Measure”), approximately 66.1% and 77.1% of our revenue derived from the U.S. by destination of delivery will be produced by our subcontractors in Vietnam. We also expect to incur additional costs for subcontracting further production to Vietnam of approximately HK\$4.4 million and HK\$5.1 million in the first year and second year, respectively, upon the implementation of Contingency Measure.

Based on the assumptions that our Group’s revenue derived from the U.S. by destination of delivery by FY2020 upon full implementation of Immediate Measures and in each of the first and second year upon activation of Contingency Measure would be the same as our revenue derived from the U.S. by destination of delivery in FY2018 (“U.S. FY2018 Revenue”), we expect to achieve revenue equal to the full amount of the U.S. FY2018 Revenue without being subject to the U.S. tariffs by the second year of fully implementing the Contingency Measure. The table below sets out the breakdown of the estimated percentage of the U.S. FY2018 Revenue to be achieved under each relevant Immediate Measure and/or Contingency Measure and remain to be subject to the U.S. tariffs upon implementation of such measures.

<table><tr><td rowspan="3"></td><td colspan="3">U.S. FY2018 Revenue to be achieved</td></tr><tr><td>By FY2020
upon full
imlipementaton
of Immediate
(NtMoe)easures</td><td>By first year
upon full
imlpementation
of Contingency
Measure</td><td>By second year
upon full
imlpementation
of Contingency
Measure</td></tr><tr><td>%</td><td>%</td><td>%</td></tr><tr><td>1. Immediate Measure 1A
and/or Contingency Measure
– enigagng and further
expanding the engagement of
subcontractors in Vietnam</td><td>55.9</td><td>66.1</td><td>77.1</td></tr><tr><td>2. Immediate Measure 1B –
enbgaigng sucontractor in
Hong Kong</td><td>15.3</td><td>15.3</td><td>15.3</td></tr><tr><td>3. Immediate Measure 2 –
alifppyng or
De Minimis value exemption
for web sales customers
based in the U.S.</td><td>7.5</td><td>7.5</td><td>7.5</td></tr><tr><td>4. Revenue generated from our
laboratory testing services
which are not subject to the
U.S. tariffs</td><td>0.1</td><td>0.1</td><td>0.1</td></tr><tr><td>5. Revenue remaining to be
subject to the U.S. tariffs</td><td>21.2</td><td>11.0</td><td> Nil</td></tr><tr><td>Total</td><td>100.0</td><td>100.0</td><td>100.0</td></tr></table>

---

Note: The table aims to show the estimated percentage of U.S. FY2018 Revenue to be achieved by FY2020. As such, the effect of Immediate Measures other than Immediate Measures 1A, 1B and 2 are not taken into account.

We will further negotiate with our customers to further take up the increased U.S. tariffs payable by our customers during the two-year transition period on a case-by-case basis. The following sensitivity analysis illustrates, based on the U.S. FY2018 Revenue, the impact on our revenue and net profit for FY2020 upon full implementation of the Immediate Measures and for the first year and second year upon implementation of the Contingency Measure assuming the Section 301 List 4 Additional Tariff of 25% is imposed and our Group was to bear all such U.S. tariffs:

<table><tr><td rowspan="2"></td><td>FY2020
following
imlpementation
of Immediate
Measures</td><td>First year
following
imlipementaton
of Contingency
Measure</td><td>Second year
following
imlipementaton
of Contingency
Measure</td></tr><tr><td>HK$’000</td><td> HK$’000</td><td> HK$’000</td></tr><tr><td>Decrease in revenue</td><td>42,672</td><td>11,285</td><td>3,023</td></tr><tr><td>Decrease in net profit</td><td>35,999</td><td>9,523</td><td>2,551</td></tr></table>

In light of the Contingency Measure our Group have in place, our Directors believe that we will continue to be able to maintain our customer relationships and our business operation and financial performance will not be materially affected by the potential increase of the Section 301 List 4 Additional Tariff to 25% in the imminent future. Our Directors confirm that the implementation costs of the Contingency Measure would be funded by our internal resources and/or bank loan(s). Our Directors undertake that our Group will implement the Contingency Measure in parallel with the Immediate Measures as listed in the above if the Section 301 List 4 Additional Tariff is increased from 15% to 25% or above anytime in the future. In the event that the Contingency Measure has to be activated in the future, our Directors will continue to closely monitor the market and economic environment as well as our business and financial conditions to ensure any material adverse effect on our Group’s business and operations will be minimised as a whole. Our Directors also undertake to keep reviewing the relevant laws and regulations in relation to the U.S. tariffs and will seek legal advice as and when appropriate.

# Relocation of sales upon full implementation of Immediate Measures 1A, 1B and 2 and Contingency Measure to shift our production outside the PRC

We expect that by the end of FY2020, our Group will be able to fully implement Immediate Measures 1A, 1B and 2. The following tables set out the breakdown of revenue and sales volume attributable to our U.S. sales products by production channels in different geographical locations (i) during the Track Record Period; and (ii) upon full implementation of Immediate Measures 1A, 1B and 2 and Contingency Measures (in terms of our sales amount and sales volume attributable to our U.S. sales products by production channels in different geographical locations for FY2018):