Dufu Liquor Group Limited - Proxy Solicitation & Information Statement 2010

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 stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Nam Hing Holdings Limited (the “Company”), you should at once hand this circular together with the enclosed form of proxy to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer 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 disclaims any liability whatsoever for any loss howsoever arising from or in reliance on the whole or any part of the contents of this circular.

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NAM HING HOLDINGS LIMITED 南興集團有限公司[*]

(Incorporated in Bermuda with limited liability)

(Stock Code: 986)

(I) MAJOR DISPOSAL AND CONNECTED TRANSACTION; (II) CONTINUING CONNECTED TRANSACTION IN RELATION TO MASTER SUPPLY AGREEMENT; (III) DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO PROVISION OF

FINANCIAL ASSISTANCE UNDER CORPORATE GUARANTEE; AND

(IV) DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO PROVISION OF FINANCIAL ASSISTANCE BY WAY OF LOANS ADVANCES AND

NOTICE OF SPECIAL GENERAL MEETING

Independent financial adviser

A notice convening a special general meeting of the Company to be held at 27/F., Yuen Long Trade Centre, 99-109 Castle Peak Road, Yuen Long, New Territories, Hong Kong on Tuesday, 11 January 2011 at 3:00 p.m. is set out on pages 73 to 75 of this circular. Whether or not you are able to attend the special general meeting, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return the same to the Company’s share registrar, Tricor Tengis 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 the holding of the special general meeting or any adjourned meeting. Completion and delivery of the form of proxy will not preclude you from attending and voting in person at the special general meeting if you so wish.

24 December 2010

For identification purposes only

	Page
Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Letter from the Independent Board Committee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	25
Letter from Veda Capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	27
Appendix I – Valuation report on the property interests
held by the Disposed Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	47
Appendix II – Financial information of the Group. . . . . . . . . . . . . . . . . . . . . . . . . . .	65
Appendix III – General information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	67
Notice of SGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	73

– i –

DEFINITIONS

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

“ Annual Cap”

the maximum aggregate annual value of the purchase and supply of the Finished Products for the period commencing from the Disposal Completion and ending 31 March 2011 and the year ending 31 March 2012

“associates” has the meaning ascribed to this term under the Listing Rules “Bangkok Bank” Bangkok Bank Public Company Limited “BIL” Bangkok Industrial Laminate Limited, a company incorporated in Thailand and a member of the Fittingco Group
“Board” the board of Directors “Business Day” a day (other than a Saturday, Sunday or public holiday) on which licensed banks are generally open for business in Hong Kong throughout their normal business hours

“Company” Nam Hing Holdings Limited, a company incorporated in Bermuda with limited liability and the issued Shares of which are listed on the Stock Exchange “Cosmo Group” collectively, Cosmos Terrace and its subsidiaries “Cosmo Sale Shares” the 10 issued ordinary shares of US$1.00 each in the share capital of Cosmo Terrace, which represent the entire issued share capital of Cosmo Terrace “Cosmo Terrace” Cosmos Terrace Corporation, a company incorporated in the British Virgin Islands “connected persons” has the meaning ascribed to this term under the Listing Rules

– 1 –

DEFINITIONS

“Consideration” the consideration of HK$28,000,000 payable by the Purchaser to the Vendor for the Sale Shares and Sale Loans pursuant to the Sale and Purchase Agreement
“Corporate Guarantee” a guarantee executed by the Company on 11 February 2004 in favour of the Bangkok Bank in respect of the borrowings of BIL up to a maximum principal amount of Thai Baht 70,000,000
“Directors” the directors of the Company “Disposal” the disposal of the Sale Shares and the Sale Loans by the Vendor to the Purchaser as contemplated under the Sale and Purchase Agreement
“Disposal Completion” completion of the sale and purchase of the Sale Shares and the Sale Loans in accordance with the terms and conditions of the Sale and Purchase Agreement
“Disposed Group” collectively, the Cosmo Group, the Fittingco Group, the Majestic Group and Ottawa Group
“Finished Products” industrial laminates “Fittingco” Fittingco Inc., a company incorporated in the British Virgin Islands
“Fittingco Group” collectively, Fittingco and its subsidiaries “Fittingco Sale Shares” the 10,000 issued ordinary shares of US$1.00 each in the share capital of Fittingco, which represent the entire issued share capital of Fittingco
“Group” the Company and its subsidiaries “Hong Kong” the Hong Kong Special Administrative Region of the PRC

– 2 –

DEFINITIONS

“Independent Board	the independent board committee comprising all the
Committee”	independent non-executive Directors, which has been formed
	to advise the Independent Shareholders as to the fairness and
	reasonableness of the Disposal, the Master Supply Agreement,
	the provision of the Corporate Guarantee and the Loans
	Advances
“Independent Shareholders”	Shareholders other than the Purchaser and its associates
“Independent Third Party”	any person or company and their respective ultimate beneficial
	owner(s), to the best of the Directors’ knowledge, information
	and belief having made all reasonable enquiries, are third
	parties independent of the Company and its connected persons
“Latest Practicable Date”	22 December 2010, being the latest practicable date prior to
	the printing of this circular for the purposed of ascertaining
	certain information contained herein
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock
	Exchange
“Loans Advances”	all obligations, liabilities and debts owing or incurred under
	the Zhongshan Chung Yuen Loans, the Zhongshan NH Loans
	and the Zhuhai Loans at Disposal Completion
“Majestic”	Majestic Mountain Limited, a company incorporated in Hong
	Kong
“Majestic Group”	collectively, Majestic and its subsidiaries
“Majestic Sale Shares”	the two issued ordinary shares of HK$10.00 each in the share
	capital of Majestic, which represent the entire issued share
	capital of Majestic

– 3 –

DEFINITIONS

“Master Supply Agreement”	the master supply agreement dated 28 June 2010 entered into
	between Nam Hing HK and Nam Hing DG, as purchaser, and
	Zhongshan Chung Yuen, as supplier, in relation to the supply
	and purchase of industrial laminates (as supplemented by the
	Supplemental Supply Agreement and the Supplemental Supply
	Agreement II)
“Nam Hing HK”	Nam Hing Circuit Board Company Limited, a company
	incorporated in Hong Kong
“Nam Hing DG”	Nam Hing Circuit Board (Dongguan) Co., Ltd., a company
	incorporated in the PRC
“Ottawa”	Ottawa Enterprises Limited, a company incorporated in the
	British Virgin Islands
“Ottawa Group”	collectively, Ottawa and its subsidiaries
“Ottawa Sale Shares”	the 10 issued ordinary shares of US$1.00 each in the share
	capital of Ottawa, which represent the entire issued share
	capital of Ottawa
“PRC”	the People’s Republic of China
“Purchaser”	Nature Ample Limited, a company incorporated in the British
	Virgin Islands
“Remaining Group”	the Company and its subsidiaries immediately after the
	Disposal Completion
“Re-organisation”	an internal corporate re-organisation to be conducted by the
	Vendor involving Majestic and Ottawa pursuant to which the
	Vendor shall acquire the entire issued share capital of Majestic
	and Ottawa, such re-organisation shall be conducted in such
	manner and on such terms as the Vendor may agree
“Sale and Purchase	the conditional sale and purchase agreement dated 28 June
Agreement”	2010 entered into between the Purchaser, the Vendor and
	Mr. Lau Chung Yim (as guarantor) in relation to the sale
	and purchase of the Sale Shares and the Sale Loans (as
	supplemented by the Supplemental SP Agreements)

– 4 –

DEFINITIONS

“Sale Shares”	collectively, the Cosmo Sale Shares, the Fittingco Sale Sales,
	the Majestic Sale Shares and the Ottawa Sale Shares
“Sale Loans”	all obligations, liabilities and debts owing or incurred by
	the Disposed Group to the Remaining Group as at Disposal
	Completion, whether actual, contingent or deferred and
	irrespective of whether the same is due and payable on
	Disposal Completion but excluding the Loans Advances
“SGM”	the special general meeting of the Company to be held and
	convened and held at 27/F., Yuen Long Trade Centre, 99-109
	Castle Peak Road, Yuen Long, New Territories, Hong Kong
	on Tuesday, 11 January 2011 at 3:00 p.m. for the purpose
	of considering and, if thought fit, approving the Sale and
	Purchase Agreement, the Master Supply Agreement, the
	provision of the Corporate Guarantee, the Loans Advances and
	the transactions contemplated thereunder
“Share(s)”	ordinary share(s) of HK$0.10 each in the capital of the
	Company
“Shareholder(s)”	holder(s) of the Share(s)
“Supplemental SP	the supplemental agreements respectively dated 30 September
Agreements”	2010 and 21 December 2010 entered into between the
	Purchaser, the Vendor and Mr. Lau Chung Yim in relation to
	the Sale and Purchase Agreement
“Supplemental Supply	the supplemental agreement dated 30 September 2010 entered
Agreement”	into between Nam Hing HK and Nam Hing DG and Zhongshan
	Chung Yuen in relation to the Master Supply Agreement
“Supplemental Supply	the supplemental agreement dated 21 December 2010 entered
Agreement II”	into between Nam Hing HK and Nam Hing DG and Zhongshan
	Chung Yuen in relation to the Master Supply Agreement
“Stock Exchange”	The Stock Exchange of Hong Kong Limited

– 5 –

DEFINITIONS

“Veda Capital”	Veda Capital Limited, a licensed corporation to carry on
	type 6 regulated activity (advising on corporate finance)
	under the Securities and Futures Ordinance (Chapter 571 of
	the laws of Hong Kong), acting as the independent financial
	adviser to advise the Independent Board Committee and the
	Independent Shareholders in respect of the Sale and Purchase
	Agreement, the Master Supply Agreement, the provision of the
	Corporate Guarantee, the Loans Advances and the transactions
	contemplated thereunder
“Vendor”	Nam Hing (B.V.I.) Limited, a wholly owned subsidiary of the
	Company
“Zhongshan Chung Yuen”	Zhongshan Chung Yuen Electronic Applied Materials Company
	Limited, a company incorporated in the PRC and a member of
	the Disposed Group
“Zhongshan Chung Yuen	all the liabilities, indebtedness and obligations (whether actual,
Loans”	contingent or deferred) due by Zhongshan Chung Yuen to
	Suzhou Nam Hing Industrial Laminate Co., Ltd., (a member of
	the Remaining Group) as at Disposal Completion (whether or
	not the same is due and payable at Disposal Completion)
“Zhongshan NH Loans”	all the liabilities, indebtedness and obligations (whether
	actual, contingent or deferred) due by Zhongshan Nam Hing
	Insulating Material Limited (a member of the Disposed Group)
	to Nam Hing Industrial Laminate Limited (a member of the
	Remaining Group) as at Disposal Completion (whether or not
	the same is due and payable at Disposal Completion)
“Zhuhai Loans”	all the liabilities, indebtedness and obligations (whether
	actual, contingent or deferred) due by Zhuhai Nam Hing Long
	Electronics Company Limited (a member of the Disposed
	Group) to Nam Hing DG as at Disposal Completion (whether
	or not the same is due and payable at Disposal Completion)
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“RMB”	Renminbi, the lawful currency of the PRC

– 6 –

DEFINITIONS

“Thai Baht” Thailand Baht, the lawful currency of Thailand “US$” United States dollars, the lawful currency of the United States of America “%” per cent.

– 7 –

LETTER FROM THE BOARD

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NAM HING HOLDINGS LIMITED 南興集團有限公司[*]

(Incorporated in Bermuda with limited liability)

(Stock Code: 986)

Executive Directors:

Mr. Lau Chung Yim Ms. Lau May Wah Ms. Deng Hong Mei Ms. Chan Ching Ho, Kitty

Mr. Xiang Liang Ms. Chen Tong

Independent non-executive Directors:

Mr. Pravith Vaewhongs

Mr. Yau Kwan Shan

Mr. Tse Yuk Kong

Registered office: Clarendon House 2 Church Street Hamilton HM 11 Bermuda

Head office and principal place of business in Hong Kong: 27th Floor, Yuen Long Trade Centre, 99-109 Castle Peak Road, Yuen Long, New Territories, Hong Kong

Mr. Lam Kwun Fu

Ms. Zhou Jue

24 December 2010

To the Shareholders

Dear Sir or Madam,

(I) MAJOR DISPOSAL AND CONNECTED TRANSACTION;

(II) CONTINUING CONNECTED TRANSACTION IN RELATION TO MASTER SUPPLY AGREEMENT;

(III) DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO PROVISION OF FINANCIAL ASSISTANCE UNDER CORPORATE GUARANTEE; AND

(IV) DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO PROVISION OF FINANCIAL ASSISTANCE BY WAY OF LOANS ADVANCES AND

NOTICE OF SPECIAL GENERAL MEETING

INTRODUCTION

Reference is made to the announcement of the Company dated 28 June 2010 in which the Board announced that on 28 June 2010, the Vendor, the Purchaser and Mr. Lau Chung Yim (as guarantor) has entered into the Sale and Purchase Agreement for the sale and purchase of the Sale Shares and Sale Loans for a consideration of HK$28,000,000 payable in cash upon the Disposal Completion.

For identification purposes only

– 8 –

LETTER FROM THE BOARD

Since the Purchaser is a company wholly-owned by Mr. Lau Chung Yim, an executive Director, the Disposal constitutes a connected transaction on the part of the Company and since the applicable percentage ratio (as defined in the Listing Rules) exceed 25% but less than 75%, the Disposal also constitutes a major transaction on the part of the Company under the Listing Rules. Accordingly, the Disposal is subject to approval by the Independent Shareholders at the SGM.

As part of the terms of the Disposal, the Remaining Group will continue to provide financial assistance to members of the Disposed Group under the Corporate Guarantee and the Loans Advances after the Disposal Completion. The continued provision of the Corporate Guarantee and the Loans Advances also constitute connected transactions on the part of the Company. As the monetary value of the financial assistance provided under the Corporate Guarantee and the Loans Advances exceed HK$10,000,000, the provision of the Corporate Guarantee and the Loans Advances are also subject to approval by the Independent Shareholders at the SGM.

The Board also announced on 28 June 2010 that Nam Hing HK and Nam Hing DG, as purchaser, has entered into the Master Supply Agreement (as supplemented by the Supplemental Supply Agreement and Supplemental Supply Agreement II) with Zhongshan Chung Yuen, as supplier, for the purchase and supply of the Finished Goods for a term commencing from the Disposal Completion up to 31 March 2012. Since Zhongshan Chung Yuen, a member of the Disposed Group, will become a connected person of the Company upon the Disposal Completion and since the Annual Caps exceed HK$10,000,000, the Master Supply Agreement is subject to approval by the Independent Shareholders at the SGM.

The purpose of this circular is to provide you with further information regarding the Disposal, the Master Supply Agreement, the provision of the Corporate Guarantee and the Loans Advances; to seek approval from the Independent Shareholders for the aforesaid and the transactions contemplated thereunder; and to give you financial information on the Group, valuation on property interests held by the Disposed Group and notice of the SGM.

THE SALE AND PURCHASE AGREEMENT

Date:	28	June 2010
Parties:	(1)	Vendor	:	Nam Hing (B.V.I.) Limited, a wholly owned subsidiary
				of the Company
	(2)	Purchaser	:	Nature Ample Limited
	(3)	Guarantor	:	Mr. Lau Chung Yim (“Mr. Lau”)

– 9 –

LETTER FROM THE BOARD

The Purchaser is a company incorporated in the British Virgin Islands and its principal business is investment holding. The Purchaser is wholly and beneficially owned by Mr. Lau, an executive Director. Accordingly, the Purchaser is a connected person of the Company. Mr. Lau, who, together with his associates, is interested in approximately 0.09% of the entire issued share capital of the Company as at the Latest Practicable Date.

Assets to be disposed

Pursuant to the Sale and Purchase Agreement, the Purchaser has agreed to acquire and the Vendor has agreed to sell: (i) the Sale Shares and (ii) the Sale Loans, which amounts to approximately HK$83,067,029 as at 30 September 2010. The Sale Shares comprise (i) the entire issued share capital of Cosmo Terrace; (ii) the entire issued share capital of Fittingco; (iii) the entire issued share capital of Majestic; and (iv) entire issued share capital of Ottawa.

Mr. Lau has guaranteed to the Vendor the due performance of all the obligations of the Purchaser under the Sale and Purchase Agreement.

Consideration

The Consideration for the sale and purchase of the Sale Shares and Sale Loans shall be satisfied in cash payable by Purchaser to the Vendor upon the Disposal Completion. The Consideration was determined after arm’s length negotiations with reference to the net liabilities value of the Disposed Group as at 31 March 2010 of approximately HK$57,684,000 and the amount of the Sale Loans, which was approximately HK$84,739,000 as at 31 March 2010. As at 30 September 2010, the net liabilities value of the Disposed Group was approximately HK$58,799,276. There would now be a gain of approximately HK$3,732,247 upon the completion of the Disposal based on the latest financial figures of the Disposed Group as at 30 September 2010. The business of the Disposed Group has not been profitable and there is little prospect that the Disposed Group is able to repay the Sale Loans to the Vendor in view of the net liabilities of the Disposed Group. As part and parcel of the Disposal, the Remaining Group will be extending the Loans Advances to the Disposed Group, further details of which have been disclosed under the paragraph headed “ DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO PROVISION OF FINANCIAL ASSISTANCE BY WAY OF LOANS ADVANCES ”, in relation to which a personal guarantee in favour of the Vendor has been given by Mr. Lau. Accordingly, the Disposal allows the Group to get rid of a loss-making business segment while at the same time provides the Remaining Group the benefit of a personal guarantee for recovering its financial assistances extended to the Disposed Group. As such, the Directors consider that the terms and conditions of the Disposal to be fair and reasonable and are in the interests of the Company and the Independent Shareholders as a whole.

– 10 –

LETTER FROM THE BOARD

Conditions precedent

The Disposal Completion shall be conditional upon and subject to:

(i) the passing by the Independent Shareholders at the SGM to be convened and held of an ordinary resolution to approve the Sale and Purchase Agreement and the transactions contemplated thereunder in accordance with the Listing Rules and the applicable laws and regulations;
(ii) the passing by the Independent Shareholders at the SGM to be convened and held of an ordinary resolution to approve the financial assistance provided under the Loans Advances in accordance with the Listing Rules and the applicable laws and regulations;
(iii) the passing by the Independent Shareholders at the SGM to be convened and held of an ordinary resolution to approve the provision of the Corporate Guarantee;
(iv) the passing by the Independent Shareholders at the SGM to be convened and held of an ordinary resolution to approve the Master Supply Agreement and the transactions contemplated thereunder, including the Annual Caps in accordance with the Listing Rules and the applicable laws and regulations;
(v) all necessary consents, authorizations, licences and approvals required to be obtained on the part of the Vendor and/or the Company in respect of the Sale and Purchase Agreement and the transactions contemplated thereunder having been obtained;
(vi) the warranties given by the Purchaser in the Sale and Purchase Agreement remain true and accurate in all respects;
(vii) the warranties given by the Vendor in the Sale and Purchase Agreement remain true and accurate in all respects;
(viii) (where required) all necessary consents and approval from third parties for or in connection with the Disposal Completion and the transactions contemplated under the Sale and Purchase Agreement having been obtained by the Vendor or other relevant members of Disposed Group; and
(ix) completion of the Re-organisation.

– 11 –

LETTER FROM THE BOARD

All of the conditions are not waivable under the Sale and Purchase Agreement except (vi) and (vii) which can be waived by respectively the Vendor and the Purchaser. If the conditions have not been satisfied or waived on or before 4:00 p.m. on 31 January 2011 or such later date as the Vendor and the Purchaser may agree, the Sale and Purchase Agreement shall cease and determine, and thereafter neither party shall have any obligations and liabilities towards each other thereunder save for any antecedent breaches of the terms thereof.

As at the Latest Practicable Date, none of the above conditions has been fulfilled or wavied.

Completion

Completion shall take place at 4:00 p.m. on the date falling three Business Days after the fulfilment (or waived) of the conditions or such later date as may be agreed between the Vendor and the Purchaser.

Upon the Disposal Completion, the members of the Disposed Group will cease to be subsidiaries of the Company.

INFORMATION ON THE DISPOSED GROUP

The Disposed Group is principally engaged in manufacturing of copper foil and laminate and trading of laminate with production facilities in the PRC and Thailand.

The financial information of the Disposed Group for the three financial years ended 31 March 2008, 2009 and 2010 are as follows:

			Year ended
	Year ended	Year ended	31 March
	31 March 2008	31 March 2009	2010
	(unaudited)	(unaudited)	(unaudited)
	HK$’000	HK$’000	HK$’000
Results
Turnover	251,313	68,490	36,511
Profit/(Loss) before tax	(30,422)	(99,179)	(16,123)
Profit/(Loss) after tax	(30,950)	(99,302)	(16,420)

– 12 –

LETTER FROM THE BOARD

			As at
	As at	As at	31 March
	31 March 2008	31 March 2009	2010
	(unaudited)	(unaudited)	(unaudited)
	HK$’000	HK$’000	HK$’000
Assets and liabilities
Total assets	130,726	49,162	45,333
Net asset (Net liabilities)	57,746	(36,935)	(57,684)

FINANCIAL EFFECT OF THE DISPOSAL AND USE OF PROCEEDS

It is estimated that the gain on disposal of the Disposed Group is approximately HK$3,732,247. Such gain is estimated based on the difference between the Consideration and the net asset value of the Disposed Group as at 30 September 2010 and after taking into consideration of the Sale Loans.

The Company intends to apply approximately HK$20 million out of the net proceeds of the Disposal for repayment of bank loans of the Group and other accrued expenses and approximately HK$7,000,000 for the Group’s operating expenses including professional fees of approximately HK$600,000 per month, printing expenses of approximately HK$30,000 per month and approximately HK$50,000 as other general expenses.

REASONS FOR THE DISPOSAL AND THE FUTURE PLAN OF THE REMAINING GROUP

The Group is principally engaged in the manufacture and sale of industrial laminates, printed circuit board and copper foils.

– 13 –

LETTER FROM THE BOARD

the announcement dated 16 July 2010 of the Company and the circular dated 15 November 2010. The Company also entered into a framework agreement with another independent third party in relation to a potential acquisition (the “ Recycling Potential Acquisition ”) by Company of 80% interest in a company known as Ideal Market Holdings Limited, which is the ultimate owner of the legal and beneficial interest in Suzhou Baina Renewal Resources Co., Ltd（蘇州百納再生資源有限公司）, a PRC company principally engaging in the business of recycling business of waste paper, scrap metal and consumable waste, further details of which have been disclosed in the announcement of the Company dated 19 November 2010. Upon the completion of the Acquisition and the Recycling Potential Acquisition, the Group will be principally engaged in trading and manufacturing of printed circuit board, investment in the electricity battery related business and recycling business of waste paper, scrap metal and consumable waste. The Board considers that the investment in the electricity battery related business and the recycling business enable the Group to enter into the promising “green industry” and can improve the financial results of the Group in the future.

The Shareholders have approved the Acquisition at a special general meeting of the Company held on 30 November 2010. The consideration payable by the Company for the Acquisition is HK$170,000,000, of which HK$71,000,000 has been paid in cash. As to the remaining balance of HK$99,000,000 (the “ Acquisition Balance ”), the Company has an option to settle the same by cash or by issue of convertible notes (the “ Convertible Notes ”) up to an aggregate principal amount of HK$99,000,000 to the vendors, details of the Convertible Notes have been disclosed in the circular of the Company dated 30 November 2010.

It was the Company’s original intention that HK$100 million of the proceeds to be raised by placing of convertible bonds (the “ CB ”) on a best-effort basis for an aggregate principal amount of HK$200 million (the “ CB Placing ”) would be principally used to finance the Acquisition Balance. Details of the CB Placing have been disclosed in the circular of the Company dated 30 July 2010. Given the CB Placing was on a best-effort basis only and the Directors considered that the outcome of the CB Placing could easily be affected by market conditions such as the price of the Shares and the overall market sentiment such that the CB Placing might not be completed prior to the completion of the Acquisition. To give the Company flexibility in financing the Acquisition, the Company had negotiated with the vendors in the Acquisition that the Company would have the option to settle the Acquisition Balance by cash or by issue of the Convertible Notes.

The capital markets have been fluctuating over the past four months and trading in the Shares was suspended during August and September 2010, the CB Placing had been proceeding slower than originally expected by the Board. The Board now intends to settle the entire Acquisition Balance by issue of Convertible Notes for a principal amount of HK$99 million. It is the Company’s intention to continue with the CB Placing. As disclosed in the circular of the Company dated 30 July 2010 in relation to the CB Placing, the Company also intended to use the proceeds from the CB Placing for its general waking capital, general development and acquisition

– 14 –

LETTER FROM THE BOARD

activities of the Group and other general corporate expenses. Given that the proceeds from the CB Placing is no longer necessary for financing the Acquisition because of the flexibility of the option to issue the Convertible Notes, the Company intends to use the net proceeds raised from the CB Placing to finance its general working capital and future potential strategic acquisition, including the Recycling Potential Acquisition, in relation to which an earnest money in the amount of HK$50,000,000 has been paid on 30 November 2010.

Set out below is a comparison table of the CB and the Convertible Notes on the conversion price:

CB Convertible Notes Principal Up to HK$200,000,000 Up to HK$99,000,000 Conversion price the higher of (i) the average initial conversion price of closing price per Share as HK$0.28. quoted on the Stock Exchange for the last 5 full trading days The Conversion Price can be of the Shares immediately reset (if necessary) on the 5th before the date of conversion Business Day immediately and (ii) the nominal value of before the completion of the the Shares (HK$0.1) Acquisition (the “ Reset Date ”) in the event that the average closing price of the Shares as quoted on the Stock Exchange for the last five consecutive trading days immediately following the Reset Date and including the Reset Date (the “ Reset Price ”) is lower than the then Conversion Price of the Convertible Notes.

The minimum Reset Price is HK$0.18 each

Since the conversion price of the CB is based on the current market price of the Shares, the dilution effect will vary depending on the then market price, subject to the minimum conversion price at the nominal value of the Share. The Convertible Notes have an initial conversion price of HK$0.28, subject to reset to the market price of the Shares as at completion of the Acquisition and the minimum conversion price of HK$0.18. Based on the closing price of the Shares at HK$0.159 on 13 December 2010, the Convertible Notes will result in a lesser dilution effect on existing

– 15 –

LETTER FROM THE BOARD

Shareholders. In addition, based on the respective minimum conversion price, the Convertible Notes will also result in a lesser dilution effect. Having considered all circumstances including the respective terms of the Convertible Notes and CB, the prevailing market conditions and the future development of the Group, the Company is of the view that the issue of the Convertible Notes to finance the Acquisition is fair and reasonable and in the interest of the Company and its Shareholders as a whole.

Since all Shareholders will be diluted equally whether under the Convertible Notes or the CB Placing, the Company is of the view that all Shareholders are being treated fairly and equally and Rule 2.03(4) of the Listing Rules is complied with.

The Company has been actively seeking investment opportunities and funding to turnaround its business and financial condition. The Company considers that the Recycling Potential Acquisition is a valuable investment opportunity that can further help the Group to turnaround. After having balanced the Group’s need to maintain adequate liquidity and the need to grasp valuable investment opportunities, the Company considered that the use of the HK$50 million from the CB Placing as the refundable earnest money for the Recycling Potential Acquisition is in the best interest of the Company. As it is expected that further funds will be raised pursuant to the CB Placing prior to its expiry on 31 December 2010, the Company is satisfied that it can maintain adequate liquidity after paying the HK$50 million deposit for the Recycling Potential Acquisition.

Regarding the funding requirement for the Recycling Potential Acquisition, as disclosed in the announcement dated 30 November 2010, HK$50 million has been paid as part of the refundable earnest money. It is intended that a further HK$130 million earnest money will be paid by proceeds from the CB Placing or future fund raising activities. It is expected that further fund raising will be required if the Recycling Potential Acquisition shall materialize. The Company shall make further announcement as and when appropriate.

The Company issued the circular in relation to the Acquisition on 15 November 2010. On 17 November 2010, the Board formed the preliminary intention to issue the Convertible Notes. The Company commenced negotiation with the vendors of the Recycling Potential Acquisition on 17 November 2010 and the parties entered into a framework agreement on 19 November 2010, including the terms for the payment of a earnest money in the amount of HK$50,000,000; and the said earnest money was paid on 30 November 2010. On 1 December 2010, the Board confirmed the issue of the Convertible Notes and submitted an application for approval for the listing of the Shares falling to be allotted and issued upon exercise of the conversion rights attached to the Convertible Notes.

The Disposal was negotiated independently from and was not for the purpose of the Acquisition. The Company will proceed with the Disposal irrespective whether or not the Acquisition will be completed in accordance with its own terms and conditions.

– 16 –

LETTER FROM THE BOARD

The Directors consider that the terms of the Sale and Purchase Agreement are fair and reasonable so far as the Independent Shareholders are concerned.

LISTING RULES IMPLICATION

The Disposal constitutes a major transaction on the part of the Company under the Listing Rules. As the Purchaser is wholly-owned by Lau Chung Yim, an executive Director, who, together with his associates, is interested in approximately 0.09% of the entire issued share capital of the Company as at the Latest Practicable Date, the Disposal also constitutes a connected transaction on the part of the Company. Accordingly, the Disposal will be subject to the approval of the Independent Shareholders at the SGM by way of poll.

MASTER SUPPLY AGREEMENT

Date: 28 June 2010

Parties: (i) Nam Hing HK and Nam Hing DG, as purchaser, both being wholly owned subsidiary of the Company; and (ii) Zhongshan Chung Yuen, as supplier, which will cease to be a whollyowned subsidiary of the Company and become a connected person of the Company upon the Disposal Completion.

Nature of transaction

Pursuant to the Master Supply Agreement, Zhongshan Chung Yuen agrees to provide and Nam Hing HK and Nam Hing DG agree to purchase the Finished Products for a term commencing from the Disposal Completion to 31 March 2012. The purchase price of the Finished Products shall be determined by Zhongshan Chung Yuen and Nam Hing HK or, as the case may be, Nam Hing DG from time to time with reference prevailing prices of similar products in the market on an order-byorder basis. It is also agreed that the purchase price payable by Nam Hing HK and Nam Hing DG for the Finished Products shall be determined based on normal commercial terms through arm’s length negotiation or on terms no less favourable than the terms available to independent third parties for purchase of similar products of comparable quality and quantity.

– 17 –

LETTER FROM THE BOARD

Condition precedents

The Master Supply Agreement is conditional upon:

(i) the taking place of the Disposal Completion;
(ii) the passing by the Independent Shareholders at the SGM to be convened and held of an ordinary resolution to approve the Master Supply Agreement and the transactions contemplated thereunder, including the Annual Caps in accordance with the Listing Rules and the applicable laws and regulations.

If the above conditions have not been satisfied on or before 4:00 p.m. on 31 January 2011, or such later date as the Zhongshan Chung Yuen, Nam Hing HK and Nam Hing DG may agree, the Master Supply Agreement shall cease and determine and thereafter neither party shall have any obligations and liabilities towards each other thereunder save for any antecedent breaches of the terms thereof. None of the condition for the Master Supply Agreement is capable of being waived.

Annual Caps

The Board proposes that the Annual Caps for the period ending 31 March 2011 and the year ending 31 Mach 2012 to be HK$4,000,000 and HK$15,000,000 respectively. The Annual Caps were determined by reference to the historical purchase amounts payable by the Remaining Group to the Disposed Group for the Finished Products during the year ended 31 March 2009 and 31 March 2010 where the Remaining Group had respectively paid to the Disposed Group HK$21,796,000 and HK$10,694,000. The historical purchase amount for the six months ended 30 September 2010 was HK$12,682,567. The Board has also taken into account the prevailing market condition relating to the demand for laminates and the anticipated market demand for printed circuit board in the coming years.

Reasons for the Master Supply Agreement

As the Board intends to concentrate on, inter alia, the trading of printed circuit board following the Disposal Completion, the Board considers that the Master Supply Agreement will secure the Group with a stable supply of industrial laminate in the short run. Industrial laminates is a necessary material for the manufacture of printed circuit board. In the medium to long term, the Group will consider sourcing other supplier for industrial laminates. Taking into account that the purchase prices for the Finished Products under the Master Supply Agreement shall be on terms no less favourable than the terms available to independent third parties for purchase of similar products of comparable quality and quantity, the Directors consider that the terms of the Master Supply Agreement are fair and reasonable so far as the Independent Shareholders are concerned and is entered into during the ordinary course of business of the Group and on normal commercial terms.

– 18 –

LETTER FROM THE BOARD

Listing Rules Implication

Since Zhongshan Chung Yuen will cease to be a member of the Group upon the Disposal Completion and will become a connected person of the Company under the Listing Rules, the Master Supply Agreement therefore constitutes a continuing connected transaction on the part of the Company. As either the relevant percentage ratios (as defined under the Listing Rules) in respect of each of the Annual Caps is above 5% and the monetary value of the Annual Caps is more than HK$10,000,000, the Master Supply Agreement, pursuant to Rule 14A.34 of the Listing Rules, is subject to approval of the Independent Shareholders at the SGM by way of poll.

DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO PROVISION OF FINANCIAL ASSISTANCE UNDER THE CORPORATE GUARANTEE

As it is expected that the Corporate Guarantee given by the Company will remain in place after the Disposal Completion, the provision of the Corporate Guarantee in respect of borrowings of BIL will therefore become a connected transaction on the part of the Company.

Meanwhile, as the applicable percentage ratio of the amount of the financial assistance provided under the Corporate Guarantee exceeds 5% but less than 25%, the continued provision of the Corporate Guarantee also constitutes a discloseable transaction on the part of the Company under the Listing Rules. As the financial assistance provided under the Corporate Guarantee exceeds HK$10,000,000, the Corporate Guarantee is therefore subject to reporting and announcement requirements as well as the approval by the Independent Shareholders at the SGM by way of poll.

The Purchaser has undertaken to the Vendor that it shall use its best endeavours to obtain release of the Corporate Guarantee by the Company. The Purchaser has also agreed to indemnify the Company on a dollar-for-dollar basis for all such obligations, liabilities or indebtedness of the Company as due and owing under the Corporate Guarantee as at the Disposal Completion.

As the continued provision of the Corporate Guarantee is part of the terms for the Disposal and a personal guarantee has been given by Mr. Lau in favour of the Vendor, the Directors consider that the continued provision of the Corporate Guarantee are fair and reasonable so far as the Independent Shareholders are concerned. The Directors therefore are of the view that any amount that the Company may claim against BIL and/or Mr. Lau are recoverable.

– 19 –

LETTER FROM THE BOARD

DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO PROVISION OF FINANCIAL ASSISTANCE BY WAY OF LOANS ADVANCES

As at the Latest Practicable Date, the Remaining Group has provided the Loans Advances to the Disposed Group in the sum of approximately HK$14,562,692, which were mainly trade receivables arising out of the ordinary course of business of the Remaining Group and the Disposed Group and loans advances to the Disposed Group for its business operation. The Vendor and the Purchaser agree that the maximum amount of the financial assistance provided under the Loans Advances up to the Disposal Completion should not exceed HK$25,000,000. The monies due under the Loans Advances are interest free with no fixed term of repayment.

The Purchaser has covenanted to the Vendor that it shall procure the full repayment of the monies due under the Loans Advances by the Disposed Group within nine months after the Disposal Completion. As upon the Disposal Completion, the relevant member of the Disposed Group will cease to be a member of the Group and become a connected person, the continued provision of the Loans Advances also a discloseable transaction and connected transaction on the part of the Company for the purpose of the Listing Rules. As the financial assistance provided under the Loans Advances exceeds HK$10,000,000, the Loans Advances is therefore subject to reporting and announcement requirements as well as the approval by the Independent Shareholders at the SGM by way of poll. Since Mr. Lau has also guaranteed the Vendor the due performance of the obligations of the Purchaser under the Sale and Purchase Agreement, in the event that the Disposed Group fails to repay the amount due under the Loans Advances, it will be open to the Remaining Group to take legal action against either the members of the Disposed Group or Mr. Lau for immediate repayment of the amount due.

As the continued provision of the Loans Advances is part of the terms for the Disposal and a personal guarantee has been given by Mr. Lau in favour of the Vendor, the Directors consider that the continued provision of the Loans Advances are fair and reasonable so far as the Independent Shareholders are concerned. The Directors therefore are also of the view that the Loans Advances are recoverable.

– 20 –

LETTER FROM THE BOARD

FINANCIAL EFFECTS ON THE GROUP

Assets and liabilities

Upon the Disposal Completion, the Group will cease to be interested in the shareholding interest in the Disposed Group and all members of the Disposed Group will cease to be subsidiary of the Company. Therefore, the results of the Disposed Group will no longer be consolidated into the financial statements of the Group after the Disposal Completion.

Further, the assets and liabilities of each member of the Disposed Group will no longer be consolidated into the financial statements of the Group after the Disposal Completion. The net consolidated net asset value of the Group after the Disposal Completion will be increased by approximately HK$3,732,247.

While the Board notes that the Company’s auditors has issued a disclaimer on the accounts of the Group for the year ended 31 March 2010, the Board considers that the Disposal would improve the liquidity position since the Disposed Group had been loss making and had been a burden to the Group’s past year cash flow.

Gain on disposal

FINANCIAL AND TRADING PROSPECTS OF THE GROUP

The unfavorable trading and economic environment of the Group, especially in the industrial laminate division, urge the management team of the Group to dispose of the on-going loss making section of the Group. This includes the manufacturing plant of the industrial laminate production line in Zhongshan and the copper foil production line in Thailand. The Board considers that after the Disposal, the company can focus on the printed circuit board division in its existing mode as well as exploring new business opportunities. Cashflow of the Remaining Group is expected to be improved as the cost burden sectors are disposed.

– 21 –

LETTER FROM THE BOARD

On the other hand, the Group considers there is considerable growth potential by acquiring the electricity car battery related business as disclosed under the paragraph headed “REASONS FOR THE DISPOSAL AND FUTURE PLAN OF THE REMAINING GROUP”.

At the Latest Practicable Date, save for the Disposal, the Acquisition, the Recycling Potential Acquisition and the disposal of a piece of land in Suzhou, the PRC as disclosed in the announcement of the Company dated 4 November 2010, the Directors have no intention to or have been engaged in any discussion, arrangements, negotiation, proposals, whether concluded or not, on any further acquisition or disposal of the Group’s business or assets.

LISTING RULES IMPLICATIONS

As part of the terms of the Disposal, the Group will continue to provide financial assistance to members of the Disposed Group under the Corporate Guarantee and the Loans Advances after the Disposal Completion. The continued provision of the Corporate Guarantee and the Loans Advances also constitute connected transactions on the part of the Company. As the monetary value of the financial assistance provided under the Corporate Guarantee and the Loans Advances exceed HK$10,000,000, the provision of the Corporate Guarantee and the Loans Advances are also subject to approval by the Independent Shareholders at the SGM.

The Board also announced on 28 June 2010 that Nam Hing HK and Nam Hing DG, as purchaser, has entered into the Master Supply Agreement with Zhongshan Chung Yuen, as supplier, for the purchase and supply of the Finished Goods for a term commencing from the Disposal Completion up to 31 March 2012. Since Zhongshan Chung Yuen, a member of the Disposed Group, will become a connected person of the Company upon the Disposal Completion and since the Annual Caps are HK$10,000,000 or more, the Master Supply Agreement is subject to approval by the Independent Shareholders at the SGM.

The Purchaser and its associates are interested in 765,200 Shares as at the Latest Practicable Date, representing approximately 0.09% of the entire issued share capital of the Company. Since the Disposal, the Master Supply Agreement, the continued provision of the Corporate Guarantee and Loans Advances are connected or continuing connected transactions on the part of the Company subject to approval by the Independent Shareholders, the Purchaser and its associates will abstain from voting on the resolutions to be put forward at the SGM for approval in said transactions.

– 22 –

LETTER FROM THE BOARD

Mr. Lau Chung Yim and Ms. Lau May Wah, executive Directors, are considered to have a material interest in the Disposal, the Master Supply Agreement, the Corporate Guarantee and Loans Advances, they have abstained from voting at the meeting of the Board approving the said transactions accordingly.

Pursuant to the Listing Rules, the resolution proposed at the SGM will be taken by way of poll and an announcement will be made after the SGM on the results of the SGM.

INDEPENDENT BOARD COMMITTEE

Independent Board Committee comprising all the independent non-executive Directors has been formed to advise the Independent Shareholders as to the fairness and reasonableness of the Disposal, the Master Supply Agreement, the continued provision of the Corporate Guarantee and Loans Advances. Veda Capital has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in this regard.

SGM

Set out on pages 73 to 75 is a notice convening the SGM to be held at 27/F., Yuen Long Trade Centre, 99-109 Castle Peak Road, Yuen Long, New Territories, Hong Kong on Tuesday, 11 January 2011 at 3:00 p.m. at which relevant resolution(s) will be proposed to the Shareholders to consider and, if thought fit, approve the Disposal, the Master Supply Agreement, the continued provision of the Corporate Guarantee and Loans Advances and the transactions contemplated thereunder.

A form of proxy for use at the SGM is enclosed with this circular. Whether or not you are able to attend the special general meeting, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return the same to the Company’s branch share registrar in Hong Kong, Tricor Tengis 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 the holding of the special general meeting or any adjourned meeting. Completion and delivery of the form of proxy will not preclude you from attending and voting in person at the SGM if you so wish.

RECOMMENDATION

The Board considers that the terms of the Disposal, the Master Supply Agreement, the continued provision of the Corporate Guarantee and Loans Advances are fair and reasonable and are in the interests of the Company and the Independent Shareholders as a whole. Accordingly, the Board recommends the Shareholders to vote in favour of the ordinary resolutions as set out in the notice of SGM.

– 23 –

LETTER FROM THE BOARD

ADDITIONAL INFORMATION

Your attention is drawn to the additional information set out in the appendices to this circular.

Yours faithfully For and on behalf of the Board Nam Hing Holdings Limited Lau Chung Yim Executive Director

– 24 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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NAM HING HOLDINGS LIMITED 南興集團有限公司[*]

(Incorporated in Bermuda with limited liability)

(Stock Code: 986)

24 December 2010

To the Independent Shareholders

Dear Sir or Madam,

(I) MAJOR DISPOSAL AND CONNECTED TRANSACTION;

(II) CONTINUING CONNECTED TRANSACTION IN RELATION TO MASTER SUPPLY AGREEMENT; (III) DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO PROVISION OF FINANCIAL ASSISTANCE UNDER CORPORATE GUARANTEE; AND

(IV) DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO PROVISION OF FINANCIAL ASSISTANCE BY WAY OF LOANS ADVANCES

We refer to the circular of the Company dated 24 December 2010 (the “Circular”) to the Shareholders, of which this letter forms part. Capitalised terms used in this letter shall have the same meanings as defined in the Circular unless the context otherwise requires.

We have been appointed by the Board as members to form the Independent Board Committee and to advise you the terms of the Disposal, the Master Supply Agreement, the continued provision of the Corporate Guarantee and Loans Advances and whether such terms are fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole.

For identification purposes only

– 25 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Veda Capital has been appointed to advise the Independent Board Committee and the Independent Shareholders as to whether the Disposal, the Master Supply Agreement, the continued provision of the Corporate Guarantee and Loans Advances were entered into on normal commercial terms; and the terms of the Disposal, the Master Supply Agreement, the continued provision of the Corporate Guarantee and Loans Advances are fair and reasonable so far as the Independent Shareholders are concerned, whether such terms are in the interests of the Company and the Independent Shareholders as a whole. Details of its advice, together with the principal factors taken into consideration in arriving at such advice, is set out on pages 27 to 46 of the Circular.

Your attention is also drawn to the letter from the Board set out on pages 8 to 24 of the Circular and the additional information set out in the appendices of the Circular.

Having considered the terms of the Disposal, the Master Supply Agreement, the continued provision of the Corporate Guarantee and Loans Advances and the advice of Veda Capital, we are of the opinion that the Disposal, the Master Supply Agreement, the continued provision of the Corporate Guarantee and Loans Advances were entered into on normal commercial terms; and the terms of the Disposal, the Master Supply Agreement, the continued provision of the Corporate Guarantee and Loans Advances are fair and reasonable so far as the Independent Shareholders are concerned and are in the interests of the Company and the Independent Shareholders as a whole. We therefore recommend that you vote in favour of the resolutions to be proposed at the SGM to approve the Disposal, the Master Supply Agreement, the continued provision of the Corporate Guarantee and Loans Advances and the transactions contemplated thereunder.

Yours faithfully, For and on behalf of Independent Board Committee of

Nam Hing Holdings Limited

Mr. Pravith Vaewhongs Mr. Yau Kwan Shan Independent Independent non-executive Director non-executive Director

Mr. Tse Yuk Kong Independent non-executive Director

Mr. Lam Kwun Fu

Ms. Zhou Jue

Independent Independent non-executive Director non-executive Director

– 26 –

LETTER FROM VEDA CAPITAL

The following is the full text of a letter of advice from Veda Capital to the Independent Board Committee and the Independent Shareholders in respect of the Disposal, the Master Supply Agreement, the Corporate Guarantee and the Loans Advances prepared for the purpose of inclusion in this circular.

==> picture [114 x 35] intentionally omitted <==

Veda Capital Limited

Suite 3214, 32/F., COSCO Tower 183 Queen’s Road Central Hong Kong

24 December 2010

To the Independent Board Committee and the Independent Shareholders of Nam Hing Holdings Limited

Dear Sirs,

(I) MAJOR DISPOSAL AND CONNECTED TRANSACTION; (II) CONTINUING CONNECTED TRANSACTION IN RELATION TO MASTER SUPPLY AGREEMENT; (III) DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO PROVISION OF FINANCIAL ASSISTANCE UNDER CORPORATE GUARANTEE; AND

(IV) DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO PROVISION OF FINANCIAL ASSISTANCE BY WAY OF LOAN ADVANCES

INTRODUCTION

We refer to our appointment to advise the Independent Board Committee and the Independent Shareholders in respect of the fairness and the reasonableness of the Disposal, the Master Supply Agreement, the Corporate Guarantee and the Loans Advances, details of which are set out in the circular to the Shareholders dated 24 December 2010 (the “ Circular ”), of which this letter forms part. Terms used in this letter have the same meanings as defined in the Circular unless the context requires otherwise.

– 27 –

LETTER FROM VEDA CAPITAL

On 28 June 2010, the Vendor (a wholly-owned subsidiary of the Company) entered into the Sale and Purchase Agreement with the Purchaser pursuant to which the Purchaser has agreed to acquire and the Vendor has agreed to sell the Sale Shares and the Sale Loans for a total cash consideration of HK$28 million.

The Disposal constitutes a major transaction on the part of the Company under the Listing Rules. As the Purchaser is wholly-owned by Mr. Lau Chung Yim, an executive Director, who, together with his associates, is interested in approximately 0.09% of the entire issued share capital of the Company as at the Latest Practicable Date, the Disposal also constitutes a connected transaction on the part of the Company and will be subject to the approval of the Independent Shareholders at the SGM by way of poll.

On the same day, Nam Hing HK and Nam Hing DG entered into the Master Supply Agreement (as supplemented by the Supplemental Supply Agreement and Supplemental Supply Agreement II) with Zhongshan Chung Yuen pursuant to which Nam Hing HK and Nam Hing DG have conditionally agreed to purchase and Zhongshan Chung Yuen has conditionally agreed to sell the Finished Products for a term of up to 31 March 2012 commencing from the Disposal Completion. Since Zhongshan Chung Yuen will cease to be member of the Group upon the Disposal Completion and will become a connected person of the Company under the Listing Rules, the Master Supply Agreement therefore constitutes a continuing connected transaction on the part of the Company and is subject to approval of the Independent Shareholders at the SGM by way of poll.

As at the Latest Practicable Date, the Company has provided the Corporate Guarantee in favour of Bangkok Bank in respect of the borrowings by BIL up to a maximum principal amount of Thai Baht 70 million (equivalent to approximately HK$16.85 million). As at the Latest Practicable Date, the outstanding amount due by BIL to Bangkok Bank amount to approximately HK$5.72 million. As it is expected that the Corporate Guarantee given by the Company will remain in place after the Disposal Completion, the provision of the Corporate Guarantee in respect of borrowings of BIL will therefore become a connected transaction on the part of the Company and is subject to reporting and announcement requirements as well as the approval by the Independent Shareholders at the SGM by way of poll.

– 28 –

LETTER FROM VEDA CAPITAL

In addition, as at the Latest Practicable Date, the Remaining Group has provided the Loans Advances to the Disposed Group in the sum of approximately HK$14.56 million, which were mainly trade receivables arising out of the ordinary course of business of the Remaining Group and the Disposed Group and loans advances to the Disposed Group for its business operation. The Vendor and the Purchaser agree that the maximum amount of the financial assistance provided under the Loans Advances up to the Disposal Completion should not exceed HK$25 million. The monies due under the Loans Advances are interest free with no fixed term of repayment. As upon the Disposal Completion, the relevant member of the Disposed Group will cease to be a member of the Group and become a connected person, the continued provision of the Loans Advances constitutes a discloseable and connected transaction on the part of the Company for the purpose of the Listing Rules and is subject to reporting and announcement requirements as well as the approval by the Independent Shareholders at the SGM by way of poll.

The Independent Board Committee, comprising all the independent non-executive Directors has been established to advise the Independent Shareholders as to (i) whether the terms of the Disposal, the Master Supply Agreement, the Corporate Guarantee and the Loans Advances are fair and reasonable so far as the Independent Shareholders are concerned; (ii) whether the Disposal, the Master Supply Agreement, the Corporate Guarantee and the Loans Advances are in the interests of the Company and the Independent Shareholders as a whole; and (iii) how the Independent Shareholders should vote in respect of the relevant resolutions to approve the Disposal, the Master Supply Agreement, the Corporate Guarantee and the Loans Advances at the SGM. The appointment of Veda Capital has been approved by the Independent Board Committee.

BASIS OF OUR OPINION

In formulating our opinion and advice, we have relied upon accuracy of the information and representations contained in the Circular and information provided to us by the Company, the Director(s) and the management. We have assumed that all statements, information and representations made or referred to in the Circular and all information and representations which have been provided by the Company, the Director(s) and the management, for which they are solely and wholly responsible, were true at the time they were made and continue to be true as at the date of the SGM. We have also assumed that all statements of belief, opinion and intention made by the Director(s) in the Circular were reasonably made after due and careful enquiry and were based on honestly-held opinions.

– 29 –

LETTER FROM VEDA CAPITAL

We have also made reference to the Company’s annual report for the year ended 31 March 2009 (the “ AR 2009 ”), the Company’s annual report for the year ended 31 March 2010 (the “ AR 2010 ”) and the Company’s interim report for the six months ended 30 September 2010 (the “ IR 2010 ”). We noted from AR 2009 that auditors of the Company had expressed an opinion concerning the going concern basis of the Group’s accounts for the year 31 March 2009 because the Group incurred a loss for the year ended 31 March 2009 of approximately HK$82.41 million and, as at 31 March 2009, the Group reported consolidated net current liabilities of approximately HK$47.06 million. As detailed in AR 2009, the Group has been undertaking a number of measures to improve its financial and liquidity position. The consolidated financial statements in AR 2009 have been prepared on a going concern basis, the validity of which depends upon the continuous support from the Group’s bankers and the ability to realise the assets to meet the Group’s future working capital and financial requirements. The consolidated financial statements in AR 2009 do not include any adjustments that may be necessary should the implementation of such measures be unsuccessful. The auditors consider that appropriate disclosures have been made in the consolidated financial statements in AR 2009 concerning the situation, but the auditors consider that the fundamental uncertainty relating to whether the going concern basis is appropriate is so extreme that the auditors have disclaimed its opinion.

We also noted from the AR 2010 that the auditors did not express an opinion on the consolidated financial statements as to whether they give a true and fair view of the state of affairs of the Group as at 31 March 2010 and of its loss and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards and as to whether the financial statements have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance due to the significance of the matters described in the basis for disclaimer of opinion (the “ Opinion ”) which has been extracted from the AR 2010 as follows:

“ 1. FUNDAMENTAL UNCERTAINTY RELATING TO THE GOING CONCERN BASIS

The Group incurred a loss for the year ended 31 March 2010 of approximately HK$39,963,000 and, as at 31 March 2010, the Group reported consolidated net current liabilities of approximately HK$24,576,000. In forming our opinion, we have considered the adequacy of the disclosures made in Note 2 to the consolidated financial statements concerning the adoption of the going concern basis on which the consolidated financial statements have been prepared. As detailed in Note 2 to the consolidated financial statements, the Group is currently undertaking a number of measures to improve its financial and current liquidity position. The consolidated financial statements have been prepared on a going concern basis, the validity of which depends upon the continuous support from the Group’s existing bankers and the ability to realise the assets to meet the Group’s future

– 30 –

LETTER FROM VEDA CAPITAL

working capital and financial requirements. The consolidated financial statements do not include any adjustments that may be necessary should the implementation of such measures be unsuccessful. We consider that appropriate disclosures have been made in the consolidated financial statements concerning this situation, but we consider that this fundamental uncertainty relating to whether the going concern basis is appropriate is so extreme that we have disclaimed our opinion.

2. LIMITATION OF SCOPE

For the year ended 31 March 2010, due to the lack of certain accounting books and records of one of the Company’s subsidiary, Bangkok Industrial Laminate Company Limited (“BIL”), located in Thailand, as a consequence of the resignation and non-replacement of key accounting staff during the year, we were unable to carry out audit procedures to satisfy ourselves as to whether the income, expenses, assets, liabilities and related disclosures relating to BIL which have been included in the consolidated financial statements of the Group as stated below, have been accurately recorded and properly accounted for in the consolidated financial statements.

Income and expenses of BIL for the year ended 31 March 2010:

	HK$’000
Turnover	3,488
Cost of sales	18,468
Other income	127
Selling and distribution expenses	223
Administrative expenses	1,606
Finance costs	778
Assets and liabilities of BIL as at 31 March 2010:
	HK$’000
Property, plant and equipment	19,383
Inventories	945
Trade and bills receivables	1,084
Other receivables, prepayments and deposits paid	257
Bank balances and cash	48
Trade and bills payables	2,581
Other payables and accruals	927
Bank and other borrowings	6,910

– 31 –

LETTER FROM VEDA CAPITAL

There were no other satisfactory audit procedures that we could adopt to obtain sufficient evidence regarding the above-mentioned matters. Accordingly, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Any adjustment to these figures may have consequential significant effect on the net assets at 31 March 2010 and the loss for the year then ended of the Group.

3. RECOVERABILITY OF DEPOSIT PAID FOR ACQUISITION OF INVESTMENT

As stated in Note 23 to the consolidated financial statements, deposit paid for acquisition of an investment amounted to HK$46,000,000 as at 31 March 2010. The directors considered that the Group is able to recover the deposit paid either in the way of refund or as part of the consideration for the acquisition of the investment. However, we were unable to obtain sufficient documentation to evaluate the recoverability of the deposit paid. Accordingly, we were unable to satisfy ourselves that the above-mentioned deposit was fairly stated as at 31 March 2010. Any adjustments to the above as at 31 March 2010 found to be necessary would affect the Group’s net assets as at 31 March 2010 and have a consequential effect on its loss for the year then ended and the related disclosure thereof in the consolidated financial statements.”

As advised by the Company, save for paragraph (2) of the Opinion, the Disposed Group was not involved in other paragraphs of the Opinion. We have not, however, carried out any independent verification regarding the Opinion and the information as set out in AR 2009, AR 2010 and IR 2010. In the absence of other more comprehensive or reliable source of financial information of the Disposed Group, we could only refer to AR 2009, AR 2010, IR 2010, the Company’s announcement dated 28 June 2010 in relation to, among others, the Disposal, the Circular and the financial, economic, market, regulatory and other conditions as they existed on, and the facts, information, representations, and opinions made available to us as of the Latest Practicable Date as the basis of our analysis in respect of the financial information of the Group and the Disposed Group. The Board should note that in light of the disclaimer of opinion by the independent auditors, if there are any adjustments which should have made to the financial information of the Group and the Disposed Group, our analysis herein might have been affected. We are however not in a position to judge or assess the effects of such adjustments, if any. It is emphasized that we will not accept responsibility for any impact due to any adjustment which might have been found necessary to any published financial reports of the Company and we disclaim any undertaking or obligation to advise any person of any change in any facts or matter affecting the opinion expressed herein which may come or be brought to our attention after the Latest Practicable Date.

– 32 –

LETTER FROM VEDA CAPITAL

We have no reason to believe that any information and representations relied on by us in forming our opinion is untrue, inaccurate or misleading, nor are we aware of any material facts the omission of which would render the information provided and the representations made to us untrue, inaccurate or misleading. We have not, however, conducted any independent in-depth investigation into the business affairs, financial position or future prospects of the Group, nor have we carried out any independent verification of the information provided by the Director(s) and management of the Company.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In giving our recommendation to the Independent Board Committee and the Independent Shareholders in respect of the fairness and reasonableness of the Disposal, the Master Supply Agreement, the Corporate Guarantee and the Loans Advances, we have taken into consideration the following factors and reasons:

A. The Disposal

Information on the Disposed Group

Pursuant to the Sale and Purchase Agreement, the Purchaser has agreed to acquire and the Vendor has agreed to sell: (i) the Sale Shares and (ii) the Sale Loans, which amounts to approximately HK$83.07 million as at 30 September 2010. The Sale Shares comprise (i) the entire issued share capital of Cosmo Terrace; (ii) the entire issued share capital of Fittingco; (iii) the entire issued share capital of Majestic; and (iv) the entire issued share capital of Ottawa.

The Disposed Group is principally engaged in manufacturing of copper foil and laminate and trading of laminate with production facilities in the PRC and Thailand. The financial information of the Disposed Group for the three financial years ended 31 March 2010 are as follows:

	For the	For the	For the
	year ended	year ended	year ended
	31 March	31 March	31 March
	2008	2009	2010
	(unaudited)	(unaudited)	(unaudited)
	HK$’000	HK$’000	HK$’000
Turnover	251,313	68,490	36,511
Profit/(Loss) before tax	(30,422)	(99,179)	(16,123)
Profit/(Loss) after tax	(30,950)	(99,302)	(16,420)

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LETTER FROM VEDA CAPITAL

	As at	As at	As at
	31 March	31 March	31 March
	2008	2009	2010
	(unaudited)	(unaudited)	(unaudited)
	HK$’000	HK$’000	HK$’000
Net assets/(Net liabilities)	57,746	(36,935)	(57,684)

As can be seen from the above table, the turnover of the Disposed Group has decreased by approximately 72.75% from approximately HK$251.31 million for the year ended 31 March 2008 to approximately HK$68.49 million for the year ended 31 March 2009. As advised by the Company, such decrease in revenue was mainly attributable to the decrease in market demand and huge market competition. The loss after tax of the Disposed Group has increased by approximately 220.85% from approximately HK$30.95 million for the year ended 31 March 2008 to approximately HK$99.30 million for the year ended 31 March 2009. As advised by the Company, such significant increase in loss was mainly due to (i) the decrease in market demand and increase in raw materials costs arising from the global economic downturn; and (ii) impairment loss on fixed assets in the factories.

The turnover of the Disposed Group has decreased by approximately 46.69% from approximately HK$68.49 million for the year ended 31 March 2009 to approximately HK$36.51 million for the year ended 31 March 2010. As advised by the Company, such decrease in revenue was mainly attributable to the decrease in market demand and huge market competition. The loss after tax of the Disposed Group has decreased by approximately 83.46% from approximately HK$99.30 million for the year ended 31 March 2009 to approximately HK$16.42 million for the year ended 31 March 2010. As advised by the Company, the decrease in loss was mainly due to the reduction of operating expense as a result of the decrease in sales orders.

Financial information of the Group

According to the AR 2009, the turnover of the Group was approximately HK$129.39 million for the for the year ended 31 March 2009, which represented a decrease of approximately 57.27% as compared to the turnover for the year ended 31 March 2008 of approximately HK$302.81 million. As advised by the Company, the decrease in turnover was mainly due to decrease in overall market demand as a result of financial tsunami and the careful selection of sale orders to minimize the possibility of bad debts.

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LETTER FROM VEDA CAPITAL

The Group recorded loss for the year of approximately HK$82.41 million for the year ended 31 March 2009 which represented a decrease of approximately 10.00% as compared to the loss for the year ended 31 March 2008 of approximately HK$91.57 million. As advised by the Company, the decrease in loss was mainly due to the gain on disposal of investment properties.

According to the AR 2010, the turnover of the Group was approximately HK$69.04 million for the year ended 31 March 2010, which represented a decrease of approximately 46.64% as compared to the turnover for the year ended 31 March 2009 of approximately HK$129.39 million. As advised by the Company, the decrease in turnover was mainly due to decrease in sales order of the business segments of industrial laminate division and the printed circuit division as a result of drop in market demand and strong competition.

The Group recorded loss attributable to Shareholders of approximately HK$39.96 million for the year ended 31 March 2010 which represented a decrease in loss of approximately 51.51% as compared to the loss for the year ended 31 March 2009 of approximately HK$82.41 million. As advised by the Company, the decrease in loss was mainly due to the decrease in impairment loss recognized in respect of property, plant and equipment.

According to the IR 2010, the turnover of the Group was approximately HK$34.73 million for the six months ended 30 September 2010, which represented a decrease of approximately 7.16% as compared to the turnover for the corresponding period in the previous year of approximately HK$37.41 million. As advised by the Company, the decrease in turnover was mainly due to the decrease in sales orders of the business segments of industrial laminate division.

The Group recorded loss attributable to Shareholders of approximately HK$6.33 million for the six months ended 30 September 2010 which represented a decrease in loss of approximately 27.07% as compared to the loss for the corresponding period in the previous year of approximately HK$8.68 million. As advised by the Company, the decrease in loss was mainly due to the better control over the operating costs.

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LETTER FROM VEDA CAPITAL

Reasons for the Disposal

The Group is principally engaged in the manufacture and sale of industrial laminates, printed circuit board and copper foils.

The Disposed Group, which mainly consist of manufacturing plants and facilities for manufacturing industrial laminates and copper foils, has been loss making continuously in the past with a net loss of HK$30,950,000 for the year ended 31 March 2008, a net loss of HK$99,302,000 for the year ended 31 March 2009 and a net loss of HK$16,420,000 for the year ended 31 March 2010. Given the unsatisfactory performance of the Disposed Group, the Directors believe that it is in the interest of the Company and the Independent Shareholders as a whole to re-allocate the management and the Group’s financial resources to strengthen its remaining business after the Disposal Completion, being trading and manufacturing of printed circuit board. The Board is also actively seeking other investment opportunities in order to diversify the business of the Group and income stream. The Board is of the view that the environmental friendly related industry is prosperous in the future. The Company has on 16 July 2010 entered into an agreement with an independent third party in relation to a potential acquisition by the Company of 9.9% interest in the entire issued share capital in Swift Profit International Limited, a company incorporated in the British Virgin Islands with limited liability, the principal asset of which is an exclusive license relating to the technology of manufacturing of electric vehicle battery (the “ Potential Acquisition ”), for a consideration of HK$170 million, details of the Potential Acquisition have been disclosed in the announcement dated 16 July 2010 of the Company (the “ Acquisition Announcement ”) and the circular of the Company dated 15 November 2010. The Company also entered into a framework agreement with another independent third party in relation to a potential acquisition (the “ Recycling Potential Acquisition ”) by Company of 80% interest in a company known as Ideal Market Holdings Limited, which is the ultimate owner of the legal and beneficial interest in Suzhou Baina Renewal Resources Co., Ltd （蘇州百納再生資源有限公司）, a PRC company principally engaging in the business of recycling business of waste paper, scrap metal and consumable waste, further details of which have been disclosed in the announcement of the Company dated 19 November 2010. Upon the completion of the Potential Acquisition and the Recycling Potential Acquisition, the Group will be principally engaged in trading and manufacturing of printed circuit board, investment in the electricity battery related business and recycling business of waste paper, scrap metal and consumable waste. The Board considers that the investment in the electricity battery related business and the recycling business enable the Group to enter into the promising “green industry” and can improve the financial results of the Group in the future.

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LETTER FROM VEDA CAPITAL

The Directors consider that the terms of the Sale and Purchase Agreement are fair and reasonable so far as the Independent Shareholders are concerned. The Company intends to apply approximately HK$20 million out of the net proceeds of the Disposal for repayment of bank loans of the Group and other accrued expenses and approximately HK$7 million for the Group’s operating expenses including professional fees of approximately HK$600,000 per month, printing expenses of approximately HK$30,000 per month and approximately HK$50,000 as other general expenses.

We noted from the AR 2010, the continuing unfavourable operating environment arising from the financial tsunami has exerted great pressure on the operation of industrial businesses. Recovery of the economy is not expected in a short period of time. The Group has experienced a tight profit margin in the past year in the laminate division and considers the unfavourable operating environment will continue for a period of time. Unfavourable operating results in turn exerted significant pressure on the Group’s cashflow position. In the coming years, the Group will implement a series of measures to improve the situation. Such measures include a more conservative approach in the procurement of resources to reduce operating costs and the disposal of certain non-productive facilities, properties and assets. As discussed with the Company, the current mode of operation for the business of manufacture and sale of industrial laminates, printed circuit board and copper foils is a combination of trading and manufacturing segments. The Company is of the view that the disposal of the manufacturing plants and facilities for manufacturing industrial laminates and copper foils would enable the Group to improve and strengthen the operation and the financial performance of the Group by streamlining its business of industrial laminates, printed circuit board and copper foils into a trading mode which carries less fixed cost. Also, cashflow of the Remaining Group is expected to be improved as the cost burden sectors are disposed.

We noted from the IR 2010, the Company recorded cash and bank balances of approximately HK$0.63 million and bank and other borrowings of approximately HK$92.47 million as at 30 September 2010. We noted from the Company’s announcement dated 2 July 2010, the Company has entered into a placing agreement in respect of placing convertible bonds in principal amount of HK$200 million (the “ CB Placing ”) on a best effort basis to raise net proceeds of approximately HK$193.20 million. As advised by the Company, the CB Placing is yet to be completed and a total principal amount of approximately HK$60 million of the convertible bonds have been successfully placed under the CB Placing as at the Latest Practicable Date. As set out in the Board Letter, the Company intends to use the net proceeds from the CB Placing to finance its general working capital and future potential strategic acquisition, including the Recycling Potential Acquisition, in relation to which an earnest money in the amount of HK$50 million has been paid on 30 November 2010. The Disposal was negotiated independently from and was not for the purpose of the Potential Acquisition. The Company will proceed with the Disposal irrespective whether or not the Potential Acquisition will be completed in accordance with its own terms and conditions.

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LETTER FROM VEDA CAPITAL

Having considered (i) the persistent loss-making position of the Disposed Group; (ii) the liquidity position of the Group as at 30 September 2010; (iii) the Disposal would allow the Group to carry less fixed cost and relieve the Group from the burden of making further capital injection to sustain the operation of the lossmaking segment of the Group and hence improve the overall financial position of the Group; and (iv) the Disposal not only allows the Company to unlock the cash and the management bandwidth, but also will bring a cash inflow to the Group and hence allow the Directors to focus and effectively allocate its resources to other profitable or potential businesses of the Group, we concur with the Directors that the Disposal is commercially justifiable and in the interests of the Company and the Independent Shareholders as a whole.

Consideration for the Disposal

The Consideration for the sale and purchase of the Sale Shares and Sale Loans shall be satisfied in cash payable by Purchaser to the Vendor upon the Disposal Completion. The Consideration was determined after arm’s length negotiations with reference to the net liabilities value of the Disposed Group as at 31 March 2010 of approximately HK$57.68 million and the amount of the Sale Loans, which amounted to approximately HK$84.74 million as at 31 March 2010. As at 30 September 2010, the net liabilities value of the Disposed Group was approximately HK$58.80 million. There would now be a gain of approximately HK$3.73 million upon the completion of the Disposal based on the latest financial figures of the Disposed Group as at 30 September 2010. The business of the Disposed Group has not been profitable and there is little prospect that the Disposed Group is able to repay the Sale Loans to the Vendor in view of the net liabilities of the Disposed Group. As part and parcel of the Disposal, the Remaining Group will be extending the Loans Advances to the Disposed Group, further details of which have been disclosed under the paragraph headed “DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO PROVISION OF FINANCIAL ASSISTANCE BY WAY OF LOANS ADVANCES” in the Board Letter, in relation to which a personal guarantee in favour of the Vendor has been given by Mr. Lau. Accordingly, the Disposal allows the Group to get rid of a loss-making business segment while at the same time provides the Remaining Group the benefit of a personal guarantee for recovering its financial assistances extended to the Disposed Group. As such, the Directors consider that the terms and conditions of the Disposal to be fair and reasonable and are in the interests of the Company and the Independent Shareholders as a whole.

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LETTER FROM VEDA CAPITAL

We have reviewed the financial information of the Disposed Group (relevant details of the financial information of the Disposed Group has been set out under the above section headed “Information on the Disposed Group”) and enquired the Company the recoverability of the Sale Loans. We were given to understand by the Company that given the persistent loss-making track record and the unaudited net liabilities position of the Disposed Group of approximately HK$58.80 million as at 30 September 2010, the Company considered the possibility of having full recoverability on the Sale Loan in near future was very remote. We have also enquired the Company on whether or not the Company has considered liquidation of the Disposed Group instead of effecting the Disposal. The Company considered that the Disposal is the more effective means to divest its unprofitable business since the Purchaser has undertaken to the Vendor that it shall use its best endeavors to obtain release of Corporate Guarantee by the Company (the “ Undertaking ”) and the Disposal would allow the Company to be indemnified from the Purchaser on a dollarfor-dollar basis for all the obligations, liabilities or indebtedness of the Company as due and owing under the Corporate Guarantee as at the Disposal Completion (the “ Indemnification ”). However, should the Company choose to liquidate the Disposed Group, the Company will be obliged, as a corporate guarantor, to settle the outstanding bank borrowings due by BIL, a member of the Disposed Group, which amounted to approximately HK$5.72 million as at the Latest Practicable Date. The Company also expected that various professional fees would have to be incurred in order to execute the liquidation and it is also expected that it would take prolonged procedures and time to complete the process.

Having taken into account that (i) the loss making and net liabilities position of the Disposed Group; (ii) the remote possibility of the recoverability of the Sale Loans given the exiting financial position of the Disposed Group; (iii) the Consideration was determined under arm’s length negotiation between the Purchaser and the Vendor; (iv) the Disposal, through the Indemnification provided by the Purchaser, would reduce the contingent liability of the Group arised from the Corporate Guarantee; and (v) it is likely that the Disposed Group would streamline the business scope of the Group and allow a more effective allocation of management resources given the Remaining Group would carry less fixed cost arising from the manufacturing plants and required personnel, we considered the Consideration of HK$28 million is fair and reasonable and is in the interest of the Company and the Independent Shareholders as a whole.

Financial effect of the Disposal

(i) Net assets

As noted from the IR 2010, the unaudited consolidated net asset value of the Group was approximately HK$71.21 million as at 30 September 2010. As set out in Board Letter, the assets and liabilities of each member of the Disposed Group will no longer be consolidated into the financial statements of the Group after the Disposal Completion and as advised by the Company, the consolidated net asset value of the Group after the Disposal Completion will be increased by approximately HK$3.73 million.

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LETTER FROM VEDA CAPITAL

(ii) Working capital

As advised by the Company, the working capital of the Group is expected to be increased by the net proceeds of approximately HK$27.0 million from the Disposal.

(iii) Earnings

As set out in Board Letter, it is estimated that the gain on Disposal is approximately HK$3.73 million. Such gain is estimated based on the difference between the Consideration and the net asset value of the Disposed Group as at 30 September 2010 and after taking into consideration of the Sale Loans.

In view of the enhancement of the financial position of the Group, we consider the Disposal is fair and reasonable and in the interest of the Company and the Independent Shareholders as a whole.

Recommendation

Having considered the above-mentioned principal factors and reasons, in particular, taking into account that:

(i) the persistent loss-making and net liabilities position of the Disposed Group;
(ii) the liquidity position of the Group with cash and bank balances of approximately HK$0.63 million and bank and other borrowings of approximately HK$92.47 million as at 30 September 2010;
(iii) the Disposal would allow the Group to carry less fixed cost and relieve the Group from the burden of making further capital injection to sustain the operation of the loss-making segment of the Group and hence improve the overall financial position of the Group;
(iv) the Disposal not only allows the Company to unlock the cash and the management bandwidth, but also will bring a cash inflow to the Group and hence allow the Directors to focus and effectively allocate its resources to other profitable or potential businesses of the Group;

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LETTER FROM VEDA CAPITAL

(v) the remote possibility of the recoverability of the Sale Loans given the exiting financial position of the Disposed Group;
(vi) the Disposal would reduce the contingent liability of the Group by transferring the contingent liability arised from the Corporate Guarantee to the Purchaser on dollar-to-dollar basis;
(vii) the net proceeds from the Disposal would enhance the working capital of the Group; and
(viii) the enhancement on the financial position of the Group,

we consider (i) the terms of the Disposal are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned; and (ii) the Disposal is in the interests of the Company and the Independent Shareholders as a whole. We would therefore recommend the Independent Shareholders and advise the Independent Board Committee to recommend the Independent Shareholders to vote in favour of the resolution to approve the Disposal to be proposed at the SGM.

B. Master Supply Agreement

Reasons for the Master Supply Agreement

As the Board intends to concentrate on, inter alia, the trading of printed circuit board following the Disposal Completion, the Board considers that the Master Supply Agreement (as supplemented by the Supplemental Supply Agreement and Supplemental Supply Agreement II) will secure the Group with a stable supply of industrial laminate in the short run. Industrial laminates is a necessary material for the manufacture of printed circuit board. In the medium to long term, the Group will consider sourcing other supplier for industrial laminates. Taking into account that the purchase prices for the Finished Products under the Master Supply Agreement shall be on terms no less favourable than the terms available to independent third parties for purchase of similar products of comparable quality and quantity, the Directors consider that the terms of the Master Supply Agreement are fair and reasonable so far as the Independent Shareholders are concerned and is entered into during the ordinary course of business of the Group and on normal commercial terms.

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LETTER FROM VEDA CAPITAL

Having consider (i) the Master Supply Agreement (as supplemented by the Supplemental Supply Agreement and Supplemental Supply Agreement II) will secure the Remaining Group the sources of necessary raw materials for manufacturing its products immediately upon Disposal Completion; and (ii) the established working relationship between the Remaining Group and the Disposed Group before the Disposal may help to enhance timely delivery of the raw materials which in turn will enhance the operation efficiency of the Remaining Group and its capability to meet the production schedule, we consider that the Master Supply Agreement is fair and reasonable, in the ordinary and usual course of business of the Company and in the interests of the Company and the Independent Shareholders.

Nature and Pricing basis

Pursuant to the Master Supply Agreement (as supplemented by the Supplemental Supply Agreement and Supplemental Supply Agreement II) , Zhongshan Chung Yuen agrees to provide and Nam Hing HK and Nam Hing DG agree to purchase the Finished Products for a term commencing from the Disposal Completion to 31 March 2012. The purchase price of the Finished Products shall be determined by Zhongshan Chung Yuen and Nam Hing HK or, as the case maybe, Nam Hing DG from time to time with reference prevailing prices of similar products in the market on an order-by-order basis. It is also agreed that the purchase price payable by Nam Hing HK and Nam Hing DG for the Finished Products shall be determined based on normal commercial terms through arm’s length negotiation or on terms no less favourable than the terms available to independent third parties for purchase of similar products of comparable quality and quantity.

Given that (i) the purchase price of the Finished Products shall be determined by Zhongshan Chung Yuen and Nam Hing HK or, as the case maybe, Nam Hing DG from time to time with reference prevailing prices of similar products in the market on an order-by-order basis; (ii) the independent non-executive Directors will, pursuant to Rule 14A.37 of the Listing Rules, review, amongst other things, whether the Master Supply Agreement are conducted on normal terms, or if there are no sufficient comparable transactions to judge whether they are on normal commercial terms, on terms no less favourable to the Group than those offered to the independent customers of the Group; and (iii) the auditors of the Company will, pursuant to Rule 14A.38 of the Listing Rules, review for the purpose to confirm whether the transactions contemplated under the Master Supply Agreement are conducted in accordance with the terms of the Master Supply Agreement (as supplemented by the Supplemental Supply Agreement and Supplemental Supply Agreement II) , we are of the opinion that (a) the Master Supply Agreement (as supplemented by the Supplemental Supply Agreement and Supplemental Supply Agreement II) is fair and reasonable and on normal commercial terms; and (b) adequate measures have been in place, as required under the said Listing Rules above, to monitor the Master Supply Agreement (as supplemented by the Supplemental Supply Agreement and Supplemental Supply Agreement II) in order to protect the interests of the Company and the Independent Shareholders.

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LETTER FROM VEDA CAPITAL

Annual Caps

The Board proposes that the Annual Caps for the period ending 31 March 2011 and the year ending 31 March 2012 to be HK$4.0 million (the “ 2011 Annual Cap ”) and HK$15.0 million (the “ 2012 Annual Cap ”) respectively. The Annual Caps were determined by reference to the historical purchase amounts payable by the Remaining Group to the Disposed Group for the Finished Products during the year ended 31 March 2009 and 31 March 2010 where the Remaining Group had respectively paid to the Disposed Group approximately HK$21.80 million (the “ 2009 Purchase ”) and approximately HK$10.69 million (the “ 2010 Purchase ”). The historical purchase amount for the six months ended 30 September 2010 was approximately HK$12.68 million. The Board has also taken into account the prevailing market condition relating to the demand for laminates and the anticipated market demand for printed circuit board in the coming years.

As advised by the Company, the proposed Annual Cap for the period ending 31 March 2011 of HK$4.0 million is arrived under the assumption that the Disposal Completion will take place in December 2010, and hence, on an annualized basis, the 2011 Annual Cap would be approximately HK$16 million which represent a premium of approximately 6.67% over the 2012 Annual Cap. Based on the 2009 Purchase and the 2010 Purchase, the average of the purchases amounts payable by the Remaining Group to the Disposed Group for the Finished Products for the two years ended 31 March 2010 was amounted to approximately HK$16.25 million, representing premium of approximately 1.56% and approximately 8.33% over the 2011 Annual Cap and the 2012 Annual Cap respectively.

In light of the above, we consider that the Annual Caps have been arrived with an acceptable basis which is fair and reasonable so far as the Independent Shareholders are concerned and in the interest of the Independent Shareholders and the Company as a whole.

Recommendation

Having considered the above-mentioned principal factors and reasons, we consider that the Master Supply Agreement (as supplemented by the Supplemental Supply Agreement and Supplemental Supply Agreement II) is fair and reasonable so far as the Independent Shareholders are concerned and are in the interests of the Company and the Independent Shareholders as a whole. We also consider that the Master Supply Agreement (as supplemented by the Supplemental Supply Agreement and Supplemental Supply Agreement II) is on normal commercial terms and in the ordinary and usual course of business of the Group. Accordingly, we recommend the Independent Shareholders, as well as the Independent Board Committee to advise the Independent Shareholders, to vote in favour of the relevant ordinary resolution to be proposed at the SGM to approve the Master Supply Agreement (as supplemented by the Supplemental Supply Agreement and Supplemental Supply Agreement II) .

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LETTER FROM VEDA CAPITAL

C. Provision of financial assistance by way of Corporate Guarantee and Loan Advances

Corporate Guarantee

As mentioned above, the Purchaser has provided the Undertaking to the Vendor that it shall use its best endeavours to obtain release of the Corporate Guarantee by the Company. The Purchaser has also provide the Indemnification to the Company such that the Purchaser agreed to indemnify the Company on a dollar-for-dollar basis for all such obligations, liabilities or indebtedness of the Company as due and owing under the Corporate Guarantee as at the Disposal Completion.

As the continued provision of the Corporate Guarantee is part of the terms for the Disposal and a personal guarantee has been given by Mr. Lau in favour of the Vendor, the Directors consider that the continued provision of the Corporate Guarantee are fair and reasonable so far as the Independent Shareholders are concerned. The Directors therefore are of view that any amounts that the Company may claim against BIL and/or Mr. Lau are recoverable.

As discussed with the Company, as additional time is required for the application process for the transfer of the guarantor of the Corporate Guarantee and hence it is expected the Corporate Guarantee given by the Company will remain in place immediately upon Disposal Completion. Having consider the Company will be safeguarded by the Undertaking and the Indemnification provided by the Purchaser and the continued provision of Corporate Guarantee is a condition to the Disposal, of which we consider to be in the interest of the Company and the Independent Shareholders, we concur with the Directors that the continued provision of the Corporate Guarantee are fair and reasonable so far as the Independent Shareholders are concerned.

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LETTER FROM VEDA CAPITAL

Loan Advances

As at the Latest Practicable Date, the Remaining Group has provided the Loans Advances to the Disposed Group in the sum of approximately HK$14.56 million, which were mainly trade receivables arising out of the ordinary course of business of the Remaining Group and the Disposed Group and loans advances to the Disposed Group for its business operation. The Vendor and the Purchaser agree that the maximum amount of the financial assistance provided under the Loans Advances up to the Disposal Completion should not exceed HK$25 million. The monies due under the Loans Advances are interest free with no fixed term of repayment. The Purchaser has covenanted to the Vendor that it shall procure the full repayment of the monies due under the Loans Advances by Disposed Group within nine months after the Disposal Completion.

As the continued provision of the Loans Advances is part of the terms for the Disposal and a personal guarantee has been given by Mr. Lau in favour of the Vendor (the “ Guarantee ”), the Directors consider that the continued provision of the Loans Advances are fair and reasonable so far as the Independent Shareholders are concerned. The Directors therefore are also of the view that the Loans Advances are recoverable.

As advised by the Company, given the persistent loss-making and net liabilities position of the Disposed Group, the Disposal is unable to settle the Loan Advances immediately upon Disposal Completion and hence, the Purchaser and the Company has commercially decided that the Purchaser shall procure, with the Guarantee, the full repayment of the monies due under the Loans Advances by Disposed Group within nine months after the Disposal Completion. Since Mr. Lau has also guaranteed the Vendor the due performance of the obligations of the Purchaser under the Sale and Purchase Agreement, in the event that the Disposed Group fails to repay the amount due under the Loans Advances, it will be open to the Remaining Group to take legal action against either the members of the Disposed Group or Mr. Lau for immediate repayment of the amount due.

Having consider (i) the Loan Advances were incurred from normal course of business; (ii) the provision of the Guarantee by the Purchaser; and (iii) the continued provision of Loan Advances is a condition to the Disposal, of which we consider to be in the interest of the Company and the Independent Shareholders, we consider the continued provision of the Loans Advances are fair and reasonable so far as the Independent Shareholders are concerned.

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LETTER FROM VEDA CAPITAL

Recommendation

Having considered the above-mentioned principal factors and reasons, we consider that the Corporate Guarantee and the Loan Advances are fair and reasonable so far as the Independent Shareholders are concerned and are in the interests of the Company and the Independent Shareholders as a whole. We also consider that the Corporate Guarantee and the Loan Advances are on normal commercial terms and in the ordinary and usual course of business of the Group. Accordingly, we recommend the Independent Shareholders, as well as the Independent Board Committee to advise the Independent Shareholders, to vote in favour of the relevant ordinary resolutions to be proposed at the SGM to approve the Corporate Guarantee and the Loan Advances.

Yours faithfully, For and on behalf of Veda Capital Limited

Hans Wong Julisa Fong Chairman Managing Director

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APPENDIX I

VALUATION REPORT ON THE PROPERTIES INTEREST HELD BY THE DISPOSED GROUP

The following is the text of a letter, summary of values and valuation certificate, prepared for the purpose of incorporation in this circular received from LCH (Asia-Pacific) Surveyors Limited, an independent professional surveyor, in connection with its valuations as at 30 September 2010 of the property interests held by the Disposed Group.

==> picture [195 x 45] intentionally omitted <==

The readers are reminded that the report which follows has been prepared in accordance with the guidelines set by the International Valuation Standards, Eighth Edition, 2007 (the “IVS”) published by the International Valuation Standards Committee as well as the HKIS Valuation Standards on Properties, First Edition, 2005 (the “HKIS Standards”) published by the Hong Kong Institute of Surveyors (the “HKIS”). Both standards entitle the valuer to make assumptions which may on further investigation, for instance by the readers’ legal representative, prove to be inaccurate. Any exception is clearly stated below. Headings are inserted for convenient reference only and have no effect in limiting or extending the language of the paragraphs to which they refer. Translation of terms in English or in Chinese are for readers’ identification purpose only and have no legal status or implication in this report. This report is prepared and signed off in English format, translation of this report in language other than English shall only be used as a reference and should not be regarded as a substitute for this report. It is emphasised that the findings and conclusions presented below are based on the documents and facts known to the valuer at the date of this report. If additional documents and facts are made available, the valuer reserves the right to amend this report and its conclusions.

17th Floor Champion Building Nos. 287-291 Des Voeux Road Central Hong Kong 24 December 2010

The Board of Directors

Nam Hing Holdings Limited

27th Floor Yuen Long Trade Centre Nos. 99-109 Castle Peak Road Yuen Long New Territories Hong Kong

Dear Sirs,

In accordance with your instructions to value certain property interests currently owned by Nam Hing Holdings Limited (hereinafter referred to as the “Company”) and its subsidiaries (collectively, hereinafter together with the Company referred to as the “Group”) in the People’s Republic of China (hereinafter referred to as the “PRC” or “China”) and in Thailand but contracted to be disposed, we confirm that we have conducted inspections, made relevant enquiries and obtained such further information as we consider necessary to support our conclusion of values of the properties as at 30 September 2010 (hereinafter referred to as the “Date of Valuation”) for the Company’s internal management reference purpose.

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APPENDIX I

VALUATION REPORT ON THE PROPERTIES INTEREST HELD BY THE DISPOSED GROUP

We understand that the use of our work product (regardless of form of presentation) will form part of the Company’s business due diligence but we have not been engaged to make specific sale or purchase recommendations or give opinion for financing arrangement. We further understand that the use of our work product will not supplant other due diligence which the management of the Company should conduct in reaching its business decision regarding the properties valued. Our work is designed solely to provide information that will give a reference to the management of the Company as part of its due diligence process, and our work should not be the only factor to be referenced by the Company. Our findings and conclusion of values of these properties are documented in a valuation report and submitted to the Company at today’s date.

At the request of the management of the Company, we prepared this summary report (including this letter, summary of values and valuation certificate) to summarise our findings and conclusions as documented in the valuation report for the purpose of inclusion in this circular at today’s date for the Company’s shareholders’ reference. Terms herein used without definition shall have the same meanings as in the valuation report, and the assumptions and caveats adopted in the valuation report also applied to this summary report.

BASIS OF VALUATION AND ASSUMPTIONS

According to the IVS, which the HKIS Standards also follows, there are two valuation bases in valuing property, namely market value basis and valuation bases other than market value. In this engagement, we have provided our conclusion of values of the properties on market value basis.

The term “Market Value” is defined by the IVS and the HKIS Standards as “the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion”.

Unless otherwise stated, our valuations of the property interests have been made on the assumptions that, as at the Date of Valuation,

the legally interested party in each of the properties has absolute title to its relevant property interest;
the legally interested party in each of the properties has free and uninterrupted rights to assign its relevant property interest for the whole of the unexpired terms as granted, and any premiums payable have already been fully paid;

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APPENDIX I VALUATION REPORT ON THE PROPERTIES INTEREST HELD BY THE DISPOSED GROUP

the legally interested party in each of the properties sells its relevant property interest in the market in its existing states without the benefit of a deferred terms contract, leaseback, joint venture, management agreement or any other similar arrangement which would serve to increase the value of the property interest;
the properties have obtained relevant government’s approvals for the sale of the properties and are able to dispose of and transfer free of all encumbrances (including but not limited to the cost of transaction) in the market; and
the properties can be freely disposed of and transferred free of all encumbrances at the Date of Valuation for its existing uses in the market to both local and overseas purchasers without payment of any premium to the government.

Should these not be the case, it will have adverse impact to the values as reported.

APPROACH TO VALUE

There are three generally accepted approaches in arriving at the market value of a property on an absolute title basis, namely the Sales Comparison Approach (or known as the Market Approach), the Cost Approach and the Income Approach.

Having considered the general and inherent characteristics of the properties, in valuing the properties, we have adopted the depreciated replacement cost (“DRC”) approach which is an application of the Cost Approach in valuing specialised properties like the properties. The use of this approach requires an estimate of the market value of the land use rights for its existing use, and an estimate of the new replacement cost of the buildings and other site works from which deductions are then made to allow for age, condition, and functional obsolescence taken into account of the site formation cost and those public utilities connection charges to the properties. The land use rights of the properties have been determined from market-based evidences by analysing similar sales or offerings or listings of comparable properties.

The valuations of the properties are on the assumption that the properties are subject to the test of adequate potential profitability of the business having due regard to the value of the total assets employed and the nature of the operation.

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APPENDIX I

VALUATION REPORT ON THE PROPERTIES INTEREST HELD BY THE DISPOSED GROUP

By using this approach, the land should be assumed to have the benefit of planning permission for the replacement of the existing buildings and it is always necessary when valuing the land, to have regard to the manner in which the land is developed by the existing buildings and site works, and the extent to which these realise the full potential value of the land. When considering a notional replacement site, it should normally be regarded as having the same physical and location characteristics as the actual site, other than characteristics of the actual site which are not relevant, or are of no value, to the existing use. In considering the buildings, the gross replacement cost of the buildings should take into consideration everything which is necessary to complete the construction from a new green field site to provide buildings as they are, at the date of valuation, fit for and capable of being occupied and used for the current use. These costs to be estimated are not to erect buildings in the future but have the buildings available for occupation at the date of valuation, the work having commenced at the appropriate time.

Unless otherwise stated, we have not carried out any valuation on redevelopment basis to the properties and the study of possible alternative development options and the related economics do not come within the scope of our work.

MATTERS THAT MIGHT AFFECT THE VALUES REPORTED

For the sake of valuations, we have adopted the areas as appeared in the copies of the documents as provided and no further verification work has been conducted. Should it be established subsequently that the adopted areas were not the latest approved, we reserve the rights to revise our report and the valuations accordingly.

No allowance has been made in our valuations for any charges, mortgages, outstanding premium or amounts owing on the properties valued nor any expenses or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that the properties are free from all encumbrances, restrictions, and outgoings of an onerous nature which could affect their values.

In our valuations, we have assumed that each of the properties is able to sell and purchase in the market without any legal impediment (especially from the regulators). Should this not be the case, it will affect the reported values significantly. The readers are reminded to have their own legal due diligence work on such issues. No responsibility or liability is assumed.

As at the Latest Practicable Date of this circular, we were unable to identify any adverse news against the properties which may affect the reported conclusion of values in our work product. Thus, we are not in the position to report and comment on its impact (if any) to the properties. However, should it be established subsequently that such news did exist at the Date of Valuation, we reserve the right to adjust the values reported herein.

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APPENDIX I

VALUATION REPORT ON THE PROPERTIES INTEREST HELD BY THE DISPOSED GROUP

ESTABLISHMENT OF TITLES

Based on the purpose of this engagement and the market value basis of valuation, the management of the Company was requested to provide us the necessary copies of documents to support the Group’s titles to the properties, and that the Group has free and uninterrupted rights to transfer, to mortgage or to let its relevant property interests (in this instance, an absolute title) for the whole of the unexpired terms as granted free of all encumbrances, and any premiums payable have already been paid in full or outstanding procedures have been completed (if any). We have been provided with copies of title documents. However, we have not examined the original documents to verify the ownership and encumbrances, or to ascertain the existence of any amendments which may not appear on the copies handed to us. All documents disclosed (if any) are for reference only and no responsibility is assumed for any legal matters concerning the legal titles and the rights (if any) to the subject properties valued. Any responsibility for our misinterpretation of the documents cannot be accepted.

Due to the inherent defects in the land registration system of China, we are unable to search the original documents of the properties in Group I from the relevant authorities to verify legal titles or to any material encumbrances which may not appear on the copies handed to us. We need to state that we are not legal professional and are not qualified to ascertain the titles and to report any encumbrances that may be registered against the properties. However, we have complied with the requirements as stated in Practice Note No. 12 of the Rules Governing the Listing of Securities of The Stock Exchange of Hong Kong Limited and relied solely on the copies of document and the copy of the PRC legal opinions provided by the management of the Company with regard to the legal titles of the properties in Group I. We are given to understand that the PRC legal opinions was prepared by a qualified PRC legal adviser 廣東恒益律師事務所 (GFE Law Office) dated 25 November 2010. No responsibility or liability is assumed in relation to those legal opinions.

We have conducted title deed searches of the property in Group II in the Chachoengsao Land Department (Bang Khla Branch) in Thailand. We have not examined the original documents to verify the ownership and encumbrances, or to ascertain the existence of any lease amendments which may not appear on the copies handed to us.

In our report, we have assumed that the Group has obtained all the approval and/or endorsement from the relevant authorities to own or to use the subject properties, and that there would be no legal impediment (especially from the regulators) for the Group to dispose the subject properties. Should this not be the case, it will affect our conclusion of values in this report significantly. The readers are reminded to have their own legal due diligence work on such issues. No responsibility or liability is assumed.

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APPENDIX I

VALUATION REPORT ON THE PROPERTIES INTEREST HELD BY THE DISPOSED GROUP

INSPECTIONS AND INVESTIGATIONS OF THE PROPERTIES IN ACCORDANCE WITH VALUATION STANDARD 4 OF THE HKIS STANDARDS

We have conducted inspections to the exterior, and where possible, the interior of the properties in respect of which we have been provided with such information as we have requested for the purpose of our valuations. We have not inspected those parts of the properties which were covered, unexposed or inaccessible and such parts have been assumed to be in a reasonable condition. We cannot express an opinion about or advise upon the condition of the properties and our work product should not be taken as making any implied representation or statement about the condition of the properties. No structural survey, investigation or examination has been made, but in the course of our inspections, we did not note any serious defects in the properties inspected. We are not, however, able to report that the properties are free from rot, infestation or any other structural defects. No tests were carried out to the building utilities (if any) and we are unable to identify those services either covered, unexposed or inaccessible.

Our valuations have been made on the assumption that no unauthorised alteration, extension or addition has been made in the properties, and that the inspections and the use of this report do not purport to be a building survey of the properties. We have also assumed that the properties are free of rot and inherent danger or unsuitable materials and techniques.

We have not carried out on-site measurements to verify the correctness of the areas of the properties, but have assumed that the areas shown on the documents and official layout plans handed to us are correct. All dimensions, measurements and areas are approximations.

Our engagement and the agreed procedures to value the properties did not include an independent land survey to verify the legal boundaries of the properties. We need to state that we are not in the land survey profession, therefore, we are not in the position to verify or ascertain the correctness of the legal boundaries of the properties that appeared on the documents handed to us. No responsibility from our part is assumed. The management of the Company or interested party in the properties should conduct their own legal boundaries due diligence work.

We have not arranged for any investigation to be carried out to determine whether or not any deleterious or hazardous material has been used in the construction of the properties, or has since been incorporated, and we are therefore unable to report that the properties are free from risk in this respect. For the purpose of these valuations, we have assumed that such investigation would not disclose the presence of any such material to any significant extent.

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APPENDIX I

VALUATION REPORT ON THE PROPERTIES INTEREST HELD BY THE DISPOSED GROUP

We are not aware of the content of any environmental audit or other environmental investigation or soil survey which may have been carried out on the properties and which may draw attention to any contamination or the possibility of any such contamination. In undertaking our work, we have been instructed to assume that no contaminative or potentially contaminative uses have ever been carried out in the properties. We have not carried out any investigation into past or present uses, either of the properties or of any neighbouring land, to establish whether there is any contamination or potential for contamination to the properties from these uses or sites, and have therefore assumed that none exists. However, should it be established subsequently that contamination, seepage or pollution exists at the properties or on any neighbouring land, or that the premises have been or are being put to a contaminative use, this might reduce the values now reported.

SOURCES OF INFORMATION AND ITS VERIFICATION IN ACCORDANCE WITH VALUATION STANDARD 5 OF THE HKIS STANDARDS

In the course of our work, we have provided with copies of the documents regarding the properties, and these copies have been referenced without further verifying with the relevant bodies and/or authorities. Our procedures to value did not require us to conduct any searches or inspect the original documents to verify ownership or to verify any amendment which may not appear on the copies handed to us. We need to state we are not legal professional, therefore, we are not in the position to advise and comment on the legality and effectiveness of the documents provided by the management of the Company.

We have relied solely on the information provided by the management of the Company or its appointed personnel without further verification and have fully accepted advice given to us on such matters as planning approvals or statutory notices, locations, titles, easements, tenure, occupation, lettings, rental, site and floor areas and all other relevant matters.

The scope of valuation has been determined by reference to the property list provided by the management of the Company. All properties on the list have been included in our valuations. The management of the Company has confirmed to us that the Disposed Group (as defined in the circular) has no property interest contracted to be disposed other than those specified on the listed supplied to us.

Our valuations have been made only based on the advice and information made available to us. While a limited scope of general inquiries had been made to the local property market practitioners, we are not in a position to verify and ascertain the correctness of the advice given by the relevant personnel. No responsibility or liability is assumed.

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APPENDIX I

VALUATION REPORT ON THE PROPERTIES INTEREST HELD BY THE DISPOSED GROUP

Information furnished by others, upon which all or portions of our report are based, is believed to be reliable but has not been verified in all cases. Our procedures to value or work do not constitute an audit, review, or compilation of the information provided. Thus, no warranty is made nor liability assumed for the accuracy of any data, advice, opinions, or estimates identified as being furnished by others which have been used in formulating our report.

When we adopted the work products from other professions, external data providers and the management of the Company or its appointed personnel in our work, the assumptions and caveats adopted by them in arriving at their figures also apply to this report. The procedures we have taken do not provide all the evidence that would be required in an audit and, as we have not performed an audit, accordingly, we do not express an audit opinion.

We are unable to accept any responsibility for the information that has not been supplied to us by the management of the Company or its appointed personnel. Also, we have sought and received confirmation from the management of the Company or its appointed personnel that no materials factors have been omitted from the information supplied. Our analysis and valuations are based upon full disclosure between us and the Company of material and latent facts that may affect our works.

We have had no reason to doubt the truth and accuracy of the information provided to us by the management of the Company or its appointed personnel. We consider that we have been provided with sufficient information to reach an informed view, and have had no reason to suspect that any material information has been withheld.

Unless otherwise stated, all monetary amounts are in Hong Kong dollars (HK$). In valuing the properties in the PRC and in Thailand, the adopted exchange rates were the prevailing rate as at the Date of Valuation, being Renminbi Yuan (“RMB”) 0.86 and Thai Baht (“Baht”) 3.91 per HK$1, respectively. And no significant fluctuation in exchange rates have been found between the Date of Valuation and the date of this report.

LIMITING CONDITIONS IN THIS SUMMARY REPORT

Our conclusion of values of the properties in this summary report are valid only for the stated purpose and only for the Date of Valuation, and for the sole use of the named Company. We or our personnel shall not be required to give testimony or attendance in court or to any government agency by reason of this summary report, and the valuers accept no responsibility whatsoever to any other person.

No responsibility is taken for changes in market conditions and local government policy and no obligation is assumed to revise this summary report to reflect events or conditions, which occur or make known to us subsequent to the date hereof.

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APPENDIX I

VALUATION REPORT ON THE PROPERTIES INTEREST HELD BY THE DISPOSED GROUP

Neither the whole nor any part of this summary report or any reference made hereto may be included in any published documents, circular or statement, or published in any way, without our written approval of the form and context in which it may appear. Nonetheless, we consent to the publication of this summary report in this circular to the Company’s shareholders’ reference.

Our maximum liability relating to services rendered under this engagement (regardless of form of action, whether in contract, negligence or otherwise) shall be limited to the charges paid to us for the portion of its services or work products giving rise to liability. In no event shall we be liable for consequential, special, incidental or punitive loss, damage or expense (including without limitation, lost profits, opportunity costs, etc.), even if it has been advised of their possible existence.

The Company is required to indemnify and hold us and our personnel harmless from any claims, liabilities, costs and expenses (including, without limitation, attorney’s fees and the time of our personnel involved) brought against, paid or incurred by us at a time and in any way based on the information made available in connection with our report except to the extent that any such loses, expenses, damages or liabilities are ultimately determined to be the result of gross negligence of our engagement team in conducting its work. This provision shall survive even after the termination of this engagement for any reason.

STATEMENTS

The attached valuation certificate is prepared in line with the requirements contained in the Chapter 5 and the Practice Note No. 12 of the Rules Governing the Listing of Securities of The Stock Exchange of Hong Kong Limited as well as the guidelines contained in both the IVS and HKIS Standards. The valuations have been undertaken by valuers (see End Notes), acting as external valuers, qualified for the purpose of the valuations.

We retain a copy of this summary report and the detailed valuation report together with the data from which it was prepared, and these data and documents will, according to the Laws of Hong Kong, keep for a period of 6 years from the date of this report and to be destroyed thereafter. We considered these records confidential, and we do not permit access to them by anyone, with the exception for law enforcement authorities or court order, without the Company’s authorisation and prior arrangement made with us. Moreover, we will add the Company’s information into our client list for our future reference.

The valuation of the properties depends solely on the assumptions made in this report and not all of which can be easily quantified or ascertained exactly. Should some or all of the assumptions prove to be inaccurate at a later date, it will affect the reported values significantly.

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APPENDIX I VALUATION REPORT ON THE PROPERTIES INTEREST HELD BY THE DISPOSED GROUP

We hereby certify that the fee for this service is not contingent upon our conclusion of values and we have no significant interest in the properties, the Group or the values reported.

Our valuations are summarised below and the valuation certificate is attached.

Yours faithfully,

For and on behalf of

LCH (Asia-Pacific) Surveyors Limited

Elsa Ng Hung Mui Yuki Chan Wan Yuk B.Sc. M.Sc. RPS(GP) BCom RPS(GP) Director Associate Director

Contributing valuers:

Jaroonsak Fongthong B.Sc Member of The Valuers Association of Thailand (VAT)

Terry Fung Chi Hang B.Sc. M.Sc.

Eugene Lai Chung Yee A.Sc

Notes:

Ms. Elsa Ng Hung Mui has been conducting valuation of real estate properties in Hong Kong since 1994 and has more than 11 years of experience in valuing properties in mainland China. She is a Member of The HKIS and a valuer on the List of Property Valuers for Undertaking Valuation for Incorporation or Reference in Listing Particulars and Circulars and Valuation in Connection with Takeovers and Mergers published by The HKIS.
Ms. Yuki Chan Wan Yuk is a Member of The HKIS, an Associate Member and a Certified Practising Valuer of The Australian Property Institute, who has about 5 years of experience in valuing properties in Hong Kong and over 3 years of experience in valuing properties in the PRC.
In valuing the property in Thailand, Mr. Jaroonsak Fongthong, a qualified experienced valuer in Thailand who has over 16 years local experience and one of our associates is responsible to the report.
Mr. Terry Fung Chi Hang is a graduated surveyor who has been involved in valuation of real estate properties both in Hong Kong and in the PRC for more than 5 years. He obtained a Master Degree in Real Estate and involved in various asset valuations, mine valuation and agriculture property assets valuation.
Mr. Eugene Lai Chung Yee is an assistant graduated surveyor who has been involved in valuation of real estate properties both in Hong Kong and the PRC for more than 2 years after graduation.

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APPENDIX I

VALUATION REPORT ON THE PROPERTIES INTEREST HELD BY THE DISPOSED GROUP

SUMMARY OF VALUES

Group I – Properties held and occupied by the Group under long-term title certificates in the PRC and valued on market value basis

Property
Interest
attributable
to the Group
1.
A factory complex located at
No. 1 Dongsheng Road
Dongsheng Village
Minzhong Town
Zhongshan City
Guangdong Province
The PRC
(Postal Code 528443)
100 per cent.
2.
A factory complex located at
No. 243 An Ji Zhong Road
Sanzao Town
Jinwan District
Zhuhai City
Guangdong Province
The PRC
(Postal Code 519040)
100 per cent.
Sub-total:
Group II – Property held and occupied by the Group under long-term
in Thailand and valued on market value basis
Property
Interest
attributable
to the Group
3.
Land with improvements located at
No. 180 Moo 7
Gateway City Industrial Estate
Highway No. 331
(Chachoengsao-Sattahip Road)
Hua Sam Rong Subdistrict
Plaeng Yao District
Chachoengsao Province
Thailand
(Postal Code 24190)
100 per cent.
Sub-total:
Grand Total:

Amount of
valuation in
its existing state
attributable to
the Group as at
30 September
2010
HK$ 25,810,000
14,210,000
HK$40,020,000
title certificates
Amount of
valuation in
its existing state
attributable to
the Group as at
30 September
2010
HK$ 17,970,000
HK$17,970,000
HK$57,990,000

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APPENDIX I

VALUATION REPORT ON THE PROPERTIES INTEREST HELD BY THE DISPOSED GROUP

VALUATION CERTIFICATE

Group I – Properties held and occupied by the Group under long-term title certificates in the PRC and valued on market value basis

Description and tenure

Property

A factory complex The property comprises three parcels located at No. 1 of adjoining land having a total site Dongsheng Road area of approximately 39,876.60 Dongsheng Village sq. m. (see Note 1 below) with 17 Minzhong Town various buildings and structures Zhongshan City erected thereon. Guangdong Province The PRC The buildings and structures include (Postal Code three single storey workshop buildings, 528443) a 2-storey office building, a 3-storey male dormitory, a 5-storey female dormitory and various single storey supporting facilities which were completed between 1994 and 2004. They have a total gross floor area of approximately 14,140.23 sq. m. (see Notes 2 and 3 below).

Amount of valuation in its existing state attributable to Particulars of the Group as at occupancy 30 September 2010 HK$ We have inspected 25,810,000 and confirmed by the management of the (See Note 3 below) Company that the property is occupied (100% interest) by the Group for manufacturing, ancillary office, staff quarters and other supporting facilities purposes.

(See Note 4 below)

The property is subject to a right to use the land for various terms till 31 August 2042 or 31 December 2045 for industrial usage.

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APPENDIX I

VALUATION REPORT ON THE PROPERTIES INTEREST HELD BY THE DISPOSED GROUP

Notes:

The right to possess the land is held by the State and the right to use the land has been granted by the State or transferred to 中山南興絕緣材料有限公司 (translated as Zhongshan Nam Hing Insulating Material Limited and hereinafter referred to as “Zhongshan Nam Hing”), which is a wholly-owned subsidiary of the Company, via the following ways:

(i) A parcel of land having a site area of approximately 11,921 sq. m.

Pursuant to a State-owned Land Use Rights Certificate known as Zhong Fu Guo Yong (2009) Di 080384 Hao（中府國用(2009)第080384號）dated 19 June 2009 and issued by the Land and Resources Bureau of Zhongshan City, the legally interested party in the land having a site area of approximately 11,921 sq. m. is Zhongshan Nam Hing for a term till 31 August 2042 for industrial usage.

(ii) A parcel of land having a site area of approximately 11,453 sq. m.

Pursuant to a Contract for the Transfer of the State-owned Land Use Rights dated 24 May 1995 made between Zhongshan Nam Hing and 中山浪網鎮昌和製衣廠 (no English translation is available) and 中山浪網鎮樂星製衣廠 (no English translation is available), a parcel of land having a site area of approximately 11,453 sq. m. was sold to Zhongshan Nam Hing by way of transfer for industrial usage.

Pursuant to a State-owned Land Use Rights Certificate known as Zhong Fu Guo Yong (2009) Di 080383 Hao（中府國用(2009)第080383號）dated 19 June 2009 and issued by the Land and Resources Bureau of Zhongshan City, the legally interested party in the land having a site area of approximately 11,453 sq. m. is Zhongshan Nam Hing for a term till 31 August 2042 for industrial usage.

(iii) A parcel of land having a site area of approximately 16,502.6 sq. m.

Pursuant to a Contract for the Transfer of the State-owned Land Use Rights dated 14 November 1995 made between 中山市浪網鎮東勝經濟聯合社 (no English translation is available) and Zhongshan Nam Hing, a parcel of land having a site area of approximately 23 Chinese Mu was sold to Zhongshan Nam Hing for a term of 50 years for industrial usage.

Pursuant to a State-owned Land Use Rights Certificate known as Zhong Fu Guo Yong (2009) Di 080385 Hao（中府國用(2009)第080385號）dated 19 June 2009 and issued by the Land and Resources Bureau of Zhongshan City, the legally interested party in the land having a site area of approximately 16,502.6 sq. m. is Zhongshan Nam Hing for a term till 31 December 2045 for industrial usage.

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APPENDIX I

VALUATION REPORT ON THE PROPERTIES INTEREST HELD BY THE DISPOSED GROUP

Pursuant to 3 various Building Ownership Certificates and Realty Title Certificate known as Yue Fang Zi Di 4923385, 1189534 Hao（粵房字第4923385, 1189534號）and Yue Fang Di Zheng Zi Di C2202737 Hao（粵房地證字第C2202737號）issued by the People’s Government of Zhongshan City, the legally interested party in 10 various buildings erected on the land as mentioned in Note 1 having a total gross floor area of approximately 11,890.23 sq. m. is Zhongshan Nam Hing. The area breakdowns for each of the buildings covered in the certificates are as follows:

(i) A 3-storey male dormitory (ii) A 2-storey office building (iii) A single storey workshop (iv) A single storey warehouse (v) A single storey boiler room (vi) Two single storey guardhouses (vii) A 5-storey female dormitory (viii) A single storey workshop (ix) A single storey new workshop Total :	Gross Floor Area (sq. m.) 1,192.13 477.71 4,109.18 1,374.00 379.01 43.13 2,080.77 909.30 1,325.00
	11,890.23

According to the on-site inspection on 7 July 2010, 7 various buildings without any form of title certificate and having a total gross floor area of approximately 2,250 sq. m. were erected on the land. They are listed as follows:

(i) A single storey waste material warehouse (ii) A single storey metal truss storage (iii) A single storey air compressor room (iv) A single storey switch room (v) A single storey water pump room (vi) A single storey raw material warehouse (vii) A single storey guardhouse Total :	Gross Floor Area (sq. m.) 900.00 140.00 25.00 74.00 119.00 972.00 20.00
	2,250.00

In our valuation, we have taken the above buildings with a total gross floor area of 2,250 sq. m. into account and on the assumption that they are able to sell together with the land and other buildings as an unique interest without further encumbrances/premium. For reference purpose, the aggregate sum of depreciated replacement cost of the said buildings (excluding the land) would be in the region of HK$1,990,000, which should be deducted from the amount of valuations if the buildings are unable to sell as an unique interest in the open market.

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APPENDIX I

VALUATION REPORT ON THE PROPERTIES INTEREST HELD BY THE DISPOSED GROUP

Pursuant to a tenancy agreement and its supplemental agreement entered into between Zhongshan Nam Hing and 中山中原電子應用材料有限公司 (translated as Zhongshan Chung Yuen Electronic Applied Materials Company Limited and hereinafter referred to as “Zhongshan Chung Yuen”), which is a wholly-owned subsidiary of the Company, dated 1 December 2008 and 31 December 2009 respectively, a portion of the property having a gross floor area of approximately 1,200 sq. m. is leased to Zhongshan Chung Yuen for a term of 4 years till 30 November 2012 for production factory usage at a monthly rental of RMB4,000 inclusive of water and electricity charges. According to the HKIS Standards, any property occupied by a company under an inter-company leasing arrangement within a group falls to be valued as owner-occupied. Therefore, in our valuation, we have considered this property as being owner-occupied.
Pursuant to a copy of an 企業法人營業執照 (translated as Enterprise Legal Person Business Licence) dated 3 March 2009, Zhongshan Nam Hing is a limited liability company for an operational period commencing from 28 December 1992 to 27 December 2009 and with a registered capital of HK$93,000,000. As advised by the Company, they are in the process of applying for the renewal of the licence.
Pursuant to a copy of an Enterprise Legal Person Business Licence dated 23 April 2007, Zhongshan Chung Yuen is a limited liability company for an operational period commencing from 13 January 2003 to 12 January 2023 and with a registered capital of HK$2,000,000.
According to the legal opinion as prepared by the Group’s PRC legal adviser, the following opinions are noted:
(i) Zhongshan Nam Hing has obtained the land use rights and building ownership rights of the lands and buildings mentioned in Notes 1 and 2 legally;
(ii) Zhongshan Nam Hing is the legally interested party in the property and has the right to occupy, use, transfer, lease or mortgage the lands and the buildings mentioned in Notes 1 and 2;
(iii) As advised by Zhongshan Nam Hing, the lands and the buildings mentioned in Notes 1 and 2 are not subject to any mortgage;
(iv) The existing uses of the lands and the buildings mentioned in Notes 1 and 2 are in compliance with the permitted usages under the State-owned Land Use Rights Certificates and Realty Title Certificate;
(v) The tenancy agreement and its supplemental agreement mentioned in Note 4 are valid and legally binding to both parties; and
(vi) Zhongshan Chung Yuen has the right to use the leased portion of the property for the term stated in the tenancy agreement and its supplemental agreement.

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APPENDIX I

VALUATION REPORT ON THE PROPERTIES INTEREST HELD BY THE DISPOSED GROUP

Description and tenure

Property

A factory complex The property comprises a parcel located at of land having a site area of No. 243 An Ji Zhong approximately 17,380.90 sq. m. (see Road Note 1 below) with 3 various buildings Sanzao Town erected thereon. Jinwan District Zhuhai City The buildings include a 5-storey staff Guangdong Province quarters, a 3-storey office building The PRC and a 2-storey workshop which were (Postal Code completed in about 2007. They have a 519040) total gross floor area of approximately 10,105.30 sq. m. (see Note 2 below).

Amount of valuation in its existing state attributable to Particulars of the Group as at occupancy 30 September 2010 HK$ We have inspected 14,210,000 and confirmed by the management of the (100% interest) Company that the property is vacant.

The property is subject to a right to use the land for a term till 4 December 2055 for industrial usage.

Notes:

The right to possess the land is held by the State and the rights to use the land have been granted by the State to 珠海南興隆電子有限公司 (translated as Zhuhai Nan Hing Long Electronic Company Ltd. and hereinafter referred to as “Zhuhai Nan Hing Long”), which is a wholly-owned subsidiary of the Company, vide a Realty Title Certificate known as Yue Fang Di Quan Zheng Zhu Zi Di 0200000421 Hao（粵房地權證珠字第 0200000421號）dated 1 April 2009 and issued by Zhuhai Real Estate Registration Center. According to the certificate, the legally interested party in the land having a site area of approximately 17,380.90 sq. m. is Zhuhai Nan Hing Long for a term commencing from 5 December 2005 till 4 December 2055 for industrial usage.

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APPENDIX I

VALUATION REPORT ON THE PROPERTIES INTEREST HELD BY THE DISPOSED GROUP

Pursuant to 3 various Realty Title Certificates known as Yue Fang Di Quan Zheng Zhu Zi Di 0200000422, 0200000423 and 0200000424 Hao（粵房地權證珠字第0200000422, 0200000423及 0200000424號）issued by Zhuhai Real Estate Registration Center, the legally interested party in 3 various buildings erected on the land as mentioned in Note 1 having a total gross floor area of approximately 10,105.30 sq. m. is Zhuhai Nan Hing Long. The area breakdowns for each of the buildings covered in the certificates are as follows:

(i) A 5-storey staff quarters (ii) A 3-storey office building (iii) A 2-storey workshop Total:	Gross Floor Area (sq. m.) 2,807.36 937.86 6,360.08
	10,105.30

Pursuant to a copy of the Enterprise Legal Person Business Licence dated 25 May 2009, Zhuhai Nan Hing Long is a limited liability company for an operational period commencing from 23 September 2002 to 23 September 2052 and with a registered capital of HK$9,816,000.
Pursuant to a mortgage contact, the property is subject to a mortgage for a maximum loan amount of RMB10,000,000 in favour of Industrial and Commercial Bank of China Limited – Zhuhai Jin Wan Branch as security with the mortgage term from 16 April 2009 to 31 December 2019.
According to the legal opinion as prepared by the Group’s PRC legal adviser, the following opinions are noted:
(i) Zhuhai Nam Hing Long has obtained the land use rights and building ownership rights of the land and buildings mentioned in Notes 1 and 2 legally;
(ii) Zhuhai Nam Hing Long is the legally interested party in the property and has the right to occupy, use, transfer, lease or mortgage the land and buildings mentioned in Notes 1 and 2 except for the restriction stated in (iv) below;
(iii) The land and buildings mentioned in Notes 1 and 2 are subject to a mortgage in favour of Industrial and Commercial Bank of China Limited – Zhuhai Jin Wan Branch;
(iv) Transferability of the land and buildings mentioned in Notes 1 and 2 is subject to the consent of the mortgagee; and
(v) The existing use of the property is in compliance with the permitted usage under the Realty Title Certificates.

– 63 –

APPENDIX I

VALUATION REPORT ON THE PROPERTIES INTEREST HELD BY THE DISPOSED GROUP

Group II – Property held and occupied by the Group under long-term title certificates in Thailand and valued on market value basis

Amount of valuation in its existing state attributable to Particulars of the Group as at Property Description and tenure occupancy 30 September 2010 HK$ 3. Land with The property comprises two parcels We have inspected 17,970,000 improvements of land having a total site area of and confirmed by the located at No. 180 approximately 10 rai 1 ngan 62.9 management of the (100% interest) Moo 7 square wah (16,651.6 sq. m.) with 3 Group that the property Gateway City various major buildings and structures is occupied by the Group Industrial Estate erected thereon. (See Note 1 below) for processing, ancillary Highway No. 331 office, warehouse (ChachoengsaoThe major buildings and structures and other supporting Sattahip Road) including a 2-storey copper foil purposes. Hua Sam Rong workshop with office, a single storey Subdistrict workshop and a single storey guard Plaeng Yao District house which were completed in 1994. Chachoengsao They have a total gross floor area of Province approximately 10,410 sq. m. (See Thailand Notes 2 and 3 below) (Postal Code 24190) The tenure of the property is freehold.

Notes:

Pursuant to Title Deed Nos. 3314 and 3315 issued by the Land Department of Thailand both dated 22 December 1993, the legally interested party in the land having a total site area of 10 rai 1 ngan 62.9 square wah (16,651.6 sq. m.) is Bangkok Industrial Laminate Co., Ltd which is a wholly-owned subsidiary of the Company.
Pursuant to a Construction Permit dated 17 March 1993 and issued by Industrial Estate Authority of Thailand, 3 various buildings and other structures were permitted to build over the lots as mentioned in Note 1.
Pursuant to a Building Certificate dated 17 February 1994 issued by Industrial Estate Authority of Thailand, a 2-storey reinforced concrete factory and office building and a single storey reinforced concrete factory building are erected on the lots as mentioned in Note 1.
The property is subject to a mortgage in favour of Bangkok Bank Public Company Limited on 1 March 2004.

– 64 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

1. INDEBTEDNESS, LIQUIDITY AND FINANCIAL RESOURCES

(a) borrowings

At the close of business on 31 October 2010, being the latest practicable date for the purpose of this statement of indebtedness prior to the printing of this circular, the Group had aggregate outstanding secured bank borrowings of approximately HK$33.1 million and unsecured, non-interests bearing of other borrowings of approximately HK$25.9 million. The Group also had amounts due to directors and a related company of approximately HK$30.5 million and HK$2.8 million, respectively, which were unsecured and non-interests bearing except for an amount due to a director of approximately HK$3.04 million which bear interest at 2.13% per annum and an amount due to a related company of approximately HK$1.85 million which bear interests at 7.25% per annum.

(b) pledge of assets

As at the close of business on 31 October 2010, the Group had pledged certain of its property, plant and equipment, investment properties and bank deposits amounting to approximately HK$55.3 million, HK$6.9 million and HK$2 million, respectively to secure the general banking facilities granted to the Group.

Save as aforesaid or as otherwise disclosed herein, and apart from intra-group liabilities and normal trade payables, as at the close of business on 31 October 2010, the Group did not have any debt securities issued and outstanding or agreed to be issued, bank overdrafts, loans or other similar indebtedness, liabilities under acceptances or acceptable credits, debentures, mortgages, charges, hire purchases or finance lease commitments, guarantees or other material contingent liabilities.

2. WORKING CAPITAL

Subject to the successful issuance of a zero coupon convertible bonds up to a principal amount of HK$200,000,000, the Directors are of the opinion that in the absence of unforeseeable circumstances, taking into account the consideration from the Disposal to be received, the present internal resources and available banking and other loan facilities of the Remaining Group, the Remaining Group has sufficient working capital for its present requirements, that is for at least a period of twelve months from the date of this Circular.

As announced by the Company on 1 November 2010, the placing agent of the Company has successfully procured not less than six independent subscribers for the convertible bonds in the total amount of HK$60,000,000 which was completed on 22 October 2010 and 29 November 2010 respectively. If the remaining HK$140,000,000 convertible bonds are not placed, the Directors will seek other methods, including debt financing and equity financing, in order to fulfill the future working capital requirement of the Remaining Group if necessary.

– 65 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

3. MATERIAL ADVERSE CHANGE

The Directors confirmed that there was no material adverse change in the financial or trading position or prospects of the Group since 31 March 2010, being the date to which the latest published audited consolidated financial statements of the Group were made up, up to the Latest Practicable Date.

– 66 –

GENERAL INFORMATION

APPENDIX III

1. RESPONSIBILITY STATEMENT

This circular, for which the directors of the Company collectively and individually accept full responsibility, includes particulars given in compliance with the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited for the purpose of giving information with regard to the Company. The directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this document misleading.

2. DISCLOSURE OF INTERESTS

Director’s interests and short positions in the securities of the Company and its associated corporations

As at the Latest Practicable Date, the interests and short positions of the Directors and the chief executive of the Company in the shares, underlying shares or debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) (i) which 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 or short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) which were required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers contained in the Listing Rules, were as follows:

Nature of interests

	Number or			Approximate
	attributable			percentage or
	number of	Interests in		attributable
	Shares held or	controlled	Beneficial	percentage of
Name of Director	short positions	corporation	owner	shareholding
				(%)
Mr. Lau Chung Yim	546,000 (L)	–	546,000(L)	0.06
Ms. Lau May Wah	219,200 (L)	–	219,200 (L)	0.03

L: Long Position
S: Short Position

– 67 –

GENERAL INFORMATION

APPENDIX III

Save as disclosed above, as at the Latest Practicable Date, none of the Directors nor the chief executive of the Company had or was deemed to have any interests or short positions in the shares, underlying shares or debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) (i) which 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 or short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) which were required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers contained in the Listing Rules.

3. MATERIAL CONTRACTS

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

(i) the sale and purchase agreement dated 15 April 2010 entered into between Nurture Power Limited as vendor and the Company as purchaser for the acquisition by the Company of such number of shares of US$1.00 each as representing the entire issued share capital of Swift Profit International Limited for a consideration of HK$3,000,000,000 ;
(ii) the termination agreement dated 18 May 2010 entered into between the Company and Nurture Power Limited to terminate the agreement as referred to in (i) above;
(iii) the placing agreement dated 31 May 2010 entered into between the Company and Cheong Lee Securities Limited, as the placing agent, in relation to the placing of, on a best effort basis, 100,500,000 new shares of the Company at HK$0.29 per share;
(iv) the memorandum of understanding dated 18 May 2010 entered into by the Company and Nurture Power Limited, a company incorporated in the British Virgin Islands, in relation to the possible acquisition of the entire issued share capital in Swift Profit International Limited, a company incorporated in the British Virgin Islands with limited liability, by the Company from the Nuture Power Limited;
(v) the supplemental memorandum of understanding dated 10 June 2010 entered into by the Company and Nurture Power Limited, a company incorporated in the British Virgin Islands, in relation to the possible acquisition of the entire issued share capital in Swift Profit International Limited, a company incorporated in the British Virgin Islands with limited liability, by the Company from the Nuture Power Limited;

– 68 –

GENERAL INFORMATION

APPENDIX III

(vi) the Sale and Purchase Agreement;
(vii) the Master Supply Agreement;
(viii) the placing agreement dated 2 July 2010 entered into between the Company and Cheong Lee Securities Limited, as the placing agent, in relation to the placing of, on a best effort basis, convertible bonds for an aggregate principal amount of HK$200,000,000;
(ix) the sale and purchase agreement dated 16 July 2010 entered into between Nurture Power Limited as vendor and the Company as purchaser for the acquisition of the 9.9% interest in the entire issued share capital of Swift Profit International Limited for a consideration of HK$170,000,000;
(x) the supplemental agreement dated 30 September 2010 entered into between the Purchaser, the Vendor and Mr. Lau Chung Yim in relation to the Sale and Purchase Agreement;
(xi) the supplemental agreement dated 30 September 2010 entered into between Nam Hing HK and Nam Hing DG and Zhongshan Chung Yuen in relation to the Master Supply Agreement;
(xii) The agreement dated 28 October 2010 for sale and purchase of a parcel of land situate at No. 148, Xiang Yang Road, Suzhou National New & Hi-tech Industrial Development Zone（蘇州國家高新技術產業開發區向陽路148號）and buildings erected thereon and entered into amongst Suzhou Nam Hing Industrial Laminate Co., Ltd., the 蘇州市土地儲備中心 (Suzhou Municipal Land Reserve Centre) and 蘇州國家高新技術產業開發區管理委員會 (Suzhou National New & Hi-tech Industrial Development Zone) for a consideration of RMB62,506,663;
(xiii) the framework agreement dated 19 November 2010 entered into between the Company, as purchaser, and Lucky Start Holdings Limited, All Prosper Group Limited, Triumph Return Holdings Limited and Jia Sheng Holdings Limited, as vendors, in relation to the potential acquisition by the Company of 80% of the entire issued share capital of Ideal Market Holdings Limited;
(xiv) the supplemental agreement dated 21 December 2010 entered into between Nam Hing HK and Nam Hing DG and Zhongshan Chung Yuen in relation to the Master Supply Agreement: and
(xv) the supplemental agreement dated 21 December 2010 entered into between the Purchaser, the Vender and Mr. Lau Chung Yim in relation to the Sale and Purchase Agreement.

– 69 –

GENERAL INFORMATION

APPENDIX III

4. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contract with any member of the Group (excluding contracts expiring or determinable by the employer within one year without payment of compensation (other than statutory compensation)).

5. EXPERTS

The following are the qualification of the experts who have given opinions or advice which are contained in this circular:

Name Qualifications LCH (Asia-Pacific) Professional surveyor Surveyors Limited Veda Capital a licensed corporation to carry on type 6 regulated activity (advising on corporate finance) under the Securities and Futures Ordinance

Each of LCH (Asia-Pacific) Surveyors Limited and Veda Capital has given and has not withdrawn its written consent to the issue of this circular with the inclusion herein of its letter and report and references to its name in the form and context in which it appears.

As at the Latest Practicable Date, each of LCH (Asia-Pacific) Surveyors Limited and Veda Capital does not have any shareholding 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.

6. LITIGATION

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

– 70 –

GENERAL INFORMATION

APPENDIX III

7. MATERIAL ADVERSE CHANGE

The Directors are not aware of any material adverse change in the financial position or trading position of the Group since 31 March 2010, being the date to which the latest published audited financial statements of the Group was made up.

8. COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors nor their respective associates had any interest in any business which competes or is likely to compete, either directly or indirectly, with the business of the Group.

9. MISCELLANEOUS

(a) Save the Sale and Purchase Agreement and the Master Supply Agreement, there is no contract or arrangement entered into by any member of the Group subsisting at the date of this circular in which any Director is materially interested and which is significant to the business of the Group.
(b) As at the Latest Practicable Date, neither LCH (Asia-Pacific) Surveyors Limited and Veda Capital nor any Directors had any direct or indirect interest in any assets which had been acquired, disposed of by or leased to, or which were proposed to be acquired, disposed of by or leased to, any member of the Group since 31 March 2010, the date to which the latest published audited consolidated financial statements of the Group were made up.
(c) Tricor Tengis Limited, the share registrar and transfer office of the Company is located at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong.
(d) The company secretary of the Company is Mr. Chan Kwok Choi, who is a member of both the Hong Kong Institute of Certified Public Accountants and the CPA Australia. Mr. Chan holds a bachelor’s degree in Economics in Monash University, Australia and has extensive working experience in accounting, finance and treasury.

– 71 –

GENERAL INFORMATION

APPENDIX III

10. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be made available for inspection during normal business hours on Business Days at the office of the Company at 27th Floor, Yuen Long Trade Centre, 99-109 Castle Peak Road, Yuen Long, New Territories, Hong Kong from the date of this circular up to and including 11 January 2011 and at the SGM:

(a) the bye-laws and memorandum of association of the Company;
(b) the valuation report on the property interests held by the Disposed Group, the text of which is set out in Appendix I to this circular;
(c) the annual reports of the Company for each of the two financial years ended 31 March 2010;
(d) the material contracts referred to in the paragraph headed “Material contracts” in this Appendix;
(e) the written consents referred to under the paragraph headed “Experts” in this Appendix; and
(f) this circular.

– 72 –

NOTICE OF SGM

==> picture [54 x 54] intentionally omitted <==

NAM HING HOLDINGS LIMITED 南興集團有限公司[*]

(Incorporated in Bermuda with limited liability)

(Stock Code: 986)

NOTICE IS HEREBY GIVEN that a special general meeting (the “ SGM ”) of the shareholders of Nam Hing Holdings Limited (the “ Company ”) will be held at 27/F., Yuen Long Trade Centre, 99-109 Castle Peak Road, Yuen Long, New Territories, Hong Kong on Tuesday, 11 January 2011 at 3:00 p.m. for the purpose of considering and, if thought fit, passing with or without amendments, the following resolution of the Company:

ORDINARY RESOLUTION

“ THAT
(a) the agreement (the “ Agreement ”) (a copy of which has been produced to the SGM marked “A” and signed by the chairman of the SGM for the purpose of identification) dated 28 June 2010, as supplemented by two supplemental agreements respectively dated 30 September 2010 and 21 December 2010, and entered into between Nam Hing (B.V.I.) Limited as vendor, Nature Ample Limited as purchaser and Mr. Lau Chung Yim as the guarantor in relation to the sale and purchase of (a) 10 issued shares of US$1.00 each (the “ Cosmo Sale Shares ”) of Cosmo Terrace Corporation (“ Cosmo ”) (together with its subsidiaries as the “ Cosmo Group ”), being the entire issued share capital of Cosmo; (b) 10,000 issued shares of US$1.00 each (the “ Fittingco Sale Shares ”) of Fittingco Inc. (“ Fittingco ”) (together with its subsidiaries as the “ Fittingco Group ”), being the entire issued share capital of Fittingco; (c) two issued shares of HK$10.00 each (the “ Majestic Sale Shares ”) of Majestic Mountain Limited (“ Majestic ”) (together with its subsidiaries as the “ Majestic Group ”), being the entire issued share capital of Majestic; (d) 10 issued shares of US$1.00 each (the “ Ottawa Sale Shares ”) of Ottawa Enterprises Limited (“ Ottawa ”) (together with its subsidiaries as the “ Ottawa Group ”) (the Cosmo Group, the Fittingco Group, the Majestic Group and the Ottawa Group, collectively, the “ Disposed Group ”); and (e) the all obligations, liabilities and debts (the “ Sale Loans ”) owing or incurred by Disposed Group to the Company and its subsidiaries (collectively the “ Group ”) (excluding the Disposed Group) as at the completion of the Disposal for a consideration of HK$28,000,000 in cash (the “ Disposal ”) and the transactions contemplated thereunder, be and are hereby approved, confirmed and ratified;
For identification purposes only

– 73 –

NOTICE OF SGM

(b) the continued provision of the financial assistance by the Company to Bangkok Industrial Laminate Limited (“ BIL ”) by way of a corporate guarantee executed by the Company on 11 February 2004 in favour of Bangkok Bank Public Company Limited in respect of borrowings of BIL up to a maximum principal amount of Thai Baht 70,000,000 after the completion of the Disposal be and are hereby approved, confirmed and ratified;
(c) the continued provision of the financial assistance by the Group to the Disposed Group by way of a loans advances up to a maximum amount of HK$25,000,000 after the completion of the Disposal be and are hereby approved, confirmed and ratified;
(d) master supply agreement (the “ Master Supply Agreement ”) dated 28 June 2010, as supplemented by two supplemental agreements respectively date 30 September 2010 and 21 December 2010, and entered into between Zhongshan Chung Yuen Electric Applied Materials Company Limited (“ Zhongshan CY ”) as supplier and Nam Hing Circuit Board Company Limited (“ Nam Hing HK ”) and Nam Hing Circuit Board (Dongguan) Co., Ltd. (“ Nam Hing DG ”) as purchaser in relation to the supply and purchase of industrial laminates for a term up to 31 March 2012 commencing from the completion of the Disposal and the transactions contemplated thereunder be and are hereby approved, confirmed and ratified;
(e) the annual cap of HK$4,000,000 and HK$15,000,000 for the purchase of industrial laminates by Nam Hing HK and Nam Hing DG from Zhongshan CY pursuant to the Master Supply Agreement respectively for the period commencing from the completion of the Disposal to 31 March 2011 and for the year ending 31 March 2012 be and are hereby approved, confirmed and ratified;
(f) any one or more of the directors (the “ Directors ”) of the Company be and is/are hereby authorised to take all steps he/they consider necessary, desirable or expedient for the purpose of, or in connection with, the implementation of and giving effect to the Agreement, the Master Supply Agreement and the transactions contemplated thereunder.”

By order of the Board

Nam Hing Holdings Limited Lau Chung Yim

Chairman

Hong Kong, 24 December 2010

– 74 –

NOTICE OF SGM

Registered office: Head office and principal place of Clarendon House business in Hong Kong: 2 Church Street 27th Floor, Yuen Long Trade Centre, Hamilton HM 11 99-109 Castle Peak Road, Bermuda Yuen Long, New Territories, Hong Kong

Notes:

Any shareholder of the Company (the “Shareholder(s)”) entitled to attend and vote at the SGM shall be entitled to appoint another person as his proxy to attend and vote instead of him. A proxy need not be a Shareholder.
The form of proxy shall be in writing under the hand of the appointer or of his attorney duly authorised in writing or, if the appointer is a corporation, either under its seal or under the hand of an officer, attorney or other person authorised to sign the same.
Delivery of the form of proxy shall not preclude a Shareholder from attending and voting in person at the SGM and in such event, the form of proxy shall be deemed to be revoked.
Where there are joint Shareholders any one of such joint Shareholder may vote, either in person or by proxy, in respect of such shares as if he were solely entitled thereto, but if more than one of such joint Shareholders be present at the SGM the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint Shareholders, and for this purpose seniority shall be determined by the order in which the names stand in the register of shareholders of the Company in respect of the joint holding.
The form of proxy and (if required by the board of directors of the Company) the power of attorney or other authority (if any) under which it is signed, or a certified copy of such power or authority, shall be delivered to the Company’s Branch Share Registrar in Hong Kong, Tricor Tengis Limited, at 26/F., Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong not less than 48 hours before the time appointed for the holding of the SGM or any adjournment thereof at which the person named in the form of proxy proposes to vote or, in the case of a poll taken subsequently to the date of the SGM or any adjournment thereof, not less than 24 hours before the time appointed for the taking of the poll and in default the form of proxy shall not be treated as valid.

– 75 –

AI assistant

Dufu Liquor Group Limited — Proxy Solicitation & Information Statement 2010

49605_rns_2010-12-23_8515f643-4978-4c50-9772-caacdd3ddf38.pdf

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

NAM HING HOLDINGS LIMITED 南興集團有限公司[*]

NOTICE OF SPECIAL GENERAL MEETING

Independent financial adviser

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

LETTER FROM THE BOARD

NAM HING HOLDINGS LIMITED 南興集團有限公司[*]

(Stock Code: 986)

NOTICE OF SPECIAL GENERAL MEETING

INTRODUCTION

LETTER FROM THE BOARD

THE SALE AND PURCHASE AGREEMENT

LETTER FROM THE BOARD

Assets to be disposed

Consideration

LETTER FROM THE BOARD

Conditions precedent

LETTER FROM THE BOARD

Completion

INFORMATION ON THE DISPOSED GROUP

LETTER FROM THE BOARD

FINANCIAL EFFECT OF THE DISPOSAL AND USE OF PROCEEDS

REASONS FOR THE DISPOSAL AND THE FUTURE PLAN OF THE REMAINING GROUP

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LISTING RULES IMPLICATION

MASTER SUPPLY AGREEMENT

Nature of transaction

LETTER FROM THE BOARD

Condition precedents

Annual Caps

Reasons for the Master Supply Agreement

LETTER FROM THE BOARD

Listing Rules Implication

DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO PROVISION OF FINANCIAL ASSISTANCE UNDER THE CORPORATE GUARANTEE

LETTER FROM THE BOARD

DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO PROVISION OF FINANCIAL ASSISTANCE BY WAY OF LOANS ADVANCES

LETTER FROM THE BOARD

FINANCIAL EFFECTS ON THE GROUP

Assets and liabilities

Gain on disposal

FINANCIAL AND TRADING PROSPECTS OF THE GROUP

LETTER FROM THE BOARD

LISTING RULES IMPLICATIONS

LETTER FROM THE BOARD

INDEPENDENT BOARD COMMITTEE

SGM

RECOMMENDATION

LETTER FROM THE BOARD

ADDITIONAL INFORMATION

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

NAM HING HOLDINGS LIMITED 南興集團有限公司[*]

(I) MAJOR DISPOSAL AND CONNECTED TRANSACTION;

(IV) DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO PROVISION OF FINANCIAL ASSISTANCE BY WAY OF LOANS ADVANCES

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

LETTER FROM VEDA CAPITAL

Veda Capital Limited

(I) MAJOR DISPOSAL AND CONNECTED TRANSACTION; (II) CONTINUING CONNECTED TRANSACTION IN RELATION TO MASTER SUPPLY AGREEMENT; (III) DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO PROVISION OF FINANCIAL ASSISTANCE UNDER CORPORATE GUARANTEE; AND

(IV) DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO PROVISION OF FINANCIAL ASSISTANCE BY WAY OF LOAN ADVANCES

INTRODUCTION

LETTER FROM VEDA CAPITAL

LETTER FROM VEDA CAPITAL

BASIS OF OUR OPINION

LETTER FROM VEDA CAPITAL

“ 1. FUNDAMENTAL UNCERTAINTY RELATING TO THE GOING CONCERN BASIS

LETTER FROM VEDA CAPITAL

2. LIMITATION OF SCOPE

LETTER FROM VEDA CAPITAL

Dufu Liquor Group Limited Proxy Solicitation & Information Statement 2010