Releases from provision (4) (2) (1) — Currency translations — 1(1)1

Closing balance at reporting date 42 39 32 35

As at 3 July 2011, it is expected that less than USD15 million of the other provisions will be paid out within the next 12 months and the majority will be utilized within three years of the reporting date of 3 July 2011.

20. TRADE PAYABLES

The ageing of the trade payables based on payment due date is as follows:

31 December 31 December 31 December 3 July in USD m 2008 2009 2010 2011

Current 664 568 813 522 Over due 1–30 days 126 144 65 6 Over due 31–180 days 31 94 126 12 Over due >180 days — 1 127 97

Total 821 807 1,131 637

The carrying amounts of trade payables approximate their fair values. Credit terms generally range between 30 and 180 days.

– II-43 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

21. OTHER PAYABLES AND ACCRUALS

Other payables and accruals are summarised as follows:

31 December 31 December 31 December 3 July in USD m 2008 2009 2010 2011

Other payables Other Philips reporting units 58 55 66 64 Taxes and social security contributions 88866942 Other liabilities 7 13 27 19

153 154 162 125

Accruals Material related and other accruals 65 41 42 40 Sales related accruals 56 43 59 29 Salary and wages payable 47 44 42 40 Distribution related accruals 24 21 18 14 Deferredincome 5758 Other accruals 36 27 25 29

233 183 191 160

Total 386 337 353 285

The carrying amounts of other payables and accruals approximate their fair values. The balance payable to Other Philips reporting units reflects payables with a trading nature mostly in relation to cost recharges from Philips.

– II-44 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

22. OWNER’SNETINVESTMENT

The owner’s net investment reflects the net funding position between the Philips Business and Philips. The owner’s net investment comprises foreign currency revaluation, accumulated losses and owner’s funding.

The owner’s net investment shows the following movements during the periods presented:

Total owner’snet Foreign investment currency Accumulated Owner’s deficit/ in USD m revaluation losses funding (surplus)

2008 Opening balance 1 January n/a n/a n/a 131 Currency translation adjustment (6) ——(6) Change in funding ——(254) (254) Stock based compensation —— (3) (3) Loss for the year — 330 — 330

Closing balance 31 December 198

2009 Opening balance 1 January n/a n/a n/a 198 Currency translation adjustment 9 ——9 Change in funding —— 22 Stock based compensation —— (1) (1) Loss for the year — 231 — 231

Closing balance 31 December 439

2010 Opening balance 1 January n/a n/a n/a 439 Currency translation adjustment (34) ——(34) Change in funding ——(219) (219) Stock based compensation —— (1) (1) Loss for the year — 125 — 125

Closing balance 31 December 310

2011 Opening balance 1 January n/a n/a n/a 310 Currency translation adjustment 23 ——23 Change in funding ——(713) (713) Loss for the year — 341 — 341

Closing balance 3 July 2011 (39)

Note that it is impracticable to split the opening total owner’s net investment deficit/(surplus) into the foreign currency revaluation, accumulated losses and owner’s funding categories and therefore the opening balances for these have been included within the total owner’snetinvestment.

– II-45 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

Foreign currency revaluation reflects translation effects on the combination of the financial information.

The accumulated losses are the losses incurred in the periods presented.

The owner’s funding reflects the funding that other Philips reporting units have provided to the Philips Business to finance the net fund outflows in the periods presented.

23. OFF BALANCE SHEET COMMITMENTS

Off balance sheet commitments can be summarised as follows:

in USD m < 1 year 1–5years >5years

As at 3 July 2011 Rental commitments 1 1 — Other 1 2 —

Total 23—

As at 31 December 2010 Rental commitments 1 1 — Other 1 2 —

Total 23—

As at 31 December 2009 Rental commitments 1 2 — Other 1 2 —

Total 24—

As at 31 December 2008 Rental commitments 1 2 — Other 1 3 —

Total 25—

There are no commitments in respect of capital expenditure on intangible assets or property, plant and equipment.

24. KEY MANAGEMENT AND FIVE HIGHEST PAID INDIVIDUALS

a) Key management and five highest paid individuals

Key management of the Philips Business comprises the CEO, the Chief Operating Officer, Chief Financial Officer, Head of Research and Development and the Human Resources Director.

– II-46 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

The aggregate amounts of remuneration of the five highest paid individuals of the Philips Business (who are considered as key management) during the relevant periods are as follows:

Year ended Six months ended 31 December 4 July 3 July in USD m 2008 2009 2010 2010 2011 Unaudited

Basic salaries, housing allowances and other benefits in kind 3 3 3 1 2 Discretionary bonuses — 1 ———

Total 343 12

The emoluments fell within the following bands:

Number of individuals

Year ended Six months ended 31 December 4 July 3 July in HKD/USD 000 2008 2009 2010 2010 2011 Unaudited

HKD1,500k to HKD2,000k (~USD 193k to 257k) ——— 21 HKD2,001k to HKD2,500k (~USD257k–USD321k) ——— 23 HKD2,501k to HKD3,000k (~USD321k–USD386k) 1 1 1 —— HKD3,001k to HKD3,500k (~USD386k–USD450k) —— 1 —— HKD3,501k to HKD4,000k (~USD450k–USD514k) —— 1 —— HKD4,001k to HKD4,500k (~USD514k–USD578k) 2 1 1 —— HKD4,501k to HKD5,000k (~USD578k–USD643k) — 1 — 1 — HKD5,001k to HKD5,500k (~USD643k–USD707k) 1 —— — 1 HKD6,001k to HKD6,500k (~USD771k–USD835k) — 1 ——— HKD 8,001k to HKD 8,500k (~USD1,028k–USD1,093k) —— 1 —— HKD8,501k to HKD9,000k (~USD1,093k–USD1,157k) 1 —— —— HKD9,501k to HKD10,000k (~USD1,221k –USD1,285k) — 1 ———

No director emoluments apply as the Philips Business did not historically exist as a separate legal entity and therefore no separate governance structure was in place for the Philips Business.

During the years ended 31 December 2008, 2009 and 2010 and the six months ended 3 July 2011 and 4 July 2010, no salaries, bonus or benefits were paid by the Philips Business to the five highest paid individualsasaninducementtojoinoruponjoiningtheBusinessGrouporasaconsequenceoflossof office.

– II-47 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

25. CONTINGENT LIABILITIES

The Philips Business accounts for the contingent liabilities in accordance with HKAS 37. Provisions are recognised when the Philips Business has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Provisions are not recognised for future operating losses.

As part of the Transaction, Philips will indemnify the JVCo from liabilities coming from all known pending litigation. However such indemnifications by Philips to the JVCo have not been taken into account for the preparation of these Combined Financial Statements, in line with the basis of presentation.

a. Environmental remediation

The Philips Business is subject to environmental laws and regulations. Under these laws, the Philips Business may be required to remediate the effects of the release or disposal of certain chemicals on the environment. The Philips Business accrues for losses associated with environmental obligations when such losses are probable and can be reliably estimated. Such amounts are recognized on a discounted basis since they reflect the present value of estimated future cash flows.

Provisions for environmental remediation can significantly change due to the emergence of additional information regarding the extent or nature of the contamination, the need to utilize alternative technologies, actions by regulatory authorities and changes in judgments, assumptions and discount rates.

In the Bruges Research & Development location soil contamination has been identified. Based on external expert advice, costs of remediation have been estimated at USD0.5 million, which has been provided for in the Combined Financial Statements, within other provisions (see note 19).

In the Brazil assembly site, potential soil contamination has been identified and the investigations are under way to assess the extent of the issue and the required remedial actions. As the significance of the matter and the cost of the remediation cannot be reliably estimated at this stage, no provision has been recorded in the Combined Financial Statements.

b. Legal proceedings

The Philips Business as part of Philips is involved as a party in legal proceedings, including commercial transactions and employment related matters.

For certain legal proceedings, information required under HKAS 37 may not be fully disclosed, if the Philips Business concludes that the disclosure can be expected to prejudice seriously the outcome of the legal proceeding.

i. Former distributors

The Philips Business is engaged in legal disputes with former distributors in several countries, where the distributors claim that Philips unrightfully terminated its distribution agreement. In all of these, based on the advice taken from external legal advisors and internal legal counsel, the Philips Business is of the opinion that the claims have limited basis and are not likely to result in an unfavourable court decision.Onthisbasis,noprovisionshavebeenmade.

– II-48 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

ii. Closing of factory in Dreux, France

In relation to the closing of its factory in Dreux in France, Philips is engaged in a number of legal cases with former employees, who claim additional severance payments in excess of the social plan agreed with the labour unions.

Also in relation to the closure of the factory in Dreux, a former supplier claims damages based on the allegation that its contract was unrightfully terminated.

The management considers an appropriate amount of provision has been recorded based on external legal advice.

iii. Intellectual property rights

Intheordinarycourseofbusiness,anumberoflegal cases exist in relation to infringement of patents used by the Philips Business. There are two patent infringement cases that are considered more significant by management:

— In November 2010, a third party company made allegations against Philips in the Netherlands, concerning claims of damages related to alleged infringement of certain patents in the field of TV, in response to previous assertions made by Philips against this third party.

— In June, 2011, a third party company filed a complaint against Philips in Germany claiming that Philips TVs are captured by their patents for Gemstar free interactive program guides.

On both cases, management of the Philips Business are of the opinion that while the proceedings are still on-going, it is not possible to assess the outcome of the case for the time being. Even if the outcome turns out to be unfavourable, the directors consider that its future settlement may not have any material financial impact on the Philips Business as a whole.

The outcome of the other cases related to intellectual property rights can also not be reliably estimated at this point in time. On this basis, no provisions have been made.

iv. Other

In the ordinary course of business, the Philips Business is involved in a number of legal cases with (former) employees and suppliers. The legal cases with (former) employees mainly relate to the manufacturing location in Manaus in Brazil. The Philips Business vigorously defies the claims made and management of the Philips Business is of the view that while the proceedings are still on-going, it is not possible to assess the outcome of the cases for the time being. Even if the outcomes turn out to be unfavourable, Management of the Philips Business considers these are not of which are likely to have a material impact on the Combined Financial Statements of the Philips Business.

The Philips Business has provided for the above legal cases based on its best estimate of the most probable outcome based on legal advice from external and/or internal legal counsel.

– II-49 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

26. SHARE BASED COMPENSATION

Philips has granted stock options on its common shares and rights to receive common shares in the future (restricted share rights) to Key Management of the Philips Business and certain selected employees. The purpose of the share based compensation plan is to align the interests of management with those of shareholders by providing incentives to improve the Philips performance on a long-term basis, thereby increasing shareholder value. Under the Philips plans, options are granted at fair market value on the date of grant.

The share based compensation expense allocated to the Philips Business amounted to less than USD1 million in the six months period ended 3 July 2011 (six months period ended 4 July 2010: less than USD1 million, years ended 2010, 2009 and 2008: USD1 million, USD1 million and USD3 million respectively).

The fair value of Philips’ option grants in the periods presented was estimated using a Black-Scholes option valuation model and the following weighted average assumptions:

Year ended Six months ended 31 December 4 July 3 July USD Denominated 2008 2009 2010 2010 2011 Unaudited

Risk free interest rate 3.17% 2.25% 2.43% 2.46% Not applicable Expected dividend yield 2.8% 4.1% 3.9% 4.4% Not applicable Expectedoptionlife 6yrs 6.5yrs 6.5yrs 6.5yrs Notapplicable Expected share price volatility 27% 33% 32% 34% Not applicable

Year ended Six months ended 31 December 4 July 3 July EUR Denominated 2008 2009 2010 2010 2011 Unaudited

Risk free interest rate 3.75% 2.88% 2.43% 2.56% 2.81% Expected dividend yield 2.4% 4.3% 4.1% 4.4% 3.3% Expectedoptionlife 6yrs 6.5yrs 6.5yrs 6.5yrs 6.5yrs Expected share price volatility 26% 32% 30% 40% 30%

In the six months’ period ended 3 July 2011, no new USD denominated share options were granted.

The assumptions were used for these calculations only and do not necessarily represent an indication of Management’s expectations of future developments.

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of subjective assumptions, including the expected price volatility.

Philips has based its volatility assumptions on historical experience for a period equal to the expected life of the options. The expected life of the options is also based on historical experience.

Philips’ employee stock options have characteristics significantly different from those of traded options, and changes in the assumptions can materially affect the fair value estimate.

– II-50 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

27. RELATED PARTY TRANSACTION

These Combined Financial Statements include transactions with Philips and its subsidiaries that are outside of the Philips Business (collectively referred to as ‘‘Philips Group’’). Philips Group is a related party as it controlled the Philips Business during the periods presented.

a) General Services Agreement

As explained under note 10, the Philips Business delivered services to reporting units that conducted Philips television business in territories in which the JVCo will not operate. For these services, the fees were charged at arms’ length basis.

b) Philips Group transactions

Besides transactions with reporting units that conducted Philips television business in territories in which JVCo will not operate, the Philips Business enters into transactions with Philips Group for the purchase of goods and services, sale of goods as well as corporate and other infrastructure services provided by the Philips Group. These transactions are generally conducted with terms comparable to those with third parties. Corporate recharges reflect the allocation of costs to the Philips Business of the central service organisation and country organisations of Philips Group. This allocation in periods presented was based on the relative sales share of the Philips Business, except for IT costs, which have been allocated based on the relative share in FTEs of the Philips Business.

An overview of related party transactions with other Philips units is as follows:

Philips Group

Year ended Six months ended 31 December 4 July 3 July in USD m 2008 2009 2010 2010 2011 Unaudited

Sales to Philips Group 42 42 17 9 5 Corporate recharges from Philips Group (295) (204) (176) (78) (98)

There are no other transactions with Philips Group.

c) Transactions with TPV

TPV currently acts as a supplier to the Philips Business. Philips held a 30% share in TPV in 2008 and 2009. The 30% share was sold in full in March 2010. As such TPV has been considered a related party of Philips.

– II-51 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

The overview per below details the related party transactions between TPV and the Philips Business:

TPV

Year ended Six months ended 31 December 4 July 3 July in USD m 2008 2009 2010* 2010* 2011* Unaudited

Purchases from TPV 236 524 145 145 — Trade payables 54 178 ———

* TPV ceased to be a related party as of 9 March 2010, when Philips sold its 30% share in TPV.

d) Remuneration of key management

Key management is under employment of Philips and related salary and other costs are charged to the Philips Business. The related amounts are disclosed under note 24.

e) Financial support

Philips indicated its willingness to financially support the Philips Business should the transaction not be concluded. Furthermore, Philips and TPV have committed to provide funding to the JVCo up to the presently expected maximum funding need in case the transaction is concluded. On this basis, the combined financial statements have been prepared on a going concern basis (see note 2).

28. DETAILS OF TREASURY RISK

28.1 Financial risk factors

The Philips Business’s activities expose it to a variety of financial risks: market risk (mainly foreign exchange and country risk), credit risk and liquidity risk. The Philips Business’s overall risk management programme is based on the Philips overall risk management programme and focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Philips Business’s financial performance. Risk management is carried out by a central treasury department (Philips Group Treasury) under policies approved by the Board of Directors of Philips (‘‘the Board’’). Philips Group Treasury identifies, evaluates and mitigates financial risks in close co-operation with the Group’s operating units. The Board provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, credit risk and use of derivative financial instruments.

a) Market risk

i. Foreign exchange risk

The Philips Business operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to US Dollar. Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities.

Management has set up a policy to require Philips Business companies to manage their foreign exchange risk against their functional currency. Entities in the Philips Business manage the amount of financial assets and liabilities denominated in foreign currencies

– II-52 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

together with the use of foreign exchange forward contracts to manage their foreign exchange risk arising from future commercial transactions and recognised assets and liabilities.

Sales by invoice currency can be summarised as follows:

Year ended Six months ended 31 December 4 July 3 July 2008 2009 2010 2010 2011 Unaudited

Euro 52% 57% 51% 52% 47% Other European 12% 10% 9% 9% 9% Brazilian Real 11% 12% 14% 17% 17% Russian Rouble 9% 8% 11% 7% 10% Other 16% 13% 15% 15% 17%

Total 100% 100% 100% 100% 100%

As most sales are generated and realised in the local functional currency of the sales organisations, the sales by currency as reflected above mostly result in translation exposures rather than transaction exposures.

The Philips Business predominantly sources its supply from the PRC, with main suppliers invoicing the Philips Business in US Dollars.

Estimated division of cost of materials by currency can be summarised as follows:

Euro 3% Other European 2% US Dollar 93% Brazilian Real 1% Other 1%

Total 100%

Management of the Philips Business estimates that the composition of material costs by invoice currency has been comparable over all periods presented.

A strengthening/weakening of the US Dollar against the Euro by 1% as at 3 July 2011, with all other variables held constant, would have resulted in pre-tax losses of the Philips Business being approximately USD6 million higher/lower. For 31 December 2010, 2009, 2008 and as at 4 July 2010, this would have been USD11 million, USD8 million, USD8 million and USD9 million, respectively. This is mainly the result of less or more favourable purchasing conditions due to the strengthening/weakening of the US Dollar against the Euro.

– II-53 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

The above sensitivity is prepared based on the assumption that the composition of trade receivables and trade payables by currency at reporting period ends is not expected to significantly differ from the sales and purchases by currency as reflected above.

ii. Price risk

The Philips Business does not have any exposures to price risk, as it does not hold any securities or investments.

iii. Interest risk

The Philips Business does not have any exposures to interest risk, as it does not have any interest bearing borrowings or debt. The funding from the owner is non-interest bearing.

b) Credit risk

The Philips Business’s credit risk mainly arises from derivative financial instruments as well as credit exposures to trade and other receivables. Management has policies in place to monitor the exposures to these credit risks on an on-going basis.

As at 31 December 2008, 2009 and 2010 and 3 July 2011, derivative financial instruments are all traded with high quality financial institutions.

The Philips Business has put in place policies to ensure that sales of products are made to customers with an appropriate credit history and the Philips Business performs periodic credit evaluations of its customers. The receivable positions with customers and the financial position of customers are monitored closely and credit insurance is taken where deemed necessary. There is no significant concentration risk.

The Philips Business’s historical experience in collection of trade and other receivables falls within the recorded allowances. Based on the default history of the repayment from customers, had 10% of the receivables not been collected at 31 December 2008, 2009, 2010 and 3 July 2011, the Group would have recognised an impairment of receivables of USD95 million, USD85 million, USD86 million and USD69 million respectively.

c) Liquidity risk

The Philips Business policy is to regularly monitor current and expected liquidity requirements to ensure that it generates sufficient cash from operating activities and funding from Philips.

To manage its liquidity, the Philips Business prepares cash flow forecasts and analyses the maturity of its financial liabilities on a periodic basis.

The Philips Business has arrangements to factor its trade receivables to banks without recourse or to extend payment terms with certain suppliers, should there be additional liquidity requirements.

– II-54 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

The table below analyses the Philips Business’s non-derivative financial liabilities into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. The maturity analysis of the gross-settled derivative financial liabilities is disclosed in note 16.

Between Between Less than 1and 2and in USD m 1 year 2years 5 years Total

At 3 July 2011 Trade payables 637 ——637 Other payables and accruals 285 7 — 292

Total 922 7 — 929

At 31 December 2010 Trade payables 1,131 ——1,131 Other payables and accruals 353 7 — 360

Total 1,484 7 — 1,491

At 31 December 2009 Trade payables 807 ——807 Other payables and accruals 337 1 — 338

Total 1,144 1 — 1,145

At 31 December 2008 Trade payables 821 ——821 Other payables and accruals 386 ——386

Total 1,207 ——1,207

28.2 Fair value estimation

The carrying amounts of the Philips Business’s financial assets and liabilities, including trade and other receivables and trade and other payables and accruals, approximate their fair values due to their short term maturities.

The forward exchange contracts used by the Philips Business to manage its foreign currency risk on future cash flows are measured at their fair value at reporting dates. The fair value of the forward exchange contracts have been estimated based on discounted cash flow valuation techniques using directly observable market inputs (level 2).

– II-55 – APPENDIX II ACCOUNTANT’S REPORT ON THE PHILIPS BUSINESS

29. EVENT AFTER THE RELEVANT PERIOD

No events occurred after the reporting dates that would require disclosure in or alternations to the Combined Financial Statements.

III. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements of the Philips Business have been prepared by management of the Philips Business in respect of any period subsequent to 3 July 2011.

PricewaterhouseCoopers Certified Public Accountants Hong Kong

– II-56 – APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

(A) UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Introduction

The following is illustrative and unaudited pro forma financial information of the Enlarged Group (the ‘‘Unaudited Pro Forma Financial Information’’), including the unaudited pro forma consolidated balance sheet, the unaudited pro forma consolidated income statement, the unaudited pro forma consolidated statement of comprehensive income and the unaudited pro forma consolidated statement of cash flows, which have been prepared on the basis of the notes set out below for the purpose of illustrating the effect of the Acquisition of the Philips Business (the ‘‘Target Group’’)byTPVandthe effect of the exercise of the Philips Put Options on the remaining 30% equity interest in JVCo by Philips, as if it had taken place on 30 June 2011 for the unaudited pro forma consolidated balance sheet and on 1 January 2010 for the unaudited pro forma consolidated income statement, the unaudited pro forma consolidated statement of comprehensive income and the unaudited pro forma consolidated statement of cash flows.

The Unaudited Pro Forma Financial Information has been prepared for illustrative purposes only and because of its hypothetical nature, it may not give a true picture of the financial position, results of operations and cash flows of the Enlarged Group had the Acquisition and the exercise of the Philips Put Options on the remaining 30% equity interest in JVCo by Philips been completed as at 30 June 2011 or 1 January 2010, where applicable, or at any future date.

The Unaudited Pro Forma Financial Information should be read in conjunction with other financial information included elsewhere in this circular.

– III-1 – APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

A. Unaudited pro forma consolidated income statement of the Enlarged Group

Unaudited pro forma consolidated Unaudited income pro forma statement of Audited consolidated the Enlarged consolidated income Group for income statement of the year statement of the Enlarged ended the Group Group for 31 December for the the year 2010 — year ended ended Exercise of 31 December 31 December Philips put 2010 Pro forma adjustments 2010 options USD m USD m USD m USD m USD m USD m USD m USD m USD m USDm USD m USD m Note (1) Note (2) Note (3) Note (5) Note (6) Note (7) Note (8) Note (11) Note (12) Note (14)

Revenue 11,632 4,083 (923) ——————14,792 — 14,792 Cost of goods sold (11,007) (3,469) 923 ——(27) ———(13,580) — (13,580)

Gross profit 625 614 ———(27) ———1,212 — 1,212

Other income 31 6 — 445————86 54 140 — Realised and unrealised gains/(losses) on foreign exchange forward contracts — net 36 8 ———————44 — 44 — Net exchange gains 23 ————————23 — 23 — Others 4 ———————— 4 — 4

Other gains — net 63 8 ———————71 — 71 Selling and distribution expenses (281) (514) ———————(795) — (795) Administrative expenses (121) (101) ————(16) ——(238) — (238) Research and development expenses (105) (117) ———————(222) — (222)

Operating profit/(loss) 212 (104) — 4 45 (27) (16) ——114 54 168

Finance costs — net (14) (1) ———(78) — (16) (6) (115) — (115)

Share of profits/(losses) of: Associates 7 ———————— 7 — 7 Jointly controlled entities (2) ———————— (2) — (2)

Profit/(loss) before income tax 203 (105) — 4 45 (105) (16) (16) (6) 4 54 58

Income tax expense (43) (20) ———————(63) — (63)

Profit/(loss) for the year 160 (125) — 4 45 (105) (16) (16) (6) (59) 54 (5)

Profit/(loss) attributable to: Equity holders of the Company 170 (87) — 3 45 (73) (16) (2) (6) 34 (29) 5 Non-controlling interests (10) (38) — 1 — (32) — (14) — (93) 83 (10)

Total 160 (125) — 4 45 (105) (16) (16) (6) (59) 54 (5)

– III-2 – APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

B. Unaudited pro forma consolidated statement of comprehensive income of the Enlarged Group

Unaudited pro forma Unaudited consolidated pro forma statement of Audited consolidated comprehensive consolidated statement of income of the statement of comprehensive Enlarged Group comprehensive income of the for the income of the Enlarged Group year ended Group for the for the 31 December year ended year ended 2010 — Exercise 31 December 31 December of Philips 2010 Pro forma adjustments 2010 put options USD m USD m USD m USD m USD m USD m USD m USD m USD m USDm USD m USD m Note (1) Note (2) Note (3) Note (5) Note (6) Note (7) Note (8) Note (11) Note (12) Note (14)

Profit/(loss) for the year 160 (125) — 4 45 (105) (16) (16) (6) (59) 54 (5) Exchange differences 5 34 ——————— 39 — 39

Other comprehensive income, netoftax 5 34 ——————— 39 — 39

Total comprehensive income 165 (91) — 4 45 (105) (16) (16) (6) (20) 54 34

Attributable to: Equity holders of the Company 175 (64) — 3 45 (73) (16) (2) (6) 62 (18) 44 Non-controlling interests (10) (27) — 1 — (32) — (14) — (82) 72 (10)

Total comprehensive income 165 (91) — 4 45 (105) (16) (16) (6) (20) 54 34

– III-3 – APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

C. Unaudited pro forma consolidated balance sheet of the Enlarged Group

Unaudited pro forma consolidated Unaudited balance Unaudited pro forma sheet of the condensed consolidated Enlarged consolidated balance Group as at balance sheet of the 30 June 2011 sheet of the Enlarged — Exercise Group as at Group as at of Philips 30 June 2011 Pro forma adjustments 30 June 2011 put options NotesUSDmUSDmUSDmUSDmUSDmUSDmUSDmUSDmUSDmUSDmUSDmUSDm Note (1) Note (2) Note (4) Note (5) Note (6) Note (8) Note (9) Note (10) Note (13) Note (14)

Assets Non-current assets Intangible assets 446 34 (9) — 327 ————798 — 798 Property, plant and equipment 493 59 — 965————626 — 626 Land use rights 27 ———————— 27 — 27 Investment properties 35 ———————— 35 — 35 Investments in associates 35 ———————— 35 — 35 Investments in jointly controlled entities 10 ———————— 10 — 10 Available-for-sale financial assets 1 ———————— 1 — 1 Deferred income tax assets 19 ———————— 19 — 19 Other receivables 5 7 (1) —————— 11 — 11

Total non-current assets 1,071 100 (10) 9 392 ————1,562 — 1,562

Current assets Inventories 1,355 473 ——58 ————1,886 — 1,886 Trade receivables 1,869 421 (421) ——————1,869 — 1,869 Deposits, prepayments and other receivables 323 23 (23) ——————323 — 323 Financial assets at fair value through profit or loss 3 ———————— 3 — 3 Current income tax recoverable 8 ———————— 8 — 8 Derivative financial instruments 46 2 (2) —————— 46 — 46 Pledged bank deposit 23 ———————— 23 — 23 Cash and cash equivalents 210 —————262 145 196 813 — 813 Other current assets — 149 (131) —————— 18 — 18

Total current assets 3,837 1,068 (577) — 58 — 262 145 196 4,989 — 4,989

Total assets 4,908 1,168 (587) 9 450 — 262 145 196 6,551 — 6,551

Liabilities Non-current liabilities Borrowings and loans (76) —————(57) (145) — (278) — (278) Deferred income tax liabilities (10) ————————(10) — (10) Retirement benefit obligations (6) (12) 6 — (3) ————(15) — (15) Long term warranty provision — (20) 20 —————— —— — Other long-term provisions — (39) 37 —————— (2) — (2) Other payables and accruals (55) (7) 7 — (298) ————(353) — (353)

Total non-current liabilities (147) (78) 70 — (301) — (57) (145) — (658) — (658)

Current liabilities Trade payables (2,135) (637) 637 ——————(2,135) — (2,135) Other payables and accruals (428) (300) 257 — (53) (16) ——(196) (736) 6 (730) Current income tax liabilities (9) ———————— (9) — (9) Warranty provisions (71) (83) 83 ——————(71) — (71) Derivative financial instruments (37) (31) 31 ——————(37) — (37) Payable to Philips ——(505) (9) (120) ————(634) — (634) Borrowings and loans (242) —————(138) ——(380) — (380)

Total current liabilities (2,922) (1,051) 503 (9) (173) (16) (138) — (196) (4,002) 6 (3,996)

Total liabilities (3,069) (1,129) 573 (9) (474) (16) (195) (145) (196) (4,660) 6 (4,654)

Net current (liabilities)/assets 915 17 (74) (9) (115) (16) 124 145 — 987 6 993

Total assets less current liabilities 1,986 117 (84) — 277 (16) 124 145 — 2,549 6 2,555

Net assets 1,839 39 (14) — (24) (16) 67 ——1,891 6 1,897

Equity/capital and reserves attributable to the equity holders of the Company 1,840 39 (14) — (32) (16) ———1,817 81 1,898 Non-controlling interests (1) ——— 8 — 67 —— 74 (75) (1)

Total 1,839 39 (14) — (24) (16) 67 ——1,891 6 1,897

– III-4 – APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

D. Unaudited pro forma consolidated statement of cash flows of the Enlarged Group

Unaudited pro forma Audited consolidated consolidated statement of statement of cash flows cash flows of the of the Enlarged Group for Group for the year the year ended ended 31 December 31 December 2010 Pro forma adjustments 2010 USD m USD m USD m USD m USD m USD m USD m USD m USD m USD m USD m Note (1) Note (2) Note (5) Note (8) Note (9) Note (10) Note (11) Note (12) Note (13) Note (15)

Cash flow from operating activities Net cash (used in)/generated from operations (189) (103) 4 (16) ————196 — (108) Interest paid (15) (1) ———— (5) (6) ——(27) Income tax paid (35) (20) ————————(55)

Net cash (used in)/generated from operating activities (239) (124) 4 (16) ——(5) (6) 196 — (190)

Cash flow from investing activities Proceeds from disposal of property, plant and equipment 7 ————————— 7 Purchase of property, plant and equipment (206) (44) ————————(250) Purchase of land use rights (7) ————————— (7) Purchase/additions to intangible assets (3) (51) ————————(54) Investments in associated companies (15) —————————(15) Investments in jointly controlled entities (8) ————————— (8) Dividend from an associated company 8 ————————— 8 Interest received 3 ————————— 3 Proceeds from disposal of subsidiary (2) ————————— (2) Acquisition of subsidiaries (1) ————————(114) (115)

Net cash used in investing activities (224) (95) ———————(114) (433)

Cash flow from financing activities DividendspaidtoownersoftheCompanyand non-controlling interests (35) —————————(35) Repaymentofconvertiblebonds (211) —————————(211) Net inception of loans from a related party 466 ———219 145 ————830 Repayment for derivative financial instruments — interest rate swaps (2) ————————— (2) Pledged bank deposit (2) ————————— (2) Issuance of new shares 157 —————————157 Equity contribution by non-controlling interests ————43 —————43 Additional funding from owner — 219 ————————219

Net cash generated from financing activities 373 219 ——262 145 ————999

Net (decrease)/increase in cash and cash equivalents (90) — 4 (16) 262 145 (5) (6) 196 (114) 376 Cash and cash equivalents at beginning of year 270 —————————270 Effects of foreign exchange rates 3 ————————— 3

Cash and cash equivalents at end of year 183 — 4 (16) 262 145 (5) (6) 196 (114) 649

Analysis of cash and cash equivalents: Bank balances and cash 183 — 4 (16) 262 145 (5) (6) 196 (114) 649

– III-5 – APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

(B) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

1. The amounts are derived from the unaudited condensed consolidated balance sheet of the Group as at 30 June 2011 and the audited consolidated income statement, the audited consolidated statement of comprehensive income and the audited consolidated statement of cash flows of the Group for the year ended 31 December 2010, as set out in Appendix I to this Circular.

2. The amounts are derived from the audited combined statement of financial position of the Target Group as at 3 July 2011 and the audited combined income statement, the audited combined statement of comprehensive income and the audited combined statement of cash flows of the Target Group for the year ended 31 December 2010 as set out in Appendix II to this Circular, and have been reclassified to conform to the presentation format of the Group.

3. The adjustment represents the elimination of transactions between the Group and the Target Group for the year ended 31 December 2010. There is no elimination of balances between the Group and the Target Group at 30 June 2011 as these balances will not be transferred to JVCo as stipulated in the Sale and Purchase Agreement.

This adjustment has a recurring nature.

– III-6 – APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

4. The Sale and Purchase Agreement stipulates that the net operating capital as defined in the Sale and Purchase Agreement, excluding intangible assets and license fee payable, that will be transferred to JVCo will not exceed an amount of nil Euro. As part of the Sale and Purchase Agreement, at closing, only property, plant and equipment, intangible assets, inventories, certain receivables and other current assets, license fee payable and certain current and non-current liabilities which are required to be transferred by law (for example, personnel related accruals in certain jurisdictions) will be transferred to JVCo. To accomplish a transfer of net operating capital, excluding intangible assets and license fee payable, for an amount of nil Euro, a payable to Philips will be transferred into the JVCo, resulting in net operating capital acquired with a net value of nil.

5. The assembly sites in Manaus, Brazil, Szekesfehervar, Hungary and Tierra Del Fuego, Argentina are currently shared between the Philips Business and other Philips Consumer Lifestyle activities. As part of the Proposed Transactions, the JVCo will acquire the sites in entirety and enter into lease agreements with members of the Philips Group for the use of part of these sites by the other Philips Consumer Lifestyle activities. Theagreementtoleaseoutthepartofthe assembly site in Argentina for the use of Philips non-TV business is still under discussion with the Philips Group. As such, no rental income for the assembly site in Argentina is reflected in the Unaudited Pro Forma Financial information. This adjustment reflects the net book value of the land and buildings attributable to other Philips Consumer Lifestyle activities to be transferred to the Enlarged Group and the associated rental income for Brazil and Hungary from Philips.

This adjustment has a recurring nature, except for the rental related to Hungary, which will in principle only be for a period of less than one year. The rental income related to and taken into account for the Hungary lease is USD2.6 million per annum.

6. Upon completion of the Acquisition, the identifiable assets and liabilities of the Target Group will be accounted for in the consolidated financial statements of the Enlarged Group at their fair values as required by the acquisition method in accordance with Hong Kong Financial Reporting Standard 3 (Revised) ‘‘Business Combinations’’. Details of the identifiable assets and liabilities of the Target Group to be accounted for in the consolidated financial statements of the Enlarged Group and the calculation of gain on bargain purchase with respect to 1 January 2010 for the purpose of the unaudited pro forma consolidated income statement, unaudited pro forma consolidated statement

– III-7 – APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

of comprehensive income and unaudited pro forma consolidated statement of cash flows and with respect to 30 June 2011 for the purpose of the unaudited pro forma consolidated balance sheet are as follows:

(i) Assuming completion at 30 June 2011 for the purpose of the unaudited pro forma consolidated balance sheet:

Carrying amounts of Fair value the adjustments identifiable on the assets and identifiable Fair values liabilities of assets and of the the Target liabilities as identifiable Group as at at 3 July assets and 3 July 2011 2011(a) liabilities USD m USD m USD m USD m

Consideration — Contingent consideration(b) 18 Benefits from loans given by Philips at better than market terms(d) (24)

Total consideration/ (benefits) (6)

Less identifiable assets and liabilities to be acquired or assumed (*): Property, plant and equipment 68 65 133 Intangible assets(e) 25 327 352 Inventories 473 58 531 Other non-current receivables 6 — 6 Other current assets 18 — 18 Retirement benefit obligations (6) (3) (9) Other long-term provision (2) — (2) Other payables and accruals (non-current) — (280) (280) Other payables and accruals (current) (43) (47) (90) Payable to Philips (514) (120) (634) 25

70% of identifiable assets and liabilities 17

Gain on bargain purchase of 70% of the assets and liabilities (23)

(*) Assuming 100% of the assets and liabilities.

– III-8 – APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

(ii) Assuming completion at 1 January 2010 for the purpose of the unaudited pro forma consolidated income statement, unaudited pro forma consolidated statement of comprehensive income and unaudited pro forma consolidated statement of cash flows:

Carrying amounts of the Fair value identifiable adjustments assets and on the liabilities of identifiable Fair values the Target assets and of the Group as at liabilities as identifiable 1 January at 1 January assets and 2010 2010(a) liabilities USD m USD m USD m USD m

Consideration — Contingent consideration(b) 11 Benefits from loans given by Philips at better than market terms(d) (29)

Total consideration/ (benefits) (18)

Less identifiable assets and liabilities to be acquired or assumed (*): Property, plant and equipment 61 53 114 Intangible assets(e) 38 265 303 Inventories 190 14 204 Other non-current receivables 8 — 8 Other current assets 22 — 22 Retirement benefit obligations (9) 2 (7) Other long-term provision (3) — (3) Other payables and accruals (non-current) — (265) (265) Other payables and accruals (current) (44) — (44) Payable to Philips (225) (69) (294) 38

70% of identifiable assets and liabilities 27

Gain on bargain purchase of 70% of the assets and liabilities (45)

(*) Assuming 100% of the assets and liabilities.

– III-9 – APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

(a) For the purpose of the Unaudited Pro Forma Financial Information, the Directors have determined preliminarily the fair values of the identifiable assets and liabilities of the Target Group as at 1 January 2010 and 3 July 2011, after taking reference of valuation reports prepared by independent valuers, Jones Lang LaSalle Sallmanns Limited. The valuation was carried out on a fair value basis in accordance with the International Valuation Standards (‘‘IVS’’)issued by the International Valuation Standards Committee. Fair value is defined in IVS as ‘‘the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date’’.

(b) Pursuant to the Sale and Purchase Agreement, the contingent consideration for the 70% of the JVCo shares now being acquired will be based on 70% of the JVCo’s average audited consolidated EBIT in each financial year commencing from (and including) financial year 2012 to (and including) the Last Year times a multiple of four, provided that, if the above calculation results in a negative number, then the contingent consideration is deemed to be zero. The contingent consideration has been assumed to be USD18 million and recorded as an adjustment to other payables and accruals as if the completion was at 30 June 2011 for the purpose of the unaudited pro forma consolidated balance sheet and USD11 million as if completion was at 1 January 2010 for the purpose of the unaudited pro forma consolidated income statement, unaudited pro forma statement of comprehensive income and unaudited pro forma statement of cash flows, determined based on a valuation report prepared by an independent valuer, Jones Lang LaSalle Sallmanns Limited. The valuations of the contingent consideration are based upon the historical performance of the Group and the Target Group.

(c) Pursuant to the Shareholders Agreement, Philips will have the right to sell and transfer all of its remaining 30% of the shares in JVCo to the Company (‘‘the Philips Exit Put Option’’). The Philips Exit Put Option will become exercisable after 6 years commencing on the date of the Shareholders Agreement and the consideration will be determined based on the average audited consolidated EBIT in each financial year commencing from (and including) financial year 2012 up to (and including) the Last Year times a multiple of four. Philips will also have a put option upon change of control of TPV, on similar terms. The Directors have determined preliminarily the present value of the redemption amount of the Philips Exit Put Option to be USD6 million and recorded as adjustments to other payables and accruals and equity as if completion was at 30 June 2011 for the purpose of the unaudited pro forma consolidated balance sheet and USD3 million as if completion was at 1 January 2010 for the purpose of the unaudited

– III-10 – APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

pro forma consolidated income statement, unaudited pro forma consolidated statement of comprehensive income and unaudited pro forma consolidated statement of cash flows. The valuations of the put option are determined based on a valuation report prepared by an independent valuer, Jones Lang LaSalle Sallmanns Limited and are based upon the historical performance of the Group and the Target Group.

(d) It has been determined that the terms, under which these loans from Philips were granted, were better than market conditions. The benefit from this is estimated to be USD29 million and USD24 million assuming completion occurred on 1 January 2010 and 30 June 2011 respectively.

(e) Intangible assets identified include license rights and in-process research and development projects.

The above adjustments represent the recognition of the fair values of identifiable assets and liabilities of the Target Group, the contingent consideration and the present value of the redemption amount of the Philips Exit Put Option and the resulting gain on bargain purchase as a result of the Acquisition. Since the fair values of the assets and liabilities of the Target Group, the contingent consideration and the present value of the redemption amount of the Philips Exit Put Option as at the date of completion of the Acquisition, and the fair value of the contingent consideration at the date Philips gives notice of its election to receive the contingent consideration and the redemption amount of the Philips Exit Put Option at the date Philips gives notice of its election to exercise such option may be different from their respective fair values and the redemption amount used in the preparation of the Unaudited Pro Forma Financial Information presented above, the final amounts of the identified net assets (including intangible assets) and the actual gain on bargain purchase arising from the Acquisition, if any, to be recognised in connection with the Acquisition may be different from the estimated amount as presented above and the differences may be significant. The adjustments have no continuing effects on the consolidated income statement and the consolidated statement of cash flows of the Enlarged Group.

For the purpose of this Unaudited Pro Forma Financial Information, the Company has ensured the steps taken on the assessment of impairment on property, plant and equipment, intangible assets and goodwill have been properly performed in accordance with Hong Kong Accounting Standard No. 36 ‘‘Impairment of Assets’’ which is consistent with the accounting policy of the Company. On that basis, the Directors concluded that no impairment in the value of property, plant and equipment, intangible assets and goodwill is considered necessary.

– III-11 – APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

7. The adjustment represents the additional depreciation of property, plant and equipment, additional amortisation of intangible assets and the unwinding of interests in relation to license fee payable, as a consequence of the recognition of fair value adjustment of property, plant and equipment, intangible assets and license fee payable in Note 6 above over the remaining useful life of the respective property, plant and equipment and intangible assets and the term of the license fee payable.

This adjustment will have a recurring nature.

8. The adjustment represents the recognition of direct expenses of the Transaction.

This is a non-recurring adjustment.

9. The Sale and Purchase Agreement stipulates that Philips and TPV will provide a Shareholder Loan of EUR170 million (equivalent to approximately USD247 million1) in line with their respective shareholdings. The Philips share of this loan will be EUR51 million (equivalent to approximately USD74 million1).

Furthermore, at closing Philips and TPV will make an equity contribution of EUR100 million (equivalent to approximately USD145 million1)also based on their respective shareholdings. Philips will contribute EUR30 million (equivalent to approximately USD43 million1)ofthis.

Finally, Philips will provide a Bridge Facility for an amount of EUR100 million (equivalent to approximately USD145 million1)foraperiodof9 months after closing after which any replacing loans will be provided by the Shareholders in line with their relative shareholdings. It is assumed that the Bridge Facility will be fully drawn.

The total Shareholder Loan and Bridge Facility provided by Philips of USD219 million together with the equity contribution from Philips of USD43 million give a total cash inflow of USD262 million. The equity contribution from Philips of USD43 million is adjusted to non-controlling interests.

It has been determined that the terms, under which these loans were granted, were better than market conditions. Therefore, the fair value of the loan balance payable as at 30 June 2011 was USD195 million, which reflects the USD24 million benefit compared to loans of the same principal amount at an effective interest rate based on applicable market rates.

– III-12 – APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

10. Philips has also agreed to provide a loan to TPV for an amount of EUR100 million (equivalent to approximately USD145 million1) (the ‘‘TPV Loan’’) for the purpose of funding TPV’s obligations under the Shareholder Loan.

11. This adjustment reflects the estimated interest expense in relation to the Shareholder Loan and the Bridge Facility described under Note 9.

This adjustment has a recurring nature until full repayment of the Shareholder Loan and the Bridge Facility.

12. This adjustment reflects the estimated interest expense in relation to the TPV loan referred to under Note 10.

This adjustment has a recurring nature until full repayment of the TPV Loan.

13. Upon closing, Philips will pay EUR135 million (equivalent to approximately USD196 million1)incashasanadvancepaymentfor Philips brand promotion activities to be carried out by JVCo on behalf of Philips.

14. This adjustment reflects the financial impact on the unaudited pro forma consolidated balance sheet, the unaudited pro forma consolidated income statement and the unaudited pro forma consolidated statement of comprehensive income, if Philips exercised the Philips Exit Put Option on the remaining 30% equity interest in JVCo and the Company would have obtained a 100% equity interest in JVCo on 30 June 2011 and 1 January 2010 respectively, assuming no additional payment shall be made by TPV to Philips as the audited consolidated EBIT for the six months ended 30 June 2011 and for the year ended 31 December 2009 are negative.

For the purpose of this pro forma adjustment, it is assumed that the non- controlling interests arising from the equity contribution from Philips of USD43 million and the share of net identifiable assets and liabilities of USD11 million for the purpose of the unaudited pro forma consolidated income statement, unaudited pro forma consolidated statement of comprehensive income and unaudited pro forma consolidated statement of cash flows and USD8 million for the purpose of the unaudited pro forma consolidated balance sheet, respectively, at completion shall be adjusted to zero.

15. Pursuant to the Sale and Purchase Agreement the payable to Philips amounted to USD294 million (see Note 6(ii)) of which USD114 million represents payment for property, plant and equipment. The difference of USD180 million represents payment for working capital which has no effect to the unaudited pro forma consolidated statement of cash flows.

– III-13 – APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

16. Other than the above adjustments, no adjustments have been made to reflect any trading results or other transactions of the Group and the Target Group entered into subsequent to 30 June 2011 and 3 July 2011, respectively.

17. Currently the Philips Business uses infrastructure and corporate services from Philips, such as information technology, human resources, legal and financial administrative services. In the combined financial statements of the Target Group as set out in Appendix II, the allocations of these expenses from Philips were made on a specifically identifiable basis or using relative percentages, as compared to Philips’ other businesses, of the Philips Business’ net sales, headcount, floor area usage or other reasonable methods. TPV and Philips have agreed in the transitional services agreement that Philips will provide temporary support to JVCo on a number of areas for a transitional phase, when JVCo is setting up its organization. The support includes but is not limited to, innovation and design, finance, human resources, distribution,sales,marketing, warehousing, purchasing, consumer care, legal and real estate. The charges for such services have been agreed not to exceed USD34 million in 2012, which is a lower amount than what has historically been recharged by Philips to the TV business, as can be read in Note 27 of the financial informationontheTargetGroupassetoutinAppendixII.Theamountof USD34 million has been negotiated on an arm’s length basis between the parties and is considered a market based pricing.

Given the substantial changes in operations upon the completion of the Acquisition and the set up of the JVCo, and the fact that the above services agreement is transitory in nature, the financial effects of the changes in cost structure before and after completion of the Acquisition have not been reflected in the unaudited pro forma consolidated income statement and the unaudited pro forma consolidated statement of comprehensive income. The actual amount of service charges payable to Philips under the transitional services agreement may be different from the amounts included in the unaudited pro forma consolidated income statement and the unaudited pro forma consolidated statement of comprehensive income as presented above and the differences may be significant.

1 Amounts denominated in EUR have been translated into USD at an exchange rate of EUR1.00=USD1.45 as at 30 June 2011 and at exchange rate of EUR1.00=USD1.33 for the year ended 31 December 2010.

– III-14 – APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The following is the text of a report received from PricewaterhouseCoopers, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this circular.

ACCOUNTANT’S REPORT ON UNAUDITED PRO FORMA FINANCIAL INFORMATION TO THE DIRECTORS OF TPV TECHNOLOGY LIMITED

We report on the unaudited pro forma financial information set out on pages III-1 to III-14 under the heading of ‘‘Unaudited Pro Forma Financial Information’’ (the ‘‘Unaudited Pro Forma Financial Information’’) in Appendix III of the circular dated 23 December 2011 (the ‘‘Circular’’) of TPV Technology Limited (the ‘‘Company’’), in connection with the proposed acquisition of 70% equity interests in TP vision Holding B.V., which will directly or indirectly own and control the TV business of Koninklijke Philips Electronics N.V. (the ‘‘Transaction’’) by Coöperatie MMD Meridian U.A., a wholly owned subsidiary of the Company. The Unaudited Pro Forma Financial Information has been prepared by the directors of the Company, for illustrative purposes only, to provide information about how the Transaction might have affected the relevant financial information of the Company, its subsidiaries (hereinafter collectively referred to as the ‘‘Group’’). The basis of preparation of the Unaudited Pro Forma Financial Information is set out on page III-1 of the Circular.

Respective Responsibilities of Directors of the Company and the Reporting Accountant

It is the responsibility solely of the directors of the Company to prepare the Unaudited Pro Forma Financial Informationinaccordancewithparagraph4.29ofthe Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the ‘‘Listing Rules’’) and Accounting Guideline 7 ‘‘Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars’’ issued by the Hong Kong Institute of Certified Public Accountants (the ‘‘HKICPA’’).

It is our responsibility to form an opinion, as required by paragraph 4.29(7) of the Listing Rules, on the Unaudited Pro Forma Financial Information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the Unaudited Pro Forma Financial Information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

Basis of Opinion

We conducted our engagement in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 300 ‘‘Accountants’ Reports on Pro Forma Financial Information in Investment Circulars’’ issued by the HKICPA. Our work, which

– III-15 – APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP involved no independent examination of any of the underlying financial information, consisted primarily of comparing the consolidated balance sheet of the Group as at 30 June 2011 and the consolidated income statement and consolidated statement of cash flows of the Group for the year ended 31 December 2010 as set out in the ‘‘Pro forma Financial Information’’ section of this circular with the unaudited condensed consolidated financial information of the Group for the six months ended 30 June 2011 as set out in the 2011 interim report of the Company and the audited consolidated financial statements of the Group for the year ended 31 December 2010 as set out in the 2010 annual report of the Company, respectively, considering the evidence supporting the adjustments and discussing the Unaudited Pro Forma Financial Information with the directors of the Company.

We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the Unaudited Pro Forma Financial Information has been properly compiled by the directors of the Company on the basis stated, that such basis is consistent with the accounting policies of the Group and that the adjustments are appropriateforthepurposesoftheUnaudited Pro Forma Financial Information as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.

The Unaudited Pro Forma Financial Information is for illustrative purposes only, based on the judgements and assumptions of the directors of the Company, and because of its hypothetical nature, does not provide any assurance or indication that any event will take place in the future and may not be indicative of:

— the financial position of the Group as at 30 June 2011 or any future date, or

— the results and cash flows of the Group for the year ended 31 December 2010 or any future periods.

Opinion

In our opinion:

a) the Unaudited Pro Forma Financial Information has been properly compiled by the directors of the Company on the basis stated;

b) such basis is consistent with the accounting policies of the Group; and

c) the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.

PricewaterhouseCoopers Certified Public Accountants

Hong Kong, 23 December 2011

– III-16 – APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS AND OTHER FINANCIAL INFORMATION OF THE ENLARGED GROUP

1. INDEBTEDNESS STATEMENT

Borrowings

At the close of business on 31 October 2011, being the latest practicable date for the purpose of the statement of indebtedness prior to the printing of this circular, the borrowings of the Enlarged Group were shown as below:

US$’000

Current bank borrowings 402,472 Non-current note payable 77,397

479,869

Pledge of Assets

At the close of business on 31 October 2011, the Enlarged Group had pledged thefollowingamountsofassetstosecure the borrowings of the Enlarged Group:

US$’000

Pledged bank deposits 7,865

Contingent Liabilities

As at 31 October 2011, there was no change in the contingent liabilities of the Enlarged Group since 30 June 2011 as set out on pages I-118 to I-120 of appendix I and II-48 to II-49 of appendix II to this circular, other than as set out below:

In August 2011, a third party company filed a complaint in the US against the Group, one of its associated companies and certain third party companies. The complaint concerns alleged infringement ofaUnitedStatespatentinrespectofthe technology for the manufacture of certain televisions (‘‘Patent V’’).

The Directors are of the opinion that while the complaint was just being served, it is not possible to assess the outcome of the case for the time being.

Save as aforesaid and apart from intra-group liabilities and normal trade and other payables in the ordinary course of business, none of the companies in the Enlarged Group had outstanding at the close of business on 31 October 2011 any loan capital issued and outstanding or agreed to be issued, bank overdrafts, loans or other similar indebtedness, liabilities under acceptances or acceptance credits, debentures, mortgages, charges, hire purchase commitments, guarantees or other material contingent liabilities.

– IV-1 – APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS AND OTHER FINANCIAL INFORMATION OF THE ENLARGED GROUP

2. WORKING CAPITAL

The Directors after due and careful enquiry, are of the opinion that, in the absence of unforeseeable circumstances and after taking into account the financial resources available to the Enlarged Group, the Enlarged Group has sufficient working capital for its present requirements for the next 12 months from the date of this circular.

3. MANAGEMENT DISCUSSION AND ANALYSIS OF THE RESULTS OF THE ENLARGED GROUP

Set out below is the management discussion and analysis of the Enlarged Group for the three years ended 31 December 2008, 2009 and 2010; the six months ended 30 June 2011 (in respect of the Group); and for the period from 1 January 2011 to 3 July 2011 (in respect of the Philips Business).

FOR THE YEAR ENDED 31 DECEMBER 2008

In respect of the Group

Industry review

The ongoing financial turbulence has inevitably led to a slowdown across the board in consumer and corporate spending, lowering the growth rate of the world economy from 3.7% to 2.5% in 2008.

On a yearly basis, global LCD monitor shipment recorded a 2.8% increase in 2008 to 167.0 million units. However, most of the growth was achieved in the first half of the year. Demand for LCD monitors withered in tandem with the economy in the latter half of 2008. In fact, it was the first time in history that the LCD monitor shipment in the second half of a year declined on a year-on-year basis. It was also one of the rare instances that second half shipment was lower than that of the first half and fourth quarter shipment was lower than that of the third quarter. In this tough operating environment, the PC monitor sector saw further consolidation on the supply side. The top five manufacturers at the end of 2008 commanded in aggregate 73.8% of the market versus 68.3% a year ago.

Global LCD TV shipment, on the other hand, amounted to 105.0 million units as compared with 79.0 million units recorded in the previous year, in spite of the recessionary economy. A few trends were discernible. Firstly, the competitive landscape had become more consolidated with the top three brands commanding an aggregate 41.8% share of the market, up from 38.9% a year ago. Secondly, the average size of LCD TV sold, contrary to popular perception, grew only gently, indicating that consumers were extremely price sensitive in their purchases. Thirdly, first-tier TV brands were increasingly receptive to the idea of outsourcing, particularly for their commoditized product segmental requirements, due to price

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pressure. Furthermore, the digitalization of broadcasting signal in the US starting this year and the ban of the plasma TV in Europe later on would provide fresh impetus to the demand.

On the price front, the dismal demand for LCD products in the latter half of 2008 had driven down prices of LCD panels to below cash costs, at which levels LCD panel makers were forced to shut down capacities in order to minimize losses. It is a well-knownfactthatsomeoftheLCDpanel makers were loading at no more than 50% of their capacities at the beginning of this year. Since then, demand has improved as distributors and retailers began to replenish stocks in view of the low level of inventory in the pipeline. As a result, prices of LCD panels inched up gradually in the first quarter of 2009.

Business Review

The Group shipped a total of 54.2 million units of displays in 2008, posting a 14.8% year-on-year growth. The PC monitor business segment shipped 47.7 million units (2007: 43.1 million units) of products and contributed 75.8% (2007: 78.9%) of the Group’s consolidated revenue. The LCD TV business segment saw its shipment surged 67.7% to 6.0 million units (2007: 3.6 million units) and now contributed 21.3% (2007: 18.1%) of the consolidated revenue.

In terms of geographical market segment, because of the growing volume of LCD TV shipped for its customers to that market, North America has once again become the largest end market of the Group. Revenue generated there of US$2.5 billion (2007: US$2.3 billion) accounted for 27.4% of the Group’s consolidated revenue in 2008, up from 26.9% in the proceeding year. Both PRC and Europe trailed closely behind, matching stride for stride in terms of sales growth, delivering 25.8% (2007: 27.5%) and 24.5% (2007: 23.2%) respectively of the consolidated revenue. The Group’s presence in the emerging markets continued to grow. In 2008, sales booked outside of the top three markets amounted to US$2.1 billion (2007: US$1.9 billion) and represented 22.3% (2007: 22.4%) of the Group’sconsolidatedrevenue.Asthe penetration rate for LCD products in the developed world gradually saturates, markets like Brazil, India and Russia will continue to grow providing the Group with good business potentiality, especially for its branded business.

The drop in average selling prices (‘‘ASPs’’) for both PC monitor and LCD TV, in tandem with the LCD panel prices, was alleviated by the size migration to larger screen size products. For 2008, ASPs were US$146.9 (2007: US$155.0) and US$327.4 (2007: US$427.1) respectively for PC monitor and LCD TV. As the economy faltered and product demand dwindled during the traditional peak season last year, the Group met increasing price competition and reacted promptly by cutting prices to clear excess inventory. As a result, the Group booked its lowest ever gross profit margin of 3.4% in fourth quarter 2008, substantially below that of the 4.5%, 4.6% and 5.9% respectively recorded in the first three quarters of the year. The higher

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overhead expenses which were brought about by the expanded operation together with the heavy translation losses incurred in a volatile currency market weighed on the net margin which finished the year at 1.1%, halved the 2.2% booked a year ago.

The Group had withdrawn from the digital photo frame business segment due to changes in consumer discretionary spending pattern and had written off the small original investment on manufacturing and ancillary equipment.

Aspartofitseffortstostreamlinetheoperation,theGrouphastakenstepsto right-size its workforce, resulting in a headcount reduction of 3,468 direct and indirect workers. Moreover, some of the R&D positions will be systematically re- deployed from Taiwan to China to save on cost. As a result of this restructuring, there was a one-time charge of US$2.8 million to the 2008 consolidated income statement.

R&D

During the year, the Group launched 671 new models for monitors and 323 new models for TVs. A total of 2,049 engineers in R&D were hired to maintain the pace of innovation and product development.

The Group has adopted a two-pronged design strategy, aimed at both reductions in costs as well as simplification of manufacturing process. The new design circuitry reduces, on average, 6 to 7% parts count for PC monitor and 8 to 9% parts count for LCD TV while enhancing the stability of high-definition multimedia interface and universal serial bus (‘‘USB’’) functions as compared to two years ago. At the same time, the simplified new design circuitry streamlines production process and reduces failure rate.

In the PC monitor business segment, the Group plans to enrich its product portfolio, offering screen sizes up to 46-inch with additional functions such as TV tuner and packaged in ultra-slim shape. In a year’s time, its product line-up will be lengthened up to 65-inch with new functions like touch-screen, USB ports and wireless transmission.

As for LCD TV, in 2009-10, the Group will expand the product line to offer screen sizes up to 55-inch and products accepting all broadcasting systems across the continents. Meanwhile, its R&D team will focus on enhancing the response rate of products in order to achieve better picture quality and introduce some environmental friendly models that will save on energy.

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Production

The Group’s Poland factory commenced trial production in the second quarter of 2008 and mass production in the third quarter with satisfactory results. Last year, the Group shipped 1.5 million units of display products from this site and this year, it has a target shipment of 4.1 million units. The Group will spend another US$20 million on equipment and automation to further enhance the efficiency at the plant.

As part of the redeployment plan, the Group’s Ningbo plant has ceased production in the first quarter of 2009, incurring a one-time charge of US$2.6 million.

As at 31 December 2008, the Group had annual production capacities of 69.5 million units and 12.2 million units for PC monitor and LCD TV respectively.

Liquidity, financial resources and capital structure

The Group continued to finance its operations from internal cash flows and banking facilities. As at 31 December 2008, the Group’s cash and cash equivalents were at US$171.1 million (2007: US$135.1 million). As at 31 December 2008, the Group’s available and undrawn bank loan and trade finance facilities were US$2.8 billion (2007: US$2.5 billion).

In view of the tight credit market, the Group had used part of its internally generated operating cash flows to pay down debts to protect itself from a credit squeeze. All outstanding bank debts were borrowed on floating-rate basis. The maturity profile of outstanding bank debts as at 31 December 2008 was as follows:

Duration 2008 2007 US$’000 US$’000

Within one year 397,240 540,189 In the second year — 45,000

In line with the Group’s policy to curtail capacity expansion, total capex spending for 2009 was cut back from 2008’s US$162.2 million to between US$70 million and 100 million.

Compared to 2007, the Group’s inventory turnover improved by 11.4 days to 36.6 days while trade receivables turnover shortened from 57.9 days to 57.0 days. Trade payables turnover was 49.0 days while it was 62.6 days for the year ended 31 December 2007.

The Group’s gearing ratio, representing the ratio of total bank debts to total assets, was at 18.0% as compared to 20.5% in 2007. Current ratio was 145.1% versus 135.6% last year.

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Workforce

As at 31 December 2008, the Group employed around 28,500 (2007: 27,320) people worldwide whose total emoluments amounted to US$216 million. The remuneration terms of these employees were consistent with industry practice in the respective locations where the Group operates.

The Group has periodically provided training to its employees to encourage continuous learning and self-development, thus ensuring the competitiveness of the Group in the ever changing market environment.

Foreign exchange risk

The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to Renminbi and Brazilian Real. Foreign exchange risk arises from future commercial transactions, recognized assets and liabilities and net investments in foreign operations. Moreover, the conversion of Renminbi into foreign currencies is subject to the rules and regulations of exchange control promulgated by the PRC government. The Group aims to reduce its currency exposures against Renminbi by using foreign exchange forward contracts. In view of the volatile financial market, the Group has set out strict guidelines, against any speculative trades in derivative products.

As at 31 December 2008, the Group had the following outstanding foreign exchange forward contracts in order to mitigate the Group’s exposure in foreign currencies from its operations:

2008 2007 US$’000 US$’000

Sell Renminbi for US dollars 4,045,500 2,510,000 Sell US dollars for Renminbi 4,268,000 2,415,000 Sell Euros for US dollars 24,753 22,880 Sell Japanese Yen for US dollars 19,550 2,000 Sell US dollars for Euros 7,550 — Sell US dollars for Japanese Yen 2,000 —

In respect of the Philips Business

Results

The net loss for the period ended 31 December 2008 was US$330 million.

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Business review

Analysis of financial performance

The year 2008 was characterised by the steep downturn in the second half of the year, with its sharp decline in consumer confidence and consumer spending. This impacted the performance of the Philips Business. The Philips Business realised revenues of US$5,224 million at a sales volume of 8,604 thousand pieces.

Gross profit as percentage of revenues was 13.2% for 2008. As part of the integration of the Consumer Electronics and Domestic Appliances businesses of Philips, a number of specific value-creating initiatives have been put in place. These initiatives were focused on further optimisation of the business portfolio towards growth and higher-margin realisation. Furthermore, there was focus on increased effectiveness and investment in advertising and promotion, especially in geographic areas where the highest return is expected (in particular emerging markets).

Rigorous cost and organizational discipline, measured against internal and external benchmarks, were also part of the aforementioned value-creating initiatives and aimed at reducing the operational cost level which amounted to US$1,146 million in 2008.

Analysis of the financial position

The majority of the Philips Business’ non-current assets comprises property, plant and equipment. At 31 December 2008 property, plant and equipment still included the production plant at Dreux which was closed down in subsequent years and migrated to other production sites.

In general, current assets mainly relate to trade and other receivables and inventories. The Philips Business operated a negative net working capital as the current assets were more than offset by the trade payables and other payables and accruals carried on the balance sheet.

Cash flow analysis

In 2008 the negative cash flow from operating activities is partly compensated by positive cash flows from working capital management, especially in relation to inventory and trade receivables reductions that have been realised. Increased restructuring provisions (partly offset by utilisation of warranty provisions) drive the 2008 US$10 million positive effect on cash flows from provisions. These were the main drivers for the negative cash flow from operating activities of US$131 million generated in 2008.

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Combined with investments of respectively US$79 million and US$48 million in property, plant and equipment and intangible assets, this leads to a negative cash flow of US$254 million for 2008, which was financed by additional funding from the Philips Group.

Liquidity, capital structure and financial resources

Historically the business was mainly financed with financial support from the Philips Group. As at 31 December 2008, the Philips Business had no own bank balances and cash.

The Philips Group (including the Philips Business) utilises a central approach to cash management and the financing of its operations. Cash deposits of the Philips Group (including the Philips Business) are pooled and transferred to a Central Treasury function on a daily basis. As the Philips Business did not operate or exist as a separate legal entity during the period of the combined financial statements, no amounts for cash, cash equivalents and debt have been reflected within the combined financial statements. All balances with other Philips reporting units not reported as intercompany current trading accounts are presented as owners’ net investment in the carve out financial statements. The Philips Group’snetinvestment amounted to a deficit of US$198 million at 31 December 2008.

Capital commitments

The Philips Business did not have any significant capital commitments as at 31 December 2008.

Contingent liabilities

Please refer to note 25 to the accountant’s report on the Philips Business as set out in appendix II to this circular for further details on contingent liabilities.

Significant investments, material acquisition and disposals

The Philips Business did not have any significant investments, material acquisition or disposals as at 31 December 2008.

Employment and remuneration policy

Remuneration of the staff mainly comprised contractual monthly salary, pension contributions and bonus entitlements based on their contribution to the Philips Business. The number of full-time employees employed by the Philips Business was approximately 4,400 worldwide whose total emoluments amounted to US$405 million as at 31 December 2008.

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Charges

As at 31 December 2008, the Philips Business did not have any charges on its assets.

Foreign exchange risk management

The functional currency of the majority of the reporting units within the Philips Business is EUR unless the primary economic environment requires the use of other currencies. The Philips Business is exposed to foreign currency exchange fluctuation risk as part of its businesses carried out in local currencies in the countries it operates (mainly R$, Russian Roubles and US$). In the financial periods analyzed, the Philips Business entered into foreign currency forward exchange contracts as economic hedges of exchange rate fluctuations.

FOR THE YEAR ENDED 31 DECEMBER 2009

In respect of the Group

Industry review

Business activities around the world gradually recovered in 2009 from the trough created by the financial tsunami during the second half of the previous year. In spite of that, it was still a challenging time for businesses on every continent. The World Bank estimated that global gross domestic products, excluding that of China and India, contracted by 2.2% during the year, compared with growth of 4.3% in 2008.

In relative terms, LCD system integrators such as the Group fared much better than other component and hardware manufacturers during 2009. Following a lacklustre first quarter, demand for their products — especially LCD TVs — recovered and remained firm for the rest of the year. The increasing flow of orders, together with sporadic shortages of components, kept panel fabs running at full capacity, and panel prices rose steadily through the year, resulting in an average of 10% and 25% increase for TV panels and IT panels respectively, compared to their lowest point during the first quarter.

The turbulent economic conditions led corporations to defer or cut back their IT expenditure. As a result, worldwide shipments of PC monitors amounted to just 164 million units in 2009, approximately 7% fewer than the 176 million shipped in the previous year. It is worth noting that monitors have already become commoditised, which means end users buy them only when they need them, and demand is less affected by seasonality or economic climate. Consequently, there was little seasonal fluctuation in last year’s shipment figures, which remained flattish during the first and second halves.

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On the other hand, demand for LCD TVs continued to go from strength to strength, with consecutive quarterly growth. The total number of products shipped last year increased dramatically to 145 million units, compared with 105 million in 2008.

China was the key growth driver in the global demand for both monitors and LCD TVs. PC monitor shipments there surged 33.7% year-on-year to 43.4 million units, while its demand for LCD TVs increased by a spectacular 106.4% over the previous year’s figure to 27.6 million units.

In fact, year-on-year demand for LCD TVs increased in every other geographical region as well: by 21.5% to 36.5 million units in North America, by 8.7% to 42.1 million units in Europe, and by 41.4% to 34.2 million units in the rest of the world.

Light-emitting diode (‘‘LED’’)-backlit products became increasingly popular, achieving penetration rates of 1% and 3% in the monitor and TV segments.

Company results

The Group was not impervious to the sluggish economic conditions, which halted the revenue growth the Group had enjoyed in the preceding 13 years. Even so, the Group’s overall financial performance was respectable, and broadly in line with the management’s expectations.

In 2009, the Group posted consolidated revenue of US$8.0 billion, a decrease of 13.1% from previous year’s US$9.2 billion, partly due to the 24.8% and 13.9% declines in average selling prices (ASPs) for the Group’s PC monitors and LCD TVs, respectively. The Group’s gross profit margin improved by 120 basis points to 5.8%, as a result of various cost-saving initiatives the Group implemented during the year.

Despite higher sales and research and development costs, the Group’soperating profit margin, rose by 50 basis points to 2.2%. Net finance costs fell by 81.2% from 2008’s US$48.9 million to US$9.2 million, as the Group aggressively deleveraged in an uncertain economy. Profit attributable to equity holders came in at US$141.2 million, an impressive 45.3% higher than the US$97.2 million the Group reported in 2008. Basic earnings per share were US6.69 cents against US4.74 cents the previous year.

During the year, the PC monitor business segment contributed 63.5% (2008: 75.8%)oftheGroup’s consolidated revenue, while the contribution from LCD TV business segment continued to grow, accounting for 33.4% (2008: 21.3%) of the Group’s total sales.

Astheengineoftheworld’s economic growth, China accounted for 29.6% (2008: 25.8%) of the Group’s total revenue. Because of the Group’s new strategic presence in Poland, the Group’s sales to Europe gained traction, and this region

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surpassed North America to contribute 28.6% (2008: 24.5%) of the Group’srevenue. North America and the rest of world accounted for 24.2% (2008: 27.4%) and 17.6% (2008: 22.3%) of the Group’s revenue, respectively.

Business review

PC monitors

According to DisplaySearch, the total global demand for PC monitors was 164.1 million units in 2009, which was 6.5% lower than in the previous year. While there was good growth in some emerging economies, such as China, India and Brazil, corporate users in developed markets like the US and Europe still felt uncertain about their business prospects, and most of them resorted to cutting costs by scaling back on their IT investments.

The Group’s total PC monitor shipments dipped by 3.3% to 46.2 million units in 2009, lowering their contribution to the Group’s revenue by 27.3% to US$5.1 billion (2008: US$7.0 billion). The Group’s ASP per unit for the year was US$110.5 (2008: US$146.9), reflecting lower component costs. On a quarterly sequential basis, the Group’s ASP remained relatively stable throughout the year, at US$102.3 during the first quarter, US$104.6 in the second quarter, US$117.8 in the third quarter and US$114.7 in the fourth quarter. This suggests the operating environment has become friendlier for everyone along the supply chain. Moreover, the migration to larger screen displays helped to mitigate the pressure of price erosion.

Atthesametime,theGroup’s gross profit margin recovered to 6.1% (2008: 4.8%), however, gross profit dollar per unit slipped to US$6.7 (2008: US$7.1) due to lower ASP. Nevertheless, the Group’s operating margin improved by 30 basis points to 2.0% (2008: 1.7%) as the Group continued to streamline its production flow and enhanced efficiency. At the end of 2009, the Group had maintained its leading position in this quickly consolidating segment, with a market share of approximately 28.3% in terms of shipment volume.

In June 2009, the Group took a step forward in extending its reach to the end markets by entering into a five-year trademark licensing agreement with Philips. Pursuant to this, the Group has assumed responsibility for the design, sourcing, manufacturing, distribution, marketing and sales of Philips brand name monitors worldwide.

LCD TVs

During the year under review, the Group’sLCDTVshipmentssurgedby58.5% to 9.5 million units (2008: 6.0 million units). Its contribution to the Group’s consolidated revenue consequently rose from 21.3% to 33.4%.

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The strong growth in the Group’s LCD TV shipments was mainly attributable to better-than-expected demand in developed markets like Europe and the US, which accounted for 41.5% and 38.3% of the Group’s total shipments, respectively. At the same time, China’s strong economic growth fuelled the robust demand there, and the Group was able to benefit from the rural subsidy programme by increasing sales of the Group’sown-brandproducts.

In tandem with the panel prices, the ASP of the Group’sLCDTVsfellby13.9% to US$281.9 last year (2008: US$327.4). The proportion of LCD TVs with screen sizes of 32-inch or more that the Group shipped increased from 32.5% in 2008 to 41.7% in 2009. As a result, the weighted average screen size of the units the Group sold rose from 25.9 inches to 27.8 inches. The Group’s gross profit margin improved by 130 basispointsto5.7%(2008:4.4%).

The volume of the Group’s LCD TV sales in 2009 gave it a global market share of 6.6%, placing the Group in the fourth position among global LCD TV manufacturers. In fact, the Group was the only ODM amongst the top five.

R&D

One major achievement of the Group’sR&Deffortsin2009wasthelaunchof All-in-One PC (‘‘AIO PC’’) in May 2009. By the end of the year, the Group had shipped 70,000 units of this new product to the Group’scustomers.

The Group also scored a breakthrough in the ongoing product development programme by shipping its first consignment of LED-backlit monitors during the fourth quarter of 2009. Furthermore, the Group expanded its product line to include a full range of display sizes, from 15-inch to 65-inch.

In addition, the Group invested resources in the development of 3D and touch- screen displays. The Group delivered a small quantity of touch-screen AIOs in 2009.

Production

The Group continued to invest in its manufacturing capacity to prepare for future growth and also strengthen its status in the industry, guarantee more timely delivery to various parts of the world, and reduce its logistical costs.

The Group’s capital expenditure in 2009 totalled US$118.4 million. One of the key investment areas was its plant at Gorzow, Poland, the first the Group owned in Europe, which began mass production during the second half of 2008. It is fully operational, with an annual capacity of 4.5 million units of LCD TVs and multi- functional monitors. The plant’s location gives the Group a distinct advantage in Europe, and it was the main driver of the remarkable growth in the Group’sLCDTV sales there during 2009.

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As at 30 March 2010, the Group had two factories in Brazil to support this fast- growing market. Between them, the two processed 1.9 million PC monitors and 300,000 LCD TVs in 2009. In July 2009, the Group completed the purchase of another factory, in Mexico, where the Group planned to have an initial capacity of 700,000 units a year to serve the large-screen LCD TV requirements of North and South America.

In addition, the Group took over a new 450,000 square metre plant in Xiamen, PRC, in August 2009. Located next to a deep-water port and surrounded by a cluster of key suppliers, this plant will also be the Group’s most advanced facility, with the ability to undertake backward integrated operations in LCD module assembly, backlights and plastic injection through various joint-venture arrangements.

Finally, the Group closed its Ningbo plant in 2009, due to the strategic reallocation of its manufacturing resources.

In line with the Group’s backward integration strategy, it increased its in-house production of LCD modules to 17.8 million units, as well as 5.0 million units of backlight units during 2009.

As of December 31, 2009, the Group had an annual global production capacity of 75.2 million units PC monitors and 15.8 million units of LCD TVs.

Joint ventures

Apart from expanding the Group’s manufacturing footprint, the Group continued to acquire know-how and technologies, in order to strengthen its manufacturing capability in the competitive landscape in which it operates. One of the Group’s key strategies for achieving this is by entering into strategic alliances and joint ventures.

To this end, the Group announced the formation of two joint ventures with one of the world’s foremost panel suppliers, LGD in November 2009. One of these will focus on LCD TVs, and the other on PC monitors. These two joint ventures will be located in the Group’s Xiamen and Fuqing plants, and they will commence operations in April 2010. This partnership with LGD will ensure that the two joint ventures have captive and stable panel supplies to satisfy the needs of the Group’s customers at all times.

In addition, the Group joined Inventec Corporation, a leading notebook manufacturer, in exploring the market potential of AIO PCs, thereby allowing the Grouptoleverageoneachother’s capabilities and know-how in the PC and display areas, and shortening the learning curve required to bring competitive products to the market.

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Workforce

As at 31 December 2009, the Group employed 29,479 people worldwide whose total emoluments amounted to US$244 million. All of the Group’semployeeswere remunerated in accordance with industry practice in the locations where they worked.

The Group provides regular training to its staff members and encourages them to engage in lifelong learning and self-development, thus ensuring the Group’s competitiveness in an ever-changing market environment.

Mindful of the tremendous value of skilled and experienced workers, and the increasingly tight labour market in China, the Group introduced enhanced welfare benefits and compensation schemes to attract and retain these valuable assets to the Group’s business.

Liquidity, financial resources and capital structure

As at 31 December 2009, the Group’s cash and bank balances totalled US$270.4 million, compared to US$171.1 million 12 months earlier. Credit facilities granted by banks amounted to US$4.3 billion (31 December 2008: US$4.5 billion), of which US$0.74 billion were utilized (31 December 2008: US$1.06 billion).

The Group’s operations generated a positive operating cash flow of over US$600 million in 2009. Some of this cash was used to pay down the Group’sdebts, in order to increase its staying power in an uncertain economy. All of the Group’s outstanding bank debts were borrowed on a floating-rate basis.

The maturity profile of outstanding bank debts as of 31 December 2009 was as follows:

Duration 2009 2008 US$’000 US$’000

Within one year 209,212 397,240 In the second year 6,124 206,015

The Group’s inventory turnover days stood at 36.8 days at the end of December 2009 (31 December 2008: 36.6 days). Trade receivable turnover days and trade payable turnover days both lengthened, to 73.8 days (31 December 2008: 57 days) and 69.1 days (31 December 2008: 49 days), respectively.

The Group’s gearing ratio, representing the ratio of total borrowing to total assets, dropped significantly to 5.2% from 18.0% in 2008. The current ratio was 127% versus 145.1%.

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Foreign exchange risk

The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to Renminbi, Japanese Yen, Euros, Brazilian Real, Indian Rupee and Mexican Peso. Foreign exchange risk arises from future commercial transaction, recognized assets and liabilities and net investments in foreign operations. Moreover, the conversion of Renminbi into foreign currencies is subject to the rules and regulations for exchange control promulgated by the PRC government. The Group aims to reduce its currency exposures against Renminbi by using foreign exchange forward contracts. In view of the volatile financial market, the Group has set out strict guidelines, against any speculative trades in derivative products.

The total notional principal amounts of the outstanding foreign exchange forward contracts as at 31 December 2009 were as follow:

2009 2008 US$’000 US$’000

Sell Renminbi for US dollars 2,853,000 4,045,500 Sell US dollars for Renminbi 2,858,000 4,268,000 Sell Japanese Yen for US dollars 5,800 19,550 Sell Euros for US dollars 73,719 24,753 Sell Brazilian Real for US dollars 42,500 — Sell Indian Rupee for US dollars 10,000 — Sell HK dollars for US dollars 3,000 — Sell Mexican Peso for US dollars 1,400 — Sell US dollars for Euros — 7,550 Sell US dollars for Japanese Yen — 2,000

In respect of the Philips Business

Results

The net loss for the period ended 31 December 2009 was US$231 million.

Business review

Analysis of financial performance

The year 2009 was characterised by introduction of experience television including the 2009 Aurea and Ambilight range and the cinema 21: 9 model, the world’s first cinema proportioned LCD television. Television has evolved from a business based on scale to one driven by differentiation, especially in its channel/market mix. Traditional world-class competencies in areas like picture quality and technical performance have been maintained, while additional focus has been placed on differentiated design and experiences.

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Following the global recession caused by the financial crisis, in 2009 revenues decreased by 24% (US$1,273 million) due to a world-wide sales decline in consumer TV segment mainly incurred in Brazil, Russia, the United Kingdom and France.

Sales volumes decreased by 11% to 7,680 thousand pieces. The resulting gross profit decline is more than offset by an increase in gross profit as percentage of revenues (from 13.2% to 18.7%) leading to the US$53 million 2009 growth in gross profit. The growth in gross profit as percentage of revenues is predominantly due to portfolio changes and mix management (higher sales of televisions with Ambilight), as well as the industrial back-end consolidation (LGD/Sharp) reaping purchase price benefits.

Management continuously focused on cost reduction opportunities. In 2008, as part of the integration of the Consumer Electronics and Domestic Appliances businesses of Philips, the Earn-to-Invest (‘‘E2I’’) continuous business transformation program was started. In 2009, the cost saving effects of this integration fully materialised, which was the main driver behind the US$218 million (19%) decline in operating expenses.

Reductions in selling expenses were mainly realised by optimising fixed selling expenses (decrease by US$122 million) and advertising and promotion expenses (decrease by US$31 million). Lower general and administrative expenses were the result of lower IT costs (decrease by US$11 million), general reduction in headcount (decrease by US$6 million) and various other cost reductions (decrease by US$23 million). Rationalisation of research and development projects as well as timing of new product introductions and launches resulted in reduced research and development expenses by US$23 million.

Other income and expense reflects cost charges (of costs incurred as included in other line items) to countries not in the perimeter of the Philips Business. Under a global services agreement, operating units within Philips delivering services to other units, recharge these costs on an arm’s length basis. Within the Philips Business, the headquarters in the Netherlands and the R&D locations mainly deliver services to other units within the Philips Business. In 2008, the Philips Business delivered these services to Philips TV activities in the US and the PRC. During 2009, the activities in the US were licensed out to a third party. The activities in the PRC were licensed out to the Company in 2010. After the licensing out, no costs were incurred or recharged to these reporting units.

In 2009 the loss from operations decreased by US$100 million from US$311 million in 2008 to US$211 million in 2009. This is largely explained by a reduction in operating expenses of US$218 million in combination with the growth in gross profit of US$53 million offset by lower cost recharges to units not included in the perimeter of the joint venture (decrease by US$49 million) and results on foreign exchange forward contracts (decrease by US$122 million).

– IV-16 – APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS AND OTHER FINANCIAL INFORMATION OF THE ENLARGED GROUP

The hospitality TV segment comprises 4% of total sales generated by the Philips Business and remained stable in 2008 and 2009. During 2009 hospitality TV segment’s operating profit before tax decreased from US$15 million positive towards US$10 million negative mainly due to a slowdown in the leisure industry resulting from the global recession. The consumer TV segment more than offsets this resulting in the overall reduction in loss before tax from US$311 million in 2008 towards US$212 million in 2009.

Development in financial position

The decline in non-current assets between 31 December 2008 and 31 December 2009 of US$28 million is mainly driven by lower investments in product development included in intangible assets (decrease by US$13 million) and the decrease in property, plant and equipment (decrease by US$18 million) following the rationalisation of capital expenditure projects and production capacity. As part of the rationalisation of production capacity, a production plant in France (Dreux) was closed and related production was migrated to the plant in Szekesfehervar in Hungary.

In reaction to the sales decline, as wellasduetoshortageinpanelsupply, inventories were decreased in 2009 accordingly (by US$161 million). This was also driven by a SKU (‘‘Stock Keeping Unit’’) reduction program, which reduced the number of SKUs of the Philips Business by 34% compared to 2008.

The decrease in inventories was the main driver for the US$185 million decline in current assets between 31 December 2008 and 31 December 2009.

Non-current liabilities largely comprise the long-term portion of provisions which increased by US$45 million in 2009 to US$116 million mainly due to growth in restructuring and warranty provisions.

Current liabilities decreased by US$18 million in 2009 mainly due to lower other payables and accruals (decreased US$49 million), trade payables (decreased US$14 million) offset by increased warranty provisions (increased US$26 million). The reduction in other payables and accruals relate to the decrease in sales mainly led to lower materials related accruals. Growth in short term provisions mainly relates to restructuring provisions which increased in relation to the closure of the France Dreux production location. Warranty provisions increased due to a product failure as a result of faulty components delivered to the Philips Business by a supplier.

Cash flow analysis

In both 2008 and 2009 the negative cash flow from operating activities is largely compensated by positive cash flows from working capital management, especially in relation to inventory reductions that have been realised. Included in the negative operating results are charges for restructuring and product warranty costs. These chargesresultedinanincreaseinprovisionswithoutresultinginactualcash

– IV-17 – APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS AND OTHER FINANCIAL INFORMATION OF THE ENLARGED GROUP

outflows. This is offset by a positive non-cash item on the line item changes to provisions. These are the main drivers for the US$212 million improvement in the cash flow from operating activities in 2009 to US$81 million positive.

The increase in the cash flow from operating activities in 2009 is further increased on net fund flow level by the US$44 million reductions in capital expenditure.

Liquidity, capital structure and financial resources

Historically the business was mainly financed with financial support from the Philips Group. As at 31 December 2009, the Philips Business had no own bank balances and cash.

The Philips Group (including the Philips Business) utilises a central approach to cash management and the financing of its operations. Cash deposits of the Philips Group (including the Philips Business) are pooled and transferred to a Central Treasury function on a daily basis. As the Philips Business did not operate or exist as a separate legal entity, during the period of the combined financial statements, no amounts for cash, cash equivalents and debt have been reflected within the combined financial statements. All balances with other Philips reporting units not reported as intercompany current trading accounts are presented as the Philips Group’s net investment in the carve out financial statements. The Philips Group’s net investment amounted to a deficit of US$439 million at 31 December 2009.

Capital commitments

The Philips Business did not have any significant capital commitments as at 31 December 2009.

Contingent liabilities

Please refer to note 25 to the accountant’s report on the Philips Business as set out in appendix II to this circular for further details on contingent liabilities.

Significant investments, material acquisition and disposals

The Philips Business did not have any significant investments, material acquisition or disposals as at 31 December 2009.

Employment and remuneration policy

Remuneration of the staff mainly comprised contractual monthly salary, pension contributions and bonus entitlements based on their contribution to the Philips Business. The number of full-time employees employed by the Philips Business was approximately 3,800 worldwide whose total emoluments amounted to US$360 million as at 31 December 2009.

– IV-18 – APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS AND OTHER FINANCIAL INFORMATION OF THE ENLARGED GROUP

Charges

As at 31 December 2009, the Philips Business did not have any charges on its assets.

Foreign exchange risk management

The functional currency of the majority of the reporting units within the Philips Business is EUR unless the primary economic environment requires the use of other currencies. The Philips Business is exposed to foreign currency exchange fluctuation risk as part of its business carried out in local currencies in the countries it operates (mainly R$, Russian Roubles and US$). In the financial periods analyzed the Philips Business entered into foreign currency forward exchange contracts as economic hedges of exchange rate fluctuations.

FOR THE YEAR ENDED 31 DECEMBER 2010

In respect of the Group

Industry review

Most of the world’s economies entered 2010 in growth mode. However, the pace slowed from the second quarter onwards, as the stimulus packages governments had launched in response to the recession lost their momentum, leading to weaker consumer sentiment. The economic slowdown was exacerbated by the eruption of the sovereign debt crisis in Europe, which made it necessary for several troubled European Union states to receive large financial rescue packages.

Companies in the LCD industry, including the Group, got off to a good start last year, with strong demand for their products — especially in China — during the first quarter. Despite the dark clouds gathering on the economic horizon, sales remained firm in the second quarter too, as PC and TV brands started building up stocks in readiness for the peak season in the second half. Product prices stayed relatively stable throughout the first six months of 2010.

But lackluster sell-through numbers in June, increasing concerns about the economic outlook, and the build up of excess inventory along the supply chain began to affect monitor and TV panel prices, both of which plummeted in the third quarter.

However, monitor panel prices quickly stabilized after they reached cash-cost level in October and panel fabs drastically cut back on their outputs. On the other hand, TV panel prices continued to decline during the fourth quarter, albeit at a gentler gradient, since they were still selling at a premium to their cash cost. The prices of both product categories ended the year approximately 20 to 30% lower than they had been at the beginning.

– IV-19 – APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS AND OTHER FINANCIAL INFORMATION OF THE ENLARGED GROUP

On a brighter note, the increasing popularity of LED-backlit display products had a positive effect on the industry. Although these products are relatively more expensive, they are also slim, fashionable, and offer brighter and sharper pictures, as well as greater color contrast and lower power consumption. These features helped to create demand for them during 2010, boosting their penetration rates to around 10% in the PC monitor and 20% in the LCD TV segments.

Against the backdrop of a volatile global economy, worldwide shipments of PC monitors amounted to 172.3 million units for the year, a 5.1% increase on the 164 million units shipped in 2009. Demand for LCD TVs rose by 31.7%, up from 145.4 million units to 191.5 million units. Much of the growth came from China, Japan and Brazil, while demand in all the developed markets except Japan was impacted by the slowing global economy.

Company results

The Group posted consolidated revenue of US$11.6 billion for the year 2010, an increase of 44.8% on the previous year’s US$8.0 billion. Profit attributable to equity holders amounted to US$169.3 million, which was 19.9% higher than the US$141.2 million reported in 2009. Basic earnings per share were US7.37 cents, against US6.69 cents the previous year. The gross profit (‘‘GP’’) margin dipped 40 basis points to 5.4% because of the difficult operating environment, particularly for the LCD TV business segment.

During the year, the PC monitor business segment contributed 54.1% (2009: 63.5%)oftheGroup’s consolidated revenue, whereas the LCD TV business segment accounted for 34.8% (2009: 33.4%) of total sales.

Europe and China each accounted for approximately one-third of the Group’s total revenue, contributing 31.4% and 30.8% respectively (2009: 28.6 and 29.6%). North America and the rest of world accounted for 18.8% and 19% of the Group’s revenue, respectively (2009: 24.2% and 17.6%).

Business review

PC monitor

While some businesses around the world did finally replace their obsolete PCs and monitors during 2010, the uncertain economic conditions that prevailed in many regions deterred a lot of others from following suit. The same uncertainty dampened consumer demand, which basically stayed flat throughout the year. However, recent surveys indicate the long-overdue equipment replacement cycle will continue in 2011. This would be a welcome trend, because it would boost demand for the Group’s products.

– IV-20 – APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS AND OTHER FINANCIAL INFORMATION OF THE ENLARGED GROUP

The Group shipped a total of 56.5 million monitor units worldwide in 2010, a year-on-year increase of 22.3% on the figure of 46.2 million for the previous year. This gave the Group a global market share of 32.8% (2009: 28.3%). Moreover, the 25.1 million units the Group shipped in China gave it a particularly strong position in that market, where the Group had a share of approximately 50%.

Meanwhile, the GP per unit held firm at US$7.3 (2009: US$6.7), thanks to enhanced efficiency and the relatively stable competitive landscape. Due to changes in the Group’s product mix, the average selling price (ASP) of the Group’sproducts also rose slightly to US$111.6 (2009: US$110.5), despite the backdrop of a general decline in prices in the industry.

LCD TV

There were a total of 191.5 million LCD TV units shipped worldwide during 2010, a figure that was slightly higher than the industry’s expectations. Emerging markets like China and Brazil were the key growth drivers, although the Japanese government’snew‘‘eco-points’’ system to promote green products and stimulate consumption resulted in the shipment of 22.6 million LCD TV units to that country — ahugeincreaseontheindustry’s original forecast of 12 million units that made Japan a star performer among developed nations.

The Group’s LCD TV shipments surged by 55.6% to 14.8 million units, including TV chassis, CKD and SKD, in 2010 (2009: 9.5 million units). This represented 7.7% of the world’s total supply. Even so, the sudden and steep drop in LCD panel prices in the second half of the year made it difficult for any brand or manufacturer to attain its revenue and profitprojections,evenifitdidmanageto meet its volume targets. As a result, the contribution of LCD TV shipments to the Group’s consolidated revenue rose only slightly, from 33.4% in 2009 to 34.8% last year. During the same period, the ASP of our LCD TV units rose from US$281.9 in 2009 to US$290.8, which was attributable to increasing shipments of larger screen sizes and higher-priced LED-backlit products. Yet the GP per unit decreased from US$16 to US$13.2 in the face of the challenging business environment.

One important development for the Group during 2010 was the signing of a trademark license agreement granting the Group an exclusive license to manufacture and distribute Philips LCD TVs in China for a five-year period commencing January 2011. This has major strategic significance for the Group, because the Philips range of TV products will complement the Group’s own brand, thereby extending its product portfolio to cover the top quartile of product segments. The established sales channels and premium brand image of Philips products in China’sfirstand second-tier cities will likewise complement the Group’sbrand’sstrongpresencein the third and fourth-tier cities and rural areas.

– IV-21 – APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS AND OTHER FINANCIAL INFORMATION OF THE ENLARGED GROUP

Production

The Group invested US$213.4 million on various capital projects and on streamlining and automating our manufacturing facilities during 2010. This included expanding the annual production capacity of the Group’s plant in Poland to 10 million units, and increasing the LCD TV production capacity of our factory in Xiamen, China, to 5 million units a year. At the same time, the Group fully integrated the Xiamen plant to include LCD-module assembly and plastic injection processes, thereby streamlining its logistical requirements to enable the Group to shorten its production lead time.

In addition, the construction of the Group’s new facility adjacent to the new 8.5G panel fab in Beijing, China, got underway. This facility is scheduled to commence operations with an initial annual capacity of 2 million LCD display units in late 2011, which will coincide with the launch of mass production at the panel fab next door.

Our two joint-venture (‘‘JV’’) manufacturing plants with LG Display Co., Ltd in China were commissioned during 2010. The one in Xiamen began shipping LCD TV modules and sets in March; while the other, in Fuqing, started shipping monitor modules and sets in May. Both plants are receiving good order flows from customers, and they are contributing to the Group’s bottom line.

Two more JV agreements were signed with AU Optronics Corporation in March and September 2010. These cover new LCD-module assembly lines in Poland and Brazil to cater for the fast-growing demand for TVs and the requirements of customersinbothregions.Theyareduetocommenceproductionin2011.

Furthermore, in June 2010 the Group entered into a JV with Everlight Electronics Co., Ltd. and Epistar Corporation for the design and manufacturing of LED light bars in China. The JV benefits the Group with a captive supply and it is enabling the Group to exercise better control over components.

On the product front, the Group set up a JV with Inventec to leverage on the increasing demand for AIO PCs. The JV shipped its first original design manufacturing (ODM) order in July 2010. The JV allows both partners to leverage on each other’s know how and capabilities in PC design and display technology, thus shortening the learning curve in a highly competitive and fast-growing market segment.

R&D

The Group is committed to staying abreast of rapid technological evolution and maintaining our competitiveness in the industry through continuous investment in R&D resources.

– IV-22 – APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS AND OTHER FINANCIAL INFORMATION OF THE ENLARGED GROUP

The Group continued to work on LED-backlit solutions to provide cost-effective designs for customers in 2010, and the Group launched a total of 800 LED-backlit models last year.

To keep pace with technological trends, the Group’s R&D team has also been working with various solution providers to come up with design roadmaps for 3D and touch-screen display products. Many of these new designs have now passed critical quality tests, and the Group expects to introduce products incorporating their new features under the Group’s own brand later this year. Meanwhile, the Group is keeping a watchful eye on the development of smart TV, which the Group believes is going to be the next big catalyst for TV demand.

Workforce

As at 31 December 2010, the Group employed 37,473 people worldwide whose total emoluments amounted to US$328 million. The Group’s employees were remunerated in accordance with industry practice in the locations where they worked. The Group provides regular training to staff members, and encourages them to engage in lifelong learning and self-development, thus ensuring the Group’s competitiveness in an ever-changing market environment. Mindful of the tremendous value of skilled and experienced workers, and the increasingly tight labor market in China, the Group introduced enhanced welfare benefits and compensation schemes to attract and retainthesevaluableassetstotheGroup’s business.

Liquidity, financial resources and capital structure

As at 31 December 2010, the Group’s cash and bank balances (including pledged bank deposit) totaled US$186.7 million (31 December 2009: US$270.4 million). Credit facilities secured from banks totaled US$3.9 billion (31 December 2009: US$3.2 billion), of which US$1.5 billion was utilised (31 December 2009: US$0.48 billion).

All bank loans were borrowed on a floating-rate basis. The maturity profile of the Group’s debts as of 31 December 2010 was a follows:

Duration 2010 2009 US$’000 US$’000

Within one year 472,533 209,212 In the second year — 6,124

The Group’s inventory turnover days improved slightly from 36.8 days in 2009 to 35.8 days at the end of December 2010. Trade receivable turnover days declined to 63.9 days (31 December 2009: 73.8 days) while trade payable turnover days stood at 69.1 days (31 December 2009: 69.1 days).

– IV-23 – APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS AND OTHER FINANCIAL INFORMATION OF THE ENLARGED GROUP

The Group’s gearing ratio, representing the ratio of total borrowings to total assets, rose to 9.2%, compared to 5.2% in 2009. The current ratio was 126.1% at the end of 2010 (31 December 2009: 127.0%).

Foreign exchange risk

As at 31 December 2010, the total notional principal amounts of the Group’s outstanding foreign exchange forward contracts were as follows:

2010 2009 US$’000 US$’000

Sell Renminbi for US dollars 3,678,641 2,853,000 Sell US dollars for Renminbi 3,266,000 2,858,000 Sell Japanese Yen for US dollars 56,900 5,800 Sell Euros for US dollars 208,254 73,719 Sell Brazilian Reals for US dollars 49,800 42,500 Sell Indian Rupees for US dollars 11,000 10,000 Sell British Pounds for US dollars 7,077 — Sell US dollars for Russian Ruble 765 — Sell US dollars for New Taiwan Dollars 17,000 — Sell HK dollars for US dollars — 3,000 Sell Mexican Peso for US dollars — 1,400

In respect of the Philips Business

Results

The net loss for the period ended 31 December 2010 was US$125 million.

Business review

Review of operations

In 2010, market recovery and the World Cup has contributed to the 3% revenue growth towards US$4,083 million in 2010. Growth is mainly realised in South American countries (especially Brazil and Argentina) and Russia of (respectively of 34% and 49%), whereas European countries suffered from a 4% sales decline. In terms of volumes sales level remained stable at 7,674 thousand units in 2010.

Despite the US$132 million revenue growth realised in 2010 gross profit declined by US$126 million resulting from a decrease in gross profit realised per sold television. The gross profit margin declined to 15% in 2010. The main drivers for the latter are price pressure (especially in the lower end product range, due to high inventory levels at all global TV manufacturers in the second half of 2010) and lower

– IV-24 – APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS AND OTHER FINANCIAL INFORMATION OF THE ENLARGED GROUP

sales of high-end television models due to temporary component shortages as well as a high number of product introductions in the high-end market by some of the competitors.

Following the continuation of the E2I program to reduce fixed costs and improve the overall agility of the cost base, further cost reduction measures materialised and contributed to the US$196 million reduction in operating expenses, especially in the area of selling & distribution expenses (US$175 million) and research and development expenses (US$24 million). The decrease in selling and distribution expenses was realized by restructuring of distribution operation, headcount reductions and more efficient marketing spend. Also the establishment of forward integration and co-location partnerships with the Group, LGD and Sharp have reduced the industry fixed costs. The decrease in R&D expenses is mainly driven by timing of product launches in 2010.

In 2010 the loss from operations improved by US$107 million to US$104 million negative which is largely driven by the aforementioned cost reductions offset by the US$126 million decline in gross profit.

The global recession is the main factor explaining the US$59 million sales decline in the Hospitality TV segment and resulted in a further US$8 million decrease in profit before tax of this segment. As such, the reduction of loss from operations is fully attributable to the consumer TV segment.

Analysis of financial position

Non-current assets increased by US$13 million mainly resulting from investments in intangible fixed assets exceeding amortisation (by US$13 million).

In 2010, current assets grew by US$415 million following inventory build-up of US$316 million during the fourth quarter. Starting in the summer of 2010, all TV manufacturers were confronted with less successful selling in/out of their ambitious plans in Q2 surrounding the World Cup. Also the market pull for 3D technology was less successful than planned by all TV manufacturers. This led to a global overstock of panels and televisions. Lower sales in Brazil during the third quarter of 2010 and inefficient logistics and warehousing infrastructures, also contributed to the relatively high inventory level in the second half of 2010.

In addition, the increase in inventories resulted in growth in VAT receivable balance at 31 December 2010 driving the US$33 million growth in other current assets. Finally, the 2010 revenue growth led to higher outstanding receivable balances at 31 December 2010 contributing US$41 million to growth in current assets.

Non-current liabilities decreased by US$37 million mainly driven by lower long-term provisions.

– IV-25 – APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS AND OTHER FINANCIAL INFORMATION OF THE ENLARGED GROUP

Current liabilities increased by US$336 million in 2010 mainly due to growth of US$324 million in trade payable balances offset by lower (US$20 million) short term provisions largely due to reduced warranty provisions.

Cash flow analysis

In addition to the operating loss before depreciation, amortization, impairments and stock based compensation of US$15 million, growth in working capital balances has a negative impact of US$54 million on the cash flow from operating activities. In addition, cash out from provisions (mainly restructuring) of US$63 million is also an important factor contributing to the negative cash flow of operating activities of US$124 million. As the provisions recorded in 2009 mostly resulted in cash outflows in 2010, without operating result including any related charges, the line item provisions reflect related cash outflows.

Investments in property, plant and equipment and intangible fixed assets amount respectively to US$44 million and US$51 million.

Liquidity, capital structure and financial resources

Historically the business was mainly financed with financial support from the Philips Group. As at 31 December 2010, the Philips Business had no own bank balances and cash.

The Philips Group (including the Philips Business) utilises a central approach to cash management and the financing of its operations. Cash deposits of the Philips Group (including Philips Business) are pooled and transferred to a Central Treasury function on a daily basis. As the Philips Business did not operate or exist as a separate legal entity, during the period of the combined financial statements, no amounts for cash, cash equivalents and debt have been reflected within the combined financial statements. All balances with other Philips reporting units not reported as intercompany current trading accounts are presented as owners’ net investment in the carve out financial statements. The Philips Group’snetinvestment amounted to a deficit of US$310 million at 31 December 2010.

Capital commitments

The Philips Business did not have any significant capital commitments as at 31 December 2010.

Contingent liabilities

Please refer to note 25 to the accountant’s report on the Philips Business as set out in appendix II to this circular for further details on contingent liabilities.

– IV-26 – APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS AND OTHER FINANCIAL INFORMATION OF THE ENLARGED GROUP

Significant investments, material acquisition and disposals

The Philips Business did not have any significant investments, material acquisition or disposals as at 31 December 2010.

Employment and remuneration policy

Remuneration of the staff mainly comprised contractual monthly salary, pension contributions and bonus entitlements based on their contribution to the Philips Business. The number of full-time employees employed by the Philips Business was approximately 3,500 worldwide whose total emoluments amounted to US$274 million as at 31 December 2010.

Charges

As at 31 December 2010, the Philips Business did not have any charges on its assets.

Foreign exchange risk management

The functional currency of the majority of the reporting units within the Philips Business is EUR unless the primary economic environment requires the use of other currencies. The Philips Business is exposed to foreign currency exchange fluctuation risk as part of its business carried out in local currencies in the countries it operates (mainly R$, Russian Roubles and US$). In the financial periods analyzed the Philips Business entered into foreign currency forward exchange contracts as economic hedges of exchange rate fluctuations.

FOR THE SIX MONTHS ENDED 30 JUNE 2011 (IN RESPECT OF THE GROUP) ANDFORTHEPERIODFROM1JANUARY2011TO3JULY2011(INRESPECT OF THE PHILIPS BUSINESS)

In respect of the Group

Business review

The first half of 2011 saw the world’s developed economies recovering more slowly than previously expected. The tragic earthquake and tsunami in Japan, the prolonged and increasingly widespread sovereign debt crisis in Europe and persistently high unemployment figures in the US triggered fears of another global recession and erased the optimism that the Group saw at the beginning of the year. Meanwhile, the inflation rate rose to worrying levels in many Asian countries. These negative developments have unnerved consumers and prompted them to reduce their spending.

– IV-27 – APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS AND OTHER FINANCIAL INFORMATION OF THE ENLARGED GROUP

It was a challenging period for the thin film transistor (‘‘TFT’’)-LCD industry. Panel makers were obliged to cut back production in order to support their prices, as lacklustre economic conditions weakened global demand for LCD TVs in the second quarter of 2011. Shipments of these to the US during the first six months of the year remained at the same level as the corresponding period of 2010, whereas demand in Western Europe fell by 10.3%. However, this was offset by the growth in demand from emerging markets, such as China. Overall, global sales of LCD TVs in the first half grew by 9.5% year-on-year to 90.2 million units. At the same time, the penetration rate of LED-backlit LCD TVs continued to grow, and they accounted for almost 40% of the total shipments from January to June 2011.

The macro-economic headwinds buffeted the PC monitor segment as well. A total of 85.1 million units were shipped in the first half of the year, 0.6% fewer than in the same period of 2010. The popularity of LED-backlit monitors rose, and their penetration rate grew from 14.5% in the second half of 2010 to over 30% in the first half of 2011.

Company performance

Affected by these adverse conditions, the Group recorded consolidated revenue of US$5.3 billion during the first six months, which was 2.8% less than the US$5.4 billion it achieved in the same period a year earlier. Meanwhile, profit attributable to owners of the Company declined by 12.7% to US$70.1 million, compared to US$80.3 million in the corresponding months of 2010. Consequently, basic earnings per share fell 16.2% to US2.99 cents (1H 2010: US3.57 cents). However, the gross profit (‘‘GP’’) margin improved to 6%, up from 5.5% a year earlier.

Despite the stagnant demand in the end market, the Group’s PC monitor shipments rose by 9.5% year-on-year to 28.9 million units, as the Group continues to gain market share. The GP margin from this business segment also improved to 7.1%, compared to 6.3% a year earlier. On the other hand, declining panel prices caused the ASP of PC monitors to fall by 14% year-on-year, from US$118.10 to US$101.60. The segmental revenue was US$2.9 billion, equivalent to 55.5% of the Group’stotalrevenue.

LCD TV shipments dipped by 3.9% to 6.1 million units, compared to 6.3 million units a year earlier. This was due to the weaknessoftwoofitscoremarkets,Europe and the US. The GP margin for LCD TV units was 4.9%, which was slightly lower than the 5% achieved last year but insufficient to cover the much higher operating expenses. The ASP was US$291.30, which was higher than last year’s US$290.60, due to increased shipments of higher-priced LED-backlit models. The TV business revenue amounted to US$1.8 billion, equal to 33.4% of consolidated revenue.

In terms of geographical contributions, the China market accounted for US$1.5 billion or 28.5% of total revenue (1H 2010: 30.6%). Sales in Europe and North America declined to US$1.5 billion and US$834 million, while their respective contributions to consolidated revenue were 27.6% (1H 2010: 31.7%) and 15.8% (1H

– IV-28 – APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS AND OTHER FINANCIAL INFORMATION OF THE ENLARGED GROUP

2010: 18.1%). The contribution made by the rest of the world increased to US$1.5 billion or 28.1% (1H 2010: 19.6%), reflecting the Group’s success in penetrating into the higher growth emerging markets.

During the period under review, the Group opened a manufacturing facility in St. Petersburg to serve the growing markets in Russia and neighbouring countries. This has an annual production capacity of around 2 million units and it delivered its first ODM order in April. In addition, a newproductionbaseinBeijing,China, began trial production in June this year.

To strengthen its LCD TV business further, the Group entered into a term-sheet with Philips to establish a joint venture to take over the research and development, manufacturing, sales and marketing of Philips TVs worldwide (except in China, India, the US, Canada, Mexico and certain South American countries). Due diligence about this has already been completed, and both sides are working on the business plan and contract details.

In addition, the Group committed to acquiring a parcel of land of 8,203 square meters in Shanghai at approximately US$44 million in August. The site will be developed into the Group’s headquarters of its own brand business. Construction is scheduled to commence later this year.

Liquidity, financial resources and capital structure

As at 30 June 2011, the Group’s cash and bank balances (including pledged bank deposit) totaled US$233 million (31 December 2010: US$186.7 million). Credit facilities secured from banks totaled US$3.9 billion (31 December 2010: US$3.9 billion), of which US$1.2 billion were utilized (31 December 2010: US$1.5 billion).

The Group issued a RMB500 million note at the rate of 4.25% per annum in late March 2011 to strengthen its capital structure. Proceeds from the bond have been used to finance its capital expenditure and general working capital purpose in the PRC.

Except for the note payable, all borrowings were at floating rate. The maturity profile of the Group’s borrowings and loan as of 30 June 2011 was as follows:

30 June 31 December Duration 2011 2010 US$’000 US$’000

Within one year 241,902 427,533 Between two to five years 77,280 —

319,182 427,533

– IV-29 – APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS AND OTHER FINANCIAL INFORMATION OF THE ENLARGED GROUP

During the six months ended 30 June 2011, inventory turnover days increased to 48.7 days from 35.8 days for the year ended 31 December 2010. Trade receivable and payable turnover days lengthened to 70 days (31 December 2010: 63.9 days) and 80.1 days (31 December 2010: 69.1 days), respectively.

The Group’s gearing ratio, representing the ratio of total borrowings to total assets, lowered to 6.5% as compared to 9.2% at the end of 2010. Current ratio was at a healthy 131.3% (31 December 2010: 126.1%).

Foreign exchange risk

As at 30 June 2011, the total notional principal amounts of the outstanding foreign exchange forward contracts were as follows:

30 June 31 December 2011 2010 US$’000 US$’000

Sell Renminbi for US dollars 2,434,762 3,678,641 Sell US dollars for Renminbi 2,494,000 3,266,000 Sell Japanese Yen for US dollars 4,550 56,900 Sell Euros for US dollars 163,096 208,254 Sell Brazilian Real for US dollars 71,900 49,800 Sell Indian Rupee for US dollars 16,000 11,000 Sell British Pounds for US dollars 816 7,077 Sell US dollars for Russian Ruble — 765 Sell US dollars for New Taiwan Dollars 8,000 17,000

Workforce

As at 30 June 2011, the Group employed 34,863 people (31 December 2010: 37,473 people) worldwide whose total emoluments amounted to US$211 million (as compared to US$145 million as at 30 June 2010). All employees were remunerated in accordance with industry practice in locations where they worked. The Group provides training to staff members, and encourage them to engage in lifelong learning and self-development, thus ensuring our competitiveness in an ever- changing market environment. The Group has also adopted a share option scheme to grant share options to employees, at management discretion, as recognition to their outstanding performance.

In respect of the Philips Business

Results

The net loss for the period ended 3 July 2011 was US$341 million.

– IV-30 – APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS AND OTHER FINANCIAL INFORMATION OF THE ENLARGED GROUP

Business review

Analysis of financial performance

During the first six months of 2011 sales declined by US$289 million compared to the same period in 2010. The majority of the sales decline is concentrated in European countries where a sales decrease of US$263 million was realised following the loss of market share especially in Germany, France and the Benelux countries. Sales volumes declined by 23% to 1,519 thousand units sold during the first six months of 2011 compared to the same period in 2010.

Price erosion, partly driven by stock depletion of high inventory levels from 2010, drives the US$140 million gross profit decline in the first six months of 2011 compared to the same period last year. The gross profit margin was approximately 9% for the period ended 3 July 2011. The industry and Philips Business overstock at the end of 2010, has led to relatively high stock in the retail stores, and also higher commitments to panel manufacturers in 2011. Competitors have also driven excessive price erosion to try and clear their oversupply. This has driven the market to experience higher than normal price erosion in 2011. Next to this, the new 2011 launches of competition were a few months earlier than ours, with new designs and specifications, leading to more competition in the existing range. As a result, price erosion hit the total product range, but the higher end of the range absorbed the largest price declines.

Total operating expenses increased by US$44 million in the first six months of 2011 mainly due to US$33 million growth in research and development expenses largely resulting from exceptional impairments recorded as a result of lower return on capitalised research and development expenses, driven by lower gross profit percentages.

The results deteriorated due to the increased price erosion that materialised during the first six months of 2011 and the subsequent decline in gross profit and increased total operating expenses. Furthermore, losses of US$77 million on outstanding forward exchange contracts have been incurred in the first six months of 2011. As a result, loss for the period increased by US$327 million in the first six months of 2011 compared to the same period in 2010.

During the first six months of 2011 the Hospitality TV segment showed signs of recovery, with a number of newly contracted large customers, resulting in increased sales of US$7 million to US$56 million. In addition, operating profit improved by US$14 million to US$6 million positive. As such, the overall increase in the loss before tax is driven by the consumer TV segment.

– IV-31 – APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS AND OTHER FINANCIAL INFORMATION OF THE ENLARGED GROUP

Analysis of financial position

Non-current assets decreased to US$100 million due to US$21 million impairment losses on intangible assets. Current assets decreased by US$228 million due to lower trade and other receivables (decreased by US$172 million), reflecting the lower trading activity levels.

Current liabilities decreased by US$583 million compared to December 2010 mainly due to US$494 million lower trade payables, reflecting the lower trading activity levels.

Cash flow analysis

The negative net fund flow is driven by loss from operating activities before depreciation and amortization of US$271 million in combination with negative cash flows from working capital (US$328 million) resulting from the reduction in trade payables (US$494 million) due to the seasonality of the business, where typically in thefirsthalfoftheyearpurchasesaremadeforthelaunchofnewproductsandin preparation for the higher sales season in the second half of the year.

Liquidity, capital structure and financial resources

Historically the business was mainly financed with financial support from the Philips Group. As at 3 July 2011, the Philips Business had no own bank balances and cash.

The Philips Group (including the Philips Business) utilises a central approach to cash management and the financing of its operations. Cash deposits of the Philips Group (including the Philips Business) are pooled and transferred to a Central Treasury function on a daily basis. As the Philips Business did not operate or exist as a separate legal entity, during the period of the combined financial statements, no amounts for cash, cash equivalents and debt have been reflected within the combined financial statements. All balances with other Philips reporting units not reported as intercompany current trading accounts are presented as owners’ net investment in the carve out financial statements. The owner’snetinvestment amounted to a surplus of US$39 million at 3 July 2011.

Capital commitments

The Philips Business did not have any significant capital commitments as at 3 July 2011.

– IV-32 – APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS AND OTHER FINANCIAL INFORMATION OF THE ENLARGED GROUP

Future product pipeline

As at the date of this circular, Philips has successfully launched most of its 2011 advanced, new range of televisions into the market. During the third quarter of 2011, at this year’s Internationale Funk Ausstellung (‘‘IFA’’), Philips introduced its latest award-winning 46 inch 9000 series performance TV, which won the EISA European 3D TV of the year.

In addition, Philips showcased the latest addition to its range of cinema proportion televisions: the Cinema 21: 9 Platinum Series LED TV, the award- winning DesignLine and the second generation Econova ECO Smart LED TV, winner of the EISA award for Best Green TV of the year. These product launches further affirmed Philips commitment to innovation excellence in televisions by providing consumers with superior cinematic viewing experience at home.

Contingent liabilities

Please refer to note 25 to the accountant’s report on the Philips Business as set out in appendix II to this circular for further details on contingent liabilities.

Significant investments, material acquisition and disposals

The Philips Business did not have any significant investments, material acquisition or disposals as at 3 July 2011.

Employment and remuneration policy

Remuneration of the staff mainly comprised contractual monthly salary, pension contributions and bonus entitlements based on their contribution to the Philips Business. The number of full-time employees employed by the Philips Business was approximately 3,200 worldwide whose total emoluments amounted to US$133 million as at 3 July 2011.

Charges

As at 3 July 2011, the Philips Business did not have any charges on its assets.

Foreign exchange risk management

The functional currency of the majority of the reporting units within the Philips Business is EUR unless the primary economic environment requires the use of other currencies. The Philips Business is exposed to foreign currency exchange fluctuation risk as part of its business carried out in local currencies in the countries it operates (mainly R$, Russian Roubles and US$). In the financial periods analyzed the Philips Business entered into foreign currency forward exchange contracts as economic hedges of exchange rate fluctuations.

– IV-33 – APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS AND OTHER FINANCIAL INFORMATION OF THE ENLARGED GROUP

FOR THE NINE MONTHS ENDED 30 SEPTEMBER 2011

In respect of the Group

Business review

Overview

Global economy remained unsettled in the third quarter of 2011. Deepening of sovereign debt crisis and downgrade of financial institutions in Europe sparked fear of another financial crisis, resulting in decline of economic activities across the Eurozone. Furthermore, persistently high unemployment rates in the US continued to pose barriers to recovery. Emerging economies such as China, as a result of tightened monetary policy and softened export demand, also began to show signs of slowdown.

Against such backdrop, the TFT-LCD industry was under enormous strains. Dampened demand outlook prompted channels to keep inventory lean despite the traditional peak season ahead. As a result, TV panel prices fell 4 to 8 percentage points in the third quarter, after falling an average of 2% in the first half of the year. Nonetheless, demand growth in China and other emerging markets were broadly in line with expectation, sustaining a modest growth for the industry. According to DisplaySearch, global LCD TV shipment in the third quarter of 2011 rose 11.4% year- on-year to 50.9 million units, while PC monitor shipment grew 2.6% year-on-year to 43 million units. For the first nine months of 2011, worldwide LCD TV shipment was 139.6 million units, representing a 9% year-on-year growth; total PC monitor shipment was 127.1 million units, similar to that of last year.

Company Performance

Despite the slowdown in the broader economy, the Group’srevenueand shipment remained stable. For the three months ended 30 September 2011, the Group’s consolidated revenue amounted to US$2.9 billion, similar to the same period in the previous year. Gross margin rose from 5% a year ago to 6% in the third quarter of 2011. However, due to the foreign exchange translation losses resulted from the strengthening of the US dollar against various currencies at the end of the third quarter, as well as the increased operating expenses associated with the expanded operation, profit attributable to owners of the company declined 68.7% year-on-year to US$10 million, translating into a basic earnings per share of US0.43 cent, compared to US1.36 cents a year ago.

Performance of the Group’s PC Monitor business remained relatively steady. During the third quarter of 2011, the Group shipped 15.1 million units of PC monitors, representing a year-on-year increase of 5.6% (3Q 2010: 14.3 million units). Revenue generated for this business segment was US$1.6 billion, contributing 54.9%

– IV-34 – APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS AND OTHER FINANCIAL INFORMATION OF THE ENLARGED GROUP

to the Group’s total revenue. GP margin improved to 7.3% from 6.6% a year ago, while GP per set increased from US$7.4 to US$7.6. Average selling price (‘‘ASP’’)for the quarter was US$103.9 versus US$110.8 in the same period last year.

The Group’sTVbusinesssegmentwasadverselyaffected by the lackluster end- market demand and stiff competition in the outsourced manufacturing. For the quarter under review, the Group shipped 3.3 million units of LCD TVs, comparable to last year. Revenue for the segment was US$954.2 million, or 33.4% of the Group’s consolidated revenue. GP margin edged up to 4.5% from 4.1% last year. In dollar term, GP per set rose from US$12.30 to US$13.1 while ASP was down to US$291.5 from US$301.1 a year earlier. However, due to the high cost base attributable to the expanded TV operation and reduced revenue for the quarter, the segment incurred an operating loss.

In terms of geographical contribution, China was the biggest market and contributed US$914.4 million (3Q 2010: US$1 billion), or 32% of the total revenue. Due to the Group’shighexposuretothesoftenedTVmarketinEuropeandNorth America, contribution from these two markets fell to US$654.2 million (3Q 2010: US$835 million) and US$497.9 million (3Q 2010: US$522.9 million) respectively, or 22.9% and 17.5% of total sales. Revenue from the rest of the world rose significantly by 34.7% from a year ago to US$788.3 million (3Q 2010: US$585.3 million), or 27.6% of the consolidated revenue. Among which, revenue from Brazil increased by 61.7% to US$330.9 million (3Q 2010: US$204.6 million), or 11.6% of the Group’s consolidated revenue, while revenue from Asia-Pacific region went up 21.1% to US$427.6 million (3Q 2010: US$353.2 million), or 15% of the Group’s consolidated revenue.

– IV-35 – APPENDIX V GENERAL INFORMATION

1. RESPONSIBILITY STATEMENT

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

2. DIRECTORS’ AND CHIEF EXECUTIVE’S INTERESTS

As at the Latest Practicable Date, the interests of the Directors and the chief executive of the Company and their respective associates in the Shares, underlying shares and debentures of the Company or its associated corporations (within the meaning of Part XV of the SFO), which (a) were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO, including interests and short positions in which they were taken or deemed to have under such provisions of the SFO, or (b) were required to be and were entered in the register required to be kept pursuant to section 352 of the SFO, or (c) were required to be notified to the Company and the Hong Kong Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the ‘‘Model Code’’)setoutintheListing Rules, were as follows:

Interests in Shares

Number of Approximate Shares held %ofthe Name of Director Type of interest (long position) issued Shares

Dr. Hsuan, Jason Corporate (Note 1) 24,754,803 1.06

Notes:

(1) The interest of Dr. Hsuan, Jason disclosed herein includes the holding of 24,754,803 shares by Bonstar International Limited, a company beneficially and wholly owned by Dr. Hsuan, Jason.

– V-1 – APPENDIX V GENERAL INFORMATION

Details of share options held by Directors

Date of grant of Exercise Number Name of Director options Price Exercise Period of Options (HK$)

Dr. Hsuan, Jason 18/01/2011 5.008 18/01/2012–17/01/2021 150,000 (Note 3) 18/01/2013–17/01/2021 150,000 18/01/2014–17/01/2021 150,000 18/01/2015–17/01/2021 150,000

Mr. Chan Boon Teong 12/12/2007 5.750 12/12/2008–11/12/2012 80,000 (Note 2) 12/12/2009–11/12/2012 120,000 12/12/2010–11/12/2012 200,000

Dr. Ku Chia-Tai 12/12/2007 5.750 12/12/2008–11/12/2012 60,000 (Note 2) 12/12/2009–11/12/2012 90,000 12/12/2010–11/12/2012 150,000

Mr. Wong Chi Keung 12/12/2007 5.750 12/12/2008–11/12/2012 60,000 (Note 2) 12/12/2009–11/12/2012 90,000 12/12/2010–11/12/2012 150,000

Notes:

(2) These options are exercisable at HK$5.75 (US$0.73) per share in three trenches; the maximum percentage of share options exercisable within the periods commencing from 12 December 2008 to 11 December 2012, from 12 December 2009 to 11 December 2012 and from 12 December 2010 to 11 December 2012 are 20%, 50% and 100%, respectively.

(3) These options are exercisable at HK$5.008 (US$0.64) per share in four trenches; the maximum percentage of share options exercisable within the periods commencing from 18 January 2012 to 17 January 2021, from 18 January 2013 to 17 January 2021, from 18 January 2014 to 17 January 2021 and from 18 January 2015 to 17 January 2021 are 25%, 50%, 75% and 100%, respectively.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors and the chief executive of the Company and their respective associates had or was deemed to have any interest or short position in the Shares, underlying shares and debentures of the Company or its associated corporations (within the meaning of Part XV of the SFO), which (a) were required to be notified to the Company and the Hong Kong Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO, including interests and short positions in which they were taken or deemed to have under such provisions of the SFO; (b) were required to be and were recorded in the register required to be kept pursuant to section 352 of the SFO; or (c) were required to be notified to the Company and the Hong Kong Stock Exchange pursuant to the Model Code.

– V-2 – APPENDIX V GENERAL INFORMATION

3. SUBSTANTIAL SHAREHOLDERS’ INTERESTS

As at the Latest Practicable Date, so far as was known to the Directors and the chief executive of the Company, each of the following persons (not being a Director or chief executive of the Company) had an interest in the Shares or underlying shares of the Company which would fall to be disclosed to the Company and the Hong Kong Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO or which were recorded in the register kept by the Company pursuant to section 336 of the SFO:

Interest in Shares

Number of Approximate % Shares held of the issued Name of Shareholder (long position) Shares

China Electronics Corporation (‘‘CEC’’) 822,408,647 35.06% (Note 1, 2)

China Great Wall Computer Group Company 570,450,000 24.32% (Note 1, 2)

Great Wall Technology Co., Ltd. (‘‘GWT’’) 570,450,000 24.32% (Note 1, 2)

China Great Wall Computer (Shenzhen) 570,450,000 24.32% Co., Ltd. (‘‘CGCSZ’’) (Note 1, 2)

China Great Wall Computer (H.K.) 370,450,000 15.79% Holding Limited (‘‘CGCHK’’) (Note 1, 2)

China National Electronics Imp. & 251,958,647 10.74% Exp. Corporation (Note 1, 2)

CEIEC (H.K.) Limited (‘‘CEIEC HK’’) 251,958,647 10.74% (Note 1, 2)

Mitsui & Co., Ltd. (‘‘Mitsui’’) 473,482,590 20.19% (Note 2)

Chimei Innolux Corporation (‘‘CMI’’) 150,500,000 6.42% (Note 3)

Chimei Corporation (‘‘CMC’’) 150,500,000 6.42% (Note 3)

– V-3 – APPENDIX V GENERAL INFORMATION

Notes:

(1) CGCHK, CGCSZ and CEIEC HK are the registered holders of the aggregate of 822,408,647 Shares held within the CEC Group, of which 370,450,000 Shares are held by CGCHK, 200,000,000 Shares are held by CGCSZ, and 251,958,647 Shares are held by CEIEC HK. CGCHK is a wholly-owned subsidiary of CGCSZ. CGCSZ is owned as to 53.92% by GWT. GWT is a company owned as to 62.11% by China Great Wall Computer Group Company, which is a wholly-owned subsidiary of CEC. CEIEC HK is an indirectly wholly-owned subsidiary of CEC.

(2) CEC, CEIEC HK and Mitsui are parties to a consortium agreement dated 28 January 2010 (the ‘‘Consortium Agreement’’) and to a shareholders’ agreement dated 28 January 2010 (the ‘‘Shareholders’ Agreement’’). The Consortium Agreement and the Shareholders’ Agreement are agreements to which S.317(a) of the SFO applies. CEC Group and Mitsui are acting in concert with each other in respect of their aggregate 1,295,891,237 Shares.

(3) These Shares are held by CMI. CMI is owned as to 13.57% by CMC, and as to 3.57% by Linklinear Development Co. Ltd., which in turn is owned as to 54.22% by CMC.

Save as disclosed above, as at the Latest Practicable Date, the Directors and the chief executive of the Company were not aware of any other person who had, or was deemed to have, an interest or short position in the Shares or underlying shares of the Company, which would fall to be disclosed to the Company and the Hong Kong Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO.

4. INTEREST IN CONTRACTS OR ARRANGEMENT AND COMPETING BUSINESS

(a) As at the Latest Practicable Date, none of the Directors or proposed Directors had any direct or indirect interest in any assets which have been, since 31 December 2010 (being the date to which the latest published audited consolidated financial statements of the Group were made up), acquired or disposed of by or leased to or are proposed to be acquired or disposed of by or leased to any member of the Enlarged Group.

(b) As at the Latest Practicable Date, none of the Directors was materially interested in any contract or arrangement entered into by any member of the Enlarged Group and subsisting at the date of this circular which was significant in relation to the business of the Enlarged Group.

– V-4 – APPENDIX V GENERAL INFORMATION

(c) As at the Latest Practicable Date, save as disclosed below, none of the Directors or their associates has interests in a business, apart from the business of the Group, which competes or is likely to compete, either directly or indirectly, with the business of the Group:

Position with Name of Director the Company Nature of other interests

Mr. Chen Yen-Sung Non-executive Director Mr. Chen and his associates have interests in 151,312 shares of Chimei Innolux Corporation (being less than 0.1% of its shareholding), which is a TFT-LCD supplier with products spanning the full range of TFT-LCD panels, touch panels and LCD display products including TV panels and desktop monitors.

(d) As at the Latest Practicable Date, save for Mr. Robert Theodoor Smits, who was anofficerofPhilips,noneoftheDirectors have a material interest in the Proposed Transactions. Mr. Robert Theodoor Smits has abstained from voting on the relevant board resolution of the Company in respect of the Proposed Transactions.

5. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had existing or proposed service agreements with the Company which will not expire or are not terminable within one year without payment of compensation (other than statutory compensation).

6. QUALIFICATIONS AND CONSENTS OF EXPERTS

The following are the qualifications of the experts who have given opinion or advice as contained in this circular:

Name Qualification

Somerley Licensed corporation under the SFO for carrying out type 1 (dealing in securities), type 4 (advising on securities), type 6 (advising on corporate finance) and type 9 (asset management) regulated activities under the SFO

PricewaterhouseCoopers Certified Public Accountants (‘‘PwC’’)

Jones Lang LaSalle Professional valuers Sallmanns Limited (‘‘JLLS’’)

– V-5 – APPENDIX V GENERAL INFORMATION

Each of Somerley, PwC and JLLS has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its opinion and letter of advice (as the case may be) as set out in this circular and references to its name in the form and context in which it appears.

As at the Latest Practicable Date, each of Somerley, PwC and JLLS was not beneficially interested in the share capital of any member of the Group, nor had any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group, nor had any interest, direct or indirect, in any assets which have been, since 31 December 2010 (being the date to which the latest published audited financial statementsoftheGroupweremadeup),acquiredor disposed of by or leased to, or are proposed to be acquired or disposed of by or leased to any member of the Enlarged Group.

7. LITIGATION

(a) The Group

As at the Latest Practicable Date, neither the Company nor any of its subsidiaries was engaged in any litigation or claims of material importance and there was no litigation or claim of material importance known to the Directors to be pendingorthreatenedbyoragainsttheCompanyoranyofitssubsidiaries.

(b) The Philips Business

Save as disclosed in note 25 (contingent liabilities) to the accountant’sreporton the Philips Business as set out on pages II-48 to II-49 of appendix II to this circular, as at the Latest Practicable Date, to the best of the Directors’ knowledge, information and belief and based on the information provided by Philips, the Philips Group was not engaged in any litigation or claim of material importance with respect to the Philips Business and there was no litigation or claim of material importance with respect to the Philips Business known to the Directors to be pending or threatened by or against the Philips Group with respect to the Philips Business.

Pursuant to the Sale and Purchase Agreement, the contingent liabilities set out in note 25 to the accountant’s report on the Philips Business (pages II-48 to II-49 of appendix II to this circular) are excluded from the Philips Contributed Business. In addition, Philips has agreed under the Sale and Purchase Agreement to indemnify JVCo against any losses suffered or incurred by the JV Group arising from any such contingent liabilities.

– V-6 – APPENDIX V GENERAL INFORMATION

8. MATERIAL CONTRACTS

(a) The Group

The following contracts, not being contracts entered into in the ordinary course of business, were entered into by members of the Group within two years preceding the Latest Practicable Date and are or may be material:

(i) the economic area agreement dated 28 December 2009 between TVIL and Administrative Committee of Beijing Economic-Technological Development Area (an independent third party) regarding certain land use rights in Beijing, the PRC for a total consideration of approximately US$4.4 million;

(ii) the joint venture agreement dated 30 December 2009 between TVIL and Qingdao Huatong State-owned Capital Operation (Group) Co., Ltd (an independent third party) relating to the establishment of TPV Technology (Qingdao) Co., Ltd in Qingdao, the PRC. The initial capital contribution for TPV Technology (Qingdao) Co., Ltd is US$30 million of which TVIL will contribute 80% (US$24 million) in cash and Qingdao Huatong State-owned Capital Operation (Group) Co., Ltd will contribute 20% (US$6 million) in cash;

(iii) the joint venture agreement dated 11 January 2010 between ChungHwa Picture Tubes (Bermuda) Ltd (an independent third party), TVIL and MinDong Electric (Group) Co., Ltd (an independent third party) relating to CPT TPV Optical (Fujian) Co., Ltd in Fujian, the PRC. The initial capital contribution for CPT TPV Optical (Fujian) Co., Ltd is US$22.5 million of which ChungHwa Picture Tubes (Bermuda) Ltd will contribute 5% (US$1,125,000) in cash, TVIL will contribute 20% (US$4.5 million) and MinDong Electric (Group) Co., Ltd will contribute 75% (US$16,875,000) in cash;

(iv) the subscription agreement dated 28 January 2010 between the Company (as issuer) and Mitsui (as subscriber), relating to the subscription of the 234,583,614 new Shares by Mitsui at the subscription price of HK$5.20 per Share for a total subscription amount of HK$1,219,834,793.00;

(v) the amendment letter dated 28 January 2010 among the Company, TVIL and Philips to amend and waive certain rights under the share purchase agreement between Philips and the Company dated 15 June 2005, the component sourcing agreement dated 6 October 2009 between the Company and Philips and the trademark license agreement dated 9 February 2009 between TVIL, the Company and Philips;

– V-7 – APPENDIX V GENERAL INFORMATION

(vi) the amendment letter dated 28 January 2010 among the Company and Philips Consumer Lifestyle International B.V. to amend and waive a certain right under the supply agreement dated 5 September 2005 between the Company and Philips Consumer Lifestyle International B.V.;

(vii) the joint venture agreement dated 12 March 2010 between AU Optronics Corporation (‘‘AUO’’) (an independent third party) and the Company relating to establishments of BriVictory Display Technology (Labuan) Co., Ltd in Labuan, Malaysia and a wholly-owned subsidiary BriVictory Display Technology (Poland) Sp zoo in Poland. The total capital contribution for BriVictory Display Technology (Labuan) Co., Ltd is US$40 million of which the Company will contribute 49% (US$19.6 million) in cash and AUO will contribute 51% (US$20.4 million) in cash;

(viii) the joint venture agreement dated 11 June 2010 entered into between TVIL and Inventec (Cayman) Corporation relating to the establishment of a joint venture company to be incorporated in Hong Kong as a private company limited by shares in the name of TPV-INVENTA Holding Limited (英冠達控股有限公司). The total initial investment amount for the new joint venture is US$20 million of which TVIL will contribute 51% (US$10.2 million) and Inventec (Cayman) Corporation will contribute 49% (US$9.8 million);

(ix) the joint venture agreement dated 15 June 2010 entered into between TVIL, Epistar JV Holding (BVI) Co., Ltd (‘‘Epistar’’) and Everlight (BVI) Co., Ltd (‘‘Everlight’’) relating to the establishmentofajointventurecompanyto be incorporated in Fujian, the PRC in the name of Evertop optoelectronics Co., Ltd (億冠晶（福建）光電有限公司). The initial paid up capital for the joint venture is US$25 million of which TVIL will contribute 25% (US$6.25 million), Everlight will contribute 65% (US$16.25 million) and Epistar will contribute 10% (US$2.5 million);

(x) the joint venture agreement dated 17 September 2010 between the Company and AUO to (i) manufacture LCD modules and backlight units, (ii) sell LCD Modules produced by Brivictory Indústria de Eletrônicos Ltda. for sales in the territory of South America and (iii) conduct business related research and development in Manaus, Brazil. The total capital contribution for joint venture company is US$16 million of which the Company will contribute 81% (US$12.96 million) in cash and AUO will contribute 19% (US$3.04 million) in cash;

(xi) the second amendment dated 20 September 2010 to the trademark licence agreement dated 9 February 2009 between Philips and TVIL;

– V-8 – APPENDIX V GENERAL INFORMATION

(xii) the share purchase agreement dated 29 September 2010 between Philips (as seller), AOC (as buyer) and the Company (as guarantor) relating to the acquisition by AOC of the LCD colour TV business of Philips in the PRC for a total consideration of €1,200,000 and RMB300,000 for the spare parts (subject to adjustments);

(xiii) the deed of indemnity dated 29 September 2010 between Philips and AOC relating to the acquisition by AOC of the LCD colour TV business in the PRC;

(xiv) the trademark licence agreement dated 29 September 2010 between Philips, AOC and the Company relating to the licence and grant by Philips to AOC of the exclusive right to use the word mark ‘‘Philips’’ and the Philips shield emblem in the PRC;

(xv) the share purchase agreement dated 1 November 2010 between HannStar Display Corporation (‘‘HannStar’’), Brightstar Resources Limited (‘‘Brightstar’’) (a subsidiary of HannStar) and TVIL relating to the sale of BrightStar’s 80% shareholding in HannStar Display (Wuhan) Limited to TVIL for a consideration of US$3,400,000;

(xvi) the intellectual property agreement dated 31 December 2010 between Philips and AOC relating to a non-exclusive licence from Philips to AOC to use certain intellectual property rights in the PRC;

(xvii) the third amendment dated 1 February 2011 to the trademark licence agreement dated 9 February 2009 between Philips and TVIL;

(xviii)the subscription agreement dated 14 March 2011 between the Company (as issuer) and the Royal Bank of Scotland and Industrial and Commercial Bank of China (Asia) Limited (as the joint bookrunners) and the joint lead managers while ABCI Securities Company Limited and CITIC Bank International Limited (as the co-Lead managers) for the issue of RMB500,000,000 notes at 4.25% per annum due in March 2014 for such notes issue;

(xix) the fiscal agency agreement dated 17 March 2011 between the Company and Citicorp International Limited (as fiscal agent, paying agent, calculation agent, CMU Lodging agent, registrar and transfer agent) for the issue of RMB500,000,000 notes at 4.25% per annum due in March 2014;

(xx) the Term Sheet;

(xxi) the Sale and Purchase Agreement; and

(xxii) the sale and purchase agreement dated 8 December 2011 entered into among 蘇州冠捷科技有限公司 (TPV Technology (Suzhou) Company Limited*), 蘇州市土地儲備中心 (Suzhou Land Reserve Centre*) and 蘇州

* English translation is for identification purpose only

– V-9 – APPENDIX V GENERAL INFORMATION

國家高新技術產業開發區管理委員會 (the Suzhou National New & Hi-Tech Industrial Development Zone AdministrationCommittee*)inrelationto the sale and purchase of the land (together with the buildings and other immovable fixed assets attached thereto) situated at the Suzhou National New & Hi-Tech Industrial Development Zone, Suzhou, the Jiangsu Province, the PRC for a consideration of RMB510.0 million (equivalent to approximately US$80.3 million).

(b) The Philips Business

Based on the information provided by Philips, the following contracts, not being contracts entered into in the ordinary course of business, were entered into by the Philips Group in connection with the Philips Business within two years immediately preceding the Latest Practicable Date and are or may be material to the Philips Business:

(i) the technology license agreement dated 1 June 2011 between Philips, Philips Consumer Lifestyle International B.V. and Sharp Corporation (‘‘Sharp’’) relating to the license and grant by Philips to Sharp of certain intellectual property rights for a consideration of EUR300,000 (equivalent to approximately US$420,000); and

(ii) the technology assignment agreement dated 15 August 2011 between Philips Consumer Lifestyle International B.V. and Sharp relating to the assignment of certain knowhow from Philips Consumer Lifestyle International B.V. to Sharp for a consideration of EUR1,200,000 (equivalent to approximately US$1,680,000) with effect from 31 December 2010andanamendmentagreementtosuchtechnologyassignment agreement dated 22 September 2011.

9. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Group since 31 December 2010 (being the date to which the latest published audited financial statements of the Group were made up).

10. MISCELLANEOUS

(a) The registered office of the Company is at Canon’s Court, 22 Victoria Street, Hamilton HM 12, Bermuda.

(b) The secretary of the Company is Ms. Lee Wa Ying, Phyllis who is a member of The Hong Kong Institute of Certified Public Accountants and a fellow member of The Association of Chartered Certified Accountants.

– V-10 – APPENDIX V GENERAL INFORMATION

(c) The Hong Kong branch share registrar of the Company is Computershare Hong Kong Investor Services Limited at Rooms 1712–1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong. The Singapore share transfer office of the Company is at Boardroom Corporate & Advisory Services Pte. Ltd. at 50 Raffles Place, Singapore Land Tower #32-01, Singapore 048623.

(d) This circular has been prepared in both English and Chinese. In the case of any discrepancies, the English text shall prevail over the Chinese text.

11. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours at the principal office of the Company in Hong Kong at Unit 1208–16, 12/F, C-BONS International Center, 108 WaiYipStreet,KwunTong,Kowloon,Hong Kong from the date of this circular up to and including 22 February 2012:

(a) the memorandum of association and bye-laws (or its equivalent) of the Company;

(b) the Sale and Purchase Agreement;

(d) the Argentina JV Shareholders Agreement;

(e) the Trademark License Agreement;

(f) the Secondary Trademark License Agreement;

(g) the Intellectual Property Agreement;

(h) the Transitional Services Agreement;

(i) the IT Transitional Service Level Agreement;

(j) the Remote Control Sale Agreement;

(k) the NET TV License and Services Agreement;

(l) the Online Shop and My Shop Agreement;

(m) the Employee Shop Agreements;

(n) the Brazil Lease Agreement;

(o) the Amendment to the Dixtal Lease Agreement;

(p) the Hungary Lease and Service Agreement;

(q) the Tax Audit Service Agreement;

– V-11 – APPENDIX V GENERAL INFORMATION

(r) the letter from the Board, the text of which is set out on pages 18 to 90 of this circular;

(s) the letter from the Independent Board Committee to the Independent Shareholders, the text of which is set out on pages 91 to 92 of this circular;

(t) the letter from Somerley to the Independent Board Committee and the Independent Shareholders, the text of which is set out on pages 93 to 147 of this circular;

(u) the audited financial statements of the Group for each of the two financial years ended 31 December 2010;

(v) the accountant’s report on the Philips Business, the text of which is set out in appendix II to this circular;

(w) the accountant’s report on the unaudited pro forma financial information on the Enlarged Group, the text of which is set out in appendix III to this circular;

(x) the letters of consent from Somerley, PwC and JLLS referred to in this appendix;

(y) the material contracts as set out in the section headed ‘‘Material contracts’’ in this appendix; and

(z) this circular.

– V-12 – NOTICE OF THE SGM

TPV TECHNOLOGY LIMITED (Incorporated in Bermuda with limited liability) (Stock Code: 903)

NOTICE IS HEREBY GIVEN that a special general meeting of shareholders (the ‘‘SGM’’) of TPV Technology Limited (the ‘‘Company’’)willbeheldatUnit1208–16, 12/F, C-BONS International Center, 108 WaiYipStreet,KwunTong,Kowloon,Hong Kong on Wednesday, 22 February 2012 at 3: 00 p.m. for the purpose of considering and, if thought fit, passing the following resolutionsasordinaryresolutions:

ORDINARY RESOLUTIONS

(1) ‘‘THAT subject to and conditional upon the passing of Resolution numbered 2 below:

(a) the acquisition by MMD, the Company’s wholly-owned subsidiary, of a 70% equity interest in JVCo from Philips pursuant to the terms and conditions of the Sale and Purchase Agreement (a copy of which has been produced to the Meeting and marked ‘‘A’’ and signed by the Chairman of the Meeting for the purpose of identification) and as further described in the circular dated 23 December 2011 to Shareholders (a copy of which has been produced to the Meeting and marked ‘‘B’’ andsignedbythe Chairman of the Meeting for the purpose of identification (the ‘‘Circular’’)) in consideration of the Deferred Purchase Price be and is hereby approved, confirmed and ratified;

(b) the grant of the Philips Put Options pursuant to the terms and conditions of the Shareholders Agreement (a copy of which has been produced to the Meeting and marked ‘‘C’’ and signed by the Chairman of the Meeting for the purpose of identification) and as further described in the Circular be andisherebyapprovedandconfirmed;and

(c) the Directors acting together or by committee, or any Director acting individually, be and is/are hereby authorised to do all such acts and things (including, without limitation, signing, execution (under hand or under seal), perfection and delivery of all documents) on behalf of the Company as he or they may, in his/their absolute discretion, consider necessary, desirable or expedient for the purposes of, or in connection with, the Acquisition, the grant of the Philips Put Options and any other documents relating thereto or contemplatedthereby(ineachcaseamendedif necessary) and to make or agree such alterations, amendments and additions thereto as the Director(s) may, in his/their absolute discretion, consider necessary, desirable or expedient in the interests of the Company.’’

– SGM-1 – NOTICE OF THE SGM

(2) ‘‘THAT subject to and conditional upon the passing of Resolution numbered 1 above:

(a) the Continuing Connected Transactions to be entered into between JVCo (and/or its associates) and Philips (and/or its associates) at Completion (details of which are contained in the sections entitled ‘‘(IV) Licensing of Philips Trademarks and Philips Secondary Trademarks for the Philips Contributed Business’’, ‘‘(V) Entering into of the Intellectual Property Agreement’’, ‘‘(VI) Entering into of the Auxilary Agreements’’ and ‘‘(VII) Entering into of the Reversed Auxiliary Agreements’’ onpages52to79of the Circular) be and are hereby approved and confirmed AND the fixing of the respective Annual Caps of the Continuing Connected Transactions as disclosed in the Circular be and is hereby approved and confirmed; and

(b) the Directors acting together or by committee, or any Director acting individually, be and is/are hereby authorised to do all such acts and things (including, without limitation, signing, execution (under hand or under seal), perfection and delivery of all documents) on behalf of the Company as he or they may, in his/their absolute discretion, consider necessary, desirable or expedient for the purposes of, or in connection with, the performance and implementation of the Continuing Connected Transactions and any other documents relating thereto or contemplated thereby (in each case amended if necessary) and to make or agree such alterations, amendments and additions thereto as the Director(s) may, in his/their absolute discretion, consider necessary, desirable or expedient in the interests of the Company.’’

On behalf of the Board Dr.Hsuan,Jason Chairman and Chief Executive Officer

Hong Kong, 23 December 2011

Principal office in Hong Kong: Unit 1208–16, 12/F, C-BONS International Center, 108 Wai Yip Street, Kwun Tong, Kowloon, Hong Kong

– SGM-2 – NOTICE OF THE SGM

Notes:

1. Any shareholder of the Company entitled to attend and vote at the meetings of the Company or a meetingoftheholdersofanyclassofsharesintheCompany shall be entitled to appoint another person as his proxy to attend and vote instead of him. A proxy need not be a member of the Company.

2. A form of proxy for use at the meeting is enclosed. Completion and return of the form of proxy will not preclude you from attending and voting at the meeting or any adjournment thereof.

3. If you are a shareholder whose name appears on the register of members kept at Computershare Hong Kong Investor Services Limited, you should deposit the enclosed proxy form, together with the power of attorney or other authority (if any) under which it is signed or a notarially certified copy thereof at (i) Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, or (ii) the Company’s principal office in Hong Kong at Unit 1208–16, 12/F, C-BONS International Center, 108 Wai Yip Street, Kwun Tong, Kowloon, Hong Kong. To be valid, this should be done not less than 48 hours before the time appointed for holding the meeting or adjourned meeting or poll (as the case may be).

4. If you are a shareholder whose name appears on the Company’s records of members kept at Boardroom Corporate & Advisory Services Pte. Ltd., you should deposit the enclosed proxy form, together with the power of attorney or other authority (if any) under which it is signed or a notarially certified copy thereof at (i) Boardroom Corporate & Advisory Services Pte. Ltd. at 50 Raffles Place, Singapore Land Tower #32-01, Singapore 048623, or (ii) the Company’s principal office in Hong Kong at Unit 1208–16, 12/F, C-BONS International Center, 108 Wai Yip Street, Kwun Tong, Kowloon, Hong Kong. To be valid, this should be done not less than 48 hours before the time appointed for holding the meeting or adjourned meeting or poll (as the case may be).

5. Where there are joint registered holders of any share, any one of such persons may vote at the meeting, either personally or by proxy, in respect of such share as if he were solely entitled thereto; but if more than one of such joint registered holders be present at the meeting personally or by proxy, then the registered holder so present whose name stands first on the Company’s register of members in respect of such share will alone be entitled to vote in respect thereof.

6. The votes for approving the above resolutions will be taken by poll.

7. Capitalised terms used in this notice have the same meanings as are set out in the section entitled ‘‘Definitions’’ on pages 1 to 17 of this Circular.

As at the date of this notice, the Board of the Company comprises one executive director, namely Dr. Hsuan, Jason; and nine non-executive directors, namely Mr. Liu Liehong, Mr. Lu Ming, Ms. Wu Qun, Mr. Xu Haihe, Mr. Du Heping, Mr. Tam Man Chi, Mr. Robert Theodoor Smits, Mr. Junichi Kodama and Mr. Chen Yen-Sung; and three independent non-executive directors, namely Mr. Chan Boon Teong, Dr. Ku Chia-Tai and Mr. Wong Chi Keung.

– SGM-3 –