Design Capital Limited — Proxy Solicitation & Information Statement 2007

Nov 27, 2007

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

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

If you have sold or transferred all your shares in Swank International Manufacturing Company Limited (the “Company”), you should at once hand this circular to the purchaser or transferee or to the bank, licensed securities dealer or other agents through whom the sale or transfer was effected for transmission to the purchaser or transferee.

This circular is addressed to the shareholders of the Company for information in connection with the EGM (as defined herein) to be held on Thursday, 20 December 2007. This circular is not and does not constitute an offer of, nor is it intended to invite offers for, securities of the Company.

Swank International Manufacturing Company Limited (incorporated in Hong Kong with limited liability) (Stock Code: 663)

CONNECTED AND MAJOR TRANSACTION IN RELATION TO THE DISPOSAL OF 70% EQUITY INTEREST IN PROFITOWN AS A RESULT OF THE EXERCISE OF THE PUT OPTION AND THE ENTERING INTO THE SP AGREEMENT AND PROPOSED CHANGE OF COMPANY NAME

Financial adviser to the Company

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Mega Capital (Asia) Company Limited

Independent financial adviser to the Independent Board Committee and the Sharholders

Core Pacific – Yamaichi Capital Limited

A letter from the board of directors of Swank International Manufacturing Company Limited is set out from page 5 to 14 of this circular. A letter from the Independent Board Committee (as defined herein) is set out from page 15 to 16 of this circular. A letter from Core Pacific – Yamaichi Capital Limited containing its advice to the Independent Board Committee (as defined herein) and the Shareholders (as defined herein) is set out on pages 17 to 23 of this circular.

A notice convening an EGM to be held at Suite 1102, 11/F., ICBC Tower, Citibank Plaza, 3 Garden Road, Central, Hong Kong on 20 December 2007 is set out from page 33 to 34 of this circular. If you are not able to attend the EGM, you are requested to complete the form of proxy in accordance with the instructions printed thereon and return the same to the Company’s share registrar in Hong Kong, Tricor Secretaries Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong not less than 48 hours before the time appointed for the holding the relevant meeting. Completion and return of the form of proxy will not prevent the Shareholders from attending and voting in person at the EGM or any adjournment thereof should they so wish.

28 November 2007

CONTENTS

		Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		1
Letter from the Board
1.	Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
2.	Backgrounds of the connected and major transaction . . . . . . . . . . . . . . . . . .	6
3.	Exercise of the Put Option and the entering into the SP Agreement . . . . . . .	7
4.	Information on the Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
5.	Information on the Profitown Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
6.	Information on the Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
7.	Reasons for and benefits of the Disposal . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
8.	Listing rules implication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
9.	Proposed change of Company name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
10.	EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
11.	Procedures to demand a poll by Shareholders. . . . . . . . . . . . . . . . . . . . . . . .	13
12.	Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
13.	Additional Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . .		15
Letter from CPY Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		17
**Appendix **	I – Financial information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	24
**Appendix **	II – General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	26
**Notice of **	EGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	33

– i –

DEFINITIONS

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

• “Announcement”

• the announcement of the Company dated 7 November 2007

• “Asset Up” or “Purchaser” Asset Up Limited is a company incorporated in British Virgin Islands with limited liability. Asset Up and its beneficial owner are third parties independent of and not connected with the Group and connected persons of the Group

• “associates” the term bearing the meanings ascribed to it under the Listing Rules

• “Board” the board of Directors

• “Business Day” any day (other than Saturday and Sunday) on which licensed banks in Hong Kong are generally open for business

• “Company” Swank International Manufacturing Company Limited, a company incorporated in Hong Kong with limited liability, the shares of which are listed on the main board of the Stock Exchange

• “connected persons” has the same meaning as ascribed to it under the Listing Rules

• “CPY Capital” Core Pacific – Yamaichi Capital Limited, a corporation licensed to conduct business in type 1 (dealing in securities) and type 6 (advising on corporate finance) regulated activities under the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) and the independent financial adviser to the Independent Board Committee and Shareholders

• “China Time”

• China Time Investment Holdings Limited, a company incorporated in the British Virgin Islands with limited liability, which owned approximately 60.12% of the Company’s issued capital as at the Latest Practicable Date

• “Directors”

• the directors of the Company

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DEFINITIONS

“Disposal”

• the disposal by the Company of its 70% interest in Profitown to the Purchaser as a result of the exercise of the Put Option stipulated under the Shareholders Agreement and the entering into the SP Agreement

• “EGM” extraordinary general meeting of the Company to be held at Suite 1102, 11/F., ICBC Tower, Citibank Plaza, 3 Garden Road, Central, Hong Kong at 4:00 p.m. on 20 December 2007 to approve the proposed change of Company name

• “Group” the Company and its subsidiaries from time to time

• “Guarantee”

• the guarantee executed by the Company in favour of Probest pursuant to the Loan Restructuring Agreement in respect of the Promissory Note

• “Independent Board Committee” independent board committee of the Company comprising Mr. Wu Bin, Mr. Tam King Ching, Kenny and Mr. Choi Tze Kit, Sammy, all existing independent non-executive Directors

• “Independent Third Party(ies)”

• the independent third party or parties who is/ are not connected with any of the Directors, chief executive and substantial shareholders of the Company or any of its subsidiaries or an associate of any of them

• “Latest Practicable Date”

• 26 November 2007, being the latest practicable date prior to the printing of this circular for ascertaining certain information in this circular

• “Listing Rules”

• the Rules governing the Listing of Securities on the Stock Exchange of Hong Kong

• “Loan Restructuring Agreement”

• the conditional loan restructuring agreement dated 20 January 2005 as varied and supplemented by the supplemental loan restructuring agreement dated 13 April 2005 entered into between Probest, the Company and Profitown in relation to, inter alia, the restructuring of the loan owing by the Group to Probest

• “Mr. Wang”

• Mr. Wang An Kang ( ), being the sole shareholder of China Time and the ultimate controlling Shareholder

• “PRC”

the People’s Republic of China

– 2 –

DEFINITIONS

• “Previous Promissory Note” the promissory note dated 3 November 2003 issued by the Company in favour of Probest in the principal sum of HK$163,000,000 which is repayable by instalments, that is, as to HK$25,500,000 repayable on or before 1 June 2004, as to HK$62,500,000 repayable on or before 1 June 2005 and as to HK$75,000,000 repayable on or before June 2006 (the instalment due on 1 June 2004 being in default)

• “Probest” Probest Holdings Inc., a company incorporated in the British Virgin Islands with limited liability and a wholly-owned subsidiary of TIHL

• “Profitown” Profitown Investment Corporation, a company incorporated in the British Virgin Islands with limited liability and held as to 70% by the Company and as to 30% by Probest as at the Latest Practicable Date

• “Profitown Group” Profitown and its subsidiaries

• “Promissory Note” the promissory note issued by Profitown in favour of Probest pursuant to the Loan Restructuring Agreement

• “PVC” polyvinyl chloride which is a form of plastic

• “Put Option” the right granted to the Company to require Probest or an independent third party procured by Probest to purchase all (but not part only) of its shares, being 70% of all issued shares of Profitown

• “Put Option Notice” A notice serves to notify Probest on 31 October 2007 that the Company decided to exercise the Put Option

• “Sale Shares” 700 shares, representing 70% of the issued share capital of the Profitown as at the Latest Practicable Date

• “SFC”

• the Securities and Futures Commission of Hong Kong

• “SFO”

• the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) as amended from time to time

• “Share(s)”

• the ordinary share(s) of HK$0.01 each in the issued share capital of the Company

• “Shareholders”

• the shareholders of the Company

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DEFINITIONS

“Shareholders Agreement” the shareholders agreement entered on 3 June 2005 between the Company, Probest, TIHL and Profitown to regulate the management of the Profitown Group upon completion of the SP Agreement “SP Agreement” the sale and purchase agreement entered into between the Company and Asset Up on 2 November 2007, pursuant to which the Company sells and the Purchaser buys the 700 issued shares of Profitown “Stock Exchange” The Stock Exchange of Hong Kong Limited “substantial shareholder(s)” has the same meaning ascribed to it under the Listing Rules “TIHL” Tomorrow International Holdings Limited, a company incorporated in Bermuda with limited liability and whose securities are listed on the Main Board of the Stock Exchange “Vendor” The Company “HK$” Hong Kong dollars, the lawful currency of Hong Kong “RMB” Renminbi, the lawful currency of the PRC “US$” US dollars, the lawful currency of the United States “sq. m.” square meter “%” per cent.

For the purpose of illustration only, the translation of RMB into Hong Kong dollars is based on the exchange rate of HK$1.00 to RMB0.96.

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LETTER FROM THE BOARD

Swank International Manufacturing Company Limited

(incorporated in Hong Kong with limited liability)

(Stock Code: 663)

Executive Directors: Mr. Wang An Kang Mr. Zhao Jun Mr. Li Wei Ms. Zhou Jing

Registered office: Suite 1102, 11/F ICBC Tower, Citibank Plaza 3 Garden Road, Central Hong Kong

Independent non-executive Directors: Mr. Wu Bin Mr. Tam King Ching, Kenny Mr. Choi Tze Kit, Sammy

Principal place of business in Hong Kong: 2/F, Koon Wah Mirror Factory (3rd) Industrial Building 5-9 Ka Hing Road Kwai Chung New Territories Hong Kong 28 November 2007

To the Shareholders

Dear Sir or Madam,

CONNECTED AND MAJOR TRANSACTION IN RELATION TO THE DISPOSAL OF 70% EQUITY INTEREST IN PROFITOWN AS A RESULT OF THE EXERCISE OF THE PUT OPTION AND THE ENTERING INTO THE SP AGREEMENT AND PROPOSED CHANGE OF COMPANY NAME

1. INTRODUCTION

Reference is made to the announcement of the Company dated 18 April 2005, the circular of the Company dated 10 May 2005 and the Announcement.

As set out in the announcement of the Company dated 18 April 2005 and the circular of the Company dated 10 May 2005, the Company, Probest, TIHL and Profitown entered into the Shareholders Agreement pursuant to which Probest granted a Put Option to the Company to dispose of its 70% equity interest in Profitown to Probest or an independent third party to be procured by Probest.

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LETTER FROM THE BOARD

On 7 November 2007, the Board announced in the Announcement that it resolved, on 30 October 2007, to exercise the Put Option to require Probest itself or to procure an independent third party to purchase all of the Sale Shares of Profitown held by the Company under the Shareholders Agreement by serving the Put Option Notice to Probest. On 2 November 2007, the Company and Asset Up, a third party independent of and not connected with the Group, Probest and any connected persons of the Group and Probest, entered into the SP Agreement pursuant to which the Company has agreed to dispose of its 70% equity interest in Profitown to Asset Up at a nominal consideration of HK$1.0 in cash.

On 7 November 2007, the Board also announced in the Announcement that the Company proposed to change the name of the Company from “Swank International Manufacturing Company Limited” in English and “ ” in Chinese to “Yun Sky Chemical (International) Holdings Limited” in English and “ ” in Chinese.

The purpose of this circular is to provide you with, among others, (i) details of the exercise of the Put Option contemplated under the Shareholders Agreement and the entering into the SP Agreement; (ii) information in relation to the Group and the Purchaser; (iii) the letter from the Independent Board Committee which contains its recommendation to the Shareholders concerning the Disposal; (iv) the letter from CPY Capital which contains its recommendation to the Independent Board Committee and the Shareholders on the Disposal; (v) details of the proposed change of the Company name; and (vi) notice of the EGM to approve the change of Company name.

2. BACKGROUNDS OF THE CONNECTED AND MAJOR TRANSACTION

On 20 January 2005, the Company, Probest and Profitown entered into the Loan Restructuring Agreement pursuant to which, among others, Profitown issued the Promissory Note in favour of Probest, in consideration of Probest waiving portion of the outstanding loan due and owing by the Company to Probest under the Previous Promissory Note and releasing the Company from all future obligations and liabilities under the Previous Promissory Note. Pursuant to the Loan Restructuring Agreement, the Company would execute the Guarantee to guarantee Profitown’s obligations in respect of the interest payment under the Promissory Note due from Profitown to Probest.

On 3 June 2005, the Company, Probest, TIHL and Profitown entered into the Shareholders Agreement under which the principal terms included, among others, unanimous board approval on material issues on Profitown, the Put Option exercisable by the Company in respect of its shares in Profitown and an indemnity by Probest in favour of Profitown in the event that Profitown records any deficit in the net tangible asset value.

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LETTER FROM THE BOARD

3. EXERCISE OF THE PUT OPTION AND THE ENTERING INTO THE SP AGREEMENT

Put Option Notice

On 30 October 2007, the Board resolved to exercise the Put Option to require Probest itself or to procure an independent third party to purchase all of the Sale Shares of Profitown held by the Company under the Shareholders Agreement by serving the Put Option Notice to Probest.

Pursuant to the Put Option Notice, the Company has demanded Probest to undertake to the Company that Profitown’s net tangible asset value shall not be less than zero on completion of sale of the Sale Shares and it shall indemnify Profitown for the deficit should Profitown’s net tangible asset value fall below zero on completion of sale of the Sale Shares. As at 31 August 2007, the unaudited net liabilities recorded by the Profitown Group was approximately HK$21.59 million. In accordance with relevant clauses stipulated under the Shareholders Agreement, Probest or the purchaser procured by Probest will assume all the liabilities due from the Company to any member of the Profitown Group incurred prior to the date of the Shareholders Agreement (i.e. 3 June 2005) at nil consideration. As at the Latest Practicable Date, the Group indebted no liability to the Profitown Group.

Upon completion of the Disposal, the Guarantee given by the Company in favour of Probest in respect of the interest payment under the Promissory Note due from Profitown to Probest as stipulated under the Loan Restructuring Agreement will cease to be effective. Pursuant to the Put Option Notice, the Company shall be released from all obligations and liabilities (including any claims, losses, liabilities, costs or expenses of any kind and however arising, including penalties, fines and interest and including those which are prospective or contingent, whether they are incurred prior to or after completion of the transfer of the Sale Shares) under the Guarantee and in respect of the Profitown Group upon completion of the transfer of Sale Shares.

SP Agreement

On 2 November 2007, the Company and Asset Up, a third party independent of and not connected with the Group, Probest and connected persons of the Group and Probest, entered into the SP Agreement pursuant to which the Company has agreed to dispose of its 70% equity interest in Profitown to Asset Up.

Date: 2 November 2007

Parties: The Company, being the Vendor

Asset Up, being the Purchaser, a third party independent of and not connected with the Group, Probest and connected persons of the Group and Probest

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LETTER FROM THE BOARD

Assets to be disposed of under the Put Option

The Sale Shares, representing 70% of the issued share capital of Profitown.

Consideration

Pursuant to the SP Agreement, the consideration of the Disposal shall be HK$1.0 in cash. The Directors consider the consideration was determined after arm’s length negotiation and after taken into account the unaudited net asset value of Profitown as at 31 August 2007 and the indemnity given by Probest to the Company as contemplated under the Shareholders Agreement. The Directors expect that the net asset value of Profitown as at the date of the exercise of the Put Option would not materially deviate from that as of 31 August 2007.

Conditions

Completion in respect of the Disposal is conditional on the Disposal being approved by the Shareholder(s) in accordance with the Listing Rules.

Completion

Completion in respect of the Disposal is expected to take place on 30 November 2007.

4. INFORMATION ON THE GROUP

Principal Activities of the Group

The Group is principally engaged in (i) design, manufacture and marketing of frames, sunglasses and lenses; and (ii) manufacture and sale of chemical-related products such as phosphoric acid, yellow phosphorous and PVC.

Financial and trading prospect of the Group

Optical business

According to the Company’s 2006 annual report, for the two years ended 31 December 2006, the turnover of the optical business was approximately HK$147.0 million and HK$115.6 million, respectively. The loss of the optical business segment recorded for the two years ended 31 December 2006 was approximately HK$21.5 million and HK$40.0 million, respectively. Due to the historical unsatisfactory financial performance of the optical business, the Board decided to realize its investment in the Profitown Group. Upon completion of the Disposal, the Group will no longer be engaged in the optical business and will focus its resources in its chemical business.

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LETTER FROM THE BOARD

Chemical business

Further to the introduction of the agency services business in 2005 in relation to the sale of chemicals including phosphorus and other related materials, the Group successfully launched its new manufacturing and sale businesses of phosphoric acid and yellow phosphorus in the second half of 2006 and the beginning of 2007 respectively. These new projects enable the Group to build up a solid platform to gain further experience in operating and managing chemical business and to provide the Group a vertically integrated structure for its phosphorus business to enhance profitability. The Board, with its experience in the chemical industry together with the Group’s existing platform, will continue identifying opportunities to further develop its business into other chemical industry segments in the PRC. In particular, the Group plans to tap into the PVC market in the fourth quarter of 2007 to further expand its chemical business.

In light of the growing economy and rich phosphorus resources in the PRC, the Group is optimistic about the future of its chemical business. The Group will further strengthen and expand its existing sales team for its phosphorus products. The expanded sales team will be responsible for soliciting new customers and maintaining relationships with existing customers in both domestic and international markets. This will enable the Group to further extend its existing sales networks. Given the fact that the Board possesses considerable expertise in international trade and in light of the extensive application of yellow phosphorus, the Board is confident that the Group will gradually establish its presence in the phosphorus related chemical industrial segments to further broaden its income base and enhance profitability.

5. INFORMATION ON THE PROFITOWN GROUP

The Profitown Group is principally engaged in the design, manufacture and marketing of frames, sunglasses and lenses. As at the Latest Practicable Date, Profitown was owned as to 70% by the Company and 30% by Probest and is one of the principal subsidiaries of the Company. For the year ended 31 December 2006, the Profitown Group recorded an audited loss of approximately HK$29.6 million. For the six months ended 30 June 2007, the Profitown Group recorded an unaudited operating loss (after deducting the finance costs) of approximately HK$3.8 million. As at 31 December 2006 and 30 June 2007, the audited and unaudited net liabilities of the Profitown Group were approximately HK$20.8 million and HK$20.5 million, respectively. The loss before tax of the Profitown Group for the two financial years ended 31 December 2006 were approximately HK$24.1 million and HK$29.1 million, respectively. Upon completion of the Disposal, Profitown will cease to be a subsidiary of the Company.

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LETTER FROM THE BOARD

6. INFORMATION ON THE PURCHASER

Asset Up, a company incorporated in British Virgin Islands with limited liability, is a third party independent of and not connected with the Group and connected persons of the Group. Asset Up is principally engaged in the investment holding activities.

To the best of the knowledge of the Directors, information and belief and having made all reasonable enquiries, the Purchaser is third party independent of the Company and its connected persons.

7. REASONS FOR AND BENEFITS OF THE DISPOSAL

Prior to the change in controlling shareholder and management of the Company in 2005, the Group, through the Profitown Group, has been principally engaged in the optical business (i.e. design, manufacture and marketing of frames, sunglasses and lenses). Leveraged on the new management’s extensive expertise and sales networks in the chemical industry, the Group has diversified into the chemical business with an aim to broaden its income stream and improve profitability. The Group commenced to manufacture and sell phosphoric acid and yellow phosphorous in the second half of 2006 and the beginning of 2007, respectively. In addition, the Group plans to tap into the PVC market in the fourth quarter of 2007 to further expand its chemical business.

According to the Company’s 2006 annual report, the segment turnover and results of the Group’s chemical business for the year ended 31 December 2006 were approximately HK$119.6 million and approximately HK$22.6 million, respectively. As stated in the Company’s 2006 annual report, in light of the prosperous growth of the PRC economy and the rich phosphorous resources in the PRC, the Group is optimistic about the future of its chemical business.

The Board anticipates the optical business will be subject to fierce competition and difficult operating environment. Given the historical unsatisfactory financial performance of the optical business, in particular, the sustained net loss after tax of the Profitown Group of approximately HK$24.1 million and approximately HK$29.6 million for the two financial years ended 31 December 2006 and the operating loss (after deducting finance costs) of approximately HK$3.8 million for the six months ended 30 June 2007 as well as its unaudited net liabilities of approximately HK$20.5 million as at 30 June 2007, the Board has resolved to dispose of the Profitown Group. As a result of the Disposal, the Group will focus its resources in the development of its chemical business which may have more growth potential.

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LETTER FROM THE BOARD

For illustration purpose only, and without considering the indemnity to be compensated by Probest, the unaudited consolidated total assets and the consolidated total liabilities (excluding minority interests) of the Group as at 31 August 2007 will decrease by approximately HK$202.41 million and approximately HK$224.0 million, respectively. As a result of the indemnity compensation given by Probest in relation to the Profitown Group’s deficit as at 31 August 2007, other income of approximately HK$21.59 million (excluding minority interests) and approximately HK$15.11million (net of minority interests) attributable to Shareholders is expected to be recognized. As per the management accounts of Profitown Group, set out below is the unaudited net assets value (before Promissory Note and amount due to Probest) of the Profitown Group as at 31 August 2007:

	HK$’million
Net liabilities	(21.59)
Add:
– Promissory Note due to Probest	133.88
– Amount due to Probest	56.12
Net asset value before Promissory Note and amount due to Probest	168.41

The Profitown Group recorded unaudited net liabilities of approximately HK$21.59 million as at 31 August 2007. Given no creditors agrees to waive any debts due by the Profitown Group, the Directors considered it impracticable to assume that (i) the Company would be able to dispose of all assets of the Profitown Group at cost or above within a reasonable period of time; and (ii) the proceeds from such disposal would be sufficient to settle all the indebtedness of the Profitown Group (including the Promissory Note and amount due to Probest). Upon expiry of the 30-month period, Probest shall have no obligation to indemnify the net tangible asset value of the Profitown Group not falling below zero and the Company is obliged to share the deficit of the Profitown Group with Probest in proportion to their respective equity interest in Profitown, which is not in the best interest of the Company. Moreover, the Company will not be able to exercise the Put Option after expiry of such 30-month period. Accordingly, the Directors consider the exercise of the Put Option would be the most amicable way to realize its investment in the Profitown Group.

Furthermore, pursuant to the Loan Restructuring Agreement, upon completion of the Disposal, the Guarantee given by the Company in favour of Probest in respect of the Promissory Note due from Profitown to Probest as stipulated under the Loan Restructuring Agreement will cease to be effective. Hence, the Directors consider that the exercise of the Put Option under the Shareholders Agreement will immediately reduce the financial burden of the Group and will improve the financial position of the Group.

Taking into account the benefits associated with the Disposal as stated above, the Directors are of the view that the exercise of the Put Option under the Shareholders Agreement and the entering into the SP Agreement are fair and reasonable and in the interests of the Shareholders as a whole.

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LETTER FROM THE BOARD

8. LISTING RULES IMPLICATION

Probest, a substantial shareholder of Profitown who holds 30% equity interest in Profitown, is deemed as a controller of the Group. Accordingly, the Disposal by way of exercising the Put Option constitutes a connected transaction for the Company under Listing Rule 14A.13(1)(b)(i). The Company applied for a waiver from strict compliance with independent shareholders’ approval requirement pursuant to Rule 14A.43 of the Listing Rules from the Stock Exchange and such waiver was subsequently granted. As the relevant percentage ratio calculated under Chapter 14 of the Listing Rules in respect of the Disposal by way of the exercise of the Put Option under the he Shareholders Agreement and the entering into the SP Agreement is more than 25% but less than 75%, the Disposal also constitutes a major transaction of the Company under the Listing Rules and is therefore subject to the approval by the Shareholders. Since no Shareholder is required to abstain from voting if the Company were to convene a general meeting for the approval of the Disposal and China Time, the Company’s controlling shareholder holding 1,878,799,680 shares of the Company (representing approximately 60.12% of the issued share capital of the Company) as at the Latest Practicable Date, has given its written approval for the Disposal, which is permitted under Rule 14.44 of the Listing Rules, in lieu of holding a general meeting of the Company, no meeting of Shareholders will be convened for this purpose.

9. PROPOSED CHANGE OF COMPANY NAME

Change of the Company name

The Board proposed to change the name of the Company from “Swank International Manufacturing Company Limited” in English and “ ” in Chinese to “Yun Sky Chemical (International) Holdings Limited “ in English and “ ” in Chinese.

The proposed change of name of the Company shall become effective after (i) the approval by the Shareholders by way of a special resolution at the EGM to be convened; (ii) the new name is entered on the register of companies by the Registrar of Companies in Hong Kong; and (iii) the issuance of a Certificate of Registration of Change of Name by the Registrar of Companies in Hong Kong.

Reasons for the change of name

Upon completion of the Disposal, the Group would concentrate its business operations in the chemical industry. The Board considers that the proposed new name of the Company provides a better identification of the Group’s business strategy as well as the plan for its future operations.

Share certificates

The share certificates bearing the Company’s existing names will continue to be the evidence of title and valid for trading, settlement and registration purposes. There will not be any arrangements for free exchange of existing share certificates for new

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LETTER FROM THE BOARD

share certificates under the new name of the Company. However, only new share certificates of the Company will be issued under the new name of the Company after the change of its name has become effective.

10. EGM

Set out from pages 33 to 34 of this circular is a notice convening the EGM to be held at Suite 1102, 11/F., ICBC Tower, Citibank Plaza, 3 Garden Road, Central, Hong Kong on Thursday, 20 December 2007 at which a special resolution will be proposed to approve the change of the Company name. A form of proxy is enclosed for use at the EGM. If you are unable to attend and vote at the EGM in person, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon and return it to the Company’s share registrar, Tricor Secretaries Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong as soon as possible, but in any event not less than 48 hours before the time appointed for holding such meeting or any adjourned meeting. Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjourned meeting should you so wish.

11. PROCEDURES TO DEMAND A POLL BY SHAREHOLDERS

Pursuant to the articles of association of the Company, at any general meeting a resolution put to the vote of the meeting shall be decided on a show of hands unless a poll is (before or on the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll) demanded:–

• i. by the Chairman of the meeting; or

• ii. by at least three Shareholders present in person or by proxy for the time being entitled to vote at the meeting; or

• iii. by any Shareholder(s) present in person or by proxy and representing not less than one-tenth of the total voting rights of all the members having the right to vote at the meeting; or

• iv. by any Shareholder(s) present in person or by proxy and holding shares in the Company conferring a right to vote at the meeting being Shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the shares conferring that right; or

• v. if required by the Listing Rules, by any Director or Directors who, individually or collectively, hold proxies in respect of Shares representing five percent (5%) or more of the total voting rights at such meeting.

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LETTER FROM THE BOARD

12. RECOMMENDATION

As to the details of the Disposal, your attention is drawn to (i) the letter form the Independent Board Committee set out from page 15 to 16 of this circular which contains its recommendation to the Shareholders concerning the Disposal and (ii) the letter from CPY Capital set out from page 17 to 23 of this circular which contains its recommendation to the Independent Board Committee and the Shareholders on the Disposal and the principal factors and reasons considered by CPY Capital in arriving at its recommendation.

Having considered the above reasons and benefits, the Directors (including Independent non-executive Directors) are of the opinion that the Disposal is to the benefit of the Company, fair and reasonable and in the interests of the Shareholders as a whole. Accordingly, the Directors (including Independent non-executive Directors) recommend the Shareholders to vote in favour of the Disposal if an extraordinary general meeting were to be convened for approving the Disposal.

For the reasons for the change of the Company name set out above, the Directors consider that the change of the Company name is to the benefit of the Company, fair and reasonable and in the interests of the Shareholders as a whole. The Directors therefore recommend the Shareholders to vote in favor of the special resolution at the EGM.

13. ADDITIONAL INFORMATION

Your attention is drawn to the Appendix II of this circular setting out the general information of the Company.

By order of the Board Swank International Manufacturing Company Limited Zhao Jun Chairman

– 14 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

The following is the text of the letter of recommendation, prepared for the purpose of incorporation in this circular, from the Independent Board Committee to the Shareholders regarding the Disposal:

Swank International Manufacturing Company Limited

(incorporated in Hong Kong with limited liability) (Stock Code: 663)

28 November 2007

To the Shareholders

Dear Sir or Madam,

CONNECTED AND MAJOR TRANSACTION IN RELATION TO THE DISPOSAL OF 70% EQUITY INTEREST IN PROFITOWN AS A RESULT OF THE EXERCISE OF THE PUT OPTION AND THE ENTERING INTO THE SP AGREEMENT

We refer to the circular of the Company dated 28 November 2007 (the “Circular”) of which this letter forms part. Unless the context specifies otherwise, capitalized terms and herein have the same meanings as defined in the Circular.

We have been appointed by the Board as the Independent Board Committee to advise the Shareholders as to whether the terms of the Disposal are fair and reasonable insofar as the Shareholders are concerned and whether the Disposal are in the interest of the Company and the Shareholders as a whole. CPY Capital has been appointed as the independent financial adviser to advise you and us in this respect.

RECOMMENDATION

We wish to draw your attention to the letter from the Board and the letter from CPY Capital to the Independent Board Committee and the Shareholders which contains its advice to us in relation to the Disposal as set out in the Circular.

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Having taken into account the principal reasons and factors considered by, and the advice of, CPY Capital as set out in its letter of advice from page 17 to 23 of the Circular, we are of the opinion that the terms of the Disposal are fair and reasonable and in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Shareholders to vote in favour of the Disposal if an extraordinary general meeting were to be convened for approving the Disposal.

Yours faithfully, For and on behalf of The Independent Board Committee Tam King Ching, Kenny Wu Bin Choi Tze Kit, Sammy Independent non-executive Independent non-executive Independent non-executive Director Director Director

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LETTER FROM CPY CAPITAL

The following is the letter of advice from CPY Capital, the independent financial adviser, to the Independent Board Committee and the Shareholders in respect of the exercise of the Put Option and the Disposal for inclusion in this circular.

Core Pacific – Yamaichi Capital Limited 36th Floor, Cosco Tower Grand Millennium Plaza 183 Queen’s Road Central Hong Kong

28 November 2007

To the Independent Board Committee and the Shareholders

Dear Sirs,

CONNECTED AND MAJOR TRANSACTION IN RELATION TO THE DISPOSAL OF 70% EQUITY INTEREST IN PROFITOWN AS A RESULT OF THE EXERCISE OF THE PUT OPTION AND THE ENTERING INTO THE SP AGREEMENT

INTRODUCTION

We refer to our appointment as the independent financial adviser to advise the Independent Board Committee and the Shareholders in respect of the exercise of the Put Option and the Disposal. Details of the terms of the Put Option and the Disposal are set out in the letter from the Board (the “Letter”) as contained in the circular of the Company to the Shareholders dated 28 November 2007 (the “Circular”), 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.

In our capacity as the independent financial adviser to the Independent Board Committee and the Shareholders for the purposes of the Listing Rules, our role is to give an independent opinion and recommendation as to whether the terms of the Put Option and the Disposal, from a financial perspective, are fair and reasonable so far as the Shareholders generally are concerned. We have not been requested to opine on, and our opinion does not in any manner address, the Company’s decision to proceed with the exercise of the Put Option and the Disposal.

In formulating our opinion and recommendation, we have relied on the accuracy of the information and facts supplied, and the opinions and representations expressed, to us by the executive Directors, the Company and its management. We have also assumed that all

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LETTER FROM CPY CAPITAL

statements of belief, opinion and intention made by the executive Directors in the Circular were reasonably made after due and careful enquiry and are based on honestly-held opinions. We have no reason to doubt the truth, accuracy and completeness of the information and representations referred to in the Circular and provided to us by the Company and the executive Directors, and have been advised by the executive Directors that no material facts have been omitted from the information provided and referred to in the Circular. We have also assumed that all statements of intention of the Company or its executive Directors as set out in the Circular will be implemented. We consider that we have reviewed sufficient information to reach an informed view and to justify reliance on the accuracy of the information contained in the Circular and to provide a reasonable basis for our advice. We have assumed that all information and representations made or referred to in the Circular and provided to us by the Company and the executive Directors were true, complete and accurate at the time they were made and continue to be true, complete and accurate at the date of the Circular. We have not, however, carried out any independent verification of the information and representations provided to us nor have we conducted any form of independent investigation into the businesses and affairs, financial position or the future prospects of the Group, the Profitown Group or their respective associates. We have not studied, investigated nor verified the validity of all the legal aspects of, and procedural aspects for, the exercise of the Put Option and the Disposal. We have not investigated nor verified the title/ownership of the 70% equity interest in Profitown and the assets and liabilities of the Profitown Group to be disposed of, and the rights to transfer such assets and liabilities nor have we scrutinized the original documents to verify ownership or to verify any amendments which may not appear on the copies of the documents provided to us.

Our opinion is necessarily based upon the financial, economic, market, regulatory and other conditions as they exist on, and the facts, information, representations and opinions made available to us as of, the Latest Practicable Date. We disclaim any undertaking or obligation to advise any person of any change in any fact or matter affecting the opinion expressed herein which may come or be brought to our attention after the Latest Practicable Date.

BACKGROUND OF THE PUT OPTION AND THE DISPOSAL

As mentioned in the Letter, pursuant to the Shareholders Agreement entered into among the Company, Probest, TIHL and Profitown on 3 June 2005, Probest granted a Put Option to the Company to dispose of its 70% equity interest in Profitown to Probest or an independent third party to be procured by Probest and Probest gave an indemnity in favour of Profitown in the event that Profitown records any deficit in the net tangible asset value. Besides, Probest or the purchaser procured by Probest will assume all the liabilities due from the Company to any member of the Profitown Group incurred prior to the date of the Shareholders Agreement at nil consideration. As at the Latest Practicable Date, the Group indebted no liability to Profitown Group. On 30 October 2007, the Board resolved to exercise the Put Option to require Probest itself or to procure an independent third party to purchase all of the Sale Shares of Profitown held by the Company under the Shareholders Agreement by serving the Put Option Notice to Probest. Pursuant to the Put Option Notice, the Company has demanded Probest to undertake to the Company that Profitown’s net

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LETTER FROM CPY CAPITAL

tangible asset value shall not be less than zero on completion of sale of the Sale Shares and it shall indemnify Profitown for the deficit should Profitown’s net tangible asset value fall below zero on completion of sale of the Sale Shares.

On 2 November 2007, the Company and Asset Up entered into the SP Agreement pursuant to which the Company has agreed to dispose of its 70% equity interest in Profitown to Asset Up at the consideration of HK$1. Upon completion of the Disposal, Profitown will cease to be a subsidiary of the Company.

Under the Guarantee, the Company has undertaken to Probest that if and whenever Profitown defaults for any reason in payment of the principal sum due under the Promissory Note, the Company shall upon demand by Probest unconditionally pay and satisfy all interest which Profitown is liable to pay under the Promissory Note on and after such default. The Guarantee will cease to be effective if the Put Option is exercised and the transaction contemplated under the Put Option is completed.

INFORMATION ON THE GROUP AND THE PROFITOWN GROUP

The Group

As stated in the Letter, the Group is principally engaged in (i) design, manufacture and marketing of frames, sunglasses and lenses; and (ii) manufacture and sale of chemical-related products such as phosphoric acid, yellow phosphorous and PVC.

According to the annual report of the Company for the year ended 31 December 2006 (the “2006 Annual Report”), the segment revenue of the optical business was approximately HK$152.3 million and HK$118.4 million for each of the two years ended 31 December 2006, respectively. The loss of the optical business segment for each of the two years ended 31 December 2006 was approximately HK$21.5 million and HK$40.0 million, respectively. As mentioned in the Letter, due to the historical unsatisfactory financial performance of the optical business, the Board decided to realize its investment in the Profitown Group. Upon completion of the Disposal, the Group will no longer be engaged in the optical business and will focus its resources on its chemical business.

As mentioned in the Letter, further to the introduction of the agency services business in 2005 in relation to the sale of chemicals including phosphorus and other related materials, the Group successfully launched its new manufacturing and sale businesses of phosphoric acid and yellow phosphorus in the second half of 2006 and the beginning of 2007 respectively. These new projects enable the Group to build up a solid platform to gain further experience in operating and managing chemical business and to provide the Group a vertically integrated structure for its phosphorus business to enhance profitability. According to the 2006 Annual Report, the segment revenue and profit of the Group’s chemical business for the year ended 31 December 2006 were approximately HK$121.3 million and approximately HK$22.6 million, respectively. According to the interim report of the Company for the six months ended 30 June 2007 (the “2007 Interim Report”), the segment turnover and profit of the Group’s chemical business for the six months ended 30 June 2007 were approximately HK$100.3 million and approximately HK$31.1 million, respectively. As stated in the Letter, the Board, with its experience in the chemical industry together with the

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LETTER FROM CPY CAPITAL

Group’s existing platform, will continue identifying opportunities to further develop its business into other chemical industry segments in the PRC. In particular, the Group plans to tap into the PVC market in the fourth quarter of 2007 to further expand its chemical business.

As mentioned in the Letter, in light of the growing economy and rich phosphorus resources in the PRC, the Group is optimistic about the future of its chemical business. The Group will further strengthen and expand its existing sales team for its phosphorus products. This will enable the Group to further extend its existing sales networks. Given the fact that the Board possesses considerable expertise in international trade and in light of the extensive application of yellow phosphorus, the Board is confident that the Group will gradually establish its presence in the phosphorus related chemical industrial segments to further broaden its income base and enhance profitability.

The Profitown Group

As set out in the Letter, the Profitown Group is principally engaged in the design, manufacture and marketing of frames, sunglasses and lenses. As at the Latest Practicable Date, Profitown, one of the principal subsidiaries of the Company, was owned as to 70% by the Company and 30% by Probest.

According to the accountants’ report of Profitown Group as contained in the circular of the Company dated 10 May 2005, Profitown Group recorded an audited consolidated net loss attributable to shareholders of approximately HK$38.9 million and approximately HK$8.5 million for each of the two years ended 31 December 2004, respectively. As at 31 December 2003 and 31 December 2004, the audited net assets of Profitown Group were approximately HK$8.7 million and approximately HK$0.8 million, respectively. As mentioned in the Letter, Profitown Group recorded net loss after tax of approximately HK$24.1 million and approximately HK$29.6 million for each of the two years ended 31 December 2006 and operating loss (after deducting finance costs) of approximately HK$3.8 million for the six months ended 30 June 2007. As at 31 December 2006 and 30 June 2007, the net liabilities of Profitown Group were approximately HK$20.8 million and HK$20.5 million, respectively. As per the management accounts of Profitown Group, Profitown Group recorded unaudited net liabilities of approximately HK$21.6 million as at 31 August 2007.

PRINCIPAL FACTORS AND REASONS CONSIDERED

An opportunity for the Company to exit form the existing business of the Profitown Group

As mentioned in the Letter, no creditors agreed to waive any debts due by the Profitown Group. Besides, upon expiry of the 30 months from 3 June 2005, Probest shall have no obligation to indemnify the net tangible asset value of the Profitown Group not falling below zero and the Company is obliged to share the deficit of the Profitown Group with Probest in proportion to their respective equity interest in Profitown. In view of (i) the unsatisfactory operating performance of the Profitown Group as discussed above; (ii) no creditors agreed to waive any debts due by the Profitown Group; and (iii) the possibility of the Company to share the deficit of the Profitown Group with Probest in proportion to their respective equity interest in Profitown, we concur with the view of the Directors that it is

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LETTER FROM CPY CAPITAL

impracticable to assume that (i) the Company would be able to dispose of all assets of the Profitown Group at cost or above within a reasonable period of time; and (ii) the proceeds from such disposal would be sufficient to settle all the indebtedness of the Profitown Group (including the Promissory Note and amount due to Probest), and we consider that the exercise of the Put Option provide an opportunity for the Company to realize its investments in the Profitown Group.

The exercise of the Put Option and the Disposal are in line with the Group’s business strategies

As mentioned in the 2007 Interim Report, the Board is reviewing the overall performance of the Group’s businesses and actively contemplating various possible means to streamline the Group’s businesses to improve its overall financial positions, and is considering a proposal for the disposal of the Group’s optical business.

As stated in the Letter, prior to the change in controlling shareholder and management of the Company in 2005, the Group, through the Profitown Group, has been principally engaged in the optical business. Leveraged on the new management’s extensive expertise and sales networks in the chemical industry, the Group has diversified into the chemical business with an aim to broaden its income stream and improve profitability. As mentioned in the 2007 Interim Report, the Group has successfully launched its manufacture and sale of phosphoric acid and yellow phosphorus businesses in mainland China in the second half of 2006 and the beginning of 2007 respectively. In addition, the Group plans to tap into the PVC market in the fourth quarter of 2007 to further expand its chemical business. In light of the above, we are of the view that the exercise of the Put Option and the Disposal are in line with the business strategies of the Group.

Reducing the financial burden of the Group

As mentioned in the circular of the Company dated 10 May 2005, the obligations of the Company under the Guarantee are unsecured and not guaranteed by China Time or any of its concert parties or any other person. The Guarantee will cease to be effective if the Put Option is exercised and the transaction contemplated under the Put Option is completed. According to the 2006 Annual Report, the contingent liabilities in respect of the interest payment of the Promissory Note amounted to approximately HK$15.1 million, and according to the 2007 Interim Report, the interest payable on demand in respect of the Promissory Note amounted to approximately HK$19.9 million.

As advised by the Company and according to the financial information as set out in Appendix I to the Circular, as at 31 October 2007, the Group had contingent liabilities of approximately RMB9.5 million in relation to the provision for a guarantee issued by a non-wholly owned subsidiary of Profitown to minority interests of another subsidiary of Profitown regarding any potential loss that may be borne by the minority interests during the winding up process of such subsidiary.

Pursuant to the Put Option Notice, the Company shall be released from all obligations and liabilities (including any claims, losses, liabilities, costs or expenses of any kind and however arising, including penalties, fines and interest and including those which are

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LETTER FROM CPY CAPITAL

prospective or contingent, whether they are incurred prior to or after completion of the transfer of the Sale Shares) under the Guarantee and in respect of the Profitown Group upon completion of the transfer of Sale Shares.

In light of the release of the Company from all obligations and liabilities in respect of the Guarantee and the Profitown Group as mentioned above, we concur with the Directors’ view that the exercise of the Put Option will immediately reduce the financial burden of the Group.

Consideration

As mentioned in the Letter, the consideration of HK$1 was determined after arm’s length negotiation and taken into account the unaudited net asset value of Profitown as at 31 August 2007 and the indemnity given by Probest to the Company as contemplated under the Shareholders Agreement. The executive Directors expect that the net tangible asset value of Profitown as at the date of the exercise of the Put Option would not materially deviate from that as of 31 August 2007. In light of the fact that the Profitown Group has been loss-making as mentioned above, we consider that the price-to-earnings multiple basis is not applicable for determining the exercise price of the Put Option and it is acceptable to set the exercise price at a price equal to the consolidated net tangible asset value of the Profitown as at the date of exercise of the Put Option.

Pursuant to the Put Option Notice, the Company has demanded Probest to undertake to the Company that Profitown’s net tangible asset value shall not be less than zero on completion of sale of the Sale Shares and it shall indemnify Profitown for the deficit should Profitown’s net tangible asset value fall below zero on completion of sale of the Sale Shares. In view of the foregoing and the net liabilities of the Profitown Group of approximately HK$21.6 million as at 31 August 2007, we are of the view that the exercise price of the Put Option and the consideration of HK$1 for the Disposal are fair and reasonable so far as the Shareholders generally are concerned.

Financial effects of the exercise of the Put Option and the Disposal on the Group

(1) Earnings and cashflow

As mentioned above, the Profitown Group had unaudited net liabilities of approximately HK$20.5 million as at 30 June 2007. Based on such figure, the executive Directors have advised that other income of approximately HK$14.4 million (net of minority interests) is expected to be recognized as a result of the indemnity given by Probest in relation to the Profitown Group’s deficit as at 30 June 2007.

Following the completion of the Disposal, the Group will not hold any equity interests in Profitown and the results of the Profitown Group after the completion of the Disposal will not be consolidated into the results of the Group. As the Profitown Group has been loss-making as discussed above, we consider that the Disposal would not have any material adverse impact on the Group’s overall future results and cashflow and we, taken into

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LETTER FROM CPY CAPITAL

account the reasons and factors as mentioned in the section headed “Principal factors and reasons considered” above, concur with the Directors’ view that the exercise of the Put Option would improve the financial position of the Group.

(2) Net asset value

Based on the unaudited net liabilities of the Profitown Group of approximately HK$20.5 million as at 30 June 2007, the executive Directors have confirmed that upon completion of the Disposal, the consolidated net asset value (excluding minority interests) of the Group would be increased by approximately HK$14.4 million and Profitown will cease to be a subsidiary of the Company. On such basis, we consider that the exercise of the Put Option and the Disposal would have a positive impact on the consolidated net asset value of the Group.

(3) Gearing

According to the 2007 Interim Report, the Group’s gearing, measured as total debts to total assets, was approximately 95.2% as at 30 June 2007. On the same calculation basis and on the assumption that the total debts and total assets of the Group are equal to the balances as at 30 June 2007, the executive Directors have confirmed that the gearing ratio of the Group immediately after the exercise of the Put Option and completion of the Disposal would be reduced by approximately 17.8%. We consider that the Disposal can improve the gearing position of the Group.

RECOMMENDATION

Having considered the abovementioned principal factors and reasons, we consider that, from a financial point of view, the terms of the Put Option and the Disposal are on normal commercial terms, fair and reasonable so far as the Shareholders generally are concerned, and in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Board Committee to advise the Shareholders, and the Shareholders, to vote in favour of the resolution approving the Disposal by exercising the Put Option if a meeting of Shareholders has to be convened.

Yours faithfully, For and on behalf of

Core Pacific – Yamaichi Capital Limited Griffin Tse Director

– 23 –

FINANCIAL INFORMATION

APPENDIX I

1. INDEBTEDNESS

Borrowings

At the close of business on 31 October 2007, being the latest practicable date for ascertaining certain information relating to this indebtedness statement, the Group had the following unsecured borrowings due from Protest:

• (i) unsecured interest bearing borrowings of approximately HK$169,021,000; and

• (ii) unsecured non-interest bearing borrowings of approximately HK$23,186,000, which was guaranteed by the Company.

Save as aforesaid, at the close of business on 31 October 2007, the Group did not have any debt securities issued and outstanding, and authorised or otherwise created but unissued, and term loans.

Contingent liabilities

At the close of business on 31 October 2007, the Group had total contingent liabilities of approximately RMB9.5 million in relation to the provision of a guarantee issued by a subsidiary to minority interests of another subsidiary of the Group regarding any potential loss that may be borne by the minority interests during the winding up process of the subsidiary.

Capital commitments

At the close of business on 31 October 2007, the Group had no material capital commitments.

Disclaimers

Save as disclosed above and apart from intra-group liabilities, at the close of business on 31 October 2007, the Group did not have any outstanding loan capital issued or agreed to be issued, bank overdrafts, loans or other similar indebtedness, liabilities under acceptances (other than normal trade bills) or acceptance credits, debentures, mortgages, charges, finance lease or hire purchase commitments, guarantees or other material contingent liabilities.

2. MATERIAL CHANGE

The Directors confirm that, as at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Company since 31 December 2006, being the date to which the latest published audited financial statements of the Company were made up.

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FINANCIAL INFORMATION

APPENDIX I

3. WORKING CAPITAL STATEMENT

The Directors are of the opinion that, after taking into account the financial resources and banking facilities available to the Group and its internal generated funds, the Group has sufficient working capital to satisfy its requirements for at least the next twelve months from the date of this circular.

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GENERAL INFORMATION

APPENDIX II

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Group. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief there are no other facts the omission of which would make any statement herein misleading.

2. DIRECTORS’ INTERESTS

As at the Latest Practicable Date, the interests or short positions of each Director and the Company’s chief executive in the shares, underlying shares or debentures of the Company or any associated corporation (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 which they are taken or deemed to have under such provision of the SFO); or (b) were required pursuant to Section 352 of the SFO to be entered in the register referred to therein; or (c) were required pursuant to the Model Code for Securities Transactions by Directors of Listed Companies to be notified to the Company and the Stock Exchange are as follows:

	Long/short		Number of	Approximately
Director	position	Capacity	Shares	% of holding
Mr. Wang	Long position	Interest in a	1,878,799,680	60.12%
		controlled
		corporation

Save as disclosed above, as at the Latest Practicable Date, none of the Directors and chief executive of the Company was interested, or deemed to be interested in the long and short positions in the shares, underlying shares and debentures of the Company or any associated corporation (within the meaning 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; or (b) were required pursuant to section 352 of the SFO to be entered in the register referred to therein; or (c) were required pursuant to the Model Code for Securities Transactions by Directors of Listed Companies to be notified to the Company and the Stock Exchange. Mr. Wang, a director and beneficial owner of China Time, is also a Director. Save as disclosed above, as at the Latest Practicable Date, none of the Directors holds any directorship in any company(ies) which is (are) substantial shareholder(s) of the Company.

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GENERAL INFORMATION

APPENDIX II

3. SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, so far as it is known to any Directors, chief executives of the Company, Shareholders (other than Directors or chief executive of the Company) who have interests or short positions in the Shares or underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO or which were required, pursuant to section 336 of Part XV of the SFO, to be entered in the register referred to therein, or who is interested in 5% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meeting of any other member of the Group were as follows:

(a) Interest in Shares of the Company

			Approximate
			percentage of the
			Company’s
			issued share
Name	Capacity	Number of Shares held	capital
China Time Investment	Beneficial owner	1,878,799,680 (note 1)	60.12
Holdings Limited
Mr. Wang	Interest in a controlled	1,878,799,680 (note 1)	60.12
	corporation
Ms. Mu Yucun	Family interest	1,878,799,680 (note 2)	60.12
Choi Koon Shum, Jonathan	Interest in a controlled	188,702,795 (note 3)	6
(“Mr. Choi”)	corporation
Kwan Wing Kum, Janice	Family interest	188,702,795 (note 3)	6
(“Ms Kwan”)
Lam William Ka Chung	Interest in a controlled	188,702,795 (note 3)	6
(“Mr. Lam”)	corporation
Lam Wong Yuk Sin, Mary	Family interest	188,702,795 (note 3)	6
(“Mrs. Lam”)
Kingsway International	Interest in a controlled	188,702,795 (note 3)	6
Holdings Limited	corporation
(“Kingsway
International”)
Innovation Assets Limited	Interest in a controlled	188,702,795 (note 3)	6
(“Innovation”)	corporation
World Developments	Interest in a controlled	188,702,795 (note 3)	6
Limited	corporation
(“World Developments”)
SW Kingsway Capital	Interest in a controlled	188,702,795 (note 3)	6
Holdings Limited (“SW	corporation
Kingsway”)
Festival Developments	Beneficial owner	188,702,795 (note 3)	6
Limited (“Festival
Developments”)

Save as disclosed above, as at the Latest Practicable Date, the Directors are not aware of any person who is, directly or indirectly, interested in 5% or more of the issued share capital of the Company, has short positions on the Shares or underlying Shares, or has any rights to subscribe for Shares in respect of such capital.

Notes:

1. Mr. Wang is the sole shareholder of China Time Investment Holdings Limited.

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GENERAL INFORMATION

APPENDIX II

1. Ms. Mu Yucun is Mr. Wang’s spouse and she is deemed to be interested in Mr. Wang’s interest in the Shares.

2. Mr. Choi and his spouse Ms. Kwan were deemed to be interested in 188,702,795 ordinary shares in the Company by virtue of their 46% shareholding in Kingsway International. Mr. Lam and his spouse Mrs. Lam were deemed to be interested in 188,702,795 ordinary shares in the Company by virtue of their 40% shareholding in Kingsway International. Kingsway International, in turn, held 100% shareholding in Innovation. Innovation, in turn, held 100% shareholding in World Developments. World Developments, in turn, held 74% shareholding in SW Kingsway. SW Kingsway, in turn, held 100% direct shareholdings in Festival Developments.

(b) Substantial shareholders of other members of the Group

			Percentage of
		Name of substantial	existing share
Name of Subsidiary	Capacity	shareholders	capital
Profitown Investment	Beneficial owner	Probest Holding Inc	30%
Corporation
Global Origin	Beneficial owner	All-Success	10%
Limited		International
		Limited
Profit Trend	Beneficial owner	Wischance Investments	50%
International		Limited
Limited
Shenzhen Hengang	Beneficial owner	Hengang Zheng Stock	19%
Swank Optical		Investment Co. Ltd
Industrial Co. Ltd.

Save as disclosed above, as at the Latest Practicable Date, the Directors are not aware of any person who is, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances in general meetings of any other member of the Group.

4. SERVICE CONTRACTS

As at the Latest Practicable Date, no Director has a service contract with the Company which is not determinable by the Company within one year without payment of compensation, other than statutory compensation.

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GENERAL INFORMATION

APPENDIX II

5. COMPETING INTEREST

Pursuant to Rule 14A.59(11) of the Listing Rules, as at the Latest Practicable Date, interest of the Directors in businesses which are likely to compete, either directly or indirectly with the phosphorus business (principally the production and domestic sales of yellow phosphorous) which the Group is currently engaged through the continuing connected transactions as described in the Company’s announcement dated 11 May 2006 were as follows:

==> picture [388 x 255] intentionally omitted <==

----- Start of picture text -----

||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
|Entity|whose|Business(es)|Nature|of|
|may|compete|or|are|likely|to|interest|of|
|compete|with|the|businesses|Description|of|Name|of|the|Director|
|of|the|Group|(the|“Entity”)|businesses|of|the|Entity|Director|in|the|Entity|
|(Luliang|Principally|engaged|in|the|Mr.|Zhao|Jun|Statutory|
|Phosphorus|Chemical|Co.,|production|of|yellow|representative|
|Ltd.)|phosphorous|
|Principally|engaged|in|the|Mr.|Zhao|Jun|director|
|(Songming|Tiannan|production|of|yellow|
|Phosphorus|Chemicals|Co.,|phosphorous|
|Ltd.)|
|Principally|engaged|in|the|Mr.|Wang|substantial|
|(Luoping|Phosphorus|production|of|yellow|shareholder|
|Chemicals|Co.,|Ltd.)|phosphorous|
|Principally|engaged|in|the|Ms.|Zhou|Jing|director|
|(Yunnan|Xundian|Italphos|production|of|yellow|
|YP|Co.,|Ltd.)|phosphorous|

----- End of picture text -----

Save as disclosed above, as at the Latest Practicable Date, none of the Directors and his associates had any interests which competes or was likely to compete, either directly or indirectly, with the Company’s business.

6. EXPERTS AND CONSENT

Name Qualification

CPY Capital a corporation licensed to conduct business in type 1 (dealing in securities) and type 6 (advising on corporate finance) regulated activities under the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong).

CPY Capital has given and has not withdrawn its written consent to the issue of this circular with the inclusion herein of its letter or references to its name in the form and context in which they respectively appear.

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GENERAL INFORMATION

APPENDIX II

As at the Latest Practicable Date, CPY Capital did not have any shareholding in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group, and CPY Capital did not have any direct or indirect interest in any assets which have been or proposed to be acquired or disposed of by or leased to any member of the Group since 31 December 2006, being the date to which the latest published audited accounts of the Company were made up.

7. INTERESTS IN ASSETS

Save for the PVC leasing agreement entered into between (Fangcheng Huahai Chemicals Co., Ltd.) and (Yunnan Phosphorus Group Co., Ltd.) on 9 July 2007 in relation to the operating leasing of certain factory, the ancillary structures and the machinery and equipment for production of PVC at an annual rental of RMB75 million (approximately HK$77.3 million) in which Mr. Wang is considered to be interested in (details of such leasing are set out in the Company’s circular dated 8 August 2007), none of the Directors had any direct or indirect interest in any asset which had been, since 31 December 2006, being the date to which the latest published audited financial statements of the Company were made up, acquired or disposed of by or leased to any member of the Group.

8. DIRECTORS’ INTERESTS IN CONTRACTS

Save for the Agency Agreement as set out in the Company’s circular dated 10 May 2005, the Guangxi Agency Agreement, Guangxi Distribution Agreement, Guangxi Leasing Agreement, Guangxi Raw Materials Purchase Agreement and Yunnan Leasing Agreement as set out in the Company’s circular dated 2 June 2006 and Yunnan Factories Coal Supply Contract, Phosphorous Ancillary Materials Procurement Agreement, PVC Leasing Agreement, PVC Ancillary Materials Procurement Agreement and PVC Distribution Agreement as set out in the Company’s circular dated 8 August 2007, there was no contract of significance in relation to the Group’s business to which the Company, its subsidiaries, its fellow subsidiaries or its holding company was a party and in which a Director had a material interest, whether directly or indirectly, subsisting as at the Latest Practicable Date.

9. MATERIAL CONTRACTS

The following contracts, not being contracts in the ordinary course of business, have been entered into by the Group within two years preceding the date of this circular and are or may be material:

• (a) Requisition and compensation agreements dated 2 June 2006 entered into between Artland Manufactory Limited (a subsidiary of the Company), (Heng Gang Zheng Economic Development Co.,

• Ltd.), (Heng Gang Stock Investment Co., Ltd.), and (Shenzhen Heng Gang Swank Optical Industries

• Co., Ltd.) with (Shenzhen Zhonglianyin Guarantee Co., Ltd.) and (Shenzhen Xinyi Property Development Co., Ltd.*);

* for identification purpose only

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GENERAL INFORMATION

APPENDIX II

• (b) a winding-up agreement dated 2 June 2006 entered into between Artland Manufactory Limited and Heng Gang Zheng Stock Investment Co., Ltd.; and

• (c) the SP Agreement.

10. LITIGATION

As at the Latest Practicable Date, no member of the Group was engaged in any material litigation, claim or arbitration of material importance and no litigation, claim or arbitration of material importance is known to the Directors to be pending or threatened against any member of the Group.

11. GENERAL

The company secretary and the qualified accountant of the Company appointed pursuant to Rule 3.24 of the Listing Rules is Mr. Tang Suk Ngo, Raymond, who is an associate member of the Institute of Chartered Accountants in England and Wales.

The share registrar and transfer office of the Company in Hong Kong is Tricor Secretaries Limited at Level 25, Three Pacific Place, 1 Queen’s Road East, Hong Kong.

12. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection at the offices of the Company at Suite 1102, 11/F., ICBC Tower, Citibank Plaza, 3 Garden Road, Central, Hong Kong, during normal business hours up to and including at least 14 days from the date of this circular:

• (a) the SP Agreement;

• (b) the Put Option Notice;

• (c) the written approval resolution from China Time in relation to Disposal;

• (d) the memorandum and articles of association of the Company;

• (e) the annual report of the Company for the two financial years ended 31 December 2006;

• (f) material contracts as referred to the paragraph headed “Material Contracts” in this appendix;

• (g) the letter from the Independent Board Committee contained in this circular;

• (h) the letter of advice from CPY Capital contained in this circular;

• (i) the written consent referred to in the section headed “Experts and consent” of this appendix; and

• (j) the circular of the Company dated 8 August 2007 and this circular.

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GENERAL INFORMATION

APPENDIX II

13. MISCELLANEOUS

The English version of this circular shall prevail over the Chinese text.

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NOTICE OF EGM

Swank International Manufacturing Company Limited

(incorporated in Hong Kong with limited liability) (Stock Code: 663)

NOTICE IS HEREBY GIVEN that an extraordinary general meeting of Swank International Manufacturing Company Limited (the “ Company ”) will be held at Suite 1102, 11/F., ICBC Tower, Citibank Plaza, 3 Garden Road, Central, Hong Kong at 4:00 p.m. on Thursday, 20 December 2007 (or any adjournment thereof) for the purpose of considering and, if thought fit, passing, with or without amendment or modification, the following resolution as a special resolution of the Company to be taken by way of a poll:

SPECIAL RESOLUTION

“ THAT :

subject to the approval of the Registrar of Companies in Hong Kong being obtained, the name of the Company be changed from “Swank International Manufacturing Company Limited” to “Yun Sky Chemical (International) Holdings Limited” in English and from “ ” to “ ” in Chinese and the directors of the Company be and are hereby authorised generally to do such acts and things and execute all documents or make such arrangements as they may consider necessary or expedient to effect the change of names of the Company.”

By Order of the Board of Swank International Manufacturing Company Limited Zhao Jun Chairman

Hong Kong, 28 November 2007

Registered office: Suite 1102, 11/F ICBC Tower, Citibank Plaza 3 Garden Road, Central Hong Kong

Principal place of business in Hong Kong: 2/F, Koon Wah Mirror Factory (3rd) Industrial Building 5-9 Ka Hing Road Kwai Chung New Territories Hong Kong

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NOTICE OF EGM

Notes:

1. Any member entitled to attend and vote at the above meeting is entitled to appoint one or more than one proxy to attend and to vote instead of him. A proxy need not be a member of the Company.

2. Where there are joint registered holders of any share, any one of such persons may vote at the above meeting, either personally or by proxy, in respect of such share as if he were solely entitled to it; but if more than one such joint holders are present at the above meeting personally or by proxy, that one of such persons so present whose name stands first on the Register of Members of the Company in respect of such share will alone be entitled to vote in respect of such share.

3. A form of proxy of the meeting is enclosed. If the appointer is a corporation, the form of proxy must be under its common seal or, under the hand of an officer or attorney duly authorized on its behalf.

4. To be valid, a form of proxy must be deposited at the Company share registrar, Tricor Secretaries Limited, at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Hong Kong, as soon as possible and in any event not later than 48 hours before the time appointed for the holding of the extraordinary general meeting or any adjournment thereof.

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