THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION PROPOSED ISSUE OF SUBSCRIPTION SHARES UNDER SPECIFIC MANDATE

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1 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 Group Sense (International) Limited, you should at once hand this circular and the accompanying form of proxy to the purchaser or transferee or the bank, licensed securities dealer or other agent through whom the sale was effected for transmission to the purchaser or transferee. 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. (Incorporated in Bermuda with limited liability) (Stock Code: 601) PROPOSED ISSUE OF SUBSCRIPTION SHARES UNDER SPECIFIC MANDATE Financial Adviser to Group Sense (International) Limited BRIDGE PARTNERS CAPITAL LIMITED Independent Financial Adviser PROTON CAPITAL LIMITED A letter of advice from Proton Capital Limited, the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders, containing its opinion regarding the Subscription Agreement is set out on pages 16 to 30 of this circular. A notice convening a special general meeting of Group Sense (International) Limited to be held at Rooms 13-24, 2/F, Sino Industrial Plaza, 9 Kai Cheung Road, Kowloon Bay, Kowloon, Hong Kong at 9 a.m. on Thursday, 12 February 2015 is set out on pages 31 to 32 of this circular. If you are unable to attend the meeting in person, please complete and return the accompanying form of proxy in accordance with the instructions printed thereon and return it to Tricor Secretaries Limited, the branch share registrar of the Company in Hong Kong, at Level 22, Hopewell Centre, 183 Queen s Road East, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for the holding of the meeting. Completion and return of the form of proxy will not preclude you from attending and voting in person at the meeting should you so wish. * for identification purpose only 26 January 2015

2 CONTENTS Page DEFINITIONS LETTER FROM THE BOARD LETTER FROM THE INDEPENDENT BOARD COMMITTEE LETTER FROM THE INDEPENDENT FINANCIAL ADVISER NOTICE OF SGM i

3 DEFINITIONS In this circular, unless the context requires otherwise, the following expressions have the following meanings: acting in concert has the same meaning ascribed to it under the Takeovers Code associate(s) has the same meaning ascribed to it the Takeovers Code Bermuda the Islands of Bermuda Board the board of Directors Business Day(s) a day on which the banks are open for business in Hong Kong, other than Saturdays, Sundays and public holidays BVI the British Virgin Islands Century Sunshine Century Sunshine Group Holdings Limited, a company incorporated in the Cayman Islands with limited liability, the shares of which are listed on Main Board of the Stock Exchange (Stock Code: 509) Century Sunshine Group Century Sunshine and its subsidiaries close associate(s) has the same meaning ascribed to it under the Listing Rules Company Group Sense (International) Limited, a company incorporated in Bermuda with limited liability, the shares of which are listed on the Main Board of the Stock Exchange (Stock Code: 601) connected person has the same meaning ascribed to it in the Listing Rules Director(s) the director(s) of the Company Dr. Tam Dr. Tam Wai Ho, Samson JP, the chairman of the Company and executive Director and the director of the Vendor 1

4 DEFINITIONS Executive the Executive Director of the Corporate Finance Division of the SFC or any delegate of the Executive Director Group the Company and its subsidiaries Guarantors guarantors of the Vendor in the Sale and Purchase Agreement, namely Dr. Tam and Mr. Tam HK$ Hong Kong dollars, the lawful currency of Hong Kong Hong Kong Hong Kong Special Administrative Region of the People s Republic of China Independent Board Committee the independent committee of the Board comprising all the independent non-executive Directors, namely Mr. Wong Kon Man, Jason, Mr. Fung Henry and Dr. Li Chi Kwong, which has been established by the Company to make recommendations to the Independent Shareholders regarding the Subscription Agreement and the transactions contemplated thereunder Independent Financial Adviser Proton Capital Limited, a licensed corporation to carry out Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the SFO and the independent financial adviser to advise the Independent Board Committee in respect of the Subscription Independent Shareholders Shareholders other than (i) the Vendor, its close associates and parties acting in concert with any of them; (ii) the Subscriber, its ultimate beneficial owner and any parties acting in concert with any of them; and (iii) any Shareholders who are involved in or interested in the Sale and Purchase Agreement, the Subscription Agreement, the Offer and the respective transactions contemplated thereunder Joint Announcement the joint announcement dated 6 January 2015 issued by the Company, the Subscriber and Century Sunshine in respect of, among other things, the Sale and Purchase Agreement, the Subscription Agreement and the Offer 2

5 DEFINITIONS Last Trading Date 19 December 2014, being the last trading day for the Shares immediately prior to the suspension of trading the Shares on the Stock Exchange Latest Practicable Date 22 January 2015, being the latest practicable date prior to the printing of this circular for ascertaining certain information herein Listing Committee the Listing Committee of the Stock Exchange Listing Rules the Rules Governing the Listing of Securities on the Stock Exchange Mrs. Tam Mrs. Tam Mui Ka Wai, Vivian, an executive Director and the wife of Dr. Tam Mr. Tam Mr. Tam Wai Tong, Thomas, managing Director and the director of the Vendor Offer the possible unconditional mandatory cash general offer to be made by Octal Capital Limited and Get Nice Securities Limited on behalf of the Subscriber to acquire all the Share(s) in issue (other than those Shares already owned or agreed to be acquired by the Subscriber and parties acting in concert with it) at a price of HK$ per Share pursuant to Rule 26.1 of the Takeovers Code Subscriber Ming Xin Developments Limited, a company incorporated in the BVI with limited liability on 31 July 2014 and is indirectly wholly owned by Century Sunshine Rule 3.7 Announcement the announcement issued by the Company dated 5 September 2014 in relation to possible sale of all or part of Dr. Tam and Mr. Tam s shareholding interest in the Company Sale and Purchase Agreement the conditional sale and purchase agreement dated 19 December 2014 entered into amongst the Vendor, the Subscriber and Dr. Tam and Mr. Tam as Guarantors in respect of the sale and purchase of 500,000,000 Shares by the Vendor to the Subscriber 3

6 DEFINITIONS Sale and Purchase Completion SFC SFO SGM Shareholder(s) Shares Stock Exchange Subscription Subscription Agreement Subscription Completion Subscription Price Subscription Shares Takeovers Code Vendor completion of the sale and purchase of the Sale Shares pursuant to the Sale and Purchase Agreement The Securities and Futures Commission the Securities and Futures Ordinance (Chapter 571 of the laws of Hong Kong) a special general meeting of the Company to be convened for the purpose of, among other things, approving the issue and allotment of the Subscription Shares under the Subscription Agreement holder(s) of Shares shares of HK$0.10 each in the capital of the Company The Stock Exchange of Hong Kong Limited the subscription of the Subscription Shares by the Subscriber pursuant to the Subscription Agreement the subscription agreement entered into between the Company and the Subscriber on 19 December 2014 in relation to the Subscription the completion of the Subscription pursuant to the terms of the Subscription Agreement the subscription price of HK$0.32 per Subscription Share 239,532,000 new Shares to be subscribed by the Subscriber and issued by the Company at the Subscription Price pursuant to the Subscription Agreement The Hong Kong Code on Takeovers and Mergers Earnmill Holdings Limited, a company incorporated in the BVI with limited liability ultimately beneficially owned by Dr. Tam and Mr. Tam in equal shares 4

7 LETTER FROM THE BOARD (Incorporated in Bermuda with limited liability) (Stock Code: 601) Executive Directors: Registered Office: TAM Wai Ho, Samson JP (Chairman) Clarendon House TAM Wai Tong, Thomas (Managing Director) Church Street TAM Mui Ka Wai, Vivian Hamilton HM11 Kazuhiro OTANI Bermuda LEE Koon Hung Principal Place of Business: Non-executive Director: Rooms 13 24, 2/F LUK Chui Yung, Judith Sino Industrial Plaza 9 Kai Cheung Road Independent non-executive Directors: Kowloon Bay, Kowloon WONG Kon Man, Jason Hong Kong FUNG Henry LI Chi Kwong 26 January 2015 To the Shareholders Dear Sir/Madam PROPOSED ISSUE OF SUBSCRIPTION SHARES UNDER SPECIFIC MANDATE INTRODUCTION On 19 December 2014 (after trading hours), the Company and the Subscriber entered into the Subscription Agreement pursuant to which the Company has conditionally agreed to issue, and the Subscriber has conditionally agreed to subscribe, in cash, for 239,532,000 new Shares for an aggregate Subscription Price of HK$76,650,240. The Subscription Completion, is conditional upon, among other things, the Sale and Purchase Completion taking place simultaneously with Subscription Completion. * for identification purpose only 5

8 LETTER FROM THE BOARD The Board has been informed by the Vendor that on 19 December 2014 (after trading hours), the Vendor, the Subscriber and the Guarantors entered into the Sale and Purchase Agreement pursuant to which the Subscriber has conditionally agreed to acquire and the Vendor has conditionally agreed to sell an aggregate of 500,000,000 Shares (representing approximately 41.75% of the issued share capital of the Company as at the Latest Practicable Date) for a total consideration of HK$229,600,000 (equivalent to HK$ per Share). The Sale and Purchase Completion is conditional upon the fulfillment of a number of conditions, including but not limited to the Subscription Completion. Subject to and after the Sale and Purchase Completion and the Subscription Completion, the Subscriber and parties acting in concert with it will be interested in a total of 739,532,000 Shares, representing approximately 51.46% of the issued share capital of the Company as enlarged by the allotment and issue of the Subscription Shares. Accordingly, the Subscriber will be required to make an unconditional mandatory cash general offer to acquire all the issued Shares (other than those already owned or agreed to be acquired by the Subscriber and parties acting in concert with it) pursuant to Rule 26.1 of the Takeovers Code. According to the Joint Announcement, the Offer will be made on the basis of HK$ in cash for every Share. The purpose of this circular is to provide you with further details of the Subscription. Please refer to the Joint Announcement for further details of the Sale and Purchase Agreement and the Offer. THE SUBSCRIPTION AGREEMENT Date of Subscription 19 December 2014 Agreement: Parties: the Company the Subscriber, an indirect wholly-owned subsidiary of Century Sunshine To the best of the Directors knowledge, information and belief having made all reasonable enquiries, immediately before entering into the Sale and Purchase Agreement, each of the Subscriber and its ultimate beneficial owners is a party independent of and not connected with the Company and the Company s connected persons. Subscription Shares The 239,532,000 Subscription Shares represent (i) approximately 20.0% of the issued share capital of the Company as at the Latest Practicable Date; and (ii) approximately 16.67% of the issued share capital of the Company as enlarged by the allotment and issue of the Subscription Shares. 6

9 LETTER FROM THE BOARD Subscription Price The Subscription Shares will be subscribed for by the Subscriber at the Subscription Price of HK$0.32 per Share. The Subscription Price was negotiated on an arm s length basis which has taken into account the trading prices of the Shares prior to the Rule 3.7 Announcement. The Subscription Price of HK$0.32 represents: (i) a premium of 1.59% over the last closing price of HK$0.315 per Share as quoted on the Stock Exchange on the last trading day before the Rule 3.7 Announcement; (ii) a discount of approximately 35.35% to the closing price of HK$0.495 per Share as quoted on the Stock Exchange on the Last Trading Day; (iii) a discount of approximately 29.82% to the average closing prices of the Shares as quoted on the Stock Exchange for the five consecutive trading days up to and including the Last Trading Day of HK$0.456 per Share; (iv) a premium of approximately of approximately 88.24% over the unaudited net asset value per Share of approximately HK$0.170 based on the latest unaudited consolidated net asset value attributable to equity holders of the Company of the Group as at 30 September 2014 and the number of Shares in issue as at the Latest Practicable Date; and (v) a discount of approximately 27.27% to the closing price of the Shares as quoted on the Stock Exchange on the Latest Practicable Date of HK$0.44 per Share. The Subscription Price represented a premium of 1.59% over the closing price of the Shares on the last trading day before the Rule 3.7 Announcement but is lower than the price at which the Sale Shares are to be sold by the vendor under the Sale and Purchase Agreement and the Offer price. The Directors noted that the closing prices of the Shares were in a range of HK$0.18 to HK$0.32 per Share with an average of HK$0.23 per Share during the year prior to the last trading day before the release of the Rule 3.7 Announcement (i.e. from 4 September 2013 to 4 September 2014, both dates inclusive). They noted further that the closing prices of the Shares increased significantly after the release of the Rule 3.7 Announcement and reached a peak of HK$0.55 per Share on 23 September The Directors considered that the Share price after the publication of the Rule 3.7 Announcement may have reflected the market perceptions to the possible Offer, 7

10 LETTER FROM THE BOARD and the Company and the Subscriber, when negotiating the Subscription Price, considered that it was reasonable for the Company to have made reference to the prevailing trading prices of the Shares prior to the Rule 3.7 announcement. Conditions precedent to the Subscription Completion Set out below is a summary of the conditions precedent of the Subscription Completion: (a) the passing by the Independent Shareholders at a general meeting of the Company of such resolutions as may be necessary approving the Subscription Agreement and the issue and allotment of the Subscription Shares thereunder; (b) the granting of the approval by the Stock Exchange for the listing of, and the permission to deal in, the Subscription Shares; (c) the obtaining of approval by the shareholders of Century Sunshine in general meeting in respect of the Subscription Agreement and the Sale and Purchase Agreement and the transactions contemplated herein and therein in a manner as required by the Stock Exchange or under the Listing Rules, the articles of association of Century Sunshine and the applicable law; (d) the completion of the Sale and Purchase Agreement in accordance with its terms simultaneously with the Subscription Completion; (e) the trading of the Shares on the Stock Exchange not having been suspended for a period longer than seven (7) consecutive trading days, save for any temporary suspension required by relevant regulatory authorities for approving the announcement and circulars in connection with the transactions contemplated under the Subscription Agreement and the Sale and Purchase Agreement; (f) the listing of the Shares not having been cancelled or withdrawn and neither the Stock Exchange nor the SFC having indicated that the trading of the Shares on the Stock Exchange will be suspended, cancelled or withdrawn after the Subscription Completion or that it will object to the continued listing of the Shares on the Stock Exchange whether or not for reasons related to or arising from the transactions contemplated under any of the Subscription Agreement and the Sale and Purchase Agreement; (g) the warranties contained in the Subscription Agreement remaining true and accurate and not misleading in any material respect; 8

11 LETTER FROM THE BOARD (h) no events having occurred which caused, causes or may cause a material adverse effect; (i) there being no applicable law or regulations which shall, or which shall reasonably be expected to, forbid or restrict completion of the transactions contemplated under the Subscription Agreement and the Sale and Purchase Agreement; and (j) there being no ongoing, pending or threatened legal proceedings which seek to forbid or restrict the transactions contemplated under the Subscription Agreement and the Sale and Purchase Agreement. Specific mandate The Subscription Shares will be allotted and issued under the specific mandate proposed to be sought from the Independent Shareholders by way of poll at the SGM. An application will be made to the Listing Committee of the Stock Exchange for the listing of and permission to deal in the Subscription Shares. Subscription Completion The Subscription Completion is conditional upon the conditions precedent set out above having been fulfilled (or, where applicable, waived). The Subscription Completion will take place simultaneously with the Sale and Purchase Completion on the same date. Use of proceeds from the Subscription The net proceeds (after deducting estimated expenses, including mainly legal and professional fees) from the issue of the Subscription Shares is expected to be approximately HK$74,450,000 and the net price per Subscription Share is expected to be approximately HK$0.31. It is intended that the net proceeds from the issue of the Subscription Shares will be applied for general working capital purposes and exploring new business opportunities, should such opportunities arise. EQUITY FUND RAISING ACTIVITIES OF THE COMPANY IN THE PAST TWELVE MONTHS The Company did not carry out any equity fund raising activities in the 12 months period immediately before the date of the Joint Announcement. 9

12 LETTER FROM THE BOARD REASONS AND BENEFITS FOR THE SUBSCRIPTION Information of the Group and the Subscriber The Company is a company incorporated in Bermuda with limited liability and its Shares are listed on the Main Board of the Stock Exchange. The principal activity of the Company is investment holding and its subsidiaries are principally engaged in design, manufacturing and sale of original design manufacturing products, electronic dictionary products and personal communication productions, and the provision of electronic manufacturing services. The Subscriber is an indirect wholly-owned subsidiary of Century Sunshine and an investment holding company. Century Sunshine is a company incorporated in the Cayman Islands with limited liability and its shares are listed on the Main Board of the Stock Exchange. The principal activity of Century Sunshine is investment holding and its subsidiaries are principally engaged in magnesium product business, fertiliser business and metallurgical flux business. Financial Information of the Group The following table is a summary of certain audited financial information of the Group for the two financial years ended 31 March 2013 and 31 March 2014 respectively and the unaudited financial information of the Group for the six months ended 30 September Year ended/ As at Year ended/ As at Six months ended/as at 31 March March September 2014 HK$ 000 HK$ 000 HK$ 000 Revenue 383, , ,507 Loss before tax (76,688) (86,789) (48,117) Loss attributable to equity holders of the Company (75,724) (80,409) (45,884) Working capital 144,185 56,564 19,206 As disclosed in the annual report of the Company for the year ended 31 March 2014, the Group s revenue has been decreasing and the Group has recorded losses for an extended period of time. Loss attributable to equity holders of the Company for each of the financial year ended 31 March 2013 and 31 March 2014 was approximately HK$75.7 million and 10

13 LETTER FROM THE BOARD HK$80.4 million respectively. In addition, the Group recorded loss attributable to equity holders of the Company of approximately HK$45.9 million for the six months ended 30 September According to the interim report of the Company for the six months ended 30 September 2014, the Group had working capital of HK$19.2 million as of 30 September 2014, which was approximately HK$37.4 million and HK$125 million lower than its working capital level of approximately HK$56.6 million and HK$144.2 million as of 31 March 2014 and 31 March 2013 respectively. In addition, the Group reported negative operating cash flow of approximately HK$67.1 million, HK$31.4 million and HK$31.4 million for the two consecutive years ended 31 March 2014 and for the six months ended 30 September 2014 respectively. In order to improve the Group s liquidity position, the Group obtained a loan from a shareholder amounted to approximately HK$28.0 million during the six months ended 30 September The Directors note that the Subscriber intends to continue the current business operation of the Group after the Sale and Purchase Completion and Subscription Completion, while it may also explore other business opportunities for the Company with a view to enhancing long-term potential growth. Although the Subscriber has not engaged in any discussion or negotiation on any injection of any assets or businesses into the Group and no potential investment or specific needs for funding of investments were identified as at the Latest Practicable Date, the Directors consider that it would be difficult for the Group to explore new business opportunities and maintain its current business operation at a loss-making position with the existing low working capital level. Therefore, in view of the Group s low working capital level and significant decline in its liquidity position as compared to the recent financial years and the desire to explore new business opportunity, the Board considers that it would be in the interest of the Group to deploy the net proceeds from the Subscription to improve its working capital to support the Company s long-term development and to fund at least initial costs for looking into new business opportunities or investments as and when such opportunities arise. Based on the above and The Subscription Agreement Subscription Price, the Directors consider that the terms of the Subscription Agreement (including the Subscription Price) are fair and reasonable and the transactions contemplated under the Subscription Agreement are in the interests of the Company and the Shareholders as a whole. 11

14 LETTER FROM THE BOARD EFFECTS OF THE SHAREHOLDING STRUCTURE OF THE COMPANY The following table sets out the shareholding structure of the Company (i) as at the Latest Practicable Date; (ii) immediately after the Sale and Purchase Completion but before the Subscription Completion; and (iii) immediately after the Sale and Purchase Completion and Subscription Completion (assuming there are no changes to the issued share capital and shareholding structure of the Company from the Latest Practicable Date to the date of Subscription Completion save for the issue of the Subscription Shares): (i) As at the Latest Practicable Date Number of Shares held Approximate % of Shares in issue (ii) Immediately after the Sale and Purchase Completion Approximate Number of % of Shares in Shares held issue (iii) Immediately after the Sale and Purchase Completion and Subscription Completion (note 3) Number of Shares held Approximate % of Shares in issue Vendor and its concert parties and/or its associates The Vendor (note 1) 537,877, ,877, ,877, Dr. Tam and Mr. Tam (note 2) 40,732, ,732, ,732, Mrs. Tam 2,300, ,300, ,300, Sub-total 580,909, ,909, ,909, Other Directors Otani Kazuhiro 2,000, ,000, ,000, Lee Koon Hung 1,676, ,676, ,676, Luk Chui Yung 550, , , The Subscriber and parties acting in concert with it 500,000, ,532, Public Shareholders 612,527, ,527, ,527, Total 1,197,663, ,197,663, ,437,195,

15 LETTER FROM THE BOARD Notes: 1. Dr. Tam and Mr. Tam, being the elder brother of Dr. Tam, indirectly owned the Vendor in equal shares. 2. Such Shares included (i) 25,732,000 Shares jointly owned by Dr. Tam and Mr. Tam; (ii) 6,000,000 Shares directly owned by Dr. Tam and (iii) 9,000,000 Shares directly owned by Mr. Tam. 3. Upon Sale and Purchase Completion and Subscription Completion, the Vendor and its concert parties and/or its close associates will continue to hold 80,909,118 Shares. SGM The SGM will be held for the purpose of considering and, if thought fit, approving the resolution in respect of the issue and allotment of the Subscription Shares as contemplated under the Subscription Agreement by the Independent Shareholders. As the completion of the Subscription Agreement and the Sale and Purchase Agreement are inter-conditional, the Vendor and its concert parties and/or its close associates will abstain from voting on the resolution to approve the issue and allotment of the Subscription Shares as contemplated under the Subscription Agreement at the SGM. As at the Latest Practicable Date, the Vendor and its concert parties and/or its close associates held an aggregate of 580,909,118 Shares, representing approximately 48.50% of the existing issued Shares. RECOMMENDATION The Independent Board Committee comprising all the independent non-executive Directors has been established to advise the Independent Shareholders in respect of the terms of the Subscription Agreement. Proton Capital Limited has been appointed to advise the Independent Board Committee and the Independent Shareholders regarding the Subscription Agreement. Your attention is drawn to the letter from the Independent Board Committee as set out on page 15 of this circular. The advice of the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders as to whether the terms of the Subscription Agreement are fair and reasonable and whether the transaction contemplated under the Subscription Agreement are in the interest of the Company and its Independent Shareholders as a whole is set out on pages 16 to 30 of this circular. 13

16 LETTER FROM THE BOARD The Independent Board Committee, having taken into account the advice of the Independent Financial Adviser, considers that the terms of the Subscription Agreement are on normal commercial terms and fair and reasonable and the transactions contemplated under the Subscription Agreement are in the interests of the Company and its Independent Shareholders as a whole. Yours faithfully, For and on behalf of the Board of Group Sense (International) Limited Dr. Tam Wai Ho, Samson JP Chairman 14

17 LETTER FROM INDEPENDENT BOARD COMMITTEE The following is the text of a letter of recommendation from the Independent Board Committee to the Independent Shareholders in relation to the Subscription Agreement for the purpose of incorporation in this circular. (Incorporated in Bermuda with limited liability) (Stock Code: 601) To the Independent Shareholders Dear Sir or Madam, PROPOSED ISSUE OF SUBSCRIPTION SHARES UNDER SPECIFIC MANDATE 26 January 2015 We refer to the circular of the Company dated 26 January 2015 (the Circular ) of which this letter forms part. Unless the context specifies otherwise, capitalised terms used herein have the same meanings as defined in the Circular. We have been appointed by the Board to advise the Independent Shareholders as to whether the Subscription is in the interests of the Company and the Shareholders as a whole and the terms of the Subscription Agreement are fair and reasonable so far as the Company and the Independent Shareholders are concerned. Proton Capital Limited has been appointed as the independent financial adviser to advise us and you in this respect. Having taken into account the principal reasons and factors considered by and the advice of the Independent Financial Adviser as set out in its letter of advice to us and you on pages 16 to 30 of the Circular, we are of the opinion that the Subscription is in the interests of the Company and the Shareholders as a whole and the terms of the Subscription Agreement are fair and reasonable so far as the Company and 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 to approve the Subscription. Yours faithfully, For and on behalf of the Independent Board Committee WONG Kon Man, Jason FUNG Henry LI Chi Kwong Independent Non-executive Directors * for identification purpose only 15

18 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER Set out below is the text of a letter received from Proton Capital Limited, the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders for inclusion in this circular. PROTON CAPITAL LIMITED Unit 1001, 10th Floor, Chuang s Tower Connaught Road Central, Hong Kong 26 January 2015 To: The Independent Board Committee and the Independent Shareholders of Group Sense (International) Limited Dear Sirs, PROPOSED ISSUE OF SUBSCRIPTION SHARES UNDER SPECIFIC MANDATE INTRODUCTION We refer to our engagement as the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in respect of the Subscription, details of which are set out in the letter from the Board (the Board s Letter ) contained in the circular of the Company (the Circular ) to the Shareholders dated 26 January 2015, of which this letter forms part. Capitalised terms used in this letter shall have the same meanings as those defined in the Circular unless the context otherwise requires. On 19 December 2014 (after trading hours), the Company and the Subscriber entered into the Subscription Agreement pursuant to which the Company has conditionally agreed to issue, and the Subscriber has conditionally agreed to subscribe, in cash, for 239,532,000 new Shares for an aggregate Subscription Price of HK$76,650,240. The Subscription Completion is conditional upon, among other things, the Sale and Purchase Completion taking place simultaneously with Subscription Completion. The Board has been informed by the Vendor that on 19 December 2014 (after trading hours), the Vendor, the Subscriber and the Guarantors entered into the Sale and Purchase Agreement pursuant to which the Subscriber has conditionally agreed to acquire and the Vendor has conditionally agreed to sell an aggregate of 500,000,000 Shares (representing approximately 41.75% of the issued share capital of the Company as at the Latest Practicable Date) for a total consideration of HK$229,600,000 (equivalent to HK$ per Share). The Sale and Purchase Completion is conditional upon the fulfillment of a number of conditions, including but not limited to the Subscription Completion. 16

19 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER Subject to and after the Sale and Purchase Completion and the Subscription Completion, the Subscriber and parties acting in concert with it will be interested in a total of 739,532,000 Shares, representing approximately 51.46% of the issued share capital of the Company as enlarged by the allotment and issue of Subscription Shares. Accordingly, the Subscriber will be required to make an unconditional mandatory cash general offer to acquire all the issued Shares (other than those already owned or agreed to be acquired by the Subscriber and parties acting in concert with it) pursuant to Rule 26.1 of the Takeovers Code. According to the Joint Announcement, the Offer will be made on the basis of HK$ in cash for every Share ( Offer Price ). As the completion of the Subscription Agreement and the Sale and Purchase Agreement are inter-conditional, the Vendor and its concert parties and/or its close associates will abstain from voting on the resolution to approve the issue and allotment of the Subscription Shares as contemplated under the Subscription Agreement at the SGM. The Independent Board Committee comprising all the independent non-executive Directors, namely Mr. Wong Kon Man, Jason, Mr. Fung Henry and Dr. Li Chi Kwong, has been established by the Company to advise the Independent Shareholders regarding the Subscription Agreement and the transactions contemplated thereunder. We, Proton Capital Limited, have been appointed as the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in this regard. Proton Capital Limited is not connected with the directors, chief executive and substantial shareholders of the Company or the Subscriber or any of their respective subsidiaries or their respective associates and, as at the Latest Practicable Date, did not have any shareholding, directly or indirectly, in any member of the Group or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group and therefore is considered suitable to give independent advice to the Independent Board Committee and the Independent Shareholders. Proton Capital Limited had not acted as independent financial adviser to the Company s other transactions during the last two years. 17

20 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER BASIS OF OUR OPINION AND RECOMMENDATION In arriving at our recommendation, we have relied on the statements, information and representations contained or referred to in the Circular and provided to us by the Directors and the management of the Company. We have assumed that such statements, information and representations are true and accurate at the time they were made and will continue to be accurate as at the Latest Practicable Date. We have also assumed that all statements of belief, opinion, expectation and intention made by the Directors in the Circular were reasonably made after due enquiry and careful consideration. We have no reason to suspect that any material facts or information have been withheld or to doubt the truth, accuracy and completeness of the information and facts contained in the Circular, or the reasonableness of the opinions expressed by the Company, its management and/or the Directors, which have been provided to us. The Directors accept full responsibility for the accuracy of the information contained in the Circular and confirm having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in the Circular have been arrived at after due and careful consideration and there are no other facts not contained in the Circular the omission of which would make any statement in the Circular misleading. We consider that we have been provided with sufficient information on which to form a reasonable basis for our opinion. We have no reason to suspect that any relevant information has been withheld, nor are we aware of any facts or circumstances which would render the information provided and representations made to us untrue, inaccurate or misleading. We consider that we have performed all the necessary steps to enable us to reach an informed view and to justify our reliance on the information provided so as to provide a reasonable basis for our opinion. We have not, however, carried out any independent verification of the information provided by the Directors and the management of the Company, nor have we conducted an independent investigation into the business and affairs or the prospects of the Company, the Group, the Subscriber, Century Sunshine or any of their respective associates. Our opinion is necessarily based on the financial, economic, market and other conditions in effect and the information made available to us as at the Latest Practicable Date. Shareholders should note that subsequent developments including any material change in market and economic conditions) may affect and/or change our opinion and we have no obligation to update this opinion to take into account events occurring after the Latest Practicable Date or to update, revise or reaffirm our opinion. Nothing contained in this letter should be construed as a recommendation to hold, sell or buy any Shares or any other securities of the Company. Lastly, where information in this letter has been extracted from published or otherwise publicly available sources, the sole responsibility of Proton Capital Limited is to ensure that such information has been correctly and fairly extracted and presented from the relevant sources. 18

21 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER PRINCIPAL FACTORS AND REASONS CONSIDERED 1. Information on the Group The Company is a company incorporated in Bermuda with limited liability and its Shares are listed on the Main Board of the Stock Exchange. The principal activity of the Company is investment holding and its subsidiaries are principally engaged in design, manufacturing and sale of original design manufacturing products, electronic dictionary products and personal communication productions, and the provision of electronic manufacturing services. 1.1 Financial information on the Group Set out below is the financial information of the Group as extracted from the Company s annual reports for the three years ended 31 March 2014 ( Annual Reports ) and interim report for the six months ended 30 September 2014 (the 2014 Interim Report ): For the six months ended For the year ended 31 March 30 September HK$ 000 HK$ 000 HK$ 000 HK$ 000 (audited) (audited) (audited) (unaudited) Revenue 478, , , ,507 Gross profit 128,313 88,994 68,401 25,034 (Loss) for the year/ period attributable to equity holders of the Company (73,182) (75,724) (80,409) (45,884) As set out in the above table, there is a sliding trend in the financial performance of the Company for the three years ended 31 March 2014 and the six months ended 30 September There is a persistent decline in its revenue. Compared with a revenue of approximately HK$478,708,000 in the year ended 31 March 2012, the Company s revenue dropped by 19

22 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER approximately 19.92% to approximately HK$383,340,000 in the year ended 31 March 2013 and further decreased by approximately 8.86% to approximately HK$349,382,000 in the year ended 31 March Loss attributable to equity holders of the Company for the three years ended 31 March 2012, 2013 and 2014 and six months ended 30 September 2014 were approximately HK$73,182,000, HK$75,724,000, HK$80,409,000 and HK$45,884,000, respectively. We have also noted from the Annual Reports that there was overall decrease in the revenue in all the operating segments of the Company for the three years ended 31 March All the operating segments of the Company continued to record segment losses in the three years ended 31 March 2014 although losses in the operating segments of (i) strategic products and (ii) corporate and others were slightly narrowed down in the year ended 31 March Historical financial position of the Group Set out below is a summary of certain data relating to the financial position of the Group as at 31 March 2012, 2013 and 2014 and 30 September 2014: As at As at 31 March 30 September HK$ 000 HK$ 000 HK$ 000 HK$ 000 (audited) (audited) (audited) (unaudited) Equity attributable to equity holders of the Company 407, , , ,838 Net assets 411, , , ,026 Working capital 215, ,185 56,564 19,206 Pledged deposits 1,001 1,036 Cash and cash equivalents 138,990 80,782 33,496 39,789 Gearing ratio 5% 6% 10% 30% The Group s equity attributable to equity holders of the Company had been on a declining trend from approximately HK$407,403,000 as at 31 March 2012 to approximately HK$203,838,000 as at 30 September

23 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER The Group s working capital decreased from approximately HK$215,748,000 as at 31 March 2012 to approximately HK$19,206,000 only as at 30 September Regarding the liquidity of the Group, the consolidated cash and cash equivalents of the Company materially declined from approximately HK$138,990,000 as at 31 March 2012 to approximately HK$39,789,000 as at 30 September In conjunction with the decrease in cash and cash equivalents, gearing ratio of the Group (defined as total bank borrowings plus amount due to a shareholder, if any, divided by shareholders equities) also materially increased from 10% as at 31 March 2014 to 30% as at 30 September The Subscription 2.1 Background Pursuant to the Subscription Agreement, the Company has conditionally agreed to issue, and the Subscriber has conditionally agreed to subscribe, in cash, for 239,532,000 Subscription Shares at the Subscription Price of HK$0.32 per Subscription Share. As at the Latest Practicable Date, there were 1,197,663,029 Shares in issue and the Subscription Shares represents (i) approximately 20.0% of the issued share capital of the Company; and (ii) approximately 16.67% of the issued share capital of the Company as enlarged by the allotment and issue of the Subscription Shares. 2.2 Reasons and benefits for the Subscription According to the Board s Letter, the Subscriber is an indirect wholly-owned subsidiary of Century Sunshine and an investment holding company. Century Sunshine is a company incorporated in the Cayman Islands with limited liability and its shares are listed on the Main Board of the Stock Exchange. The principal activity of Century Sunshine is investment holding and its subsidiaries are principally engaged in magnesium product business, fertiliser business and metallurgical flux business. The Board s Letter further disclosed that the Directors note that the Subscriber intends to continue the current business operation of the Group after the Sale and Purchase Completion and Subscription Completion, while it may also explore other business opportunities for the Company with a view to enhancing long-term potential growth. Although the Subscriber has not engaged in any discussion or negotiation on any injection of any assets or businesses into the Group and no potential investment or specific needs for funding of investments 21

24 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER were identified as at the Latest Practicable Date, the Directors consider that it would be difficult for the Group to explore new business opportunities and maintain its current business operation at a loss-marking position with the existing low working capital level. Therefore, in view of the Group s low working capital level and significant decline in its liquidity position as compared to the recent financial years and the desire to explore new business opportunity, the Board considers that it would be in the interest of the Group to deploy the net proceeds from the Subscription to improve its working capital to support the Company s long-term development and to fund at lest initial costs for looking into new business opportunities or investments as and when such opportunities arise. Based on the above and the information set out in the section headed The Subscription Agreement Subscription Price in the Board s Letter, the Directors consider that the terms of the Subscription Agreement (including the Subscription Price) are fair and reasonable and the transactions contemplated under the Subscription Agreement are in the interests of the Company and the Shareholders as a whole. As stated in the section headed Information on the Group in this letter, there is a sliding trend in the financial performance of the Company for the three years ended 31 March 2014 and the six months ended 30 September 2014 with net losses for the entire aforesaid period. There were also overall decrease in the revenue in all the operating segments of the Company, material decrease in cash and cash equivalents of the Group and increase in gearing ratio of the Group. In view of (i) the unsatisfactory historical financial performance of the Group; (ii) depletion in financial resources; (iii) the existing low level of working capital; and (iv) the increase in gearing ratio of the Group, we consider that the reasons for the Subscription are fair and reasonable. 2.3 Conditions precedent of the Subscription Agreement The Subscription Completion is conditional upon, among other things, approval by the Independent Shareholders of the Subscription Agreement, approval by the shareholders of Century Sunshine of the Subscription Agreement and the Sale and Purchase Agreement, obtaining the listing of, and permission to deal in the Subscription Shares and completion of the Sale and Purchase Agreement simultaneously with the Subscription Completion. Details of the conditions precedent to the Subscription Completion are set out under the paragraph headed Conditions precedent to the Subscription Completion in the Board s Letter. 22

25 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER 2.4 The Subscription Price As disclosed in the Board s Letter, the Subscription Price was negotiated on an arm s length basis which has taken into account the trading prices of the Shares prior to the Rule 3.7 Announcement. The Subscription Price of HK$0.32 per Subscription Share represents: (i) a premium of 1.59% over the last closing price of HK$0.315 per Share as quoted on the Stock Exchange on the last trading day before the Rule 3.7 Announcement; (ii) a discount of approximately 35.35% to the closing price of HK$0.495 per Share as quoted on the Stock Exchange on the Last Trading Day; (iii) a discount of 29.82% to the average closing price per Share of as quoted on the Stock Exchange for the five consecutive trading days up to and including the Last Trading Day of HK$0.456 per Share; (iv) a premium of approximately 88.24% over the unaudited net asset value per Share of approximately HK$0.170 based on the latest unaudited consolidated net asset value attributable to equity holders of the Group (the Unaudited NAV Per Share ) as at 30 September 2014 and the number of Shares in issue as at the Latest Practicable Date; and (v) a discount of approximately 27.27% to the closing price of the Shares as quoted on the Stock Exchange on the Latest Practicable Date of HK$0.440 per Share. 2.5 Use of net proceeds As advised by the Company, the net proceeds (after deducting estimated expenses, including mainly legal and professional fees) from the issue of the Subscription Shares is expected to be approximately HK$74,450,000 and the net price per Subscription Share is expected to be approximately HK$0.31. According to the Board s Letter, it is intended that the net proceeds from the issue of the Subscription Shares will be applied for general working capital purposes and exploring new business opportunities, should such opportunities arise. 23

26 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER As disclosed in the annual report of the Company for the year ended 31 March 2014, the Group s revenue has been decreasing and the Group has recorded losses for an extended period of time. Loss attributable to equity holders of the Company for each of the financial year ended 31 March 2013 and 31 March 2014 was approximately HK$75.7 million and HK$80.4 million respectively. In addition, the Group recorded loss attributable to equity holders of the Company of approximately HK$45.9 million for the six months ended 30 September As further disclosed in the Board s Letter, according to the interim report of the Company for the six months ended 30 September 2014, the Group had working capital of HK$19.2 million as of 30 September 2014, which was approximately HK$37.4 million and HK$125 million lower than its working capital level of approximately HK$56.6 million and HK$144.2 million as of 31 March 2014 and 31 March 2013 respectively. In addition, the Group reported negative operating cash flow of approximately HK$67.1 million, HK$31.3 million and HK$31.4 million for the two consecutive years ended 31 March 2014 and for the six months ended 30 September 2014 respectively. In order to improve the Group s liquidity position, the Group obtained a loan from a shareholder amounted to approximately HK$28.0 million during the six months ended 30 September Therefore, in view of the Group s low working capital level and significant decline in its liquidity position as compared to the recent financial years and the desire to explore new business opportunity, the Board considers that it would be in the interest of the Group to deploy the net proceeds from the Subscription to improve its working capital to support the Company s longterm development and to fund at least initial costs for looking into new business opportunities or investments as and when such opportunities arise. After taking into account of (i) the loss-making position of the Group in recent years, (ii) the recent low working capital level and significant decline in the Group s liquidity position as compared to the recent financial years as aforesaid; (iii) the Group had to obtain a loan from a shareholder amounted to approximately HK$28.0 million during the six months ended 30 September 2014 in order to improve its liquidity position; and (iv) the increase in gearing ratio of the Group as discussed in the sub-section headed Historical financial position of the Group in this letter, we consider the intended use of the net proceeds of the Subscription is fair and reasonable. 24